Litigation & Dispute Resolution

Litigation & Dispute Resolution 2020 Ninth Edition

Contributing Editor: Ted Greeno Global Legal Insights Litigation & Dispute Resolution

2020, Ninth Edition Contributing Editor: Ted Greeno Published by Global Legal Group GLOBAL LEGAL INSIGHTS – LITIGATION & DISPUTE RESOLUTION 2020, NINTH EDITION

Contributing Editor Ted Greeno, Quinn Emanuel Urquhart & Sullivan

Head of Production Suzie Levy

Senior Editor Sam Friend

Sub Editor Megan Hylton

Consulting Group Publisher Rory Smith

Chief Media Officer Fraser Allan

We are extremely grateful for all contributions to this edition. Special thanks are reserved for Ted Greeno of Quinn Emanuel Urquhart & Sullivan for all of his assistance.

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

ISBN 978-1-83918-067-5 ISSN 2049-3126

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

Preface Ted Greeno, Quinn Emanuel Urquhart & Sullivan General chapter The Standing International Forum of Commercial Courts: Harmonising International Court Processes and Procedures Ted Greeno, Quinn Emanuel Urquhart & Sullivan 1

Country chapters Australia Colin Loveday, Richard Abraham & Sheena McKie, Clayton Utz 11 Austria Lukas Aigner & Johannes Lehner, Aigner Lehner Zuschin + Partner Rechtsanwälte 24 Bermuda Mark Chudleigh & Lewis Preston, Kennedys 33 Brazil Eduardo Perazza de Medeiros & Ariana Júlia de Almeida Anfe, Machado Meyer Sendacz e Opice Advogados 42 Cayman Islands Ian Huskisson, Anna Peccarino & Neil McLarnon, Travers Thorp Alberga 51 China Wen Qin & Lei Yang, Rui Bai Law Firm 60 Cyprus Constantina Hadjianastasi & Maria Afxentiou, Harris Kyriakides LLC 71 England & Wales Christian Toms, Brown Rudnick LLP 81 France Noémie de Galembert & Victoire Segard, Galembert Avocats 91 Germany Jochen Lehmann & Markus Andrees, GÖRG Partnerschaft von Rechtsanwälten mbB 102 Greece Spyros G. Alexandris & Eirini Panopoulou, Bahas, Gramatidis & Partners 112 Italy Micael Montinari, Luca Tormen & Laura Coriddi, Portolano Cavallo 123 Japan Shinya Tago, Takuya Uenishi & Landry Guesdon, Iwata Godo 134 Luxembourg Jackye Elombo, LEGALIS 148 Mexico Miguel Angel Hernandez-Romo Valencia & Miguel Angel Hernandez Romo, Foley Gardere Arena 162 Morocco Youssef Hanane & Ayoub Berdai, Hajji & Associés – Avocats 168 New Zealand Paul Heath QC, Bankside Chambers | South Square Michael Greenop, Quinn Emanuel Urquhart & Sullivan LLP 175 Poland Łukasz Doktór, Adriana Palczewska & Maciej Rzepka, DOKTÓR JERSZYŃSKI PIETRAS 188 Russia Yulia Mullina, Valeria Butyrina & Arina Akulina, Russian Arbitration Center at the Russian Institute of Modern Arbitration 199 Serbia Nemanja Aleksić, Aleksić & Associates 211 Spain Pedro Moreira & Isabel Álvarez, SCA LEGAL, SLP 221 Switzerland Balz Gross, Claudio Bazzani & Julian Schwaller, Homburger AG 237 Turkey E. Benan Arseven, Burak Baydar & Fulya Kurar, Moroğlu Arseven 253 USA Chris Paparella & Anthony Pan, Steptoe & Johnson LLP 265 PREFACE

ince the last edition of this book, the global business community has been forced to face the many new challenges that have been thrown up by the Coronavirus Spandemic and the almost universal lockdown measures that have been taken in response to it. Courts all over the world have also had to adapt and change. It might be said that the lockdown strategies pursued by governments would not have been sustainable but for the internet and the ability it affords us to work remotely. Certainly, courts around the world have adapted to this way of working, with procedural hearings and depositions, and even full-scale trials, being conducted exclusively on videoconference platforms. The use of video technology to take witness evidence is, of course, not new. It goes back 20 years or more. However, it was not embraced by commercial litigators because its lack of immediacy impaired the quality of the evidence and sometimes last- minute technical hitches could disrupt and delay trials. Over the last few months, however, the improved technology available and the need to make remote hearings work have shown that they are a reasonable, if not ideal, substitute for in-person attendance. It remains to be seen how permanent the move to remote hearings becomes. I doubt that trials will be held remotely once all Coronavirus restrictions are lifted. Courts will revert to in-person hearings, but it is surely likely that videoconferencing technology will be used more than it was before the lockdown for procedural hearings and other hearings where no oral evidence is required, both in international litigation and arbitration. The saving of the time and cost of travel, as well as the environmental benefits, will be a significant incentive. One factor that may play on the need for remote hearings is the potentially sharp increase in litigation that is likely to flow from the forthcoming lockdown-induced recession. A growing volume of cases will inevitably put pressure on the capacity of courts to cope with the increased demand. We are yet to know how serious a recession it will be, but the stress on contracts and cash flows that recessions bring always leads to an increase in commercial disputes. Litigation, even of a weak defence, is sometimes the least worst option for cash-strapped companies. Recessions also tend to expose long-running fraudulent schemes, as the money moved around to create an impression that nothing is missing ultimately runs out. As Warren Buffett famously said, albeit in a different context, it is only when the tide goes out that you discover who has been swimming naked. In such times, a swift and efficient commercial court system is all the more essential to the economic health of a nation. This time round, disputes will be even more international in nature than in the last recession. Countries can therefore help themselves and each other by easing cooperation between them for the service of process, the taking of evidence, the enforcement of judgments or awards and the swift resolution of jurisdiction challenges. To that end, this book aims to provide an insight into how such issues are managed by the court systems and procedures of jurisdictions around the world, with a particular focus on practical considerations. I hope it is a useful guide for all lawyers who advise businesses that trade internationally. Finally, I am grateful to all the contributors from across the globe for the clarity and expertise of their contributions.

Ted Greeno Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts: Harmonising International Court Processes and Procedures

Ted Greeno Quinn Emanuel Urquhart & Sullivan

‘The development of the law by the courts has…historically, been reactive. To borrow an idea from a related context their role has typically been one of fire-fighting, with fire prevention as a necessary consequence of how the fire-fighting exercise is carried out. Like traditional fire fighters, they must wait for a dispute. One consequence of this has,in general, been the absence of any concerted, considered, strategic reform of court systems to enable them better to sharpen the legal framework.’ Lord Thomas of Cwmgiedd, DIFC Academy of Law Lecture, Dubai. 1 February 2016. It is an appropriate reflection of the ambition and scale of Lord Thomas’ vision for the Standing International Forum of Commercial Courts (the SIFoCC) that it was conceived, not in the perhaps familiar confines of the halls of Middle Temple or Lincoln’s Inn, but in four rapidly evolving hubs of dispute resolution: Dubai; Singapore; the Cayman Islands; and Beijing. In four speeches between February 2016 and April 2017, Lord Thomas laid out a bold roadmap for the future of specialist commercial courts and what he sees as a necessary evolution in the interrelationship between global commerce, universal digitisation and the rule of law. His fundamental concern is obvious and well illustrated by the above extract from his speech in Dubai. It is often not in a typical lawyer’s DNA to strategise, overhaul or innovate. Rather, a respect for precedent, tradition and the gradual evolution of change is the norm. Indeed, it is usually considered one of the English common law’s principal strengths as a commercial export that it is grounded in centuries of established case law and procedural certainty which has been developed gradually on a case-by-case basis. Lawyers and the clients they serve therefore tend naturally to default to a desire for a predictable outcome rather than a novel one. That is no bad thing. However, in the speeches in which he set out the purpose of the SIFoCC, Lord Thomas was clear that significant innovation in how commercial courts operate globally is necessary if the courts are to continue to respond to the new demands of modern commercial activity. The clear message: precedent might not be enough on this occasion. While some of Lord Thomas’ proposals for the SIFoCC which we will explore in this chapter may appear radical, he makes it clear that there is an important historic tradition of courts adapting their procedures to the requirements of the business community. In his

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts speech in the Cayman Islands in March 2017, Lord Thomas noted that in London in 1892, there was widespread dissatisfaction from business with the operation of the courts. As The Times reported a High Court judge as noting at the time: ‘Two considerations are important to men of business when contemplating the possibilities of litigation. The first is – money. ‘How much is it likely at most to cost?’ The second is – time. ‘How soon at latest will the thing be over?’ They want to close their books at the end of the current year, to write off bad and hopeless debts, to know upon what lines next year to deal with similar questions should they arise.’ As a result, following demands from the City of London and the business community for a tribunal or court manned by judges with knowledge and experience of commercial disputes which could determine such disputes quickly and at limited cost, the judiciary responded by founding the Commercial Court in London on 8 February 1895. From its inception, the Commercial Court sought to make procedure more flexible and the experience of judges more targeted to meet the needs of business. Sir James Charles Mathew, one of the Court’s original judges in 1895, would, where appropriate, dispense with formal pleadings and disclosure and decide issues of principle on agreed facts.1 There have been several occasions in the history of English civil procedure in which the courts have successfully innovated to meet the changing commercial landscape: Lord Mansfield’s development of commercial special juries in England; the creation ofthe Commercial Cause List in 1895 and then the Commercial Court; Lord Woolf’s reforms culminating in the Civil Procedure Rules in 1999; and more recently, the introduction of the Financial List, the Market Test Case and the Shorter and Flexible Trial Procedures. Lord Thomas’ speeches explaining the purpose of the SIFoCC make it clear that the judiciary need to take a similar innovative leap as the Victorians did when founding the first specialist Commercial Court in London in 1895, but now the challenge is a global one. His vision makes it clear that the international judiciary must do more than fight fires, but take active steps to rethink how the law serves business in what he terms a new ‘global village’. This chapter will explore what Lord Thomas identifies as the current principal issues with commercial civil procedure, his proposed solutions, and the role of the SIFoCC including its early work and publications.

The challenge Lord Thomas neatly summarised the fundamental concern that the SIFoCC is intended to address when he noted in his speech in Singapore that: ‘Unless we are able to take a new and radical approach to procedure, we will be rooted in the past that no longer exists…’2 His premise is that the speed of expansion of the ‘global village’, in which modern commerce is no longer tied to nation states but is driven principally by digital and technological advancement, has revolutionised the demands that the courts must meet. The globalisation of business relations has obviously increased the potential scope of transnational business disputes and therefore the need for businesses and their lawyers to be able to move easily and quickly between many different jurisdictions.3 While the active promotion of the rule of law has always been considered vital to the growth and development of effective markets, business and commerce, Lord Thomas notes that this has generally been effected through the courts of each individual nation and rarely coordinated at an international level: ‘…although the provision of law adapted to the needs of international trade has a long history, the role of the courts and the legal framework for the enforcement of that law has a relatively shorter and more difficult history.’4

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Perhaps in contrast to the success of the New York Convention for the recognition and enforcement of arbitral awards, commercial courts have rarely been able to coordinate significant procedural harmonisation. Indeed, the risk that Lord Thomas identifies is that procedure ends up lagging behind substantive law: ‘As our national substantive laws are becoming ever closer in a number of specific areas related to international business, there is an increasing need for our national procedural systems to be brought closer together also.’5 In other words, if procedural law continues to be too divergent between jurisdictions, and businesses face the associated inefficiencies and costs of that divergence, the courts will collectively fail in their duty to uphold the rule of law effectively and to facilitate economic prosperity. He notes that, perhaps in contrast, international law firms and barristers chambers have actually innovated rapidly in the face of these commercial changes, and the courts should emulate that innovation as opposed to adopting an incremental approach to reform.6 In short, Lord Thomas sees the coordination of national specialist commercial courts as a starting place to examine the fundamental issue of whether our current approach to procedural law is adequate for the changes that modern commerce has undergone: ‘How do we ensure that our laws and our courts properly underpin the interconnected economies and markets of the digital age?’7

The proposal Lord Thomas’ proposals in his four speeches are undoubtedly ambitious. It is clear that he sees the reform of procedural law between nations as requiring a global step change in how we conceive international litigation and that it could take a new generation of lawyers to properly effect such change. Nevertheless, it is also clear that many practical technological changes and ways in which commercial courts communicate with each other could be implemented almost immediately to great benefit. Whether it is in the immediate or long term, however, his ambition for the SIFoCC as the forum for this change is clear: ‘This will be no talking shop. It must deliver concrete benefits. I have no doubt we shall see these before too long.’8 In Lord Thomas’ speech in Dubai in February 2016, he began by noting the existing strengths of the specialist commercial court structure, in particular the fact that, especially in common law jurisdictions, the substantive law generally ‘does not remain locked in an analogue world’ as the courts’ specialist judges can evolve precedent to meet the changing commercial climate.9 However, he noted developments in four key areas that he considered that commercial courts could make to realise their full potential if a clear strategy was implemented: market-motivated, but judge-led reform; personnel; process; and product. These areas for development and his speech in Dubai can be considered as establishing the necessary foundations to facilitate the main substance of his procedural changes which he set out in his later speech in Singapore. His vision for ‘market-motivated, but judge-led reform’ is that there is little merit in a committee of judges deriving procedural innovations from ‘abstract principle’ in isolation, but that by listening to the commercial users of courts (as opposed to just lawyers), it should be judges and not the Government or Parliament who should lead the way in progressing procedural change. He cites the successful development of Early Neutral Evaluation in London in the 1950s and 1960s, and similarly in the USA in California in the 1980s, as a successful example of judicial-led changes which were entirely responsive to market demand and which have lasted. Similarly, the creation of the Financial List from the London Commercial Court and Chancery Division was a response from the judiciary to the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts opinions of the financial community and regulators and has proved a useful forum for the significant amount of litigation arising from the 2008/9 financial crisis. In respect of ‘personnel’, Lord Thomas makes it clear that, for any reforms to thrive, we obviously need the best judges, lawyers and court administrators serving our commercial courts. Commercial courts must continue to attract the very best members of the legal profession for its judges and talent should naturally be derived from widening the pool of appointees.10 He notes that, in terms of the legal profession itself, taking England and Wales as an example, law firms and barristers chambers have been great procedural innovators in actively seeking work from other jurisdictions, working with local counsel and facilitating more multi-jurisdictional cases. It is increasingly common for young lawyers to undertake secondments and training schemes in foreign offices and even to cross-qualify. Finally, he notes that an excellent court requires first-class administrative staff. This will require court staff to have the most up-to-date technological training, and putting in place systems like those that are available in the Rolls Building in London is a key starting point.11 As to ‘process’, Lord Thomas focuses on rules and technology. Although he went into greater detail in relation to the substance of procedural rule changes in later speeches, he noted in his Dubai lecture that several pilot schemes in the London courts, including the Shorter Trial Procedure and Flexible Trial Procedure, were examples of the type of innovations that commercial courts should encourage in order to bring the procedural flexibility of alternative dispute resolution mechanisms within the court setting.12 In terms of technology, he notes that hearings by telephone and videoconference have become well established and have been successful. His comments were obviously made several years before the current coronavirus pandemic, and the swift and decisive move by the English courts to issue a Remote Hearings Protocol which assumes by default that all hearings should proceed remotely. The Coronavirus Act 2020 now allows for the live streaming of court hearings in order to ensure compliance with public access requirements of the courts and this has enabled heavy commercial trials, including the cross-examination of witnesses, to go ahead remotely. It is likely that such technological innovations and the prevalence of remote hearings will remain. Indeed, even in 2016, Lord Thomas suggested an intriguing extension of the potential for remote hearings: ‘Why stop there? May I pose an idea that some years hence may seem feasible, if all goes well between Commercial Courts. If technology enables such hearings to take place might it equally facilitate something more? Might we be able to devise joinder of proceedings across jurisdictions: applying the same substantive law, with the parties and court determining which of the jurisdictions’ procedure and law of evidence to apply, with the tribunal made up of a judge from each jurisdiction – with perhaps a third judge from a roster of international commercial judges, and parallel judgments being rendered. Too far-fetched now? Yes. But should not our thinking be that ambitious?’13 Finally, Lord Thomas refers to the ‘product’, by which he means the end product of high- quality justice which ‘underpins the prosperity of our global village’. He notes that one important way for commercial courts to maintain this quality is for them to keep informed of rapidly changing market developments and to listen to the needs of commercial court users through, for example in London, the Commercial Court Users Committee or Financial List Users Committee.14 Second, he notes that a commercial court must put itself in a position where it can develop new law to meet new commercial challenges. One example of how this can be achieved which comes from the London Financial List is the pilot Market Test Case Scheme in which commercial parties can present a problem for which there is

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts currently no cause of action, and seek declaratory relief as to how the courts might respond if litigation were brought. This should allow the market to raise uncertainties arising from new products or practices before the stage is reached where the damage caused by the uncertainty has occurred.15 Lord Thomas concluded his remarks in Dubai by noting that, based on his experiences from London, he considered that all commercial courts should consider these four areas of development as a starting point for procedural reform, but stressed that, in an interconnected world, this was not sufficient. Reform would only be effective if commercial courts collaborated in their efforts. This was the reason for the establishment of the SIFoCC. In his speech in Singapore in September 2016, Lord Thomas set out three main features of a radically reformed approach to procedure nationally and transnationally: the design of a basic common IT system; the use of a generic procedural code based on principle for that system; and the proportionate and tailored application of those two things.16 Then, crucially for the role of the SIFoCC, he contends that there should be a convergence of such a procedural system for international civil disputes. Lord Thomas contends that the starting point must obviously be technology and digitalisation. In particular, he refers to a project inspired by Professor Richard Susskind with the assistance of Herbert Smith Freehills that has demonstrated that the basic procedure for all civil, family and administrative claims has the same fundamental common characteristics. Consequently he suggests that: ‘The aim must therefore be to design one basic IT system to underpin a common procedural system to cover the different civil, family and administrative law jurisdictions, and possibly the criminal jurisdiction as well.’17 He also notes that the process of all claims should be ‘digital by default’ and the procedural system should utilise the same electronic personal reminders and prompts for action as Amazon, Google and Facebook have been using for years. The proposed use of a single generic code based on principle would clearly represent a radical overhaul of how the legal profession currently practises, at least in England and Wales. Lord Thomas notes that a single procedural code for civil claims has been successfully developed in the form of the Civil Procedure Rules, but this should serve ‘as an inspiration today to create a procedural code which can be used for all disputes’. In terms of how a single generic code based on a common digitalised system would function, Lord Thomas notes that, much like the current Civil Procedure Rules, the procedure should be tailored and applied proportionately based on the value and complexity of specific claims. It is clear that the full scope of a procedural code does not need to be used in every instance and the success of the summary judgment process under the Civil Procedure Rules is a good example. As part of this development, Lord Thomas notes that there also needs to be an acceptance that ‘full disclosure [of documents] is not necessary to secure justice’. Excessive disclosure is one of the most significant hindrances to the efficient and cost- effective disposal of justice and, if possible, predictive coding or other artificial intelligence review tools should be used more to try and limit disclosure to the absolute minimum.18 The key question that Lord Thomas positions the SIFoCC to answer is: ‘If this is the correct approach to reform of civil procedure within a nation state, as I believe it to be, would it be worthwhile to adopt a similar approach to minimise differences internationally in the area of civil litigation?’19 The idea of minimising differences between national procedures is not new. The idea was developed by the American Law Institute and UNIDROIT from 1997 to 2004, but it has rarely led to significant coordination between nation states. As Lord Thomas observes,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts however, the world of commerce is now significantly more interconnected and therefore the need for meaningful convergence is much greater. A transnational civil procedural code could initially be used if litigants choose to have their disputes litigated under such a code, in the same way as parties often elect for arbitration to benefit from the New York Convention. Lord Thomas notes that the issues should really be ones of practice rather than principle, and therefore solvable by better communication: ‘The question then is really a practical one: how do we draw together our experience to devise a practical basis for a converging code for transnational civil disputes?...The Standing International Forum of Commercial Courts is one means by which this can be achieved.’ While such a project is clearly very ambitious, he notes that the timing for exploring it seriously is obviously now, as the interconnectedness of world commerce and international litigation is clear and unlikely to regress. As he concluded his speech in Singapore, in order to effect this change, there would need to be a transition in the culture of procedural law. This, he states, ‘will take a much greater effort on the international than national stage. That, however, is simply to note the scale of the endeavour. It is not to run up the flag of surrender’.20 In Lord Thomas’ speech in the Cayman Islands in March 2017, he discussed several of the specific changes that commercial courts could undertake to improve the use of technology and harmonise procedure. In his final speech in Beijing in April 2017, shortly before the first meeting of the SIFoCC, he outlined many of the same themes and ended with a rallying cry that the objective of the SIFoCC was: ‘…to build on and develop a more systematic and common approach to the provision of dispute resolution, to keep commercial dispute resolution up to date and to see that the law and legal framework is developed in a way that supports international trade, international commerce and the international financial markets. All will benefit.’21

The meetings and work of the SIFoCC The SIFoCC’s first meeting took place in London on 4–5 May 2017 with over60 representatives from commercial courts from five continents congregating to discuss the principles set out by Lord Thomas. There were representatives from jurisdictions with a longer established commercial court offering and those with relatively more recent specialist procedures. Australia, Delaware, Hong Kong, Ireland, New York, Singapore, and of course London were among the more established commercial courts represented and they were joined by the judiciary from, amongst others, Bermuda, the Cayman Islands, Eastern Caribbean, Kazakhstan, Nigeria, Rwanda, Sierra Leone, and Uganda. Sixteen jurisdictions were represented by their Chief Justice. It is notable that Lord Thomas repeated the significance of the purpose of the forum in his opening remarks, stating ‘[w]e could be a most agreeable talking shop…but, to be blunt, I really do think that what we have to do by the end of the day is to ensure we have a clear perspective of what the forum is to do and what we intend to deliver’. During the first meeting, discussions were chaired on four topics: cooperation and collaboration between commercial courts; enforcement of judgments; case management, technology and best practice; and finally the relationship between the courts and arbitration and mediation. In the discussion on cooperation and collaboration between national courts, the proposal of standardisation of transnational procedures was discussed and it was agreed that in the now common circumstance in which a company was, for example, trading in 10 jurisdictions, a degree of harmonised procedure would inevitably reduce the risks and costs of undertaking that type of commerce. The work of the American Law Institute on how to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts create transnational procedures was discussed and it was agreed that the key was to build on that type of procedure. It was also noted that, in cases in which foreign law had to be applied, the SIFoCC might provide a platform to give access to that foreign law rather than relying on third-party experts. In the discussion on enforcement, there was a particular focus on the fact that the perception of difficulties of enforcement in certain jurisdictions was often worse than the reality and that it was usually because the relevant procedures are opaque to lawyers from outside the jurisdiction that problems arose. The obvious point of contrast with arbitration was highlighted that, unlike the New York Convention, commercial courts do not have a universal international convention for the reciprocal enforcement of judgments. However, the 2005 Hague Convention on Choice of Court Agreements was cited as an underused but promising example of how transnational procedure should be promoted. During the discussion on case management, technology and best practice, there was a significant dialogue on the variance in practices between jurisdictions and how different courts could best learn from each other. In particular, it was considered how judges from developing jurisdictions could witness how case management and technology already combine to produce efficient hearings in certain jurisdictions. The discussion on arbitration and mediation highlighted the significant importance of the interrelationship between the commercial courts and arbitration, with the recognition that with the globalisation of world trade there are not enough courts to do all the required dispute resolution and there certainly will not be enough capacity in 20 years’ time. Therefore, commercial courts should do as much as possible to promote the proper development of arbitration and the enforcement of its awards. Four key action points emerged from the first meeting of the SIFoCC. First, the forum agreed to produce a Multilateral Memorandum on enforcing judgments with the purpose of providing a clear and easy-to-use guide that explains how, under current rules, the judgments of one commercial court may most efficiently be enforced in another country. Second, a working party was created to examine in further detail how best court practices could be identified to make litigation more efficient, including the use of technology and case management. Third, a structure was agreed to be established for the judges of one commercial court to be able to spend short periods of time as observers in the commercial court of another, which might be especially helpful for newly created or emerging courts. Fourth, the forum agreed to consider the practical arrangements that can be made for better communication between arbitral bodies and commercial courts to identify issues, including the development of new law. The Report of the first meeting noted that, although it was a success, it was only through continued and growing collaboration that real progress would be made: ‘Across such a wide range of jurisdictions there are different views, and different priorities. For some, domestic capacity‐building is most important. Others have their eyes firmly fixed on the international market. There were, of course, some important jurisdictions absent. Our hope is that they will be present for the second and subsequent meetings. Enhancing, through collaboration, the just and effective resolution of commercial disputes is a prize worth having.’22 The second meeting of the SIFoCC took place in New York on 27–28 September 2018. On this occasion, around 100 representatives from 35 jurisdictions attended, with most delegations including the head of their commercial court. In her opening remarks, Chief Judge Janet DiFore, Chief Judge of the Court of Appeals and of the State of New York,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Quinn Emanuel Urquhart & Sullivan The Standing International Forum of Commercial Courts noted some of Lord Thomas’ same concerns about the need for the evolution of procedural law to match the demands of business: ‘In today’s global economy, litigation is a major cost of doing business. When cases languish for years and litigation costs increase due to inefficiency, business litigants naturally grow frustrated and turn to more attractive venues, or outside our judicial systems altogether to private dispute resolution providers. We cannot afford to accept judicial approaches, practices or attitudes that are not responsive to the needs of litigants and counsel alike. We know we must maintain the status and value of our courts as the best possible option among a growing array of alternatives for commercial dispute resolution.’23 The discussions focused on five key topics: enforcement; a perspective from court users; case management; alternative dispute resolution; and technology. The key action points arising from the New York meeting were: i) To complete the draft Multilateral Memorandum on Enforcement of money judgments of commercial courts and publish it on the SIFoCC website. ii) Start work towards a second document that will identify shared principles for enforcement. iii) Start work to highlight obstacles to the use of summary process for enforcement. iv) Establish the first SIFoCC International Working Group, to bring together case management best practice from both common law and civil law systems, and distil working presumptions of international best practice keeping in mind the individual needs of the case. v) Continue and expand the SIFoCC Judicial Programme of Observation and Study following the first programme hosted in London. The third meeting of the forum was arranged to take place in Singapore in March 2020, but has been postponed due to the coronavirus pandemic. In November 2019, the SIFoCC produced its first publication: the ‘Multilateral Memorandum on Enforcement of Commercial Judgments for Money’, which details those laws and procedures of 32 commercial courts around the world that are relevant to claimants/ judgment creditors seeking to enforce a money judgment obtained in one jurisdiction in the courts of another. The Memorandum is written and approved by the relevant national courts as a high-level summary of their procedures, although it is non-binding and does not have the same status as a treaty instrument. However, the Memorandum is likely to be an additional source for practitioners who want an accessible summary of enforcement procedures in a jurisdiction before consulting local lawyers. In this sense, it seeks to address the concerns raised at the first meeting of the SIFoCC that often issues of enforcement arise simply because of a lack of transparency of how local procedural laws function. While this publication may be a long way from the single unified transnational procedural code that Lord Thomas envisioned in his speech in Singapore, it is a first step in the process as national courts begin to codify the similarities between jurisdictions and seek to minimise the divergence between their enforcement processes for the benefit of global business. Progress will inevitably be slow, but it is consistent with the philosophy that Lord Thomas articulated in founding the SIFoCC. Following the first meeting of the SIFoCC, judges from The Gambia, Sri Lanka and Uganda also took part in a judicial observation visit for a week in the Commercial Court in London in July 2018. The judges had the opportunity to discuss a number of issues of case management and technology with current London Commercial Court judges and to observe live cases from the bench. The same judges were then able to report their findings at the second meeting of the SIFoCC in New York.

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Conclusions The SIFoCC is in its infancy and, from the discussions that have been reported from the first two meetings of the forum, it is evident that it will take considerable time and effort for each jurisdiction to articulate even the basic concerns and issues that underpin Lord Thomas’ vision for the international harmonisation of procedural law. However, the reports indicate that there is a common acceptance that changes in global business practices and products require courts to adapt in turn and for reform to be led by a global judiciary being proactive rather than reactive. The Multilateral Memorandum on Enforcement of Commercial Judgments for Money may represent a small step but, because it is published by the judiciaries of the jurisdictions themselves, it is a unique one. Recent events have highlighted even more acutely the need for global responses to global problems and, in that sense, the SIFoCC’s and Lord Thomas’ vision for procedural reform are even more timely. Although the challenges facing the SIFoCC are daunting, the ambitions of its founders are laudable. As with most things in the law, it may take many years to achieve them, but every small step in pursuit of their aims is to be applauded.

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Endnotes 1. https://www.judiciary.uk/you-and-the-judiciary/going-to-court/high-court/queens- bench-division/courts-of-the-queens-bench-division/commercial-court/about-us/. 2. Cutting The Cloth To Fit The Dispute: Steps Towards Better Procedures Across The Jurisdictions, (Singapore) paragraph 60. https://www.judiciary.uk/wp-content/ uploads/2016/10/lcj-speech-singapore-academy-of-law.pdf. 3. Commercial Justice in the Global Village: The Role of Commercial Courts (Dubai), paragraph 5. https://www.judiciary.uk/wp-content/uploads/2016/02/LCJ-commerical- justice-in-the-global-village-DIFC-Academy-of-Law-Lecture-February-2016.pdf. 4. Dubai, paragraph 11. 5. Singapore, paragraph 7(5). 6. Dubai, paragraph 27. 7. Dubai, paragraphs 9 and 12. 8. Dubai, paragraph 50. 9. Dubai, paragraph 15. 10. Dubai, paragraph 25. 11. Dubai, paragraph 31. 12. Dubai, paragraph 35. 13. Dubai, paragraph 38. 14. Dubai, paragraph 43. 15. Dubai, paragraph 45. 16. Singapore, paragraph 11. 17. Singapore, paragraph 14. 18. Singapore, paragraph 28. 19. Singapore, paragraph 33. 20. Singapore, paragraph 57. 21. Beijing, paragraph 33. 22. Report of the First Meeting of the SIFoCC, page 5. 23. Report of the Second Meeting of the SIFoCC, page 19.

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Ted Greeno Tel: +44 20 7653 2000 / Email: [email protected] Ted Greeno is Co-Managing Partner of the London office of Quinn Emanuel Urquhart & Sullivan, the world’s largest litigation-only law firm. Since qualifying as a solicitor in 1983, he has conducted complex, high-value disputes in all of the higher English courts and in international arbitrations and has led teams to numerous awards. Many of these disputes were international in nature and often involved litigation in the courts of other jurisdictions. Ted’s work has ranged across most types of dispute from corporate actions to contract, tax, anti-trust and professional negligence cases, to name a few, and he is particularly well known for his work in the energy sector. Ted speaks and writes on aspects of English litigation and international arbitration and has served on various sub-committees of the Commercial Court Users Committee over the last 20 years, most recently on the Witness Evidence Working Group. Ted also sat on the steering group set up by the Lord Mayor to promote London as a centre for international litigation and arbitration.

Quinn Emanuel Urquhart & Sullivan UK LLP 90 High Holborn, London WC1V 6LJ, United Kingdom Tel: +44 20 7653 2000 / URL: www.quinnemanuel.com

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Colin Loveday, Richard Abraham & Sheena McKie Clayton Utz

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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Clayton Utz Australia evidence concerning fields of specialised knowledge. Most Australian jurisdictions have Codes of Conduct with which expert witnesses must comply. Occasionally, the court will direct both parties’ experts to prepare a joint report, setting out their areas of agreement and disagreement. Throughout the proceedings, the parties will attend court at regular intervals for case management. At directions hearings, orders will be made to govern the conduct of the matter. Once all the parties’ evidence has been prepared and all the interlocutory disputes resolved, the case proceeds to a final hearing. Most civil cases are heard by a judge sitting alone, who will usually deliver a written judgment. Australian courts have broad case management powers which are generally defined by the relevant court rules. Judges have wide discretion to manage cases as they see fit to ensure that the real issues in dispute are identified and the matter is progressed to trial as soon as possible. Australian court systems have, over time, introduced methods of court-instigated “management” of litigation. The reforms have involved shifting control of aspects of the conduct of litigation from lawyers to the courts, and a focus on case management orders designed to “… facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings” (described as the “overriding purpose rule”). While parties may apply to the court for a wide range of interim orders, including orders for evidence, discovery, the issue of subpoenas and the referral of the matter to mediation, parties must have regard to the overriding purpose. In a 2013 per curium decision, the High Court of Australia made clear its view that it is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose and that “unduly technical and costly disputes about non-essential issues are clearly to be avoided”. Australian courts have wide discretion to impose sanctions (which may include adverse costs orders) on a party that has not complied with court orders or directions. Each court has its own case allocation system. The Federal Court has adopted the individual docket system where cases are allocated to judges and the case will ordinarily stay with the same judge from commencement until it is finalised. Cases requiring particular expertise are allocated to a judge who is a member of a specialist panel. The docket judge monitors the parties’ compliance with the court’s directions, deals with interlocutory issues and ensures that the proceedings progress according to the timetable. The judge may direct the parties to participate in alternative dispute resolution (ADR) processes, such as referrals to mediation. In many State and Territory courts, cases are allocated to judges in particular divisions or lists according to the subject matter of the claim. For example, the Supreme Court of New South Wales (NSW) has established a Commercial List to deal with disputes arising out of commercial transactions involving substantial amounts of money or issues of importance to trade and commerce. The list system provides litigants with judges with specialist expertise and access to a relatively high level of case management where needed. The Federal Court and most State Supreme Courts have also instituted specific “Fast Track” or Expedition Lists. The principal object of these lists is to ensure that urgent matters can be heard and determined quickly. The case management principles applied in the Fast Track Lists are innovative. Their primary objective is to speed appropriate matters through the court lists and limit parties’ exposure to delay and wasted costs by adhering to strict time limits. Recent practices that have been adopted in appropriate cases include limited discovery, interlocutory applications without hearing (otherwise known as “on the papers”) and stop-watch hearings.

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The Australian class action regime has become a key feature of the Australian legal landscape. Outside of North America, Australia is the place where a corporation is next most likely to find itself defending a class action. The Australian class action regime comprises essentially identical rules in the Federal court system and the Supreme Courts of NSW, Victoria and Queensland. Legislation is currently before the Western Australian parliament which would introduce a similar regime in that State if passed. This regime has some important features: (a) There is no certification requirement – that is, no threshold requirement that the proceedings be judicially certified as appropriate to be brought as a class action. Once a class action has been commenced, it continues until finally resolved by judgment or settlement, unless the defendant can convince the court to terminate the proceedings on certain limited grounds. (b) There is no requirement that common issues predominate over the individual issues. (c) The Australian rules expressly allow for the determination of “sub-group” or even individual issues as part of a class action. (d) A representative plaintiff can define the class members by description. This means that a person who meets the criteria set out in the class definition will be a class member unless they “opt out” of the proceedings. If a class member fails to opt out by the specified date, they are a class member in the proceedings. Thus, a person may be a class member and bound by the outcome of the proceedings without their knowledge or consent, simply on the basis that they fall within a class definition. Despite a slow adoption of the procedure (which was first introduced in 1992), class actions are now firmly embedded in the Australian legal landscape. Developments in the class action landscape cannot be viewed without considering the developments in litigation funding in Australia (discussed further below). A key driver of the Australian class action industry has been the emergence of the litigation funding enterprises.

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

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

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

Costs Australian courts have broad discretion over the costs of all proceedings. In effect, a court may make whatever order as to costs that are justified in the circumstances; however, there are general court rules that govern the exercise of that power. Ordinarily, costs follow the event, which means a successful litigant receives costs in the absence of special circumstances justifying some other order. A party is usually entitled to costs of any issue on which it succeeds, assessed on an ordinary basis. The onus is on the unsuccessful party to show the presence of “special circumstances” sufficient for the court to depart from the rule that costs follow the event. There are two main classes of costs: (a) those that arise by virtue of the retainer with the client and are governed by contract (“solicitor/client” costs); and (b) those that arise by order of the court, which may either be on an ordinary basis (“party/ party” costs) or an indemnity basis (“solicitor/client” costs). Indemnity costs are usually awarded against a party in circumstances where that party has engaged in unreasonable behaviour in connection with the conduct of the proceedings. Class action proceedings are unique in many ways. One of the characteristics peculiar to class actions is that a successful respondent can only recover costs against the lead applicant, as group members are immune from having costs orders awarded against them. This immunity is underpinned by important policy considerations, including affordable access to justice. However, it means that respondents will often be forced to defend an action at considerable cost, with no ability to recover those costs if they are successful. That dynamic can impact many aspects of the proceedings, including settlement negotiations. It shifts the balance of power in favour of applicants. An offer of settlement may entitle the party making the offer to obtain costs on an indemnity basis. The offer may not be the only issue that determines the court’s decision on this issue, but it is certainly a key factor.

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

Litigation funding Australian lawyers are currently prohibited from entering into contingency fee arrangements with their clients under which their professional fees are calculated by reference to the amount of any judgment or settlement received by the client. While there have been recent calls to remove the prohibition on contingency fees for lawyers (including most recently by an Australian Law Reform Commission report released in January 2019), Victoria is the only jurisdiction in which legislation has been introduced that, if passed, would allow contingency arrangements to be entered into (under the supervision of the Court) in class action proceedings (but not otherwise).

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Importantly, the prohibition on contingency only applies to lawyers. Litigation funders are not so constrained, and have found a very profitable role in the Australian legal (and in particular, class action) market. Australian lawyers are, however, permitted to enter into conditional costs agreements (where payment is conditional upon a successful outcome) which involve the payment of a premium or “uplift” fee calculated as a percentage of legal fees (up to 25%) – rather than by reference to any judgment or settlement amount. Such “no win, no fee” arrangements are common in Australian class actions. Litigation funding agreements are commercial arrangements under which the funder agrees to pay the fees and out-of-pocket expenses of the lawyer representing the plaintiffs. The funder will also agree to satisfy any adverse costs orders. In return for accepting this risk, the funder will take a portion of any judgment or settlement, usually one-third to two-thirds, calculated after the costs of the proceedings have been reimbursed. While initially a matter of some debate, the validity of litigation funding was established by the High Court in 2006 and subsequently reaffirmed in 2012. The flourishing litigation funding industry that has emerged as a result of thelight- touch legislative scheme in Australia has been active, particularly in class actions and in an insolvency context. Concerns have been raised as to whether the current regulatory arrangements can ensure the proper protection of consumers, management of conflicts, and proper financial supervision and capital adequacy. These concerns may drive regulatory reform in this area, and indeed the Federal Government has commissioned a Parliamentary Inquiry into Litigation Funding and the Regulation of the Class Action Industry which is scheduled to report in December 2020. Despite the light-touch legislative scheme and High Court authority in favour of litigation funding, the growth of the industry has not occurred unchecked. In recent Supreme Court of NSW proceedings involving the consideration of competing class actions, a proceeding involving a “no win, no fee” arrangement was permitted to continue, favoured over other proceedings which had litigation funders (the proceedings of which were themselves stayed). Aspects of that decision are currently subject to appeal. Similarly, the Victorian Court of Appeal has held that a particularly novel funding model amounted to an abuse of process, and stayed the proceedings as a result. The Federal Court Class Actions Practice Note (and its equivalents in the NSW and Queensland Supreme Courts) requires the disclosure, at an early stage of proceedings, of any litigation funding agreements. Details of costs agreements must also be provided to the Court and class members. An area of considerable interest in the past year has been the legitimacy of the so-called “common fund” order (CFO). Funded class actions, and in particular securities class actions, have traditionally been commenced on a “closed class” basis (a closed class action generally includes, as a part of the group definition, a requirement that a group member sign a retainer with the solicitors acting for the lead applicant, and a funding agreement with the litigation funder who is financing the class action). However, in recent years, Australian Courts have been willing to make CFOs, being orders permitting a litigation funder to take a proportion of a net judgment or settlement sum without group members needing to be signatories to a funding agreement (instead, the funder provides an undertaking to the Court to abide by Court-approved funding terms, which will override terms in existing funding agreements to the extent of any inconsistency). The introduction of CFOs was somewhat controversial, and the validity of such orders (at least at the early stage of proceedings) was successfully challenged before the High

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Court of Australia. In December 2019, the High Court handed down its decision in BMW Australia Ltd v Brewster; Westpac Banking Corporation v Lenthall [2019] HCA 45, holding that neither the Federal Court nor the NSW Supreme Court had power to make the CFOs sought in two separate class actions, each of which was proposed at an early stage of the case. The decision has generated considerable debate as it could perhaps be interpreted as allowing a CFO at settlement – with different members of the judiciary holding apparently divergent views on this question. Usually in litigation in Australia, where a respondent does not expect to be able to recover costs from a plaintiff, it has an option to make an application for security for costs. The involvement of third-party funders with no pre-existing interest in the proceedings, but who stand to benefit substantially from any recovery from the proceedings, is a material consideration in the courts considering whether to grant security for costs. The courts proceed on the basis that funders who seek to benefit from litigation should bear the risks and burdens that the process entails.

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

Enforcement of judgments Successful plaintiffs have a range of mechanisms available for the enforcement of judgments. The most common mechanism for enforcing a judgment against companies is issuing a statutory demand. If the judgment debtor company does not respond to a statutory demand within 21 days, the successful plaintiff can apply to a court to have the company wound up on the basis that it is insolvent (unable to pay its debts).

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Where the judgment debtor is an individual, there are a range of mechanisms, including: applying to have the judgment debtor declared bankrupt; garnishee orders to have money taken from the judgment debtor’s bank accounts or wages; and writs authorising the sheriff to seize and sell property belonging to the judgment debtor. The enforcement of foreign judgments in Australia is governed by a statutory regime and common law principles. Enforcing a foreign judgment in Australia depends on where the judgment was issued and the type of judgment that was issued. Australia is not a party to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971. However, Australia has reciprocal arrangements for the enforcement of judgments with a number of countries. Australia has a statutory scheme in the Foreign Judgments Act 1991 (Cth) for the recognition and enforcement of judgments entered in foreign countries with which Australia has reciprocal arrangements. The Foreign Judgments Regulations 1992 (Cth) list the countries to which the statutory scheme applies. The Foreign Judgments Act applies to enforceable money judgments that are obtained either on a final or interlocutory basis. Non-monetary judgments must be enforced at common law. Where no international treaty or statutory arrangement operates, a foreign judgment may be enforced under common law principles. A judgment may be enforceable at common law provided the Australian court is satisfied that the foreign court has exercised jurisdiction in the international sense, which includes in circumstances where: (a) the defendant voluntarily submitted to the foreign court’s jurisdiction; or (b) the defendant was ordinarily resident in the foreign jurisdiction, or present in the foreign jurisdiction at the time that the defendant was served with the originating process. Provided that the relevant Australian court is satisfied that the jurisdiction of the foreign court to make the order can be shown, prima facie, the judgment will then be entitled to recognition at common law. Generally, the only objections that the defendant can raise against enforcement of the judgment are that: (a) the judgment was obtained by fraud; (b) the foreign court acted contrary to natural justice; or (c) the foreign judgment is contrary to Australian public policy.

Cross-border litigation Australian courts may make two kinds of transnational freezing orders: (a) orders that apply to foreign assets in aid of Australian judicial proceedings (sometimes called “worldwide” orders); and (b) orders that apply to Australian assets in aid of foreign judicial proceedings. In relation to the first category, Australian courts have jurisdiction to make freezing orders and ancillary orders against those over whom they have personal jurisdiction, even if they reside overseas and even in relation to overseas assets. An important long-arm service rule provides: “An application for a freezing order or an ancillary order may be served on a person who is outside Australia (whether or not the person is domiciled or resident in Australia) if any of the assets to which the order relates are within the jurisdiction of the court.” In order to prevent harassment of a respondent in multiple actions around the world, the Australian example form of freezing order contains several undertakings that must be given by the claimant to the court. These reflect “Dadourian guidelines” laid down by the English Court of Appeal.

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In relation to the second category, the primary elements for obtaining such an order from an Australian court are: (a) a foreign judgment or “good arguable case” in a foreign court; (b) a sufficient prospect of registration or enforcement of the foreign judgment or prospective judgment in the Australian court; (c) a danger that the foreign judgment will go unsatisfied; and (d) satisfaction of discretionary matters (such as the effects on the respondent and third parties and the diligence and expedience of the applicant in bringing the application). For example, in Davis v Turning Properties Pty Ltd (2005) 222 ALR 676, a freezing order was granted in support of a freezing order from a Bahamas court made over the defendant’s assets worldwide, including its assets in Australia. It was the first time that such an application had been made in Australia. Australia is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965, which governs the international service of process on a defendant who resides in Australia. The primary method for taking evidence in Australia for a foreign proceeding is through the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Evidence Convention). Australian authorities will not accept any Letters of Request that require a person to state what documents relevant to the proceedings are or have been in their possession, or produce any documents, other than particular documents specified in the Letter of Request that the requested court believes to be in their possession. Given the strict statutory regime regarding pre-trial discovery in Australia, any veiled request for pre-trial discovery that circumvents that process is likely to be rejected. Australian law also permits the taking of evidence without compulsion and the giving of evidence by video link testimony, provided it is otherwise consistent with evidentiary requirements of the relevant court. Australian courts will generally respect an exclusive jurisdiction clause if it is consistent with the construction of the relevant contract. However, an exclusive jurisdiction clause does not necessarily prevent an Australian court from exercising jurisdiction where there is a strong case for the court to do so, namely where the party would be deprived of a legitimate juridical advantage available in an Australian court.

International arbitration Australia offers an established and hospitable environment for international commercial arbitration, with highly experienced legal practitioners and arbitrators. Australia has been a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) since 1975, is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention), and was one of the first countries to adopt the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) in 1989. International arbitration is governed by Commonwealth legislation: the International Arbitration Act 1974 (Cth) (IAA). The IAA incorporates the UNCITRAL Model Law. Unless parties have excluded the Model Law by an agreement in writing, the Model Law will apply to international arbitrations seated in Australia. If parties exclude the Model

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Law, the arbitration will still be governed by the IAA as the curial law. In addition to giving force of law in Australia to the Model Law, the IAA implements the New York Convention and the Washington Convention. In 2010, amendments were made to the IAA to enhance the efficacy and cost-effectiveness of international commercial arbitration. For example, one amendment specified that Australian courts have no residual discretion to refuse enforcement of an arbitral award on any grounds other than those provided in ss8(5) and 8(7) (which reproduce the grounds embodied in Art 5 of the New York Convention). While Australian courts have in the past taken a rather conservative approach to the enforcement of foreign arbitral awards, they are developing a strong track record of enforcement. International arbitral awards are now almost universally enforceable in Australia without the need to reopen the substance of the dispute in court. In 2013, the Australian Commercial Disputes Centre (ACDC) and the Australian International Disputes Centre (AIDC) became the Australian Disputes Centre (ADC), aiming to provide an ADR centre of excellence that is the “first choice for businesses, government and the community to resolve or learn how to resolve conflicts and disputes”. The ADC has a history of co-operation with leading ADR providers, including the Australian Centre for International Commercial Arbitration (ACICA) and the Chartered Institute of Arbitrators (Australia) Limited (CIArb). ACICA is the sole default appointing authority competent to perform the arbitrator appointment functions under the IAA. ACICA has a standard set of arbitration rules (including an expedited option) which are to a large degree based on the UNCITRAL Arbitration Rules 1985. However, these Australian rules are not compulsory and parties are free to (and commonly do) use foreign procedural rules. In 2010, a scheme of uniform Commercial Arbitration Acts based upon the UNCITRAL Model Law was also introduced to apply to domestic arbitration. The new scheme was adopted to minimise court intervention and promote finality in arbitral awards, while simultaneously endeavouring to enhance the arbitration process.

Mediation and ADR ADR mechanisms, including arbitration and mediation, are increasingly popular in commercial matters in Australia. Indeed, some of the Australian courts are now directing parties to use specific ADR mechanisms to attempt to resolve or narrow issues in dispute. In addition, there are a number of tribunals in each jurisdiction that have been established to deal with disputes in a specific area and provide affordable ADR mechanisms. There has been an increasing focus by the judiciary on the costs of litigation, which in turn has promoted a greater use of ADR in Australia. In the Federal Court, the parties to a dispute are required to file a “genuine steps statement”, which outlines the steps taken to constitute a sincere and genuine attempt to resolve the dispute. In the Commercial List of the Supreme Court of NSW, it is common for the court to order that the parties mediate before the matter is set down for hearing. Many contractual agreements now contain ADR clauses that require the parties to attempt to resolve the dispute in a specific way, prior to the commencement of proceedings. In Australia, the court may order that the proceedings be stayed until such time as the process referred to in the dispute resolution clause is completed. A dispute resolution clause may, however, be deemed unenforceable where the clause is found to be so vague as to be uncertain in terms of setting out the method by which to resolve the dispute.

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An arbitration award is binding on the parties and will be enforced by the Australian courts. An application for enforcement can be made to the courts in Australia. The relevant legislation applicable will depend on whether it is classified as domestic arbitration or international arbitration. In practice, the arbitrators of choice for major commercial arbitrations in Australia are usually retired judges of the High, Federal or Supreme Courts. One consequence of this is that the conduct of the arbitration can sometimes involve many of the formalities of a legal proceeding. There are no laws or rules that govern the conduct of ADR mechanisms such as mediation or expert determination. Settlement agreements reached at mediation do not require court sanction and will be binding and enforceable upon the parties if a valid contract has been formed. Whether an expert determination is binding and enforceable will depend on the process adopted by the parties and the terms of the particular clause. The major dispute resolution institutions in Australia are ACICA and the ADC, which provides a range of training, professional development, case management and consultancy services in relation to ADR.

Regulatory investigations Australia has important Federal regulatory authorities, which have their own prescribed areas of responsibility, including: • the Australian Competition and Consumer Commission (ACCC), the Federal regulatory authority responsible for ensuring that individuals and businesses comply with Australian competition, fair trading, and consumer protection laws; • the Australian Securities and Investments Commission (ASIC), which oversees Australian corporations and financial markets. In particular, ASIC regulates the provision of consumer credit, financial products and financial services; • the Australian Prudential Regulation Authority (APRA), the prudential regulator of the Australian financial services industry, which is responsible for regulating the conduct of banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies, and most of the superannuation industry; and • the Therapeutic Goods Administration (TGA), Australia’s regulatory agency for therapeutic goods including medicines, medical devices, blood and blood products. Australia also has a process whereby the Governor General of Australia can establish a Royal Commission for the purpose of investigating a reporting on certain matters. The Royal Commissions Act 1902 (Cth) grants the Royal Commission considerable powers to, for example, compel the attendance of persons to give evidence, or produce documents or information.

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

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

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

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

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Lukas Aigner & Johannes Lehner Aigner Lehner Zuschin + Partner Rechtsanwälte

Efficiency of process General information concerning legal proceedings and jurisdiction In the Austrian legal system, a difference is made between public law proceedings and civil proceedings. Civil proceedings include private disputes before courts between natural persons or legal entities opposing each other at the same level. In public law proceedings, on the other hand, a public authority with sovereign power acts against the legal subject. Civil procedure law is widely understood in Austria and encompasses the civil litigation proceeding (civil procedure) and the non-contentious proceeding, as well as the enforcement proceeding and the insolvency law. In Austria, the different substantive and formal legal sources, not only in civil law, can be found in codified collections of laws, which is why not only the application of a law comes into question, but also why different legal sources can be used for questions of (civil) procedural law. Supreme court rulings are of paramount importance in Austria for the interpretation of the codified laws. However, the further development of the law through case law does not go so far as to create new laws. In Austria, all supreme court rulings are published electronically in a timely manner. Access to this legal database is public, so that any interested party can easily access supreme court rulings through a search mask. Different types of proceedings and also different access to courts in civil litigation proceedings are a consequence of the procedural requirement of the jurisdiction. In each individual case, after the lawsuit has been received, the court examines ex officio whether, according to the information provided by the plaintiff, it is also responsible for the specific case. It is the plaintiff’s responsibility to bring an action before the competent court. If the court believes that it has no jurisdiction, it must dismiss the action, in which case the plaintiff has the option of applying for the case to be transferred to the competent court. The following must be assessed: • Subject-matter jurisdiction: there are separate jurisdictions for individual legal matters, such as the jurisdiction of the district courts in matters of family law; this kind of jurisdiction can also depend on the amount in dispute, so that regional courts are responsible for cases with a value in dispute over EUR 15,000 (monetary jurisdiction). • Territorial jurisdiction: this determines the district court in which a case is to be heard, so that the defendant’s permanent place of residence is the general place of jurisdiction. • Operational jurisdiction: this determines the composition of the decision-making body, i.e. whether a judicial officer, a single judge or a senate (with the participation of lay judges) decides in a case.

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Selected options for the settlement of civil disputes In order to avoid or to settle a civil dispute, the parties are free to reach an amicable (extra) judicial agreement. Regardless of their classification, settlements have the purpose of resolving civil disputes. The parties are always free to conclude a settlement agreement out of court as per Sec. 1380 ff. of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB). The praetorian settlement and the court settlement are good examples for the judicial settlement option: • Praetorian settlement: it is also possible to have the counterparty summoned to a praetorian settlement (attempt) on a lawful day, i.e. before a civil litigation proceeding is pending before the court, whereby the counterparty does not have to appear (Sec. 433 of the Austrian Civil Procedure Code, Zivilprozessordnung). If an agreement is reached, a praetorian settlement constitutes an execution title (Sec. 1 No. 5 of the Austrian Enforcement Act, Exekutionsordnung) and can be enforced if the counterparty fails to comply. • Court settlement: if a civil litigation proceeding is already pending, a settlement can be concluded between the parties in any procedural situation. An agreed settlement has the same value of a sentence and ends the proceeding in the points covered by it. To be effective, the court settlement must be recorded in an oral hearing and signed by both parties. This settlement also represents an execution title (Sec. 1 No. 5 of the Austrian Enforcement Act, Exekutionsordnung). The European legislation is particularly important, especially with regard to consumer affairs. For example, the ADR (Directive 2013/11/EU) in Austria was implemented by the Federal Act for Alternative Dispute Resolution for Consumer Disputes (Alternative- Streitbeilegung-Gesetz). The importance of mediation in the context of conflict resolution, without a decision by an ordinary court or an arbitral tribunal, should not be underestimated. In addition to the general mediation, regulated in the Federal Act on Mediation in Civil Law Matters (Bundesgesetz über Mediation in Zivilrechtssachen), mediations regarding cross-border matters within the European Union are regulated, in the course of the implementation of Directive 2008/52/ EC, by the European Mediation Act (EU-Mediations-Gesetz). Technological side The Federal Legal Information System (RIS) is a database freely accessible to everyone. Federal, national and local laws as well as other announcements and decrees (e.g. individual ministries) can be accessed here. A large number of citations of supreme court decisions on public and civil law rulings are also published in the RIS. However, first instance decisions are not published here. The user-friendly search mask also makes it possible for legal laypersons to examine a specific issue juridically. In this search mask, not only can you search for specific paragraphs, but it is also possible to perform an amateurish word search. Submissions to the ordinary courts, thus also in civil proceedings, are generally mandatory for the representatives of the parties via the e-Justice portal (ERV). Therefore, lawyers and courts correspond electronically without exception (unless there are technical interruptions). This means that lawsuits, written submissions and all attachments must be recorded electronically and transmitted to the court via the ERV. Longer legal documents with several attachments require a certain amount of technical preparation so that the ERV can be used efficiently. A strategic initiative of the Ministry of Justice is currently being implemented under the name ‘Justice 3.0’, which is intended to establish a general digital file management. This

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aigner Lehner Zuschin + Partner Rechtsanwälte Austria means that, if possible, all courtrooms should be equipped with appropriate flat screens, so that the entire court file is also available electronically during the trial. In this way, for example, attachments should no longer be provided physically, but only electronically using a screen. Due to the current COVID-19 pandemic, courts are now empowered to conduct hearings by video conference without the presence of the parties and their representatives. This is a temporary innovation, as usually the presence of at least the representatives of the parties during the court hearings is a basic requirement for conducting proceedings. However, lawyers are extremely critical of court hearings conducted by means of video conferencing, especially since it cannot be guaranteed that witnesses are not influenced in a separate room and also because the lack of a personal impression during the witness hearing appears to be detrimental for the establishment of the truth. It is therefore expected that court hearings by video conferencing will be a temporary measure used only during the COVID-19 pandemic.

Integrity of process The model establishing the separation of powers prevails in Austria. This means that the legislature (legislation), the executive (execution) and the judiciary (jurisdiction) must be strictly separated. In order to ensure this separation of powers, there are also judicial guarantees of independence, non-transferability and irremovability. The independence of the judges, and thus the complete freedom to issue directives in matters of the judiciary, is constitutionally enshrined in Article 87 (1) of the Federal Constitutional Law (Bundes- Verfassungsgesetz). The judicial guarantees of non-transferability and irremovability are constitutionally enshrined in Article 88 (2) of the Federal Constitutional Law (Bundes- Verfassungsgesetz) and include exceptional circumstances only to a very limited extent. This special position of the judges also leads to a special protection of the individual legal subject during a fair trial. In addition, in Austrian civil procedure law it is also possible to reject a judge due to the presence of objective bias. This does not mean that it is necessary to actually give proof of subjective bias to the judge, but rather that a judge is already considered to be biased if an objective third party can assume the bias of the judge on the basis of outward appearances.

Privilege and disclosure In principle, general limits are already set at constitutional level, albeit with reservations, that protect information and documents of legal advice. For example, Article 8 of the European Convention on Human Rights (ECHR) protects apartments and facilities, also including law firm premises, as well as the correspondence. This protection is particularly important for government interventions in the form of house searches and guarantees in criminal proceedings. The nemo tenetur principle inherent in Article 6 of the ECHR of not having to incriminate oneself, as an outflow of the principle of fair trial, can be used to obtain a special protection for the relationship between client and lawyer and to counter the inclusion of information and documents from this relationship in proceedings. The Austrian code of professional responsibility of lawyers, specifically Sec. 9 of the Lawyers’ Act (Rechtsanwaltsordnung), specifies the rule-exception principles resulting from constitutional law to protect the confidentiality of lawyers and the documents relating to the client-lawyer relationship. In specific cases, the procedural (formal) legal source must always be used depending on the substantive legal case. This connection is crucial for assessing which information and which documents are protected.

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For example, in the various procedural laws there are rights to refuse to give evidence – in civil proceedings in accordance with Sec. 321 of the Civil Procedure Code (Zivilprozessordnung), in criminal proceedings in accordance with Sec. 157 of the Code of Criminal Procedure (Strafprozessordnung), whereby the Code of Criminal Procedure also stipulates prohibitions of circumventions, for example as per Sec. 157 (2) leg cit., according to which the right to refuse to give evidence may not be circumvented by seizure and confiscation of documents or information stored on data carriers or by interrogation of assistants or persons participating in professional activities for training purposes. The prohibition of circumvention also extends to documents and information that are within the control of the accused in criminal proceedings (clients) and that were created for the purpose of consultation or defence. The lawyer also has the right to refuse to give evidence in public law proceedings in accordance with Sec. 49 of the general administrative procedure law (Allgemeines Verwaltungsverfahrensgesetz).

Evidence Traditionally, Austrian civil procedure partly realises both the adversarial and inquisitorial principle while having a tendency to lean towards the inquisitorial principle (scholars use the term ‘attenuated inquisitorial principle’). While it is the parties’ duty to assert propositions and collect evidence, the court also has its own duty to collect evidence ex officio. Document production can be compelled: if one party manages to show that the opposing party or a third party possesses a specific document it needs as evidence, it can request the court to issue a submission order. The document production cannot be refused by the other party if (i) it referred to the document for its own evidence, (ii) it is obliged to submit the document to the requesting party, or (iii) the document in question is a common document between the parties (made in the legal interest of both parties, certifying a mutual legal relationship or written statements in a negotiation between the parties). Regarding documents in possession of third parties, naturally only (ii) and (iii) apply. Concerning electronic disclosure, there are no special rules in Austrian law. Witnesses are obliged to appear at the hearing and testify. If a witness fails to do so without a valid excuse, a penalty will be imposed with the new witness invitation and the parties can request the court to impose on the witness the frustrated costs of the parties due to their failure to appear. If the witness repeatedly fails to appear at the hearing, the penalty can be doubled and enforced appearance can be ordered by the court.

Costs The applicable court fees for commercial disputes in Austria are known to be quite high in comparison to other states, especially due to the non-existence of a cap. According to the Austrian Court Fees Act (Gerichtsgebührengesetz), in order to make use of first instance courts, a claimant seeking to litigate damages of EUR 1 million, for example, is obliged to advance 1.2% plus EUR 3,488 of the amount in dispute. To appeal, the appellant would be obliged to advance 1.8% plus EUR 5,027, and for the third instance 2.4% of the amount in dispute plus EUR 6,703. For amounts in dispute below EUR 350,000, the court fees are staggered. The decision of the court states which party must bear the costs eventually. If the claimant succeeds only in part, the costs are born proportionally to the quota of success. The decision on costs by the court can be challenged separately. Reimbursable lawyers’ fees are regulated by the Austrian Lawyers’ Fees Act (Rechtsanwaltstarifgesetz). Unlike the court fees, the reimbursable lawyers’ fees are capped by an amount in dispute of approximately EUR 32 million. Up to that amount, lawyers’ fees

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aigner Lehner Zuschin + Partner Rechtsanwälte Austria are regulated by tariffs that are dependent on the amount in dispute and distinguish between qualitative criteria on three levels (‘taxameter principle’, e.g. the statement of claim and one hour of oral court hearings being the most expensive, and a written notification to the court stating the address of a requested witness being the cheapest). Regarding the security for costs for the defendant, the defendant can file an application for a security deposit for the defendants potential costs of the proceedings in the statement of defence if the claimant is residing outside of the European Union; however, exemptions exist, e.g. if international treaties provide otherwise.

Litigation funding As contingency fees are only permitted if they are not calculated as a percentage of the amount awarded by the court (pactum de quota litis), litigation funding in Austria is commonly based on agreed-upon hourly rates or the Austrian Lawyers’ Fees Act (Rechtsanwaltstarifgesetz), sometimes with added success fees. Lump sum agreements are not very common in litigation. Legal expenses insurance is generally widespread among consumers but typically exempts particular sorts of claims, e.g. claims deriving from investments and construction disputes. Among commercials, legal expenses insurance exists but is not as widespread as among consumers. Such insurance usually covers court fees and lawyers’ fees on the basis of the Austrian Lawyers’ Fees Act (Rechtsanwaltstarifgesetz), while hourly rates are covered very rarely. Third-party funding is relatively new in Austria, but is already an established and accepted practice being used in a variety of proceedings. Currently, different forms of third-party funding exist, such as third-party funding for specific claims (e.g. flight rights, rent deduction, etc.) or for mass claims such as investor claim procedures. At this very moment, third-party funders are particularly present in the public due to the sudden bankruptcy of a middle-size bank in Austria and many damaged investors from Wirecard AG.

Class actions Austrian law does not provide for class actions in the strict sense. Nevertheless, Austrian law provides some mechanisms that deal with mass claims/collective actions. Firstly, some privileged institutions such as the Consumer Information Association (Verein für Konsumenteninformation) or the Austrian Economic Chambers (Wirtschaftkammer Österreich) can, e.g. file injunctions to protect collective interests of consumers. There is no compensatory relief; therefore, these actions cannot be used to claim damages. These actions are called Verbandsklagen. Secondly, if compensatory relief is sought, an individual can assign its claim to a privileged institution to litigate its case. In this case, even if the amount in dispute would ordinarily be too low to be admitted to the Supreme Court (Oberster Gerichtshof ), these quantitative restrictions do not apply and therefore the privileged institution, typically a consumer organisation, can obtain a supreme court judgment which can be used in similar cases and act as a model action. Thirdly, regarding mass claims, there is a mechanism unofficially addressed as ‘class action Austrian style’ (Sammelklage österreichischer Prägung), where one party accepts assignments of claims from many owners of claims in order to file a single action against the defendant, including all assigned claims. According to the Supreme Court (Oberster

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Gerichtshof ), the prerequisite for the admissibility of the class action Austrian style is that there is a substantially similar ground of claim (relevant common basis) and in addition, essentially identical questions of factual or legal nature, which concern the main question or a very relevant preliminary question of all claims. Additionally, the so-called ‘group model’ has been established in practice over the last few years to litigate mass claims: the ‘group’ is typically organised by a law firm (or a consumer protection organisation) and uses several ‘test cases’ in order to get judgments to several legal and factual aspects while the group tries to arrange a ‘procedural agreement’ with the defendant to prevent limitation of the claims. Also, different defendants for each group might be an option in some cases. If the defendants refuse to enter a procedural agreement, the individual cases need to be filed and usually interrupted (formally the proceeding would ‘rest’) to wait for the outcome of the test cases. A success in one of the test cases will not be formally binding to the other cases; however, it certainly strengthens the legal position of each member of the group.

Interim relief Interim measures provided by Austrian law are either of a preventive (i.e. to secure the enforcement), regulatory (i.e. to regulate the temporary state of affairs rather than just freeze the situation), or performance (i.e. to provide preliminary fulfilment) nature. In order to secure the enforcement of monetary claims, preventive measures may be granted in the presence of either a subjective or objective threat to the prospective enforcement. A subjective threat to the prospective enforcement in this sense considers the case where a defendant might damage, destroy or relocate assets. Intent or negligence by the defendant does not need to be proven. An objective threat to the prospective enforcement may appear if the respondent will not have any assets on Austrian territory and the judgment would have to be enforced in a state where enforcement is not guaranteed by European or international law. Available means of interim measures to secure monetary claims include: the custody and administration of the respondent’s movable tangible property; a prohibition of disposal or pledging of movable tangible property with the effect that any disposition against this prohibition will be invalid; a prohibition of disposal of monetary or performance claims including an interdiction to the third party to settle the debt or perform; the administration of the respondent’s real estate; and/or the prohibition of disposal or pledging of real estate. Interim measures for non-monetary claims are linked to the object to which the applicant’s claim refers and include prohibitions of disposal or pledging of real estate, deposit by the court of the (movable and tangible) object of dispute, etc. Interim measures issued by a Member State of the European Union or the Lugano Convention can be recognised and enforced in Austria. Outside of the scope of Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels Ia Regulation) and the Lugano Convention, enforcement of foreign measures often fails due to the narrow requirements. Regulation (EU) No. 655/2014 establishing a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters and Sec. 422 et seq. of the Austrian Enforcement Act (Exekutionsordnung) regulate the possibility to obtain a preservation order with the purpose of preventing the transfer or withdrawal of funds by the debtor that may put the subsequent enforcement in danger in cross-border matters within the European Union.

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Enforcement of judgments/awards Judgments by the court can generally be enforced once they are final and binding, i.e. in most circumstances if there is no longer the possibility of appeal. National arbitral awards as well as court judgments can be enforced through the procedural rules of the Austrian Enforcement Act (Exekutionsordnung), which requires a court order warranting the enforcement. Such court orders warranting enforcement will usually be granted without an oral hearing if the award or judgment is enforceable. Concerning the recognition and enforcement of foreign judgments, several bi- and multilateral treaties exist. The most relevant would be the Lugano Convention. Judgments from courts of EU Member States can be recognised and enforced according to the Brussels Ia Regulation. There is no proceeding to obtain recognition of a court decision from a different EU Member State, so the party must provide a copy of the judgment that satisfies the conditions necessary to establish its authenticity and a certificate pursuant to Article 53 of the Brussels Ia Regulation issued by the court of origin. The Lugano Convention provides a very similar system as the Brussels Ia Regulation for recognition and enforcement. As Austria is a member state of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), recognition and enforcement of foreign arbitral awards follow the procedures set forth therein and are common in Austria.

Cross-border litigation For intra-European cases, the question of whether a civil lawsuit can be brought before Austria (international jurisdiction) is determined according to the Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (EuGVVO). For matters not related to the European Union, the international jurisdiction is governed by the Regulation on the Law Applicable to Contractual Obligations (Rome I). Both regulations are binding and therefore determine the conditions under which a lawsuit with conflicting parties of different nationalities can be brought before Austria. The aforementioned regulations expressly set out the conditions under which the parties can reach an international agreement on the place of jurisdiction. If the civil proceeding has not been brought before Austria, it is still possible, by means of a letter rogatory, to arrange for witnesses based in Austria to be heard before national courts by video conference. On the other hand, the freezing of assets is not possible under civil law, but only on the basis of criminal court orders in connection with an offence. Injunctions by courts of other states that would prevent proceedings in this country are not common in Austria.

International arbitration The Austrian Civil Procedure Code (Zivilprozessordnung) provides a modern arbitration law for both national and international arbitration proceedings, substantially reflecting the UNCITRAL Model Law on International Commercial Arbitration, granting a great degree of party autonomy and independence to the arbitral tribunal. For actions for setting aside an arbitral award, actions for the declaration of existence or non-existence of an arbitral award and proceedings deriving out of the constitution of the arbitral tribunal, the Supreme Court (Oberster Gerichtshof ) has sole jurisdiction. If the arbitral tribunal does not have the authority to perform certain judicial acts, it may request

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aigner Lehner Zuschin + Partner Rechtsanwälte Austria a court to perform said act. Interim measures can be requested by a party at the arbitral tribunal and will be enforced by the competent district court. Austria’s most relevant arbitration institution for international commercial arbitration is the VIAC, the Vienna International Arbitral Centre of the Austrian Federal Economic Chamber, operating under the ‘Vienna Rules’, recently amended and now including rules of mediation as well as rules of arbitration.

Mediation and ADR Mediation has gained more and more acceptance over the last few years, but is still mainly used in family disputes rather than in commercial disputes. It is governed by the Federal Act on Mediation in Civil Law Matters (Bundesgesetz über Mediation in Zivilrechtssachen). Through Sec. 433a of the Civil Procedure Code (Zivilprozessordnung), in a settlement reached in a mediation procedure, an enforceable title can be obtained at every district court (mediation settlement, Mediationsvergleich). Furthermore, it is not uncommon for judges to informally encourage the parties to turn to mediation to solve the dispute. With regard to cross-border mediation within the European Union, the European Mediation Act (EU- Mediations-Gesetz) was introduced as implementation of Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters. The VIAC provides administration not only for (national and international) mediation but for all kinds of amicable dispute resolution procedures led by an ‘all-party’ third party. Various professional bodies provide dispute resolution mechanisms for disputes between their members or between members and their clients (lawyers, doctors, etc.). Directive 2013/11/EU on alternative dispute resolution for consumer disputes was implemented by the Federal Act for Alternative Dispute Resolution for Consumer Disputes (Alternative- Streitbeilegung-Gesetz). In addition to conciliation boards and similar institutions for telecommunications, energy, postal services, flight and passenger rights, etc. as set forth in Directive 2013/11/EU, other conciliation boards exist, e.g. for rental and housing disputes between a tenant and a landlord. In this case, the attempt of a proceeding in front of the conciliation board is even a prerequisite to be able to take the claim to an ordinary court.

Regulatory investigations In Austria, since the introduction of general civil law, it has been a general rule that the state does not interfere in the private legal relationships of the citizens. Such regulations of the civil law relationships only apply in very exceptional situations, namely where one of the parties to the proceeding is particularly superior to the other. For example, there are special rules for the relationship between consumers and entrepreneurs and also for entrepreneurs with a monopoly. Due to special consumer protection, it is not possible in Austria to restrict compensation and warranty rights in contracts with the consumers. In contrast, there is greater scope for contractual arrangements between entrepreneurs. Due to the private autonomy historically enshrined in Austria, state interventions in civil law relationships of private individuals are carried out with extreme care and only to a very limited extent.

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Mag. Lukas Aigner Tel: +43 1 361 9904 / Email: [email protected] Practice areas: Litigation & dispute resolution; investor protection law; corporate law; and capital markets and securities law. Career: Attorney at Law since 2005; Partner, Founder and Head of the Investor Protection Law department at Kraft & Winternitz Rechtsanwälte; and Founder and Naming Partner at Aigner Lehner Zuschin + Partner Rechtsanwälte (2015). Professional memberships: Member of the international WIN Network (World Investor Lawyer Network). Publications: Co-author of “Liability of investment advisors” (Orac/ Lexisnexis, 2004); and Co-author of “Commentary on Securities Supervision Act (WAG)” (Orac/Lexisnexis, 2007).

Dr. Johannes Lehner Tel: +43 1 361 9904 / Email: [email protected] Practice areas: Litigation & dispute resolution with a focus on commercial law and real estate, corporate law, tenant protection, and representation in professional football. Career: Attorney candidate at Hasch & Partner und Völkl Rechtsanwälte; Attorney at Law at Wildmoser/Koch & Partner (2014–2016); and Partner at Aigner Lehner Zuschin + Partner Rechtsanwälte (2016). Publications: “Establishment of a European Cooperative Society with State of Registration Austria” (2008); “Commentary on the Austrian Commercial Code” §§ 271, 274 and 275 (2012) (Co-author); “Liability of the legal professional” (in Althuber, “Liability of managing director and management board in Austrian tax law”) (2012); and numerous articles in his fields of practice. Personal: University of Vienna and University of Fribourg (Mag. iur. 2005, Dr. iur. 2008); University Assistant for Business Private Law and Corporate Law at the Technical University of Vienna (2008–2016); Attorney at Law (2013); and Senior Scientist for Business Private Law and Corporate Law at the Technical University of Vienna (2016–2017).

Aigner Lehner Zuschin + Partner Rechtsanwälte Pestalozzigasse 4/5, 1010 Vienna, Austria Tel: +43 1 361 9904 / URL: www.aigner-partners.at

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Mark Chudleigh & Lewis Preston Kennedys

Efficiency of process The Bermuda Court system, with a dedicated Commercial Court, is efficient and the Court endeavours to facilitate the requirements of its commercial users. In common with courts elsewhere, the Bermuda Courts experienced severe disruption as a result of the COVID-19 pandemic which was exacerbated by the Court’s paper-based record system and manual filing processes. The anticipated introduction of an electronic document management system and electronic filing will improve the efficiency of the Court in future. The Supreme Court (Bermuda’s Court of first instance in respect of commercial matters valued over US$25,000) has two full-time judges, including Bermuda’s Chief Justice, and a number of assistant judges, who are highly experienced in civil and commercial matters. Bermuda statutes, rules, practice directions and judgments are all available online. Court files (subject to certain confidentiality restrictions) may be inspected on the same day as a request is filed. Urgent applications can be heard at almost no notice, if necessary. The Rules of the Supreme Court 1985 closely follow the contemporaneous rules of the England and Wales Supreme Court (i.e. pre-Civil Procedure Rules but the English “overriding objective” has been incorporated more recently) and provide a clear and efficient structure for litigation (with template forms for users). There are, however, a number of material differences between Bermuda civil procedures and those currently applied in English High Court proceedings. At a very high level, Bermuda’s civil procedures are not dissimilar to those in the United States, with parties adopting an “adversarial” approach. For example, a typical damages claim will encompass pleadings, discovery, fact (and possibly expert) witness testimony, opportunities for early disposition, use of written submissions/briefs and a trial with live witness testimony and oral submissions from counsel. At a lower level, however, there are a number of very significant differences between Bermuda and US civil procedures. In insolvency matters, the Companies Act 1981 and Companies (Winding-up) Rules 1982 also provide a reasonably clear set of rules for those proceedings. Under normal circumstances, non-urgent applications and preliminary hearings in proceedings are listed within two to eight weeks and the Court can be relied upon to give commercial directions for the efficient and expeditious hearing of trials. The Court’s summary judgment procedure also follows the England and Wales model and the Court generally takes a robust approach to the early determination of issues where one party has no real prospect of success at trial.

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Integrity of process The integrity of the Bermuda Court process is beyond reproach. As above, the Supreme Court’s judiciary are highly experienced in civil and commercial matters. Appeals are to the Court of Appeal of Bermuda, which sits three times a year and whose bench is drawn from highly experienced members of the UK and Caribbean judiciaries, including from the English High Court and Court of Appeal. Final appeal, with permission, lies to the Privy Council, whose members also constitute the English Supreme Court (England’s Apex Court), sitting in London. Principles of natural justice are therefore well respected and the right to a fair hearing is enshrined in Bermuda’s constitution. Bermuda’s judiciary operate in a manner that is free from political interference and the Courts have a long history of reviewing government actions and legislation.

Privilege and disclosure Subject to certain protections, and/or agreement between the parties, in standard factual disputes (particularly where commenced by a writ of summons), disclosure between litigants of documents relating to the matters in question is compulsory in Bermuda. The obligation, which continues to the point of judgment, extends to preserving and disclosing all documents that are or have been in the litigants’ possession, control or power relating to the issues in question, whether helpful to their case or not. Third parties may be compelled to produce documents in certain circumstances, particularly where necessary to dispose fairly of the claim or save costs. The use of electronic disclosure is a matter for the parties and the Court has not yet sought to regulate this area, although the modern practice of the English Commercial Court is often adopted. Bermuda’s procedural rules do not permit US-style deposition discovery of witnesses. Protections from disclosure extend to privileged documents, “without prejudice” communications made with a view to settling the litigation, documents that it would not be in the public interest to disclose, and the right to avoid self-incrimination. As to privilege, the position in Bermuda is based on the English common law which rigorously protects against disclosure of documents attracting advice, litigation, joint and common interest privilege. In summary: • “advice privilege” protects against disclosure of confidential communications between lawyer and client made for the purposes of seeking or giving legal advice; • “litigation privilege” protects against disclosure of all confidential documents created primarily for the purpose of ongoing or anticipated litigation; • “joint interest privilege” is the protection against disclosure of material passing between clients and their jointly instructed lawyer in relation to litigation; and • “common interest privilege” protects against disclosure material passing between parties with a common interest in litigation with a view to informing one another about matters in the litigation. Documents disclosed in Bermuda proceedings are generally subject to an implied undertaking of confidentiality/against collateral use. They cannot therefore be used outside of the proceedings without the Court’s permission, which is rarely given. Subject to balancing the importance of open justice, the Bermuda Court will, where appropriate, seal the Court file and hear matters in camera to protect confidentiality. This

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Kennedys Bermuda approach is most often taken in arbitration, trust, intellectual property or other sensitive and/ or confidential commercial matters.

Evidence Bermuda’s common law and statutory rules of evidence in civil proceedings generally follow English law, and the presentation of the evidence is “adversarial” in nature. In large part reflecting the lack of jury trials for civil matters in Bermuda, issues as to the quality of evidence (e.g. hearsay) rarely arise (in contrast to the US courts) and most factual disputes are determined by reference to the relative “weight” of the parties’ evidence. In respect of proceedings requiring the final determination of factual disputes, written evidence-in-chief (or “direct testimony” in US parlance) is exchanged prior to, and affirmed by live witnesses at, the hearing, where witnesses may be subject to cross-examination. Expert evidence, including evidence of foreign law, is permitted with the Court’s consent and is treated in the same way with experts producing written reports. There is no practice of deposing experts in advance of trial, and communications between counsel and experts (including draft reports) are generally protected from disclosure. Interlocutory applications are almost always dealt with on written evidence alone. Consistent with the Hague Convention on the Taking Abroad of Evidence in Civil and Commercial Matters (although that Convention is not technically applicable in Bermuda), Bermuda provides assistance to foreign courts through a formal “Letter of Request” (or “Letters Rogatory”) process for the examination of witnesses in Bermuda and for their production of particular specified documents, or other prescribed real evidence, for use in foreign proceedings. Witnesses in both domestic proceedings and those providing evidence for use in foreign courts are compellable by subpoena.

Costs Awards of costs (or “attorneys’ fees” as they are labelled in US litigation) are made at the discretion of the Court, but reasonably incurred legal costs in respect of Bermudian proceedings are normally recoverable by the winning party (i.e. what Americans call the “English rule” on costs). Pre-emptive costs capping in Bermuda is rare and limited to cases where there is a public interest component. While awards of costs of interlocutory hearings may be deferred until the end of proceedings or awarded at each contested application/hearing, the quantum assessment of costs in Bermuda is usually postponed until the end of the proceedings and the Court does not, except in exceptional circumstances, make an order for payment on account of costs pending assessment. There is conflicting authority on the extent to which the Court can take an “issues-based” approach to the award of costs, as opposed to the determination of costs more generally by assessing who the substantial winner is. However, the trend appears to favour issues-based orders. Costs can be awarded on an indemnity or standard basis, which changes the presumption between the parties as to whether the costs were reasonably incurred (and therefore recoverable).

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In cases where costs are assessed on the standard basis (which is the usual basis absent agreement or unreasonable conduct of the losing party), as a “rule of thumb” the winning party might expect to recover 65–75% of their costs. Applications for security for costs are permissible, but only by the defendant to a claim or counterclaim, where the plaintiff is ordinarily resident outside of the jurisdiction, a nominal plaintiff suing for some other person, or there are questions over the address of the plaintiff and there are legitimate concerns about the enforceability of any costs order against that person. In the case of a foreign plaintiff, the amount of security is assessed by reference to the estimated cost of enforcing a costs order in the jurisdiction of the foreign party. Appeals to the Court of Appeal require, as a condition of the appeal, the securing by the appellant of the respondent(s)’s costs.

Litigation funding Neither contingency nor conditional fee arrangements are currently permitted in Bermuda, although the Bermuda Bar Association has been campaigning for legislation to enable the use of conditional (but not contingency) fee arrangements. Bermuda has yet to enact legislation in relation to third-party funding. However, in recent years, the Bermuda Courts have taken a modern approach to third-party funding arrangements (based on notions of “access to justice”), and, in the context of commercial cases, are generally unsympathetic to assertions that such arrangements are unlawful (although third-party funders can be made liable for costs). Third-party funding is most common in claims being pursued by companies in liquidation. Litigation insurance, including after the event (“ATE”) insurance, is also permitted.

Class actions Where numerous persons have the same interest in any proceedings, those proceedings may be brought and/or continued by or against any one or more of them in a representative capacity. In such proceedings, a judgment or order is binding upon the member-represented group, but is enforceable against those persons who were not parties, with leave of the Court. In practice, these types of proceedings are very rare and have little in common with US- style class actions.

Interim relief Interim relief in support of underlying proceedings (whether local or, under certain circumstances further set out below, foreign proceedings) is available in Bermuda, including orders: • prohibiting a person from doing, or mandating a person to do, something; • requiring disclosure of assets and information in relation to those assets; • providing for the searching of property; • securing particular property, the ownership of which is disputed; • freezing a respondent’s general assets in Bermuda or, if the Court has in personam jurisdiction over the respondent to such an application, the freezing of their worldwide assets; • prohibiting a party from engaging in proceedings, including foreign proceedings; and • requiring a stay of Bermudian proceedings.

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Penal notices (warning of possible contempt of court for non-compliance) can attach to such orders as appropriate. Where necessary, applications can be made on an urgent and ex parte basis and undertakings can be required from the applicant to compensate the respondent in damages for losses flowing from any injunction that is ultimately set aside. Additional complexities in relation to interim relief in support of foreign proceedings are considered below.

Enforcement of judgments/awards There are various mechanisms for enforcing a Bermuda judgment within the jurisdiction: • a bailiff action to seize such assets of the judgment debtor as may be sold to satisfy the judgment debt, interest and costs of execution; • third-party debt (garnishee) orders, in which third parties, including banks, may be ordered to pay to the judgment creditor any sums they owe to, or sums they hold in respect of, the judgment debtor; • the appointment of a receiver by way of equitable execution over a judgment debtor’s real and/or personal property; and/or • in circumstances where the failure to comply with an order constitutes a contempt of court, sequestration to seize the judgment debtor’s assets until the order is complied with and the costs of the judgment creditor are secured. Domestic arbitration awards are, with the leave of the Court, enforceable as a judgment or order to the same effect and judgment may be entered in the terms of the award. They can also provide a basis for set-off,res judicata and issue estoppel defences in Bermuda. Enforcement of foreign judgments and arbitration awards are considered below.

Cross-border litigation Most of the matters pending before Bermuda’s Commercial Court have a “cross-border” component. The circumstances in which the Bermuda Court will permit claims to be served on a non- resident person or entity outside of the jurisdiction (and accept jurisdiction over such claims and defendants) are restricted to certain categories (which are common to Commonwealth jurisdictions) and include: • injunctions in relation to acts within Bermuda; • claims concerning necessary or proper parties (outside Bermuda) to proceedings in which other parties have been duly served (inside or outside Bermuda); • claims in respect of: • contracts made within the jurisdiction; • contracts made by or through an agent within the jurisdiction; • contracts governed by Bermuda law, or with a Bermuda jurisdiction clause; or • breaches of contract within the jurisdiction; • torts in which the tortious act or damage occurred within the jurisdiction; • claims relating to land in Bermuda or Bermuda trusts; • claims concerning probate in Bermuda; and • claims for the enforcement of judgments or arbitration awards in Bermuda. Even if jurisdiction can be established, the Bermuda Court can stay actions on the basis of forum non conveniens where some other forum is more appropriate.

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Bermuda has adopted various other measures to facilitate cross-border litigation and enforcement. As set out above in the section on Evidence, Bermuda provides assistance to foreign courts through a formal “Letter of Request” process for the examination of witnesses in Bermuda and for their production of particular specified documents, or other prescribed real evidence, for use in foreign proceedings. There is a simplified system for the registration and enforcement of foreign money judgments (excluding taxes, fines and penalties) from certain countries and territories. Those countries and territories are: Anguilla; Antigua; the Bahamas; Barbados; Barbuda; the British Virgin Islands; Dominica; Gibraltar; Grenada; Guyana; Hong Kong; Jamaica; Montserrat; Nevis; Nigeria; Redonda; St Kitts; St Lucia; St Vincent; the UK; the Federal Courts of the Commonwealth of Australia; and various State and Territory Courts within Australia. Registration under this procedure can be withheld or set aside on the grounds that: • the foreign court lacked jurisdiction in a private international law sense (i.e. the defendant was not present in the foreign country when the foreign proceedings were issued, did not make a claim or counterclaim in those proceedings, or did not voluntarily submit to those proceedings); • insufficient notice was given to the defendant in the foreign proceedings; or • the foreign judgment was obtained by fraud. Judgment creditors of foreign judgments not issued in the above countries and territories are required to use the common law method of enforcement, by issuing a claim in Bermuda mirroring the original proceedings against the same parties and seeking summary judgment on the basis of res judicata. In order to employ this mechanism, the foreign judgment must be the finalin personam judgment for a definite sum of money given by a competent court with jurisdiction (in a private international law sense (as above)), which was not obtained by fraud or in breach of natural justice and the enforcement of which must not be contrary to public policy. Provided a foreign court’s proceedings have produced or might produce a judgment that is enforceable in Bermuda as above: • a Bermuda Court may grant a freezing injunction in aid of those proceedings to prevent the dissipation of assets within Bermuda; or • if the Bermuda Court has in personam jurisdiction over the judgment debtor (or potential judgment debtor), it may also grant a freezing injunction in aid of those proceedings to prevent the dissipation of worldwide assets. In relation to anti-suit injunctions, where there is an agreement to arbitrate or litigate in Bermuda, or where the Bermuda Court has jurisdiction over a party seeking to avoid the consequences of a jurisdictional or arbitration clause, an anti-suit injunction can be sought in Bermuda to prohibit engagement in litigation contrary to that agreement. A foreign judgment obtained against a Bermudian defendant in violation of an arbitration clause may not be enforceable in Bermuda. In relation to insolvency, it is not possible to wind up foreign companies in Bermuda unless they have been granted a permit by the Minister of Finance to carry on business in Bermuda. However, the Bermuda Court frequently does recognise liquidators appointed by foreign courts both in relation to the liquidation of foreign companies and Bermuda companies where there is a sufficient connection to the foreign court’s jurisdiction making it the most

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Kennedys Bermuda convenient jurisdiction to have made the winding up or appointment order, where there are documents, assets or liabilities in Bermuda or other connecting factors with Bermuda, and recognition or assistance would be consistent with Bermuda’s substantive law and public policy. The exact scope of the Bermuda Court’s jurisdiction to assist in the absence of a Bermuda liquidation is the subject of a number of recent decisions and is an area in which we are likely to see further clarification. While Bermuda has not implemented the UNCITRAL Model Law on Cross-Border Insolvency, the Bermuda Court has taken a pragmatic approach in developing its practice and procedure relating to provisional liquidations to facilitate the implementation of cross- border restructuring of Bermuda companies.

International arbitration Bermuda’s (re)insurance industry utilises arbitration clauses in all contracts, typically applying New Law and often Bermuda-seated arbitration. As such, there is widespread understanding of international arbitration and a significant body of case law. Bermuda has enacted into law, with supporting provisions, the UNCITRAL Model Law on International Commercial Arbitration (albeit without its 2006 amendments). It therefore has an excellent mechanism for international arbitration with detailed provisions for: • assistance and supervision by the Bermuda Court; • the appointment of arbitrators; • addressing questions as to the jurisdiction of the tribunal; • the conduct of the arbitration proceedings; • interim, interlocutory or partial awards (which are permissible); • representation; • the enforcement of awards; • the reporting of proceedings; and • costs (which are recoverable). As a general matter, the Bermuda Courts are very supportive of the arbitration process. Although the Courts are frequently called upon to support the arbitration process, in the case of international arbitrations the Courts rarely review arbitration awards, given the very limited grounds for appeal under Bermuda’s international arbitration statute. Bermuda is subject to the New York Convention on the enforcement of arbitration awards. Convention awards are enforceable in Bermuda with the leave of the Court, in the same manner as a judgment or order to the same effect, and judgment may be entered in the terms of the award. Such awards are also recognised for the purposes of set-off, issue estoppel and res judicata. As above, the Court has jurisdiction to grant an injunction to stay any court proceedings issued contrary to an agreement to arbitrate. The Bermuda Court can only refuse to enforce an arbitration award if: • one of the parties to the arbitration agreement was under some incapacity; • the arbitration agreement was not valid under the law of either the agreement or, in the absence of an agreement, under the law of Bermuda; • the award debtor was not given proper notice of the appointment of an arbitration tribunal or of the arbitral proceedings or was otherwise unable to present its case; • the tribunal did not have jurisdiction because the award deals with a dispute not contemplated by or within the terms of the arbitration agreement, or the decision itself goes beyond the scope of the agreement to arbitrate (in which case those decisions

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that do go beyond the submission to arbitrate can be set aside but do not necessarily extinguish the whole award); • the composition of the arbitration tribunal or the arbitration procedure itself was not in accordance with the agreement between the parties; • the award has been suspended or set aside by a competent authority in the country in which it was made; • the subject matter of the dispute is not capable of settlement by arbitration under the law of Bermuda; or • enforcement of the award would be contrary to public policy. In the case of arbitrations taking place between persons and entities all resident in Bermuda (which are governed by a separate domestic arbitration statute), appeals of arbitration awards may be made on a point of law to the Court of Appeal with leave of the Supreme Court.

Mediation and ADR Mediation is not compulsory in Bermuda but there are statutory model provisions for mediation that can be agreed between parties to international arbitration agreements to apply to their dispute (and such provisions could largely be agreed between parties to standard litigation dispute). Those standard provisions allow for without prejudice discussions, stays of proceedings, representation, equal bearing of costs and standard terms with the mediator. Bermuda has a branch of the Chartered Institute of Arbitrators which facilitates such mediations.

Regulatory investigations Regulatory investigations have become increasingly common over the past decade. The Bermuda Monetary Authority (the “BMA”) has regulatory and supervisory authority over a wide range of financial services and related businesses conducted in Bermuda and/or by Bermuda entities, including in the insurance, banking, trust, investment, funds, and corporate service provider sectors. The BMA has a wide range of inspection- and information gathering-powers, including (in addition to routine annual regulatory filings by registrants) conducting on-site examinations, commissioning inspections and audit reports, requiring the provision of written answers to interrogatories, the production of documents, and attendance at the BMA for live questioning. Regulated institutions are also required to self-report regulatory non- compliance. Although most requests are dealt with voluntarily, the BMA does have powers to enter regulated business premises for the purpose of its investigations. Where investigations result in the discovery of a breach of regulatory requirements or there is non-cooperation, the BMA has a number of enforcement options, including the imposition of conditions on a registrant’s licence, imposition of directions, seeking statutory civil penalties and injunctions from the Court, prohibition orders in respect of officers and shareholder controllers, revocation of licences, winding-up by the Court and referral to the police. Decisions to take such actions are subject to judicial review. In addition to the BMA, professional bodies, including those regulating lawyers and accountants, have certain investigatory powers.

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Mark Chudleigh Tel: +1 441 535 7160 / Email: [email protected] Mark Chudleigh, managing partner of the Bermuda office, has over 30 years of commercial litigation experience including in the City of London, the United States and Bermuda. He maintains an international practice and frequently represents clients on complex, multijurisdictional matters, particularly involving the United States, having been admitted as an attorney in the State of California in 1998. He is well known for his work in relation to international (re)insurance arbitrations. Mark’s litigation practice includes commercial/corporate litigation, regulatory matters, insolvency and trust matters. His contentious insurance and reinsurance practice includes disputes and coverage investigations involving entities in Bermuda, other British Overseas Territories, the United States, Europe and Asia. He frequently acts as an expert witness on Bermuda law and is regularly appointed as an arbitrator in commercial disputes. Mark has been recognised as a leading lawyer in Bermuda by several directories, including Chambers Global and The Legal 500.

Lewis Preston Tel: +1 441 534 7161 / Email: [email protected] Lewis Preston is a commercial litigation barrister with over 10 years’ experience, admitted to the English, Bermuda and BVI Bars. Lewis practised for six years in London, spent two-and-a-half years in Hong Kong as a litigation associate at offshore firm Maples, during which time he litigated BVI and Cayman Islands disputes, and has spent the last two years as a senior associate at Kennedys in Bermuda. Recent work includes representing a protector in a multi-billion-dollar trust dispute, representing a liquidator investigating a structure allegedly involved in a £1bn VAT fraud, representing directors in a US$300m breach of fiduciary duty and confidentiality dispute, representing an insurer in an arbitration dispute to secure the first Commonwealth estoppel defence in an enforcing court in reliance on a decision of a supervising court, drafting the documents to obtain an injunction in a US$750m unlawful conspiracy/breach of duty claim, defending a US$60m winding up petition to prevent the liquidation of the largest Chinese retailer in its sector, and representing shareholders defending a US$100m unfair prejudice petition.

Kennedys 20 Brunswick Street, Hamilton HM 10, Bermuda Tel: +1 441 296 9276 / URL: www.kennedyslaw.com

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Eduardo Perazza de Medeiros & Ariana Júlia de Almeida Anfe Machado Meyer Sendacz e Opice Advogados

Efficiency of process In recent years, despite all of the peculiarities and difficulties arising from having a continental dimension, as well as the volume of judicial claims filed every day as a result of its historically litigious culture, Brazil has sought to achieve greater efficiency in terms of dispute resolution, mostly by reducing the time taken to reach a definitive and fair outcome for processes submitted to the judicial courts and officially embracing alternative dispute resolution methods. In this context, the Code of Civil Procedure, which was approved in 2015 and entered into force in March 2016, brought some important contributions. Among all the innovations brought by the current Code of Civil Procedure, the following must be highlighted: (i) facilitation of parties’ participation in dispute processes; (ii) enhancement of the system of binding precedents; (iii) encouragement of parties to solve their disputes through alternative dispute resolution methods (mainly mediation and conciliation, along with the consolidation of arbitration); and (iv) modernisation of certain procedures with technology support. All of these innovations were carefully considered and implemented with the main goal of delivering fair and final decisions in disputes processes in a much more reasonable time frame. Another gain was to put the parties at the centre of case management, together with the judge, so that they are now able to adapt certain procedures to their particular needs in a specific dispute (e.g., the parties may determine new ways of subpoena such as email, WhatsApp and others). This allows parties the possibility to contribute to case management, and for active collaboration with the judge in order to find the best approach for each kind of dispute, a departure from the rule in the former legal framework in which parties had few opportunities to discuss procedural rules because the judge would have a much more stringent approach in construing and applying such rules. The 2015 Code of Civil Procedure also introduced in our jurisdiction a formal system of binding precedents. In spite of the fact that Brazil has a civil law-based legal system as opposed to a common law system, the 2015 Code of Civil Procedure now formally recognises a system of binding precedents, which brings efficiency to civil procedure. It is worth mentioning that, even before the enactment of the new Code of Civil Procedure, the lower courts were already bound to observe the so-called súmulas vinculantes issued by the Brazilian Supreme Court. The more recent Code of Civil Procedure enhances the system of binding precedents to the extent that, in addition to the súmulas vinculantes, decisions issued by higher courts, especially concerning repetitive cases, now may also have a binding effect. In this respect, the new Code of Civil Procedure provides for the so-calledIncidente de Resolução de Demandas Repetitivas and Julgamento de Recursos Repetitivos, which

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Machado Meyer Sendacz e Opice Advogados Brazil basically allow the judgment of a particular case by higher courts that will influence the outcome of all significantly similar lawsuits. Decisions by higher courts in such situations will apply to all cases dealing with the same controversy, therefore permitting the trial of thousands of cases at once. Moreover, it must be stressed that efforts have been made in the last few years to promote conciliation between parties to a process. The Brazilian Code of Civil Procedure sets out certain rules to encourage the parties to reach a settlement before initiating a controversial procedure. Accordingly, it is also important to mention that investments have been made in the specialisation of judicial conciliators and mediators. Additionally, the modernisation of dispute proceedings through the development of the technology used has certainly sped up dispute resolution. Today, all interested parties, lawyers, judges and the main parties themselves process a considerable number of judicial lawsuits in Brazil electronically, which facilitates access to the case files. In this regard, the National Justice Board (“CNJ”) plays an important role in establishing guidelines and the structure of the Brazilian judiciary. The CNJ is also in charge of the standardisation of rules and systems adopted by the state courts, including those related to electronic proceedings. Another initiative to be highlighted is the implementation of specialised courts for cases of insolvency and corporate law. Some states have highly specialised judges for frequently arising areas of work, bringing more quality and agility to court decisions. Finally, it is worth mentioning that some changes brought about by the COVID-19 pandemic have proved to be excellent tools to increase the efficiency of the judicial process in Brazil. The National Council of Justice enacted normative acts aimed at minimising the impacts of the isolation imposed by the pandemic and several courts have adopted remote practices, working face-to-face only as an exception. Furthermore, virtual audiences and tele-presidential dispatches were finally put into practice widely in the country. Some of these changes, such as remote working, the structuring of virtual communication channels between society and the judicial bodies, and the digitalisation of physical court records, are likely to become irreversible.

Integrity of process The way the judicial system is implemented in Brazil curbs, or at least discourages, improper behaviour and wrongdoing in lawsuits. Therefore, in general, lack of integrity in dispute resolution should not be a concern in Brazil. First of all, it can be said that the vast majority of magistrates possess a good level of technical knowledge and are chosen after vigorous examination. Their career development occurs over a period of years, and judges are promoted to the Appellate Courts or higher courts according to specific criteria, including seniority and productivity. With regard to independence, there is a guarantee provided in the Federal Constitution called the tenure rule, which prohibits magistrates from being fired or moved from their position except by a judicial decision issued by a competent body, which ensures that magistrates have discretion to issue decisions according to the specific circumstances without feeling threatened by any external factors. In the same way, the Federal Constitution sets forth rules and principles that ensure impartiality in judgments. As Brazil is a civil law country, its judges are bound to apply the law (and to observe binding precedents, as provided in the new Code of Civil Procedure) when issuing decisions on judicial cases. In other words, the judges are not free to adjudicate a dispute based on equity or on rules of natural justice.

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Additionally, the CNJ, as mentioned above, is an administrative body that plays an important role in our judicial system, and monitors the performance of judges.

Privilege and disclosure The general rule is that lawsuits are public in Brazil. Therefore, any interested person can access the documents filed along with a judicial claim. Of course, there are a few exceptions to this rule and, under specific circumstances, a lawsuit may be processed under secrecy of court; to wit: (i) cases that requires secrecy for public or social interest reasons; (ii) family disputes; (iii) lawsuits involving data and information that is protected by the constitutional right to privacy; and (iv) judicial claims dealing with arbitral matters. Apart from these situations that are provided in the law, the parties may request confidential treatment for any specific document they consider to contain sensitive information. However, it is up to the discretion of the judge whether to grant it or not, depending on the specific situation. Regarding the rules of disclosure, it is important to clarify that Brazilian regulation is very superficial when compared to the systems of full disclosure and discovery adopted by other countries. However, the Code of Civil Procedure does provide a specific procedure for requests for the disclosure of documents in the possession of third parties. Accordingly, anyone can file a lawsuit in order to obtain the forced disclosure of documents, provided that the purposes of such disclosure, and the facts and rights related to the requested documents, can be demonstrated and that the documents are in the defendant’s possession. The defendant, in turn, may oppose the request, citing that the document concerns its private life, the disclosure of the requested document infringes its duty of honour, or it publicises confidential facts and information. The judge cannot allow the defendant’s refusal whenever (i) it has a legal obligation to disclose, (ii) it referred to the requested document as evidence, and/or (iii) the requested document is common to the parties. Apart from the above, it is worth mentioning that the Brazilian Code of Civil Procedure also sets forth a procedure somehow similar to the discovery system adopted by the United States, the so-called early production of evidence. Such procedure comprises the production of any kind of evidence, including the disclosure of documents, and its purpose is to provide the parties beforehand with evidence related to a specific matter, encouraging them to reach a settlement and avoid unnecessary disputes. The main difference introduced by this new procedure relates to the moment when evidence is shared between the parties. While in the United States, for example, discovery is a pre-judicial phase, in Brazil the early production of evidence is processed before the civil courts, giving the judge the decision on whether the evidence should be collected (in this case, whether a document should be disclosed by a party). Concerning client confidentiality, both the Brazilian Federal Constitution and the Code of Ethics of the Brazilian Bar Association (Federal Law No. 8,906/1994) have specific provisions that ensure the attorney-client privileged relationship. Accordingly, counsel are entitled to protect and treat with confidentiality any document and information received from their clients in the context of the provision of legal services. The privileged attorney- client relationship can only be broken under exceptional circumstances; to wit, if a lawyer infringes the law in collusion with his/her client.

Evidence The evidence plays a central role in the Brazilian litigation system. Any valid judicial decision must be based on the evidence presented by the parties over the course of the lawsuit.

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Our Code of Civil Procedure lists some types of evidence that can be presented, but this should not be considered a limiting list: there may be other means of proof as long as they do not violate the Brazilian legal system. Among all the evidence used in the forensics practice, the most important are: documental; expert’s examination; witnesses; and personal testimony. The burden of proof in the Brazilian civil procedural system is, as a rule, static (Section 373 of the Brazilian Code of Civil Procedure). In summary, the plaintiff must prove the constitutive fact of his or her claim, and it is up to the defendant to demonstrate the existence of a fact that prevents, modifies or extinguishes the plaintiff’s claim. The judge may, however, assign the burden of proof in a dynamic manner, according to the peculiarities of the case, provided that: (i) the excessive difficulty on the part of fulfilling the charge attributed to it is demonstrated; and/or (ii) it is easier for the other party to obtain proof of the contrary fact. In 2017, Brazil ratified the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, one of the main multilateral instruments for international legal cooperation, which brought in improvements to the speed and effectiveness of measures to produce evidence abroad.

Costs As a general rule, the claimant bears the initial costs required to initiate the proceedings. These costs are estimated in the range of 0.5% to 6% of the amount involved, depending on the state where the lawsuit is filed. For instance, in São Paulo, initial costs amount to 1% of the amount being discussed in the case, limited to a cap that is updated annually. The payment of costs is also required when filing appeals to the higher courts. Depending on the state, such costs may vary from 1% to 5% of the amount involved in the lawsuit. It is worth mentioning that individuals who meet specific criteria of income may benefit from the institute of free justice, which permits them to bring lawsuits and file appeals without incurring costs. Additionally, it is important to highlight that proceedings may also give rise to additional costs. For instance, whenever the case requires the production of specific evidence or the analysis of experts, generally, on such occasions, the party who has requested it will incur the costs related to the production of evidence. However, there are a few situations when the judge may determine that the non-requesting party should share the costs equally or even bear the costs by itself. The latter situation mostly applies in cases involving consumer relationships, as it is assumed that consumers are vulnerable and are therefore at a disadvantage against suppliers, but it can also be applied in situations where the judge understands that the burden of proving something lies with the party who is in a better position to produce it, given the factual circumstances present in the particular case. When the dispute ends, the defeated party has the burden of loss, which means it is obliged to pay the winning party the costs and expenses of the proceedings, and an amount that can range from 10% to 20% of the value involved in the demand to the winning party’s lawyers. It is important to clarify that such amount aims to compensate the job performed by the attorney engaged by the winning party and should not be confused with the contractual fees negotiated between the winning party and its attorney. Lastly, foreign parties without residence and/or real estate assets in Brazil must post a bond when filing a lawsuit, according to Article 83 of the Code of Civil Procedure. This provision ensures the payment or reimbursement of all legal fees in case the foreign party is defeated in the proceedings.

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Litigation funding Litigation funding is not regulated in Brazil. Although some companies and investment funds are willing to fund disputes, this practice is still embryonic in Brazil.

Class actions In Brazil, the class or collective actions system aims at protecting the environment, consumers, cultural patrimony, economic and antitrust rights, as well as other collective rights. Class actions (also known and referred to interchangeably as group actions or collective actions) in Brazil have a very protective scope towards the environment, consumers, cultural patrimony, economic and antitrust rights, as well as other collective rights, and the specific legislation provides for several mechanisms that may overburden the defence of the accused parties. For example, the plaintiff in a collective action does not pay for court fees, or, in case of defeat, for the defendant’s attorney’s fees, except in cases of bad-faith litigation. On the other hand, if the lawsuit is successful, defendants are liable for attorney’s fees, costs and expenses. Section 82 of the Brazilian Code of Consumer Protection (Federal Act No. 8,078/1990) exclusively confers standing to initiate a class action on behalf of a group’s interest upon the Public Prosecutors’ Office, the Federative Republic of Brazil, the states, municipalities and the Federal District, administrative agencies and private associations (non-governmental organisations) that have been legally incorporated for at least one year. These entities may bring a class action alone or jointly. A particularity of all collective actions is that the Public Prosecutors’ Office is always notified of the filing of a suit and is invited to participate in the proceeding as a supervisor custos( legis), in order to guarantee the adequacy of representation of the absentees’ interests. Public civil actions, specifically, can discuss any collective interest related to the protection of Public Property, the environment and consumers (in accordance with Sections 129(III) and 170(V) of Federal Act No. 7,347/1985), and their main purpose is to redress the damages caused to Public Property and the dissolution of the harmful act, as provided for by Section 1 of Federal Act No. 7,347/1985. Such type of action admits a wide range of claims by the plaintiff and suits virtually all kinds of situations. Section 5 of Federal Act No. 7,347/1985 provides for the standing to sue, which is attributed to public agents (the Federal Government, the states, the municipalities, state-held companies, Public Attorneys’ Office and other governmental agencies working for the public interest, such as those for consumer defence) and, in the private sector, to associations, which have been pre-constituted for at least one year and have among their institutional goals the defence of those interests. In the concrete case, however, the judge may exempt the association from the legal pre-constitution. Their standing is concurrent and independent. The lawsuit can be filed against any person, private or public, natural or legal, who has contributed to the unlawful act, in offence to the interests protected by Federal Act No. 7,347/1985, the Consumer Protection Code or by other specific statutes. As the main purpose of this kind of lawsuit, plaintiffs claim for redress and indemnification for substantial and moral damages. The claim for damages is limited to the declaration of the defendant’s liability and each individual class member must bring an individual action to prove causation and the amount or extent of the individual damages suffered. This means that, after a final decision is granted, the individuals that might benefit from it must appear

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Machado Meyer Sendacz e Opice Advogados Brazil at the lawsuit to prove their specific damages and claim compensation. Otherwise, such individuals will not be entitled to any compensation. Another important characteristic of this lawsuit is to dissolve the harmful act, and the defendant is usually required either to perform some act (affirmative covenant) or to refrain from performing it (negative covenant). The law provides for two kinds of instruments in order to enforce these condemnations: (a) specific performance; and (b) a monetary fine. The plaintiff may request for an injunction when filing this public civil action by which it may freeze assets of defendants, as a precautionary measure to guarantee the redress of the damages under discussion. Federal Act No. 7,347/1985 created the concept of a special fund account in protection of diffuse rights, which serves as a repository for damages awarded in collective actions. Should a defendant be condemned to pay a fine or damages in a collective action, the award will be deposited in this special account. If it is not possible to distribute the individual damages to absent class members, the judge may calculate the damage to all the members as a whole and the sum obtained will be deposited in the fund. The resources of the fund are to be used to finance the restoration of the rights violated by the defendant’s conduct.

Interim relief The Code of Civil Procedure basically provides for two possibilities for obtaining interim relief: (i) tutela de urgênciai; and (ii) tutela de evidência. The first concept is based on urgency. As well as the likelihood of what it is claiming, the claimant should also demonstrate the risks of damage or a risk to the practical result of the proceeding. In other words, it should be clear that full satisfaction of the right pursued (or to be pursued) in the lawsuit may turn out to be ineffective if the interim remedy is not granted. The second concept, in turn based on evidence, is usually granted when the claimant succeeds in demonstrating the reasoning of the merits of the case (strong case), the defendant abuses its right of defence by using delaying tactics, or there is no controversy on the main matter regarding the judicial claim. Brazilian courts are empowered to issue any type of interim remedies, including interim freezing injunctions and search orders. The Code of Civil Procedure currently in force eliminated the previous distinction between precautionary measures and injunctive relief and simplified the mechanism of granting urgent remedies in order to guarantee the efficacy of the proceedings. Specifically regarding the arbitration procedure, it is possible to plead for injunctions to the court judge. However, once the arbitral tribunal is constituted, such decisions may be reviewed, to ensure the integrity of the process, and new injunctions may be requested before the arbitral tribunal directly.

Enforcement of judgments/awards Any judgment rendered by a foreign court depends on its homologation to be enforceable in Brazil. The Brazilian Superior Court of Justice does not review the merits of the judgment, nor does it modify the decision in any manner, but simply verifies whether the judgment obtained abroad complies with certain requirements that Brazilian law deems to be indispensable. The Superior Court of Justice would not recognise and grant exequatur to any judgment considered offensive to national sovereignty, public policy or good morals. For instance,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Machado Meyer Sendacz e Opice Advogados Brazil a judgment related to the collection of some account that imposes the imprisonment of the debtor will not be recognised in Brazil if it violates public policy. Moreover, only final decisions are subject to homologation. Interlocutory decisions rendered by foreign courts during the course of a lawsuit may not be enforced in Brazil. Nevertheless, a partial decision issued in the course of a proceeding that decides on the merits of part of the case is enforceable, as long as it is final and unappealable. In addition to such requirements, judgments obtained abroad must be: (i) issued by a court that has jurisdiction; (ii) preceded by due service of process to the defendant; and (iii) final and unappealable. Once confirmed by the Superior Court of Justice, the decision may be enforced in Brazil. A lower federal court will conduct the enforcement procedure.

Cross-border litigation In recent decades, Brazil has been involved greatly in international cooperation. This involvement took place not only in the enforcement of foreign judgments (judicial or arbitral), but also in obtaining evidence and collaboration in corruption investigations. The Law of Introduction to the Rules of Brazilian Law (Decree-Law No. 4,657/1942) is the main source for determining the basic principles governing relations of cross-border litigation. With the exception of arbitral procedures, in which the parties have the freedom to choose the applicable law, the Law of Introduction to the Rules of Brazilian Law states that the law of the country in which it was entered into shall govern the contract. It is worth mentioning, however, that the new Brazilian Code of Civil Procedure gives the parties the opportunity to choose a specific venue outside Brazil for the resolution of disputes involving international agreements. This was an innovation made clear by the new legislation.

International arbitration The Brazilian Arbitration Law (Law No. 9,307 of 1996, as amended by Law No. 13,129 of 2015) is based on several pieces of modern arbitration legislation, and its main sources are the UNCITRAL Model Law on International Commercial Arbitration and the Spanish Arbitration Law of 1988. The texts of the New York Convention of 1958 and the Convention of Panama of 1975 were also important during the process that resulted in the enactment of the Brazilian Arbitration Law. The only restrictions imposed by the legislature on parties’ freedom to regulate and organise arbitral procedures are related to mandatory compliance with the adversarial principles, equal treatment of the parties, impartiality and freedom of decision of the arbitrator(s). The reliability of arbitration as an effective means of settling conflicts has found growing support in the Brazilian judicial system. Court decisions are increasingly recognising the binding nature of arbitration clauses, leading the parties to arbitrate even when one of them tries to renege on its commitment to submit to arbitration. Likewise, the judiciary has guaranteed enforcement of awards rendered in Brazil and abroad. The challenge of an arbitral award in court is an exceptional measure that can only be sought when there is a serious procedural error in the decision that makes it null and void, as provided by Article 32 of the Brazilian Arbitration Law. During the arbitration, the only occasion in which a court may intervene is upon request by the arbitral tribunal seeking coercive enforcement of an arbitral order.

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Mediation and ADR Mediation in Brazil is regulated by Law No. 13,140/2015. According to this law, mediation is binding if contractually established. This is important when dealing with multi-tiered dispute resolution clauses. If the parties do not reach a settlement regarding their dispute, none of the disclosed information or concessions can be used in subsequent litigation. Any settlement in mediation or negotiation is binding and enforceable before a judge. Mediation is in full growth, being adopted as a tool to assist parties in finding creative solutions to their disputes. Parties are adopting mediation before arbitration and the judicial system. Brazil has specialised centres for mediation and negotiation, which enables parties to hire professionals to assist them in mediation.

Regulatory investigations Certain markets in Brazil are extremely regulated and protected by one or even more agencies and government bodies. For instance, one can point out the financial and capital market, regulated by Banco Central do Brasil (the Brazilian Central Bank) and CVM (the Brazilian Securities and Exchange Commission). Any player active in this market should comply with the regulations set forth by these authorities. Otherwise, the party can be investigated and suffer administrative sanctions. Government bodies also closely monitor matters involving competition and consumers. The Administrative Council for Economic Defense (“CADE”) is responsible for investigating and ultimately deciding on competition issues, as well as for fostering and promoting the culture of competition in Brazil. CADE’s job is increasingly gaining relevance after recent cases involving antitrust practices. It is worth mentioning the role of Public Prosecutor Offices in Brazil, which can independently investigate and file lawsuits about virtually any illegality that might involve public interests, even in parallel to investigations conducted by agencies and government authorities. Lastly, it is important to note that decisions issued by regulatory agencies are deemed to be very technical. Accordingly, although these decisions can be subject to judicial court review, judges usually focus their analysis on formalities and legality issues, keeping the merits of the decision away from review in most cases.

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Eduardo Perazza de Medeiros Tel: +55 11 3150 7691 / Email: [email protected] Eduardo Perazza de Medeiros is a partner in the litigation and arbitration department. He engages in several types of litigation, administrative and judicial procedures, as well as arbitration and the provision of advisory services to prevent and settle conflicts. His practice encompasses actions against misconduct in public office related to: bidding processes; civil actions of public interest concerning environmental matters, as well as competition and consumer law; and judicial procedures related to corporate litigation, civil liability, law of obligations, and rights of personality and media. He further engages in administrative procedures before the Brazilian Prosecution Office, Securities Commission, Central Bank, National Financial System Appeal Council and the Foundation for Consumer Protection and Defence. He has experience in managing crises and emergencies, assisting in the drawing up of action plans and judicial and extrajudicial performance strategies.

Ariana Júlia de Almeida Anfe Tel: +55 11 3150 7734 / Email: [email protected] Ariana Júlia de Almeida Anfe is a senior lawyer in the litigation and arbitration department. She is a specialist in civil litigation and arbitration, with emphasis on product liability cases and corporate litigation. She holds a Master’s degree in Civil Procedure from the University of São Paulo and an LL.M. degree from the London School of Economics. Her academic research focused on judicial precedents and the management of recurrent cases.

Machado Meyer Sendacz e Opice Advogados Av. Brigadeiro Faria Lima, 3144, 11th floor, 01451-000 São Paulo, Brazil Tel: +55 11 3150 7000 / URL: www.machadomeyer.com.br

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Ian Huskisson, Anna Peccarino & Neil McLarnon Travers Thorp Alberga

Efficiency/integrity The Cayman Islands are a British Overseas Territory. The legal system is based on the English common law, as amended by domestic statute, with the Privy Council in London as the highest court of appeal. The legal structures, concepts, and approach are instantly recognisable to any English, US or other common law adviser. This backbone of legal similarity and political stability has proved crucial to the growth of the Islands. Over the last 30 years and more, the Cayman Islands have developed specific legislation to facilitate a wide range of international financial transactions. In addition, the Cayman Islands have a broad and deep pool of accountants, bankers, lawyers and other service providers in order to offer service levels similar to those found in the leading onshore centres. Over 40 of the top 50 banks globally hold licences in the Cayman Islands. With approximately 11,000 registered investment funds, Cayman Islands fund vehicles are routinely used by institutional and independent asset managers. Cayman vehicles are considered, by a very wide margin, to be the market leader for offshore hedge funds. In terms of insurance, the Cayman Islands are one of the most attractive jurisdictions for captive vehicles, and continue to be the leading jurisdiction for healthcare captives. The administration of justice in the Cayman Islands is carried out on three levels: the Summary Court; the Grand Court; and the Court of Appeal. In 2009, in response to the needs of the financial services industry, the Financial Services Division of the Grand Court was established (the “FSD”). The FSD is modelled on the English commercial court and has highly experienced judges presiding over complex financial services disputes. Appeals from the Grand Court lie with the Cayman Islands Court of Appeal, which sits regularly throughout the year. Appeals are heard by three judges, including Lord Justices of Appeal from the English Court of Appeal. In appropriate cases, further appeal may lie with the Judicial Committee of the Privy Council in London. Judgments of the Privy Council are persuasive in many jurisdictions. There have been numerous ground-breaking decisions of the Privy Council in its capacity as the superior court of appeal of the Cayman Islands. Decisions addressing issues arising out of the 2008 financial crisis include: Culross v Strategic Turnaround [2010] UKPC 33 (dealing with the alteration of an investor’s status from shareholder to creditor upon redemption of shares); DD Growth v RMF [2017] UKPC 36 (providing that unlawful distributions to an investor can only be clawed back by a liquidator upon evidence of knowledge of wrongdoing); Pearson v Primeo [2017] UKPC 19 (dealing with priorities between different investors in a liquidation); and Maso Capital v Shanda Games [2020] UKPC 2 (dealing with the valuation of forcibly acquired shares following a merger).

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Leading cases in a range of other areas include: Francis v Vista Del Mar [2019] UKPC 14, which concerns the enforceability of option agreements in real estate transactions; Almazeidi v Penner [2018] UKPC 3, which addresses the requirements for judicial independence; and Crawford Adjusters and others v Sagicor General Insurance (Cayman) Limited [2013] UKPC 17, which extended the tort of malicious prosecution to civil as well as criminal cases for the very first time and has since been applied in several UK cases.

Privilege and disclosure Cayman Islands law follows the traditional common law approach to both privilege and disclosure. Privilege will apply to legal advice generally and also to communications made in contemplation of litigation. During the course of litigation, all parties are under an automatic and strictly enforced obligation to disclose documents within their control that relate to the matters at issue. This includes documents that are adverse to their case and that may lead to a “train of enquiry”. Parties must also identify documents that were once but are no longer within their control; for example, if they have been lost or destroyed. The disclosure obligation extends to electronically stored documents and data. Offshore jurisdictions such as the Cayman Islands are often unfairly labelled “secrecy” jurisdictions. In the litigation context, confidentiality is unlikely ever to justify failing to disclose a document. In some limited circumstances, a direction from the court may be required before certain confidential documents are disclosed under The Confidential Information (Disclosure) Law (2016 Revision) (“CIDL”). CIDL is not a “secrecy law”. All it does is require a court application to be made before making any required disclosure. In all but the most extreme cases, you can expect an order to be made permitting disclosure. Furthermore, most court hearings and especially trials are heard in open court. This means that any member of the public or interested party may attend court and in some cases may be entitled to request disclosure of documents read by the judge under the principle of “open justice”, even though they are not party to the claim (The International Banking Corporation BSC v AHAB CICA No 28 of 2017). Some documents filed at court may be inspected by the public as of right and others with leave of the court.

Evidence Evidence is provided by witnesses and experts (where required). Trial evidence must be given orally after witness evidence has been prepared and exchanged in writing. A party can only rely on evidence at trial of a witness who has provided a signed witness statement. Signed witness statements will be accepted at trial as the witnesses’ direct evidence without the need for that evidence to be orally read out in court, but witnesses can be examined in chief and cross-examined in court trials. For most court hearings other than the substantive trial, evidence is primarily given by way of written affidavit. The right to examine a person who has given affidavit evidence for other applications must be obtained from the court. Experts are normally appointed by the party who intends to rely on them. The court can, however, appoint an independent expert to assist in its decision-making. Experts usually exchange written reports and may be directed to provide a joint expert report to narrow the issues at dispute. Experts must be independent and uninfluenced by the matter or the party instructing them. The expert owes a duty to help the court and must only opine on matters within their sphere of knowledge.

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Costs and litigation funding Courts in the Cayman Islands follow the principle of “loser pays” in most situations. The winner generally has to wait until the conclusion of the case to receive payment, and only then after the amount has been assessed by the court in a process called “taxation”. It is possible in some circumstances to request a payment on account prior to taxation and/ or the provision of security for costs at an earlier stage in the proceedings if there is a demonstrable risk that a costs order will not be paid. Defendants may make a payment into court which (if not beaten at trial) should result in a costs order in favour of the defendant from the deadline for acceptance onwards. It is also possible to ask the court to require third parties who have in fact been directing litigation behind the “cloak” of the named party to pay the winner’s costs, provided they have been put on notice of their cost risk. Contingency fees are not recoverable in the Cayman Islands, although there have been a number of recent cases in which liquidators of companies have been permitted to enter into conditional fee arrangements with local lawyers, or contingency arrangements with lawyers overseas. In December 2015, the Law Reform Commission released a draft bill and a discussion paper for public consultation on conditional and contingency fee agreements between clients and lawyers in civil action cases which, if passed into law, will pave the way for a “no win, no fee” regime. There have been several high-profile claims in recent times against directors of Cayman Islands companies for breach of duty, amongst other things. One particular feature of Cayman Islands’ company law (which differs from English law) is the availability of widely drawn exclusions of liability for directors. Cayman Islands law follows the traditional approach of the English common law in trust cases, where trustees may exclude liability very widely. It is common for the Articles of Association of Cayman Islands companies to exclude liability for a director’s negligence (but not fraud, liability for which cannot be excluded) and/or to provide for a company pursuing claims against its directors to indemnify the directors for their costs of the proceedings. One such provision was enforced in the case of Goodman v Cummings (13 September 2018 FSD No 204 of 2006).

Class actions Where a group of individuals have a common interest and a common complaint, one or more of them can issue and continue a representative action on behalf of all of the members of that group. A representative action will not be entertained where the relief claimed is not beneficial to all of the represented parties or where there are differing interests among the members. Any judgment or order made in a representative action will be binding on all persons within the representative group but cannot be enforced against any person who is not a party to the proceedings, except with leave of the court.

Interim relief Interim relief in the form of asset freezing and other injunctions is available in the Cayman Islands. The Cayman Islands government has recently passed a law (the Grand Court Amendment Law 2014) for the purpose of clarifying the courts’ ability to grant injunctive relief in support of proceedings in other jurisdictions. This is a welcome development and assists claimants in recovering assets that may have been placed offshore in order to defeat claims. The Cayman Islands courts now have the power to grant a wide variety of injunctions in support of domestic and other proceedings. These include the freezing of assets, preservation of property, disclosure of assets, documents, etc.

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Unlike most European jurisdictions where conventions establish the relative priority of the different jurisdictions, in the Cayman Islands it is often necessary to seek the assistance of the court to prevent unlawful “forum shopping” by granting an anti-suit injunction. Anti-suit injunctions are normally aimed at preventing a party (who is subject to the jurisdiction of the Cayman Islands courts) from pursuing litigation in another country that should be litigated in the Cayman Islands. This will commonly be where there is an exclusive jurisdiction clause, or where a claim raises issues that can only be determined by the courts of the Cayman Islands. This last issue was raised in the case of Asia Pacific Online Limited v Marcus Watson and Others (Unreported, 25 April 2012), in which the Cayman Islands court granted an “anti-anti-suit injunction” to restrain intended anti-suit injunction proceedings about to be brought in the United States. The dispute related to Chapter 11 proceedings in which it was alleged that certain shares in a Cayman Islands company would be expropriated against their wishes through the Chapter 11 process. The court granted the injunction on the basis that the United States proceedings could amount to a repudiation of the constitution of a Cayman Islands company. In a similar vein, the Privy Council in London (the highest appellate court for the Cayman Islands) has recently determined that when a company is being wound up in the jurisdiction where it is incorporated, an anti-suit injunction is available to prevent a creditor or member from pursuing proceedings in another jurisdiction that are calculated to give him an unjustifiable priority. A creditor (Shell) brought proceedings in the Netherlands against a company that was later wound up in the British Virgin Islands. In those proceedings, Shell obtained an order attaching certain assets of the company. The effect of the attachments was that, if Shell succeeded in its claim in the Dutch courts, it would likely be able to satisfy its judgment debt in full, whereas other creditors who had claims in the liquidation could recover only a dividend. The purpose of the Dutch attachments was to obtain priority, which Shell would not get in the liquidation. The liquidators applied for an anti-suit injunction to restrain Shell from taking steps to enforce the attachments. They lost at first instance but, on appeal, an injunction was granted. Shell appealed. The issue on appeal was whether Shell was, in principle, entitled to do what it had done, and, if not, whether an injunction could be issued to prevent it taking any steps to enforce the attachments. The court considered the fundamental principle applicable to all anti-suit injunctions, that the court does not purport to interfere with any foreign court, but may act personally upon a defendant by restraining him from commencing or continuing proceedings in a foreign court where the ends of justice require. On this basis, the court dismissed the appeal, upholding the injunction that had been granted (Stichting Shell Pensioenfonds v Krys and another [2014] UKPC 41).

Enforcement of judgments/awards In principle, foreign judgments and arbitral awards can be enforced in the Cayman Islands courts. At the time of writing (with the exception of Australian judgments), there is no system for registration and automatic enforcement of foreign judgments. However, it is intended that legislation will be passed, extending the current registration system to most Commonwealth countries. Even after the new legislation is passed, judgments from other countries (most notably the United States) will continue to be enforced by court under the common law system, as if they were based on a contractual right. The process for enforcement therefore involves the commencement of a fresh action in the Cayman Islands courts. Judgment is usually granted on a summary basis. Once granted, the judgment can be enforced by seizure of property or other means, as with any other local judgment.

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There are a number of well-established formal requirements that must be satisfied before the court will enforce a foreign judgment or arbitral award. These are as follows: • The foreign court or tribunal was competent to hear the claim. • The judgment or award involves a positive obligation, such as an obligation to pay a debt or perform a specified task. • The judgment or award is final and conclusive. • The judgment or award does not involve taxes, fines or penalties. The requirement that the foreign court is competent to hear the claim should be assessed with reference to the principles of Cayman Islands law, rather than the law of the country making the judgment. This important distinction was illustrated in the case of Banco Mercantil Del Norte SA v Cabal Peniche [2003 CILR 343], in which the Cayman Islands court declined to summarily enforce a judgment of the Mexican courts. It was argued that the defendant in that case had submitted to the jurisdiction of the Mexican court by voluntarily appearing in those proceedings. The appearance relied on what is known as Amparo proceedings in the Mexican courts. The aim of the Amparo proceedings was to obtain an order setting aside the deemed service of the proceedings. This would be considered a submission to the jurisdiction of the Mexican courts, but under Cayman Islands law it would not. Under Cayman Islands law, purely contesting the jurisdiction of the court does not amount to a voluntary submission to the jurisdiction. Accordingly, on the facts of this case, there was real doubt that the Mexican court had jurisdiction (applying Cayman Islands law), and the Cayman Islands judge declined to grant summary judgment on the enforcement application. The judge concluded: “I am of the view that this was a purely jurisdictional hearing on the face of the record. The threshold for a summary judgment is not met in my view.” Practitioners should be aware that there are circumstances in which the Cayman Islands courts will not recognise foreign trust laws or enforce judgments that are inconsistent with Cayman Islands trust law and practice. The Trusts Law (2018 Revision) will prevent the enforcement of a foreign judgment setting aside the transfer of property into a Cayman Islands trust in certain circumstances. For example, a trust might be established to prevent a relative from inheriting property as of right (also known as “forced heirship”) under the relevant foreign law. The Cayman Islands courts will not recognise a judgment of a foreign court requiring the property to be returned.

Cross-border litigation A very large part of the business of the Cayman Islands courts is cross-border in nature. The judges of the Cayman Islands courts regularly interact and cooperate with judges from other jurisdictions. The Cayman Islands courts are, in principle, receptive to requests for judicial assistance from other courts, including requests for the production of documents or the examination/deposition of witnesses located in the Cayman Islands. The Cayman Islands courts generally adopt the approach taken in the well-known English case of Rio Tinto Zinc v Westinghouse [1978] A.C. 547, where it was said: “It is our duty and our pleasure to do all we can to assist that court, just as we would expect the [foreign court] to help us in the circumstances.” A good example of successful cooperation between the Cayman Islands and other courts is the collapse of the Bank of Credit and Commerce International (“BCCI”). BCCI’s worldwide operations were put into a coordinated liquidation process in 1991. The liquidation has since resulted in substantial recoveries for creditors. Central to the success of the liquidation was

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Travers Thorp Alberga Cayman Islands a plea-bargaining agreement struck between the Cayman Islands liquidators and the United States authorities. The following extracts from one of the overseas liquidator’s reports confirm the extent of the cooperation involved. “In November and December of 1991, under the supervision of the Grand Court of the Cayman Islands, the District Court of Luxembourg, and the High Court in England, the BCCI liquidators negotiated an historic plea and co-operation agreement with the United States. The Agreement was presented to the Grand Court of the Cayman Islands and approved in December 1991.” “In accepting this agreement, Judge Joyce Hens Green of the United States District Court for the District of Columbia stated: The Plea Agreement now before the Court reflects, on a truly global measure, extraordinary efforts and amazing co-operation of a multitude of signatories representing myriad jurisdictions, to fully settle actions against the corporate defendants, which had operated in 69 countries around the globe, and through the plea restitution, to locate and protect all realizable assets of BCCI for the ultimate benefit of the depositors, creditors, United States financial institutions, and other victims of BCCI. The promise of the Plea Agreement is that those extraordinary efforts, that amazing co-operation, should continue.” Cross-border insolvencies have continued to generate ground-breaking decisions. The English Supreme Court decision in Rubin v Eurofinance [2012] UKSC 46 is particularly relevant to offshore litigation. Here the English Supreme Court established that a judgment made in foreign insolvency proceedings would not be enforced against an English defendant, unless the defendant had been within the jurisdiction of the foreign court. It had previously been suggested that judgments made in insolvency proceedings in the country of an insolvent company’s incorporation or centre of main interests (including claims to set aside pre-insolvency transactions) should be enforced against defendants domiciled elsewhere, even where they had not submitted to the insolvency jurisdiction. The decision in Rubin has been followed by the courts in the Cayman Islands and other offshore jurisdictions. An interesting variation on this theme was presented in the Cayman Islands case of Irving Picard and Bernard Madoff Investment Securities LLC (in Securities Investor Protection Act Liquidation) v Primeo Fund (In Official Liquidation) [Court of Appeal, 16 April 2014]. In this case, applying Rubin, liquidating trustees appointed in the United States brought proceedings in the Cayman Islands to recover assets alleged to be due to the bankrupt Madoff estate. The proceedings had to be brought in the Cayman Islands becausethe defendants were not within the jurisdiction of the United States bankruptcy courts. However, the liquidating trustees sought to argue (amongst other things) that the Cayman Islands courts should apply the relevant United States bankruptcy laws rather than Cayman Islands law. It was argued that it was open to the Cayman Islands courts to apply foreign bankruptcy laws, based on sections of the Cayman Islands companies legislation that encourage cooperation with foreign office-holders. The court found that any avoidance proceedings (e.g. proceedings to set aside suspect transactions) a foreign office-holder wishes to bring in the Cayman Islands would have to be brought under the applicable Cayman Islands legislation. The Cayman Islands is also a developing jurisdiction in terms of cross-border restructuring. One recent case of note is the complex restructuring through four schemes of arrangement of the Ocean Rig offshore drilling group. The Cayman Islands court supervised and implemented a restructuring of the group as an alternative to a Chapter 11 filing in the United States, which was ruled out primarily on cost grounds. The Cayman restructuring was, however, recognised

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Travers Thorp Alberga Cayman Islands and subsequently enforced by the United States courts. It constitutes a positive endorsement of the restructuring credentials of the Cayman Islands. Note there is also legislation in prospect which will introduce an insolvency practitioner-led turnaround regime.

Trusts and private client disputes The Cayman Islands is one of the leading jurisdictions for the establishment and management of trusts and has a sophisticated professional trust sector, modern trusts legislation and an effective judicial system. Cayman’s firewall provisions generally operate to protect trusts governed by Cayman Islands law, and this means that provisions of foreign laws do not allow, as a right, foreign parties to attack a Cayman trust. This is particularly relevant in the context of jurisdictions with “forced heirship” restrictions, and the protection extends to those trying to assert a personal relationship with the settlor or a beneficiary. Trusts disputes are generally dealt with in the FSD and will cover Beddoe applications, breach of trust claims, and beneficiaries seeking to enforce their rights in respect ofa particular trust settlement. Cayman’s Trusts Law was amended in early 2019 to enhance the inherent jurisdiction of the Cayman Grand Court in relation to the administration of trusts. In particular, the amendment gives the Grand Court the power to set aside fiduciary decisions made by mistake, effectively codifying the Hastings-Bass“ Rule” (regarding the validity of a trustee exercising its discretion when making decisions) as it stood prior to the UK Supreme Court’s decision in Futter/Pitt v HMRC [2013] UKSC 26. There is therefore no requirement to prove that the trustee was in breach of trust when they made the decision. Another amendment also provides the Grand Court with the ability to sanction settlements of trusts disputes, as long as doing so would be not be detrimental to the beneficiaries (as opposed to previously needing to be for their benefit).

International arbitration The principal benefits of arbitration, such as confidentiality and potentially more limited discovery, are making arbitration more popular with the international business communities. Many parties selecting arbitration in the Cayman Islands for the resolution of international commercial disputes will expressly provide in their agreements for the arbitration to be governed by the rules of a particular organisation or arbitral body. A model ad hoc arbitration clause can be found in the Arbitration Law 2012. This replaced previous legislation which had been based on the English Arbitration Act of 1950. Under the new law, arbitration agreements may be in the form of either an arbitration clause in a contract, or a separate agreement. Whichever form it takes, with a couple of specific exceptions, an arbitration agreement must be in writing, and it must be contained in a document signed by the parties or in an exchange of letters, facsimile, telegrams, electronic or other communications which provide a written record of the agreement. Subject to certain mandatory rules, the parties may agree to adapt the arbitral process to suit their needs. In particular, the parties may agree on: the number and method of appointment of the arbitrators; their specific areas of expertise and qualifications; the language of the arbitration; whether the arbitration is to be conducted under institutional rules, and if so, which arbitration boards to adopt; and whether to nominate an appointing authority to choose the members of the arbitral tribunal or to retain the power to choose the tribunal themselves.

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The enforcement of arbitration agreements, and of resulting arbitral awards made in countries that are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “NY Convention”), is governed by the Foreign Arbitral Awards Enforcement Law, which was originally enacted in 1975 and later revised in 1977 (the “FAAEL”). The FAAEL incorporates the provisions of the NY Convention into Cayman Islands law. A NY Convention award will be enforced as if it were a judgment of the courts of the Cayman Islands, unless one of the limited circumstances for an award to be challenged under the NY Convention can be established. The Cayman Islands courts can be expected to adopt a robust approach to enforcement of NY Convention awards. In Globeop Financial Services LLC and others v Titan Capital Group and others (Unreported), 23 April 2014, the Chief Justice of the Cayman Islands summarily rejected allegations of impropriety and required the enforcement of a NY Convention award from the United States. In conclusion, the Cayman Islands courts are respectful of, and will readily enforce, arbitration awards from qualifying convention and other countries. Where the parties have agreed that their disputes should be arbitrated, not litigated, then the Cayman Islands courts can be expected to stay proceedings before the court to enforce the arbitration agreement. A 2020 decision of the Court of Appeal, however, shows that that rule may not always extend to winding-up proceedings based on just and equitable grounds, Family Mart China Holding Co. Ltd. v Ting Chuan (Cayman Islands) Holding Corporation CICA No 7 & 8 of 2019.

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

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Acknowledgment The authors would like to thank Bhavesh Patel for his invaluable assistance in the preparation of this chapter. Bhavesh is an experienced commercial litigator specialising in cross-border insolvency matters, commercial litigation, shareholder and company disputes, and contentious trusts and private client work. Tel: +1 345 623 2411 / Email: [email protected]

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Ian Huskisson Tel: +1 345 623 2367 / Email: [email protected] Ian is a commercial litigation partner with over 20 years’ post-qualification experience gained in London and the Cayman Islands. His experience covers all aspects of company law, insolvency and other financial services disputes. Ian qualified as a solicitor advocate when practising in London and has also acted as an expert witness on the law of insolvency. Ian was part of Global Law Experts’ Alternative Dispute Resolution Team of the Year in 2014.

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

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

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

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Wen Qin & Lei Yang Rui Bai Law Firm

Introduction China is one of the world’s most-welcomed investment hotspots. The Belt and Road Initiative (BRI), proposed by President Xi Jinping in 2013, covers the Silk Road Economic Belt and the 21st Century Maritime Silk Road, with the aim of creating a trade and infrastructure network to connect Asia with Europe and Africa along ancient trade routes. The Supreme People’s Court (SPC) said Chinese courts resolved about 15,000 foreign- related civil disputes from 2013 to 2017, with BRI-related cases a major component. It also said that Chinese courts have always highlighted the equal protection of litigants as a guiding principle, no matter where they are from. This chapter will give a general picture for guiding foreign investors to refer to on how to effectively and legally resolve their commercial disputes in China through litigation or arbitration. It introduces the recent litigation and arbitration practice in China, analysing in particular the general circumstance of foreign-related cases, efficiency of process, technology promotion, measures taken against COVID-19 and protections for foreign investors, then finally draws attention to updated development of arbitration in China.

An overview on foreign-related case development in China There were few foreign-related disputes in the decades after the founding of the People’s Republic of China (PRC) in 1949, as the country was blocked from the rest of the world. Disputes involving foreign litigants began after the Third Plenary Session of the 11th Central Committee of the Communist Party of China was held in 1978. At the session, China decided to open its doors to the world and make economic development a priority. The SPC established a new division to hear economic cases, including those involving foreign litigants. However, it was limited in the first years because there was no law and few judicial talents who could deal with foreign-related disputes. The situation did not change until 1984, when the country’s first conference on economic legal disputes was held. It was a turning point for the hearing of foreign-related legal cases, as it clarified that dispute resolution was needed to help promote economic development. The SPC set up the economic division in the late 1980s. In 2000, it built a division that specialises in handling foreign-related marine and commercial disputes. It was a judicial move to face the globally diversified economic exchanges and to join the World Trade Organization, and it showed that the hearing of foreign-related cases had become professional. In the 1980s, foreign-related cases heard by Chinese courts focused on contracts, purchases and joint ventures. The disputes now emerging are caused by overseas construction projects

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Rui Bai Law Firm China and equipment purchases. They are the major problems of Chinese companies going global after the BRI was pushed forward. As the equal protection has attracted more foreign litigants to solve their international disputes in China, local courts have also taken measures to improve their legal services. In June 2018, the SPC set up international commercial courts in Shenzhen, Guangdong province, and Xi’an, Shaanxi province. The two courts integrate three different resolution methods – mediation, arbitration and litigation – into one platform, aiming to more effectively help litigants settle BRI-related cases. So far, the two courts have accepted 13 international commercial disputes from countries including Japan, Italy and Thailand, mainly relating to shareholder verification and earnings distributions, the SPC’s latest statistics show. In November 2018, the SPC ordered all judges who handle foreign-related disputes to improve the quality of trials and provide quicker and more convenient legal services for litigants. Tongzhou District People’s Court in Beijing, for example, has set up a special reception window for foreign litigants, dispatches judges who can speak English to help the litigants understand the court procedures, and also has a separate room for financial institutions, corporations and individual foreign litigants to file cases. Some courts in Shanghai, such as the Shanghai Intellectual Property Court and the Shanghai Maritime Court, have English language websites so foreign litigants can follow their cases via the courts’ online service. The Chinese courts have seen a rapid rise in foreign-related cases, as litigants from home and abroad doing international business place a higher demand on dispute resolution. Courts across the country heard 63,894 foreign-related commercial or maritime cases from 1978 to 2000, according to statistics from the nation’s SPC. Over the following 10 years, the figure skyrocketed to 220,080. Chinese courts’ equal protection of both parties in the handling of cases has made more foreign litigants willing to select the courts when they encounter trouble in international investment or trade.

Efficiency of process The global ranking of China’s business environment jumped to 31st from last year’s 46th in Doing Business 2020, released by the World Bank in October 2019. Doing Business is a World Bank Group flagship publication, documenting changes in regulatory measures in 12 areas of business activity in 190 economies to analyse whether they encourage efficiency and support freedom to do business. The report outlines eight of China’s business reforms and three of them, namely enforcing contracts, resolving insolvency and protecting minority investors, involved the efforts of the country’s SPC, which reflects the responsibilities and contributions of China’s courts to cultivating the economy as one of the top most favourable business environments worldwide. Pilot programme China’s SPC on January 15, 2020 issued a plan on a pilot programme to explore new ways to handle simple civil cases after separating such cases from those more complicated. According to the plan, selected courts can expand the scope of mediation agreements eligible for judicial confirmation, raise the threshold for small claims cases, apply the summary procedure and the sole-judge system to more cases, and improve the rules for online trials, without changing the current Civil Procedure Law.

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The parties can submit the litigation and evidence materials via the internet when they choose to file the lawsuit online. Upon the consent of the addressees, the judgment, order or conciliation statement could also be delivered online, according to the plan. With the consent of the parties, cases applicable to summary procedure or ordinary procedure may be tried online. The pilot programme is expected to be carried out in courts at the intermediate and primary levels in cities including Beijing, Shanghai and Guangzhou, as well as three intellectual property courts in the aforesaid three cities, the Shanghai Financial Court and three internet courts in Hangzhou, Guangzhou and Beijing. The programme will last for two years. Guidelines on enforcing court rulings At a press conference held on August 22, 2019 in Beijing, the SPC announced its plan for implementing a guideline to tackle difficulties in enforcement of court rulings. The court will strive to establish a long-standing mechanism by increasing the intelligence of the existing information technology-based enforcement system, accelerating the building of the social credit system, and deepening reform of current enforcement mechanisms. The aims of the guideline include popularising the idea of bona fide enforcement so as to reduce the adverse impact on people subject to court orders, advancing legislation on compulsory enforcement, enhancing enforcement in specific categories of cases, building an inclusive one-stop litigation mechanism, and creating a benign business environment by cracking down on the crime of refusing to enforce court rulings.

Innovative technology promotion Chinese courts have become smarter and more technology-friendly, with more legal services offered online. Statistics released by the SPC show that 97.8 per cent of courts supported online case filing in 2019, allowing litigants to initiate lawsuits at home or any place with internet access, instead of having to go to a court. The online exchange of evidence and online case hearings were also practised in more than half the country’s courts last year. Besides providing more convenience for litigants through the internet, Chinese courts have also been improving judicial transparency by disclosing information about legal procedures and broadcasting case hearings. Courts at all levels used an online platform to broadcast case hearings more than 3.9 million times last year. The data shows that the construction of most smart courts has been completed, and the related technologies will be widely applied to judicial work, making case handling more efficient and legal services more convenient. Online mobile case-hearing platform One online legal platform in particular has shone during the COVID-19 outbreak, a mobile platform offering litigation-related services which has played a big role in helping people deal with lawsuits and legal affairs during the pandemic. The SPC opened the mobile platform on WeChat in March last year to provide litigants and lawyers with quicker and easier access to litigation.

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On the platform, users can enjoy more than 20 legal services, including case filing, case hearing, evidence exchange and searching for relevant laws. Statistics released by the SPC showed that the platform has more than 1.39 million users and has been visited more than 270 million times as of March 31, 2020. In March, the platform saw about 390,000 new users and received 437,000 case filing applications, up 86.8 per cent and 28.7 per cent, respectively compared with the figures in February. About 2.08 million people visited the platform in March, up 53.7 per cent compared with February. The COVID-19 outbreak reduced travel and face-to-face activities, but litigation-related services did not stop and in fact became more convenient. The platform can also provide a bridge for judges, litigants and attorneys to communicate. Case concluded online The Third Circuit Court of the SPC recently concluded a foreign-related commercial case via the SPC’s online mobile case-hearing platform. Appealed to the Circuit Court by a Chinese decoration firm based in Wuxi, East China’s Jiangsu province, the case was scheduled to be heard on a day in the midst of the pandemic, leaving the appellant anxious about whether the trial could be held as scheduled. Taking into account the pandemic and the rights and interests of the parties involved, the court decided to hear the case through the online platform on the scheduled date. The proceeding went smoothly online with the court announcing its verdict in court, putting an end to the dispute that had lasted for a year and a half. Enforcement of court orders The SPC pledged to strengthen the enforcement of court orders at a national videoconference on May 29, 2020. Courts across the country should adeptly apply information technology to tackle difficulties in enforcing judgments, the SPC said. China set up a nationwide database to help enforce court orders in 2014. The database is connected to banks and other agencies to monitor the properties of those subjected to the enforcement of court orders, including deposits in bank accounts and online accounts, real estate, vehicles and stocks. On the basis of a blacklist of dishonest people subject to enforcement, courts can impose penalty restrictions on defaulters in areas such as travelling, house purchasing and investment. Meanwhile, the SPC required courts to enforce in a procedure-based, impartial and non- abusive way, and to strengthen oversight over the exercise of power. Online foreign law ascertainment platform On November 29, 2019, the SPC officially launched its Foreign Law Ascertainment Platform on the website of the China International Commercial Court (CICC). The platform is an important step for the SPC in its effort to establish mechanisms and institutions for the settlement of international commercial disputes under the framework of the BRI, to remove the barriers to the ascertainment of foreign law, and to improve a rule of law-based business climate. The courts at all levels, parties in litigation and their attorneys, enterprises involved in disputes related to cross-border trade and investment or other cross-border affairs, and legislative and administrative organs as well as arbitration institutions, can all access the platform.

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At present, people cannot only use the platform to acquire information about foreign law provided by designated experts or institutions, but also to access its database, which already contains over 50 related adjudications, for the laws and court rulings relevant to their situations.

Measures taken against COVID-19 Due to COVID-19, difficulties in handling foreign-related civil and commercial disputes could last half a year or longer, but the SPC has started researching solutions such as issuing judicial interpretations, drafting guidelines and disclosing typical cases for reference. Online litigation services Chinese courts have been urged to make full use of information technology in litigation work since the outbreak of COVID-19, according to the SPC. From February 3 to March 20, 2020, courts at various levels filed nearly 550,000 cases online across the country, made over 440,000 payments online, held over 110,000 court sessions online, and conducted online mediation more than 200,000 times, according to data from the SPC. The number of evidences exchanged and electronic deliveries made online was more than 130,000 and 1.67 million, respectively. A recent circular issued by the SPC called on Chinese courts to move their work online, including case filing, mediation, evidence exchange, court hearing, sentencing and document delivery, aiming to meet people’s judicial needs and to ensure the smooth and orderly operation of courts despite COVID-19. On February 21, 2020, the Beijing Internet Court released the country’s first protocol of an online court hearing with 26 procedures, stipulating the details from online identity authentication to transcripts of hearings in a video courtroom. Courts at all levels have also taken measures such as strengthening internet surveillance and promoting online judicial auctions to ensure enforcement amid the pandemic. Guidance for court hearings and judgment enforcement The SPC issued guidance for court hearings and judgment enforcement amid the novel coronavirus outbreak, stressing strong judicial service and support for the battle against the pandemic. With respect to the hearing of civil cases, the guidance upholds the concepts of equally protecting the legal rights and interests of all litigants under the law, serving broad pandemic prevention and control efforts, and maintaining social and economic development. It calls on the courts to proactively guide litigants in resolving their disputes through mediation. As for civil disputes over contract performance, medical services, product quality and labour, which are the issues that have raised widespread public concerns, the guidance demands equal attention to the protection of workers’ rights and interests and the healthy development of enterprises, enhanced protection of medics’ rights and interests, and severe punishment for the production or sale of fake or inferior pandemic control materials. As for the issue of judgment enforcement, the guidance demands enforcement measures against units or individuals undertaking the task of pandemic prevention and control as well as the sites, equipment, materials and funds being used for this purpose. No property preservation measures, such as sealing off, freezing, distraining and transferring, or compulsory enforcement measures, should be taken against funds or materials explicitly dedicated to pandemic prevention and control, according to the guidance.

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With respect to litigation processes, the guidance stresses that hearings that should be adjourned during the pandemic must be adjourned. Those meeting the conditions for suspension must be suspended, as must their enforcement. Litigants’ legal rights and interests in postponed matters must be fully protected in light of the actual situations, said the guidance. For urgent cases, the hearings must be held with precautionary measures in place or, if possible, by video. Guidelines for foreign trade disputes The SPC has issued a set of new guidelines to deal with foreign-related commercial and maritime cases stemming from or affected by the COVID-19 pandemic. Under the fresh guidelines, parties facing difficulties due to the pandemic may apply for an extension of the time limit for submitting foreign-related certificates and evidence or filing an appeal. The guidelines stipulated that the carrier or the shipper may request the cancellation of the contract prior to the commencement of the voyage, if the contract could not be performed due to the pandemic. In terms of general carriage contract disputes, the SPC also stated that if the carrier informs the shipper in a timely manner, the carrier’s exemption of liability for delay in delivery caused by the pandemic or quarantine measures shall be guaranteed. Typical cases On April 22, 2020, the SPC released 13 typical cases that demonstrate courts throughout the country providing services to help ensure the resumption of work and production amid pandemic prevention and control. Mainly consisting of contract disputes and enforcement cases, these cases are successful practices of Chinese courts facilitating the parties to reach conciliation by using information technology and flexible enforcement measures during the coronavirus pandemic, according to the SPC. The SPC said that such cases were published with an aim to promote courts at all levels to establish the concept of fair and civilised enforcement to better facilitate pandemic control and economic and social development. Force majeure and handling of contractual disputes Already on February 10, 2020, the Legal Working Committee of the Standing Committee of the People’s Congress had declared that, generally, “COVID-19 can constitute Force Majeure under the PRC Contract Law”. In general, both the COVID-19 pandemic and respective prevention and control measures may constitute force majeure. Provided that the pandemic situation or the pandemic prevention and control measures directly lead to a situation that meets the statutory requirements of force majeure (i.e. “objective circumstances which are unforeseeable, unavoidable and insurmountable”), relevant statutory provisions, such as Article 180 of the General Rules of the Civil Law of the PRC and Articles 117 and 118 of the PRC Contract Law, shall apply. In line with general legal principles, the party seeking a partial or total exemption of its liabilities due to force majeure bears the burden of proof that a force majeure event directly resulted in the partial or total non-performance of its contractual obligations. According to the above-mentioned statutory force majeure provisions, where a contract is not able to be performed due to force majeure, liabilities for breach of contract shall be

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Rui Bai Law Firm China exempted in part or in whole in light of the effects of the force majeure event, except as otherwise provided by law. If the force majeure event occurs after one party has already delayed its performance, the liabilities of the party shall not be exempted. Further, if either party to a contract is not able to perform the contract due to force majeure, such party shall give notice to the other party in due time so as to reduce the losses that may be caused to the other party and provide evidence within a reasonable time limit.

Protections for foreign investors Judicial interpretation On December 27, 2019, the SPC issued a judicial interpretation applicable to the Foreign Investment Law, aiming to better protect the legitimate rights and interests of foreign investors in the country. The courts around the country will not support contracted parties who claim that investment contracts formed in areas not on China’s negative list of foreign investment are void because the contracts have not been approved or registered by administrative authorities, according to the interpretation. Investment contracts formed in areas where foreign investment is restricted by the negative list can still take effect as long as the parties concerned take necessary corrective measures before the courts make effective judgments. Investment contracts that did not meet the requirements of the negative list when they were signed can still be deemed effective if the negative list loosens restrictions before court judgments take effect. These designs are aimed at guaranteeing the legitimate rights and interests of investors to the largest extent under the prerequisite of safeguarding the stability of foreign capital management. Lin-gang Special Area Court The China (Shanghai) Pilot Free Trade Zone Court, subordinate to the Shanghai Pudong New Area People’s Court, together with the intellectual property court of the Shanghai Free Trade Zone (FTZ), established a branch in the Lin-gang Special Area on October 19, 2019. The Lin-gang Special Area is a newly added part of the Shanghai FTZ that officially launched on August 20, 2019. The branch is responsible for hearing and mediating disputes over foreign-related commercial affairs, joint ventures and foreign-related enterprises, and intellectual property in the area, under the principles of impartiality, convenience and efficiency. The branch will also cooperate with other agencies in the area to resolve conflicts and to conduct case analysis and prediction. The First Foreign-related Civil and Commercial Court of Hainan The First Foreign-related Civil and Commercial Court of Hainan is an organisation established with the official approval of the SPC of China and the permission of the Office of Government Set-up Committee of Hainan Province. The jurisdiction of the Court covers Changjiang Li Autonomous County, Chengmai, Danzhou, Dingan, Haikou, Lingao, Qionghai, Qiongzhong Li and Miao Autonomous County, Sansha, Tunchang, Wenchang, and the Yangpu Economic Development Zone. The Court has centralised jurisdiction of the case filing, adjudication and enforcement of foreign-related civil and commercial cases at first instance with the subject of an action less than RMB 5 billion.

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The Court runs by the integrative pattern of case filing, adjudication and enforcement, and consists of the case-filing team, the adjudication team and the enforcement team. The Case Management Office and Litigation Service Center belong to the case-filing team. There are six judges at present and another six judges will be staffed as scheduled. Twelve judges would man the Court. By cooperating with the China Council for Promotion of International Trade Hainan Sub-council and other domestic and international mediation and arbitration organisations, the Court focuses on the online and onsite connective procedures among litigation, mediation and arbitration of foreign-related civil and commercial cases, including those concerning the Hong Kong Special Administrative Region, the Macao Special Administrative Region and the Taiwan Region of the PRC, aiming at perfecting the alternative disputes neutral assessment mechanism and exploring the high-standard and all standing information-based dispute resolutions, comprehensively playing its role as a social institution and providing an impartial, efficient, authoritative and convenient dispute resolutions service for international and domestic parties in civil and commercial cases.

Updated development of arbitration in China With the development and shift of global trade and investment, the market share of international arbitration in China is expanding. In terms of the caseload, this chapter takes the Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC), as an example, as the leading Chinese arbitration institution whose international cases increased from 52 in 2015 to 163 in 2019, with an average annual growth rate of 35.95 per cent. By introducing and innovating international practice in institutional arbitration rules, the arbitrators and parties who take part in Chinese international arbitration practice are well equipped with more procedural tools and capacities. First, in terms of the arbitration language, since the 2015 amendment repeals of the default language provision, which introduced Chinese as the arbitration language if no agreement on arbitration language has been specified, more arbitration tribunals and parties concerned have opted for English as the arbitration language. In addition, as more and more arbitrators (including non-Chinese arbitrators) who are capable of handling international cases preside over BAC/BIAC’s international arbitration cases, cases in English will be handled more smoothly. Second, in terms of the applicable laws and arbitration rules, in the past five years we have witnessed a diversified scenario, where the applicable laws involve the laws of: Hong Kong; Korea; Kyrgyzstan; the US state of New York; Uzbekistan; and the UN Convention on Contracts for the International Sale of Goods, while the applicable arbitration rules involve the International Chamber of Commerce (ICC) Arbitration Rules and the UNCITRAL Arbitration Rules. In a number of cases, parties from within and outside China even reached amendments on their arbitration agreements that stipulated another well-known international arbitration institution, and replaced BAC/BIAC as the eligible arbitration institution for their dispute resolution. Finally, since the BAC/BIAC’s 2015 Arbitration Rules introduced a series of cutting-edge international practices, the joinder and the consolidation of arbitration has been a frequent practice in BAC/BIAC’s international cases. It is also worth noting that after the first emergency arbitrator case in Mainland China was administered by BAC/BIAC, and the interim measures of that case were enforced in 2017,

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BAC/BIAC has begun to encourage and support more tribunals and parties to apply for emergency arbitrator proceedings, and to seek enforcement of interim measures in countries and regions along the Belt and Road. Outstanding efforts are made as follows: Overseas arbitration agencies can set up offices in the Lin-gang Special Area starting on January 1, 2020 On November 8, 2019, at the Shanghai International Arbitration Summit, a parallel forum of the Second China International Import Expo (CIIE), the Shanghai Municipal Bureau of Justice formally published the “Measures for the Administration of Overseas Arbitration Agencies’ Offices in the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone” (the Measures). According to the “Measures”, starting on January 1, 2020, eligible non-profit arbitration organisations legally established in foreign countries or in Hong Kong, Macao and Taiwan of China, and arbitration agencies established by international organisations of which China is a member, can apply to the Shanghai Municipal Bureau of Justice for registration and establishment of offices in the Lin-gang Special Area to carry out foreign-related arbitration. To establish an office in Lin-gang, an overseas arbitration agency should satisfy the following three conditions. First, it must have been legally established overseas for more than five years. Second, it must carry out substantive arbitration services overseas and have a high international reputation. Third, the head of the office to be established must not have received any criminal punishment for intentional offences. The registration, alteration and deregistration information of such offices should be made public by the Shanghai Municipal Bureau of Justice through the official website or other channels. The arbitration offices can provide foreign-related arbitration on civil and commercial disputes in international commerce, maritime affairs, investment and other fields, including: case acceptance, trials, hearings and verdicts; case management and services; and arbitration consulting, guidance, training and seminars. The Shanghai Municipal Bureau of Justice encourages and supports such arbitration offices to carry out exchanges and cooperation with local arbitration organisations in Shanghai, including signing cooperation agreements, recommending arbitrators and mediators to each other, providing internships and exchange positions to each other, facilitating each other’s arbitration activities such as trials and hearings, and jointly organising training, conferences, seminars and promotional activities. Enforcement of foreign judgments Under the Civil Procedure Law of China, it is possible to enforce foreign judgments in China according to applicable treaties or the principle of reciprocity. China has yet to enter into treaties for recognition and enforcement of judgments with its major trading and investment partners, including Australia, England, Germany, Japan and the USA, but has entered into such treaties with around 30 other countries. As such, any case based on a reciprocal relationship has been intensely reviewed and interpreted in the legal profession. It is generally understood that a Chinese court will consider whether there is any precedent indicating reciprocity. In other words, a Chinese court may recognise and enforce the judgment of a foreign country only if the foreign country in question has recognised and enforced the judgment issued previously by Chinese courts. In practice, the Chinese courts have traditionally adopted a conservative approach in enforcing foreign judgments on the basis of reciprocity.

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The most influential case is the decision made by a court in Nanjing in December 2016, where the court recognised and enforced the judgment relating to a commercial matter rendered by the Supreme Court of Singapore on October 22, 2015 on the ground of the principle of reciprocity. This decision is deemed a positive development. In the Nanjing decision, the Nanjing Court recognised a judgment by the High Court of Singapore, the same court that had previously recognised a judgment by the Suzhou Intermediate People’s Court. Both the Nanjing Court and the Suzhou Intermediate People’s Court are located in Jiangsu province. In addition, according to a speech made by a judge in the SPC in 2016, Chinese courts may consider enforcing the judgment of a foreign country that has not recognised and enforced the judgment issued previously by Chinese courts but intends to do so. Unless the Chinese defendant has assets in a foreign jurisdiction outside China or there is a clear record of “reciprocity” in such foreign jurisdiction, it is highly advisable to consider other approaches rather than litigating outside China. These approaches include: 1) international arbitration in a country that is a member of the New York Convention; 2) litigation in Hong Kong according to the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters; and 3) litigation in China. New interim measure enforcement arrangement between Hong Kong and Mainland China On April 2, 2019, the SPC of China and the Government of the Hong Kong Special Administrative Region signed the groundbreaking Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings (the Arrangement). The gist of the Arrangement is that parties to Hong Kong arbitrations can apply directly to an Intermediate People’s Court in the Mainland for property, asset or conduct preservation orders, and parties to Mainland arbitrations can apply directly to the Hong Kong High Court for injunctions or other interim measures. The Arrangement is set to facilitate and increase the number of cross-border applications for urgent preservation measures. The Arrangement adds to the growing repertoire of tools for parties with China-related, Belt and Road and Greater Bay Area disputes to have these resolved in Hong Kong, and also enhances the reach of parties resolving such disputes in the Mainland to assets in Hong Kong.

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Wen Qin Tel: +86 10 8540 4653 / Email: [email protected] Wen is a Partner at Rui Bai Law Firm, which is an independent law firm and a member of the PwC global network of firms. Prior to joining Rui Bai, Wen was a partner at a local law firm in Beijing. He specialises in dispute resolution, employment law and general corporate law. Wen obtained his Master of Laws degree from the China University of Political Science and Law. Wen is a native Chinese speaker and is fluent in English. Wen has been praised by his clients for his expertise in the practice areas mentioned above. As a result, he has been continuously recommended as one of the leading lawyers by the well-known ranking and recognition organisations in the legal profession, such as Chambers and Partners, The Legal 500 and Asialaw Leading Lawyers. In 2015, he was ranked as an “Eminent Practitioner” by Chambers and Partners. Chambers and Partners also quoted one of his clients as saying that “he has a sound understanding of the PRC laws and global aspects of a case”.

Lei Yang Tel: +86 10 8540 4651 / Email: [email protected] Lei is a Senior Attorney at Rui Bai Law Firm, which is an independent law firm and a member of the PwC global network of firms. She is experienced in the areas of civil litigation and arbitration. She worked as a qualified lawyer for seven years in a PRC law firm before joining Rui Bai. She graduated from the University of Southampton with an LL.M. degree and from Dalian Maritime University with a Bachelor’s degree in Law. Lei is a native Chinese speaker and is fluent in English.

Rui Bai Law Firm Unit 01, 6/F Fortune Financial Center, 5 Dongsanhuan Zhong Road, Chaoyang District, Beijing 10020, China Tel: +86 10 8540 4688 / URL: www.ruibailaw.com

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Constantina Hadjianastasi & Maria Afxentiou Harris Kyriakides LLC

Efficiency of process Cyprus has a quasi-common law jurisdiction which has been influenced by English and Greek law. Section 29(1)(c) of the Courts of Justice Law introduces and endorses common law in the Cypriot legal system. The courts are bound by the doctrine of precedent, according to which the superior courts’ decisions bind subordinate courts. Civil procedure in Cyprus is regulated by the 1954 Civil Procedure Rules (CPR) which have been amended from time to time. Cyprus has five districts which act as courts of first instance and one Supreme Court. Each district court has jurisdiction to try civil cases which fall within their territorial jurisdiction, except for specific civil matters which fall within the jurisdiction of specialised courts. Namely, the: • family court; • rent control court; • industrial disputes court; and • military court. All first instance court judgments are subject to appeal before the Supreme Court, whose judgments are final. Derived from the decisions issued, Cyprus shows significant delays in the time of completion of the litigation before the competent courts. More precisely, in civil proceedings the delay is between four to six years in Cyprus courts of first instance and there is a further delay of up to four years for appeals before the Supreme Court of Cyprus. However, during recent years, the judicial system in Cyprus has been under constant reform that aims to reduce the delay. In the last few years, the CPR have been amended and a simplified procedure was established for amendments of pleadings under Order 25 of the CPR and for summons of directions under Order 30 of the CPR. The amendment of Order 30 of the CPR has made the process more expedient in relation to claims under €3,000. As a result of this amendment, the courts can now issue summary judgments in relation to these cases. In general, additional changes are pending in relation to the CPR in order to make the procedures shorter and more convenient. Furthermore, the appointment of new Judges is expected to be concluded within the next few months in order for the backlog to be limited and, in addition, the establishment of a second instance court is expected to be concluded which will handle appeals that are submitted against the decisions issued by the first instance court. In light of this, the Supreme Court of Cyprus will operate as the tertiary jurisdiction

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Harris Kyriakides LLC Cyprus and will examine and handle only a limited number of appeals for reasons related to legal grounds or legal matters of major public interest.

Integrity of process The Cyprus Judiciary is characterised by impartiality and independence. Judicial independence is safeguarded by the Constitution and the traditions of the Judiciary. Judges are members of the Judicial Service of the Republic. In Cyprus, the doctrine of the separation of powers is applied, according to which, in order to prevent power from being abused, the legislature (parliament), the executive (government) and the Judiciary (the law courts) are separate from one another. In Cyprus, the independence of Judges is guaranteed by their permanence and the securing of their remuneration. A Judge cannot be removed except under very exceptional circumstances. The applicable laws in Cyprus are the following: • The Constitution of the Republic of Cyprus. • The laws retained in force by virtue of Article 188 of the Constitution. • The principles of Common Law and Equity. • The laws enacted by the House of Representatives. Τhe Constitution has been amended so that European law has supremacy over the Constitution and national legislation. Recently, the Supreme Court of Cyprus adopted further principles/guidelines in order to ensure the impersonal nature of the courts and judicial integrity. These principles are intended to provide guidance and assistance to Judges to reach their own decisions as to whether or not a particular activity or behaviour is appropriate.

Privilege and disclosure Pursuant to the provisions of the CPR, any party can apply to the court in order to obtain a decision ordering the other party to disclose the documents that are or have been in his/her possession, custody or power. Disclosure applications are made in the course of summons for directions. Parties must disclose: • documents considered relevant to the matters in question even if these adversely affect the parties; and • documents referred to in pleadings or affidavits (for which inspection must also be allowed). The following documents do not have to be disclosed: • documents that are not material to the case; • privileged documents; and • without prejudice documents. Documents that are not disclosed cannot be adduced as evidence. Parties have a continuous obligation to disclose any new relevant documents that come into their possession. In cases where there are valid grounds to suspect that the other party has not provided full disclosure, a party can apply for specific disclosure. Disclosure is followed by an inspection whereby each party can physically inspect or request copies thereof. Furthermore, the CPR allows for a third party to be summoned to produce documents to the court during the trial.

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Privileged documents that are deemed confidential are not subject to disclosure and are as follows: • documents “without prejudice”, e.g. communications between the parties’ lawyers (either discussing the case or potential settlement options); • legal professional privilege which includes (a) confidential communications between lawyers and clients containing legal advice, and (b) communication between lawyers, the client and third parties in relation to pending or contemplated litigation; and • self-incriminating information. In a case where a party requests disclosure of a specific document which is privileged, the court will inspect it and then decide whether it should be produced. In Cyprus, legal professional privilege is ensured: • by the relevant regulations issued pursuant to the provisions of the Lawyers Law (Chapter 2) and the Code of Conduct; • by the principles of common law, applied in accordance with the provisions of the CPR; and • by the decisions of the Court of Justice of the European Union. Pursuant to the provisions of Article 13 of the Code of Conduct, professional secrecy is recognised as the fundamental and primary right and obligation of advocates and must be protected by the court and any State or public authority. In general, the below derive from the Code of Conduct: • Advocates are guardians of the confidential information and evidence entrusted to them by their client. The safeguarding of secrecy is a necessary prerequisite in inspiring the client’s trust in the advocate and in this respect, advocates are obliged, without any time limitation, to respect the secrecy of all confidential information or evidence that has come to their knowledge in the course of their professional activity. • In cases where an advocate is a witness, they must no longer appear also as an advocate. As a witness, they must appear before the court with a fully independent opinion and may refuse to answer any question that may lead them to a disclosure or violation of secrecy. • The duty of maintaining secrecy includes the protection of confidential information provided by third persons in the context of the advocate’s professional capacity, as well as confidential information arising from conversations necessary in view of reaching an agreement, which later did not materialise. Secrecy also includes the confidential information entrusted by a fellow colleague. • If a client makes an accusation against their advocate, or if the advocate faces criminal or disciplinary prosecution, then the latter is entitled to disclose any confidential information with regard to the accusation or the case, even if information confided to them by their client would, in this manner, be disclosed.

Costs In general, the costs of civil court proceedings are calculated based on the economic scale, nature and complexity of the case and include the costs of the proceedings. Normally, the costs include the costs of: • the procedure; • the preparation of the legal documents (i.e. interim applications); • the court appearances; • the witnesses; • the preparation of the list of costs; and • the preparation of informative letters before and during the proceedings.

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As a rule, in civil cases, the unsuccessful litigant to the proceedings will be ordered to pay all the costs. However, pursuant to Order 59 of the CPR, the awarding of costs lies exclusively at the court’s discretion. The factors considered by the court when awarding the costs are, inter alia, the nature, importance, difficulty or urgency of the case and the demeanour of the parties. In light of the above, the court may decide that the successful litigant may only be able to receive part of the costs or that each party to the proceedings will bear its own costs. Costs are assessed by the court registrar and approved by the court, unless otherwise agreed between the parties. Legal costs awarded to a successful litigant bear legal interest.

Litigation funding The legal fees are generally charged based on (a) an agreement between the client and the lawyer subject to the provisions of the Advocates’ Code of Conduct, and (b) Supreme Court regulations providing the minimum and maximum charges for each stage of litigation, depending on the scale of the claim. However, the exact amount of legal fees depends on the complexity, urgency and difficulty of the case, the nature of the claim and the extent of the proceedings. Funding of litigation is normally provided by the parties to the legal proceedings. However, in cases where (a) the litigants lack liquidity to support their valid claims in Cyprus, and/ or (b) the parties to the proceedings can afford litigation but prefer to receive funding, the litigation funding comes into play. In this respect, we note the following: • Contingency fee agreements (i.e. an agreement that provides that any fee is payable only if there is a favourable result) are prohibited as they offend the equitable principle against champerty, which aims to restrict the funding and selling of litigation. • Third-party funding is not expressly prohibited, although its legality has yet to be considered and examined by Cyprus courts. In case such an issue is raised, Cyprus courts will probably take guidance from common law and/or English case law. Third- party funding is prima facie available to both the plaintiff and defendant. • Pursuant to the provisions of the Legal Aid Law (Law 165(I)/2002), as amended, the Republic of Cyprus may provide legal aid when individuals cannot bear the costs of the legal proceedings. However, legal aid can only be granted in cases of specific violations of human rights, cross-border disputes, and family and matrimonial law disputes.

Interim relief Pursuant to Article 32 of the Courts of Justice Law (Law 14/60), Cyprus district courts are vested with the power to grant interim orders in the context of proceedings, pending before the Cyprus court. This means that Cyprus courts do not have jurisdiction to issue an injunction in respect of contemplated court proceedings and therefore, the proceedings should have already commenced before the court is vested with jurisdiction to issue an injunction. However, this would not apply in relation to international arbitration, where courts do have jurisdiction to issue an injunction in aid of contemplated arbitration proceedings. Cyprus courts have the discretion to issue an injunction provided that the following criteria are met: • the applicant demonstrates that he/she has a good arguable claim which presents a serious question to be tried; • the applicant demonstrates a reasonable probability that he/she is entitled to the relief sought; and

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• the applicant presents evidence that demonstrates that it will be difficult or impossible to do complete justice at a later stage without granting an interim injunction or that it is likely that the applicant will suffer irreparable harm or harm that will be difficult to be redressed through monetary compensation. Even if all of the above conditions are met, an interim injunction is not granted automatically. The court will assess whether it is just and convenient to grant the order after having taken into account all of the facts and circumstances surrounding the case. A wide range of interim relief is available in Cyprus: Freezing orders: A freezing order usually restrains the respondent from selling, disposing, exchanging, leasing, charging or transferring its property in any way. Chabra orders: Cyprus courts have jurisdiction to freeze the assets of a co-defendant against whom no direct cause of action lies, provided that the claim for the injunction is ancillary and incidental to the claimant’s cause of action. Norwich Pharmacal orders: These take their name from the well-known case of Norwich Pharmacal Co. v. Commissioners of Customs and Excise of the House of Lords. This type of order aids the search and discovery of information, especially that which is necessary in order to identify a wrongdoer or to obtain the necessary information or evidence in order to pursue an action against the ultimate wrongdoers. Tracing orders: A tracing order enables the applicant to ascertain the extent and whereabouts of the respondent’s assets so that the freezing injunction may operate effectively. Bankers trust orders: Cyprus courts can order a Cyprus bank to submit an affidavit in court which discloses and specifies any information regarding the interaction they have had with the defendants, including correspondence, orders received, transactions in their bank accounts, monetary transfers and any other information deemed necessary, and the affidavit is accompanied by the copies of the documents disclosed. Anton Piller (search) order: A search order is a form of mandatory injunction that compels the defendant to allow the claimant’s representatives to enter into the defendant’s premises and search for, copy, remove and detain documents, information or other material in order for these to be stored in a safe place and to safeguard such evidence from being destroyed or altered. Gagging order: Where interim freezing injunction proceedings are commenced and disclosure orders are sought on an ex parte basis (i.e. without notice to the other side), the defendants are ordered not to notify in any manner whatsoever any person in relation to the pending proceedings commenced against them and/or in relation to the provisions of any court order issued on an ex parte basis until all requested information is properly disclosed and/or until any further directions are given by the court. Anti-suit injunctions: Cyprus courts have jurisdiction to restrain a party from commencing or continuing proceedings abroad. Quia timet order: A quia timet injunction is granted where no actionable wrong has been committed, to prevent the occurrence of an actionable wrong or to prevent the repetition of an actionable wrong. Pursuant to Section 9 of the Civil Procedure Law, an interim injunction can be obtained on an ex parte basis (i.e. without notice to the defendant) provided that very urgent or exceptional circumstances are shown. In an application made ex parte, the applicant has a duty of full and frank disclosure to the court in connection with all material facts (and possible defences of the respondent) that the applicant is aware of (or could have reasonably discovered with prudent and reasonable inquiries). What is considered material is a matter for the court to decide.

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In addition, the court will require the applicant to provide an undertaking in damages, which may also be fortified with a bank guarantee or other similar security. This works as a counter- security, used to indemnify the respondent against all losses sustained due to the injunction, in case the court finds that the injunction issued was unreasonable or was issued mala fides. Provided that the court is satisfied by the applicant in regard to the existence of the conditions justifying the issuance of the ex parte order, and provided that the principles established by case law are also satisfied, the order is generally made returnable. After the service of the order to the respondent, the respondent will have the right to object to the application and request the discharge or variation of the orders issued ex parte, during an inter partes hearing. Non-compliance with a court order amounts to “contempt of court”. Pursuant to Section 42 of the Courts of Justice of 1960 (Law No. 14/60), and Order 42A of the CPR, Cyprus courts are vested with the power to compel a person to obey the provisions of any order issued by it ordering or prohibiting any action, through the imposition of a penalty (i.e. a fine) or a sentence of imprisonment, or through the attachment or sequestration of assets.

Enforcement of judgments Domestic judgments A judgment issued by a Cyprus court becomes automatically enforceable. The Civil Procedure Law, Cap. 6, provides for, inter alia, the following methods of enforcement: • writ of execution for the sale of movables; • writ for sale of immovable property or registration of a charge over the property; • writ of sequestration of immovable property; • writ of possession, ordering property to be delivered to the judgment creditor; • an order to the judgment debtor to make payments over the debt on a monthly basis; and • injunctions and other orders encumbering the interest of the judgment debtor on shares and other stock owned. Furthermore, bankruptcy or liquidation proceedings can be initiated against a judgment debtor. Foreign judgments The recognition and enforcement of a foreign court judgment depends on whether or not the said judgment was issued in another EU Member State. In this respect, the recognition and enforcement of a foreign court judgment can be based on: • the provisions of Regulation 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters; • the provisions of a bilateral or multilateral convention between Cyprus and other countries, in which case reliance can be given on the law of Judgments of Foreign Courts (Recognition, Registration and Enforcement pursuant to a Convention), Law 121(I)/2000; • the Foreign Court Judgments Law (Reciprocal Enforcement), Cap. 10; and • a common law action pursuant to domestic private international law. As far as the judgments issued by courts of EU Member States are concerned, these are recognised without any special procedure and without the need of a declaration of enforceability for proceedings instituted on or after 10 January 2015. The court must be satisfied that the conditions necessary to establish the authenticity are fulfilled. The recognition of a foreign judgment can be refused for the specific reasons set out in Regulation 1215/12.

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In relation to the cases where there exists a bilateral treaty or multilateral convention between Cyprus and the country that issued the judgment, the procedure is governed by the specific treaty or convention. In any of the above-mentioned cases, an application must be filed before the appropriate Cyprus district court, seeking the recognition and subsequent enforcement of the issued foreign judgment. If there is no multilateral or bilateral agreement between the state of origin and Cyprus, then the filing of a new claim in Cyprus is needed, in which the cause of action would be the foreign judgment itself (by a common law action). Once a foreign judgment has been recognised and registered in Cyprus, it obtains the status of a domestic judgment.

Cross-border litigation The general rule is that service of judicial documents in Cyprus is effected through a private process server to the defendant in person or at his/her house or usual place of employment. Service on a corporate entity is effected either (i) at its registered office on a person who is authorised to accept service, or (ii) on the company’s directors or secretary. If service cannot be effected in the manner prescribed by the CPR, a party can request leave from the court for substituted service. Judicial cooperation in civil matters includes the simplification of (a) the cross-border service of judicial and extrajudicial documents, (b) the recognition and enforcement of awards, and (c) the cooperation in obtaining evidence. More precisely, if a defendant resides outside the jurisdiction, leave of the court must be obtained before the claim is served. The method of service depends on any existing treaty or agreement between Cyprus and the country in which the defendant resides. Service to defendants residing in the European Union is carried out pursuant to Council Regulation (EC) No. 1393/2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters, which provides for the following means of service: • post; • direct service (if permitted by the State’s domestic law); • diplomatic or consular agents; and • transmitting and receiving agencies designated by the State. In Cyprus, the Ministry of Justice and Public Order has been designated as the receiving agency. If the country in which the defendant resides is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965, the following means are also available: • postal channels, directly to persons abroad; • designated judicial officers; • post (if there is no objection to this); and • in accordance with any bilateral agreement concluded between the signatory parties. Cyprus has entered into bilateral agreements with a number of countries for legal assistance in civil matters and for the enforcement of court decisions in their respective jurisdictions. This means that Cyprus is obliged to follow, in relation to the service of documents, the procedures described in the content of each bilateral agreement so that the service can be effected accordingly.

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International arbitration There are two pieces of legislation governing international arbitration in Cyprus: (a) the International Commercial Arbitration Law of 1987 (Law 101/1987); and (b) the Law on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1979 (Law 84/1979). Law 101/1987 Law 101/1987 is an almost identical adaptation of the original UNCITRAL Model Law of 1985 and applies exclusively to international commercial arbitrations. Pursuant to Article 1(2), an arbitration is considered international if: • the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or • one of the following places is situated outside the State in which the parties have their places of business: • the place of arbitration if determined in, or pursuant to, the arbitration agreement; or • any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected. Pursuant to the provisions of Law 101/1987 and Law 84/1979 (which has transposed the provisions of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention)), a foreign arbitral award can be recognised as binding and be enforced in the Republic of Cyprus upon the filing of a written application in court, accompanied by the duly authenticated original award or a duly certified copy thereof, as well as the arbitration agreement. If the award and/or the agreement is not made in an official language of the Republic of Cyprus, then the court may request the party to supply a duly certified translation. In accordance with Article 36, the recognition and/or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only: • on the application of the party against whom the recognition and enforcement of the arbitral award are being sought, if the said party (respondent) shows that: • one of the parties to the arbitration agreement was lacking contractual capacity or that said agreement is not valid under the law governing the agreement or, in the absence of an express agreement of the parties as to choice of law, under the law of the country in which the arbitral award was issued; in the case under examination, therefore, the parties would have to prove that the arbitration agreement was invalid under English law; • he/she was not duly notified of the appointment of the arbitrator or the carrying out/ conduct of the arbitration, or was in any other way deprived of the opportunity to appear and present his/her case; • the arbitral award refers to a dispute that was not anticipated or did not fall within the terms of the arbitration agreement, or includes decisions on issues that fall outside the scope of the arbitration agreement; • the composition of the arbitral tribunal or the conduct of the arbitration proceedings was not in accordance with the relevant agreement of the parties or, in the absence of such an express agreement, took place in breach of the law of the country where the arbitration took place; or • the arbitral award has yet to become binding on the parties or has been set aside or suspended by a competent court of the country in which it was issued or in pursuance to whose laws it was issued; or

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• if the court finds that: • the subject matter of the dispute is not capable of settlement by arbitration under the laws of the Republic of Cyprus – i.e. it is not arbitrable; or • the recognition or enforcement of the arbitral award would be contrary to public policy principles in the Republic of Cyprus. Law 84/1979 Cyprus has also ratified the New York Convention and transposed its provisions into national legislation through Law 84/1979. It should be noted that the New York Convention applies only to the recognition and enforcement of awards made in the territory of another contracting state.

Mediation and ADR The alternative dispute resolution (ADR) methods that are available in Cyprus include arbitration, mediation and conciliation, of which the most frequently used form is arbitration proceedings. Arbitration secures privacy and confidentiality and is a speedy means of resolution. Mediation is a non-binding, private, confidential and low-cost procedure in which the parties, with the help of an intermediary, attempt to reach a binding settlement agreement. Conciliation is a non-binding procedure in which the conciliator can provide the parties with a non-binding opinion on possible settlement terms. The Arbitration Law, Cap. 4 governs domestic arbitral proceedings while Law 101/1987 regulates international arbitration. Arbitration procedures are also regulated by Order 49 of the CPR. Mediation is governed by Law 159(I)/2012, which implements Directive 2008/52/EC on mediation in civil and commercial matters and applies also to cross-border disputes. However, there are areas of law that cannot use mediation or arbitration as means of ADR. More precisely, (a) matters concerning criminal law, (b) matters concerning family law, and (c) matters that may have public policy implications, are considered to be non-arbitrable. In Cyprus, mediation is often used to resolve family disputes.

Regulatory investigations In Cyprus, there are independent administrative authorities that perform their duties and exercise their powers in complete independence. These authorities have under their control the monitoring of sensitive fields of economy, politics and private life. The most important authorities are, inter alia, the below: • The Commission for Protection of Competition (CPC). CPC has the exclusive competence for the harmonious operation of the market, within the rules of fair competition far from any anticompetitive distortions as means to boost economic growth and social welfare. • The office of the Commissioner for Personal Data Protection. The Commissioner for Personal Data Protection is an independent public authority responsible for monitoring the implementation of Regulation (EU) 2016/679 (GDPR) and other laws aiming at the protection of individuals with regard to the processing of their personal data. • The Cyprus Energy Regulatory Authority (CERA). CERA is the National Independent Energy Regulatory Authority of the Republic and is legally distinct and functionally independent of any other public or private entity. It takes autonomous decisions independently of any political organisation and draws up separate budget forecasts, with budgetary autonomy and sufficient human and financial resources to carry out its tasks.

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Constantina Hadjianastasi Tel: +357 24 201 600 / Email: [email protected] Constantina Hadjianastasi is a Senior Associate of the Corporate Dispute Resolution Department at Harris Kyriakides LLC. She has experience in advising foreign companies as well as individuals in worldwide freezing (Mareva) injunction proceedings, asset disclosure and gagging orders. Her expertise focuses on unfair business-to-consumer commercial practices and matters of parental responsibility, maintenance and assets. Constantina has handled cases before the Tenders Review Authority, and has been involved in cartel cases. Moreover, Constantina has experience in law concerning the processing of personal data, as well as in issues pertaining to state aid.

Maria Afxentiou Tel: +357 24 201 600 / Email: [email protected] Maria Afxentiou is an Associate of the Corporate Law and Shipping Department at Harris Kyriakides LLC. She specialises in fraud and asset tracing, disclosure and freezing injunctions at a multinational level.

Harris Kyriakides LLC 115 Faneromenis Avenue, Antouanettas Building, 6031 Larnaca, Cyprus Tel: +357 24 201 600 / URL: www.harriskyriakides.law

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Christian Toms Brown Rudnick LLP

Efficiency of process For High Court claims, there is a widely used online CE-File system enabling parties not only to issue claims and pay court fees online, but also to upload filings to which all parties to a matter will have access, including electronic court orders. For lower value disputes (under £100,000), the Money Claims Online portal (MCOL) allows parties (typically unrepresented) to issue claims, file defences, and (where appropriate) seek default judgments. There is then also the Online Civil Money Claims Pilot (OCMC). Initially this allowed parties to file claims and defences online, but updates in early 2020 introduced a fuller process enabling parties to pursue a civil money claim, from beginning to end, totally online. Parties can file directions questionnaires, and the court may post case management directions online. There is a current limit of £10,000 on OCMC claims, but there are plans to increase this to £25,000. The pilot is due to come to an end in November 2021. Other key areas welcoming technological innovation are document review and disclosure. There are now numerous Technology Assisted Review (TAR) tools available to litigating parties, designed to improve efficiency and accuracy in document reviews, thereby saving time and cost. In addition to judicial expressions of support (Pyrrho Investments Limited v MWB Property Limited [2016] EWHC 256 (Ch); Brown v BCA Trading Limited [2016] EWHC 1464 (Ch)), since 1 January 2019, the Business and Property Court has been running a two-year Disclosure Pilot Scheme aiming to make disclosure more efficient; a key aspect being the role of technology. The pilot establishes a two-stage disclosure process and requires parties to consider and agree on matters like TAR much earlier. Where parties do not adopt such processes, they must explain why. On 23 March 2020, the UK went into lockdown in response to the COVID-19 pandemic. As a result, more than half of all courts and tribunals across England and Wales were closed, with others remaining open for essential hearings only; Her Majesty’s Courts & Tribunals Service (HMCTS) published guidance to facilitate remote hearings via audio or video technology. While many hearings still were postponed, by the end of April 2020, 90% of cases that proceeded were conducted remotely. The pandemic has expedited the use of remote hearings which were already part of reforms announced in 2016. The current plan is for most civil matters to be resolved via an online court by 2023. Despite hastening the ubiquity of remote hearings, the pandemic has also unavoidably led to a case backlog. In response, the Ministry of Justice has created 10 ‘Nightingale courts’ throughout England and Wales which will hear cases from August 2020.

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Privilege and disclosure The three substantive forms of privilege are: (i) legal advice privilege (communications between a lawyer and their client for the purposes of seeking and providing legal advice); (ii) litigation privilege (communications between a lawyer/their client and any third party (and other documents they might each create), provided the dominant purpose was litigation); and (iii) without prejudice (WP) privilege (communications between disputing parties discussing settlement). However, there are still regular disputes as to when privilege applies. One legacy of the 2003 decision in Three Rivers District Council and others v The Governor and Company of the Bank of England (No.5) is that legal advice privilege can be relatively narrow in its application given the definition of ‘client’. For global organisations this presents a serious issue; ‘client’ presently does not apply to everyone within an organisation seeking legal advice, but only to those within that organisation who have been specifically charged with seeking and receiving legal advice. Accordingly, and in the absence of litigation (which brings other considerations), a party needs to be careful about who emails the lawyers, as well as who may be compiling/providing information for/to the lawyers. The practical danger is that any communications to or from parties outside a defined ‘client’ group, even if still within the organisation, may be vulnerable to disclosure. The case of Civil Aviation Authority v R Jet2.com Ltd [2020] EWCA Civ 35 has also confirmed that for legal advice privilege, a document or communication must also have been created for the ‘dominant purpose’ of obtaining legal advice. In terms of litigation privilege, the case of Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006 (ENRC) raised concerns at first instance as to the extent of litigation privilege protection; fortunately the position was reset by the Court of Appeal. In summary: (i) documents and communications (including, e.g., interview notes and forensic accountants’ documents) will be privileged provided they were produced for the dominant purpose of reasonably contemplated, adversarial proceedings (which include criminal enforcement); (ii) there is no proper distinction to be drawn between an investigation and prosecution; and (iii) there is no real distinction between avoiding, settling, resisting and defending litigation – all are ‘litigation purposes’. The Court of Appeal’s stance was that in assessing such matters, one should take a realistic, commercial view of the facts of a matter – the key should always be whether the dominant purpose is/was litigation. Of further particular interest was that in arriving at its decision on litigation privilege, the Court also separately expressed concerns over Three Rivers No.5 and defining the ‘client’ for the purposes of legal advice privilege. While they were not able to overturn the prior decision, the Judges did expressly leave open the question as to the correctness of the ‘narrow’ approach. As to WP privilege, this is designed to protect (as against any other party, including the Court) the content but not the fact of negotiations between parties genuinely aimed at settling a dispute. The effect is that such matters, oral or written, are inadmissible in legal proceedings to encourage parties to be frank in their negotiations, without fear of such matters being used against them. Crucially it is the content that will be determinative, and a document or meeting does not need to be expressly marked or agreed as ‘WP’, but it is prudent to do so and will help any future argument. Similarly, even if something is marked or agreed as ‘WP’, it does not mean that it must be if it has nothing to do with a genuine effort to resolve a dispute. A slight variation of this protection is ‘without prejudice save as to costs’, which permits a party to deploy material if relevant to the apportionment of legal costs.

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While oftentimes litigation privilege arises alongside without privilege protection, questions have arisen as to the extent of such protection during settlement negotiations. The case of WH Holding Ltd and another v E20 Stadium LLP [2018] EWCA Civ 2652 concerned two parties engaged in WP dialogue, and a handful of emails (internal to one of the parties) that had passed between Board members and stakeholders which discussed commercial terms of a potential settlement. Notwithstanding a claim of litigation privilege, they were ordered to be disclosed. The Court of Appeal’s view was that there was no authority or justification for litigation privilege to cover purely commercial discussions – it was not enough to be created for the general purpose of conducting litigation; they must also have been created for the (dominant) purpose of obtaining advice or information in connection with litigation. This accordingly raises the possibility that unless it is not possible to disentangle other content from legal advice (sought or provided for the sole or dominant purpose of deciding to litigate or to settle), or disclosure of the document might reveal the nature of any legal advice, then documents that are merely created with the dominant purpose of discussing a settlement – even amidst or in reasonable contemplation of litigation – may not attract privilege.

Evidence The legal procedure in England and Wales follows an adversarial system. Each party has an opportunity both to present their evidence and witnesses, and to test and cross-examine the other party’s case and witnesses. There is not, however, any property in a witness and evidence can be sought by either party from any source. It is possible for an unwilling witness residing (even perhaps temporarily) within the jurisdiction to be compelled to attend court to give evidence by a witness summons. In the case of witnesses outside of the jurisdiction, it may be possible to seek a letter of request from the English Court requesting a court in a jurisdiction with power over the witness to order an examination. In the case of a non-party to a claim who may otherwise be ‘mixed up’ in the matter (innocently or otherwise) and who therefore might be expected to have documents or other evidence, it may be possible to seek a court order requiring disclosure, a so-called Norwich Pharmacal order (NPO) – this, however, is an equitable remedy which will be granted only where ‘necessary’ in the interests of justice. For example, in Burford Capital Ltd v London Stock Exchange [2020] EWHC 1183 (Comm), an NPO to disclose identities of London Stock Exchange participants was not granted as, amongst other reasons, the applicant did not appear to have a cause of action against any wrongdoer, and the order would have resulted in confidential information of innocent third parties being disclosed.

Costs The costs regime in England and Wales typically operates on a ‘loser pays’ model. That said, at the end of a matter there is often a process of negotiation/taxation, and in many instances this results in only a proportion of the total fees claimed being payable. In higher value matters, there is increasingly proactive costs management by the court, with the parties required early on to submit cost budgets, agree them with the court, and to maintain them, seeking increases as appropriate. The benefit of this is that an approved budget amount will likely be due in full on a successful outcome. That said, until 30 September 2020, the Financial Markets Test Case Scheme is operating a model whereby each party bears their own costs, an option in the case of certain financial services litigation where urgent guidance may be required. In June 2020, a Financial Conduct Authority test case relating to COVID-19 business interruption insurance claims became the first case admitted to the scheme.

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Litigation funding There are several options open to parties for litigation funding. Aside from lawyers agreeing reduced or capped rates, there are statutorily approved fee arrangements: (i) conditional fee agreements (CFAs); and (ii) damages-based agreements (DBAs). CFAs involve some (or all) of a lawyer’s fee being put at risk, with the lawyer getting paid that portion not put at risk regardless of success. Nothing more is payable if the client loses. However, on a success the at-risk portion is paid in full, plus a success fee amount which can be equal to up to 100% of the at-risk amount. A DBA, on the other hand, is a fully contingent or ‘at-risk’ arrangement; nothing is ever paid by a client on a loss. On a success, the lawyer’s remuneration is typically a percentage of a client’s damages – up to a 50% cap in commercial cases. In relation to all of these arrangements, third-party funding is another option. This is an arrangement whereby for a share of any final proceeds (typically 30–50%), an unrelated third party finances some or all of the legal fees and disbursements required to pursue a claim. The funding is ‘non-recourse’, therefore if the claim ultimately loses, the funder will lose their investment. While the Courts are increasingly supportive of third-party funding, there remain areas where caution is merited for funders, most notably liability for adverse costs. Where a losing party in receipt of funding is unable to pay the winner’s costs, the successful party may look to the funder to pay. Initially there was comfort for funders in the form of the ‘Arkin’ cap (Arkin v Borchard Lines [2005] EWCA Civ 655), which appeared to limit a funder’s liability for adverse costs to the value of its total investment. However, there has been growing opposition to such protection for commercial funders if a claim fails. This issue again arose in Chapelgate Credit Opportunity Master Fund Ltd v Money and others [2020] EWCA Civ 246 (Davey). In the years leading up to Davey, the application of a ‘cap’ had already been ‘clarified’ (first a determination that any ‘cap’ was to be calculated by reference to the total investment including any security for costs amounts; and second through a ruling that there is no concept of a ‘cap’ in respect of security for costs orders imposed earlier in a case). The first instance decision in Davey took another step forward and determined that it was inappropriate for the ‘cap’ to apply automatically in all cases. The Court of Appeal then confirmed that the Arkin cap was not a binding rule and Judges did not need to adopt it. While thus far this decision has not deterred funders or meaningfully impacted the growth of third-party funding, it may give some pause for thought, and lead to others tightening up on their parameters when approving funding.

Class actions US-style class actions are not permitted in England and Wales. However, there are procedures under which so-called ‘group’ actions can be pursued. These are as follows: • Group litigation order (or GLO) – orders that provide for the case management of claims giving rise to common or related issues of fact or law. These are ‘opt-in’ claims that claimants must take proactive steps to join. • Representative action (Civil Procedure Rules (CPR) 19.6) – claims brought against a party by ‘representatives’ of others who have the ‘same interest’. These types of claims are pursued on an opt-out basis, and there is no need to identify every member of the represented class. Currently, representative actions are relatively uncommon due to the Court’s narrow interpretation of the ‘same interest’ requirement. However, the Court of Appeal recently overturned a High Court decision to strike out a claim brought on behalf of iPhone users against Google in respect of data privacy issues (Lloyd v Google

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LLC [2019] EWCA Civ 1599), finding that the members of the class had all suffered the same basic loss (loss of control over their data), under the same circumstances, and during the same period, and therefore were all victims of the same alleged wrong. • Informal mechanisms – these are opt-in by nature and include: (i) naming multiple claimants in a single claim; (ii) asking the Court to consolidate a number of individual claims into a single set of proceedings; and (iii) test cases, which may be included in a GLO or run on an informal basis. • Collective proceedings – Competition Appeal Tribunal (CAT) – these are competition law proceedings brought before the CAT on behalf of a class of businesses and/or consumers; the claims must first be certified by the CAT to proceed. Under the current regime, claims can be brought on an opt-in or an opt-out basis. Opt-out cases can be brought without the need to identify all individual claimants in the specified group or class, and UK-based claimants are automatically included unless they expressly opt out. When certifying a collective action, the CAT considers certain criteria, e.g.: that the claims raise the same, similar or related issues of fact or law; are suitable for collective proceedings; and it is just and reasonable for the lead claimant to be a representative. To date, less than a handful of applications for certification have been made to the CAT. In one, the Mastercard case, the CAT’s refusal to certify was overturned by the Court of Appeal in April 2019, with the Supreme Court’s decision on the issue pending. If the Supreme Court upholds the Court of Appeal’s decision, the case will return to the CAT which will be expected to certify the case to proceed. It remains to be seen if one outcome of these judgments will be to facilitate the growth of class action litigation in England and Wales.

Interim relief A key remedy in the High Court’s toolbox is the worldwide freezing order (WFO) which restrains a party from disposing of or dealing with their assets; this can include a specified list of assets, and/or an overall amount/limit up to which they are barred from accessing/ dissipating. Crucially, the WFO applies to assets located anywhere in the world, including assets that may be jointly owned or held by third parties. Any party subject to the order must ensure strict compliance until the injunction is discharged, otherwise they risk criminal penalties including imprisonment. However, given their potential impact, WFOs are not given easily; they are an equitable and therefore discretionary remedy. An applicant accordingly must have a substantive cause of action and a good arguable case; there must be a real risk of the subject dissipating assets before any claim can be heard and/or enforced; and it must be just and convenient to grant the order. Key considerations for the Court are whether an applicant: (i) has, at all times, been full and frank; (ii) is free of wrongdoing itself; (iii) has acted promptly; and (iv) is willing and able to give a cross-undertaking in damages. It is also pertinent to consider whether granting an order would cause legitimate and disproportionate hardship for the subject, as well as any impact on third-party rights. Applicants also may seek ancillary orders. These include: disclosure orders requiring a subject to disclose written details of their assets and/or to attend for cross-examination; search and seizure orders where there may be urgency to secure assets; third-party disclosure orders; and orders requiring the delivery-up of a target’s passport. In Eastern European Engineering Ltd v Vijay Construction (Pty) Ltd [2018] EWHC 1539 (Comm), the Court was faced with a question as to the full extent of the High Court’s jurisdiction to make a

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WFO. This case concerned an application for a WFO against a foreign party based on the enforcement of an arbitration award where the seat also had not been England. While the Court did in that instance decline to grant a WFO, the Court nevertheless openly concluded that, in appropriate cases, it did have jurisdiction to grant a WFO against a foreign party to a foreign seated arbitration in support of enforcement in England.

Enforcement of judgments/awards There are a number of regimes for the enforcement of foreign judgments in England and Wales. In brief terms: • The UK regime – applies to civil judgments (money and non-money) from Scotland or Northern Ireland. • The European regime (including the Lugano Convention) – (Pre-Brexit) applies to civil and commercial judgments (money and non-money) from EU and certain European Free Trade Association (EFTA) countries save for matters related to tax, customs or administrative matters, family law and insolvency. Enforcement can be challenged on grounds including: public policy; if the party was not served with the claim form in sufficient time; and if there are irreconcilable judgments on the same issue and/or conflicts with procedural rules and treaty obligations. This should continue to apply throughout the Brexit transition period. Additionally, in April 2020, the UK applied to accede to the Lugano Convention in its own right. If accepted, there may therefore be little change. • The statutory regime – applies to judgments from most Commonwealth (and certain other) countries. Judgments must be final and conclusive, and for money only (excluding taxes, fines or other penalties). Enforcement can be challenged on grounds including: an appeal that is pending; the original court did not have jurisdiction; if the party was not served with the claim form in sufficient time and so did not appear; the judgment was obtained by fraud; and/or public policy. • The Hague Convention regime – applies to civil and commercial judgments from the courts of states that are parties to the HCCH Convention on Choice of Court Agreements 2005, save for matters including those related to family law, wills and succession, insolvency and arbitration, consumer, employment and insurance, real estate and company law. Enforcement can be challenged on grounds including: the original agreement was null and void; lack of notice of the original proceedings; fraud; public policy; and inconsistency with another judgment between the same parties, or with an earlier judgment in another state. • Specific bilateral treaties – applies where a specific bilateral enforcement treaty exists. • The common law regime – applies to court judgments from all countries, including those to which none of the other regimes above apply, e.g., the USA. In order for a judgment to be enforced, it must be final, binding and conclusive – this means that any matter still subject to ongoing proceedings, including any appeals, will not be determined until such proceedings are over – and for a sum of money (excluding taxes, fines or other penalties). Enforcement may be challenged on grounds including: where the original court did not have jurisdiction; that the original court’s procedures breached rules of natural justice, i.e. the defendant did not have due notice and/or an opportunity to be heard; fraud; and/or public policy. • The New York Convention regime – applies to arbitration awards rendered by arbitral tribunals in states that are New York Convention signatories. It requires courts of contracting states to give effect to an arbitration agreement, and to recognise and enforce

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awards made in other states, subject to specific limited exceptions. The grounds on which enforcement of a Convention award can be refused include: (i) the parties to the agreement were under some incapacity, or the agreement is not valid in law; (ii) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings; (iii) the award deals with matters not contemplated by or not falling within the terms of the submission to arbitration and/or this cannot be separated from those matters properly submitted; (iv) the composition of the arbitral authority was not in accordance with the agreement of the parties; (v) the award has not yet become binding on the parties, or has been set aside or suspended; (vi) the subject matter was not capable of resolution by arbitration; and/or (vii) public policy.

Cross-border litigation The English Court is very receptive to applications for orders in support of foreign proceedings. Typical remedies include injunctions (e.g. freezing injunctions and anti-suit injunctions) and enforcement of letters of request that seek oral evidence and/or documents from potential witnesses. As already discussed above, freezing injunctions can be a powerful equitable remedy that may be sought in support of foreign proceedings. In relation to anti-suit injunctions – to restrain a defendant from pursuing foreign proceedings contrary to an arbitration agreement – the Court must be satisfied that there is both a ‘high degree of probability’ of a binding arbitration agreement, and that there has been a breach by the commencement or threat of court proceedings. While the jurisdiction of a foreign court cannot be limited by an anti-suit injunction, the order can at least be notified to the foreign court. It is not, however, presently possible for an English anti-suit injunction to restrain proceedings in an EU Member State. This follows the 2009 European Court of Justice decision in Allianz SpA v West Tankers Inc (Case C-185/07). It had been argued that the 2013 Recast Brussels Regulation 1215/2012 may have reversed the bar, but this was rejected in Nori Holding Ltd v Public Joint-Stock Co Bank Otkritie Financial Corp [2018] EWHC 1343 (Comm). Post-Brexit, it may be that the Supreme Court would choose to overturn the West Tankers decision. As to sanctions for breaching an anti-suit injunction (assuming inclusion of a penal notice), these can include a finding of contempt of court, and related criminal penalties of a fine and/or imprisonment (a 12-month sentence of imprisonment was imposed in Mobile Telecommunications Co KSC v HRH Prince Hussam bin Abdulaziz au Saud [2018] EWHC 3749 (Comm)).

International arbitration A signatory to the 1958 New York Convention since 1975, the English Court has a demonstrably pro-enforcement stance. As well as rarely refusing to enforce a qualifying New York Convention arbitral award, the Court is also willing in the right circumstances to recognise foreign arbitration awards made in a non-signatory territory. However, even under the New York Convention, there are exceptions where recognition and enforcement can be refused: • A party to the arbitration agreement was under some incapacity. • The arbitration agreement was not valid. • A party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.

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• The award deals with a dispute that did not fall within the terms of the arbitration, or deals with matters out of the scope of the arbitration. • The composition of the arbitral tribunal was not in accordance with the agreement of the parties or the law of the country of the arbitration. • The award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which it was made. • The award is in respect of a matter not capable of settlement by arbitration. • Enforcement of the award would be contrary to public policy (including, for example, where the award has been obtained by fraud). • The award includes decisions on matters not submitted to the arbitration which can be separated. As already noted further above, in addition to the recognition and enforcement of awards, the English Court can also make orders for interim relief in support of arbitrations, e.g., injunctions. The Court has previously demonstrated that it has discretion to enforce an award that may already have been set aside or suspended by the courts in the seat of arbitration, and, where there is compelling evidence, it will also question a foreign court’s decision on its own law on the basis of apparent bias or unfairness. Despite the ongoing uncertainties arising out of Brexit, the London Court of International Arbitration (LCIA)’s 2019 statistics showed the highest year-on-year growth in the use of London-seated arbitration for finance parties. As regards the International Centre for Settlement of Investment Disputes (ICSID) awards, there are no defences equivalent to those provided for under the New York Convention. This accordingly means, on its face, that the English Court would be obliged to recognise any ICSID award as if it were a final judgment of its own courts. However, there is currently an apparent exception to this, which arises where enforcement of an ICSID award would breach EU law. This exception will continue to apply until the end of the Brexit transition period.

Mediation and ADR Parties can explore ADR (the current most popular being mediation) at any point during a dispute, but it is not compulsory. That is not to say that ADR is not strongly encouraged, and cooperation between parties is emphasised in our CPR, and therefore by the Court which may require evidence that the parties have at least considered ADR. The voluntary approach to ADR was underlined in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which determined that forcing litigants into ADR would be a violation of parties’ rights of access to court. Accordingly, while a court may direct parties to explore ADR, there will be no compulsion or direction as to any particular form of ADR. That said, one other legacy of Halsey is that, in some circumstances, the Court will impose costs sanctions on a party where there is evidence of an unreasonable refusal to pursue ADR. Attitudes do shift, however: Wright v Michael Wright (Supplies) Ltd [2013] EWCA Civ 234 suggested that it may be time to reconsider the rule in Halsey in the light of (even at that time) developments in the field of ADR; in July 2016, as part of plans for an online court, there was a recommendation for increased focus on ADR, including online, face- to-face and telephone solutions; and in December 2018, the Civil Justice Council’s ADR working group’s report suggested that the current rules were ‘too generous to those who ignore ADR’, and proposed earlier and more stringent court encouragement. While this

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Brown Rudnick LLP England & Wales report does not go as far as compulsory ADR, it did suggest that costs sanctions should be reviewed in order further to restrict the circumstances where it would be reasonable to refuse mediation. Following court closures during the COVID-19 pandemic, more parties have turned to ADR to seek to resolve disputes swiftly and cost-efficiently. Whether this is just a temporary shift remains to be seen.

Regulatory investigations In the past decade, the High Court has handed down a number of relatively favourable decisions where financial institutions have sought to rely upon ‘basis’ or ‘non-reliance’ clauses – clauses purportedly drafted merely to delimit the primary obligations of one of the contracting parties, but often with the very real consequence of excluding liability to a customer for alleged representations made and relied upon. However, regulated firms are expressly prohibited (Conduct of Business Rules Sourcebook (COBS) 2.1.2) from seeking to exclude or restrict regulatory duties or liability to a client. This was confirmed in Parmar v Barclays Bank PLC [2018] EWHC 1027 (Ch) which was the first misselling claim to get to trial that included a claim for breach of COBS brought under s138D of the Financial Services and Markets Act 2000 (FSMA). While the defendant bank was almost entirely successful on the facts, the Court nevertheless determined that where an advisory relationship was proven, then the regulatory regime in COBS would prevent reliance on a basis clause that acted to exclude liability. In the same year, the Court of Appeal in First Tower Trustees Ltd and other v CDS (Superstores International) Ltd [2018] EWCA Civ 1396 again scrutinised basis clauses, determining that if the real effect of a contractual clause would be retrospectively to prevent a party from asserting that a representation has been made or relied upon, then this would not be a mere ‘basis clause’ but an attempt to exclude or restrict liability; such clauses would be subject to the statutory reasonableness/ fairness tests of the Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 (CRA), respectively. The Court also noted that the identity and sophistication of contractual counterparties would be irrelevant to the construction of a contractual term, but it would likely be a factor when determining the reasonableness of such terms.

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Christian Toms Tel: +44 20 7851 6009 / Email: [email protected] Christian Toms is a member of Brown Rudnick’s International disputes team. He regularly advises in a range of matters, having previously acted for and against investment banks, hedge funds and other investor groups, as well as individuals and corporates. He has particular experience in complex financial disputes, contentious financial regulatory matters, and director/ shareholder/joint venture disputes. Before joining Brown Rudnick, Chris was an associate barrister with the then Lovells LLP. Prior to that, he was a criminal tenant in London chambers defending and prosecuting in a variety of cases. His previous experience at the Criminal Bar gives him an invaluable insight when advising on contentious regulatory and white-collar matters. Chris is recommended by The Legal 500 for Banking Litigation: Investment and Retail, and Commercial Litigation.

Brown Rudnick LLP 8 Clifford Street, London, W1S 2LQ, United Kingdom Tel: +44 20 7851 6000 / URL: www.brownrudnick.com

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Noémie de Galembert & Victoire Segard Galembert Avocats

Efficiency of process Key features of the French judicial system France belongs to the civil law tradition and has a judicial system divided into two separate and distinct branches: • Public law, which governs relationships between administrative bodies and private individuals/companies and implies administrative courts exercising general jurisdiction over litigation in which one of the administrative organs of the French State is a party. The administrative court system has a three-tier structure and is made up of local courts of first instance, administrative courts of appeal and the French Conseil d’Etat (Council of State). • Private law, which regulates commercial, civil, and criminal matters and is ruled by private courts under the authority of the French Cour de Cassation (Supreme Court). Private law and the French private judicial legal system are the core focus of this chapter. Jurisdictional divergences between administrative and private courts are brought before the French conflict court Tribunal( des Conflits); a court specialised in those disputes. The boundaries between Public and Private law have, however, become quite clear over the years and only very few cases are brought annually before the Tribunal des Conflits (24 cases in 2019). The French private court system adopts a three-tier structure composed of (i) courts of first instance having original jurisdiction, (ii) courts of appeal which hear cases on appeal from lower courts, and (iii) courts of last resort which mainly rule on interpretation of law issues. To ensure efficiency of the process, jurisdiction is spread amongst specific courts or specialised chambers depending on the subject matter of the case. More particularly, the private judicial system is made up as follows: • There are four kinds of courts of first instance: civil; commercial; criminal; and labour. Civil courts have long been divided into two categories depending notably on the cases’ financial stakes. Superior courts Tribunaux( de grande instance) had jurisdiction over private disputes of amounts exceeding EUR 10,000, while courts of common pleas (Tribunaux d’instance) were ruling disputes of a lesser amount. On 1 January 2020, a comprehensive reform of the French Code of Civil Procedure entered into force and combined these first instance civil courts into a new court called the “judicial court” (Tribunal Judiciaire) with jurisdiction over all civil litigation cases. Other courts continue to exist independently. • Appeals from courts of first instance proceed to courts of appeal within their geographic jurisdiction. As of 2020, there were 37 courts of appeal in France, which are competent to review the findings of fact and law of lower courts.

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• The final tier of the system encompasses the French Cour de Cassation, which is the supreme judicial court in France. Like the Conseil d’Etat on the Public law side, the Cour de Cassation exercises final control over judgments of courts of appeal. It is only competent to review questions of law and does not hear arguments on the facts. If the Cour de Cassation has jurisdiction and quashes a lower court decision, the case is remanded to another court of the same level which may re-examine both questions of law and fact. French judicial courts are normally made up of three judges, who are usually State employees appointed to the bench by the French President after they have completed special training at the National School of Magistrature (ENM – Ecole Nationale de la Magistrature). Other judges are either elected, as is the case with judges of the commercial courts (Tribunaux de commerce) (they are, in addition, non-professional) and the labour courts (Conseils des prud’hommes), or appointed by specific individuals or organisations, as is the case with judges of the social security courts (Tribunaux des affaires de securite sociale). All judges, except those of the criminal courts (Cours d’assises), preside without a jury. In parallel to the traditional court system, France offers a wide range of alternative dispute resolution (ADR) methods, the main methods of which are arbitration, mediation, and conciliation. French ADR is run either as a complement or an alternative to national courts’ jurisdiction and judicial proceedings. Over the past few years, ADR methods have been widely promoted in France both by courts and legislation, and especially by the recent legal reform of the French civil procedural framework which passed on 23 March 2019 and entered into force on 1 January 2020 (see infra). Case management and impact of the COVID-19 health situation The typical length of French proceedings is usually about 12 to 18 months for the first- instance trial. The appeal proceedings can take an additional 12 to 24 months. From a general perspective, the use of electronic communications and new technologies has been largely encouraged by French courts over the past years to handle cases in a faster and more efficient way. This “dematerialisation” took a step further within the frame of the COVID-19 global health crisis. Case management was indeed strongly affected by the pandemic, which resulted in courts shutting down and hearings being postponed. To ensure the continuity and effectiveness of the judicial process, the Government adopted – by means of ordinances – a series of emergency measures aiming at adapting the operation of non-criminal courts: • simplification and use of electronic means for hearing postponement and for production of procedural documents (including documents, written submissions, and briefs); • possibility that rulings in the first instance are made by single judges upon the decision of the President of the court; • use of videoconference calls or simple conference calls to hold hearings and avoid postponements; • possibility for courts – upon agreement of the parties – to issue rulings without any oral hearing, by following a procedure based exclusively on the parties’ written submissions and briefs; and • filter by the courts on application for summary proceedings.

Integrity of process The French judicial process is governed by the rule of law and the principle of due process. The European Convention of Human Rights, which provides notably for the right to a fair

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Galembert Avocats France trial (Article 6), is incorporated into French law and has a direct effect on the operation of domestic proceedings. The Constitution ensures the rights of individuals to effective judicial protection in the exercise of their legitimate interests. French criminal law is furthermore guided by the principles of presumption of innocence, right to legal assistance or right to prepare one’s defence. In the context of the COVID-19 crisis, an emergency law was passed on 23 March 2020 and authorised the French Government to adapt procedural deadlines, limitation periods, and certain contractual deadlines, with retroactive effect as to 12 March 2020. Moreover, hearings related to essential criminal litigation, including litigation on correctional hearings for pre-trial detention and judicial review measures, immediate appearances, appearances before the investigating judge and the liberty and custody judge, and hearings of the sentence enforcement judge for emergency management, were maintained despite the COVID-19 health crisis and the postponement of all other hearings.

Privilege and disclosure Privilege Unlike in the US, the UK and other common law jurisdictions, the concept of legal professional privilege does not exist as such in France. Indeed, as disclosure requirements in France are much narrower than in common law countries, rules of legal professional privilege protecting documents have not developed to the same extent. Instead, communications between French lawyers and their clients are covered by professional secrecy (secret professionnel), which protects all information that a lawyer has acquired in assisting his/her client. The scope and application of professional secrecy do not depend on the content of a communication (in rem) but on the quality/role of its author/ recipient (in personam). Under French law, professional secrecy is of public order, and is general, absolute, and unlimited. Such rule can be quite restrictive for lawyers compared to the legal protection granted. Violations of professional secrecy can indeed be subject to criminal prosecution for lawyers, whereas the protection granted is relative and has recently been weakened in some criminal cases. Professional secrecy covers communications between lawyers and their clients or between lawyers and their colleagues. As such, negotiations and discussions between lawyers in an attempt to settle a case cannot be disclosed before courts. A lawyer can waive professional secrecy when communicating with another lawyer by qualifying communication or a named document as “official” (i.e. non-confidential). Waiving professional secrecy in client/attorney relationships is much harder, as clients themselves are not allowed to release lawyers from their obligations. A client can nevertheless decide to use and disclose to himself/herself a document or piece of information covered by professional secrecy. From an international standpoint, communications between French lawyers and foreign lawyers are covered by professional secrecy only if safety measures are taken. For instance, under the Code of Conduct for lawyers in the European Union, communication between EU lawyers will be subject to professional secrecy if their confidential nature is expressly mentioned. In-house French lawyers (juristes d’entreprises) are not bound by professional secrecy as they are considered a separate profession, and do not benefit from the same status as lawyers who are members of the Bar.

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Disclosure There is no general principle of discovery in France. At trial, parties are not obliged by law to comply with any standard of disclosure as the submission of evidence is entirely voluntary. Therefore, interlocutory measures can be used before any trial (avant tout procès) to obtain useful evidence, usually when a party is encountering difficulties in proving its claims. Such interlocutory measures are provided under Article 145 of the French Code of Civil Procedure and are called “in futurum” investigative measures. They allow a party to obtain some evidence to prove his/her claim on the merits subject to three conditions: (i) no litigation is engaged on the facts giving rise to the request; (ii) the applicant has a legitimate interest in preserving or establishing the evidence asked for (i.e. there is a chance for the future trial to succeed); and (iii) the measure sought is legally admissible, which means that it is one of the inquiry measures provided by the French Code of Civil Procedure and that it does not proportionally affect the defendant’s fundamental rights. Article 145 is usually used to obtain court appointment of (i) a bailiff who may seize documents from the premises of a company against which the applicant intends file a claim, or (ii) an expert who will deliver a report that the applicant will use in court on the merits. Legally investigative measures under Article 145 may be requested inter partes by petition or through ex parte petition. In the latter option, the applicant will have to demonstrate the existence of special and exceptional circumstances justifying non-compliance with the adversarial system (e.g. there is a risk of loss of evidence without “surprise effect”).

Evidence Applicable evidence rules depend on the nature of the litigation at stake. With respect to criminal law, the French legal system is inquisitorial, which means that the court is actively involved in determining the facts of the case and the conduct of the trial. The “investigating judge” (Juge d’instruction) conducts the investigation, gathers useful evidence, supervises police forces leading the investigation, and finds and questions subjects. The investigating judge must examine both incriminating and exonerating facts. He also compiles a record to present to the criminal court if he deems necessary, which will eventually oversee the trial and rule the case. When it comes to civil and commercial matters, the system is merely adversarial, and the burden of proof is placed on the party asserting a claim. As mentioned, there are no principles of discovery or disclosure (see supra) and it is incumbent upon a party to deliver to the opposing party all evidence upon which its claim relies. To facilitate or obtain the production of evidence, French judges can intervene through different mechanisms: • Before the trial, they can order “in futurum” measures based on Article 145 upon request of one of the parties (see supra). • Once the lawsuit has commenced, if the delivery of evidence is not made by the party relying on it, the judge may order delivery to be made under penalty or the inadmissibility of such evidence (incident de communication de pièce). Similarly, where evidence is held by a third party, a litigant can petition the judge for an order mandating its production (sommation de communiquer). Failure to communicate can be punished by the payment of a fine, except in cases of legitimate cause empêchement( légitime). There is no cross-examination of witnesses in commercial and civil proceedings, and witness statements need to be provided in the form of written affidavit.

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Experts can be appointed by courts upon request of one of the parties or on the judge’s own initiative.

Costs Article L. 111-2 of the Judicial Organization Code states the principle of free justice before civil and administrative courts. Nevertheless, all legal proceedings entail a certain number of expenses for litigants (costs of lawyers, notaries, bailiffs, translation, appointed experts, etc.). In civil and commercial matters, litigants face two types of costs: the legal costs (dépens) governed by Article 696 of the French Code of Civil Procedure; and the extra costs of proceedings (les frais irrépétibles), which encompass attorneys’ fees governed by Article 700 of the French Code of Civil Procedure. More specifically, legal costs only include disbursements relating to judicial acts incurred throughout the proceeding and the enforcement of the decision (court fees, translation fees, expert’s fees, etc.). They exclude costs that are not legally necessary for the continuation of the proceedings ( frais irrépétibles) (translator whom a party had taken the initiative to appoint, technicians’ fees, travel expenses, etc.) which are covered under Article 700. Article 696 states that “the losing party shall be ordered to pay the legal costs”. Likewise, Article 700 states that the defeating party shall be ordered to pay the other party the sum determined by the judge for the costs incurred and not included in the legal costs. Nevertheless, the judge will freely determine the amount to be awarded, taking notably into account the fairness and/or economic situation of both parties. The sum allowed by French judges on a discretionary basis can correspond to a portion of the legal costs incurred. It is generally quite low, and most lawyers’ fees remain generally irrecoverable. One must keep in mind that the global cost of a trial in France tends to be rather reasonable compared to other countries; for instance, the United States.

Litigation funding Legal assistance exists in France for individuals whose resources are insufficient to assert their rights in court. Legal aid is granted by the French State for all or part of the proceedings and can cover all or part of the costs incurred. When legal aid is granted, the head of the local Bar appoints a lawyer to the aided party (avocat commis d’office). The amount of legal aid is usually pretty low and remains quite inadequate compared to real judicial costs. Commercial companies are not eligible for State legal assistance. It is also possible in France to have recourse to third-party funding, which consists of having a third party bearing all or part of the legal costs relating to the proceeding in return for a percentage of the sums obtained in case of success. As of today, third-party funding is not subject to any specific legislative or regulatory provisions in France, which means that the financing of legal costs by a third party is only subject to the contractual provisions discussed between the financing third party and the financed party. The French Council of the Bar recalls that a lawyer representing a client who benefits from third-party funding is bound to respect his ethical obligations towards his client and not towards the third party paying for the legal disbursements. Finally, fee arrangements are mandatory between a lawyer and his clients. Fee arrangements must be concluded in writing and specify both (i) the amount of fees (or the method to be used to determine the amount of fees), and (ii) the various costs contemplated. “No win, no

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Galembert Avocats France fee” agreements are prohibited in France. Contingency fees are allowed, but only if they are combined with another fee arrangement (i.e. hourly rate or task-based fees).

Class actions Introduced in 2014, the group action (action de groupe), which is the French version of the class action, was initially reserved for consumer and competition disputes. This procedure has since been extended to cover damages related to health products, environment, protection of personal data, discrimination in employment and real estate rentals. To be entitled to bring a group action, it is required that: • at least two consumers justify that they have suffered damage resulting from the same breach by the same professional person or entity; • the action is brought by an accredited association or by an association that has been duly declared for at least five years and whose statutes include the defence of the interests that have been harmed; and • the damage resulting from the breach is a material damage. The group action works on an opt-in mechanism and both individuals and associations can apply to opt in. First, based on the facts and testimonies of the persons represented by the association, the competent judge assesses the liability of the defendant (the professional). Then, if the defendant is found liable, the judge defines the group of persons affected and publishes the criteria to enter the scope of the action. Individuals who fulfil the previously set criteria can opt into the class action. Finally, the quantum and nature of damages payable by the defendant to each member of the group action is set by the judge. French case law simultaneously provides other forms of action by a group. Indeed, associations may act in legal proceedings for the defence of a collective interest. To do so, its bylaws must state that the association’s purpose is to defend such interests. An association may also act to defend an individuals’ interests. Like trade unions, associations created for more than five years may exercise a substitution action. Individuals must give their written consent to the action of the association.

Interim relief The French legal system offers various options of interim measures available to litigants. Apart from the conservatory measures existing to preserve or establish evidence (Article 145 of the French Code of Civil Procedure – see supra), French interim measures are of two types: provisional measures; and asset-preserving measures. Provisional measures Provisional measures can be granted by judges through summary proceedings (procédure de référé). Summary proceedings are held inter partes and enable parties to request or obtain protective orders, which are immediately enforceable but do not terminate the dispute. Such protective orders can later be overruled by the court having jurisdiction on the merits. In civil or commercial disputes, summary proceedings are usually chosen by litigants for cases concerning payment of a debt, performance in kind of a contract, unfair competition, defamatory statements, or unauthorised use of intellectual property. Under French law, protective orders are granted if a claimant demonstrates: • the need to take urgent measures that do not encounter any serious challenges from the opposing party (référé ordinaire); • the need to get a conservatory injunction (référé conservatoire) in order to avoid an imminent or manifestly illegal damage (despite any existing serious challenges); or

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• the absence of a serious challenge when seeking an interim payment from a party (référé provision). Provisional measures can be mandatory (an order to actively do something) or prohibitive (an order to stop doing something). When mandatory, protective orders may set a reasonable deadline to comply with and may be subject to a fine per day of lateness. In case of clear emergency, parties can request the President of the competent court to authorise summary proceedings at short notice (référé d’heure à heure), which can be initiated in a very short amount of time even during public holidays or judicial vacations over the summer. Summary proceedings have been mostly maintained before French courts during the COVID-19 pandemic. Asset-preserving measures Any person whose claim appears to be well founded in its principle and not seriously questionable can apply to the judge for a conservatory attachment order (saisie conservatoire) or a judicial security (sûreté judiciaire) over its debtor assets. Those measures can be qualified as “freezing instruments” as they allow creditors to freeze real estate or movable assets belonging to their debtors, in fear, for instance, that the debtor will seek to sell his or her property to avoid reimbursement of his or her debt. To obtain freezing measures, the claimant must demonstrate (i) the principle of the claim, and (ii) the existing circumstances that are likely to threaten the recovery of the debt (e.g. insolvency of the debtor). Once the freezing order has been granted, the creditor must carry out the attachment within three months and start an action on the merits within one month. A freezing order can be obtained without any prior notice to the defendant if the case is urgent or if there are circumstances likely to threaten recovery. In case of an abuse of process, the judge can order the applicant to compensate the defendant for any loss suffered.

Enforcement of judgments/awards To enforce a local French judgment before civil and commercial courts, the successful party must notify the court’s decision – usually by the bailiff in charge of serving it – to both the other party and its lawyer. Traditionally, a judgment was deemed enforceable when it acquired the force of res judicata (autorité de chose jugée), i.e. when it became final and was no longer subject to ordinary recourse. Practically, this meant that a local court judgment was enforceable at the expiry of the time limit to file an appeal, unless where provisional enforcement exécution( provisoire) was either granted to the debtor by a court decision or automatically assigned by law. Decree 2019-1333 of 11 December 2019, reforming the French Code of Civil Procedure, has reversed this rule. For proceedings initiated as from 1 January 2020, first-instance judgments are, in principle, automatically assigned provisional execution. However, there are some exceptions to this new principle for which parties must still request provisional execution from judges (mostly regarding nationality of physical persons and inscriptions on civil registries). Besides, judges can – by means of a specifically motivated decision – deprive judgments of provisional execution if they believe such measure is incompatible with the nature of the case concerned. On appeal, parties may now request that the first President of the court of appeal stops the provisional execution of a judgment if: • there are serious grounds to request the annulment or reformation of the judgment; and • no manifestly excessive consequences are foreseen.

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The procedural reform can trigger some uncertainty. Indeed, when the successful party provisionally executes a judgment, it does so at its own risk. In case of reversal in appeal, it may be ordered to correct the imbalance (on which it has already payed taxes) and sentenced to pay indemnities to the other party. Regarding judgments issued by courts in the European Union, France is a party to the Brussels Regulations on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Rome II Regulations) – which have been incorporated into the French Code of Civil Procedure. As such, judgments rendered in EU Member States are to be recognised in France without any special procedural requirement (save in case of a violation of public policy rules). Outside of the European Union, and in the absence of a bilateral enforcement treaty concluded with France, a claim of exequatur must be filed and granted for a foreign judgment to be enforceable in France. Civil courts, as single judge, are competent for the exequatur of foreign judicial decisions. The exequatur procedure is always initiated by a summons and is always public.

Cross-border litigation France is a party to many EU and international agreements regarding cross-border litigation. As an EU Member State, France follows EU Regulations as to (i) service of judicial and extrajudicial documents, (ii) cooperation between courts relating to the taking of evidence, (iii) jurisdiction and recognition and enforcement of judgments in civil and commercial matters, and (iv) applicable law to contractual and non-contractual obligations.

International arbitration France is known for having a leading position as an arbitration-friendly jurisdiction and has developed an important arbitration practice, which has increased over the years notably due to the seat of the International Chamber of Commerce (ICC) being based in Paris. French law makes a fundamental distinction between domestic and international arbitration. Arbitration is considered international when it involves the interests of international trade. Its regime and legal framework are much more permissive and flexible than the domestic regime. Like domestic arbitration, international arbitration requires an arbitration agreement between the parties, which may be concluded either in respect of a dispute that has already arisen or in respect of a dispute that is yet to arise. Such agreement is not subject to any formal requirement, contrary to domestic arbitration where it must be made in writing. Pursuant to French case law, the existence and effectiveness of an arbitration agreement is defined in accordance with the common intention of the parties. It is also independent of the main contract into which it is introduced, which keeps it valid even if the contractual instrument is deemed invalid or void. The effect of the international arbitration agreement is to render State courts incompetent to hear the dispute at stake. In accordance with the well-known principle of “competence competence”, the chosen arbitrators have authority to decide on their own jurisdiction in case of a challenge, without having to suspend the proceedings a State court decision. Therefore, if the dispute is submitted to French State courts before the constitution of the arbitral tribunal, such courts will refer the parties to arbitration (except if the arbitration agreement is manifestly void). Parties to the arbitration agreement may designate the arbitrator or arbitrators who shall constitute the arbitral tribunal. Such designation may be made directly or by reference to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Galembert Avocats France arbitration rules or rules of procedure. In the event of a disagreement, the arbitrator shall be appointed either by the entity responsible for organising the arbitration, or by the President of the Paris Civil Court (Tribunal Judiciaire de Paris), unless otherwise agreed. An arbitral award has the force of res judicata and may be subject to provisional enforcement. The arbitral award shall only be enforceable by virtue of an exequatur order issued by the Tribunal Judiciaire of the jurisdiction in which it was delivered or, if the award was rendered abroad, by the Paris Civil Court. If the arbitral award is rendered in France, it may only be subject to an action for annulment in very limited and specific cases before the court of appeal of the jurisdiction in which the award was rendered within one month of notification of the award. As France signed the New York Convention of 1958 (UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards), arbitral awards made in the territory of another contracting State are enforceable in France. The decision ruling on the application for recognition or enforceability of an arbitral award made abroad can be appealed within one month from the notification of the decision.

Mediation and ADR There are several ways of resolving disputes in France, including – apart from traditional judicial proceedings – arbitration proceedings, conciliation, and mediation. The use of ADR has been widely promoted in recent years as a cost-effective and time-efficient solution to help with court congestion. In civil and commercial matters, the French Code of Civil Procedure provides that before instituting any judicial proceedings, one must be able to demonstrate that attempts were made between the parties to find an amicable solution to the dispute. In other words, no judicial proceedings may be instituted that the parties have tried to settle beforehand. To prove it, the claimant must mention in the summons which specific action was taken prior to the proceedings. Some judges, especially at the Paris Commercial Court, frequently impose conciliation measures upon the parties before the proceedings can be carried on through before the court. The conciliation can be conducted by the judge or by a court-appointed conciliator. Moreover, when parties to a contract agree in a contractual clause that a measure of ADR will be initiated and respected before going to court, such ADR clause is binding on the parties and a party who initiates proceedings in breach of this provision will be dismissed. The reform of the French Code of Civil Procedure dated 23 March 2019 actively promotes ADR. The reform attempts to resolve disputes through ADR before litigation by making it mandatory for civil claims up to EUR 5,000 and for a list of “neighbourhood” claims that can usually be resolved without magistrates. Failing to comply will render the claims inadmissible. In France, the main entities offering ADR solutions in civil and commercial matters are: • The ICC (arbitration and mediation). • The Paris Centre for Mediation and Arbitration (arbitration and mediation). • The International Arbitration Chamber of Paris (domestic and international business transactions, through arbitration and mediation). • The French Arbitration Association (arbitration and mediation institution). • The European Institution for Mediation and Arbitration (arbitration and mediation). The new law passed on 23 March 2019 also provides a legal framework for online mediation, conciliation, and arbitration.

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Mediation and conciliation are confidential, which means that the mediator’s or conciliator’s findings and statements cannot be disclosed to third parties or submitted in judicial proceedings without the parties’ agreement. French criminal law also provides for two main settlement measures: • The Comparution sur reconnaissance préalable de culpabilité (guilty plea), which is a pre-trial guilty plea procedure entitling the prosecutor to impose a sentence on the offender who has consented to the procedure and pleaded guilty in advance. Once the offender has accepted the sentence (or the plea bargain), a request is filed to the court for the judge’s approval or rejection of the whole procedure. • The Convention judiciaire d’intérêt public (judicial convention of public interest, or CJIP), which is inspired by the American and English Deferred Prosecution Agreements (DPA) and is appropriate for financial criminal litigation. Under the French DPA, prior to public prosecution, the French Public Prosecutor can offer the legal entity being questioned on charges of corruption, influence peddling or other offences, the option to enter into a CJIP, which will put an end to criminal proceedings (the CJIP may also be offered during the criminal investigation into the case, provided that the legal entity admits the facts and accepts the related criminal implications). In an exchange at the end of proceedings, the legal entity may be asked to comply with specific obligations, such as paying a public interest fine (which cannot exceed 30% of the turnover), setting up a compliance programme under the supervision of the French Anti-Corruption Agency (Agence Française Anti-corruption), or compensating any identified victim.

Regulatory investigations There is a wide range of administrative agencies in France that are empowered to conduct inquiries or investigations of different sorts. Such matters are very generally governed by specific laws, practice and procedures applicable to these agencies. One of the most important French agencies is the AMF (Autorité des Marchés Financiers). The AMF is the French equivalent of the US Securities and Exchange Commission. It has the power to investigate insider trading and other infractions relating to public securities markets. The sanctions imposed by the AMF can now be up to EUR 100 million or 10 times any earned profit from the breach. Alternatively, the monetary penalty decided by the AMF can reach 15% of the annual turnover in case of failure to comply with several European Regulations. Appeals are heard by the Paris Court of Appeal or the Council of State, depending on the market violation involved. Furthermore, the so-called “Sapin II” law, passed on 9 December 2016, has established the French Anti-Corruption Agency which is tasked with recovering seized and confiscated assets. The new agency’s mission essentially consists of: • assisting the competent authorities and persons concerned in preventing and detecting acts of corruption; • controlling the proper implementation of the anti-corruption compliance programme for companies subject to sanctions; and • ensuring good communication of sensitive information outside France to prevent sensitive information leaks to foreign authorities in the benefit of France’s sovereignty and economy.

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Noémie de Galembert Tel: +33 1 40 54 31 20 / Email: [email protected] Noémie de Galembert is a graduate of McGill University (2002) and of University Paris II Panthéon-Assas (Master’s degree in Business and Tax Law, 2003). She began her career in the litigation department at the Paris office of Latham & Watkins where she held offices in various committee meetings (Associate Committee, Recruiting Committee). In 2013, she joined Scotto & Associés to create their litigation activity, which has developed quickly around shareholders’ litigations, M&A-related disputes and liability of executives. She also has a strong track record in negotiating and implementing exit packages for executives, particularly in a private equity context. This is the same activity that she decided to continue with her team in 2017 within its own structure, supported by the increasing trust of her clients. Noémie de Galembert is also a member of AFFIC and think tank Cabinets de Croissance. She also supports Ashoka, promoting social entrepreneurship. Her activity is recognised by all the professional rankings.

Victoire Segard Tel: +33 1 40 54 31 20 / Email: [email protected] Victoire Segard is a member of both the Paris Bar and the New York Bar (2015). She holds an LL.M. degree from Cornell University (Ithaca, NY – USA) and graduated from Paris II Panthéon-Assas University (Master’s degree in International Commercial Law) and Paris I Panthéon-Sorbonne University (Master’s degree in French/American Business Law). She began her career at the Gibson Dunn Paris office, where she developed her expertise in M&A and business litigation, before joining Galembert Avocats in 2018. Her practice currently focuses on corporate litigation, including governance issues, shareholders and M&A litigation and liability of executives (civil or white collar). She represents clients of the firm in judicial and arbitral proceedings.

Galembert Avocats 49 avenue Hoche – 75008 Paris, France Tel: +33 1 40 54 31 20 / URL: www.galembert-avocats.com

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Jochen Lehmann & Markus Andrees GÖRG Partnerschaft von Rechtsanwälten mbB

Efficiency of process The German judicial system enjoys an excellent reputation in the world. For example, the “Rule of Law Index 2020” of the World Justice Project ranks Germany in sixth place, and with regard only to civil justice, Germany ranks fourth worldwide. The high reputation very likely results from the reasonable expectation that well-founded judgments are issued within an appropriate period of time. Germany has a three-tiered court system in civil law matters. A Local Court or a Regional Court act as court of first instance, depending generally on the amount in dispute: claims with an amount in dispute exceeding EUR 5,000 must be filed with a Regional Court, whereas claims with a lower amount must be filed with a Local Court. Exceptions for specific subject matters may apply. A first round of appeal can be based on correcting facts and questions of law, whereas a second round of appeal is limited to questions of law. The duration of first instance proceedings varies depending basically on the complexity of the case. Recent statistics from the department of justice in North Rhine-Westphalia show an average duration of first instance proceedings between eight and 11 months. Appellate proceedings have average durations between six and eight months. Thus, since the parties often refrain from appealing to the Federal Court of Justice, the cases are generally concluded after 14 to 19 months. Of course, if the Federal Court of Justice is seized in the second round of appeal, it can happen that more than two years pass until a final decision is issued. In cases of complex international litigation, it should also be expected that first and second instance proceedings may take slightly longer. Obtaining an enforceable judgment in a shorter period of time is basically only possible in two ways. First, in case of a payment claim, the claimant may apply for a payment order. The application must be made at the Local Court, which does not actually examine the merits of the case. The claimant gets a payment order which has the same effect as a default judgment. If the debtor objects to the claim within two weeks, the case will be referred to a court of first instance as ordinary litigation. Second, in case of payment claims and certain delivery claims that can be established by documentary evidence, the claimant may choose another, less time-consuming procedure. In such proceedings, both claimant and defendant may only present documentary evidence. If the defendant cannot challenge the claim without hearing a witness or an expert, the court will issue a preliminary but enforceable judgment. The defendant’s witness or an expert will only be heard in a second stage of the proceedings. Another procedure that might provide an efficient solution is the independent evidentiary hearing. Before commencing a legal dispute, the claimant may request to a court that an

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© Published and reproduced with kind permission by Global Legal Group Ltd, London GÖRG Partnerschaft von Rechtsanwälten mbB Germany expert prepares a written report in order to, e.g. determine the cause of personal injury, property damage or a material defect. Depending on its outcome, parties could be inclined to settle the case based on the findings. Unlike the U.S. system, German Civil Procedure does not provide for something like a summary judgment procedure in order to avoid the time and expense of a trial. However, the procedural rules in Germany contain the court’s option to hand down a default judgment, either if the defendant fails to notify the court about his intention to defend against the claim, or if he does not appear or fails to plead at the oral hearing. Such a judgment is immediately enforceable but can be appealed. The oral hearing is an important part of the procedure. This is the time and place where the factual and/or legal issues between the parties shall be addressed and where the court has both the opportunity and the obligation to offer guidance to the parties. The language spoken in the oral hearing is German. In case one participant of the process does not speak or understand German, an interpreter must be requested. While physical attendance in the hearing is the rule, the Code of Civil Procedure also allows that parties, witnesses and experts may request to participate via video transmission; however, experience shows that the courts are reluctant to use that tool. It remains to be seen whether the COVID-19 pandemic and its restrictions will lead to a different attitude of the courts. In order to increase attraction to international claimants, some federal states have established specific chambers at Regional Courts that conduct the oral hearing in international commercial cases in English. Although these recent developments are widely appreciated, there is still much criticism because written statements, the judgment and the appellate proceedings must still be in German. A draft bill that aims at conducting the whole procedure in English and issuing an English version of the judgment if both parties agreed to it is still being discussed on a political level.

Integrity of process German courts are also widely respected because the parties can expect proceedings of the highest integrity. As is typical for a state under the rule of law, the courts are bound by principles and rights in higher-ranking law, i.e. the German constitution, the European Convention of Human Rights and the EU Charter of Fundamental Rights. The most important rights with regard to the justice system are the right of access to justice, the right of a fair trial and the right to be heard in court. Apart from these general rights, there are five basic principles for civil law proceedings: 1. the principle of disposition, which means that (only) the parties decide on the beginning, the subject matter and the end of litigation; 2. the principle of production, which means that the parties must present all their facts and their evidence and that the court may only rely on facts and evidence as presented; 3. the principle of oral hearing, i.e. a judgment may only be issued after an oral hearing; 4. the principle of directness, so that the oral hearing and taking of evidence have to be conducted before the judge(s) issuing the judgment; and 5. the principle of publicity, so that the oral hearing and announcement of the judgment are public and may be attended by anyone. The filing of a statement of claim marks the starting point for legal proceedings. As a general principle under German civil procedural rules, the claim must be filed at the court in whose district the defendant has his place of residency. Exceptions are available, especially

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© Published and reproduced with kind permission by Global Legal Group Ltd, London GÖRG Partnerschaft von Rechtsanwälten mbB Germany for corporate, lease and tort disputes. It is also possible to agree to submit disputes to courts at a certain venue if the parties to such an agreement are businesses. Claim documents from a historical perspective have mostly been filed in paper form (including fax), because a signature is mandatory for their validity. Submitting the statement of claim electronically (e.g. via email) is only possible by using a qualified electronic signature. Since the legislator obliged all lawyers to make use of the so-called “special electronic lawyer’s mailbox” (an electronic network that provides for safe and authentic means of service for electronic documents), and expects all courts to keep court records of the dispute as electronic files at the latest from 1 January 2026 onwards, a shift to the electronic form is happening. It is the court’s obligation to formally serve the statement of claim on the defendant (after receiving the court fees). The claimant is not allowed to serve the statement of claim by simply handing it over or sending it via mail to the defendant. Regulation (EC) 1393/2007 is applicable when one of the parties is domiciled within a Member State of the European Union while the other party is domiciled in Germany. If service needs to be effected in a country outside of the EU, the method of service will depend on whether an international instrument applies (e.g. the Hague Convention on the service abroad of judicial and extrajudicial documents in civil or commercial matters). If not, the service will be performed via diplomatic channels. Service under German procedural law basically means delivery of the physical document and although there have been some exceptions when the document to be served was produced electronically, as the service of a claim requires evidence of service, electronic service does not, in practice, take place. While the parties have to present all their facts and produce their evidence to establish their claim or defence, it is the court’s task to “steer” the process. This central role of the court shall help the parties to focus on the decisive issues and thus to avoid unnecessary disputes or unnecessary taking of evidence. The court guides the parties by notifications and suggestions.

Privilege and disclosure Confidentiality of information is a key element of German legal representation. A lawyer is, in general, legally obliged to keeping confidential all knowledge gained about a client during the course of professional activity. That rule applies regardless of the professional status of the lawyer (e.g. as an employee) and extends to employees of lawyers, including those who are not members of the legal profession. An unlawful breach of confidentiality is a criminal offence and may be sanctioned with a fine or even imprisonment. The confidentiality principle itself is not transferable to communications, documents or other information; instead, it is “attached” to the aforementioned professions and applies before arbitral tribunals as well. With regard to the parties, they are usually not under a duty to confidentiality. If a party refrains from providing allegedly confidential material, that party is at risk of losing this point of the case when it cannot meet its burden of proof otherwise (cf. next section). The German Code of Civil Procedure in general does not contain rules demanding full disclosure of all documents in the possession of the other party. The only exception – resulting from an EU Directive – exists in connection with antitrust follow-on damage claims. So, in general, a party must only provide evidence for the facts on which it builds its case and may generally limit its disclosure to those documents that support its case. However, the principle of the so-called “secondary burden of proof” may require a party to disclose specific documents in its possession if these documents are necessary to prove a disputed fact claimed by the opposing party and that party itself does not have these documents at

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© Published and reproduced with kind permission by Global Legal Group Ltd, London GÖRG Partnerschaft von Rechtsanwälten mbB Germany its disposal. Further, the court may order a respective party, which acknowledged that a specific document is in its hands, to provide that document if the court considers it to be of the essence of the case. Refusing to disclose such documents may lead to the legal fiction that the opposing parties’ submission regarding the content of the document is true. Foreign lawyers with an admission to practise in Germany are subject to the rules of professional practice, including the rules on confidentiality. While the obligations on foreign lawyers are the same as for German lawyers, the protection by German laws might be weaker. Following a recent case in the German Federal Constitutional Court, it is doubtful whether foreign lawyers and German lawyers in foreign law firms enjoy the same protection as German lawyers and law firms.

Evidence Rather than finding out the “material truth”, Germany’s civil procedural rules aimat resolving a dispute with a more practical approach. Facts that are presented unanimously by both parties, or presented by either party and not contested by the other party, are considered “undisputed”. German civil courts will not, in principle, take evidence on undisputed facts, even if they might not be “true”. Facts presented by either party and challenged by the other party are “disputed” facts. This principle is supplemented by each party’s obligation to be truthful. Thus, a party must not challenge facts presented by the other party if it knows that the presentation of the facts was correct. A disputed fact is proven when the court considers it to be true. The court must be convinced to such a degree of certainty that reasonable doubts are silenced without the need to exclude them at all. Taking of evidence is limited to disputed facts that are legally relevant for the case at hand. In contrast to, e.g. the U.S. system, German procedural law does not provide for a discovery procedure. Litigating parties must produce the evidence on which the case is built before the courts (cf. the aforementioned principle of production). The parties can only provide evidence in five ways: by witness; by expert; by documents/ records; by visual inspection; or by examination of a party. The burden of proof, that is that the party must provide evidence for certain facts of the case, is a matter of substantive law. The general rule is that each party must prove the facts that are favourable to their case. However, the lack of discovery and disclosure proceedings is remedied by the aforementioned principle known as “secondary burden of proof”. There is no general exclusion in relation to evidence illegally obtained. However, in some cases, the use of evidence must take second place to the fundamental rights of one party. A court will decide on a case-by-case basis whether to prohibit the use of certain evidence, if otherwise a breach of fundamental rights would occur. Additionally, the court may reject a party’s offer of evidence if it would delay the closing of the proceeding, e.g. by postponing an oral hearing or requiring a second oral hearing. The same applies if the facts proven to be true in the offered evidence are not sufficiently detailed for the court to decide on their relevance for the case or are evidently a fishing expedition by the relevant party. Witnesses must give oral evidence. The court may exempt a witness by ordering a written statement if it considers it to be sufficient. However, the parties’ right to question the witness requires the witness to be present (physically or via video transmission) at an oral hearing. It is primarily the court’s task in the evidence-taking procedure to interrogate the witnesses. The parties’ lawyers have the right to examine a witness afterwards. In practice, the court questions the witness first and then determines whether the lawyers have any further questions. This may go back and forth if the lawyers’ questions bring up new facts

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© Published and reproduced with kind permission by Global Legal Group Ltd, London GÖRG Partnerschaft von Rechtsanwälten mbB Germany that the court wishes to clarify. However, this does not fully correspond to the common law instrument of cross-examination as the court’s leading role in the evidence-taking process is a key principle of German procedural law. With regard to documentary evidence, there is no authentication process. The authenticity of a private document, such as a contract, is subject to the general rules on the provision of facts. If the opposing party challenges a document, the party providing the document must prove its authenticity. Public documents established by authorities are subject to other regulations. Documents that appear as public documents in format and subject matter are presumed to be authentic. Nonetheless, the opposing party may prove the contrary. By duly exercising its judicial discretion, the court must appoint an expert witness if it cannot assess the validity of the facts in dispute. Courts regularly order the expert to provide a written expert opinion. In addition, each party can question the expert.

Costs Legal costs consist of court fees (including, i.a., the costs of taking evidence) and lawyer’s fees. The question of cost will be decided upon at the end of a dispute. Apportionment of costs between the parties is based on a “costs after case” principle that is basically dependent on winning and losing. In principle, the losing party does not only have to bear its own lawyer’s fees, but also the court fees and the lawyer’s fees of the opposing party. If the claimant is only partially successful, the costs are split according to the success ratio. The costs of litigation in Germany are rather predictable. The calculation of court fees and reimbursable lawyer’s fees is regulated by law. The amount of both fees depends in general on the amount in dispute. The higher the amounts in dispute, the higher the fees. If several legal matters with different amounts are included in one claim, the amounts are, in general, summed up. However, law sets a limit for the calculation of fees at an amount in dispute of EUR 30 million per claimant. Consequently, litigation for a claimant with an amount in dispute of EUR 200 million causes the same fees as litigation with an amount of EUR 30 million. The Lawyer’s Fees Act also allows for individual fee agreements (in written form), such as the agreement of hourly rates or project-related lump sum agreements. Contingency fees are generally inadmissible, except where the client would otherwise be barred from pursuing its rights due to their financial circumstances. While a fee agreement may provide for fees that exceed the statutory framework, reimbursement of the opposing party’s lawyer’s fees is limited to the amount calculated in accordance with the Lawyer’s Fees Act. If the parties settle, whether before or during the hearing, the court splits the costs using equitable discretion as part of its final judgment. If the parties settle without the necessity of a judgment (that is, they also agree on cost apportionment), the court costs will decrease to one-third of the costs of full proceedings.

Litigation funding Although the winning party of a dispute can expect the reimbursement of its costs (calculated on the basis of the statutory tariffs), litigants have always needed to find an answer to the question of how the procedure will actually be paid; therefore, different funding mechanisms have evolved. The state itself provides for financial funding if a party is unable to pay the costsof proceedings. However, an application for financial assistance will only be granted if

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© Published and reproduced with kind permission by Global Legal Group Ltd, London GÖRG Partnerschaft von Rechtsanwälten mbB Germany financial need is proven and if litigation has sufficient prospect of success. Besides, if the financially supported party loses the dispute, it must reimburse the winning party’s lawyer’s fees and might even have to repay the amount received by the state in instalments. Of course, there are private institutions that finance claims after an assessment of the merits. These institutions bear the risk of loss since they cover all the costs accrued if the respective party loses and this is the reason why they may, e.g. charge a fee of 30% of the gains in case the litigation is successful. As a general rule, the support for the respective party is re-evaluated after every instance. A more recent tendency is to rely on litigation investment firms. Potential claimants assign their claims to these firms and agree to pay, on average, 30–35% of the sums awarded as compensation in return for bringing them to court. This is quite popular with regard to cases that are numerous and similar in design. However, these litigation investment companies provide services that are similar to those that may only be provided by lawyers. The Federal Court of Justice in late 2019 decided that this practice is not illegal as such but its legality must be decided on a case-by-case basis.

Class actions A general class action regime such as that in the U.S. and other jurisdictions is not provided for in the German Civil Procedure System. However, there are procedures that may be considered a “light version” of class actions. At the end of 2018, the German legislator introduced the so-called Act on Model Declaratory Proceedings. This basically happened in order to help consumers with damage claims against Volkswagen in connection with the “Diesel Case”. Under this new law, qualified institutions protecting consumer rights can start a model proceeding against a consumer- facing business. The proceedings simply aim at determining factual and legal conditions for potential later claims. Consumers intending to benefit from the model proceeding must enrol in the model proceedings register. After a decision is issued in the model proceedings, consumers must commence individual litigation to pursue their damage claim. If the consumer files a statement of claim for damages, the court is generally bound by the decision made in the model proceedings. At the beginning of 2020, the Regional Court in Munich issued a judgment that basically rejected the attempt to implement something similar to a class action “through the back door”. The claimant was a Legal Tech Company which had contacted companies that had suffered losses as a result of a cartel between manufacturers. In return for bringing the claims before the courts in one bundled procedure, the Legal Tech Company demanded one-third of the amount that should be awarded by the court. The court, amongst others, pointed out that the business model aimed at filing a class action, which is not provided for in the German Civil Procedure System, and dismissed the claim. The judgment has been appealed by the claimant and it remains to be seen whether it will be backed by the following instances.

Interim relief The German Code of Civil Procedure provides, in principle, for two means of interim relief – asset freezes and preliminary injunctions – which both aim to quickly and effectively secure a claim. In these procedures, the rules of evidence are less strict, since facts may not only be established by documents, witnesses or experts but also by affidavits. Additionally, given the urgent nature of the issue, the court may, in general, issue a decision without an oral hearing.

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Asset freezes and preliminary injunctions are immediately enforceable. However, enforcement must be conducted within one month. Otherwise, the decision granting interim relief becomes unenforceable. The court may rule that enforcement is subject to provision of security (e.g. a bank guarantee) that must be presented before enforcement can be commenced. An additional, special form of interim relief is based on EU Regulation No 655/2014. It enables a creditor to obtain a “European Account Preservation Order” which prevents the subsequent enforcement of the creditor’s claim from being jeopardised through the transfer or withdrawal of funds that are held by the debtor or on his behalf in a bank account in a Member State. The procedure can be applied in cases of pecuniary claims in civil and commercial matters in cross-border cases according to Art. 3 of the aforementioned Regulation. However, the Regulation itself contains some exceptions for claims in specific areas of law, such as bankruptcy law.

Enforcement of judgments/awards Enforcement may be pursued on judgments that have become final or that have been declared provisionally enforceable. A judgment becomes final when it can no longer be appealed. However, the courts usually declare judgments to be provisionally enforceable even if the judgment is still appealable. Provisional enforceability requires the prevailing party to provide security (usually a bank guarantee) to safeguard the losing party’s position. If the enforced judgment is overturned in appellate proceedings, the enforcing party must repay collected money and is strictly liable for any damage caused to the other party. Enforcement may be made through a bailiff (e.g. if chattels have to be seized), or by a court (e.g. if a mortgage has to be entered in the land register). Since court decisions are acts of state sovereignty that have effect only within the territorial limits of the state of origin, foreign judgments must, in principle, be recognised and, if necessary, declared enforceable in Germany. However, Regulation (EU) No 1215/2012 ensures that within the EU, decisions issued by courts of a Member State of the European Union are automatically recognised and also directly enforceable. This also includes courts’ decisions on interim relief. The party against which the judgment shall be enforced has only limited possibilities of defence, such as a violation of the right to be heard when the foreign decision was issued or a potential violation of ordre public. However, the enforcement proceedings may be suspended if an appeal has been lodged against the judgment in the Member State of origin or if the time for such appeal has not yet expired. Due to these EU-wide rules, a creditor enforcing a court decision of one Member State in Germany only needs a copy of the judgment and a certificate confirming that the judgment is enforceable. The certificate, which is basically a standard form issued by the court of origin at the request of the person entitled, contains detailed information on the enforceable content of the judgment. This aims at avoiding expensive translations. However, the enforcement authority in Germany has discretion to require a translation of the certificate and, under exceptional circumstances, also of the decision itself. If a judgment from a state outside the EU shall be enforced in Germany, some multi- or bilateral treaties are also exempt from an exequatur procedure. However, there are still a considerable number of countries without any agreements, e.g. the U.S. and many Asian countries. If creditors want to enforce judgments in Germany from those countries, they must first request a decision of a German court of first instance that explicitly states that the foreign judgment can be enforced. During this procedure, the defendant can raise far more objections, e.g. that the foreign court did not have jurisdiction, procedural rules protecting the defendant have been violated, or reciprocity has not been granted.

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Cross-border litigation When questions of cross-border litigation arise (e.g. with regard to the taking of evidence abroad, service of documents or parallel legal venues), very different legal sources may provide the answer. International treaties or EU regulations may take precedence over the German Code of Civil Procedure or at least complement it. The most important sources within the EU are Regulation (EC) No 1393/2007, Regulation (EU) No 1215/2012, Regulation (EC) No 1206/2001, Regulation (EC) No 864/2007, and Regulation (EC) No 593/2008. On an international level, the Hague Service Convention, the Hague Evidence Convention and the Hague Choice of Court Convention must be taken into consideration. In Germany, it is generally possible to obtain evidence abroad by a formal letter rogatory. The specific form of application may be dependent on the conditions stipulated inone of the aforementioned legal sources. It can only be made by the German court to a foreign court. Both parties must be heard in this context. Where necessary evidence is abroad, the court must initiate the process of obtaining this evidence. Foreign officials (such as consular officials) are allowed to take evidence in Germany under an applicable international instrument. However, German law basically prohibits foreign officials from taking evidence from German citizens. When there is a conflict between suits pending in different EU Member States dealing with the same subject matter, the court first seized will continue with the proceedings. The court seized second will stay its proceedings. If the matter pending is not strictly the same but it would not be sensible for two courts to decide due to possible contradictions or very close connections between the matters pending, the second court may decide to stay its proceedings. As Regulation (EU) No 1215/2012 deals with the problem of conflicting issues, anti-suit injunctions do not play a significant role in Germany. This is probably also due to the fact that under German civil law, seizing a court not competent in violation of a clause on jurisdiction can lead to claims for damages. Enforcement of foreign asset freezing orders in Germany is rarely used. Due to the aforementioned exequatur proceedings (if necessary due to the lack of specific rules in a treaty), the assets to be frozen will probably be gone before the foreign asset freezing order actually becomes enforceable. German law also does not acknowledge asset tracing claims.

International arbitration The German Code of Civil Procedure contains rules on arbitration that are based on the UNCITRAL Model Law on International Commercial Arbitration (cf. sec. §§ 1025–1066). However, most of these rules only apply if the parties have not reached agreement on certain points. Germany is a signatory state of the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards. Thus, a judgment rendered by an arbitral tribunal in accordance with the New York Convention is recognised and will, in general, be quite easily declared as enforceable. Upon application, German courts may look into certain arbitration-related matters, such as appointment and challenge of arbitrators, setting aside and enforcement of (foreign) awards, orders for interim measures or declaring arbitration proceedings admissible. Any arbitration-related matters are decided upon by Higher Regional Courts. Court decisions can be appealed to the German Federal Court of Justice, though only based on violation of laws, not facts.

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Mediation and ADR Mediation is a commonly used alternative dispute resolution mechanism in Germany. A recent survey by the University of Technology in Cologne showed that commercial mediation is growing. Parties can involve a mediator before or after a case has been filed. Because a settlement can be reached by mediation, a judge would have to suspend the hearing for the duration of the mediation. If the mediation is unsuccessful, the court proceeding will continue. In the absence of a dispute resolution clause, mediation is, in general, not a pre-condition to bringing a commercial dispute before a court. Settlement agreements reached at mediation are considered to be legally binding contracts. If there are court proceedings in addition to mediation, the settlement will be formalised by the court. Otherwise, the settlement could be formalised by a notary. In both cases, the document containing the settlement between the parties would serve as the enforceable deed. Further alternative dispute resolution mechanisms are conciliation and expert determination. Conciliation can be carried out by a private conciliator or by a governmental conciliation body. It aims at finding a mutual settlement together with the parties. If that cannot be achieved, a conciliator will issue a non-binding decision. The parties can also agree on expert determination, which means that factual or legal questions need to be assessed by an independent expert. It is up to the parties to decide if the expert determination is binding or non-binding on them. Due to these practical advantages, “multi-step” dispute resolution clauses have become more popular in Germany. The parties have to mediate a dispute first and, in case of failure, can initiate litigation. However, the wording of such a clause needs to be carefully drafted, especially when it is contained in general terms and conditions.

Regulatory investigations Germany has numerous federal and regional agencies that have authority to conduct regulatory investigations within their jurisdiction. One example of a powerful agency is the Federal Cartel Office which supervises competition. Recently, data protection authorities are also more inclined to exercise their powers. In general, authorities may request production of documents, hear witnesses and, most of all, conduct (dawn) raids both at business premises and private residences. If an infringement is found, substantial fines can be imposed on businesses and individuals. Actions taken by and orders from authorities are subject to review by the courts. If there are objections against a decision of an authority, the court will review both the verdict and the fine and apply its own discretion. Thus, the court may lift or uphold the decision and/or decrease or increase the imposed fine.

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Jochen Lehmann Tel: +49 221 33660 244 / Email: [email protected] Dr. Jochen Lehmann is a partner at GÖRG Partnerschaft von Rechtsanwälten mbB, where he has worked in the Cologne office since being admitted to the Bar in 2000. He obtained his doctorate from the University of Bonn on the concept of ownership in civil law, winning an award there for the best thesis in 2003. His focus is in the fields of litigation, insurance law and data protection. He advises national and international companies on litigation and arbitration. He has many years of experience coordinating and managing cross-border disputes. Amongst others, he focuses on disputes in the finance and insurance sector, the IT and telecommunications sector as well as the trade and services sector. In recent times, he has advised his clients in several multi-million lawsuits, including a lawsuit against the Austrian bank HETA with approximately EUR 1 billion in dispute, and in several insolvency proceedings where he represented the administrators comprehensively in every kind of litigation, an example being the insolvency proceedings over the assets of Germany’s once greatest real estate group, IVG.

Markus Andrees Tel: +49 221 33660 244 / Email: [email protected] Dr. Markus Andrees is an associate at GÖRG Partnerschaft von Rechtsanwälten mbB. He was admitted to the Bar in 2019 and then joined the Cologne offices of GÖRG. He obtained his doctorate degree inthe field of IT law at the University of Münster. Markus advises national and international companies on data protection as well as commercial and distribution law. His sector focus is in the fields of trade and services, IT and telecommunications as well as banking and insurance. He not only deals regularly with questions of cross-border data processing but is also frequently asked for judicial and extrajudicial support in commercial law disputes, including the enforcement of domestic or foreign judgments.

GÖRG Partnerschaft von Rechtsanwälten mbB Kennedyplatz 2, 50679 Cologne, Germany Tel: +49 221 33660 0 / Fax: +49 221 33660 80 / URL: www.goerg.de

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Spyros G. Alexandris & Eirini Panopoulou Bahas, Gramatidis & Partners

Efficiency of process Greece, when compared with the results of other European countries from a survey of the European Commission (Justice Scoreboard 2019), shows considerable delays in the completion time of litigation before the competent courts of law. The Greek justice administration system, especially in civil proceedings, proved to have considerable delays, mainly due to the great number of actions, legal remedies and aids filed before the Civil Courts, a fact that, in turn, was leading to delays in delivering court judgments. Law 4335/2015, which entered into force on 1 January 2016, brought significant amendments to the Greek Code of Civil Procedure (GCCP) in the direction of speeding up the administration of justice, without sacrificing the (equally worthy of protection) need for giving a correct and fair judgment. The essential changes occurred with the new Code of Civil Procedure mainly concerning ordinary proceedings before first instance courts, as well as enforcement. The most significant novelty introduced is the replacement of the (until recently, partly oral) ordinary proceedings at first instance, with more flexibility and less time takenin terms of written proceedings. On the basis of these new articles, ordinary proceedings are, in principle, written and based on written pleadings and the filing of all evidentiary means, including up to five affidavits, while the hearing before a court audience is formal, without the necessity of litigant parties, or the lawyers acting for them, attending and participating therein. The new process provides for the following stages: (a) service of the action within 30 days as from filing for residents of Greece and 60 days for non-residents; (b) filing of pleadings within 100 days as from filing of the action for residents and 130 days for non- residents; (c) filing of replication within 15 days as from the deadline set for the filing of pleadings; and (d) appointment of judges and court composition within 15 days and fixing the hearing day within 30 days after the expiry of the 15-day term. Adjournment of the hearing is permitted once and only for a significant reason (see especially articles 237, 241 GCCP). It is noted that if the court needs further clarification, the court may, by a simple act, call, at a subsequent time, the witnesses that rendered the affidavit for hearing. The decision of the court should be issued and published within eight months of the court hearing (articles 237 para. 5 and 307 para. 2 GCCP). In the field of compulsory enforcement, two improvements have occurred: the first improvement limited the number of the legal remedies; and the second limited the time required for the completion of the actual implementation of the enforceable titles (articles 237, 241 GCCP). It is noted that the outcome of the recent reforms is not as positive as expected because, despite the above-mentioned strict deadlines, the justice administration system has not been

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bahas, Gramatidis & Partners Greece improved. More specifically, due to the heavy workload of the first instance courts, the decisions, in the majority of the cases, are not published within eight months of the court hearing, but rather within one to one-and-a-half years of the court hearing. It must be mentioned that in Greece, the above-mentioned deadlines were suspended from 13 March 2020 until 30 June 2020 with various Legislative Acts which were ratified by Law 4690/2020, due to the extreme COVID-19 measures taken by the Greek Government.

Integrity of process A fundamental element of judicial independence is its operational and organisational distinction from the other directions of the State authority. The jurisdictional operation of the State authority is exercised by the courts of law that are composed of ordinary judges who enjoy operational and personal independence (articles 26 § 3 and 87 § 1 of the Constitution). Personal independence of judges is ensured, in the first stage, by being appointed after having successfully passed the admission competition in which they are evaluated, under guarantees of irreproachable judgment, both in terms of qualifications and merits, and after having completed attendance at a special School of Judges. Thereafter, it is intended to ensure the personal independence of judges by subordinating their promotions and transfers to the Supreme Judicial Council. Personal independence should be founded on respective basic financial independence. The Constitution binds the Ministry of Finance to make sure that the remuneration of judges is proportional to their office (article 88 § 2 of the Constitution). The second considerable institutional guarantee of neutrality is the clear distinction of the court from other participants of the litigation process, namely the litigant parties, but also from other persons involved in the procedure, such as, for instance, the witnesses. Besides the operational and personal independence of judges, the judicial authority is also inspected by other mechanisms, such as: • the review of court judgments by means of legal remedies; • the challenge of judges on the grounds of mere suspicion of partiality; • penal and civil liability of judges; • a more active disciplinary liability of judges, either following complaints or within the framework of the inspection provided for in article 87 § 3 of the Constitution; and further • the publicity of court proceedings and hearings, but mainly of the court judgments (article 93 §§ 2 and 3 of the Constitution).

Privilege and disclosure Lawyer’s privilege, as a more specific expression of the professional secret, constitutes a particularly important aspect of a lawyer’s practice and has constitutional and legislative grounds; therefore, lawyers always enjoy special protection in Greek law. It should be noted that, in contrast with other secrecies, such as banking, tax, secrecy of communications, etc., which have already been bent mainly for the purpose of repressing serious financial crimes and at the recommendation of the European Union, lawyer’s privilege remains strong and may only be bent under very strict conditions. In particular, a lawyer’s privilege is established both in the Penal Code (PC) and the Code of Penal Procedure. More specifically, under article 371 PC, lawyers and their assistants who disclose confidential information with which they have been entrusted, or which came to their knowledge by reason of their profession or capacity, are punished with pecuniary penalty or imprisonment of no more than one year. In addition, under article 212 GCCP, a prohibition

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bahas, Gramatidis & Partners Greece of examination as witnesses is imposed on the defence lawyers both in preliminary and main proceedings in connection with the information entrusted to them by their clients. The said prohibition is also ensured by the provisions of articles 261 and 262 of the Code of Penal Procedure, which prohibit the seizure of documents of the persons indicated therein. Besides these articles, lawyer’s privilege is also established in article 38 of the Lawyers’ Code (Law 4194/2013), while article 39 § 1 of the aforesaid Code has enhanced the protection over lawyer’s privilege, providing that “[i]t is prohibited to conduct investigation for seeking documents or other evidences or the electronic storage media thereof, as well as to seize such documents or evidences or storage media for as long as these are in the lawyer’s possession for a case that is handled by the latter”. Furthermore, lawyer’s privilege is guaranteed in article 400 GCCP, which prohibits the examination of the lawyer in civil proceedings in connection with facts covered by the lawyer’s privilege.

Costs As a rule, the party that causes or undertakes a proceeding (filing of action, legal remedy, speeding up of enforcement, etc.) pays in advance the costs and dues of such proceeding. The document proving advance payment of costs and dues (court stamp duty is also included), and also the fee of the lawyer acting for the party (Lawyer’s Fee Collection Receipt issued by the competent Bar Association), must be adduced to the court no later than the day of the case hearing. However, as regards the final allocation of legal costs, it remains completely irrelevant who has paid the above costs in advance. The essential rule of costs allocation is the principle that the losing party bears the costs. The losing party is ordered to pay the necessary costs of the entire proceedings, and thus also the costs paid in advance by the counterparty. The court, however, may offset all costs or any part thereof in two cases: (a) in disputes between spouses or relations by blood up to the second degree; and (b) in any trial where the construction of the applicable rule of law was particularly difficult. Moreover, the court, based on article 58 para. 5-a’ of the Lawyers’ Code, may determine by force of office the increase of the lawyer’s fee, depending on the scientific work, the value of the subject matter and the type of case, the amount of time required, the out-of-office services, the importance of the dispute and of the particular circumstances and any kind of judicial or extrajudicial acts. Independent of the minimum lawyer’s fee provided for in the Lawyers’ Code (Law 4194/2013), the fee may be freely determined by a written agreement between the lawyer and the principal or the principal’s agent. Ιn Greek law, there is no prohibition of derogation from the minimum legal fees and the contractual derogation therefrom is freely allowed. Said fees are only applicable in the event that no written agreement has been concluded between the lawyer and the principal on a different fee. The fees include the conduct of either the entire trial or any part or specific proceedings thereof, or any other legal work of any nature, both judicial and extrajudicial. The process of remuneration is freely chosen by the parties from the following methods: a time-based charge system (article 59 of the Lawyers’ Code); a success fee contract (article 60 of the Lawyers’ Code); a lump sum fee; and a salaried services system (articles 44–46 of the Lawyers’ Code). The provision of lawyers’ services free of charge is strictly prohibited (article 82 para. 1 of the Lawyers’ Code), unless such services are provided to family members by trainee lawyers or retired lawyers and concern a personal case.

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The Court of Justice of the European Union (CJEU), with its judgment of 5 December 2006 (Federico Cipolla vs. Rosaria Portolese C-94/04 and Stefano Macrino and Claudia Capoparte vs. Roberto Meloni C-202/04), has ruled that setting mandatory minimum fees constitutes, in principle, a restriction on freedom of establishment and on freedom to provide services that could be justified by the existence of overriding reasons relating to public interest, insofar as such restrictions are compatible with the proportionality principle. The matter also concerned the Greek Council of State which, in its Judgment No. 3154/2014, adopted the version that setting a scale of minimum lawyers’ fees comes within the regulatory power of the State, and therefore the regulation thereof by means of a regulatory administrative act does not prejudice the Union provisions on competition and freedom to provide services. The fees differ depending on the kind of legal service and on the existence, or not, of economic subject matter in dispute (articles 73–82 of the Lawyers’ Code). When the subject matter in dispute is pecuniary, the fee brackets are calculated cumulatively by applying progressively declining rates to the price of the economic subject matter in dispute (the rates start from 2% and go down to 0.05% for economic subject matters ranging from EUR 200,000 to EUR 25,000,001 and over). Legal works without a specific economic subject matter are regulated by special Annexes to the Lawyers’ Code and depend on the kind of legal work, the court before which the dispute is brought, and the amount of time dedicated to the case.

Litigation funding Law 3226/2004 on the “supply of legal assistance to low-income citizens” and the GCCP contain certain arrangements that aim to address economic poverty that does not make it possible for all people to conduct costly and time-consuming legal proceedings, ensuring in this way the principle of free access to justice (article 20 of the Constitution), the principle of procedural equality (article 4 of the Constitution, article 110 para. 1 GCCP), and the principle of the social rule of law (article 25 of the Constitution). The costs for such benefits to the most vulnerable social groups are paid from the State budget. In particular, based on Law 3226/2004, beneficiaries are low-income citizens of an EU Member State, low-income citizens of a third State, and stateless persons if they have legally domiciled or have a habitual residence in a country in the European Union. Low-income citizens and legal assistance beneficiaries are those whose annual family income does not exceed two-thirds of the minimum annual individual remuneration as set forth each time in the National General Collective Labour Agreement or in the law providing for the minimum fees. Legal assistance is only supplied upon application, where all necessary supporting documents evidencing the financial situation of the applicant, as well ashis domicile or residence in the case of third State nationals, are attached. The application examination procedure, carried out by the duty President of the court, where the attendance of a lawyer is not mandatory, is simple and rapid and any rejection thereof must be justified. It is clarified that legal assistance aims at discharging the beneficiary of the proceedings costs that would be incurred by the latter, but has no effect on his obligation to pay the costs to the counterparty in case of defeat or set-off of costs. Subject to certain conditions, legal assistance may also be provided to legal entities (articles 194, 204 GCCP); namely, public utilities or non-profit legal entities, associations of persons and unlimited or limited partnerships and cooperatives. As applicable under Law 3226/2004, the fact that the benefit of indigence has been granted does not have any effect on the obligation of that party to pay the legal costs to the counterparty in case of defeat or set-off of costs.

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Interim relief Provisory and conservative measures, and injunction measures generally (articles 682–738 Α GCCP), are an interim provision of judicial protection, an accessory to the main diagnostic trial, which may be either pending or soon to begin. Such an interim provision of judicial protection aims to secure the future satisfaction of the claim to be diagnosed in the main trial. Injunction measures include the following: granting a guarantee; registration of future mortgage; conservative seizure; sequestration and temporary adjudication of claims; preventive injunction; apposition and removal of seals; inventory and public deposit; and possessory injunction. The court orders injunctions in cases of emergency or to prevent imminent danger, provided that the right to be safeguarded and for which the injunction measure is sought, is likely to exist. The validity of injunctions ceases when the final judgment on the main case is given, and in the event of conciliation for the main case, upon expiry of 30 days as from completion or cancellation of the trial, if the judgment is revoked or reformed due to occurrence of new facts and if the main action is not filed within the deadline eventually set by the judgment granting the injunction. It is noted that the injunction order, aiming to prevent the occurrence of irreparable or hardly reversible situations, does not lead to full satisfaction of the right to be safeguarded (article 692 IV GCCP), is subject to revocation or reform (articles 696–698, 702 ΙΙ 2 GCCP) and has a temporary validity, without affecting the main trial (article 695 GCCP). Prior to a court judgment granting an injunction, the court may issue an interim order (article 691 ΙΙ GCCP) in cases of emergency or imminent danger. Thus, an interim order operates as a guarantee that ensures the content of the injunction judgment.

Enforcement of judgments Enforcement in Greece may be affected only by way of an enforceable title, as set forth in articles 904 and 905 GCCP. Enforceable titles are the final judgments, as well as the judgments of any Greek court of law, that have been declared provisory enforceable, foreign judgments, records of conciliation, etc. The provisions on the recognition and enforceability of foreign judgments coming from a third State (outside the EU) are set forth in the GCCP (article 905 in conjunction with article 323 GCCP). In particular, article 323 GCCP provides for the requirements for the recognition of a foreign judgment by a Greek court. It is strictly required that the foreign judgment be, pursuant to the law of the place of issuance, of such procedural maturity so as to have the force of res judicata and to not be contrary to public order. According to the GCCP (article 321), final court judgments have the force of res judicata, namely those that cannot be contested by ordinary legal remedies. On the other hand, in case of a judgment from an EU Member State, the Regulations of the European Parliament and of the Council No. 1215/2012 “on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters”, No. 2201/2003 “concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility”, as well as No. 1896/2006 “creating a European order for payment procedure”, are applicable. Under the Regulations, the recognition of every foreign judgment is permitted regardless of the procedural maturity, provided that it is enforceable. The recognition of foreign

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bahas, Gramatidis & Partners Greece judgments, when governed by the Regulations, is affected by operation of law. This means that in order for a foreign judgment to be recognised in Greece, it is not necessary to follow a specific procedure but, on the contrary, it may be invoked against any and all persons (including the State) in any contracting Member State producing the legal effects thereof, as if given in that State. The Regulations use the term recognition “by operation of law” of the foreign judgment. The reasons for which a foreign judgment may not be recognised by a Member State are exhaustively indicated in the Regulations, namely: if such recognition is manifestly contrary to public policy; if the defendant was not served with the document that instituted the proceedings where the judgment was given in default of appearance; if the judgment is irreconcilable with a judgment given between the same parties in Greece; or if the judgment is irreconcilable with an earlier judgment given in another Member State or in a third State involving the same cause of action and between the same parties.

Cross-border litigation Judicial cooperation in civil matters includes improvement and simplification of the cross- border service or notification of judicial and extrajudicial documents, of the cooperation in the taking of evidence, and of the recognition and enforcement of judgments in civil and commercial matters. In this case, the Ministry of Justice, Transparency and Human Rights acts as the Central Authority for the cooperation with the counterpart authorities of other countries, for the purpose of exchanging information in the field of civil law (substantive and procedural), and also for facilitating the introduction and conduct of court or administrative proceedings. Further, it operates as the mediating authority for the provision of legal assistance by the judicial authorities of the State to the counterpart authorities of the contracting States and vice versa, examination of witnesses, experts, transmission and service of documents, etc. Greece has acceded to International and European Treaties on the cross-border cooperation between countries. In particular, the Hague Convention (1965), which was ratified with Law 1334/1983 and entered into effect as of 18 September 1983, is in force for the States (outside the EU) having acceded thereto. Greece has expressed a reservation only about article 10 concerning service by post. Service or notification in Greece is permitted only if the documents are compiled or translated in the Greek language and have been duly apostilled (Hague Convention of 5 October 1961). In the European Union, the applicable enactment is Regulation No. 1393/2007 (except in Denmark) on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents), by establishing a simple and short service procedure, and also Regulation No. 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters. In the case of countries not having acceded to any bilateral or multilateral treaties or to which the aforesaid Regulation No. 1393/2007 is not applicable, the service is effected pursuant to article 134 GCCP, and the document to be served is consigned to the Prosecutor to the competent court. The Prosecutor must forward such document, without culpable delay, to the recipient of the service, through the Ministry of Foreign Affairs. Moreover, pursuant to article 137 GCCP, the service abroad may be affected in compliance with the formalities of the foreign law by the organs provided for therein.

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International arbitration Greece transposed, early in the national legal order, the Geneva Protocol (1923) on an arbitration clause that was ratified with L.D. 4/1926, and also the Geneva Convention (1927) on the enforcement of foreign arbitration awards that was ratified with Law 5013/1931. These legislative instruments were abolished by L.D. 4220/1961 which ratified the New York Convention (1958) on the recognition and enforcement of foreign arbitration awards. Moreover, with Emergency Law 608/1968, Greece has ratified the Washington Convention (1965) on the settlement of investment disputes. As generally known, this Convention provides that arbitration proceedings are to be conducted (International Centre for Settlements of Investment Disputes – ICSID) on “investment disputes”. By means of Law 2735/1999, Greece has adopted the UNCITRAL Model Law on international commercial arbitration. Insofar as any of the requirements of Law 2735/1999 are fulfilled, the arbitration is international and commercial. On the contrary, if all elements of the arbitration are identified in one legal order and in particular in Greek legal order, the arbitration is internal and articles 867 et seq. GCCP are applied thereto. In order for an arbitration clause to be effective, it must be laid down in writing. The differences between the provisions in these two legislative instruments (GCCP and Law 2735/1999) are not many in number and are mostly of minor importance. Still, the difference existing in the fees of arbitrators for conducting internal and international commercial arbitration is remarkable. More specifically, pursuant to article 882 GCCP, fixed amounts in internal arbitration are determined as a fee for the arbitrators, while pursuant to article 32 para. 4 of Law 2735/1999, the arbitrator may freely determine the amount of the arbitration cost which includes, of course, his own fee. Another significant difference concerns injunction measures. In particular, article 889 GCCP explicitly provides that, in internal arbitration, the arbitration court does not have the power to order injunction measures. On the contrary, article 17 of Law 2735/1999 clearly provides that the arbitration court may order injunction measures unless otherwise agreed by the parties, and said measures may even be foreign, namely outside the Greek legal order, providing it is not contrary to the public policy thereof. Certainly, both in internal and international commercial arbitration, it is not ruled out that injunctions may be requested from the State court, even if the dispute is subject to arbitration (article 889 para. 2 GCCP and article 9 of Law 2735/1999, respectively).

Mediation and ADR ADR Within the context of alternative dispute resolution (ADR), as already known, four major categories are identified: (a) negotiation; (b) mediation; (c) conciliation; and (d) arbitration, mentioned above. The objective of the European Union, with which Greece is also in line, is to obtain alternative ways of resolving disputes (ADR) with the aim to facilitate and improve access to justice. The wider concept of ADR includes the provisions of the GCCP that are intended to facilitate court settlement or the amicable settlement of disputes with court intervention, but also the provisions governing arbitration. Respectively, ADR also includes the “extrajudicial” mediation in civil and commercial matters, which has been instituted with Law 3898/2010, amended by Law 4512/2018 and again amended by Law 4640/2019 which transposed into Greek law Directive 2008/52/EC of the European Parliament and of the Council of 21

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May 2008 on certain aspects of mediation in civil and commercial matters of cross-border disputes. Many Member States, Greece among them, have not only regulated cross-border mediation but have extended the legal regulations to mere internal disputes. The ADR process is not a novelty for the Greek judge since in the Law of Civil Procedure there are plenty of provisions that, in one way or another, provide for a reconciliation intermediating intervention of the judge. In particular: • The category of negotiation also includes the attempt to resolve the dispute pursuant to article 214Α GCCP, namely the extrajudicial amicable settlement of a dispute. In an extrajudicial amicable settlement of a dispute, the parties may compromise after the occurrence of pendency until the giving of the final judgment and without having a trial hearing, by signing a private deed of settlement that may also be ratified by the court, if the parties wish to do so. It is worth noting that the mandatory attempt of dispute resolution between the parties that was provided for in article 214A GCCP, before being amended by article 19 of Law 3994/2011, did not yield any results. The rate of the settlements achieved by means of this procedure was extremely low (1–2% of the total cases, even zero in certain court districts). • In the second ADR category, namely in court mediation (article 214Β GCCP) as in mediation, besides the litigant parties and the lawyers acting for said parties, a neutral mediator judge also participates in the procedure and assists the negotiations, proposes solutions, and eases the stress so that parties may arrive by themselves at an agreement for the resolution of their dispute and at a mutually accepted and viable solution. • The third ADR category includes conciliation, which means the procedure in which a neutral third party, usually of high prestige, ex officio attempts to recommend his own solution to the parties in order to resolve the dispute or obtain a settlement (articles 209–214 GCCP). In Greece, the reconciliation intervention is made by the competent Justice of the Peace. • Conclusively, the fourth category includes the institute of arbitration, which has been addressed above. Court mediation and mediation The two institutes of (a) court mediation (article 214Β GCCP), and (b) extrajudicial mediation (Law 4640/2019) present several similarities, especially those set forth in articles 9 (substantial effects), 10 (secrecy) and 11 (enforceability of the agreement). The two enactments also present some differences: in the GCCP, mediation is carried out by a third party having the capacity of a judge, who proposes solutions and addresses non- binding proposals for the resolution of the dispute at his will. On the contrary, in private mediation provided for in Law 4640/2019, the mediator is not a judge and acts exclusively as a catalyst between the interested parties, while the authority to make decisions rests exclusively with the interested parties. Further, the recourse to private mediation requires, according to the initial regulation, that the relevant agreement between both parties comes first before their mutual decision on the appointment of the mediator. On the contrary, as regards court mediation, it is enough that one party wishes to have recourse to it, and then, addressed to the judge, the said party files the petition, and the judge invites the counterparty to take part in the procedure. Private mediation is a formal procedure that follows specific stages, almost always strictly prescribed. The mediator must master these stages and be specially trained on them. In court mediation, the mediator judge has more freedom and tries to individualise the problem and shall investigate, along with the interested parties, the way in which he shall approach the case at issue.

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Already, pursuant to article 182 of the previous Law 4512/2018 which entered in force on 17 January 2018, the optional recourse to mediation became mandatory, before having recourse to the competent court in civil and commercial matters (disputes arising from infringement of trademarks, patents, industrial designs or models). It is remarked that the aforesaid article 182 of Law 4512/2018, which provides for the mandatory reference of private disputes to mediation procedures, was found to be unconstitutional by Judgment No. 34/2018 of the Supreme Court in a plenary session. According to the judgment, the constitutionally safeguarded core of the right of access to justice is offended because of the high cost that private mediation requires from the average citizen and that it was in fact carried out in the midst of the economic crisis. “Extra judicial” mediation (new Law 4640/2019) The new Law 4640/2019 “Mediation on civil and commercial disputes – Further harmonization of Greek legislation with Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 and other provisions” was published in the Official Government Gazette on 29 November 2019.1 The new Law was drafted in order for Greek legislation to conform with the above-mentioned Judgment No. 34/2018 of the Supreme Court that mandatory mediation, as it was provided in Law 4512/2018, was unconstitutional, offending the right of access to justice, and also to conform with a decision of the CJEU which was issued following a complaint filed by the European Commission against Greece, doubting whether the first mediation Law 3898/2010 (article 5 paras 1 and 2.2, article 7), and other pieces of legislation implementing these provisions, were aligned with Directives 2006/123/EC and 2005/36/EC. This decision of the CJEU found that, in comparison to the recognition of accreditation of mediators in other EU Member States, this law was contrary to EU law. Law 4640/2019 provides that national or cross-border civil and commercial litigation may be subject to mandatory mediation. Prior to the court hearing, the lawyer must inform his client in writing of the option to resolve the dispute through mediation, as well as of the obligation to attend a mandatory, first joint session to be informed about the possibility of mediating his dispute. This document must be signed by both the lawyer and the party and it is submitted together with the lawsuit in order to be admissible by the court. The first mediation session is obligatory in the following cases: • All first instance disputes before the single-member and multi-member first instance courts, for claims above EUR 30,000 (concerning lawsuits filed as of 15 March 2020). • Disputes arising from contracts that contain a valid mediation clause (concerning lawsuits filed as of 30 November 2019). • Certain family law disputes (concerning lawsuits filed as of 15 January 2020). This session shall take place no later than 20 days after the mediation request of the plaintiff to the mediator if the parties reside in Greece, and no later than 30 days if any of the parties reside abroad. The mediation must be concluded in 40 days, unless the parties agree on an extension. The Law provides for certain monetary penalties (from EUR 100 to EUR 500) in case one of the parties does not appear in the first joint mediation session, taking into account the overall behaviour of the party and the reasons for their non-attendance. If the parties agree to mediate, they enter into a written mediation agreement and continue after the first session. In the event of a successful outcome of mediation, the respective minutes must be signed by the mediator, the parties and their lawyers, and a certified copy

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bahas, Gramatidis & Partners Greece must be submitted before the secretariat of the competent court in order to become an enforceable exequatur. If the mediation is unsuccessful, the parties are entitled to refer the case to court, simultaneously submitting thereto the minutes proving the attempt and failure of the mediation for the admissibility of the hearing of the case. As mentioned above, the provisions on the obligatory first mediation session entered into force in March 2020 for all disputes apart from family law disputes, for which the law was due to enter into force in January 2020. However, due to the COVID-19 pandemic, these deadlines have been extended to 1 July 2020 according to Law 4690/2020.

Regulatory investigations In Greece, independent administrative authorities consist of national collective State bodies with autonomous administrative infrastructure and budgets, the members of which enjoy personal and operational independence, and have the role of monitoring sensitive fields of political, economic and social life by exercising regulatory, consultative, arbitration and auditing competences. The most important independent administrative authorities are: the Competition Commission which, in collaboration with the competition authorities of other countries, examines the operation of commercial enterprises, distribution networks, the regulations regarding commercial prices, monopolies, issues regarding free establishment of businesses, etc.; the Regulatory Authority for Energy (which cooperates closely with the Competition Commission to address breaches of the Competition Law) for electricity and natural gas, its main competence of monitoring the domestic energy market in all its sectors; the National Council for Radio and Television, which controls the contents of radio and television broadcasts to safeguard the observance of the equal-time rule for news broadcasts and ensures the quality level of programmes; and the Data Protection Authority, which also monitors the application and observance of the new Data Protection Regulation No. 676/2016 of the European Parliament and of the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data.

* * *

Endnote 1. See the article “The experience from the application of the Mediation scheme (Directive 2008/52/EC) in EU member states”, Spyros G. Alexandris, “The Revision of the Greek Civil Procedural Law” Journal, p. 526.

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Spyros G. Alexandris Tel: +30 210 331 8170 / Email: [email protected] Spyros G. Alexandris, LL.M., Managing Partner of the firm Bahas, Gramatidis & Partners, is leading its Commercial Litigation, Arbitration & ADR practice. Ηis expertise spans across almost all fields of commercial and company law, as well as financial crime law. One of the most reputable attorneys in Greece, Spyros has built an impressive record in both national and international litigation and dispute resolution projects, with impeccable results over the years. Throughout his career, Spyros has lodged and/or fought cases before the ECHR, the Court of Justice of the European Union (former ECJ) and the ICSID. Further to his active practice, Spyros also has tens of publications in both Greek and international legal journals, whilst also serving as a member of the law-drafting committee for the new legislative framework governing Partnerships (Section Seven of Law 4072/2012). His expertise has been recognised internationally and he has been awarded the “International Commercial Litigation Lawyer of the Year in Greece” award for four consecutive years by Corporate INTL, Global Law Experts, and Legal 100. Spyros has been a member of the Athens Bar Association since 1983, a member of the BoD and Secretary General of the Association of Greek Commercialists, a member of the Editorial Board of the legal journal Nomiko Vima (NoB), published by the Athens Bar Association, a member of the Examination Committee for the trainee lawyers’ Bar examinations in the course of commercial law in 2004 and 2005, a lecturer of commercial law in seminars for trainee lawyers previously organised by the Athens Bar Association and currently by the Athens Association of Trainee and Newly Qualified Lawyers, and a key speaker as well as organiser in a number of conferences of the Association of Greek Commercialists.

Eirini Panopoulou Tel: +30 210 331 8170 / Email: [email protected] Eirini Panopoulou is a Junior Associate of the firm Bahas, Gramatidis & Partners, focusing on consulting and litigation in civil, corporate and commercial law. She has been a member of the Piraeus Bar Association since 2014. She is an LL.M. graduate in civil procedural law from the Law School of the National and Kapodistrian University of Athens.

Bahas, Gramatidis & Partners 26 Filellinon Str., Athens 10558, Greece Tel: +30 210 331 8170 / Fax: +30 210 331 8171 / URL: www.bahagram.com

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Micael Montinari, Luca Tormen & Laura Coriddi Portolano Cavallo

Efficiency of process The Italian civil judicial system is governed by the Italian Constitution, the Code of Civil Procedure (“CCP”) and by several special laws on various matters. Thanks to recent reforms, the entire civil judicial process is managed electronically. A party can lodge a claim by filing either a hard copy of the petition or an electronic one. Except for the statement of defence, submissions from any other parties are only valid when lodged via the electronic system managed by the Ministry of Justice. As soon as the law clerk uploads the submission on to the proceedings folder, briefs and exhibits are immediately available for all the other parties and for the Judge. This system has recently been extended to administrative proceedings as well. Together with other recent interventions of the Italian legislator, it is aimed at increasing the efficiency of the Italian legal system. The first result of this effort is the decrease in the average length of proceedings. The Minister of Justice estimates that, today, first-degree proceedings last for around one year on average, against an average of 487 days in 2014. Other independent studies concerning the year 2017 seem to confirm this trend. In addition to the above, Italian procedural rules also provide for fast-track proceedings in case of credits supported by written evidence and certain in their amount. In such cases, the creditor can apply for a summary payment order (decreto ingiuntivo) instead of using ordinary proceedings. Typically, these orders are issued within a month from the time of the application, subject to variations depending on the Court’s workload at any given time. If the application is upheld, the Court orders the debtor to pay in the context of ex parte summary proceedings, i.e. without the appearance of the defendant. The order is then served by the applicant on the debtor. The latter has up to 40 days to challenge the order. Further to such opposition, ordinary proceedings on the merits commence. Under certain circumstances, or if the order is not wholly or partially challenged, the same order can become enforceable, even if proceedings on the merits are still pending. Given the length of civil proceedings, some statistics released by the Ministry of Justice show that people are relying more and more on ADR mechanisms. As we will see infra, assisted negotiation and mediation are in some cases mandatory, and a party cannot start judicial proceedings without first having attempted to resolve the dispute extra-judicially. In conclusion, it also worth noting that a reform of the civil proceedings is expected within this year. As a matter of fact, one of the major aims of the new regulation will be that of enhancing the efficiency of civil proceedings.

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Integrity of process Principles and high-level rules concerning the Italian judicial system can be retrieved in the Italian Constitution. Article 24 Const. grants everyone the right to bring their case before a Court of law. It also states that everyone – irrespective of their economic condition – is entitled to be defended before any Court. Further, Article 25 Const. enshrines the principle that no case may be removed from a Court established under the law. It additionally provides for the principle nullum crimen, nulla poena sine lege, i.e. no one can be punished if the relevant fact was not criminally relevant at the time it was committed. Article 101 Const. grants the independence of the Judiciary body: Judges are subject only to the law. Article 111 Const. sets the principle of due process of law. It states that all parties shall be entitled to equal conditions before an impartial, third-party Judge. To guarantee the full manifestation of this principle, the Constitution states that all judicial decisions shall include their reasoning. Additionally, the same Article provides that any party can appeal to the Supreme Court of Cassation – the highest Italian Court – in case of violations of law. The Italian legal system is organised into three main levels. Except for peculiar and limited cases, the petitioner can file an ordinary litigation before Ordinary Courts or the Justice of the Peace. The latter has exclusive competence for claims concerning movable assets whose value is lower than €5,000, or claims concerning vehicle circulation whose value is lower than €20,000. In all other cases, Courts are competent. Appeals against first-instance decisions can be brought before Courts of Appeal, in case the appealed decision has been issued by an Ordinary Court, or before an Ordinary Court, to appeal a decision of the Justice of the Peace. Eventually, the losing party can appeal to the Supreme Court of Cassation only for violations of law on the grounds enlisted in Section 360 CCP.

Privilege and disclosure Disclosure Italian civil procedure is not based on the concept of disclosure, so compulsory disclosure mechanisms do not exist, and parties are, in general, free to file only the documents that support their claims and arguments. As set out under Sections 210–213 CCP, a party may request the Judge to order the other or a third party to disclose certain documents, provided that the documents are specifically identified by the applicant party and their disclosure is essential for the decision of the case. The Judge examines the party’s application and can issue an order granting the application. If the order is addressed to a third party, the Judge may summon the third party, who in turn has the chance to file an opposition to the order and thus intervene in the proceedings. The CCP provides for no pecuniary sanction against a party who does not comply with the order. If, however, the non-compliance is without a legitimate reason, the Judge may negatively consider such conduct when deciding the case. In addition, if documents are not disclosed, it is debated whether the applicant party may apply for the documents to be seized further to an order of the Judge (Section 670, paragraph 2 CCP, sequestro probatorio or “precautionary seizure”).

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Moreover, the Judge, even without a specific request by one of the parties, may always request information or documents from public administration bodies that are necessary for the decision of the case. The same rules apply to arbitration proceedings.

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

Evidence Pursuant to Article 2697 of the Italian Civil Code, it is generally the plaintiff who must prove his/her requests. Evidence can be (a) oral, or (b) written. Confessions, formal interviews, pledges and testimonies are oral evidence, while electronic documents, private agreements, certified private agreements and public documents are admitted as written evidence. The Italian legal system also acknowledges the institute of presumptions. These are divided into absolute and relative presumptions and even when considered alone they do not bear evidential value; if summed up together, they can be probative of a certain event.

Costs Pursuant to Section 91 CCP, the Judge usually orders the losing party to pay the legal fees and expenses of the winning party. Counsel can submit to the Court a statement of their costs, but the final determination is left to the sole discretion of the Judge. Using his/her discretion, the latter awards the fees on the basis of tables periodically published and updated by the Ministry of Justice with its decree. The last update is Ministerial Decree no. 37 of 2018. The rule has two main exceptions. The legal fees and expenses can be offset – wholly or partially – in case: (a) there is no clear winning party; (b) the issue brought before the Court was new and innovative; (c) the law has recently changed; and/or (d) there is a brand-new case law trend. Notably, Section 96 CCP empowers the Court to issue a separate order in case one party failed to act in good faith in the proceedings or started it mala fide. This is not intended to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Portolano Cavallo Italy reimburse legal fees, but to sanction a party for his/her behaviour during the proceedings. Specific sanctions, also for breach of ethics, are provided for counsel. Indeed, the Judge has the power to report unethical behaviours to the competent divisions of the local bar.

Litigation funding Litigation funding and pactum de quota litis In Italy, as well as in other civil law countries, litigation funding is not common and, according to authors, can be said to be underdeveloped considering that there are no rules or standards on the point. Several Italian law journals are currently dealing with this issue. Authors report that there is an increasing interest from international players who are exploring funding litigation in Italy. In particular, funders are showing interest in financing suits concerning private enforcement in competition claims. It shall be considered that, as in many other European countries, Italian lawyers are prohibited from applying pactum de quota litis to their clients; however, considering that, in litigation funding, lawyers would always be paid by funders, there would not reasonably be a breach of this rule. Legal Expenses Insurance Legal Expenses Insurance is dealt with by Sections 173 and 174 of the Code of Private Insurance. It is also rather underdeveloped in Italy. Legal aid Legal aid is known as Patrocinio a spese dello Stato in Italy and is set out by Presidential Decree no. 115 of 30 May 2002 (and following amendments). This implemented Article 24 Const. to also ensure effective access to the justice system for those unable to independently retain a lawyer due to their inability to pay his/her fees. Legal aid is available in civil, administrative and criminal proceedings, and the requesting party must have a yearly income below €11,493.82.

Class actions The legal framework concerning class actions has been strongly impacted by the adoption of Law no. 31 of 12 April 2019 regarding “Provisions on class actions”. The new provision broadens the application field of class actions proceedings. This is because it extends class actions both on an objective and a subjective level (by allowing a larger audience to use a class action) and because it significantly simplifies the relative proceedings.

Interim relief These proceedings follow the general rules provided by CCP (Sections 669-bis to 700 CCP). The interested party may file a petition with the competent Judge. The latter will then issue a decree scheduling the hearing, in which the parties will discuss the case. When reasons of particular urgency exist, upon the petitioner’s request, the Court may issue the requested ex parte measure before the first hearing. Then, the petitioner shall serve the decree and the petition on the defendant to allow the latter to properly prepare their defence. Unless the case presents complexities or there is any need to carry out summary preliminary activities (e.g. hearing witnesses), the decision – in the form of an “order” – can be issued immediately after the hearing.

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Interim relief can be granted only if two conditions are met: (i) when the application is likely to be successful on the merits (so-called fumus boni iuris); and (ii) if there is danger of any delay (so-called periculum in mora). In accordance with Section 669-ter CCP, if a dispute is not subject to Italian jurisdiction, the competent Court for the issuance of the interim measure is the one where the measure shall be concretely executed or enforced. Under the CCP, the remedies available on an interim basis are: • judicial seizure, aimed at securing goods whose ownership is being challenged; • precautionary seizure, aimed at securing assets when the alleged creditor fears that the debtor might dispose of them so that the guarantee on the credit might be lost; • reporting of new works or of potential damages to avoid damage taking place as a consequence of new work being started or of other goods placing a claimant’s property or possessions in danger; • preliminary investigation proceedings, aimed at securing evidence to be used in ordinary proceedings when there is the risk that such evidence will be lost; and • in all other cases, the Judge may issue any kind of measure deemed the most appropriate under the circumstances (Section 700 CCP). In case a Judge issues measures pursuant to Section 700 CCP, these will be stand-alone proceedings, i.e. they do not require the party to start proceedings on the merits for their confirmation. Given the urgent nature of these proceedings, the measures obtainable are aimed at repairing contingent situations, in particular when they are of such a damaging nature that they cannot wait to be rectified until the end of full proceedings on the merits. Via interim proceedings, the petitioner cannot in fact seek damages from the opposite party. He/she may only request specific performance to stop the damaging action(s).

Enforcement of judgments/awards Enforcement proceedings: general overview As soon as a party gets an enforcement order (titolo esecutivo), they are entitled to start enforcement proceedings aimed at obtaining goods, money, etc. from the other side, even without the latter’s cooperation. The enforcing party shall serve the enforcement order and the writ of enforcement (atto di precetto). No sooner than 10 days from service – and provided that the debtor has not by that time performed the payment – the creditor may file an application with the bailiff to: (i) seize the debtor’s movable assets; (ii) serve a writ of execution (atto di pignoramento immobiliare) to seize real estate; and/or (iii) serve a writ of execution to third parties (atto di pignoramento presso terzi) that may owe money/goods to the debtor. Normally this is the most common modality and the recipients of the writ of execution are banks. In all the above cases, the bailiff will create the enforcement proceedings folder, including all the originals, and he/she will provide it to the enforcement Judge. Irrespective of the type of enforcement chosen, the Judge will in any case hold the hearings, instruct the bailiff to perform activities, and order that the amounts/goods seized be assigned to the creditor. As soon as the creditor is fully satisfied or if the debtor does not have any additional goods that can be used to pay the creditor, the Judge will declare the enforcement proceedings closed.

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Enforcement of foreign judgments Foreign judgments Enforcement of judgments issued by foreign Courts is regulated by the Italian Law on Private International Law (Law no. 218 of 1995). Article 64 provides that foreign judgments are fully recognised and enforceable in Italy, provided that certain conditions exist. In particular, the judgment shall not be contrary to Italian public policy. See below for more details in relation to the concept of public policy. Pursuant to EU Regulation no. 1215 of 2012, judgments issued by Courts of Member States of the European Union are automatically recognised throughout the EU without the need for formal recognition. Considering the EU framework, Italian private international law rules only apply when a judgment of a non-EU country needs to be enforced in Italy. Additional provisions may be provided by multilateral treaties with third countries. Enforcement of awards Domestic awards In relation to domestic awards, a party seeking to enforce an award shall follow the steps set out by Section 825 CCP. It shall file an application with the competent Court for the place where the arbitration is seated, attaching the original or a certified copy of the award, together with the original or a certified copy of the arbitration agreement. The Court verifies the formal compliance of the award and issues an order that renders the award enforceable (the so-called “exequatur”). The order may be appealed to the Court of Appeal within 30 days. Foreign awards The procedure for the recognition and enforcement of foreign arbitral awards is set out by Sections 839 and 840 CCP. Pursuant to these provisions, the party wishing to enforce a foreign award must file an application with the Court of Appeal of the place where the other party is domiciled. If the other party is domiciled abroad, the Court of Appeal of Rome will be the competent Court. The applicant must file the original award or a certified copy, a certified translation if the award was not rendered in Italian, and the arbitration agreement. The President of the Court of Appeal verifies the formal compliance of the application and of the attached documents and issues an order that renders the award enforceable in Italy, unless: (a) the dispute could not have been decided by arbitration according to Italian law; or (b) the award is in contrast with Italian public policy. Pursuant to Section 840 CCP, the order of the President of the Court of Appeal can be challenged before the Court of Appeal within 30 days. The Court of Appeal will refuse recognition of the award for the reasons set out in the New York Convention, as well as for the reasons mentioned above. Public policy The standard applied by Courts of Appeal to refuse enforcement of foreign judgments and awards on the grounds of public policy has so far been a restrictive one, aimed at allowing the international circulation of awards. Public policy is usually interpreted as including only domestic public policy and not international public policy. Legal authors define domestic public policy as the core of fundamental principles that shape the ethical and social structure of the national community in

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Portolano Cavallo Italy a certain period. In practice, Court precedents have interpreted the concept of domestic public policy as incorporating provisions and principles of the Constitution, principles deriving from criminal law, and fundamental principles of EU law, including competition principles. According to some authors, Courts of Appeal should also consider violations of procedural public policy, including violations of the principle of due process or the contrast of the award with a previous final award or judgment between the parties. Given the nature of the elements, however, such violations are more likely to be ascertained in the challenge phase, where the other party will have the chance to allege them. In a historical change of perspective, in July 2017, the Supreme Court of Cassation issued a landmark decision stating that punitive damages are not incompatible per se with public policy. As a result of the Supreme Court of Cassation’s reasoning, a condemnation for punitive damages issued by a foreign Court may be enforced in Italy on certain conditions (among which there is the need that such measure is explicitly provided in the foreign country in specific situations, so that the damaging party may know in advance that it may face punitive damages for its conduct).

Cross-border litigation Taking of evidence abroad In relation to the taking of evidence abroad, the rules applicable depend on whether the states involved are members of the European Union or not. For members of the EU, the taking of evidence abroad is governed by EU Regulation 1206/2001, which fully applies in Italy. Italy is also a party to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters – more commonly referred to as the Hague Evidence Convention – of 18 March 1970; this Convention thus applies when an Italian Court requests the taking of evidence in a non-EU state or when a non-EU state requests the taking of evidence in Italy. When an Italian Court requests the taking of evidence from a state that is not party to any international convention, Section 204 CCP shall apply, according to which the Judge shall request the taking of evidence through a letter rogatory addressed to the foreign authority, and transmit the letter through diplomatic channels. In addition, Italian private international law rules (Articles 69 and 70 of Law no. 218/1995) set out that when a request is issued by a foreign (non-EU) state, the taking of the evidence is carried out pursuant to Italian procedure rules; however, Italian authorities may follow the instructions given by the requesting states, as long as they are compatible with Italian principles. Enforcing interim or freezing orders Italian Courts can assist EU Member States in relation to interim or freezing orders, as per the rules set out by the Recast Brussels Regulation (Reg. 1215/2012). In particular: • interim measures ordered by the Courts of a Member State can freely circulate and be enforced in other EU countries; indeed, the Regulation includes provisional, including protective, measures in the concept of “decisions”; the only measures excluded from circulation are those taken without the defendant being summoned to appear; and • applications for provisional, including protective, measures may be made to the Courts of a state even if another Member State has jurisdiction over the substance of the matter (Article 35). According to authors, this means that interim relief can be sought in the EU state (including Italy) in which the interim measure is to be enforced. In other words, if a party wishes to apply for a freezing order to be enforced in Italy, Italian Courts will have

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jurisdiction even if another state has jurisdiction to hear the merits of the case. Interim measures issued by a Court that does not have jurisdiction on the matter cannot, however, circulate in other EU countries and are only effective in the country of issuance. Italian Courts may also assist non-EU countries in relation to interim or freezing orders. Indeed, according to Section 669-ter CCP, Italian Courts also have jurisdiction to hear applications for interim measures if the substance of the matter falls within the jurisdiction of a foreign state, provided that the measure is to be enforced in Italy. However, Italian private international law rules do not allow recognition and enforcement of interim measures issued by a non-EU Member State, as they are not final within the meaning of Article 64 of Law no. 218/1995.

International arbitration Arbitration is governed by Sections 806–840 CCP. Further to the arbitration reform of 2006, Italian law no longer makes a distinction between domestic and international arbitration. The only criterion still in place is that of the seat of the arbitration. If the arbitration is seated in Italy, Italian law (i.e. the relevant Sections of the CCP) applies. This is the case even if the arbitration has international elements in relation to the nationality of the parties or of the arbitrators, the law applicable to the case, or the language of the proceedings. Thus, even if international elements are present, the arbitration will be considered a domestic, Italian arbitration, if the seat is in Italy. Concerning the judicial support or interference in relation to international arbitrations seated in Italy, it must first be noted that Italian law fully adopts theKompetenz-Kompetenz principle. Indeed, only arbitral tribunals can rule on their jurisdiction and competence, not national Courts. There are, however, certain cases where national Courts intervene with arbitrations pending in Italy. The competent national Courts retain the power to grant preliminary or interim relief even when arbitration proceedings are pending. As already mentioned, however, they cannot rule on the jurisdiction of the arbitral tribunal. Indeed, pursuant to Section 818 CCP, Italian arbitrators are prohibited from issuing seizures and any other interim or precautionary measures. The only exception to this rule is provided for by the rules on corporate arbitration, which allow arbitrators to stay a resolution adopted by the company’s shareholders’ meeting. National Courts may also be called to intervene in relation to the appointment of the arbitrators. In particular: (i) if the parties have indicated an even number of arbitrators and have not otherwise come to an agreement, a further arbitrator is appointed by the President of the Court where the arbitration has its seat, upon an application of the claimant; (ii) if the parties have not agreed upon the number or appointment method of the arbitrators, the arbitrators are three and are appointed by the President of the Court where the arbitration has its seat; and lastly, (iii) if the claimant has served a statement of commencement of an arbitration and appointed an arbitrator, requesting the defendant to do the same, if the defendant does not proceed to do so within 20 days, the claimant may apply to the President of the Court where the arbitration has its seat to request the appointment. Under Section 816-ter CCP, if a witness refuses to appear before the arbitral tribunal, the latter, if deemed opportune, may request the President of the Court where the arbitration is seated to order the appearance of the witness.

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When challenges against awards are possible, they are decided upon by the Court of Appeal competent for the place where the arbitration was seated; the parties may then appeal the judgment of the Court of Appeal to the Supreme Court only on points of law in relation to the decision of the Court of Appeal. According to Section 832 CCP, the parties may also opt for an institutional arbitration (instead of an ad hoc one) and thus rely on the rules set out by the relevant institution. In Italy, there are several arbitration institutions, the most prominent being the Milan Chamber of Arbitration, run by the Milan Chamber of Commerce, which runs the largest number of institutional arbitrations in Italy.

Mediation and ADR In recent years, Italian lawmakers have passed several bills aimed at enhancing the use of ADR in order to settle disputes without relying on the Court system. Assisted negotiation This is a procedure first introduced by Law Decree no. 132 of 2014, passed into Law no. 162 of 2014. Before starting a lawsuit, the claimant must invite the other side to enter into an agreement (a so-called Convenzione di negoziazione assistita). The latter aims to amicably settle the dispute in good faith, with the mandatory assistance of the parties’ counsel, before filing a claim with the Court. In general, for claims regarding damages arising from the circulation of vehicles and for all matters not already included in the mandatory mediation, where one party demands payment of a sum not exceeding €50,000, the offer to conclude such an agreement is mandatory. This means that, at the first hearing, the Judge can autonomously investigate whether the process was ever started, and order the claimant to invite the other side to conclude such an agreement. The process can last from a minimum of one month to a maximum of three months. Where the parties are able to settle the dispute, the final agreement, duly signed by them and by the assisting counsel, is considered an enforcement order and can be used to start enforcement proceedings. It is a breach of professional ethics for a lawyer who signed the agreement to appeal it. Mediation This instrument was first introduced by Legislative Decree no. 28 of 2010 and later amended by Legislative Decree no. 69 of 2013. Similar to the assisted negotiation, in certain cases, before filing a suit the claimant shall first seek an amicable solution via a mediation process. The mediation is mandatory for matters concerning, e.g., condominium, rights in rem, damages compensation for medical liability, libel committed via press or any other public means, insurance, banking and financial agreements, etc. The mediation can last for a maximum of three months, starting from the date the mediation claim was submitted. If an agreement is reached, duly signed by the parties and their counsel, it has the same force as an enforcement order.

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Regulatory investigations In relation to consumer protection, Italian law is shaped in accordance with EU law and its principles. There is no regulatory agency in charge of overseeing the matter, except for some powers of the Italian Competition Authority. The matter falls within the competence of the Ministry of Economic Development (Ministero dello Sviluppo Economico), which includes departments dealing with consumer protection, with the assistance of the National Council of Consumers and Users (Consiglio nazionale dei consumatori e degli utenti), which is a public body representing Italian consumer organisations. In relation to business affairs, in Italy there are different independent regulatory agencies (autorità amministrative indipendenti), with investigative, regulatory and sanctioning powers in their relevant areas of competence. These bodies are independent, which means that they do not report to either the government or its branches. These authorities have investigative powers, often also with the help of police bodies, and – further to sanctioning proceedings in which the entities involved have the chance to defend themselves – they can issue administrative sanctions. These include monetary fines, injunctions, disqualifications and confiscations in accordance with the powers granted to each authority. Appeals against the sanctions of Italian regulatory agencies are heard by the Courts. There are 11 of these agencies, the most prominent being: • Banca d’Italia (Bank of Italy), the Italian Central Bank, which has regulatory and sanctioning powers in relation to banks and financial intermediaries under its supervision in the fields of transparency in the ownership structures and management, corporate governance and internal control systems, and compliance with rules and regulations, as well as from a contractual perspective. In addition, the Unità di Informazione Finanziaria, Italy’s Financial Intelligence Unit, is a division of the Bank of Italy responsible for investigating money laundering and terrorist financing. • CONSOB, the Italian financial markets regulator, which has regulatory and sanctioning powers in relation to insider trading and market manipulation cases. In addition, CONSOB has regulatory powers to ensure transparency of ownership, accounting documents of listed companies, and appeals for public investment (IPOs, takeover bids and equity swaps). • Autorità garante della concorrenza e del mercato, the Italian Competition Authority, which has powers in relation to market dominance abuses, cartels and other anticompetitive practices, mergers/takeovers and market concentration, the repression of unfair commercial practices, misleading and unlawful comparative advertising, and the application of conflict-of-interest laws to government office-holders. • Autorità per le garanzie nelle comunicazioni, the Italian Communications Authority, which is the regulatory and competition authority for the broadcasting, telecommunications, publishing and postal sectors. • Garante per la protezione dei dati personali, the Italian Data Protection Authority, which has powers in relation to the protection of fundamental rights and freedoms in connection with the processing of personal data.

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Micael Montinari Tel: +39 06 696 661 / Email: [email protected] Micael Montinari focuses on litigation; his clients include retail chains, fashion houses and brands, and media/digital players. He heads the dispute resolution team (which has been ranked by The Legal 500 since 2006). His experience includes a broad range of matters, including commercial and business and intellectual property disputes as well as arbitration, often with a significant cross-border element. He is ranked by World Trademark Review (WTR1000) and Who’s Who Legal, and he was recognised as a Client Choice International Awards 2017 winner in the Litigation practice area. Micael has 20 years of experience in all forms of commercial and corporate litigation (contractual disputes, corporate-related matters, unfair competition, passing-off, advertising issues, etc.), interim and injunctive proceedings, proceedings before the Competition and Consumers’ Authority and other Italian agencies, arbitration proceedings (including ad hoc and managed arbitration) serving as counsel and arbitrator, and mediation.

Luca Tormen Tel: +39 06 696 661 / Email: [email protected] Luca joined Portolano Cavallo in 2017. He assists both Italian and foreign clients in matters of disputes and arbitration in civil and commercial matters. Luca obtained his cum laude law degree from La Sapienza University of Rome in 2016 with a private law dissertation, prepared at the Université Paris Panthéon-Assas (Paris II). Luca is a Ph.D. student in private autonomy business, work and protection of rights from a European and international perspective, European private law curriculum, at La Sapienza University’s law department. He is an Assistant Professor of private law institutions (of which he has recently been recently nominated “Cultore della materia”), private law and advanced private law at La Sapienza University of Rome and is the author of a number of scientific publications.

Laura Coriddi Tel: +39 06 696 661 / Email: [email protected] Laura Coriddi joined Portolano Cavallo in February 2019. In that same year she received her law degree, graduating cum laude from the Luigi Bocconi University, and continued her collaboration thereafter with the firm as a trainee attorney. In 2017, Laura was a visiting student at the Faculty of Economics and Business Administration of the Vienna University of Economics and Business (WU Wirtschaftsuniversität Wien) as part of the THEMIS Law Network promoted by the Luigi Bocconi University. Laura assists both Italian and foreign clients, dealing mainly with litigation and arbitration matters in relation to civil and commercial disputes. She is enrolled in the Register of Lawyers-In-Training of the Milan Bar Association.

Portolano Cavallo via Rasella, 155 – 00187 Rome / piazza Borromeo, 12 – 20123 Milan, Italy Tel: +39 06 696 661 / URL: www.portolano.it

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Shinya Tago, Takuya Uenishi & Landry Guesdon Iwata Godo

Efficiency of process Japan is a civil law jurisdiction and there are fundamental differences between the civil law and the common law litigation practices. In contrast with the adversarial system, the inquisitorial approach of the Japanese civil law procedural system means that the judge largely controls the process and the collection of factual information, and the decision- making process proceeds through a series of oral hearings. A new Code of Civil Procedure (Law No. 109 of 26 June 1996 (CCP)) was adopted in 1996. One of the key objectives of the reform was to speed up the course of trials. This goal was further emphasised through the enactment of the Law on the Expediting of Trials, Law No. 107 of 16 July 2003, which provides that the objective of expediting trials is to conclude the first instance proceedings as swiftly as possible, within two years of their commencement. First instance proceedings last eight months on average, but complex cases can take longer. The courts typically schedule the initial hearing within one to one-and-a-half months after the plaintiff has submitted a statement of claims, and require the defendant to submit an answer about a week before the hearing (Article 60-2 of the Rules of Civil Procedure provide that “[e]xcept when special circumstances exist, the presiding judge shall designate a date within thirty days from the date on which the action has been filed […]”). In general, the courts have succeeded in increasing the pace of the litigation process. Information technology plays a role in the CCP: telephone conferencing is possible for parties residing in remote areas (Article 170-3); as is videoconferencing for the long-distance examination of witnesses (Article 204); and the electronic processing of claims for payment demands (Article 397). A technical adviser asked by the court to participate in proceedings can be heard by audio conferencing (Article 92-3), and an expert may be heard using teleconference or videoconference services (Article 215-3) when they live in remote areas. The COVID-19 pandemic is likely to have an impact and should accelerate the use of information technology for proceedings, which are so far largely paper-based. The following measures were taken or are expected to be implemented in the relatively near future: solving issues arising out of the use of web conferencing in certain courts, dealt with in February 2020 (Phase 1); online oral argument and arrangements regarding issues and evidence (Phase 2, target year 2022, after a revision of the CCP); and online filing of lawsuits, etc. (Phase 3, not yet scheduled). There are no general fast-track proceedings but for monetary claims not exceeding JPY600,000, special proceedings known as “petty claim actions” are available (Article 368). Cases must generally be concluded at the first hearing and the judge delivers a judgment immediately after the hearing. The defendant may object and start ordinary civil proceedings before the court.

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Integrity of process Integrity of process underpins the general acceptance of Japanese courts as a safe and reliable forum for commercial dispute resolution, sometimes in stark contrast with the situation prevailing in certain Asian jurisdictions. The professionalism, effectiveness, integrity, accountability and transparency of the courts are highly rated. The operation of Japanese justice relies on the existence of a highly trained, professional and independent judiciary. Japanese courts have been very successful in upholding integrity and judgments that impartially reflect the evidence, the arguments and the laws. Judges do not depart from the law and do not act from personal or political motives. Japan is a society governed by the Rule of Law. The judicial system provides parties to a dispute with a reasonable opportunity to obtain relief when justified, and a reasonable opportunity to defend against unjustified, spurious, or malicious claims. The system attempts to implement these ideals through Constitutional provisions guaranteeing the defendant in criminal cases the right to counsel, the privilege against self-incrimination, and a right to a speedy trial before an impartial tribunal (Constitution of Japan, Articles 37 and 38). The civil justice system provides the parties with a reliable means of resolving disputes by: being reasonably quick; being reasonably available (although cost is still an issue); providing a neutral forum; and offering a procedure for resolving disputes that gives a righteous plaintiff reasonable opportunity to be adequately compensated. Other factors, in addition to access to justice and the relative timeliness of justice delivery, include: the quality of justice delivery; the independence, impartiality and fairness of the judiciary; public trust in the judiciary; the absence of corruption; the stability and consistency of laws and regulations and their interpretation (even in the absence of a doctrine of binding precedent, decisions of the Supreme Court are generally consistently followed by the lower courts to the extent that is equitable); as well as the relative ease of retrieving past judgments and extracting data from court records. In contrast with the handling of commercial disputes, Japan’s criminal justice system has long been criticised abroad (and increasingly domestically) and, according to many critics, including legal practitioners, would need to be revamped, in particular in relation to the practice known as “hostage justice” (hitojichi-shiho). Detention is traditionally seen as a means to prevent suspects from fleeing or destroying evidence. The idea of holding suspects for a long time is to use that time to interrogate them and attempt to secure a confession to make a trial easier. According to Human Rights Watch, “the long-term detention in the Carlos Ghosn case has triggered surprise and criticism overseas, leading to doubts about Japan’s integrity as a democratic nation that guarantees human rights”. Carlos Ghosn, the ousted chairman of Nissan Motor, was arrested in November 2018 and indicted on charges of financial misconduct to find himself in the throes of the Japanese legal system before fleeing the country in “one of the most brazen and well-orchestrated escape acts in recent history”, to quote an assistant US attorney. His prolonged detention and other aspects (bail, defence rights) have put the international spotlight on the criminal justice system. This should not, however, undermine the trust one may have in the Japanese civil justice system.

Privilege and disclosure Privilege There is currently no concept of attorney-client privilege under Japanese law. However, around the same time as a bill was submitted to the Diet to amend the Act on the Prohibition of Private Monopolization and Maintenance of Fair Trade in March 2019, the Japan Fair Trade

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Commission (JFTC) announced that it would also establish new procedures for administrative investigations into allegations of unreasonable restraint of trade (e.g., cartels and bid-rigging) to address concerns regarding the absence of attorney-client privilege, whereby the JFTC would respect confidential communications between an attorney and a client addressing legal issues and satisfying certain conditions. Accordingly, JFTC investigators would not be able to access or use such documents to prove any unlawful conduct, and seized documents would be returned to the client following a specific vetting process. Attorneys, doctors and other professionals and experts to whom confidential information has been disclosed may refuse to testify and give evidence (Article 197-1(2) of the CCP) or refuse to submit documents (Article 220 of the CCP) regarding facts that have come to their knowledge in the performance of their duties. However, Article 197-1(2) does not apply where the witness is released from his or her professional duty of secrecy under Article 197. The attorneys’ obligation to keep secret information obtained in confidence in the course of their professional duties is also stated under Article 23 of the Lawyers’ Law (Law No. 205 of 10 June 1949). Disclosure Under Japanese law, there is no disclosure obligation or extensive discovery process, in contrast with common law jurisdictions. Documents submitted as evidence by the parties are typically collected by the parties through their own efforts. Accordingly, in a product liability case, for instance, if a manufacturer is not cooperating, critical evidence may be concealed from the plaintiff, which is both relevant and admissible in a product liability case, including, but not limited to, notice to the manufacturer of the existence of a defect in one or more of its products, causation, the existence of a defect, and the feasibility of safer alternate designs. It is nonetheless possible to petition a court to issue an order to submit documents after an action has commenced by providing valid reasons to compel the counterparty, or a third party keeping certain documents listed in Article 220 of the CCP in his possession, to submit said documents (Article 221). The person filing a motion must indicate (insofar as possible) the document, the identity of the person holding it, its significance, what needs to be proven with it and the reasons why it is necessary. The obligation to produce documents has been recognised in the following situations: (i) documents a party has referred to for the purpose of presentation or assertion of proof; (ii) documents that a party submitting evidence has the right to require delivery or inspection of while in the possession of another person; (iii) documents showing a legal relation that support the rights or legal position of the person filing a motion, or documents showing a legal relation between the person filing a motion and the holder of the documents; (iv) documents that are not excluded (e.g., documents exclusively prepared for use by their possessor, documents that contain confidential, technical or professional information (e.g., confidential information held by professionals such as lawyers and doctors)); and (v) public officials’ documents, disclosure of which would harm the public (Article 220-4). If the other party fails to comply with the court order to produce a document, the court may find the applicant’s allegations concerning said document to be true (Article 224-1). Before filing an action, if the future plaintiff has given advance notice of the filing to the future defendant, the plaintiff or recipient of the notice may, within four months ofthe date of the notice, make inquiries to the other party on matters necessary to substantiate his allegations or collect evidence (Article 132-2 of the CCP). In addition, the court may order the submission of documents and the commissioning of examinations when a motion is filed by a party and it is difficult for that party to collect documentary evidence from the other side that would be clearly necessary to prove his case (Article 132-4).

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The absence of extensive discovery may to some extent inhibit litigation in Japan. The Japanese legal system has a fact-pleading requirement that obliges a plaintiff to plead facts sufficient to be successful at the start of the case. The means for compelling the production of facts before the initiation of a lawsuit described above are relatively limited and inefficient and plaintiffs also have little opportunity to obtain meaningful factual discovery even after the suit has begun.

Costs The general rule is that court costs are borne by the losing party (court costs consist of court filing fees, the costs associated with service of process, documentary fees (preparation and submission of documents, including petitions, briefs, copy of evidence, translation of documents), the costs incurred for the examination of evidence, accommodation and travel expenses and daily allowances paid to witnesses and interpreters, and the remuneration of experts, as provided for under the Law on Costs of Civil Procedure (Law No. 40 of 1971)). Court costs do not include legal fees (attorneys’ fees) that are borne by each party respectively in the absence of an attorneys’ fees clause. Apart from these court costs, the general rule is that litigation costs are borne by the party incurring the expense, even if the party prevails in the dispute. In the context of tort claims, the court may nonetheless award a usually small part of the prevailing party’s attorneys’ fees as part of the damages when there is a reasonable causal nexus between a tort and the fees. The allocation of court costs is ordered as part of the court’s decision. Attorneys’ fees may be freely agreed upon between attorneys and clients, and lawyers are allowed to charge part of their fees on a contingency basis under Bar Association rules. Many law firms continue to determine their fees based on a combination of retainer fees and success fees based on the now repealed legal fee table of the Japanese Federation of Bar Associations. The Japan Legal Support Center, an independent public institution, provides civil legal aid services including free legal consultations and loans for attorneys’ fees for people who require the assistance of legal experts but who, for economic reasons, are unable to pay for attorneys’ fees and court costs although, in practice, this is irrelevant for international commercial disputes. To obtain public funding, the applicant must have financial resources below a certain amount, have some reasonable chance of success, and pursue aims consistent with the purposes of legal aid. Criminal matters are excluded from the scheme.

Litigation funding Third-party funding is not yet common in the Japanese litigation practice. Its lawfulness is still a moot point, although it does not appear to be prohibited per se. The assignment of claims or causes of action is generally permitted but the entrustment of a claim for litigation purposes is prohibited under the Trust Law (Law No. 108 of 2006). Depending on the circumstances, there is still a risk that third-party funding could be regarded as a criminal act under the Lawyers’ Law, which prohibits any person who is not an attorney from engaging in legal business (including lawsuits, arbitration and conciliation) and also prohibits them from “acting as an intermediary in such matters” (i.e., referring cases to attorneys to obtain compensation for their business activities) (Article 72 of the Lawyers’ Law). Confirmation that third-party funding schemes are lawful could be welcomed by some in Japan, as litigation before the courts can be very costly. For example, the Japanese legal system’s practice (no longer a requirement) of paying a substantial part of lawyers’ fees upfront, inhibits litigation. The now defunct Bar Association courts’ filing fee system,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Iwata Godo Japan which for most cases has a graduated fee that increases with the size of damages sought regardless of the actual work completed by the attorney, increases the cost of getting one’s case before the court. Legal fees are generally borne by each party respectively, as explained above. Also, under rules applicable to security for costs, the parties must pay litigation expenses in advance to cover the cost of handling the case to be incurred by a court, as well as a per diem expense allowance and transportation costs needed for witnesses, experts and interpreters, etc. Those persons benefitting from legal aid who would have financial difficulties in paying such costs can be exempted (Article 82-1 of the CCP). A party seeking interim measures may also have to pay a security deposit. There are currently no US-style class actions in Japan, but making access to justice easier and more affordable through collective/mass actions was the main thrust behind the introduction of the special procedure known as the Japanese class action system. The Act on Special Provisions of Civil Procedure for Collective Recovery of Property Damage Suffered by Consumers (Law No. 96 of 2013) introduced a system that provides fora two-tier, opt-in procedure. During the first stage, a qualified consumer organisation files a lawsuit requesting the court to confirm the liability of a business operator for a common obligation arising under a consumer contract on behalf of potential consumer claimants. If the action is confirmed, the quantum of damages will be determined based on individual claims filed by consumers having elected to opt in. However, the scope of claims under this Act is limited and only covers claims arising from consumer contracts and to certain categories of property damage: claims for performance based on contractual obligations; for unjust enrichment; breach of contract; warranty against defects; and claims for damages arising out of unlawful acts. However, damage to property other than the subject matter of the consumer contract, lost profits, personal injury, and pain and suffering are expressly excluded by the Act. There is also the so-called “appointed party” mechanism under Article 30 of the CCP, which allows certain plaintiffs (or defendants) appointed by other claimants (or defendants) to act on their behalf in pursuing (or defending) civil actions. Appointments can be made when there are enough claimants/defendants sharing a “common interest” (i.e., the main allegations or defences are common amongst them). The appointed party can pursue the case on behalf of the appointing parties and the result will be binding upon the appointing parties, including a settlement.

Interim relief The following forms of interim relief are available under the Civil Provisional Remedies Law (Law No. 91 of 22 December 1989). Where a dispute involves a monetary claim, obligees/potential plaintiffs may apply for a provisional attachment order kari( sashiosae) to ensure that any future monetary judgment will be enforced under said Law (Article 20). The effect of the attachment is to freeze the obligor’s/potential defendant’s assets to keep the defendant from disposing of his movables (most often money in bank accounts) or immovables and secure the future collection of their claims. It does not entitle the obligee to convert the seized property into money and have his obligation satisfied therewith. Where a dispute involves certain categories of non-monetary claims, potential plaintiffs may apply for a provisional disposition order (kari shobun) to preserve their rights with respect to the subject matter in dispute (Article 23). Unlike a provisional attachment which only concerns monetary claims, provisional disposition may take different forms due to the variety of subject matters in dispute. Provisional orders establishing a provisional legal relationship between the parties (e.g., labour relationship between an employer and

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Iwata Godo Japan a dismissed employee: the employee would file a motion requesting the court to issue a provisional order confirming the employee’s status as an employee pending a resolution of the dispute on the merits and receive salary without having to report to work) are available to avoid substantial detriment or imminent danger caused by disputed legal relationships. To be granted an order, the claimant must demonstrate: (i) its substantive right to be protected; and (ii) that the exercise of its rights will most likely be impossible or extremely difficult without such provisional attachment or disposition. For provisional dispositions establishing a provisional legal relationship between certain parties, the claimant must establish the prima facie existence of a legal relationship that the other party is disputing, and the need for interim relief to avoid substantial detriment or imminent danger to the claimant.

Enforcement of judgments Domestic judgments A local judgment may be enforced by submitting, to the execution court or to a bailiff, an original of the judgment and a certificate of enforceability issued by a court clerk of the judgment court (Articles 25 and 26 of the Civil Execution Law, Law No. 4 of 30 March 1979 (CEL)). The court or bailiff handles the enforcement of judgments. Enforcement differs for a monetary and a non-monetary judgment. Pursuant to Article 22 of the CEL, compulsory execution may be carried out based on (inter alia) the following “obligation- titles” (saimu meigi) (also covering foreign judgments discussed in the next paragraph): a final and binding judgment; a judgment with a declaration of provisional execution; an order of compensation of damages with a declaration of provisional execution; a demand for payment with a declaration of provisional execution; a notarial deed prepared by a notary with regard to a claim for payment of a certain amount of money or any other fungible chattel or a certain amount of securities, which contains a statement to the effect that the obligor will accept compulsory execution; a judgment of a foreign court for which an execution judgment has become final and binding; or an arbitral award for which an execution order has become final and binding, etc. Compulsory execution may be commenced only when an authenticated copy or a transcript of an obligation-title, or a judicial decision that is to become an obligation-title when it becomes final and binding, has been served upon the obligor in advance or simultaneously. Means of compulsory execution of obligation-titles include the following: • For the enforcement of a monetary claim, the CEL allows for compulsory execution, and the debtor’s general properties (real properties, ships, moveable properties, claims and other property rights) can be attached and sold in a public auction sale, and the sales proceeds are then used for the satisfaction of the monetary claim (Section 2 of Chapter 2 of the CEL). • For the enforcement of an obligation to deliver real property, a request for the surrender or delivery of real estate property, etc. (i.e., real property in which a person resides) may be made under Articles 168 and 169 of the CEL and an indirect, compulsory execution method is also available under Articles 173 and 172 of the CEL. • For the enforcement of an obligor’s performance obligation, execution may be made by a third-party substitute (Article 414-2 of the CCP and Article 171 of the CEL) or through an indirect compulsory execution method under Article 172 of the CEL (monetary sanction: the execution court orders the obligor to pay the obligee a certain amount deemed reasonable to secure performance of the obligation by reference to the period of delay, or immediately if the obligor fails to perform the obligation within a reasonable period).

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• For the enforcement of an obligor’s obligation not to do something, a petition may be filed with the court to remove the results of the obligor’s actions at the expense of the obligor or impose any other reasonable disposition for the future (Article 414-3 of the CCP and Article 171 of the CEL). In addition, indirect compulsion is available under Article 172 of the CEL. No direct enforcement by specific performance is allowed if the nature of the obligation does not permit enforcement (Article 414-1 of the CCP). Foreign judgments Japan is not party to any bilateral or multilateral treaty for the recognition and enforcement of foreign judgments. To enforce a foreign judgment, the party enforcing the judgment of the foreign court must obtain an execution judgment from a competent District Court in Japan declaring such enforcement (Article 24-4 of the CEL). The requirements for the recognition of a foreign judgment are set forth in Article 118 of the CCP. The petitioner must establish that the judgment is final. In addition, the judgment must satisfy the following requirements: (i) the jurisdiction of the foreign court that rendered the judgment in accordance with or under laws, regulations, conventions or treaties; (ii) the losing party has received proper service of summons or orders required to commence the proceedings (excluding service through notice by publication), or has appeared without being so served; (iii) the content of the judgment and the proceedings of the lawsuit are not contrary to public policy in Japan; and (iv) reciprocity exists (i.e., the courts of the relevant foreign country provide reciprocal recognition of Japanese judgments). If these requirements are satisfied, the foreign judgment will be effective and enforceable in Japan and the court issuing an execution judgment must not retry the whole case or review the case on its merits regardless of whether or not the foreign judicial decision was erroneous (Article 24-2 of the CEL). With respect to (iii) above, a Supreme Court judgment of 1997 denied the enforceability of punitive damages in a judgment of a state court of California as a violation of Japan’s public policy.

Cross-border litigation Jurisdiction The jurisdiction of the Japanese courts in cross-border disputes is governed by the CCP (Chapter 2, Section 1, Articles 3-2 et seq.), which lays down international jurisdiction rules applicable to litigation in the Japanese courts. Jurisdiction over a dispute primarily depends on the classification of the dispute,as per the examples below: • Jurisdiction based on the defendant’s domicile (Article 3-2 of the CCP): the defendant’s domicile or residence in Japan; or the principal place of business or business office of the defendant’s legal entity. • Jurisdiction over an action involving a contractual obligation (Article 3-3): for an action based on a claim for performance of a contractual obligation; on a claim for damages due to non-performance of a contractual obligation; or on any other claim involving a contractual obligation, the place of performance of the obligation (Article 3-3(1) of the CCP). • A tortious action: the place of the tortious act (Article 3-3(8) of the CCP). A tortious act is deemed to happen where the tortious act was committed (including the place where the product has been manufactured in product liability cases) or where the results have occurred (unless the occurrence in Japan of the results of a wrongful act committed abroad was unforeseeable).

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• Jurisdiction over actions involving consumer contracts and labour relations: • Article 3-4(1): Consumer dispute commenced by a consumer whose domicile is located in Japan at the time the action is filed or at the time the consumer contract is concluded. • Article 3-4(2): An action involving a dispute over a civil matter that arises between an individual worker and that worker’s employer with regard to the existence of a labour contract, or any other particulars of their labour relations, may be filed with the Japanese courts if the place where the labour is to be supplied is within Japan. • Article 3-5(3): Intellectual property (IP) dispute related to the registration of an IP right in Japan, or about the existence or validity of certain IP rights registered in Japan. • Agreement on Jurisdiction: Article 3-7(1): Parties’ agreement to international jurisdiction. • Article 3-8: Jurisdiction by appearance. Even if one of the foregoing grounds is found, the court may dismiss the case if it finds that there exist special circumstances under which a trial and judicial decision by the courts of Japan would harm equity between the parties or impede the well-organised progress of court proceedings (Article 3-9). Proceedings, etc. Court proceedings are conducted in Japanese only. Interpretation or translation in Japanese is required for testimonies or submission of documents in a foreign language. Legal representation by an attorney is not required before all courts, especially the lower courts. In court proceedings, the basic rule is that only a Bengoshi (an attorney-at-law registered in Japan) may act as a procedural attorney. A Gaikokuho Jimu Bengoshi (a foreign attorney registered with the Ministry of Justice) is not able to act as a procedural attorney in a court of law in Japan. With respect to the application of a foreign law in the Japanese courts where a foreign law was selected or determined to be the governing law, the foreign law is seen as the norm on which the judgment should be predicated. In principle, the duty of the court is to ascertain the law and its substance and in doing so, the court may make enquiries to the Supreme Court, the Ministry of Justice, universities, or the foreign country’s embassy or consulate. An expert witness can be appointed by the court. The court may also ask the parties to assist and produce legal opinions from foreign lawyers or scholars (and in practice, the court very often ends up relying on the submissions of the parties). Service of summons • Service to a Japanese party Service of summons is important, especially if a foreign judgment needs to be enforced in Japan at a later stage. Under Article 118-2 of the CCP, the defeated defendant must have received proper service of summons or order necessary for the commencement of the lawsuit (or have appeared without service). It also provides that service by publication does not suffice. According to a Supreme Court judgment of 28 April 1998, service of summons or order does not need to be done in accordance with Japanese law but it must notify the defendant of the commencement of the lawsuit and must not impair the defendant’s defence rights. If there is any treaty on the service method to be used between the State where the judgment is entered and Japan, service must be made accordingly. Japan is a signatory to both the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters of 1965 (the Service Convention) and the Hague Convention on Civil Procedure. The Service Convention provides for the channels of transmission to be used when a judicial or extrajudicial document is to be transmitted from one State party to the Convention to another

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State party, for service of the latter. The Service Convention deals primarily with the transmission of documents; it does not address or comprise substantive rules relating to the actual service of process. The Service Convention does not preclude a party from exercising its authority to serve directly by post unless the contracting State declares that it refuses such service. Although Japan has not made such a declaration, service directly made by post is considered not to meet the requirements of Article 118-2 of the CCP. In addition, a Tokyo High Court judgment of 18 September 1997 requires the service of summons or order to include a Japanese translation if the defendant is a Japanese national, regardless of his language skills. The document to be served under the Service Convention is first sent to the Ministry of Foreign Affairs which reviews it to determine whether the document satisfies procedural requirements (for example, whether the request and the summary of the document are properly filled in and whether the complaint is translated). If the requirements are satisfied, the Ministry sends the document to the Supreme Court of Japan. Following its own review, the Supreme Court sends the document to the District Court having jurisdiction over the addressee of the document. The District Court then serves the document on the addressee by special mail service. Once this is done, the District Court issues a certificate of service which is sent to the Ministry through the Supreme Court. • Service to a foreign party Service outside Japan is performed by service as commissioned by the court to the competent government agency of the foreign country or to a Japanese ambassador or consul stationed in the relevant foreign country (Article 108 of the CCP). Even if the foreign country was also a party to the Service Convention and central authority service were allowed, it normally takes between six months to more than a year to complete service. Service by a consul may normally be achieved within six months; however, if a person on whom documents are served refuses to accept them, service cannot be affected. If there is no diplomatic relationship between Japan and the foreign country and service under Article 108 of the CCP may not be performed, or if the competent authority of the foreign country fails to send a report of service for more than six months, documents may be served by publication (Article 110) although, in practice, this is seldom the case.

International arbitration Arbitration is not a popular method of resolving domestic disputes between Japanese companies. The number of cases handled by the main institute, the Japan Commercial Arbitration Association (JCAA), is nominal compared with the number of litigations handled by domestic courts or the caseload of competing institutions in Singapore or Hong Kong. Japanese companies typically rely on Japanese courts for domestic matters and would only favour arbitration for their cross-border activity: in this context, they tend to select major, internationally recognised arbitration centres such as the International Chamber of Commerce (ICC) or the Singapore International Arbitration Centre (SIAC). The Arbitration Law, Law No. 138 of 1 August 2003 (JAL) is applicable to arbitral proceedings whose place of arbitration is in Japan. The JAL is based on the UNCITRAL Model Law, although there are a limited number of deviations from the Model Law. In addition, the Supreme Court Rules on Procedures of Arbitration Related Cases (Supreme Court Rules No. 27 of 26 November 2003) prescribe procedural rules for court cases relating to arbitration. No distinction is drawn between domestic and international arbitration. The JAL sets out procedural rules, but should the parties specifically agree on other procedural

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Iwata Godo Japan rules (for example, JCAA’s Commercial Arbitration Rules or the ICC Arbitration Rules), these rules will override the JAL, which will only fill the gaps. The arbitration agreement must be in writing (Article 13-2 of the JAL). Documents signed by all the parties or letters exchanged between the parties, including documents exchanged by fax or other communication devices, and other written instruments, are acceptable. The agreement is valid only when the subject matter relates to a civil dispute (excluding divorce, etc.) that can be resolved by settlement between the parties (Article 13-1). Arbitrability of a dispute is broadly construed in Japan to cover a variety of civil and commercial disputes. Certain matters are generally considered to be not arbitrable, including: insolvency; antitrust matters; the validity of IP rights granted by the government; and shareholders’ lawsuits against shareholders’ general meeting resolutions. Japanese courts generally take a pro- arbitration approach towards the enforcement of agreements to arbitrate. Article 14-1 compels Japanese courts, upon a petition by the defendant, to dismiss a claim related to a civil dispute that is subject to an arbitration agreement (save in limited circumstances, including when the arbitration agreement is null and void, cancelled or invalidated for other reasons). A consumer may unilaterally terminate an arbitration agreement with a business operator to arbitrate disputes that may arise in the future, and an agreement with respect to labour disputes that may arise in the future between an individual employee and his employer is null and void (JAL Supplementary Provisions, Articles 3 and 4). The tribunal itself may rule on its own jurisdiction (i.e., the authority to conduct arbitral proceedings and make an award). Article 23-1 of the JAL expressly provides the principle of competence-competence in the same manner as the Model Law. The tribunal may rule on assertions made on the existence or validity of an arbitration agreement or its own jurisdiction. If such an objection is made, the tribunal shall issue a preliminary independent ruling or an arbitral award when it considers it has jurisdiction, and when it deems otherwise, shall issue a ruling to terminate the arbitral proceedings (Article 23-4). Article 36 provides that unless the parties have agreed on the rules of law applicable to the substance of the matter, the arbitral tribunal will apply the substantive law of the State with which the dispute subject to the arbitral proceedings is most closely connected. Unless otherwise agreed by the parties, the tribunal may order a party to take such interim protection measures as the tribunal deems fit with respect to the subject matter of the dispute and order a party to provide appropriate security in connection with such measure (Article 24). Because interim measures decided by arbitrators are not immediately enforceable, Article 15 provides that, notwithstanding the existence of an arbitration agreement, a party may request an interim protection measure from a court before or during arbitration proceedings, and that the court may grant such measure in respect of a dispute which is the subject of the arbitration agreement. Pursuant to Article 39, the award must be in writing, dated and signed by the arbitrators and should, unless agreed otherwise by the parties, state the reasons for the award. If the arbitral tribunal is a panel, it is sufficient for the award to be signed by a majority of arbitrators. Copies of the award must be served on the parties. The grounds for the setting-aside of an award by the court under Article 44-1 are substantially similar to those entrenched in the Model Law. Article 45 provides that an arbitral award (irrespective of whether or not the place of arbitration is in Japan) shall have the same effect as a final and conclusive judgment. Japan is a party to the New York Convention and the Washington Convention. The JAL also adopts the provisions of the Model Law on the recognition and enforcement of foreign awards. For the enforcement of an arbitral award made in a foreign country, the applicant

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Iwata Godo Japan needs to file a petition with the court to get an enforcement order, together with a certified copy of the award and a translation into Japanese (Article 46 of the JAL). The costs of arbitration are apportioned between the parties in accordance with the parties’ agreement (Article 49-1). If there is no agreement (or applicable rules such as JCAA’s Commercial Arbitration Rules), each party bears the costs it has disbursed with respect to the proceedings (Article 49-2). The JAL does not provide that the losing party should systematically bear the costs.

Mediation and ADR There is no obligation to pursue alternatives to litigation (except for court-annexed mediation, which is mandatory at first instance for family disputes and certain rent disputes but is rarely used for large commercial disputes). Japanese people and corporates typically prefer the amicable settlement of disputes through negotiation over court litigation. Even then, a negotiated settlement (wakai) can be made at any time before or during the court proceedings. ADR is available on a voluntary basis in the form of civil mediation under the Law Concerning the Promotion of the Use of Alternative Dispute Resolution Procedures (Law No. 151 of 1 December 2004 (ADR Law)). The ADR Law has introduced an accreditation system for private dispute resolution services, but this is not mandatory. If the parties can reach an agreement, this agreement is put on record by the court and becomes enforceable in the same manner as a final judgment. Civil mediation procedures are simple and cost- effective (costs are fixed) and proceedings are confidential. The relative success of mediation is due to the increasing costs and sophistication of modern litigation and the recognition that existing commercial relationships had better be preserved insofar as possible. Civil litigants can also agree to refer their dispute to civil conciliation (chotei) under the Civil Conciliation Law (Law No. 222 of 9 June 1951 (CCL)). Conciliation under the CCL is conducted by a conciliation committee composed of one judge and two or more civil conciliation commissioners appointed from amongst knowledgeable and experienced citizens. The committee assists the parties in finding an amicable settlement and usually submits a settlement plan to the parties. If the parties can reach an agreement, this agreement is put on record by the court and has the same effect as a court judgment and can be enforced accordingly. If the parties are unable to reach an agreement, the plaintiff must file a suit before the ordinary courts to pursue their claims. Arbitration (chusai) is the most frequently used ADR mechanism to resolve large commercial disputes. The main thrust behind the new Arbitration Law (JAL) based on the UNCITRAL Model Law discussed above was to encourage the use of arbitration. Although commercial arbitration has not been used very actively as a means of resolving domestic disputes in Japan, it has gradually become an important option, especially in an international context. The major ADR institutions in Japan include, with respect to arbitration, the JCAA, the Tokyo Maritime Arbitration Commission (TOMAC) of the Japan Shipping Exchange, the Japan Sports Arbitration Agency (JSAA) for sports-related disputes, and the Japan Intellectual Property Arbitration Center (JIPAC) for IP-related disputes. For mediation, institutions include the courts, the Financial Instruments Mediation Assistance Centre (FINMAC), and the Japan Bankers’ Association. A number of domestic construction disputes are also resolved through the Med-Arb process before the Construction Dispute Review Boards established pursuant to the Construction Business Act. A number of industry-associated (product-specific) trade associations have established permanent

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Iwata Godo Japan dispute resolution organisations in the wake of the enactment of the Product Liability Law (Law No. 85 of 1 July 1994): the Federation of Pharmaceutical Manufacturers Associations of Japan; the Japan Chemical Industry Association; the Association for Electric Home Appliances; the Japan Automobile Manufacturers Association, Inc.; the Center for Housing Renovation and Dispute Settlement Support; the Consumer Product Safety Association; the Japan General Merchandise Promotion Center; the Japan Cosmetic Industry Association; the Fire Equipment and Safety Center of Japan; the Japan Toy Association; and the Japan Construction Material & Housing Equipment Industries Federation, etc. In 2017, the Japanese government announced its intention to establish a new, dedicated dispute resolution centre to bring various dispute resolution bodies, such as the JCAA, under the same umbrella in a more internationally focused environment, and to raise the profile of international arbitration in Japan at a time when there is a noticeable uptick in the number of disputes involving Japanese companies. As a result, the first Japan International Dispute Resolution Center (JIDRC) was established in early 2018 in Osaka, followed by a second JIDRC facility established in Tokyo (JIDRC-Tokyo) in March 2020. The JIDRC facilities provide a venue for parties to hold hearings on cross-border disputes under procedural and substantive rules of their choosing. The JIDRC facilities can be used for institutional or ad hoc arbitrations and other ADR procedures. On 4 June 2019, the SIAC entered into a memorandum of understanding (MOU) with the Japan Association of Arbitrators (JAA) and JIDRC to promote international arbitration as a preferred method of dispute resolution for resolving international disputes. Under the MOUs, SIAC will work with JAA and JIDRC to jointly promote international arbitration through conferences, seminars, workshops and training programmes on international arbitration in Japan and Singapore. In addition, Doshisha University and the JAA opened an international mediation centre in Kyoto in November 2018, in collaboration with the Singapore International Mediation Centre (SIMC). The new mediation centre (the Japan International Mediation Centre in Kyoto, or JIMC-Kyoto) is headquartered at Doshisha University. It relies on a system similar to the Arb-Med-Arb, which is in place between the SIAC and the SIMC in Singapore, which gives parties the opportunity to resolve disputes referred to arbitration through mediation first. In May 2020, the Diet passed a bill to amend the Foreign Lawyers Act designed to promote international arbitration in Japan. In order to boost international arbitration, the amendments aim to expand the scope of services that can be rendered by Registered Foreign Lawyers involved in arbitration proceedings.

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

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

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Shinya Tago Tel: +81 3 3214 6205 / Email: [email protected] Shinya Tago is a Japanese attorney-at-law, admitted to the New York State Bar Association, partner and a member of the International Practice Committee of Iwata Godo. His practice encompasses a broad range of litigation which, in recent years, has included: general commercial litigation; securities litigation; shareholder derivative litigation; arbitration (domestic and international), conciliation and mediation; and tort claims (including product liability disputes). Shinya Tago has particular expertise in representing foreign clients in a wide variety of litigations in Japanese courts. He has extensive experience dealing with complicated cross-border issues which can arise involving Japanese and non-Japanese defendants. Shinya Tago is also a professor at the Hitotsubashi University Law School.

Takuya Uenishi Tel: +81 3 3214 6205 / Email: [email protected] Takuya Uenishi is a Japanese attorney-at-law (who has passed the New York State Bar Examination) and partner. He has vast experience representing financial institutions (Japanese mega-banks, regional banks, trust banks, etc.) in litigations and cross-border transactions. He also has extensive experience as a litigator involved in corporate-related lawsuits, damages suits, competition law-related disputes, and labour disputes. He was seconded to the legal department of a Japanese mega-bank from 2014 to 2016. Takuya Uenishi graduated from the University of Tokyo School of Law (J.D., 2010) and UC Berkeley School of Law (LL.M., 2019).

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

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

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Jackye Elombo LEGALIS

Court structure The Grand Duchy of Luxembourg is composed of three main jurisdictional orders: The Constitutional Court is the highest authority, which examines the constitutionality of laws excluding those that approve treaties. If, during a trial before a judicial or administrative jurisdiction, a party questions the constitutionality of a law, and if the issue of constitutionality is deemed vital to the solution of the dispute, the matter must be referred to the Constitutional Court for preliminary rulings. Administrative, composed of the Administrative Tribunal (for the first instance) and the Administrative Court (for the appeal process), assigned to hear and adjudicate administrative and tax-related disputes. The Administrative Tribunal controls the legality of administrative acts (regulative decisions) and decisions (individual). It rules in principle on applications for annulments of any administrative decisions opposing local government authorities and users, while it hears applications for rectification in cases expressly provided for by law. The Administrative Court is the Supreme administrative jurisdiction; the appeal body primarily hears cases brought against the decisions of other administrative jurisdictions and arbitrates disputes between the government and the Court of Auditors. Judicial, composed of civil, commercial and criminal sections. The court of laws is divided into three instances: • first instance courts: Justices of Peace Justice( de Paix); and District Courts (Tribunal d’arrondissement); • the Courts of Appeal: District Court (Tribunal d’arrondissement) for decisions of Justices of Peace; and Court of Appeal (Cour d’Appel); and • the Court of Cassation (Cour de Cassation). Justices of Peace deal with small claims in civil and commercial matters, and with certain matters assigned by law (such as rental agreements and labour claims). For commercial matters, Judges of Peace only sit for smaller disputes, of which an object may not exceed the amount of EUR 10,000. They also have jurisdiction over summary procedure in the field of enforcement (e.g. attachments of earnings). In criminal matters, they act as a Police Tribunal (Tribunal de police) which has jurisdiction over small criminal matters. District Courts have jurisdiction in civil and commercial matters for all cases not specifically attributed by law to any other court. There are no specific courts for commercial matters. Commercial disputes are usually brought before special chambers of the District Court, usually called the “commercial court”.

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In criminal cases, District Courts act as a correctional chamber,1 or as a criminal chamber dealing with acts defined by law as crimes punishable by life or fixed-term custodial sentences, or by imprisonment of more than five years. Finally, District Courts act as Family Courts having jurisdiction over divorce and child and youth protection cases, as determined by law.2 Courts of Appeal act as second instance courts and have general jurisdiction over decisions handed down by the District Courts. They re-examine cases already judged in a court of first instance, in civil, commercial, criminal and family matters, and also have jurisdiction over cases decided by labour tribunals. The Court of Cassation has jurisdiction over Court of Appeal rulings as well as judgments rendered as last resort by the District Courts. An appeal to the Court of Cassation does not constitute a third path of appeal. The Court of Cassation does not rule on the merits but checks the exact application of the law by Courts of Appeal, District Courts and lower tribunals. The Court of Appeal, the Court of Cassation and the Public Prosecutor’s Office form together to act as the Superior Court of Justice. Besides these ordinary law courts, Luxembourg has set up some specialised jurisdictions, such as: Social courts composed by the Council of Arbitration for social security (Conseil arbitral de la sécurité sociale), which has jurisdiction throughout the country in social security matters, and the Higher Council for social security (Conseil supérieur de la sécurité sociale), which deals with appeals lodged against the ruling of the first. Rent Commission (Commission des loyers), a quasi-legal authority which governs disputes concerning issues with rent. It is considered a conciliation body, so it must be consulted before bringing a case to court.

Procedure and representation The New Code of Civil Procedure (Nouveau Code de Procédure Civile, or “NCPC”) encompasses most of the rules that apply to the proceedings before the courts, in particular for civil and commercial matters. When dealing with commercial matters, commercial courts apply specific rules of procedure provided by the NCPC and the Commercial Code.3 In criminal matters, the Code of Criminal Procedure (Code de Procedure Pénale, or “CPP”) applies. Although the set of rules governing the organisation and functioning of the State and its authorities (collections of divergent texts) was codified in 2016, two laws, regulating non-contentious administrative procedure and laying down the rules of procedure before the administrative courts, encompass the procedural rules in administrative matters.4 Administrative courts, in comparison to judicial courts, largely apply the rule of precedent. For proceedings before the lower court, Justice of the Peace, commercial proceedings, social proceedings, and generally for non-contentious remedies, the assistance of a lawyer is not mandatory. The form of the application is quite simple and mostly accessible to the public. The procedure is oral5 and the parties may appear in person, or be represented by a lawyer. It is recommended to use a lawyer when the claim is challenged or when the merits of the case are complex. Civil proceedings are formalistic and the procedure is all written. Before the District Court dealing with civil matters and the Court of Appeal, the parties must be represented by a lawyer, namely by an Avocat à la Cour. During the first stages of a civil proceeding,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London LEGALIS Luxembourg there is usually an application form stating the claims of the claimant, which must be served on the defendant. This document is served by a bailiff or a clerk from the court, depending on whether the document is a writ of summons or a summons.6 The lawyer representing the defendant shall notify his appearance in court (constitution d’avocat) within 15 days from the date on which the writ of summons was served. This period can be extended if the defendant resides abroad (article 167 NCPC). The written procedure implies a written instruction phase in the trial. During this phase, a supervising judge is appointed to conduct the proceedings. The supervising judge determines the time limits necessary for the parties to exchange submissions and supporting evidence, based on the nature, urgency and complexity of the case (generally but not necessarily on a monthly basis). Then, upon the parties’ request or ex officio, the supervising judge orders the closure of the written instruction of the trial and sets a date for the pleadings. It is worth mentioning that, if a lawyer does not comply with the instructions of the supervising judge, injunctions may be delivered or the hearing may be held without further delay. The length of a civil proceeding is usually between 12 to 30 months. Commercial proceedings: Before the District Court dealing with commercial matters, the commercial procedure is usually held orally but the parties can choose to apply rules on civil proceedings: • during oral proceedings, the parties will exchange their justification and supporting documents before the pleadings, the arguments will be pleaded before the court, and a ruling will be rendered after the pleadings based on the court’s agenda; or • if the parties choose to apply rules on civil proceedings, depending on the complexity of the case, they will need to be represented by an Avocat à la Cour. A supervising judge will determine the time limits for the parties to exchange submissions and set a date for the pleadings (article 204 NCPC). It is difficult to assess the average timing of proceedings as it depends on the number of parties involved, the complexity of the case, and whether proceedings are at the court of first instance or on appeal. The duration would ordinarily be around a maximum of six to 18 months for the first instance, and around 12 months to two years for the appeal proceedings. When the parties choose oral proceedings in case of a commercial matter, the first instance is usually faster and takes between six and 12 months. Before administrative courts, the proceeding is quite straightforward and the decision of the first instance shall, in principle, be handed down within seven months of the filing of the application initiating the proceedings.

Efficiency and integrity of process Luxembourg judiciary does not know the “rule of the precedent” applied in the common law systems. Judges are not generally bound by judicial decisions pronounced in other cases, even when quite comparable. The courts are obliged to implement statutory law, and judges are considered to be “interpreters of law”, restricted to implementing the solutions provided for by enacted law. They have a general power to ensure that the proceedings are performed in accordance with the law. Judges are also entitled to make any order that could be required for the instruction of the case. Judges have the power to reconcile the parties where possible.

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It is forbidden for judges to rule by general disposition. Court decisions must therefore always be motivated and limited to the specific case on which a court is ruling. On the other hand, when laws or contracts are subject to interpretation, the power of a judge is undeniably more important because it is possible for him to interpret it. Despite this, courts often take guidance from previous decisions of other courts and the lower courts tend to follow decisions of higher courts. The production or use of case law in comparable cases therefore has an undeniable impact on rulings issued by judges. Over the last decades, a judge is increasingly required to act as a referent, and his role has also been considerably reinforced, because of and by establishing a series of general standards for today’s legal landscape. Luxembourg law, which continues to evolve with an array of wider and more intricate challenges, such as cross-border transactions, new information and emerging communication technologies, also allows for broader discretion on the part of the judge. In this context and since 2018, among the major changes envisaged is a reform of the judicial system, including the “Paperless Justice” project. This project, which is initially a five-year project, aims at establishing digital justice, similar to that in neighbouring countries (e.g. France and Belgium). Despite the progress achieved with digitalisation of administrative procedures as well as the digital availability of case law and digital access to investigation files in criminal matters, the project is currently behind schedule. The COVID-19 pandemic has accelerated the development of digital communication with judicial institutions. Courts, in cooperation with the Bar Association, have developed the process of electronic communications and facilitated exchanges between lawyers and the courts. According to communications from the Bar, it is planned to extend and expand the process to the filing of documents, pleadings and exhibits, in order to allow cases to be pleaded exclusively at a distance. It is anticipated that there will be separate rules for written proceedings (where lawyers appear alone for oral argument) and oral proceedings (where parties may plead in person). To date, there has been a significant advance in the recent COVID-19 laws passed on 22 June 2020.7 The COVID-19 law includes the very controversial provision allowing forced hospitalisation of infected people who refuse to isolate, ordered by the President of the District Court upon applications (including in appeal) that may be filed by email.

Privilege and disclosure Under Luxembourg law, there is no disclosure procedure as such. In compliance with the adversarial principle, a party is obliged to disclose, in due time during the proceedings, the documents on which it wishes to rely and which therefore support and evidence its case. This communication will enable the parties to prepare their defence and legal arguments. The disclosure must be submitted to all parties as well as to the judge and it should occur in a timely manner, meaning at least five days before the court hearing for oral proceedings and as soon as possible in case of written proceedings, but in any case before the closure of the written instruction of the case ordered by the supervising judge. If a justifying document is submitted after this deadline, such evidence may be excluded from the debates. Indeed, the judge will not take into account any document or evidence not submitted to the consideration of both parties. Following this adversarial principle, courts must ensure that the documents and evidence have been exchanged.

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Any party may apply to the court for an order that additional documents may be disclosed. Such an order will only be granted if the document sought proves to be in the possession of the party – or even a third party – and if it is necessary to determine the case. Depending on whether it is a commercial case or a civil case and whether it is a legal fact or a legal act, the proof will consist of a witness statement or a written document. The judge is empowered to make disclosure orders ex officio or upon request of one of the parties. Thus, the judge makes sure the adversarial principle is well applied and may order one of the parties to disclose a document, or a third party to disclose the required documents. Third parties also have a duty to comply with the court’s order by disclosing documents in due time. However, a right to legal privilege is expressly recognised in • the Criminal Code (article 458 – professional secrecy); • special laws;8 and • professional regulations (e.g. the Luxembourg Bar Association Regulation, as amended, and the Luxembourg Chartered Accountant Regulation, as amended). Restrictions on the use of documents by disclosure are governed by the principle of professional secrecy, such right being implicitly acknowledged in the NCPC, or the defence rights (the EU Charter of Fundamental Rights principles, on which the Luxembourg jurisdiction relies, apply the parties’ rights of defence and impose as such a general right to legal privilege). However, in the context of anti-money laundering, the disclosure in good faith of any relevant information to the Luxembourg competent authorities does not constitute a breach of the duty to maintain professional secrecy and does not result in liability of any kind for the lawyer making the disclosure. Communication between lawyers is privileged and its contents may not be divulged to the courts unless the correspondence is specifically marked to be official; otherwise, all correspondence between lawyers and their clients and all correspondence between lawyers is considered to be confidential by nature. The protection extends to every type of communication between lawyers and their clients (letters, email, telephone conversations, tapes, photographs, electronic documents, etc.). The duty to maintain confidentiality extends to any information that the lawyer has obtained as a result of his being instructed on a matter, from the client or third party, whether the information concerns the client and/or a third party. Communication between Luxembourg lawyers and foreign lawyers is only privileged if specially marked as such. There is no difference between civil and criminal matters, save that a lawyer may communicate freely with his client if the latter is in jail, without any possibility for the judicial authorities to listen in or to open the correspondence between the lawyer and his client. All documents communicated during the proceedings without prejudice are consequently covered by confidentiality. If the documents are stored outside Luxembourg, mechanisms of evidence can be used by courts based on Council Regulation (EC) n° 1206/2001 of 28 May 2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters. Some documents are confidential by nature, such as correspondence between the client and his doctor or bank. The client is entitled to waive the confidentiality covering the document and whether to disclose it. Based on such waiver, a lawyer is then entitled to disclose these documents with the consent of the client. Regarding conflicts of interest, a lawyer cannot assist or represent parties with conflicting interests. Guidelines and recommendations in relation to conflicts of interest are provided

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© Published and reproduced with kind permission by Global Legal Group Ltd, London LEGALIS Luxembourg by the Luxembourg Bar Association. A lawyer shall refuse multiple mandates if there is a real risk of conflict at a later stage or if the lawyer has advised several parties at a preliminary stage. The legal privilege does not extend to in-house counsel, since in Luxembourg a lawyer registered with the Luxembourg Bar Association shall work independently and is not permitted to work as an employee for a company. Being registered at the Luxembourg Bar Association, lawyers are covered by legal privileges. However, in-house lawyers working within the financial or insurance sector are bound by a confidentiality duty regarding information obtained in the course of their professional activities. This privilege, however, aims at protecting clients. Lawyers working within the Commission de Surveillance du Secteur Financier are also under a duty of confidentiality.

Costs and funding In Luxembourg, each party should bear its own legal expenses, unless the court charges the other party to bear these costs at the end of the proceedings. Court fees are borne, most of the time, by the unsuccessful party further to the ruling. Luxembourg judiciary provides for two kinds of costs: The proceedings’ expenses (frais et dépens de l’instance) (article 238 NCPC), which are the fees resulting from preliminary investigations, bailiff fees, clerk fees, expert fees and the costs and expenses pursuant to the Règlement grand-ducal du 21 mars 1974 concernant les droits et émoluments alloués aux avoués, as amended (costs for office supplies). These expenses do not include lawyers’ fees. The compensation for proceedings (indemnité de procédure) are covered by article 240 NCPC. Compensation includes, essentially, part of the lawyers’ fees, excluding all the expenses of proceedings. They must be requested during the proceedings by the parties. The judge will allocate compensation for proceedings if a party proves that it is unfair to bear them. Courts do not necessarily allocate compensation for proceedings to one or another party if the party fails to prove unfairness. However, courts usually allocate compensation for proceedings on the defeated party, between EUR 250 and EUR 2,000. Lawyers’ fees are freely determined and agreed with the client. Fees are usually charged at an hourly rate, or may be task-based. An agreement on a flat fee is also possible. Regarding the rules of the Luxembourg Bar Association, success fees are prohibited if they entirely depend on the outcome of a case. Similarly, the Code of Conduct for lawyers in the European Union prohibits agreements by virtue of which the client undertakes to pay the lawyer a share of the result, regardless of whether this is represented by a sum of money or by any other benefit achieved by the client upon the conclusion of the matter. An agreement fixing one part of the fees referring to the service rendered, and another part by reference to the outcome of the case, is permitted. Finally, individuals with low income may be granted judicial assistance (assistance judiciaire) by the State covering the main expenses of the proceedings. Various associations also finance the legal costs of court proceedings of their members. It is also possible to subscribe for a private insurance contract covering legal costs such as lawyer fees, bailiff fees or legal expenses (protection juridique). Albeit not prohibited, Luxembourg does not have local companies specialised in litigation funding.

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Interim relief Ordinary courts (including lower ones), dealing as Summary Judge (Juge des référés) may pronounce several interim measures9 to prevent a prejudice, to preserve establishment of evidence, and/or to preserve the rights of the requesting party. Administrative courts may also be sitting as Summary Judge. Though criminal courts do not deal as such with summary proceedings, they may sit in chambers (Chambre du Conseil) as investigating courts and have jurisdiction on requests for interim relief.10 Depending on the legal matter, provisional and precautionary measures may be sought before the action on the merits is brought, in conjunction with it or after it has been brought. Courts dealing in summary proceedings can also restrict the period of validity of an interim measure or limit its effect to specific assets or acts. In principle, the requisites for obtaining interim measures are: • based on specific grounds and specific legal basis; • the claiming party can provide evidence reasonably with a sufficient degree of certainty that there is either a genuine need or urgency, or a risk of further deterioration of the situation; and • taking into account the specific circumstances of the case, the claimant’s rights must be observed, cannot be seriously disputed, and must appear to be due. Summary proceedings may be launched through a petition or writ of summons stating the claims of the claimant, which must be served on the defendant by a bailiff or the court’s secretary. Interim relief is principally granted if the claim is not seriously disputed or challengeable (e.g. request for payment), but also sometimes because the right is challenged (e.g. interim administrator in shareholder disputes or judicial expertise for alleged construction defects and shortcomings). In cases of extreme urgency, interim measures (e.g. bank account attachment, authorisation for reducing time limits for procedures) may be granted on an ex parte basis, based on the evidence and on the information contained in the application, as a first step to a procedure that is subjected to the adversarial principle in a second step. Ex parte orders are granted if the request is not seriously disputed and is confirmed only after a debate has taken place during a court hearing. Luxembourg law recognises several kinds of interim injunctions, from the order for payment to prohibitory injunctions (cease and desist or demolition orders), and including the placement under receivership. A summary proceedings order does not have the authority of res judicata (autorité de la chose jugée) on the merits of the case. In case of proceedings on the merits, the judge handling the case is therefore not bound by the order. The order is, however, not without effect. It is temporarily fully enforceable, and can be immediately enforced, despite the suspensive effect ordinarily attached to the appeal, which is available in front of the Court of Appeal.

Enforcement of judgments Domestic rulings become enforceable after having been served upon the unsuccessful party by the opposing party and can be enforced only when having the authority of res judicata, namely when no further remedies are available. The enforcement of a foreign decision differs according to the State of origin of the judgment. Decisions rendered in the EU, or subject to an international treaty, are generally recognised from one country to another and the conditions for enforcement are significantly simplified.

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For EU judgments, the main legal instrument is Regulation n° 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Brussels Ibis Regulation”).11 The Brussels Ibis Regulation provides that, for decisions rendered from 10 January 2015 onwards, based on the principle of international cooperation, a judgment given in a EU Member State which is enforceable in that State shall be enforced in another Member State without any declaration of enforceability being required. It provides for two forms, namely: the certificate concerning a judgment; and the certificate concerning an authentic instrument/court settlement. For third-country decisions (which do not originate from an EU country and are not subject to an international treaty), the ordinary exequatur proceeding applies, meaning that the defendant must first be properly summoned before the District Court dealing with the exequatur. However, the court will not rule on the case, but is confined to verifying whether: • the decision is enforceable in the country of origin; • the original judge had jurisdiction to make a decision according to Luxembourg international private law; • the original judge had jurisdiction to make a decision according to its own procedural law; • the foreign court has applied the law as designated by Luxembourg’s conflicts of law; • the foreign procedure rules have been respected; and • the decision does not contravene any Luxembourg public policy rules. With respect to judgments rendered in a jurisdiction outside the EU with which Luxembourg has concluded a bilateral or multilateral treaty for the reciprocal recognition and enforcement of foreign judgments, article 679 NCPC lists, non-exhaustively, several conventions, such as the convention on jurisdiction and the enforcement of judgments in civil and commercial matters signed in Lugano on 30 October 2007 and published in the Official Journal on 21 December 2007 (theLugano “ Convention”). The judge verifies whether the conditions imposed by the treaty are respected. The procedure is also ex parte, meaning that the defendant will only intervene if he lodges an appeal against the exequatur order. Other regulations abolished the enforcement procedure, such as Regulation (EC) n° 805/2004 of the European Parliament and of the Council of 21 April 2004, creating a European enforcement order for uncontested claims. The EU Member State of origin certifies its judgment as a European enforcement order which will then be enforced in Luxembourg as if it originated from a Luxembourg court.

National and international arbitration Domestic arbitration is governed by articles 1224 to 1251 NCPC. In addition, Luxembourg ratified several international agreements governing arbitration.12 Pursuant to the NCPC, parties are permitted to enter into an arbitration agreement relating to rights that they are free to dispose of. In any case, the parties shall agree to submit their dispute to arbitration proceedings. A large number of matters can be subject to arbitration. However, some disputes may not be subject to arbitration, in particular those concerning the status and legal capacity of persons, marital relations, requests for divorce, separation and disputes concerning persons who are missing or presumed missing, and employment matters. The parties can use arbitration without submitting the proceedings to the rules of an institution and will therefore have to use deadlines and forms required before ordinary

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© Published and reproduced with kind permission by Global Legal Group Ltd, London LEGALIS Luxembourg courts. Alternatively, the parties can agree to submit their dispute to the rules of an institutional arbitration, such as the rules of the International Chamber of Commerce or the Arbitration Centre of the Luxembourg Chamber of Commerce, which has put its secretariat at the service of parties interested in submitting their dispute to arbitration. In the event that the parties disagree on the appointment of the arbitrators, the NCPC sets forth a default procedure. The dispute shall be settled by three arbitrators. Each party appoints its own arbitrator and informs the other party thereof. If a party fails to appoint its arbitrator, that party shall be required to do so within eight days following the receipt of the registered letter from the other party. After this period, in case the party did not appoint its arbitrator, the President of the Luxembourg District Court shall order the appointment of an arbitrator. There is no appeal available against such appointment. The two appointed arbitrators shall then elect the third arbitrator. Again, if they fail to do so, each party has the right to request the President of the District Court to proceed with the appointment with both parties present or duly summoned. Regarding interim measures during arbitration proceedings, arbitrators can order interim measures if the parties have agreed that interim measures are covered by the arbitration clause or the arbitration agreement. The intervention of the national courts during an arbitration is exceptional but it may occur for interim remedies. In addition, if a document submitted to the arbitrators is challenged by another party as being a forged document, or if a criminal offence is raised in the course of arbitration, the arbitrators shall suspend the arbitration until those issues are ruled on by the Luxembourg courts (article 1236 NCPC). Arbitration awards are binding on the parties and the award is final. According to case law, the nationality of arbitration depends on the award. An arbitration award is deemed to be domestic if the award is issued in Luxembourg. The main consequence of the nationality of arbitration is the enforcement proceedings. Domestic awards are enforced by an enforcement order granted by the President of the District Court and cannot be appealed before the Luxembourg courts, although they can be declared void by the Luxembourg District Court in limited cases (such as invalidity of the arbitration clause, violation of the rights of the defence, etc.). This action is introduced by means of the objection procedure filed against the enforcement order rendered by the President of the District Court. With respect to the enforcement of foreign arbitral awards, in 1983, Luxembourg ratified the New York Convention on the recognition and enforcement of foreign awards. According to article 1250 NCPC, foreign awards are enforced in Luxembourg by an exequatur order granted by the President of the District Court, knowing that the exequatur procedure provided under article 1250 NCPC is identical to the simplified exequatur procedure of a foreign judgment. The opposite party may appeal the order issued by the President of the District Court before the Court of Appeal, within one month after the notice of the order if he resides in Luxembourg, or within two months if he resides outside Luxembourg. However, the Court shall limit its review of the award on the grounds set forth in article V of the New York Convention and has no authority to review the merits of a foreign arbitral award. Luxembourg arbitration is generally quicker than litigation before the courts as a means of dispute resolution. The confidentiality of arbitration proceedings is one of the main advantages of resolving disputes.

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Mediation and alternative dispute resolution (“ADR”) In Luxembourg, dispute resolutions may be sought through either public or private means. Since ordinary courts have jurisdiction over disputes between individuals and/or legal entities, rulings are issued under the judicial system procedures, which also determines their enforcement conditions. Parties are free to have recourse to ADR, which is not a compulsory preliminary to legal proceedings. However, the parties may be obliged to have recourse to ADR, depending on the provisions of the agreement or contract which defines the legal relationship between them. Besides, parties may settle a dispute resolution by contracting a private agreement, which will specify and lay down the different aspects of the resolution. This agreement will be governed by the general contract laws (Civil Code) and is broadly referred to as a “settlement”. In terms of content, the agreement should identify the parties, cover the merits and position of the parties (e.g. relationship between the parties, dates and periods, termination of the contract and execution processes, etc.), as well as the financial claims (i.e. outstanding, alleged and/or challenged claims, etc.), compensation granted or agreed (legal and/ or contractual), and waivers and/or withdrawals and any mutual concessions granted by the parties. The contract may also include post-contract covenants. The assistance of a lawyer is not mandatory but highly recommended for the sake of confidentiality, since the negotiations and discussions will then be privileged and without prejudice. These out-of- court agreements can happen during the course of a trial. In Luxembourg, settlement agreements have the authority of res judicata. The enforcement of a settlement is governed by the parties to the agreement, private and legal persons to whom the agreement is binding. Any infringement to the settlement may be referred to a judge within the judiciary system’s procedures for its enforcement. ADRs, such as arbitration, are applicable to civil and commercial disputes. In criminal matters, a law of 24 February 2015 amending the CCP introduced the plea bargaining procedure called “judgment upon consent” (jugement sur accord). This procedure allows the shortening of the duration of criminal proceedings by giving both the Public Prosecution and the prosecuted person the opportunity to propose to the other party an agreement at any stage of the proceedings, for criminal offences that are, on the basis of extenuating circumstances, subject to a fine of less than five years’ imprisonment, as long as a criminal chamber of the District Court has not ruled on the public proceedings. The agreement must contain a summary of the proceedings, a statement of the facts on which they are based, the criminal charges, any extenuating circumstances, the proposed penalty(ies) and the decision on restitutions and costs, as well as any claims for compensation. It shall be sent to the other party by a registered letter with acknowledgment of receipt. The assistance of a lawyer is mandatory throughout the agreement procedure and the file can be communicated. The proposed agreement may be refused at the discretion of both the prosecuted person and the State Prosecutor. It shall lapse in the event of a complete refusal, sent by registered letter with acknowledgment of receipt, or at the end of a period of one month following its receipt, in which case all the relevant documents shall be destroyed. If the agreement is signed, the State Prosecutor shall summon the person prosecuted to the correctional chamber of the District Court for a decision on the agreement. The President of the Chamber shall question the prosecuted party on the facts that he admits to have committed. The lawyer, the prosecuted person and the State Prosecutor are also heard.

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After having reviewed the legality and adequacy of the sentences, the District Court rules on the guilt of the prosecuted person and sentences him to the sentences set out in the agreement by a reasoned judgment. If, in particular, it considers that guilt has not been established or that the penalties are not adequate, the agreement is null and void. The ordinary remedies are applicable. The judgment upon consent ends the public proceedings against the person prosecuted in respect of the facts referred to in the agreement, but does not affect the civil proceedings brought by a person whose claims have not been settled by the agreement. Alongside the ordinary courts, where the judge’s first role is that of conciliation,individual conciliation services also exist, such as the Standing Committee on Labour and Employment (“CPTE”) at the level of the Inspectorate of Labour and Mines (“ITM”). Additionally, the ITM has an informal mediation role. The law of 24 February 2012 on the introduction of mediation in civil and commercial matters (the “Law of 2012”)13 also offers the possibility of open mediation in the area of civil and commercial law. The Law of 2012 excludes from its scope inalienable rights and liabilities, public policy provisions and acts and omissions for which the State is liable in the course of the exercise of public authority. The parties sign a mediation convention at the beginning of the process in which they undertake to settle the conflict using the mediation proceedings. The parties appoint a mediator by common consent. However, the mediator does not have the power to make a binding decision on the parties. The main mission of the mediator is to create a dialogue between the parties and help them resolve their dispute. If an agreement is reached during the mediation process, it must be ratified by the judge in order to be enforceable. The mediation process is confidential. Regarding the mediator’s costs, they vary significantly. The Civil and Commercial Mediation Centre of the Luxembourg Bar (Centre de Médiation Civile et Commerciale, or “CMCC”), one of the main mediation bodies, was set up on 13 March 2003. The CMCC deals with civil, commercial and social matters. Mediators are chosen from a list approved by the CMCC regarding the nature of the dispute. The importance of mediation in civil and commercial proceedings has been proven since its introduction in the Luxembourg legal system. In addition, the law of 22 August 2003 has created the possibility to call an ombudsman regarding claims against public administrations. In that case, the ombudsman analyses the claim against the public administration and decides whether the claim is grounded. The ombudsman issues a recommendation to the concerned public administration. The recommendation may be published if the public administration does not follow the recommendation. It is worth stressing that: • conciliation decisions will not be legally binding, and if they are not executed, the parties will have to submit the case to court; • mediation agreements lack legal force. If such agreements are not executed by one of the parties, the other party must take the matter to court; and • when the parties have opted for arbitration, in principle the dispute cannot be taken to court, i.e. the arbitration sentence is binding and enforceable. Courts may invite the parties to use ADR. The judge may attempt to reconcile the parties. As long as no final court decision has been handed down, any party may propose the approach to the other one. However, in principle, agreement from both parties is always required.

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Endnotes 1. They deal with offences punishable by imprisonment from eight days to a maximum of five years, or by a fine exceeding EUR 251. 2. Law of 27 June 2018 establishing the Family Court, reforming divorce and parental authority. 3. Articles 547 et seq. NCPC and articles 642 et seq. Commercial Code. 4. Law of 1 December 1978 regulating non-contentious administrative procedures and its implementing regulations of 8 June 1979 on the procedure to be followed by State and municipal administrations, commonly known as “PANC”, and the Law of 21 June 1999 laying down the rules of procedure before the administrative courts. 5. Oral proceedings do not require the parties to be represented by a lawyer registered on List 1 of the Luxembourg Bar Association (Avocat à la Cour); they may be represented by any lawyer, or by one of the persons referred to in the NCPC holding a special proxy. The parties are also entitled to defend themselves if they choose to do so. 6. Articles 153 and 154 NCPC. 7. Law of 22 June 2020 (COVID-19 law) introducing a series of measures concerning individuals as part of the fight against the COVID-19 pandemic. 8. E.g. the Law of 8 August 1991 on the legal profession, as amended (article 35), the Law of 5 April 1993 on the financial sector, as amended (article 44), the Law of 23 December 1998 creating the financial sector supervisory commission (Commission de Surveillance du Secteur Financier – article 16), the Law of 20 December 2002 relating to undertakings for collective investments, as amended (article 98), the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended, the Law of 7 December 2015 on the insurance sector, as amended (article 7), the internal regulation of 9 January 2013 of the Luxembourg Bar (Règlement intérieur de l’Ordre des Avocats du Barreau de Luxembourg) (the “2013 Regulation”), and the internal regulation of 22 April 2005 of the Diekirch Bar (the “2005 Regulation”). 9. According to article 932 NCPC (référé urgence), in urgent cases, or if the interim measure precludes no serious dispute, the Summary Court can order all measures necessary to avoid imminent danger or to stop disturbances that are manifestly illicit, including an injunction to pay. Urgency is an implied condition of imminent danger. The Summary Court will make its decision after having heard the parties during a hearing. Articles 933 et seq. NCPC (référé voie de fait) provide for a preservation order. To prevent unlawful nuisance or any imminent damage, the Summary Court can order protective measures, if they are not seriously challenged by the opposite party. The claimant must prove imminent danger of damage (voie de fait) of the defendant. According to article 350 NCPC (référé dit préventif ou probatoire), a measure of inquiry could be rendered by the court. Before any lawsuit, if there is a legitimate reason to retain or establish proof of facts on which the case depends, the Summary Court can order any legally permissible measures of inquiry. According to articles 919 et seq. NCPC (provision sur requête), if the defendant (the debtor) lives in Luxembourg, the claimant (the creditor) can ask for a court order instructing the debtor to pay the debt if the debtor’s obligation is not seriously subject to dispute, which must be proven by the claimant beyond a reasonable doubt. If the creditor supplies the documents needed to justify his claim, the Summary Court will take this order. Such order will be made without an adversarial hearing. According to article 938 NCPC, in urgent matters, the Summary Court can order that the enforcement of the order will be possible based on the first authentic copy

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of the order bearing the executory formula. According to the case law, however, the Summary Court has no jurisdiction to order the execution of a duty of affirmative action (obligation de faire). 10. E.g. requests for provisional release during pre-trial detention, applications for the release of a temporary driving prohibition, and requests for the release/return of seized objects, funds and documents. 11. The Brussels Ibis Regulation replaces Regulation n° 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Brussels I Regulation”), which continues to apply to proceedings instituted before the Brussels Ibis Regulation came into application on 10 January 2015. 12. Among them are: the European Convention on International Commercial Arbitration, signed in Geneva on 21 April 1961; the Arrangement regarding the European Convention on International Commercial Arbitration, ratified in Paris on 17 December 1982; the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York on 10 June 1958; and the Convention on Conciliation and Arbitration within the OSCE, ratified in Stockholm on 15 December 1992. 13. The Law of 2012 implements Directive 2008/52/CE on mediation in civil and commercial matters in Luxembourg. These provisions are introduced into the NCPC under a new section (articles 1251-1 to 1251-24 NCPC).

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Jackye Elombo Tel: +352 691 122 056 / Email: [email protected] Jackye, LEGALIS Dispute Resolution Partner, is an award-winning social and legal litigator, ranked amongst Luxembourg’s top 500 legal experts. Over the past 15 years, she has distinguished herself by helping clients rethink their dispute cases and providing responsive, cost-effective and efficient solutions, allowing them to implement the right measures and avoid disruptive, large-scale litigation. Jackye also has broad commercial litigation experience (including shareholder disputes, breach of contracts and non- compete disputes) and acts as legal advisor in a number of ongoing, high- value restructuring cases, in particular on employment issues. Her ability to anticipate risks and prioritise relevant issues and problems logically has greatly contributed to her success and reputation. She brings to LEGALIS her precious know-how and unique capabilities in resolving complex and sensitive litigation challenges.

LEGALIS 93, route d’Arlon – L1140 Luxembourg Tel: +352 206 011 55 / Fax: +325 206 011 56 / URL: www.legalispartners.com

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Miguel Angel Hernandez-Romo Valencia & Miguel Angel Hernandez Romo Foley Gardere Arena

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

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

Privilege and disclosure As a general rule, all documents may be considered privileged, understanding such concept in the sense that parties have no obligation to give such documents to another party, unless they are requested by the authority to do so. Even though parties have no obligation to open their files to other parties, this general rule has an exception. Such exception exists when one of the parties requests specific documents from the other. The request must be very clear, i.e. establishing date, sender, recipient, etc.

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Therefore, if parties in litigation do not have certain documents in their possession (documents that are the basis of their claim and/or defence), they can request a certified copy of such documents to the party that has them in its possession. Once the request has been made, if the requesting party can prove to the court that it has requested the document but that it has not been delivered by the other party, the court can order such party to give the certified copy requested. In case the other party does not wish to give such document, the court can give warning that if it fails to produce the document requested, the court will consider that the claims made by the requesting party in its lawsuit are true and valid. In Mexico, full discovery is not permitted.

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

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

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

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

Enforcement of judgments The Federal Code of Civil Procedures establishes that foreign judgments can be enforced in Mexico as long as they comply with the following rules: (a) the formalities related to letters rogatory were complied with; (b) they were not issued in an in rem action; (c) the foreign judge had jurisdiction according to international rules consistent with those mentioned in Mexican law; (d) the defendant was notified or served personally; (e) such judgment cannot be overturned or modified by any means in the jurisdiction where it was issued; (f) the action brought in such jurisdiction is not pending, between the same parties, before Mexican courts, and in which Mexican courts had heard first about such case; (g) the fulfilment of the obligation ordered is not contrary to Mexican public policy; and (h) the judgment fulfils the conditions as to be considered authentic (apostille). Mexican courts can deny the execution of foreign judgments, even if they comply with all of the requirements mentioned above, if it can be proven that Mexican judgments are not enforced in the jurisdiction where the judgment was issued. In order for a foreign judgment to be executed, it must be requested through letters rogatory, and such letters rogatory must comply with the following: (a) must have an authentic copy of the judgment, award or judicial resolution; (b) must have authentic copies proving that

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Foley Gardere Arena Mexico summons were served personally and that the judgment cannot be overturned or modified by any means; (c) must be translated into Spanish; and (d) the party that wishes to execute such judgment must mention an address where the homologation will take place. The competent court to enforce a foreign judgment is the court of the domicile of the defendant, or where the defendant has its assets. Once the court receives the request for executing the foreign judgment, it will grant the defendant a period of nine days in order to put up a defence or exercise their rights. If they offer evidence, the court will set a date for a hearing. After the hearing, the court will issue its judgment. Mexican courts are very open in assisting foreign courts. The Federal Code of Civil Procedures has a chapter devoted to assisting foreign courts, and it establishes that requests from foreign courts do not have to be legalised if they are transmitted by official authorities, but they do have to be translated into Spanish. Mexican courts can assist foreign courts in any aspect, since the Federal Code of Civil Procedures does not establish any prohibition on assistance. Letters rogatory must be delivered to the required authority either through the parties, judicially or by diplomatic or consular agents, or by the central authority of any of the countries involved in this process. Once the letters rogatory are received by the court that will assist the foreign court, such court will assist the foreign court according to the applicable laws, but the foreign court can request the local court to avoid local formalities or to use specific formalities that differ from local formalities, provided this is not harmful to Mexican public policy. Mexico is a signatory to several conventions related to the execution and enforcement of judgments and awards, including the New York Convention.

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

International arbitration The following bodies are used to resolve large commercial disputes in Mexico: • The International Chamber of Commerce. • The American Arbitration Association. • The Mexican Arbitration Centre. The legislation applicable to arbitration is the Commerce Code. Mexico has incorporated the UNCITRAL Model Law into the Commerce Code, with a few modifications. For example, the Commerce Code has a full chapter on costs and fees of the arbitration tribunal.

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The parties are free to agree on the procedural rules that the arbitrators will follow. If they do not agree, the arbitrators will guide the arbitration in a manner they deem appropriate (this includes determining the admissibility, appropriateness and value of the evidence). However, the parties must be treated equally and be granted the full opportunity to express their rights (Commercial Code), and the arbitration proceedings must reflect this. Local courts can intervene to assist arbitration proceedings. The competent court is the judge of first instance (local or federal) of the place where the arbitration takes place. If the arbitration takes place outside of Mexico, the competent court for the recognition and execution of the judgment is one of the following: • federal judge of first instance; • local judge of first instance of the domicile of the party against whom the judgment is rendered; or • judge where the assets are located. If requested by one of the parties, local courts can adopt provisional interim measures, even if an arbitration agreement exists and the arbitration proceedings have begun. If the arbitration tribunal or one of the parties (after obtaining approval from the arbitration tribunal) requests it, local courts can intervene to assist arbitration by taking or obtaining evidence. Arbitration proceedings and awards cannot be appealed before local courts, but they can be challenged. The only challenge that Mexican law accepts in arbitration is the challenge against an award on the basis of nullity of the award. After the arbitration tribunal has issued the award, the parties can try to nullify it. The award may be nullified if: • One of the parties to the arbitration agreement was incapacitated. • The arbitration agreement is not valid under the law chosen by the parties or under Mexican law. • One of the parties was not duly notified of the appointment of an arbitrator or of the arbitration proceedings, or if for any other reason it was not able to exercise its rights. • The award refers to an issue outside the scope of the arbitration agreement or makes decisions outside the terms of the arbitration. • The composition of the arbitration tribunal or the proceedings was not in line with the agreement of the parties. • The judge confirms that under Mexican law, the subject matter of the dispute cannot be subject to arbitration or that the award is contrary to public policy. The party that claims nullity should file a writ before the court claiming such nullity, and a summary proceeding will initiate. In such proceeding, the parties have the right to present evidence and prove the nullity or not of the award. In such proceeding, the defendant may counterclaim recognition and enforcement of the arbitral award. The parties cannot appeal against the decision issued by the trial court; the only existing avenue to try to modify it is through Amparo proceedings (a remedy for the protection of constitutional rights in Mexico). With respect to arbitration awards, the parties cannot waive their rights to request the nullity of the proceeding or the Amparo proceedings.

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

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Miguel Angel Hernandez-Romo Valencia Tel: +52 55 5214 5000 / Email: [email protected] Obtained his law degree from Escuela Libre de Derecho in Mexico City in 1992. Studied at the Southwestern Legal Foundation in 1993. Obtained his LL.M. from the University of Texas in Austin in 1994. Worked as a summer clerk in Washington, D.C. for Hogan & Hartson. Worked in Houston, Texas, for Fulbright & Jaworski as an intern. Attended post-degree studies at Escuela Libre de Derecho for the course of Obligations (Torts), Commercial Law and International Business Transactions. Author of an article related to insurance law. Professor of Introduction to the Mexican Legal System and Professor of Procedural Law at Universidad Iberoamericana. He has been practising law since 1992, specialising in civil, commercial, insurance and family litigation, international arbitration and bankruptcy proceedings. Joined Foley Gardere law firm as head of the litigation group in the Mexico City office in September 2017.

Miguel Angel Hernandez Romo Tel: +52 55 5214 5000 / Email: [email protected] Obtained his law degree from Escuela Libre de Derecho in Mexico City in 1960. Obtained his LL.M. from Harvard Law School in 1961. He has been a professor of law since 1961. He has been practising law since 1961, specialising in civil, commercial, arbitration and bankruptcy proceedings. He studied in Rome, Italy, for three years at the Gregorian University (1952– 1955). He is the former Dean of Escuela Libre de Derecho in Mexico City (1993–1998). Member of the American Law Institute. He was the chair and co-reporter for the Transnational Insolvency Project, Mexico, of the American Law Institute. Member of the American College of Bankruptcy. Has written several articles on Mexican civil, commercial and procedural law.

Foley Gardere Arena Blvd. Manuel A. Camacho No. 36-1802, Lomas de Chapultepec, Ciudad de Mexico 11000, Mexico Tel: +52 55 5214 5000 / URL: www.foley.com

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Youssef Hanane & Ayoub Berdai Hajji & Associés – Avocats

Efficiency of process The efficiency of process in the Moroccan judicial system is based on a structured and highly functional legal procedural framework, as well as on the proclamation by the Moroccan Constitution of 2011 of several measures and principles which asserts the independence and impartiality of the judiciary system. The above-mentioned efficiency may be analysed through several points and measures, including in particular: • The liberty to resort to alternative dispute resolution mechanisms. It should be noted that the Moroccan legal system provides for two methods of dispute settlement, with some exceptions depending on the nature of the dispute. The first is judicial procedure and the second is voluntary procedure, being an alternative to the first method, in which two types of instruments may be selected, i.e. mediation and arbitration, which are beginning to become widespread in disputes between companies (business-to-business disputes). Foreign businesses that are involved in Moroccan trade opt for arbitration as a dispute resolution mechanism given the international enforceability of arbitral awards. The choice of mediation as a dispute resolution mechanism in cross-border trade may supersede arbitration in the near future due to the entry into force of the Singapore Convention on International Settlement Agreements Resulting from Mediation. • The Moroccan judicial system encourages judicial specialisation. In fact, there are various judicial institutions entrusted with the exercise of judicial power, organised in the civil, criminal, administrative, commercial, labour, constitutional and military orders. These institutions must handle and settle all disputes that must be pursued in Morocco, depending on their nature. Moreover, and subject to some particularities and requirements, these institutions may be single judge courts or collegiate courts, e.g. the administrative courts are empowered to resolve issues concerning customs, taxation, abuse and misuse of power by public authorities, land-use, etc., while the commercial courts are specialised in business-to-business disputes. Such specialisation enables judges to be aware of the legal and technical particularities of cases submitted to the court to the jurisdiction to which they belong and thus contribute to making the judicial system more efficient. • The Moroccan judicial system is a three-tier judicial system. The first degree comprises general civil courts (including criminal and labour chambers or courts), and administrative and commercial courts of first instance; any appeals from the courts of first instance are brought before a court of appeal within the territorial jurisdiction of the lower court and, as the highest court in the structure of the ordinary courts, we find the Supreme Court “Court of Cassation”.

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Furthermore, it is important to emphasise that Moroccan courts are making strenuous efforts to accelerate judicial proceedings in order to avoid excessively long court proceedings. The Ministry of Justice is constantly analysing and proposing various means of streamlining the procedure before the Moroccan courts, pursuant to the continuing calls for efficiency and speed at the national and international levels. In this context, one of the new measures taken as part of the modernisation of the Moroccan judicial system is the gradual use of new technologies. It is currently possible to carry out a number of operations from the official courts’ website (https://www.mahakim.ma) and/or the e-justice application, such as the monitoring of cases, filing submissions and motions by lawyers (available for the moment in limited cases), and requesting judgments. Also, and for the first time since the impact of the COVID-19 pandemic, Morocco has been testing the use of the videoconferencing system in criminal cases. This kind of remote court hearing is a possibility, but so far it has not been very successful and requires the prior approval of the parties and their lawyers.

Integrity of process The judges in Morocco are impartial and their independence is strongly protected by the Moroccan Constitution of 2011. Moreover, the basic right of natural and legal persons to effective judicial protection in the exercise of their legitimate rights and interests is recognised as a constitutional right. The judicial system of Morocco is commonly regarded as fair and impartial with regard to all parties to a dispute and is considered to be of integrity.

Privilege and disclosure The premise of legal professional privilege to protect information and documentation from disclosure has not been developed in Morocco as is the case in common law jurisdictions. However, Moroccan law recognises the protection of the confidentially of information and in particular the legal advice provided by a lawyer to his clients through the principle of professional secrecy. The general framework of professional secrecy is set forth in Article 446 of the Moroccan Criminal Code, which provides that: “All persons who are entrusted with secrets by virtue of their status or profession or function are prohibited from disclosing them” (non-official translation from the Arabic language of the official Moroccan Criminal Code). Non- compliance with this provision is punishable by imprisonment from one to six months and a fine between MAD 1,200 to 20,000 (approximately GBP 100 to 1650). Furthermore, legal professional privilege is protected by Article 36 of Law No. 28-08 dated October 20, 2008 organising the profession of lawyers, which forbids them from disclosing any information in breach of legal professional privilege. Thus, and according to the aforementioned regulations, lawyers are bound by the said principle of confidentiality and they must therefore keep secret all factual elements or information they have received during their professional performance, so that the relationship between lawyers and their clients is protected by a strict duty of confidentiality. The obligations that imply professional secrecy will remain even after the lawyers have ceased to provide services to their client. Accordingly, the breach of professional secrecy by lawyers may lead to various disciplinary consequences which, depending on their severity, range from a warning to disqualification of their position for a specific period of time, or even expulsion from the Bar Association to which they belong.

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Evidence Unlike many legal systems that adopt single judicial systems, the Moroccan judicial system is both adversarial and inquisitorial, depending on whether it is a civil, commercial or criminal matter. In civil matters the system is adversarial, and the parties to the dispute may support their arguments and facts by only submitting to the judge the means of proof listed in Article 404 of the Moroccan Civil Code of 1913 “Dahir formant Code des Obligations et Contrats” which provides that “[t]he means of proof recognized by the law are: (i) the confession of the party, (ii) the written documentation, (iii) the testimonial evidence, (iv) the presumption and (v) the oath and the refusal to take it”. Moreover, Article 443 of the aforementioned law adds that conventions and other legal facts intended to create, transfer, modify or extinguish obligations or rights, and any value exceeding MAD 10,000 (approximately GBP 825), must be proven by an executed document. As to the commercial field, the proof of evidence is free according to Article 334 of the Commercial Code of August 1, 1996, thus letting the parties to the commercial dispute support their cases by submitting to the judge any type of evidence. However, it should be noted that such evidence must be reported in writing when required by a specific law or by an agreement executed between the parties. Furthermore, it is important to note that Law No. 53-05 relating to the electronic exchange of legal data dated December 6, 2007, which has amended the Moroccan Civil Code, provides that electronic exchange and documentation are accepted as evidence under the conditions provided by the same law. On the other hand, at the request of one of the parties or ex officio, a judge may appoint an expert to provide the court with technical opinions on specific issues. However, such expert conclusions are of solely advisory value and they are therefore not considered evidential, meaning that the judge is not bound to retain them as part of the judicial decision. In criminal matters, the Criminal Procedure Code dated October 3, 2002 provides that the criminal justice system is inquisitorial and therefore allows the judicial police broad investigative powers to gather evidence, including by means of searches.

Costs In Morocco, procedural costs are all the expenses that arise from legal proceedings. Among the most important are judicial tax, bailiff fees, expert fees, if any, and the costs of translating documents when it is necessary to obtain the translation. As for judicial tax in Morocco, the Law on Judicial Expenses of 1984 regulates judicial expenses in the civil, administrative and commercial fields and provides that the value of the judicial fee varies according to the type and nature of a tax claim. There are some lawsuits that result in a fixed fee, and there are some types of claims for which judicial fees are paid according to the value of said claims. The Moroccan Code of Civil Procedure allows the prevailing party to obtain payment by the other party of the costs and disbursements incurred throughout the proceedings, as well as all the other expenses incurred during the course of the trial. However, according to the aforementioned law, the judge is empowered to decide to divide the costs between the parties in litigation. Furthermore, it is important to note that, unlike legislation in other countries, the lawyers’ fees are not considered by Moroccan law as a procedural cost and thus the state courts do not order the unsuccessful party to pay the other party’s lawyers’ fees.

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Litigation funding Court proceedings in Morocco are usually funded by the parties themselves. Moroccan law does not provide for any specific provisions with respect to third-party funding for judicial disputes nor for arbitration, and we are not familiar with the practice of such a financial service. However, as the discussion around the creation of third-party-funding institutions dedicated to conditionally supporting arbitration fees is beginning to emerge, we believe that such a service should soon be implemented.

Class actions As a general rule, class action suits, as understood by common law jurisdictions, are not recognised under Moroccan law. However, and insofar as Moroccan procedural law does not prohibit it, it is theoretically possible to file a class action before courts, as long as the parties’ claim has, among other things, the same object and interest when going to court.

Interim relief According to the Moroccan Code of Civil Procedure dated September 28, 1974, interim relief proceedings are assigned to the President of the court to whom the case is heard in an inter partes manner at a public hearing and, if necessary, the judge delivers an interim order. However, in cases of special summary proceedings, the judge may also order interim measures on an ex parte basis, i.e. without hearing the opposing party. This is the situation where there is a risk that the enforcement of the measure will be frustrated if the opposing party is informed of the requested relief before it is sentenced. The Moroccan Code of Civil Procedure provides that a party may submit a request for interim relief either before or after the main proceedings have become pending. In this context, the claimant must prove that (i) the claim is urgent, (ii) a right to which he is entitled has been violated or that a violation is impending, and (iii) the violation threatens to cause harm that cannot be rapidly and efficiently remedied. The application for interim relief can be submitted to the President of the court at any time on business days. Moreover, in case of extreme emergency, the “hour to hour” interim relief proceedings can be initiated in order to offer an expeditious solution, even during public holidays and non-working days, either in the hearing room or at the judge’s residence. The interim relief order rules only provisionally and does not settle the dispute on the merits. It is, however, provisionally enforceable.

Enforcement of judgments/awards Pursuant to Articles 428 to 451 of the Moroccan Code of Civil Procedure of September 28, 1974, an application for enforcement of a domestic judgment is filed with the registry of the court that issues the decision. However, as a general rule, subject to a few limited exceptions, the enforcement of domestic judgment is suspended if an appeal is ongoing. Foreign court judgments are only enforceable in Morocco after having been vested exequatur by the Moroccan court of the domicile or residence of the defendant or, failing that, the place where the execution of such a judgment must be carried out. The seized Moroccan court must ensure the legality and validity of the foreign judgment and the jurisdiction of the foreign court who rendered the judgment. The Moroccan judge should also verify whether any stipulation of this decision undermines Moroccan public order.

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Similarly, Article 327-31 of the Moroccan Code of Civil Procedure provides that the arbitral award may be enforced only pursuant to an order of exequatur issued by the President of the jurisdiction where the award was rendered. The proceedings before the competent lower court and the court of appeal to obtain an enforcement order are conducted inter partes. With respect to the application for recognition and enforcement of foreign arbitral awards rendered abroad, such a proceeding may be carried out before a Moroccan jurisdiction. However, such recognition and enforcement are applicable if they are not manifestly contrary to Moroccan national or international public policy. Thus, the enforcement of a foreign award means that its terms are enforced by an exequatur and by judicial coercive and/or interim measures, if necessary.

International arbitration Arbitration is regulated by the Moroccan Code of Civil Procedure of September 28, 1974 as amended, among other laws, by Law No. 08-05 dated December 6, 2007 on Arbitration and Conventional Mediation. The current Moroccan framework, which adopted the UNCITRAL Model Law on international commercial arbitration, rules both internal and international arbitration. It provides all relevant issues in arbitration, including the arbitration agreement, its effects and validity requirements, arbitrators and their powers, the arbitration proceedings, the award, its effects, its enforcement and validity. The said enforcement is particularly supported by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, to which Morocco has been a party since February 12, 1959. According to the aforementioned regulation, the parties are free to opt for an institutional arbitration instead of an ad hoc proceeding, thus relying on the rules set out by the relevant institution. There are several arbitration institutions in Morocco, such as the International Center of Arbitration and Mediation of Rabat, and the Mizan Institution which is considered a newly established arbitration and mediation centre in Casablanca. Additionally, it should be noted that the current Moroccan law relating to national and international arbitration is expected to be amended very soon, as a project law is currently under discussion by the Moroccan Parliament. This new law, which will take the form of an Arbitration and Mediation Code, aims at encouraging international investment in particular, with better and more efficient international arbitral legislation.

Mediation and ADR The only alternative dispute resolution paths governed by the Moroccan Code of Civil Procedure are arbitration and conventional mediation proceedings. Arbitration is regarded as the main alternative dispute resolution path, with mediation proceedings being less common. Neither the current regulation nor the project of law under discussion refer to judicial mediation. Only voluntary mediation is recognised by law, which defines such a procedure as a mechanism in which two or more parties try amicably to reach an agreement to resolve a dispute between them with the assistance of a third party: the mediator. Similarly to arbitration, the Moroccan Code of Civil Procedure provides all relevant issues in mediation, including the mediation agreement, its effects and validity requirements, the mediator and their prerogatives, the mediation proceedings, and the transaction, its effects, enforcement and validity.

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Moreover, in order to promote and facilitate international trade and commerce by enabling the parties to a dispute to easily enforce and invoke settlement agreements across borders, the Moroccan government is currently in discussions about whether to sign and ratify the Singapore Convention on International Settlement Agreements Resulting from Mediation dated December 20, 2018. Said decision should be released in the next few months.

Regulatory investigations Morocco has several independent institutions in charge of upholding the regulations applicable to some economical, industrial and environmental sectors of activity, such as banking, telecommunications, competition, and securities markets, among others. A few examples are the Competition Council “Conseil de la Concurrence”, Bank Al-Maghreb, the National Telecommunications Agency “Agence Nationale de Réglementation des Télécommunications”, the Data Protection Commission “Commission Nationale de contrôle de la protection des Données à caractère Personnel” and the Moroccan Capital Market Authority “Autorité Marocaine du Marché des Capitaux”, as well as various regulatory agencies with regard to specific professional groups (i.e. lawyers, notaries and accountants). Each one of these agencies and institutions is empowered to carry out inspections and investigations in order to detect any breach of any mandatory legislation by companies or individuals operating in the sectors under its supervision. Moreover, Moroccan regulation allows such regulators extensive investigative and repressive powers. In particular, regulators may issue regulations, carry out inspections by making raids, check books and other documents, obtain copies of any documentation, question the staff of the operator under investigation, issue injunctions to comply with, and impose enforcement and protective measures as well as disciplinary and administrative sanctions, including substantial financial penalties (e.g. on January 27, 2020, the National Telecommunications Agency imposed a fine of MAD 3.3 billion on a Moroccan telecommunications company for abuse of a dominant position). In general, the regulator’s decisions could be subject to review by the state courts, which will review both the verdict and, as the case may be, the pronounced sanction. Thus, the court may lift or uphold the regulator’s decision and/or decrease or increase the imposed sanction.

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Youssef Hanane Tel: +212 522 48 74 74 / Email: [email protected] Youssef Hanane is a visiting professor of business law and has been an Attorney-at-Law at the Casablanca Bar since 2010. He is a cofounder of the Mizan Arbiration Center, which is a newly established arbitration and mediation centre in Casablanca. He joined Hajji & Associés in 2017 and has extensive experience in international and domestic arbitrations and in commercial litigation before the Moroccan Courts.

Ayoub Berdai Tel: +212 522 48 74 74 / Email: [email protected] Ayoub Berdai is a trainee lawyer holding a Master’s degree in business law. He joined Hajji & Associés in 2018 and has assisted domestic and international clients in corporate, data protection compliance, investment, commercial litigation, mergers and acquisitions, international financing and international arbitration. Ayoub Berdai is one of the three cofounders of the Mizan Arbiration Center in Casablanca.

Hajji & Associés – Avocats 28 Boulevard Moulay Youssef, 20070 Casablanca, Morocco Tel: +212 522 48 74 74 / URL: www.ahlo.ma

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Paul Heath QC, Bankside Chambers | South Square Michael Greenop, Quinn Emanuel Urquhart & Sullivan LLP

Efficiency of process New Zealand’s legal system is based on the English common law with its two main sources of law being statute and the common law. The courts of general jurisdiction have four levels. At first instance, the District Court has jurisdiction over civil claims of up to NZ $350,000 (District Court Act 2016, s 74). Most civil cases in the District Court are undisputed or “undefended”, meaning that they are resolved without proceeding to a hearing (2019 Annual Report: District Court of New Zealand). In 2019, the District Court delivered 221 decisions of which 87% (192) were delivered within a period of one–three months (2019 Annual Report: District Court of New Zealand). The High Court hears civil claims exceeding NZ $350,000 in value or those involving particularly complex issues. The High Court is a court of general jurisdiction under the Senior Courts Act 2016. In 2019, there were 1,933 civil judgments delivered by the High Court of New Zealand, of which 92% were delivered within three months of the hearing or last submissions (Report from the High Court 2019: The Year in Review at 4). A case that is decided in a District Court can be appealed to the High Court, or in some cases, directly to the Court of Appeal. The Court of Appeal hears appeals from the High Court. The Supreme Court is the final appeal court and its decisions are binding on all other courts. Outside of the courts of general jurisdiction, there are specialist courts of limited statutory jurisdiction as well as specialist tribunals, designed to hear specific categories of disputes. For example, there is the Employment Court and Environment Court. As a general principle, all civil matters that proceed to a trial are heard by Judge alone who issues a written judgment. Rule 1.2 of the High Court Rules 2016 (“HCR”) provides that the objective of the rules is to “secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application”. Proceedings are commenced by filing a statement of claim and notice of proceeding in the appropriate registry (HCR, Subparts 5–6). If a defendant intends to defend the proceeding, it must file and serve a statement of defence (HCR, Subparts 6 and 14). The parties are then required to file a comprehensive memorandum addressing a number of procedural matters (HCR, r 7.3). A first case management conference usually follows, convened before an Associate Judge where preliminary issues are discussed, and procedural directions are timetabled. Throughout proceedings, the parties may attend case management conferences in which orders are made to govern the conduct of the proceedings (HCR, Part 7). During these conferences, the Judge assists the parties in identifying and refining issues requiring judicial resolution, determining the procedural steps to prepare proceedings for a hearing, deciding

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand how to facilitate the conduct of a hearing and ensuring that the costs of proceedings are proportionate to the subject matter. Judges have wide discretion to manage cases as they see fit to ensure that the real issues in dispute are identified and the matter is progressed to trial as soon as possible. Courts have wide discretion to impose sanctions (which may include adverse costs orders) on a party that has not complied with court orders or directions. Once all of the parties’ evidence has been prepared and the interlocutory disputes (if any) resolved, the case proceeds to a pre-trial conference and then a final hearing. The New Zealand court system hears at least 1,000 substantive civil cases each year (https://www.courtsofnz.govt.nz/about-the-judiciary/overview/). From commencement of proceedings until judgment, the average time taken to resolve a dispute in the New Zealand courts is reported as being approximately 216 days (World Bank Group, Economy Profile: New Zealand Doing Business 2020 at 49). However, the latest statistics indicate that the median time to trial for general proceedings trial adjudications in the High Court system has increased to approximately 406 days as at 31 December 2019 (Report from the High Court 2019: The Year in Review at 12). According to the World Bank Group statistics, the average costs of court fees, lawyer fees and enforcement fees is approximately 27.2% of the claim value (World Bank Group, Economy Profile: New ZealandDoing Business 2020 at 49).

Integrity of process The New Zealand system of government is based on the separation of powers between the Legislature, the Executive and the Judiciary. New Zealand’s constitutional arrangements do not take the form of a written constitution as such but of a collection of laws, conventions and practices. The Judiciary is the third branch of government (led by the Chief Justice, Dame Helen Winkelmann) and works alongside, but remains independent of, the other branches. The funding and administration of the courts is provided by the Executive (through the Ministry of Justice), although there is some administrative interaction between the Executive and Judiciary. New Zealand’s laws and constitution provide Judges with some protections. The independence of the Judiciary is sacrosanct and is primarily protected through a statutory safeguard against removal from office (other than in circumstances of misbehaviour or incapacity to fulfil the functions of office) as well as a safeguard against government ministers or Judges controlling other Judges’ salaries. The rule of law forms a significant part of the New Zealand constitution. Under this rule, government and all citizens are bound by the law and are accountable under the law. Decisions of the courts themselves similarly must be lawful and can be appealed or reviewed by higher courts for error. New Zealand led the East Asia and Pacific Region on the World Justice Project 2017/18 Rule of Law Index, which measures how the rule of law is experienced and perceived by the public (https://www.newzealandnow.govt.nz/living-in- nz/history-government/legal-system). On 28 February 2019, the World Justice Project Rule of Law Index ranked New Zealand in eighth place globally and first in the East Asia and Pacific Region. The Index is the world’s most comprehensive data set of its kind and serves as an independent quantitative tool that measures adherence to the rule of law in practice. All judicial appointments are made by the Governor-General acting on the recommendation of the Attorney-General. No person shall be appointed a Judge unless he or she has had a practising certificate as a barrister or solicitor for at least seven years. Judges are expected to act independently and must observe a Statement of Principles in the Administration of the Courts.

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As well as being independent, Judges must also be accountable to the public. Public adjudication of disputes is an expression of the rule of law in action. As a general rule, the courts are open to the public so that the delivery of justice can be observed by the public. Subject to specific statutory exceptions, members of the public and the media have the right to attend court hearings. As a testament to transparency of the system, judgments rendered in commercial cases at the appellate and Supreme Court levels are made available to the general public through publication. Transparency International’s Corruption Perceptions Index for 2019 placed New Zealand first-equal with Denmark. Courts apply the rules of natural justice as a condition governing the exercise of a statutory power. For example, in adjudicating the exercise of a statutory power, a court will have regard to whether the procedure adopted in exercising that power was procedurally fair. In 2019, there were 172 judicial reviews filed.

Evidence New Zealand’s legal procedure adopts an adversarial system wherein each party can present their evidence and witnesses, and test the other party’s case and witnesses through cross-examination. Part 8 of the HCR sets out the rules on discovery, inspection and interrogatories. Under these rules, there are a number of aspects that are designed to assist in the efficient resolution of disputes. Similar to many other jurisdictions, as soon as a proceeding is reasonably contemplated, all parties or prospective parties are required to take “all reasonable steps” to preserve documents that “are, or are reasonably likely to be, discoverable” (HCR, r 8.3). After filing a pleading, a party must serve on other parties documents referred to in that pleading as well as any additional principal documents in that party’s control that it has used when preparing the pleading and on which it intends to rely at the trial or hearing, unless such documents are claimed to be privileged or confidential (r 8.4). Unless a Judge considers that a proceeding can be justly disposed of without any discovery, it is usual for a Judge to make a discovery order at the first case management conference (r 8.5). Under the interlocutory procedure of “discovery”, a party obtains from an opponent the disclosure and subsequent production of documents that are relevant to a fact in issue in the proceedings. Under the HCR, a party may also apply for an order for discovery against non-parties (r 8.21). The process of discovery is an ongoing one (r 8.18) and requires disclosure of documents of actual and direct relevance – being something that is directly connected, related or pertinent to the matter in hand. Parties assess relevance by reference to the pleadings. They set the outer limits of what needs to be disclosed. A Judge may order either: (i) standard discovery; or (ii) tailored discovery (r 8.6). Under standard discovery, each party must conduct a reasonable search for and disclose all documents that are or have been in that party’s control and that are (r 8.7) documents: (i) on which the party relies; and (ii) that adversely affect or support that party’s own case or the case of another party. Control includes possession of the document, a right to possess the document or a right to inspect or copy the document. In 2011, the HCR were amended to introduce the concept of tailored discovery to reduce the cost and delay associated with proceedings (similar to the concept of document production in international arbitration). Tailored discovery involves the disclosure of documents that

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand fall within the categories indicated in cl 3(2) of Part 1 of sch 9 of the HCR or, alternatively, under some other classification method ordered by a Judge (e.g. by subject heading or date periods). Under r 8.8, tailored discovery “must” be ordered when the interests of justice require an order involving either more or less discovery than standard discovery. For example, tailored discovery is presumed to be appropriate where there are allegations of fraud or dishonesty or sums in excess of NZ $2,500,000. Discovery sought must also be proportionate to the subject matter of the proceedings (r 8.14). The High Court in Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 clarified that proportionality requires consideration of the chances of finding relevant documents and their degree of relevance. These factors are then balanced against the cost of carrying out the discovery process and weighed against broader considerations such as “the amount at issue, the resources of the parties, and delay to the proceedings”. As a general principle under r 8.2, the parties are expected to co-operate to ensure that the processes of discovery and inspection are both proportionate to the subject matter of proceedings and facilitated by agreement on practical arrangements (such as electronic disclosure). For example, the parties are expected to consider the efficient and effective use of technology. Where an order for discovery is made by the court, the parties are required to compile and exchange lists of discoverable documents, which is verified on oath or affirmation. A discovery order will usually incorporate the standard listing and exchange protocol set out in Part 2 of sch 9 of the HCR, which may be varied (r 8.12). Relevant documents are then produced by each party for inspection. In large or complex cases, discovery is often completed on an electronic basis, in accordance with a pre-agreed protocol. Every person is guilty of contempt of court who, being a person against whom a discovery order has been made, wilfully and without lawful excuse disobeys the order or fails to ensure the order is complied with. Furthermore, subject to certain limited exceptions, a party is not entitled to produce any document in evidence if it has not previously discovered the document to the other side (HCR, r 8.31). Failing to discover a document that should have been discovered may also lead the Judge to make an adverse inference about a witness’ credibility. The Evidence Act 2006 (“Evidence Act”) codifies the laws on evidence and addresses matters such as privilege and confidentiality (ss 51–70). The grounds for privilege are set out in ss 53–60. Such grounds include, inter alia, solicitor-client privilege (s 54) and litigation privilege in respect of any preparatory materials for proceedings or reasonably apprehended proceedings (where there is a real likelihood, not mere possibility) (s 56). Where in the process of discovery a party declares a document to be privileged, it is entitled to withhold that document from inspection by the other party/parties (unless another party successfully challenges the claim to privilege) (s 53 and HCR, r 8.28). Under r 8.25 of the HCR, a party may apply to a court for an order setting aside or modifying another party’s claim to privilege or confidentiality. In accordance with s 65, privilege can be waived expressly or impliedly by a party in circumstances where that party’s treatment of the document is inconsistent with maintaining the confidentiality of the material in a way that could lead to injustice if privilege is claimed. Aside from waiver, Judges are empowered to disallow a claim of privilege under s 67 in certain specific circumstances. Commercial litigation often involves the disclosure of commercially sensitive documents. Documents obtained on discovery may not be used for any purpose other than the proceedings

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand in which they were disclosed (HCR, r 8.30). While confidentiality does not provide a basis for resisting production of a document, parties will often enter into confidentiality and non-disclosure agreements to manage the exchange of such documents (for example, by agreeing to limit access to commercially sensitive documents). A Judge may exercise an overriding discretion to protect confidential documents from disclosure in a proceeding where the Judge considers the public interest in disclosure is outweighed by the public interest in preventing harm to persons affected by, or involved in obtaining, communicating, or receiving, the confidential information, or by the public interest in preventing harm to relationships of confidentiality or in maintaining the free flow of information (Evidence Act, s 69). Even if relevant information is confidential, it will still be required to be given in court unless the court makes a non-disclosure order. If a case proceeds to a hearing (at which stage, confidential documents may be put into evidence or otherwise disclosed in court), the parties can apply to the court for suppression and non-publication orders. In practice, parties to a domestic arbitration will often have recourse to equivalent discovery as that available under the HCR. There is some debate as to whether the rules of evidence which apply to court proceedings in New Zealand (by virtue of the Evidence Act) apply to arbitration proceedings in New Zealand. The better view seems to be that reliance on the Evidence Act is impermissible unless the parties have specifically agreed to its application (as a result of Arbitration Act 1996, sch 1, art 19(1)–(2)). In Sir David AR Williams KNZM QC’s view, arbitral tribunals shall apply autonomous evidentiary principles rather than seeking to resort to any national laws on evidence. He opines that the IBA Rules on Evidence in International Arbitration 2010 provide a better “soft law” guide on evidentiary principles for arbitral proceedings. A possible exception could be where the parties had agreed to an appeal on a question of law (see cl 5 of sch 2 of the Arbitration Act 1996 discussed below) and, for example, a decision on privilege could substantially affect the rights of the parties. In those circumstances, a court may be prepared to use the Evidence Act as the basis for assessing New Zealand law. Rule 7 of the Senior Courts (Access to Court Documents) Rules 2007 prevents access to confidential documents on a New Zealand court file concerning an arbitration. It provides that no person may access “a document, Court file, or any judgment or order that relates to … the Arbitration Act 1996”. If a person other than a party to the proceeding seeks access to such document, a Judge must be “satisfied that there is good reason for permitting access”. In other appropriate cases, a Judge may make an order that the Court file not be searched, copied or inspected without permission from an appropriate judicial officer. Sections 184–187 of the Evidence Act address the discretion or power given to New Zealand courts to order that evidence be taken in New Zealand for use in civil proceedings in other jurisdictions. For the preliminary question of jurisdiction, the application must: (i) seek assistance from a requesting court in an overseas jurisdiction; (ii) meet form and manner requirements; and (iii) relate to the obtaining of “evidence” for the purpose of a civil proceeding instituted or contemplated in an overseas court. An example of such an application is Republic of Kazakhstan v Mega [2016] NZHC 1898. Section 188 of the Evidence Act sets out the procedure for taking evidence outside New Zealand in civil proceedings in the New Zealand High Court.

Interim relief The primary court from which interim relief may be granted is the High Court of New Zealand. That is a superior court of record with inherent jurisdiction, generally not dealing

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand with disputes involving less than NZ $350,000. Its ability to grant interim relief stems both from the HCR and the inherent jurisdiction of the court. The most frequently used measures are injunctions, preservation orders, freezing orders (formerly known as Mareva injunctions), and search orders (formerly known as Anton Piller orders). An application for an injunction may be made by a party before or after commencement of the hearing of a proceeding, whether or not claimed in the parties’ statement of claim, counterclaim, or third-party notice (HCR, r 7.53(1)). An application may only be made before the commencement of a proceeding in cases of urgency (r 7.53(2)). Where an application for an injunction is made without notice to the party against whom the remedy is directed, counsel for the applicant must lodge a certificate confirming that the application complies with relevant rules relating to such applications (r 7.23). Certifying counsel must be satisfied personally of compliance with the rules. In every case in which an injunction is sought, it must be supported by a written undertaking that the applicant will comply with any order for the payment of damages to compensate the other party for any damage sustained through the injunction (r 7.54(1)). The High Court can also exercise jurisdiction to grant an interim measure when the parties have agreed to arbitration, though its jurisdiction is limited to cases in which no arbitral tribunal has yet been constituted (Arbitration Act 1996, sch 1, arts 17–17M). That jurisdiction extends to making preliminary orders in cases of urgency where the opposing party is not heard (arts 17C–17G). The Arbitration Act 1996 does not require an undertaking as to damages to be lodged on an application for an interim measure, but that may be directed by the Court as a condition of the grant of interim relief. To obtain injunctive relief, an applicant must generally demonstrate a seriously arguable case on the merits. A serious question to be tried is one for which there is supporting material, but the outcome is uncertain. Further, the applicant must satisfy the Court that the balance of convenience lies in its favour. This involves balancing whether the grant of an interim injunction or refusal is the course that will best allow adjustments to the rights of the parties in a manner that accords with fairness and justice. The word “convenience” is somewhat of a misnomer as the real question involves balancing the risks to each party of granting or refusing interim relief. Maintaining the status quo is sometimes a relevant factor but will not be determinative of the outcome. Ultimately, before granting an interim injunction, the Court must stand back and assess whether the overall interests of justice require such relief to be granted. Generally, see Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 at 142 (CA). An injunction may be issued to restrain conduct or in a mandatory form, to compel a person to do something specific. Where the grant of mandatory relief may have the effect of determining a proceeding, the Court will focus more intensely on the question whether the balance of convenience justifies relief if a wrong decision were made. Generally, mandatory interim injunctive relief will not be granted save in a clear case. An appropriate means by which the dissipation of property may be avoided is to seek a preservation order. Such an order may be made subject to any conditions specified by a Judge and is designed to require the detention, custody or preservation of any property (HCR, r 7.55(1)). The particular type of order that may be made will depend on the nature of the property. In cases involving real property, the court may authorise a person to enter any land or to do any other thing for the purpose of giving effect to the order (r 7.55(2)). If it were intended to restrain the disposition of money, the court may order that a particular fund be paid into court or otherwise secured if the proceeding concerns the right of a

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand party to the fund (r 7.55(3)). The term “property” for the purpose of a preservation order includes both real and personal property or any other form of right or interest (r 1.3(1), definition of “property”). The primary purpose of a preservation order is to ensure that a defendant remains judgment-worthy. A court may also make freezing orders to prevent the disposition of assets pending determination of specific claims (r 32.2(1)). Generally, such an order will besought without notice in order to protect the applicant from disposition of assets located in or outside New Zealand. The general form of relief is to prevent the respondent “from disposing of, dealing with, or diminishing the value” of specified assets (r 32.2(3)). A signed undertaking as to damages must state that the applicant will comply with any order for the payment of damages to compensate for loss sustained in consequence of the freezing order (r 32.2(5)). Further, because a freezing order is generally made on a without notice basis, the applicant must “fully and frankly” disclose to the court all material facts, including possible defences known to it or doubts as to the applicant’s ability to comply with the undertaking as to damages (r 32.2(3)). Search orders enable an applicant, under strict conditions, with or without notice to a respondent, to search property to secure or preserve evidence and to require a respondent to allow persons to enter premises for the purpose of securing and preserving that evidence (r 33.2). A search order may only be granted if the court were satisfied the applicant has a strong prima facie case on the merits, the potential or actual loss or damage will be serious if an order were not made, and there is sufficient evidence to show that the respondent possesses relevant evidentiary material and a real possibility that such evidence might be destroyed or caused, in some other way, to be unavailable for use in court (r 33.3). An independent solicitor must be appointed to supervise the execution of the order and the applicant must undertake to pay the reasonable costs and disbursements of any such person (rr 33.5 and 33.7). The same duties of candour and certification apply as with other forms of interim relief, and an undertaking as to damages must be given. The terms of a search order will strictly circumscribe the way in which entry to specified premises is to be made, the steps to be taken in executing the order, provision of information to the respondent and not to disclose information about the order for up to three working days after service. In addition, the court may impose such other terms as it thinks fit (r 33.6(1) and (2)).

Cross-border disputes The Insolvency (Cross-border) Act 2006 adopts, in a slightly adapted form, the UNCITRAL Model Law on Cross-border Insolvency. That Act is designed to enable representatives of foreign collective insolvency proceedings to apply to the High Court of New Zealand for an order recognising it (Insolvency (Cross-border) Act 2006, sch 1 art 2(a), definition of “foreign proceeding” and art 15). Recognition can be granted on the basis that the entity in issue is a foreign main proceeding or a foreign non-main proceeding (arts 15 and 17(2)). To fall within the former category, it must be demonstrated that the entity has its centre of main interests in the jurisdiction from which the application is brought (art 2(b), definition of “foreign main proceeding”). To qualify for recognition of a foreign non-main proceeding, it must be demonstrated that the entity has an “establishment” in the jurisdiction from which the application is made (art 2(c), definition of “foreign non-main proceeding”). The term “establishment” means any place of operation where the debtor carries out a “non-transitory economic activity with human means and goods or services”

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(art 2(f), definition of “establishment”). Recognition as a foreign main proceeding carries with it certain automatic relief, whereas under a foreign non-main proceeding, relief is limited to remedies that the High Court may grant as a matter of discretion (arts 20 and 21. Additional discretionary relief may also be granted for foreign main proceedings). There may be cases in which a foreign proceeding does not fit within the definition of either a foreign main or foreign non-main proceeding. In such cases, the High Court may still grant assistance to a foreign insolvency representative through what was previously known as the “order in aid” procedure. In doing so, the High Court may exercise any power that it could exercise if the matter in issue had arisen within its own jurisdiction (Insolvency (Cross-border) Act 2006, s 8). Generally, see Williams v Simpson [2011] 2 NZLR 380 (HC). Interim relief may be granted after an application for recognition has been filed but before an order is made. The purpose of such an order is to protect, in urgent circumstances, the risk of assets being moved or concealed. It may also be used to preserve perishable property or other types which may be susceptible to devaluation or be otherwise in jeopardy (sch 1, art 19). A debtor whose property has been made subject to such an order must be served promptly and the order reviewed. The High Court will take an holistic approach to whether interim relief should be granted and will ensure that the benefits to be gained by recognising collective proceedings initiated in another jurisdiction are not undermined by a debtor using the period between filing of an application for recognition and disposal of it to move assets beyond the reach of those entitled to participate in their proceeds. Provided the interim relief sought is one that could be ordered in a domestic insolvency, the court has jurisdiction to impose that measure. See Williams v Simpson [2011] BPIR 918 (NZHC). There are provisions in the Insolvency (Cross-border) Act that require court co-operation and co-ordination of concurrent proceedings (arts 25–29 and 31). Among the forms of co-operation with foreign courts and foreign representatives that the High Court is required to undertake are the ability to communicate directly with foreign courts or foreign representatives, to appoint any person to act at the direction of the High Court, to implement agreements about the co-ordination of proceedings, and to ensure concurrent proceedings in relation to the same debtor are co-ordinated (arts 25–27). The injunction to the High Court to “co-operate to the maximum extent possible with foreign courts or foreign representatives” includes an ability for courts in New Zealand to consider issues simultaneously with courts in other countries in which the debtor has places of business. That may include joint hearings; one with Australia is scheduled for late 2020. Parties may apply to register a final and conclusive judgment for the payment of a sum of money (regardless of any appeal that may be pending against it) pursuant to the Reciprocal Enforcement of Judgments Act 1934. A registered judgment has the same force and effect as if the judgment had been originally given in the New Zealand High Court on the date of registration (s 4(2)(a) and (d)). A registered judgment may be enforced in New Zealand only if, and to the extent that, it is capable of being enforced in the country of the original Court at the time the enforcement proceedings are taken (s 4(2A)). See Ho Wah Genting International Ltd v Kasuya (1999) 13 PRNZ 19 on the issue of registration being prohibited in circumstances where the judgment is unenforceable in the country of the original Court. Additionally, a foreign judgment may not be enforced or recognised in New Zealand where the proceedings were contrary to New Zealand’s concepts of natural justice.

Alternative dispute resolution New Zealand was an early adopter of alternative dispute resolution processes. Indeed, it is referred to in at least 191 domestic statutes, many of which refer disputes to mediation

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand or arbitration (MBIE Dispute Resolution: Best Practice Report 2 of 2 to Joint Ministers (March 2014) at 18). Arbitration is widely used and understood in New Zealand. Arbitration of commercial disputes has increased in New Zealand in the last two decades (see Williams & Kawharu on Arbitration, second ed, 2017 at 10). The prevalence of international arbitration is increasing with the globalisation of New Zealand’s economy. New Zealand provides an ideal, neutral and independent seat/venue for international dispute resolution. The Arbitration Act 1996 governs all forms of arbitration in New Zealand, whether domestic or international. It has four underlying principles that form the “philosophical bases upon which the Act is underpinned”, namely: (i) party autonomy; (ii) equality of treatment; (iii) reduced curial involvement in the arbitral process; and (iv) increased powers for the arbitral tribunal (see Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 (HC)). The Arbitration Act contains a core set of 20 mandatory provisions applying to all New Zealand-seated arbitrations, unless the parties agree otherwise in writing. The Act then sets out two primary schedules. Schedule 1 comprises rules based on the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) which apply by default to both international and domestic arbitrations (s 6). Schedule 2 contains additional rules that apply by default to domestic arbitration (unless agreed otherwise) but only to international arbitration if the parties so agree (s 6(2)). Accordingly, an arbitration agreement/provision that selects New Zealand as the seat of arbitration will, by default, be conducted under the Model Law. Reference to the preparatory works of the Model Law in interpreting the Arbitration Act is expressly permitted under s 3. In enacting that statute, New Zealand became the first country in the world to adopt the whole of the new UNCITRAL legislative provisions on interim measures and preliminary orders (with very few minor modifications). Clause 5 of Schedule 2 of the Act (presumed to apply by default to domestic arbitrations and applicable only by agreement in international arbitrations) expressly permits appeals to the High Court on questions of law arising out of an award if: (i) the parties agreed before the making of the award that an appeal as of right would lie; (ii) every party gives consent to the appeal after the award is made; or (iii) the High Court grants leave to appeal. Leave will only be granted if, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of a party. Relevant factors to be considered are set out in Gold & Reserve Developments (New Zealand) Ltd v Doug Hood Ltd [2000] 3 NZLR 318 (CA). A question of law does not include any question of whether the award was supported by any (or any sufficient) evidence, or whether the tribunal drew the correct factual inferences (cl 5(10)). New Zealand is one of a small number of jurisdictions that codifies a suite of default provisions on confidentiality and privacy, set out in ss 14–14I of the Arbitration Act. All arbitral proceedings in New Zealand must be conducted in private (s 14A). However, consistent with the principle of open justice, all arbitration-related cases are to be heard in public unless a court orders otherwise (s 14F–14H). If arbitration-related proceedings are to be heard in private, the court’s decision shall be anonymised in order to protect the identity of the parties (s 14I). Information obtained in arbitration proceedings in New Zealand is confidential, subject to a number of limited exceptions (ss 14B and 14C–14E, respectively). Much domestic arbitration in New Zealand tends to resemble litigation before the High Court (including pleadings, particulars, trials of preliminary issues, extensive discovery and briefs of evidence). However, as noted in Williams & Kawharu on Arbitration, second ed, 2017 at 12, “[w]ithin the confines of the non-derogable provisions of the NZ Act,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand including certain fundamental tenets of natural justice, the parties are free to agree on a process that best suits them for resolving the dispute, and are not bound by strict rules of evidence or court procedures”. In that regard, parties may find it helpful to adopt standard form rules developed by the: • Arbitrators’ and Mediators’ Institute of New Zealand (https://www.aminz.org.nz/); • New Zealand International Arbitration Centre (https://www.nziac.com/); or • New Zealand Dispute Resolution Centre (https://www.nzdrc.co.nz/). New Zealand courts will respect parties’ autonomy to choose arbitration as a means of alternative dispute resolution. Valid arbitration agreements are therefore regularly enforced by the courts and stays of court proceedings in favour of arbitration ordered. In this regard, r 7.80 of the HCR provides that parties to a proceeding may agree to arbitrate their dispute at any time during the course of a proceeding. Where this occurs, the court must stay the proceeding unless it finds that the arbitration agreement entered into has no effect oris inoperative or incapable of being performed. Art 8(1) of sch 1 of the Arbitration Act (derived from art II(3) of the New York Convention) adopts the same wording but adds that a court may also refuse to stay court proceedings in favour of arbitration if it finds that “there is not in fact any dispute between the parties with regard to the matters agreed to be referred”. These words reflect a conscious effort by the Law Commission to ensure the availability of the summary judgment procedure in suitable cases. The Supreme Court in Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 held that a stay application should be determined first and, only if that is rejected, should an application for summary judgment be considered (at [52]). A stay will be refused only if it is clear that “the defendant is not acting bona fide in asserting that there is a dispute, or it is immediately demonstrable that there is nothing disputable at issue” (at [36]). The Supreme Court clarified that, even in circumstances where the “no arguable defence” test applicable to summary judgment applications could be satisfied, or one party’s view on a decisive legal question is held to be incorrect, there is still a real “dispute” even though a court may ultimately be prepared to grant summary judgment in relation to it (at [36]–[39]). One of the express purposes of the Arbitration Act is to “redefine and clarify the limits of judicial review of the arbitral process and arbitral awards”. New Zealand courts offer strong judicial support for arbitration and Part 26 of the HCR sets out certain procedural rules for court proceedings in relation to arbitral matters. A court may assist in matters such as: upholding the arbitration agreement (through staying court proceedings or anti-suit injunctions); ensuring the proper commencement of the arbitration proceedings through the appointment of the arbitral tribunal (art 11(1), sch 1 and cl 1, sch 2); considering challenges to arbitrators (art 13(3)) and confirming replacement of arbitrators (art 14(1)); issuing subpoenas for New Zealand-based witnesses to provide evidence for use in a foreign-based arbitration, at the request of a foreign arbitral tribunal (see, for example, Dalian Deepwater Developer Ltd v Sveinung Dybdahl [2015] NZHC 151); and reviewing domestic arbitral orders and awards (arts 16(3) and 34, sch 1 and cls 4–5, sch 2). New Zealand is a contracting party to the Convention on the Execution of Foreign Arbitral Awards 1927 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”). Recognition and enforcement of arbitral awards is governed by arts 35 and 36 of sch 1 of the Arbitration Act, which essentially incorporate the New York Convention into New Zealand law. New Zealand courts are typically supportive of enforcement of foreign arbitral awards (see Hi-Gene Ltd v Swisher Hygiene Franchise Corp [2010] NZCA 359 at [27]). A binding arbitral award may be enforced by originating application to the High Court or District Court (as appropriate) for entry of judgment in

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Bankside Chambers | South Square | Quinn Emanuel Urquhart & Sullivan LLP New Zealand terms of the award under art 35 of sch 1. A New Zealand court will recognise the award, as long as it meets the requirements set out in arts 35(2) and 36, without needing to apply for enforcement. Recognition and enforcement of an award is irrespective of the country in which it was made and can only be refused on application by a party on the limited grounds listed in art 36 of sch 1 of the Arbitration Act (reflecting the New York Convention). Generally, see Methanex Motuni Ltd v Spellman [2004] 1 NZLR 95 (HC). Unlike arbitration in New Zealand, there is no mandatory set of statutory procedures imposed by law where parties use mediation or refer their dispute to expert determination. Settlement agreements reached at mediation do not require court sanction and will be binding and enforceable upon the parties if a valid contract has been formed. Any order to engage in mediation can only be made with the consent of the parties (HCR, r 7.79(3)). Indeed, the High Court in BC 198900 Ltd v Bhana Investments Ltd [2015] NZHC 2787 recognised that costs sanctions for failing to attempt mediation would undermine its voluntary nature in New Zealand. Expert determination has become a popular method of resolving disputes concerning construction contracts, professional services contracts, sale of goods, leases, licences and valuations. Whereas an arbitral tribunal must act judicially, an expert decides according to his or her own expertise (Forestry Corporation of New Zealand Ltd (in rec) v Attorney- General [2003] 3 NZLR 328 (HC)). According to the Court of Appeal in Waterfront Properties (2009) Ltd v Lighter Quay Residents’ Society Inc [2015] NZCA 62, [2015] NZAR 492, where an expert determination clause provides that any determination by the experts shall be “final and binding”, those words without any qualification mean there are only very limited grounds on which the determination may be challenged. A court may intervene only where the expert has departed from their mandate in a material respect and failed to do what they were appointed to do. It is not enough to show the expert has made a mistake, was negligent or even patently wrong. The High Court also has jurisdiction to convene a judicial settlement conference (HCR, r 7.79(1)). This involves an in-person conference with a Judge to facilitate settlement discussions between the parties, on a confidential and without prejudice basis. If a settlement is not reached, a different Judge will preside at trial.

Costs The High Court has a general jurisdiction as to costs (HCR, r 14.1). The basic principle is that costs follow the outcome of the proceeding. Provisions in the nature of a scale exist whereby costs can be awarded (rr 14.2(b) and 14.3). There are four layers: standard costs (rr 14.4 and 14.5); reduced costs (r 14.7); increased costs (r 14.6(3)); and indemnity costs (r 14.6(4)). Separate rules exist to enable ready calculation of disbursements incurred in the proceeding (r 14.12). Standard costs are assessed by reference to a categorisation of proceedings by a High Court Judge based on criteria relevant to its complexity (r 14.3), appropriate daily recovery rates (r 14.4) and principles for the determination of a reasonable time to take identified steps in the proceeding (r 14.5). Costs below those that would be fixed as standard will be ordered where there are circumstances justifying that course (r 14.7); as a specific example, reference can be made to cases in which a without prejudice save as to costs letter has been sent at a time at which it will not be given full effect to deny costs against the party making the offer (rr 14.10 and 14.11).

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Increased costs are designed to attach to cases in which there is a failure by the paying party to act reasonably (r 14.6(3)). Indemnity costs are likely to be ordered where that party has behaved either badly or very unreasonably; for example, by making allegations of fraud known to be false or commencing or continuing the proceeding for some ulterior motive (r 14.6(4)). Bradbury v Westpac Bank Corporation [2009] 3 NZLR 400 (CA) discusses the principles. It is possible to calculate the likely costs that will be ordered by reference to the standard scale applied in most cases and the steps required to bring the case to trial. That enables both parties to assess in advance, for settlement purposes, the amount of costs that is likely to be awarded should they lose. In cases where the court departs from standard costs, reasons for that decision must be given.

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The Honourable Paul Heath QC Tel: +64 9307 8779 Email: [email protected] / [email protected] Hon Paul Heath QC was admitted to the New Zealand Bar in 1978, practised as a barrister and solicitor until 1998, when he was appointed a Queen’s Counsel. Paul served as a High Court Judge between 2002 and 2018. During that time, he sat as an ad hoc member of the Court of Appeal from 2003. Following his retirement from the Bench, he joined Bankside Chambers, Auckland and Singapore, and offers services primarily as an arbitrator, and provides strategic advice in his specialist area of insolvency and restructuring law. Paul is also an Associate of South Square, London. He is currently a member of the Presidential Panel of the Chartered Institute of Arbitrators (UK) and Panels maintained by the Singapore International Arbitration Centre and the Arbitrators’ and Mediators’ Institute of New Zealand. He is also a member of the P.R.I.M.E Finance Panel of Experts for Dispute Resolution. Further information can be found at https://www.bankside.co.nz.

Michael Greenop Tel: +44 20 7653 2071 Email: [email protected] Michael Greenop is an Associate in Quinn Emanuel’s London office and a Fellow of the Chartered Institute of Arbitrators (UK) and the Arbitrators’ and Mediators’ Institute of New Zealand. His practice focuses on international arbitration and public international law. Michael previously practised as an employed barrister at Bankside Chambers, where he assisted Sir David Williams KNZM QC. He has appeared as junior counsel in commercial cases in the New Zealand High Court, arbitrations and specialist courts. Additionally, he has assisted arbitral tribunals in international commercial arbitrations and investor-state arbitrations under various institutional rules. He has been invited to speak on arbitration-related topics and assisted in the preparation of the second edition of New Zealand’s leading text on arbitration, Williams & Kawharu on Arbitration. In 2019, he co-founded New Zealand’s preeminent group for young arbitration practitioners, the AUT-AMINZ Young Arbitration Group. Further information can be found at https://www. quinnemanuel.com/attorneys/greenop-michael/.

Bankside Chambers South Square Level 22, Lumley Centre, 88 Shortland Street, 3–4, South Square, Gray’s Inn, Auckland 1140, New Zealand London WC1R 5HP, United Kingdom Tel: +649 379 0802 / URL: www.bankside.co.nz Tel: +44 20 7696 9900 / URL: www.southsquare.com

Quinn Emanuel Urquhart & Sullivan LLP 90 High Holborn, Holborn, London WC1V 6LJ, United Kingdom Tel: +44 20 7653 2000 / URL: www.quinnemanuel.com

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Łukasz Doktór, Adriana Palczewska & Maciej Rzepka DOKTÓR JERSZYŃSKI PIETRAS

Efficiency of process Polish civil procedure is generally two-tiered. An appeal to a court of second instance may be based on points of fact and/or points of law. Although the ruling issued by a second instance court is final, it may be challenged through a cassation appeal to the Supreme Court which may be based only on points of law and is limited to certain types of disputes (i.e. most non-monetary claims as well as monetary claims exceeding PLN 50,000 (approx. EUR 11,000)). Even if the formal criteria of a cassation appeal are met, the appellant must demonstrate a major legal issue requiring resolution or guidance, qualified errors in proceedings or a manifestly legitimate nature of the appeal. If any of those circumstances are successfully demonstrated, the case is remanded for the Supreme Court’s examination, and if not – the case is dismissed. Although the Polish legal system is based on statutory law, the Supreme Court’s rulings play an important role in shaping the jurisprudence of lower courts. Polish law provides for several simplified and low-cost procedures for categories of monetary claims if the plaintiff provides sufficient documents supporting the claim in which a summary judgment may be issued based on these documents, without a comprehensive evidence-taking process. The plaintiff may apply for a summary judgment (payment order) if it provides the court with qualified evidence confirming the debt. In case of claims based on commercial agreements of goods supply/service provision, the plaintiff must only confirm that it has performed its contractual obligations and has not obtained remuneration despite properly invoicing the debtor. A summary judgment is issued without hearing. It may be appealed to the issuing court, which then sets a hearing and conducts regular proceedings – which may result in upholding or revocation of the summary judgment. However, even if the summary judgment has been appealed against, it may be used to secure the claim, e.g., by attachment of the defendant’s bank accounts. Application for a summary judgment is also possible even if a plaintiff does not produce qualified evidence as described above. In such cases, a summary judgment is issued unless the court finds the claim clearly unfounded or doubtful. Unlike in the procedure referred to above, this type of summary judgment itself does not constitute a basis for securing the claim – the plaintiff must separately apply for interim measures. If the defendant does not appeal against the summary judgment within two weeks, it becomes final. Monetary claims may also be pursued in an electronic summary judgment procedure, provided that: (i) the claim became due within three years before initiating the proceedings; and (ii) the defendant has a service address in Poland. In this procedure, a statement of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London DOKTÓR JERSZYŃSKI PIETRAS Poland claim is submitted online in an electronic form, via the website provided by the Ministry of Justice. Any court decisions, including the summary judgment, are also prepared and delivered to the parties via electronic means. Moreover, mechanisms intended to streamline all types of judicial proceedings are continuously being introduced in Poland. A major amendment to the Code of Civil Procedure, adopted in 2019, provides for several new procedural solutions aimed at speeding up the proceedings, including a preliminary organisational hearing, a rule of single court hearing in simple cases, or a possibility for the witnesses to testify in writing. Court hearings in Poland are recorded on a sound or audio-visual recording – a solution that helped reduce the duration of court hearings by an average of 30%. Further enhancements of the procedure include videoconferences used to hear witnesses residing outside the locality of the court seized. The parties and their attorneys may access online information on the status of court proceedings via an online platform provided by the Ministry of Justice. Use of the system is free of charge and enables parties to view court orders, download recordings of the hearings, access information on the planned court hearings and recent actions of the court. Further developments are also being planned, aiming at the digitalisation of court proceedings, e.g., enabling parties and their attorneys online reception of official correspondence from courts and other public authorities. The Polish Code of Civil Procedure already contains provisions enabling the parties to lodge pleadings electronically, but an IT system necessary to make use of such possibility has not yet been implemented.

Integrity of process The judicial system in Poland has been undergoing reforms since 2015. Some of the reforms have sparked controversies and led to opinions that they do or may jeopardise independence and impartiality of the judiciary. The most debated elements of the said reforms were: • a new system of appointment of judges to the National Judiciary Council (a body that appoints and promotes common court judges which are then nominated by the President), after reform appointed by the lower chamber of parliament by a majority of ⅗ votes; • appointment of presidents of common courts (judges who supervise and manage the administrative affairs of a given court) by the Minister of Justice; • lowering the retirement age of common court judges as well as judges of the Supreme Court (to the general retirement age applicable to all workers) with the right of the Minister of Justice or the President to allow an extension of the term of office beyond retirement age; • introduction of a new chamber of the Supreme Court overseeing disciplinary proceedings against judges with the members of the chamber appointed by the National Judiciary Council, elected pursuant to amended rules; and • enactment of legislation extending the grounds for disciplinary sanctions against judges, e.g., to include activities that question the status of other judges or the legitimacy of a constitutional body, or activities that may render the functioning of a court impossible or substantially impeded. As a result, some of the reforms have been withdrawn, e.g., application of new retirement age to the current judges of the Supreme Court accompanied by a discretionary right of the President to allow a Supreme Court judge to continue his or her duties beyond the retirement age. The Court of Justice of the European Union (CJEU) also ruled that the Polish Supreme

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Court should ascertain whether its new Disciplinary Chamber is independent in the context of reviewing retirement of Supreme Court judges (joined cases C-585/18, C-624/18 and C-625/18). Following that, the Polish Supreme Court ruled its Disciplinary Chamber not to be independent and, in addition, challenged the independence of the National Judiciary Council, opening a way for parties to court proceedings to challenge the authority of the judge if appointed by the National Judiciary Council after the reform (case III PO 7/18 and Resolution No BSA I-4110-1/20). On the other hand, the Constitutional Tribunal of Poland ruled the Supreme Court’s Resolution No BSA I-4110-1/20 to be in violation of the Polish Constitution, the Treaty on the Functioning of the European Union (TFEU) and the European Convention on Human Rights (ECHR) (case U 2/20). Despite the present controversies, the Polish judiciary remains independent and impartial and the government’s or parliament’s powers in respect of the appointment or promotion of judges are not greater than those existing in many EU countries, e.g., Germany or France. The level of corruption is low, as evidenced by the “no corruption” factor in civil justice amounting to 0.78 in the WJP Rule of Law Index 2020. There is no visible trend on the part of judges to favour government in disputes with third parties, including foreign investors, and there are no reasons to assume lack of impartiality of the court in a regular commercial dispute driven by government influence. Polish law provides for two main instruments related to the concept of natural justice. First, it is possible to assert a transaction invalid on equitable grounds, in an action seeking to declare the transaction invalid as well as through a defence raised in response to an action seeking enforcement of terms of such transaction. According to the judicature of the Supreme Court, the application of these instruments requires two criteria to be met, i.e. there must be a specific equitable rule grossly infringed by the disputed transaction, e.g., loyalty in business dealings, basic contractual balance, etc. and the infringement in question must result from specific circumstances adversely affecting the broadly understood freedom of contract of the injured party, e.g., emergency situation or lack of proper information, etc. The other instrument is equivalent to an estoppel in common law systems, i.e. it may be used only as a defence and enables the court to prevent a party from asserting its rights under law or contract on equitable grounds. This may happen only in specific circumstances which may be temporary or permanent. Theoretically, the estoppel may be invoked both in private as well as in business disputes, although the courts tend to allow it only exceptionally in the latter.

Privilege and disclosure The Polish legal system provides for attorney-client privilege. Professional lawyers (i.e. advocates and legal advisers) are obliged to maintain the secrecy of all information learned in connection with the provision of legal assistance to a client for an unlimited period of time. According to the prevailing view of the doctrine, the privilege can be waived by its holder (the client). Consequently, a lawyer summoned as a witness in a court proceeding has the right, and at the same time, an obligation, to refuse to answer a question relating to the privileged information. A lawyer is also entitled and obliged to refuse the court order requesting him or her to produce a document if it contains privileged information. A lawyer disclosing privileged client information bears civil, disciplinary, and in certain cases even criminal, liability. Other forms of privilege relate to mediation, provided for in the Polish Code of Civil Procedure as a method of alternative dispute resolution. A mediator, the parties and other persons participating in mediation proceedings are obliged to maintain secrecy of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London DOKTÓR JERSZYŃSKI PIETRAS Poland facts disclosed to them in connection with the mediation. Only the parties may release the mediator and other persons participating in the mediation proceedings from the said confidentiality obligation. Any settlement proposals, mutual concessions or other statements made in mediation have no effect when invoked by a party in the course of court or arbitration proceedings. As regards informal settlement negotiations, their confidentiality is not addressed in the provisions of law. The Advocates’ Code of Ethics (enacted by the Advocate Bar Association) stipulates that an advocate is obliged to keep such negotiations confidential if other advocates or legal advisers participate in such negotiations. As a rule, court hearings in Poland are open to the public. However, in certain circumstances, a court may order the whole or part of a hearing to be held in camera. An announcement of a judgment is always public. By contrast, access to case files is restricted only to the parties and their attorneys. Judicial decisions, including their written grounds, are made public after being anonymised. A vast number of them are regularly published on http://orzeczenia. ms.gov.pl/, a website run by the Ministry of Justice, as well as in commercial databases.

Evidence With regard to evidence, Polish civil procedure is predominantly adversarial. It is primarily the parties’ responsibility to present evidence in order to support their claims. Theoretically, a court is permitted by law to admit evidence that has not been presented by a party. However, according to the established view, this may be done only in exceptional circumstances, e.g., when a case can hardly be resolved without additional evidence. In 2019, a major reform of Polish civil procedure was implemented which introduced several changes to the rules of evidence. First, it brought back the once existing division into standard court proceedings and proceedings in commercial cases where procedural burdens imposed on parties (generally professional entrepreneurs) are higher. Secondly, it introduced a new procedural institution, i.e. a pre-trial hearing. During this hearing, the parties and the court, inter alia, are to prepare, and the court is then to approve, a trial plan which must contain the court’s decisions regarding evidence presented by the parties. Consequently, if a pre-trail hearing is scheduled in standard proceedings (which is a rule), parties may not put forward further allegations or evidence after the court’s approval of the trial plan. If a pre-trial hearing is not scheduled, parties generally may do so up to the end of the trial. The presiding judge, however, may oblige a party to present all allegations and evidence in a pleading under the pain of losing the right to invoke them at a later stage, unless demonstrated that it was not possible to present them in the pleading or that the need to present them arose later. Stricter rules apply in commercial cases. First, parties are obliged to present all allegations and evidence early on. Those represented by professional attorneys should do so in their opening briefs (plaintiff in statement of claim, defendant in its response to it), and those not represented by professionals should do so within a deadline specified by the judge; not shorter, however, than one week. Allegations and evidence presented in breach of these rules are disregarded, unless a party can prove that that it was not possible to present them in due time or that the need to do so arose later. In such cases, further allegations and evidence to support them should be presented within two weeks from the day on which it became possible to present them or the need to present them arose. Secondly, parties may invoke an agreement on evidence, i.e. a contract excluding specific evidence in the dispute arising out of a certain transaction, executed before or during the dispute, in writing or orally before the court. Thirdly, the role of witness testimony is reduced as to supplementary

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© Published and reproduced with kind permission by Global Legal Group Ltd, London DOKTÓR JERSZYŃSKI PIETRAS Poland evidence, admissible by the court only after all other evidence has been exhausted or, if in their absence, there are material facts that remain unclarified. And fourthly, parties’ actions, especially statements of intent or knowledge, resulting in acquisition, loss or change of their legal rights, may be proven only by documents, unless a party can demonstrate that it is unable to present a document due to reasons beyond its control. Polish law does not recognise disclosure or discovery procedures, other than in antitrust damages claims where Polish law implements the provisions of EU Directive 2014/104/EU relating to damages claims for infringements of competition law. It is up to the parties whether they want to produce certain evidence during the proceedings or not. There are, however, some general procedural mechanisms in place to help a party obtain evidence that is not under its control. First, a party may apply to a court for ordering the other party or a third party to produce a document in its possession if such document constitutes evidence relevant for the case. If the addressee of the order, being the other party to a trial, refuses to produce the document, a court may assume that factual allegations that a party seeking the order wanted to prove with this document are true. If the addressee of the order is a third party, unjustified refusal to produce a document is sanctioned with a fine imposed by the court. Secondly, if a party relies on the records of a commercial enterprise and the delivery of such records to the court poses major difficulties, the court may order their review in the place where they are kept – either by the entire panel or by one delegated judge.

Costs The general principle is that costs of the dispute are paid by the losing party, including the obligation to reimburse the opponent with the costs incurred. There are, however, a number of exceptions to that principle. Firstly, if the claim is not awarded in full, the costs should be proportionally shared between the parties. Moreover, the court may decide not to charge the losing party with the costs if it finds it justified on the grounds of equity. Also, the obligation to reimburse the costs may be imposed on the plaintiff winning the case, if the defendant gave no reason to bring an action and admitted the claim upon being sued. In commercial disputes, the court may impose, fully or partially, the costs on the party that refused to attempt to resolve the dispute amicably, if that led to unnecessary initiation of court proceedings. Each party may also apply for a full or partial exemption from the litigation costs, if it demonstrates that it is unable to bear them. A party exempt from the costs may also request a legal aid attorney, but it remains obliged to reimburse the opponent for the incurred costs on general terms. If the plaintiff resides outside of the EU, it may be obliged, upon a defendant’s request, to pay bail securing litigation costs, subject to certain specific exceptions. If the plaintiff does not pay the ordered bail, the claim will be rejected. Litigation costs in Poland are reasonably predictable and comprise: • court fees payable on the pleading initiating the case in a particular instance, e.g., statement of claim, appeal, etc. The amount of the court fee varies depending on the subject matter of a dispute and may either be fixed (in specific cases listed in the Polish Act on Court Fees in Civil Proceedings) or calculated as a percentage of the total claim value, i.e. 5%, but not more than PLN 200,000 (approx. EUR 44,000); • expenses incurred in relation to the proceedings (which may include, inter alia: remuneration of an expert or interpreter appointed in the case; other expenses related

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to evidence; travel expenses of the parties; and witnesses and attorneys attending the hearings); and • costs of legal representation subject to maximum amounts provided for in the provisions of law in respect of particular types of cases, depending on the subject matter of a dispute or total claim value. As a result, the legal representation costs agreed upon with the attorney and actually incurred by the party may – and usually do – exceed the lawyer’s fees awarded by the court.

Litigation funding Third-party litigation funding is not common in Poland, except for claim purchasing by specialised debt recovery companies and securitisation funds. The relatively high number of overdue receivables in the Polish market (depending on the industry) is a key driver, and financial institutions and telecom operators use this option frequently. The COVID-19- related economic slowdown and liquidity problems experienced by many firms and individuals are likely to further boost this industry. Contingency fee arrangements between lawyers and their clients are, in principle, legal and permitted by the Bar Associations, subject to a requirement according to which a contingency fee should not be the only remuneration of an advocate or legal adviser. Legal expense insurance policies are offered by many insurance companies, but their use is not very popular. According to public domain data, the total number of outstanding legal expense insurance policies as at the end of 2019 amounted to 1,575,434 and it is likely that an overwhelming majority constituted add-ons on car insurance. Third-party claim financing is present on the Polish market only to a limited extent and there are no specific regulations addressing this type of financial service. There are only a few firms advertising claim financing in Poland and there are no data in the public domain on the number of cases financed or the overall value of financing. It is probable that this market segment will experience dynamic growth especially if, in the wake of the COVID-19 pandemic, the number of complex disputes increases.

Class actions Polish legislation provides for an opt-in model of class actions, which means that each plaintiff must clearly express its will to join the proceedings. Only certain types of claims may be asserted through class action lawsuits, i.e.: claims for damage caused by a hazardous product; tortuous liability claims; claims resulting from a breach of contract; claims on account of unjust enrichment; and consumer protection claims. A class action may be brought by at least 10 persons, whose claims are based on the same or identical factual grounds. The group is represented in the proceedings by one representative who exercises the plaintiff’s powers. Upon submission of a class action, the court orders publication of a relevant notice on initiation of the proceedings online and/or in the nationwide press, so as to enable the persons concerned to join the case on the plaintiff’s side. The merits of the case are examined upon the expiry of a deadline for joining the group. Any significant procedural measures, such as withdrawal, waiver or limitation of a claim or conclusion of a settlement with the defendant, require the consent of more than 50% of the members of the group in order to be effective. The awarding judgment in class action proceedings lists the relevant amounts due to each particular member of the group. An extract from such judgment enables each member to initiate enforcement proceedings against the defendant.

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Introduction of an opt-out model of class actions has been under consideration for some time, intended to coexist with the current opt-in model and to be available in certain types of cases relating to infringement of consumer rights or competition law.

Interim relief A range of interim measures available differs depending on the type of claim. For monetary claims, there is an exhaustive list of available interim measures, e.g., seizure of the defendant’s assets, establishment of a mortgage, prohibition of real property alienation and establishment of receivership over the defendant’s enterprise. As regards non-monetary claims, the plaintiff is free to choose and request its preferred interim measure. A plaintiff may apply for an interim order after, upon or even before initiation of the legal proceedings. In the latter case, the plaintiff will have to initiate legal proceedings properly within a deadline set by the court, not exceeding two weeks. Interim measures may also be sought from a common court when the dispute is subject to arbitration, including foreign arbitration, with the court sometimes requiring that the arbitration proceedings be pending upon application for the interim measure. Interim orders may be issued only at the plaintiff’s explicit request and the relevant proceedings are conducted ex parte (without the defendant which is notified of the interim order upon its enforcement). To obtain such an order, the plaintiff must demonstrate the plausibility of its claim and its interest in obtaining the interim measure. However, no demonstration of “legal interest” is required if the plaintiff seeks payment based on commercial transactions (i.e. supply of goods or provision of services between entrepreneurs), provided that the claim does not exceed PLN 75,000 (approx. EUR 16,500) and the delay in payment does not exceed three months. In each case, the court takes into account the interests of both parties and grants a requested interim relief only if it is adequate to secure the plaintiff’s interest on the one hand and, on the other, is not excessively onerous to the defendant. An order on interim measures may be appealed against to the court of higher instance. Interim measures awarded by foreign courts are generally enforceable in Poland. The injunctions issued in EU Member States are enforceable in Poland without exequatur, provided that the injunction in question is enforceable in the issuing country. If such injunction contains interim measures not known to Polish law, such measure will be modified by the Polish court or bailiff to correspond to the measures permitted in Poland that have equivalent effects. On the other hand, in order to enforce a non-EU originated injunction, its enforceability must first be confirmed by a Polish court, which will examine the terms of the injunction and verify its enforceability in the country of origin.

Enforcement of judgments/awards and cross-border litigation The enforcement of judgments, enforceable awards and interim measures is effected by bailiffs and district courts sąd( rejonowy). In principle, only judgments of second instance courts are enforceable (except for interim orders which are, in principle, immediately enforceable), but in certain cases a first instance court may rule its judgment immediately enforceable. Such immediate enforceability may be made conditional upon the enforcing party providing adequate security.

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Not only court judgments or arbitral awards are subject to enforcement. Other enforceable titles include court settlements, settlements executed in mediation, and certain notarial deeds providing for voluntary submission to enforcement. In general, all kinds of assets may be subject to enforcement save for specified exceptions, such as certain household items, food, 50% of monthly wages, etc. Garnishee orders are widely used by court bailiffs without the need to obtain court approval. Remedies available to debtors include a complaint against a bailiff to the relevant district court or challenging enforceability of the judgment or other relevant title in separate proceedings, e.g., based on events occurring after issuance of the judgment. The 2019 reform of civil procedure has increased the level of debtor protection, imposing on courts a duty to refuse to issue a declaration of enforceability of a given title (otherwise enforceable) if it is clear that the limitation period applicable to the relevant claim has passed, unless demonstrated otherwise by the creditor. The enforcement of judgments issued by courts of EU Members States in civil and commercial matters is regulated by EU Brussels I Regulation Recast, i.e. they are recognised and directly enforceable in Poland without any exequatur requirement or separate proceedings confirming enforceability. Poland is also bound by the EU legal framework relating to, inter alia, cross-border service of court documents (Regulation (EC) No 1393/2007) and cross-border taking of evidence (Regulation (EC) No 1206/2001). In respect of non-EU countries (other than those that are signatories to bilateral treaties relating to enforcement of judgments), foreign judgments are granted exequatur by virtue of law unless they qualify as one of the specified exceptions, which include the relevant judgment not being final, the case belonged to exclusive jurisdiction of Polish courts, a party was deprived of a right to defend themselves, the judgment violates ordre public in Poland, etc. Lack of reciprocity does not preclude a foreign court judgment from being granted exequatur in Poland. A foreign court judgment must be declared enforceable by a Polish regional court (sąd okręgowy) before it is enforced in Poland. Enforceability in Poland requires only enforceability in the country of issuance and lack of exceptions which would preclude exequatur by virtue of law. Anti-suit injunctions are generally not available under Polish law. As between the EU Member States, anti-suit injunctions, issued by common courts, are ruled by the CJEU as incompatible with EU law (case C-185/07 West Tankers Inc.). Anti-suit injunctions issued by a foreign arbitration tribunal or a non-EU common court would most probably not be enforced in Poland based on ordre public defence and the Polish court generally refuses to issue anti-suit injunctions. Under EU law (Regulation (EU) No 655/2014), an EU-wide bank account freezing order issued by any EU court will be directly enforceable in Poland. Freezing orders issued by a court of a non-EU country may be enforced in Poland based on general terms applicable to interim measures. Asset tracing is generally possible only within the enforcement proceedings.

International arbitration The Polish legal system is arbitration friendly. In general, practically any claim, whether monetary or not, except for claims for maintenance/alimony, may be subject to arbitration. The Polish Code of Civil Procedure includes provisions regarding arbitration, reflecting the UNCITRAL Model Law on International Commercial Arbitration. Arbitral awards,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London DOKTÓR JERSZYŃSKI PIETRAS Poland whether issued in Poland or abroad, are recognised and enforceable in Poland based on an exequatur order of a Polish court, issued at the request of a party to the arbitration proceedings. The court may refuse to declare the enforceability of an arbitral award only in certain situations, e.g., in absence of a valid arbitration agreement, or if the award relates to a matter excluded from arbitration or if the award infringes ordre public in Poland. The proceedings before a Polish court regarding exequatur of an arbitral award are formal in nature and the court is not allowed to review the substance of the award, except for instances of ordre public violations. Moreover, Poland has been a party to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitration Awards. Arbitral awards granted in countries signatory to the convention are recognised and enforceable in Poland based on an exequatur (which is subject to conditions equivalent to those set out in the Polish Code of Civil Procedure). In turn, Polish arbitral awards are recognised in signatory countries, following a similar exequatur procedure carried out by a relevant foreign common court. Currently, there are approximately 50 permanent arbitration courts in Poland. The largest number of cases are submitted to the Court of Arbitration at the Polish Chamber of Commerce in Warsaw, which also happens to be the oldest arbitration tribunal in Poland, functioning since 1950. This tribunal also handles cross-border cases (such cases account for approx. 20% of the total number of cases) and conducts proceedings in Polish, English, French, German or Russian, depending on the parties’ choice.

Mediation and ADR Despite numerous mediation centres operating in Poland, this method of dispute resolution is not very popular. Generally, the parties may attempt to mediate both before and during legal proceedings. A dispute may be submitted to mediation at any stage, pursuant to the parties’ agreement or a court order. In any case, mediation is voluntary and requires the consent of both parties. Mediation is conducted by a mediator, either appointed by the court or chosen by the parties. If the mediation is successful and leads to a settlement, a common court validates such a settlement by issuing an appropriate order. Upon the issuance of such order, the settlement is equivalent to an in-court settlement, in particular entitling the parties to initiate enforcement proceedings. Although the courts encourage parties to settle disputes amicably, statistics show that mediation is not particularly effective as regards court disputes. In the first half of 2019, only 1% of civil cases were submitted to mediation, out of which 36% ended in reaching a settlement in the course of mediation.

Regulatory investigations The Polish government agency responsible for enforcement of competition and consumer protection laws is the President of the Office for the Protection of Competition and Consumers (OPCC). Other important regulatory agencies include the Financial Supervision Commission (supervising financial institutions), the Office for the Protection of Personal Data, the Office for Energy Regulation (overseeing the fuel and energy market), and the Office for Electronic Communication (the telecom and postal services regulator). The OPCC has relatively broad competences and effective enforcement powers in the areas of competition law (enforcing Polish and EU competition laws), consumer protection

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(declaring general terms and conditions as ineffective due to infringement of consumer rights and issuing decisions on infringement of collective consumer rights), combatting undue abuse of contractual advantage in contracts regarding agricultural produce and food products, as well as undue payment delays in commercial transactions. It is entitled to impose significant fines, demand all requisite information and documents from entrepreneurs, publish information on entrepreneurs infringing consumer rights, and carry out dawn raids at entrepreneurs’ premises in search of evidence (also at the request of the EU Commission). Upon prior approval of the court, the OPCC may also request that the Police carry out a search of premises or means of transportation or even, in case of alleged infringements of consumer rights, carry out an undercover controlled purchase. In connection with the COVID-19 pandemic, additional competences have been vested in the OPCC to control compliance with price and margin regulations concerning selected products. In case of large-scale or repeated infringements of such regulations, the OPCC may impose fines (up to 10% of annual turnover). The activities of the OPCC (as well as the Office for Energy Regulation and the Office for Electronic Communication), including investigations, are subject to judicial review by a specialised common court, i.e. the Court for the Protection of Competition and Consumers (Competition Court), except for decisions on undue payment terms which are reviewed by administrative courts (which exercise judicial review of most administrative decisions). Decisions of the OPCC are subject to appeal to the Competition Court which acts as a court of first instance and applies rules of civil procedure. As a result, judgments of the Competition Court are then subject to an appeal to a court of second instance and cassation appeal to the Supreme Court. Due to the specialised nature of the Competition Court, the judicial review of OPCC decisions is active and vigorous, with the Competition Court overturning such decisions relatively frequently and modifying the amounts of imposed fines.

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Łukasz Doktór Tel: +48 22 460 55 93 / Email: [email protected] Łukasz Doktór is a partner and one of the founders of DJP with nearly 20 years of experience in litigation and is the co-head of the firm’s Dispute Resolution department. He now focuses on disputes regarding derivative financial instruments as well as cases involving competition and corporate issues. In addition, his experience extends to representing clients in ADR proceedings, mainly out-of-court mediation proceedings. Łukasz Doktór also has over 20 years of experience in mergers, acquisitions and restructurings and has been involved in numerous M&A transactions of varying complexity, advising financial and strategic investors. He also advises on competition law, both from the perspective of merger control, anticompetitive practices and private enforcement.

Adriana Palczewska Tel: +48 22 460 57 84 / Email: [email protected] Adriana Palczewska has been an associate at DJP since 2015 and an attorney- at-law at the Warsaw Attorneys-at-Law Bar Association since 2019. Adriana has six years of experience in litigation and in the field of intellectual property and new technologies. As regards litigation, she focuses on disputes regarding unfair competition acts, trademarks and copyrights. She is also involved in drafting contracts relating to film production and in various transactions relating to the transfer, licensing and services of IT and media products. She has worked with business clients from various industries including energy supply, industrial automatics solutions, press publishing, cinematography and cosmetics production.

Maciej Rzepka Tel: +48 22 460 55 99 / Email: [email protected] Maciej Rzepka joined DJP in 2011. He holds a Master of Laws Degree from the University of Warsaw (2014) and finished advocate training at the Warsaw Advocates Bar Association (2018). In the area of litigation, he focuses mainly on disputes between financial institutions and entrepreneurs regarding derivatives and agency agreements. Maciej Rzepka has also been involved in drafting and negotiating contracts underlying numerous transactions in the field of intellectual property and new technologies, including transfer, licensing and maintenance services of IT and media products, hosting services and others.

DOKTÓR JERSZYŃSKI PIETRAS ul. Ursynowska 62, 02-605 Warsaw, Poland Tel: +48 22 460 55 90 / Fax: +48 22 460 55 91 / URL: www.djp.pl

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Yulia Mullina, Valeria Butyrina & Arina Akulina Russian Arbitration Center at the Russian Institute of Modern Arbitration

General overview of dispute resolution in Russia In the Russian Federation, parties to a conflict enjoy wide discretion in choosing the methods of dispute settlement. To date, litigation remains at the forefront of the selected means of resolving conflicts, followed by rapidly evolving arbitration. Although Russian legislation promotes mediation and conciliation, these types of alternative dispute resolution (ADR) are still not widely used in the Russian jurisdiction. Commercial litigation in Russia is governed by two main legislative acts: the Commercial (Arbitrazh) Procedure Code (APC); and the Civil Procedure Code (CPC). According to the Codes, private disputes may be heard in commercial (arbitrazh) courts and courts of general jurisdiction. The former mostly resolve business disputes between the companies not involving individuals, while the latter deal with other types of disputes. Proceedings in courts are usually public and court decisions are available online,1 unless the proceedings are confidential (e.g., in disputes concerning state secrets). Importantly, state courts in Russia are borrowing and implementing best practices to make litigation more convenient; for instance, the web platform of commercial (arbitrazh) courts allows for submitting documents online, which is extremely useful when parties are located in different regions or abroad. Importantly, the notion of an “arbitrazh court” is not connected with arbitration; instead, it takes its roots from old Soviet times when disputes between state enterprises were heard before “state arbitrazh”. However, this chapter will on the contrary focus on arbitration in Russia.

Development of arbitration in Russia The process of development of arbitration in Russia has a rather long history: the first documented proof of dispute resolution involving an arbitrator is the Charter of Grand Duke Dmitry Donskoy with the Prince of Serpukhov Vladimir the Brave of 1362. However, despite several attempts to establish a working system of arbitration, they proved to be unsuccessful. Commercial (arbitrazh) courts established in times of Nicholas I were the predecessors of the modern system of arbitration.2 In these arbitration proceedings, the rules and customs of general trading practice were applied. Further, at the end of the 19th century to the beginning of the 20th, the process of development of arbitration was rather controversial until the end of the first decade after the Soviet Union had been established. In the 1930s, the two oldest Russian arbitration institutions, authorised to consider international disputes, were established (the Maritime Arbitration Commission (MAC) and the Foreign Trade Arbitration Commission). The adoption in 2002 of the new APC and the Federal Law “On Arbitral Tribunals (treteiskiye sudy) in the Russian Federation” was supposed to complete the formation of a

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Russian Arbitration Center at the Russian Institute of Modern Arbitration Russia new arbitration system in Russia that could be described as a shift to both state litigation and private arbitration. According to the logic of the legislator, this should have led to the emergence of the opportunity to choose between two equally effective institutions in commercial relations. In turn, due to the lack of demand, many private arbitrations became fictitious. Moreover, “internal” or “pocket” arbitral tribunals, created by large companies to resolve disputes with counterparties, were sometimes used in order for the companies to receive victorious decisions. This practice, along with other shortcomings in arbitration in Russia, was reflected in a number of cases in 2011–2012, including the cases of Business Lada,3 First Excavator Company,4 and LUKOIL Energoset,5 which were actively debated and highlight the need for the reform of arbitration proceedings. In this regard, by 2010 the issue of reforming the arbitration system was ripe.

Current regulation of arbitration in Russia In 2016, a new Federal Law “On Arbitration (Arbitral Proceedings) in the Russia Federation” (hereinafter – Federal Law on Arbitration) entered into force. International commercial arbitration continued to be regulated by the amended Law of the Russian Federation “On International Commercial Arbitration” (hereinafter – Law on ICA). The new regulation introduced UNCITRAL Model Law standards for the procedure of domestic arbitration and substantially changed the regime of institutional arbitration. Now only those arbitral institutions that have received official permanent arbitral institution (PAI) status from the Ministry of Justice may administer arbitral proceedings with a seat in Russia. Applicable legislation provides strict requirements for the establishing and functioning of arbitral institutions with a view that only truly professional and independent arbitral institutions administer arbitration in Russia. The right to administer arbitration has been granted to five arbitral institutions: the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC at the CCI); the MAC; the Russian Arbitration Center at the Russian Institute of Modern Arbitration (RAC); the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs; and the National Center for Sports Arbitration at the Sports Arbitration Chamber. Foreign arbitral institutions may also apply for the status of a PAI in the Russian Federation. In order to obtain a right to administer arbitration, a foreign arbitral institution must have a “widely recognized international reputation”. Among foreign arbitral institutions, the Hong Kong International Arbitration Centre (HKIAC) and Vienna International Arbitral Centre (VIAC) obtained the status of PAI. The PAI status provides certain advantages, as compared with foreign arbitral institutions or ad hoc arbitration: • Only PAIs may administer arbitration of corporate disputes involving Russian companies (including M&A disputes arising from sales and purchase agreements). • Parties referring disputes to a PAI may enter into so-called direct (special) arbitration agreements that allow them to “fine-tune” their arbitration (e.g., exclude annulment proceedings in a state court and other forms of state court assistance and supervision in regard to arbitral proceedings). • The arbitral tribunal or parties in the arbitration administered by a PAI may apply to a state court to seek assistance in obtaining evidence.

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Regrettably, upon completion of the reform, a number of former arbitral institutions, which have not received permission to operate as PAIs, continued their activities disguised as ad hoc arbitrations. These structures continued to act within a grey area and potentially remained conducting illegal operations. The decisions of such institutions may be challenged based on procedural irregularities of arbitration.6 In March 2020, the Supreme Court of the Russian Federation (hereinafter – Supreme Court) assessed the activities of the Helsinki International Commercial Arbitration (HICA) at the “Helsinki International Arbitrators” organisation.7 The Supreme Court refused to enforce an award rendered by a “foreign” ad hoc arbitral tribunal, since it hid Russian arbitral institutions that have not received PAI status. According to the Court, there was no evidence of the foreign nature of the arbitration in the case. The claim was filed to the secretariat in Russia, the appointment of an arbitrator was carried out in Moscow, and the arbitration website says that HICA acted on the basis of the Federal Law on Arbitration. The Supreme Court ruled that the HICA arbitral award violated public policy of the Russian Federation, which resulted in circumvention of the law with an unlawful purpose. The ruling once again reiterated the approach of strict regulation of activities of arbitral institutions, with the ultimate aim of building a professional arbitration framework in Russia. The other layer of governance is provided in the acts of the Supreme Court. The main aim of the Supreme Court in this respect is to produce guidance for the lower courts to reach uniformity in case law. The Supreme Court has become a successor of the Supreme Commercial (Arbitrazh) Court (SAC), which was abolished in 2014. Following the practices of the SAC,8 the Supreme Court recently issued two important documents: the Review of Russian courts’ practice relating to international and domestic arbitration (hereinafter – the Review);9 and the Ruling of the Plenary Session of the Supreme Court on Performance by the Russian courts of functions on assistance to and control over domestic and international commercial arbitration (hereinafter – Ruling No. 53).10 The Review summarised the debatable case law, dealing with questions of the operability of arbitration clauses, the validity of alternative arbitration agreements, arbitrability of disputes with state-owned companies, etc. Ruling No. 53 is a more comprehensive document touching upon questions of jurisdiction, arbitrability of disputes, arbitration agreements, and different aspects of assistance and control by the Russian courts.

Practical issues of arbitration in Russia Arbitration agreements Russian arbitration legislation establishes the presumption of the validity of arbitration agreements, implying that all doubts concerning the validity of arbitration agreements should be interpreted in favour of their validity and enforceability (Article 7 (9) of the Law on ICA, Article 7 (8) Federal Law on Arbitration). The Supreme Court in Ruling No. 53 specified that the party to arbitration challenging the arbitration agreement bears the burden of proof to show that any interpretation of the agreement leads to its invalidity or inoperability. Russian arbitration legislation does not specify mandatory elements of an arbitration agreement, except for the written form of the agreement. The requirement of the written form is compiled when the arbitration agreement is made by way of exchange letters, telegrams or other documents, including electronic documents. An arbitration agreement is also deemed in writing if made by way of an exchange of procedural documents (e.g., claim and defence), where one of the parties claims that the arbitration agreement exists, while the other does not object to it.

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Parties are generally free to model their arbitration agreement to fit their practical needs, including the number of arbitrators and the procedure for their appointment, as well as the seat, venue and language of arbitration. Moreover, the newly introduced mechanism of direct (express) agreements on certain procedural issues can also be incorporated into an arbitration agreement. The parties shall conclude direct agreements if they decide, for example, to waive their right to challenge an arbitral award in court. These opt- out provisions are available only in arbitration administered by a PAI. Some Russian arbitral institutions (for instance, the RAC) provide recommended wording of such direct agreements. The parties are also free to choose the law applicable to the arbitration agreement. In the absence of a choice by the parties, it is subject to the law of the country in which the arbitral award is made or should be made in accordance with the arbitration agreement (para. 27 of Ruling No. 53). In Russia, an arbitration agreement may be considered invalid if proved that it is concluded under threat, fraud, or coercion, does not comply with form requirement, or contradicts mandatory rules of the law applicable to the arbitration clause. Disparity agreements, securing a right of only one party to a contract to choose the method of dispute resolution, are invalid due to in part restricting the other party from choice of forum. In this case, each of the parties to the contract has the right to use any means of dispute resolution out of those provided for in the alternative agreement concluded by the parties. The arbitration agreement may be regarded as unenforceable only in exceptional circumstances when it is objectively impossible to derive the actual will of the parties from the wording of an arbitration agreement (e.g., in cases where it is impossible to establish a certain arbitration procedure or where an agreement cannot be executed due to the absence of an agreed arbitral institution). Despite some cases of providing over-restrictive interpretations to arbitration agreements by the Russian courts,11 the courts now tend to rule in favour of enforceability of arbitration agreements.12 Arbitrability The general approach towards the arbitrability of disputes was introduced in Russian arbitration legislation in 2016, following the arbitration reform. Moreover, in Ruling No. 53, the Supreme Court established the presumption of arbitrability of all private disputes. The parties to private law relations may thus refer any disputes to arbitration, except those categories of disputes that the law specifically marks as non-arbitrable. Russian legislation stipulates the exhaustive list of non-arbitrable disputes: Article 33 of the APC for disputes involving companies and relating to commercial activities; and Article 22.1 of the CPC for disputes involving individuals. Among commercial activities, the following remain as non-arbitrable disputes: • Insolvency disputes. • Disputes regarding state registration of legal entities and individual entrepreneurs. • Disputes subject to the resolution of the Intellectual Property Court and disputes related to the protection of intellectual property rights involving organisations of collective management of copyright and related rights. • Administrative and public-related disputes. • Disputes related to the establishment of legally important facts. • Disputes related to the compensation for the delay in justice. • Disputes related to the protection of rights and legal interests of the groups of persons and companies. • Disputes on compensation for the damage caused to the environment.

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• Certain types of corporate disputes (for more details, see further below). • Public procurement disputes arising out of contracts concluded by the state bodies and municipal bodies (temporarily non-arbitrable until the Federal Law determines the order to choose a PAI to administer such disputes). Following the arbitration reform, most corporate disputes became arbitrable. However, certain types of corporate disputes are still non-arbitrable, such as: • Disputes on the convocation of general shareholders’ meetings. • Disputes arising out of notaries’ activities relating to verifying SPAs in regard to Russian limited liability companies. • Disputes in relation to strategic enterprises (with the exception of disputes regarding the ownership of shares/interests in such companies if their sale does not require prior approval in accordance with Federal Law No. 57-FZ on Strategic Enterprises). • Disputes on mandatory tender offers and squeeze-out procedures. • Disputes on expulsion of the shareholders from the company. Other types of corporate disputes are arbitrable, but subject to certain conditions. Arbitration of corporate disputes shall be administered by a PAI and cannot be submitted to ad hoc arbitration or to a foreign arbitral institution without the status of a PAI. It appears that the Russian jurisdiction is now trying to foster arbitration by means of legislative amendments or guidance. For instance, according to the recent amendments to the Law on Arbitration,13 to submit to arbitration the disputes related to the shareholders’ agreements (SHAs), it is no longer required to conclude arbitration agreements by all the participants of a company, but rather directly by the parties to such SHA. To arbitrate this category of corporate dispute, it is not required for a PAI to adopt special arbitration rules for corporate disputes as it was required before 29 March 2019. Moreover, the Supreme Court in the Review (item 16) noted that disputes arising from procurement contracts concluded by state-owned companies and other entities are arbitrable.14 Further, this position was reiterated in legislation and Ruling No. 53. Evidence Based on the UNCITRAL Model Law, Russian arbitration legislation does not specify any detailed rules of evidence. The general rule is that the parties shall submit the evidence to prove their claims and objections, and the arbitral tribunal may request additional evidence from the parties (Article 26 of the Law on ICA). As a default rule under Article 19 of the Law on ICA, the arbitral tribunal conducts the proceedings in such a manner it considers appropriate, including as regards the determination of the admissibility, relevance, materiality and weight of any evidence. Russian arbitration legislation does not provide any specific powers to an arbitral tribunal to order disclosure of evidence or to invite a witness to attend the hearing, or any restrictions on the tribunal’s powers in this regard. The arbitral tribunal does not have any coercive powers, particularly towards non-signatories of an arbitration agreement, which implies that the tribunal’s orders of disclosure or witness’s attendance are unenforceable. At the same time, if the arbitration rules or arbitration agreement allows, depending on the failure of a party to comply with the tribunal’s order, the arbitrators may decide on specific allocation of costs. For example, the Arbitration Rules of the RAC envisage that, depending on the circumstances of a specific dispute and the procedural behaviour of the parties, the arbitral tribunal may effect a different allocation of the arbitration costs between the parties. Interim measures According to Article 17 of the Federal Law on Arbitration and Article 17 of the Law on ICA, unless the parties agree otherwise, the arbitral tribunal may, at the party’s request,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Russian Arbitration Center at the Russian Institute of Modern Arbitration Russia grant any interim measures it deems necessary (Article 17 of the Law on ICA). A PAI may also order emergency interim measures if the parties have agreed on this. Russian legislation does not provide for any specific list of types of interim relief; therefore, in principle, any type of interim measure may be ordered (e.g., injunctions, freezing orders, etc.). An arbitral tribunal has an inherent power to order interim measures and need not seek the assistance of a court to do so. Granted emergency or interim measures are mandatory for the parties, but unenforceable in the manner established for the execution of arbitral awards (para. 36 of Ruling No. 53).

Efficiency of arbitration Apparently, due to the lack of coercive powers, efficiency of arbitration is frequently ensured, inter alia, by state courts, performing functions of assistance and control over arbitration. Assistance to arbitration Under the Russian procedural legislation, state courts may assist arbitration with its seat in Russia in several ways. Appointment, challenge of arbitrators and termination of mandate The competent courts can appoint arbitrators only in exceptional circumstances after all procedures prescribed by law or the parties’ agreement have been complied with (para. 34 of Ruling No. 53). A competent court will be the court of the constituent entity of the seat of arbitration (Article 240.1 of the APC, Article 427.1 of the CPC). The competent court shall have due regard for any qualifications that the parties’ agreement requires of the arbitrator, as well as ensure that the appointed arbitrator be impartial and independent. Based on this, it may follow that the courts are empowered to look for an arbitrator according to the requirements of the arbitration agreement, request his consent and provide him with the information to check the conflict of interest. In practice, such failures in the appointment of arbitrators are quite rare in institutional arbitration. It is more typical in ad hoc arbitration where there is no appointing committee. A party may also apply to a state court within one month with the challenge previously denied by the arbitral institution. Such application to a state court does not preclude the arbitral tribunal from proceeding with the arbitration and rendering an arbitral award. A competent state court may also terminate the mandate of the arbitrator who does not resign voluntarily due to his inability to participate in arbitration, or who fails to participate in arbitration without undue delay and the parties cannot agree on his recusal. Interim measures As awards on interim measures are non-enforceable, the parties are guaranteed the additional right to request the competent court to order interim measures in relation to arbitration. A party to arbitral proceedings may apply to the court for interim relief, with the competent court being either a court at the seat of arbitration, at the respondent’s address or at the location of the respondent’s property that could be subject to the interim measures (Article 90 (3) of the APC, Article 139 (3) of the CPC). It should be noted that this is the only form of assistance granted in arbitration with not only a Russian but also a foreign seat. The presence of a resolution or other act of the arbitral tribunal on interim measures does not prevent the submission of an application for interim measures to the court. Apart from the general pre-conditions for granting interim measures, the court will examine the following specific requirements while considering requests for interim relief by parties

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Russian Arbitration Center at the Russian Institute of Modern Arbitration Russia to an arbitration agreement: (i) the arbitrability of a dispute submitted to arbitration; and (ii) the validity of an arbitral agreement (The Resolution of the Plenum of the Supreme Commercial (Arbitrazh) Court of the Russian Federation No. 55, dated 12 October 2006 (as amended by the Supreme Court on 27 June 2017) On the Application of Interim Measures by Commercial Courts). Obtaining evidence In arbitrations administered by a PAI, the arbitral tribunal, or the party upon the tribunal’s consent, may request assistance from the court in taking evidence. A competent court (i.e., the court where the evidence is located) may order for the production of written (e.g., contracts, emails, etc.) or material (e.g., objects) evidence, as well as other documents (e.g., photos, audio- or video-records, etc.) within 30 days. Such a request is not applicable for obtaining witness statements. Parties to arbitration administered by a PAI are entitled to waive their right to apply to a competent court on each of the issues listed above by entering into a direct agreement on such waiver. Control over arbitration Russian courts exercise several control powers in relation to arbitration: Challenge of the arbitral tribunal’s jurisdiction When the arbitral tribunal rules on its jurisdiction as a preliminary question and decides that it has jurisdiction over the dispute, a party may challenge this ruling with a state court within a month from the date of the receipt of such ruling. Such challenge does not preclude the arbitral tribunal from proceeding with the arbitration and rendering an arbitral award. The decision of the competent court on setting aside or refusing to set aside a preliminary order is not subject to appeal. The decision of the competent court on setting aside a preliminary order constitutes a basis for the termination of the ongoing arbitral proceedings (para. 33 of Ruling No. 53). Challenge of the arbitral award The procedure for challenging an arbitral award is established in Chapter 30 (para. 1) of the APC and Chapter 46 of the CPC. The application for annulment shall be filed with a competent court at the location where the arbitral award was rendered within three months from the date of receipt of the award by the applying party. The parties may alter territorial jurisdiction of a state court and agree that an application to challenge an award be filed with a competent court at the location of the losing or winning party. The application shall include, inter alia, an arbitral award and an arbitration agreement (either original versions or duly certified copies), as well as the duly certified translation of the mentioned attachments into Russian, and can be filed either in hard copy or online. The parties may preclude the right to challenge an arbitral award by direct agreement if their arbitration is administered by a PAI. Enforcement of domestic arbitral awards The procedure of enforcement of domestic arbitral awards is governed by Chapter 30 (para. 2) of the APC and Chapter 47 of the CPC. The application shall be filed with a state court at the place of location or residence of the debtor, or if such place is unknown, at the place of location of the debtor’s assets. Upon the agreement of the parties, the application may be filed with a court at the seat of arbitration or location of the winning party.

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Recognition and enforcement of foreign arbitral awards The Russian Federation is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter – the Convention). Therefore, the provisions of the Convention are applicable to enforcement procedures in Russia. Upon the ratification of the Convention in 1960, the USSR made a reservation (para. 3 Article 1) to apply the Convention in respect of arbitral awards rendered in the territories of non-contracting states only on the basis of reciprocity. The application to recognise and enforce a foreign arbitral award shall be filed with a state court at the place of location or residence of the debtor, or if such place is unknown, at the place of location of the debtor’s assets (Article 242 of the APC and Article 410 of the CPC). A party to arbitration can resort to the state court for its enforcement in Russia within three years from the date the award becomes binding, with a possibility to reinstate an expired limitation period upon a motivated party’s application. The application shall include an arbitral award and an arbitration agreement (either original versions or duly certified copies), as well as the duly certified translation of the mentioned attachments into Russian (Article 242 of the APC and Article 416 of the CPC), and can be filed either in hard copy or online. A sole judge considers the application both for annulment and enforcement of domestic and foreign arbitral awards within one month from the date of its filing with a competent state court, holding an oral hearing. The ruling, rendered as a result of the consideration of the application, may be subject to review upon the request by the Court of Cassation within one month from the date of its rendering.

Grounds for annulment and refusing enforcement of arbitral awards The grounds for annulment and refusing enforcement of arbitral awards essentially copy Article V of the Convention and Articles 34 and 36 of the UNCITRAL Model Law. According to Russian legislation, review of arbitral awards on any grounds different from those prescribed by the legislation is not permissible. Similarly, the grounds for setting aside and refusing enforcement are divided into two categories. Firstly, those that the competent court may rely on based only on the request of the party. Secondly, those that the competent court could rely on based on its own initiative. The grounds for setting aside or refusing enforcement of an award that an applying party shall invoke are the following: • a party to an arbitration agreement was under some incapacity or the arbitration agreement is not valid under the law to which the parties have subjected it to or, failing any indication thereon, under Russian law; • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise deprived of an opportunity to present its case; • the arbitral award deals with a dispute not contemplated by, or not falling within, the scope of the arbitration agreement; or • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or Federal Law. The state court may also check the following grounds ex officio: • if the dispute is non-arbitrable; or • if the award violates public policy of the Russian Federation.

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One of the most frequently invoked grounds for setting aside and refusing enforcement of arbitral awards is the violation of public policy. The concept of public policy remains highly debated and controversial due to the diverse approach taken by different national courts, even those located in the same jurisdiction. In order to promote consistency in interpretations, the Supreme Court in Ruling No. 53 (para. 51) provided the following definition of public policy: “Public policy is understood as fundamental legal principles having the highest imperative and universal value; unique social and public significance; and constituting the basis of the economic, political and legal system of the Russian Federation.” According to Ruling No. 53, the court may set aside or refuse enforcement of an arbitral award due to a breach of public policy only if it establishes two cumulative criteria. First, the existence of a violation of the fundamental principles that constitute the basis of the economic, political and legal system of the Russian Federation. Second, the fact that such violation may infringe the sovereignty and security of the state, affect the interests of large social groups, or violate the constitutional rights and freedoms of individuals or legal persons. Recent examples of the application of public policy grounds by Russian state courts to refuse the recognition and enforcement of foreign arbitral awards include the following: • Debtor’s insolvency.15 • Tax evasion.16 • Withdrawal of assets from Russia abroad and money laundering.17 • Involvement of budgetary funds in the disputed transaction.18

Other means of ADR in Russia Mediation in Russia is regulated by the Federal Law of 27 July 2010 No. 193-FZ “On an Alternative Dispute Resolution Procedure with the Participation of a Mediator (mediation procedure)”, which entered into force on 1 January 2011. The essence of mediation is well known: the parties, unwilling to bring their dispute to the court or arbitration, or understanding that it can be resolved peacefully, refer the dispute to a third person – a mediator who handles the negotiations and other procedures necessary for the parties to find a proper solution. The basis of Russian mediation is the principle of facilitative mediation. Mediation is voluntary; the court cannot force the parties to resort to a mediator. Mediation can be used to resolve disputes arising from private relations, including those in connection with entrepreneurial and other economic activities, as well as disputes arising from labour relations and family legal relations. Mediators can have the status of a professional or non-professional mediator. Any person who is over 25 years old, has a higher education and has undergone training of mediators, can receive the status of a professional mediator. A rather new method of ADR, which was introduced in 2019, is judicial conciliation. Judicial conciliation may be initiated by the parties or proposed by the court at any stage of court proceedings. Only retired judges may perform functions of judicial conciliators. The list of judicial conciliators is approved by the Plenary Session of the Supreme Court based on proposals of state courts. Parties mutually choose the conciliator from the list, taking into account the specialisation and region of residence of the conciliator. The conciliator may not disclose information that became known to him during the course of conciliations without the consent of the parties.

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Endnotes 1. See the database of arbitrazh court decisions: https://kad.arbitr.ru/ (available in Russian). 2. Personal Decrees of His Imperial Majesty Nicholas I of 14.05.1832: “On the special property of controversial commercial cases.” “On the establishment of commercial courts and the Charter of their legal proceedings <…>.” 3. Ruling of the Supreme Arbitrazh Court of the Russian Federation No. 17020/10 (24 May 2011). 4. Ruling of the Supreme Arbitrazh Court of the Russian Federation No. 1308/11 (28 June 2011). 5. Ruling of the Supreme Arbitrazh Court of the Russian Federation No. 16541/11 (22 May 2012). 6. Ruling of the Plenary Session of the SC No. 53 “On Performance by the Russian courts of functions on assistance to and control over domestic and international commercial arbitration” (10 December 2019) para. 50. 7. Ruling of the Supreme Court of the Russian Federation No. 304-ЭС19-20506 in case А27-5147/2019 (12 March 2020). 8. The SAC issued a number of documents dedicated to arbitration: the Informational Letter of the Presidium of the Supreme Arbitrazh Court of the Russian Federation No. 96 “Review of commercial court practice on recognition and enforcement of foreign court decisions, on challenging the arbitral awards and issue of execution writ to enforce arbitral awards” (22 December 2005); and the Informational Letter of the Presidium of the Supreme Arbitrazh Court of the Russian Federation No. 156 “Review of the commercial court practice on cases of applying public policy when deciding to refuse recognition and enforcement of foreign court rulings and foreign arbitral awards” (26 February 2013). 9. “Review of Russian court practice relating to international and domestic arbitration” approved by the Presidium of the Supreme Court of the Russian Federation (26 December 2018). 10. Ruling of the Plenary Session of the SC No. 53 “On Performance by the Russian courts of functions on assistance to and control over domestic and international commercial arbitration” (10 December 2019). 11. For instance, in one of the cases, the judge of the Supreme Court found that an arbitration agreement, almost identical to the ICC model clause, was unenforceable as it did not clearly provide for an arbitral institution, referring only to arbitration rules (Ruling of the Supreme Court of the Russian Federation No. 305-ЭС18-11934 in case А40-176466/17 (26 September 2018)). However, soon after this case, the Supreme Court adopted the Review, where it rectified the debatable position: it expressly confirmed the enforceability of arbitration clauses following a model arbitration clause recommended by a particular arbitral institution. Further, the Supreme Court reiterated this position in Ruling No. 53. 12. See, inter alia: Ruling of the Supreme Court of the Russian Federation No. 309-ЭС20- 7675 in case A50-31243/2019 (8 June 2020); and Ruling of the Supreme Court of the Russian Federation No. 307-ЭС19-25153 in case A56-8862/2019 (20 January 2020). 13. Federal Law No. 531-FZ “On Amendments of the Federal Law on Arbitration (Arbitral Proceedings) in the Russian Federation” dated 27 January 2018 (entered into force 29 March 2019).

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14. Public procurement disputes arising out of contracts concluded by the state bodies and municipal bodies remain non-arbitrable until the Federal Law determines the order to choose a PAI to administer such disputes. 15. Ruling of the Supreme Court of the Russian Federation No. 305-ЭС18-11934 in case А40-176466/17 (26 September 2018), Ruling of the Moscow Arbitrazh Court dated 6 December 2019 and Moscow Circuit Arbitrazh Court dated (4 March 2020) in case А40-30440/19-68-246. 16. Ruling of the Moscow Arbitrazh Court in case А40-169104/18 dated 26 September 2018 and Ruling of the Moscow Circuit Arbitrazh Court in case А40-169104/2018 (5 December 18). 17. Ruling of the Moscow Arbitrazh Court in case А41-15132/18 dated 30 June 2018. 18. Ruling of the Supreme Court of the Russian Federation No. 305-ЭС18-21635 in case А40-75603/2017 (23 April 2019) and Ruling of the Supreme Court of the Russian Federation No. 305-ЭС19-1212 in case А40-111339/2018 (10 June 2019).

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Yulia Mullina Tel: +7 495 797 94 77 / Email: [email protected] Yulia Mullina has worked in the Russian Arbitration Center at the Russian Institute of Modern Arbitration (RAC) (Moscow) since the very beginning of the project in 2016. Since December 2019, Yulia has been the Executive Administrator of the RAC. In her current capacity, Yulia supervises the administering of arbitrations under the Arbitration Rules of the RAC, as well as being actively involved in promoting arbitration domestically and internationally. Prior to that, Yulia served as a legal counsel and was involved in arbitral proceedings administered by the RAC as an assistant to arbitral tribunals. Before launching the RAC, Yulia practised litigation and arbitration in one of the oldest Russian law firms. Furthermore, Yulia has a Master’s degree in private law and is now working on a Ph.D. project at Lomonosov Moscow State University.

Valeria Butyrina Tel: +7 495 797 94 77 / Email: [email protected] Valeria Butyrina is a legal counsel at the Russian Arbitration Center at the Russian Institute of Modern Arbitration (RAC). Valeria is now pursuing a Master’s degree in law of international trade, finance and economic integration at the Higher School of Economics (Moscow). Valeria administers arbitral proceedings and has acted as a tribunal assistant in plenty of arbitrations under the Arbitration Rules of the RAC. Alongside this, Valeria is actively involved in RAC activities connected with the promotion of arbitration in Russia and abroad.

Arina Akulina Tel: +7 495 797 94 77 / Email: [email protected] Arina Akulina is a junior case manager at the Russian Arbitration Center at the Russian Institute of Modern Arbitration (RAC). In 2020, Arina graduated with honours from the Faculty of Law of Lomonosov Moscow State University with a Master’s degree in international economic (commercial) law. Before joining the RAC team, Arina participated in the models of international investment arbitration of the Frankfurt Investment Arbitration Moot Court (FIAMC, 2019) and the Foreign Direct Investment International Arbitration Moot (FDI Moot, 2019) and was a fellow of the exchange programme with the Faculty of Law of the University of Geneva, Switzerland (2019). In her current capacity, Arina assists in arbitral proceedings in arbitrations under the Arbitration Rules of the RAC.

Russian Arbitration Center at the Russian Institute of Modern Arbitration 14, Building 3, Kadashevskaya Embankment, 119017 Moscow, Russia Tel: +7 495 797 94 77 / URL: www.centerarbitr.ru

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Nemanja Aleksić Aleksić & Associates

Introduction: Legal system of the Republic of Serbia The Republic of Serbia is a country applying European continental law. The German system dominates the civil law; that is, the Greek-Roman-German legal tradition. The Pandect systematics of the civil law has been accepted, developed by German legal scholars during the 19th century. In the recent period, in company or bankruptcy law, the impact of solutions from Anglo-Saxon law is noticeable; such as, for example, reorganisation in bankruptcy. In the Republic of Serbia, since there is no common civil law, four laws act as relevant sources: the Law on Contracts and Torts (LCT) from 1978 (prepared in line with Swiss law); the Law on Basics of Property and Legal Relations (LBPLR) from 1980; the Law on Inheritance (LI) from 1995; and the Family Law (FL) from 2005. Furthermore, there is no common trade law, since the principle of unified regulation of obligations has been accepted. An important source of company law is the Law on Companies (LC) from 2011. All of the aforementioned laws have been amended on numerous occasions. The rule of law is the basic presumption of the Constitution and it is based on inherent human rights (Constitution of the Republic of Serbia, Official Gazette of the Republic of Serbia, no. 98/2006). The courts are state authorities, independent in their work. Judicial authority is uniform in the territory of the Republic of Serbia and it is allocated to the courts with general and special competence. The courts of general competence include basic courts, higher courts, courts of appeal and the Supreme Court of Cassation. The courts of special competence are commercial courts, commercial courts of appeal, magistrates’ courts, magistrates’ courts of appeal, and administrative courts. The law prescribing judicial authority and important issues related to the functioning of courts is the Law on Organization of Courts. The table below presents the organisation and hierarchy of civil and commercial courts in the Republic of Serbia:

Supreme Court of Cassation Court of appeal Commercial court of appeal Magistrates’ court of appeal Administrative court Higher courts Commercial courts Magistrates’ courts – Basic courts – – –

The right to provide legal services is acquired by adopting the decision on the registration into the directory of lawyers kept by any of the Bar Associations in Serbia. In addition to other conditions, the registration into the lawyer’s directory includes passing the judicial and Bar examination in the Republic of Serbia and having citizenship of the Republic of Serbia. Foreign citizens may be registered in a special register in case of fulfilment of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia regulated terms. There are bilateral international agreements with certain countries that allow lawyers from such countries to represent their clients in courts in Serbia, without registration in domestic Bar Associations. Furthermore, in line with judicial practice that is not generally accepted, there is the possibility for foreign lawyers to represent clients ad hoc in an individual dispute, even though this issue is not specifically regulated by law.

Process efficiency The right to a trial in a reasonable period of time is one of the basic principles of the Law on Litigation (LL) (Official Gazette of the Republic of Serbia, nos 72/2011, 49/2013 (Decision of the Constitutional Court), 74/2013 (Decision of the Constitutional Court), 55/2014, 87/2018, 18/2020) that prescribes the following in Article 10: “The party is entitled to the court deciding on its claims and proposals in a reasonable period of time. The court shall act on the proceedings without delay, in line with predetermined time frame for litigation (hereinafter referred to as: time frame) with as low costs as possible. Failure of the judge to act within the time frame shall represent the basis for the initiation of the disciplinary procedure in line with the provisions of the Law on Judges.” This principle was implemented in a series of legal provisions: the rule that the second instance court is obligated to decide on an appeal within nine months from the day of reception of the records of the first instance court at the latest is of utmost importance (Article 383 paragraph 2 of the LL). Also, in the appeal proceedings, the rule on the preclusion of new facts and evidence is applied: the appeal cannot include new facts or propose new evidence, unless the applicant proves probable that such facts or evidence could not have been presented or proposed without any responsibility for this by the applicant, by the conclusion of the main hearing (Article 372 paragraph 1 of the LL). Efficiency of dispute resolution is also impacted by the rule on the limitation of multiple verdict cancellations in the appeal proceedings: in case the first instance verdict has already been cancelled once, the second instance court cannot cancel the verdict and may send the case to the first instance court for retrial, a hearing must be scheduled and the appeal and claims of the parties must be decided upon (Article 387 paragraph 3 of the LL).1 System improvement through the use of technology was performed through process provisions from the LL, by regulating the option of filing suits and other documents by e-mail. Parties may receive summons for hearings by e-mail and they can also receive other acts from the procedure: “Written form shall include documents sent to the court by telegram and electronic mail, in line with separate laws.” (Article 98 paragraph 2 of the LL.) “In case the filing is sent by e-mail, time of submission to the court shall be the time specified in the certificate on e-mail reception.” (Article 104 paragraph 4 of the LL.) The introduction of the Judicial Information System (JIS) in courts and prosecutor’s offices in Serbia is currently ongoing. The judicial system has been subjected to digitalisation and application of new technologies since 2010.2 This system shall enable faster exchange of data between judicial institutions and other state authorities (Ministry of Interior, National Bank of Serbia (NBS), Business Registers Agency, Ministry of State Administration and Local Governments) that are out of the judicial system and shall significantly reduce the duration of court proceedings. Introducing this system shall significantly reduce the utilisation of letters as means of communication, and information relevant for the proceeding shall be received by “clicking a button”. The project shall improve the efficiency of work of judges, prosecutors, notaries and public executors since it enables the imminent insight into records that are important for the proceeding. For example, judges presiding over alimony cases will be able to see, using one click only, whether the parent of an underaged

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia child is registered for mandatory social security, since when, by which employer and other significant information. In addition, judges will be able to see the address of the respondent or the address of the company the respondent works in. This will prevent the possibility of citizens avoiding the service of subpoena or suits. The successful service of subpoena or suits will significantly reduce the duration of almost all court proceedings; on average, by three to six months. If we consider current postal service prices, printing and paper costs, the estimate is that this system will save approximately RSD 55 million annually3 for the judiciary. This system may also improve the number of resolved cases in court, and the specific example proving this is the Basic Court in Novi Sad which has resolved 5,000 out of 15,000 enforcement cases since October 2017 with 30% fewer judges in the enforcement matter, owing only to this system.4 Regarding records from registers, the judges and notaries public will be able to review, immediately and simply, registers of birth, marriage and the deceased in the proceedings related to last wills and testaments, thus disabling avoidance and failure to state legal successors. System abuse will be practically impossible. Only a limited number of people will be able to access JIS; that is, they shall be determined by the presidents of courts and public prosecutors. Currently, the possibility of abuse is narrowed as precise records are kept on who, when, and for what specific case checked on an individual citizen. Recent amendments to the Law on Enforcement and Security Interest (LESI) (Official Gazette of the Republic of Serbia, nos 106/2015, 106/2016 (Authentic interpretation), 113/2017 (Authentic interpretation), 54/2019, 9/2020 (Authentic interpretation) have introduced a special form of summary proceedings into our jurisdiction. Summary proceedings have been prescribed by provisions of Articles 326a-326e of the LESI applied as of 1 January 2020. The attribute of parties has been prescribed by Article 326a of the LESI and shall represent a subjective condition for the implementation of the summary proceedings. These proceedings may be executed if the enforcement creditor and the enforcement debtor are companies for which the dispute resolution is the competence of the commercial court. The intent of the legislator was to apply the summary proceedings if the enforcement creditor and debtor are companies5 – foreign and domestic companies, including banks and other persons from the financial sectors, legal entities, collectives and entrepreneurs and their associations. In the conditions of recovery from the COVID-19 pandemic, the efficiency of summary court proceedings, enabling the avoidance of prolonged litigation for the petitioner where there is no proper defence, becomes more important than ever.

Process integrity The Constitution of the Republic of Serbia, in part related to human and minority rights, proclaims that everybody is entitled to the protection of the court in case any human or minority right has been violated or denied, as guaranteed by the Constitution, as well as the right to remove consequences that occurred due to such violation. Additionally, it is proclaimed that everybody is entitled to an appeal or other legal remedy against the decision made on his/her right, obligation or legal interest. This, without any special stipulation, determined the minimum of court protection and two instance levels in decision making. Judicial authority belongs to the courts and is independent from the legislative and executive power. Courts are governmental bodies, independent in their work. Courts pass judgments based on the Constitution, laws and other general acts, when prescribed by law, and on generally accepted rules of international law and confirmed international treaties.

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Judges are the holders of judicial authority. Their functions are permanent ones, except for when elected for the first time. In this case, their mandate is three years. To secure absolute impartiality of trial in our legal system, the so-called “entitlement to an innate judge” principle is applied. This means that the judge does not know who the parties will be, and the parties may not know in advance who the judge in their process will be. This principle is recognised in practice by precise registration of time of submission of the case to the court and even distribution between present judges. In a court including, for example, 10 judges, each 10th case must be given to an individual judge.

Privilege and disclosure Mechanisms for the protection of legal counsel and documents that are prepared during litigation and arbitration are regulated by law. The LL contains several provisions on secrecy: “[A] person that would violate the duty of confidentiality in his/her testimony may not act as a witness until the competent authority releases such a person from such duty” (Article 247 of the LL). “[A] witness may refuse testifying about: 1) what the party disclosed to the witness as its holder of the power of attorney; 2) what the party or other person disclosed to the witness as the religious confessor; 3) facts that the witness would learn acting as the lawyer, doctor or performing some other occupation, in case of confidentiality obligation” (Article 248 paragraph 1 of the LL). Stated rules are applied accordingly regarding the rights of the party to deny the submission of documents in litigation (Article 241 paragraph 3 of the LL). The Law on Advocacy (LA) (Official Gazette of the Republic of Serbia, nos 31/2011, 24/2012) protects the confidentiality of client records, by regulating the rules onthe confidentiality of lawyers: “[A] lawyer shall be obligated to, in line with the statute of the Bar Association and the code, keep records confidential and to care on such obligation being met by the persons employed within its office, namely, all disclosed by the party or its authorized representative or what the lawyer learned or procured within the case in which the lawyer provides legal assistance, as well as during the preparation, duration and after the cessation of the representation.”

Evidence After the reform of the civil process legislation in Serbia in 2011, a deviation from the principle of material truth and affirmation of the principle of hearing occurred. For the purpose of improving the efficiency of litigation, the possibility of deviation from the principle of hearing, which was set as a general rule by Article 7 paragraph 1 of the LL, was further narrowed, so the application of the official principle, that is, the investigative principle, was permitted only as the exception, by regulating that the court shall “consider and determine only the facts the parties presented and accept only evidence that the parties proposed, unless the law prescribes otherwise” (Article 7 paragraph 2 of the LL), and that the “court shall be authorized to determine the facts not presented by the parties and present evidence not proposed by the parties, if the results of hearing and evidence presenting show that the parties hold requests they are not allowed to hold (Article 3 paragraph 3)” (Article 7 paragraph 3 of the LL). Therefore, a hearing principle is affirmed when determining facts and presenting evidence. In this manner, all doubts in the theory and court practice related to solutions from previous laws are removed, which has resulted in extensive application of the investigative principle in the practice of courts.

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Costs The rule that the losing side at the end of the process pays for the costs applies in Serbia, with certain deviations: “Each party shall initially bear all the costs arising from actions of such party.” (Article 151 of the LL.) “In case a party proposes the presentation of evidence, the party shall, in line with the order of the court, submit a down payment for the settlement of costs arising from presentation of evidence. In case the presentation of evidence is proposed by both parties, the court shall set a fee required for the settlement of costs for both parties, equally. In case the court ordered presentation of evidence ex officiopayment shall be executed by the party with burden of proof related to the fact subject to presentation of evidence. The court shall release from the settlement of costs the party that, in its general financial status, is not able to bear such costs. Exempt from payment of costs of procedure shall include the exemption from the payment of taxes and the down payment for the costs of witnesses, court experts, investigation and court notices (Article 168 of the LL). The court shall, during the entire proceedings, recognize the party with the right to free legal aid when the party is fully exempt from the payment of proceedings costs (Article 168 paragraph 2), if necessary for the protection of the rights of the party, that is, if prescribed by special law” (Article 170 of the LL). The amount of the court fee shall be set by the Law on Court Taxes. The regulated maximum amount of court tax for the civil suit shall be RSD 97,500, and in economic disputes it shall be RSD 390,000. The amount of compensation for the work of lawyers is also set by the Tariff on rewards and compensation of costs for the work of lawyers. Securing litigation costs (caution iudicatum solvi) exists only in disputes with a foreign element and is regulated by Article 82 of the Law on the Resolution of the Conflict of Law with Regulations of Other Countries (LRCLROC) (Official Gazette of the Socialistic Federal Republic of Yugoslavia, nos 43/82, 72/82, Official Gazette of the Federal Republic of Yugoslavia, no. 46/96, Official Gazette of the Republic of Serbia, no. 46/2006): when a foreign citizen files a suit in courts of the Republic of Serbia, such citizen shall be obligated to secure the costs of litigation to the respondent, at the request of the respondent. Securing costs of litigation shall be executed by monetary payment, but the court may approve provision of securities in another suitable form. However, the right to securing litigation costs shall not apply under the terms of reciprocity.

Litigation funding Litigation funding by third parties is not developed in Serbia. The Tariff on rewards and compensation of costs for the work of lawyers (Article 7) prescribes: “In property and legal cases the lawyer may agree on the reward in writing with the party for work in proportion (percentage) with success of the proceedings that is, with success in legal matters that shall be taken in the name of the party, where the contracted percentage cannot exceed 30%.” In this manner, the lawyers are indirectly financing the client by not collecting the reward for work in line with the type and number of taken litigation actions in the proceedings, but only after and if they succeed, where the agreed percentage (success fee) cannot be over 30%.

Class actions Class actions are not permitted in Serbia. However, they are expected to become available in the near future. Amendments to the LCT that should be completed by the end of the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia year shall provide an opportunity to file collective suits through registered consumer associations; therefore, the protection of rights of consumers, and banks’ clients, will be more efficient. The proposal for the amendment of the law is supported by the fact that class action is necessary in all cases including the violation of the legal rights of consumers that are endangered in the same manner or by the same merchant. The same is valid for clients of banks.6 The previous LCT envisaged class action, but the Constitutional Court found that this provision was not detailed in a sufficient manner. However, in our legislation, “several persons can sue, with one suit, that is, be sued (co- suitors), provided that: 1) regarding the subject of dispute, they are within a legal union or if their rights, that is, obligations arise from the same factual or legal basis; 2) subject of dispute are claims, that is, obligations of the same kind based on materially identical factual or legal basis and in case of actual and territorial competence of the same court each claim and each respondent; and 3) it is regulated by law”. In this manner, with the application of the institute of co-suitors, for example, workers can claim their salaries and protect other rights from employment, etc. if it is not a class action in a narrow sense.

Interim relief Injunctions related to the property of the sued debtor are available in Serbia. The LESI envisages different forms of interim relief. In addition to securing clams including giving, acting, failure to act or suffering, interim relief may be imposed for securing claims that include the request for the determination of existence, or non-existence, of a right or legal relation, violation of personal rights and veracity, or lack of veracity of a document or request for the transformation of a material or process relationship (Article 447 of the LESI). In bankruptcy proceedings that may be initiated only against legal entities in Serbia, the court may, during the previous procedure, set security measures (moratorium) for preventing the change of the property status of the bankruptcy debtor, by prohibiting the payments from the account of the bankruptcy debtor without the consent of the bankruptcy judge or receiver, or prohibit or temporarily delay the enforcement regarding the bankruptcy debtor.7 The European order for the preservation of accounts, in line with Regulation (EU) no. 655/2014 facilitating the cross-border collection of debt in civil and commercial matters, is not applied in Serbia since Serbia is not an EU member. However, in line with the provisions on international bankruptcy from Article 191 of the Law on Bankruptcy (Official Gazette of the Republic of Serbia, nos 104/2009, 99/2011, 71/2012 (Decision of the Constitutional Court), 83/2014, 113/2017, 44/2018, 95/2018), one of the consequences of the recognition of the main foreign proceedings is the prohibition of disposal of the property of the debtor in Serbia.

Enforcement of judgments/rewards The LRCLROC in Articles 86–96 regulates the recognition and execution of foreign court decisions. A foreign court decision shall be equal to the decision of the court in the Republic of Serbia and shall cause legal effect in the Republic of Serbia only if recognised by the court of the Republic of Serbia. A foreign court decision shall be recognised only if the applicant submitted the certificate of the competent foreign court, that is, another authority on the validity of such decision in line with the laws of the country of adoption. A foreign court decision shall not be recognised in cases where there is no reciprocity. The non-existence of reciprocity is not an obstacle for the recognition of the foreign court decision from a marital dispute, nor in disputes related to the determination and dispute of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia fatherhood or motherhood or in cases where the recognition or enforcement of the foreign court decision is required by a Serbian citizen. The existence of reciprocity regarding the recognition of a foreign court decision is presumed until proven otherwise, and in case of doubt of the existence of such reciprocity, the clarification shall be provided by the Ministry of Justice.

Cross-border litigation Serbia provides support to processes in other jurisdictions by providing legal assistance that the domestic court enables foreign courts regarding procurement of evidence (for example, witness testimonies, procurement of written documents), and related to the delivery of documents, in line with the procedure as prescribed in the LL and international conventions. “The courts shall provide assistance to foreign courts in cases prescribed by laws, international agreements, generally accepted rules of international law and in case of reciprocity in providing legal aid. In case of doubt on the existence of reciprocity, notice shall be issued by the Ministry responsible for judiciary.” (Article 176 of the LL.) Serbia is a signatory to a number of bilateral and multilateral international conventions that regulate legal assistance that the domestic courts provide to the courts from the signatory countries. The most important source of international law is the Hague Convention on Civil Proceedings as of 1 March 1954 which, among other things, specifies that: “In civil and commercial matters, delivery of documents for persons that are located abroad shall be performed in countries signatories to the treaty at the request of the consul of the requesting country to the authorities specified by the country receiving request.” In Serbia, in contractual and obligatory civil or commercial relations with a foreign element, contracting a foreign material applicable law is permitted. Furthermore, in material and legal matters with an international element, contracting the competence of the domestic or foreign court or foreign or international arbitration is permitted. Domestic courts shall not consider, ex officio, the existence of the treaty on the competence of foreign courts, and cannot be announced incompetent or reject the suit ex officio; it shall be obligated to deliver the suit to the respondent and only upon an objection of the respondent may it announce incompetence and reject the suit due to the competence of a foreign court.8

International arbitration National law (LA) regulates the arbitrary resolution of disputes with or without a foreign element (hereinafter referred to as “internal arbitration”). Arbitrary resolution of disputes shall be organised by a foreign arbitration institution, and the parties may agree on an ad hoc arbitration. In our jurisdiction, the highest arbitrary body is the Permanent Arbitration with the Serbian Chamber of Commerce. The Rulebook on the Permanent Arbitration with the Serbian Chamber of Commerce (RPASCC) (Official Gazette of the Republic of , Serbia no. 101/2016) regulates the organisation and competence of the arbitration. Resolution of domestic and international commercial disputes for which the arbitration is competent and contracted shall be performed by an individual arbiter or an arbitrary council, in line with this Rulebook and the law regulating arbitration (Article 6 of the RPASCC). There is judicial support for the arbitrary procedure regarding the enforcement of the arbitrary decision: “Domestic arbitrary decision shall have the power of the domestic valid court decision and shall be enforced in line with the provisions of the law regulating

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia enforcement procedure. Foreign arbitrary decision shall have the power of the domestic valid court decision after the recognition by the competent court of the Republic.” (Article 64 of the LA.) Furthermore, a form of judicial support to the arbitrary process is the option to adopt interim orders based on Article 15 of the LA: “prior to the initiation of the arbitrary procedure or during the procedure, each party may submit a request for the adoption of interim orders to the court, and the court may order such measures.”

Mediation and ADR There is a growing trend of mediation development in Serbia as an alternative method of solving disputes in our jurisdiction. Mediation represents an alternative way of solving disputes in which an interdependent and impartial third party, or mediator, helps the parties in dispute to reach a mutually acceptable solution. Mediation may commence before or during the court proceedings, as well as during the proceedings resulting in legal remedies or during the enforcement proceedings. The specification of mediation as a voluntary, informal, very fast and cheap process is the fact that, during the procedure, the parties retain full control and no one but such parties is able to make any decision on the manner of resolution of such dispute, and in case the agreement occurs, it is concluded in mutual interest. The role of the mediator is to help the parties determine their interest in relations with one another and to reach an agreement. The agreement may have the power of the executive document, and the mediator and the holders of the power of attorney of both parties may participate in its written preparation. Compared to the cost of regular court proceedings, depending on the dispute value, the cost can be lower by 35 to 60%.9

Regulatory investigations The most significant regulatory body in the area of business, primarily in the financial sector, is the NBS. The position, organisation, authority and functions of the NBS are regulated by the Constitution of the Republic of Serbia (Official Gazette of the Republic of Serbia, no. 98/2006) and the Law on the National Bank of Serbia (LNBS) (Official Gazette of the Republic of Serbia, nos 72/2003, 55/2004, 85/2005 (as amended), 44/2010, 76/2012, 106/2012, 14/2015 (Decision of the Constitutional Court) and 44/2018). Article 86v of the LNBS regulates the judicial control of the acts of the LNBS: “Administrative dispute may be initiated against an administrative act of the National Bank of Serbia adopted in the performance of its duties, but the suit against this act cannot prevent or delay its implementation. In the administrative dispute against the act from paragraph 1 of this Article the court may not resolve the administrative matter for which the jurisdiction of the National Bank of Serbia has been determined by law.” Therefore, the Administrative Court shall decide on the legality of the act of the NBS, thus achieving judicial control of operations of this regulatory body; however, the court cannot decide in the “dispute of full jurisdiction”, meaning the decision of the Administrative Court cannot replace the act of the NBS, but the act may be annulled and returned to the NBS for decision making. For example, if the NBS refuses to issue an operating licence to a business bank, the Administrative Court, in resolving the suit in the administrative procedure against the decision of the NBS, may not issue a licence; it can only cancel the decision of the NBS. Another significant regulatory body is the Securities Commission that supervises the operations of equity market participants, based on the Law on Equity Market (LEM) (Official Gazette of the Republic of , Serbia nos 31/11, 112/15). The decisions of the Securities Commission are final, and an administrative procedure may be initiated against

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Aleksić & Associates Serbia them (Article 242 paragraph 2 of the LEM). Thus, acts adopted by this regulatory body are subjected to control by courts, and by the Administrative Court in the administrative procedure. Article 49 of the Law on Administrative Procedure (LAP) (Official Gazette of the Republic of Serbia, no. 111/2009) regulates that, against a valid decision of the Administrative Court, the party and the competent public prosecutor may submit a request to the Supreme Court of Cassation for review of the court decision, as an extraordinary legal remedy, in matters in which the administrative procedure excluded the appeal, including the acts of stated regulatory bodies, since an appeal is not permitted against their decisions. This means that the highest court of the Republic of Serbia is included in the process of court control of the legality of acts of regulatory bodies.

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Endnotes 1. Vladimir Kozar, Milan Počuča, Komentar Zakona o parničnom postupku sa novelama iz 2014. godine, sudskom praksom i registrom pojmova, Drugo izmenjeno i dopunjeno izdanje, “Poslovni biro” d.o.o., Belgrade, 2014, p. 614. 2. Ana Opačić, Vladimir Kozar, “Primena novih tehnologija u pravosudnom sistemu Srbije” Pravo i digitalne tehnologije (edited by Marko Carić), Novi Sad, 2019, pp. 115–128. 3. Nela Kuburović, Minister of Justice in her speech in the First Basic Court in Belgrade on the presentation of JIS, https://www.mpravde.gov.rs/vest/19103/predstavljen-rad- pravosudno-informacionog-sistema.php, 25.04.2018. 4. http://www.politika.rs/sr/clanak/399616/Klikom-do-podataka-iz-pravosudne-baze, 24.05.2019. 5. Vladimir Kozar, Dragoljub Lazarević, Komentar zakona o izvršenju i obezbeđenju sa novelama iz 2019. godine, sudskom praksom i registrom pojmova, second amended edition, “Poslovni biro”, Belgrade, 2019, p. 585. 6. https://www.blic.rs/biznis/moj-novcanik/uskoro-ce-i-u-srbiji-biti-moguce-kolektivne- tuzbe-protiv-nesavesnihtrgovaca/tdveeqg, 17.05.2020. 7. Vladimir Kozar, Nemanja Aleksić, Komentar zakona o stečaju sa novelama iz 2017. godine i sudskom praksom, “Poslovni biro” d.o.o, Belgrade, 2018, p. 154. 8. Response determined at meetings of the Department of the Commercial Court of Appeals as of November 9 and 10, 2010 – Judicial Practice of Commercial Courts – Bulletin no. 3/2010 http://www.propisionline.com/Practice/Decision/33443, 17.05.2020. 9. https://www.mpravde.gov.rs/sekcija/15868/medijacija.php, 17.05.2020.

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Nemanja Aleksić Tel: +381 21 3000 800 / Email: [email protected] Dr Nemanja Aleksić is the Managing Partner of Aleksić & Associates and has more than 19 years of experience working in the legal profession. After founding Aleksić & Associates, he grew his practice to include over 290 professionals focusing on general corporate law, banking and finance, real estate law and dispute resolution. Under his guidance, the law firm has developed particular expertise in financial regulation, NPL portfolio services and restructuring and distressed transactions, including debt recovery and workout, and due diligence of portfolios for sellers and buyers. Today, his clients include local and international financial institutions, multinational corporations, and public and private stakeholders. Nemanja supports both local and international clients in establishing their business in Serbia. He is widely recognised as a leading figure in the Serbian legal sector.

Aleksić & Associates Grčkoškolska 1, 21101 Novi Sad, Autonomous province Vojvodina, Serbia Tel: +381 21 3000 800 / Fax: +381 21 3000 851 / URL: www.lawofficealeksic.rs

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Pedro Moreira & Isabel Álvarez SCA LEGAL, SLP

Efficiency of process Introduction to the Spanish legal system Spain is a democratic State and a parliamentary monarchy in which, as in all modern democracies, powers are divided up between the three main branches of Government. Judicial Power is vested in courts and tribunals, whose function is to administer justice in the name of the people. In Spain, Judicial Power is ruled by the Constitution of 1978 (hereinafter, “CE”), specifically in Title VI (arts 117 to 127), and in Organic Law 6/1985, of July 1st, on the Judicial Power (hereinafter, “LOPJ”), modified by, among others, Organic Laws 19/1993, 20/2003, 2/2004, 6/2014, 13/2015, 3/2008, 4/2018 and 5/2018. Different judicial bodies are in charge of the exercise of Judicial Power, organised in the civil, criminal, contentious-administrative, labour and military orders. These bodies must deal with and decide all the litigations that must be prosecuted in Spain, according to their nature. In this chapter, we will focus on the Spanish institutional framework by which the prosecution of litigations in the civil and commercial areas is governed. Courts and tribunals For judicial purposes, Spain is organised territorially into municipalities, parties, provinces and autonomous communities. The organisation and running of the courts and tribunals is regulated in the LOPJ, under which these bodies may be single-judge courts or collegiate courts. Next, we proceed to analyse the most relevant categories of courts and tribunals in the context of civil and commercial disputes: • Supreme Court (Tribunal Supremo): Based in Madrid, the Supreme Court is the highest judicial body in all orders, except for the interpretation of constitutional rules, for which the Constitutional Court is responsible. The Supreme Court has jurisdiction throughout Spain and all other judicial bodies exercise their powers in subordination to it. It is formed by the civil, criminal, contentious-administrative, labour and military chambers. The matters it deals with are assessed and regulated in the LOPJ, the most relevant civil proceedings dealt with by such court being those related to cassation of appellation rulings, revision and other extraordinary remedies. • Regional High Courts of Justice (Tribunales Superiores de Justicia): These courts are judicial bodies with jurisdiction over the territory of each Autonomous Community, after which they are named. Each of these courts is made up of the civil and criminal, contentious-administrative and labour chambers.

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The High Courts of Justice are the judicial bodies before which all successive procedural instances of pleas initiated in the respective communities for matters within their competence finish up, without affecting the higher competence of the Supreme Court and central jurisdictional bodies in certain matters. The Civil Chamber of these courts deals with appeals for annulment and review against resolutions of jurisdictional bodies of the civil order based in the Autonomous Community, provided that the appeal is based on violation of civil, local or special law norms of the community, and after the corresponding Statute of Autonomy has approved this. In addition, it supports and controls arbitration, as well as requests for exequatur of arbitration awards or foreign resolutions, unless this corresponds to another court or tribunal according to the provisions of treaties or European Union regulations. • Provincial Courts (Audiencias Provinciales): Each province has a court, which is a higher judicial body with certain powers in the civil and criminal areas. As a rule, each Provincial Court is named after the capital of the province and extends its jurisdiction to the entire territory of that province. In the civil order, these courts mainly deal with and decide on appeals against rulings given by the courts of first instance. • Courts of first instance: These are single-judge judicial bodies with jurisdiction in civil and most commercial matters. In each judicial county, there are one or more courts of first instance. Their headquarters are in its capital and each of these courts has jurisdiction in all of its territorial area. • Commercial courts: These courts are single-judge judicial bodies based in the capital of each province; they have jurisdiction over it, although commercial courts may be established to extend their jurisdiction to two or more provinces of the same Autonomous Community. These are specialised courts within the civil order, and have jurisdiction in the commercial area (bankruptcy, anti-competitive practices, transportation, industrial property, intellectual property and publicity, as well as corporate matters, among others). However, civil and commercial matters that are not expressly assigned to them by law are dealt with by the courts of first instance. • Constitutional Court (Tribunal Constitucional): This court is the Spanish constitutional body that acts as supreme interpreter of the Constitution. It is regulated in the CE, in Title IX (arts 159 to 165), and in Organic Law 2/1979, of October 3rd, of Constitutional Court, amended, among others, by Organic Laws 6/2007, 12/2015 and 15/2015. This court is independent from the Judicial Power and, in the performance of its function, is subject to the CE and its Organic Law only. In addition, it is unique in its order and extends its jurisdiction to the entire national territory. The magistrates of the Constitutional Court are appointed by the King, among lawyers and other professionals in the world of law proposed by different higher bodies of the State, including Parliament and Government (art. 159 CE). The last interpretation of the provisions of the CE is constitutionally assigned to the Constitutional Court which, as such, is in charge of hearing requests for the declaration of unconstitutionality of ordinary rules, protection of rights foreseen by the CE and solving conflicts of competence between the State and the Autonomous Communities and between the Autonomous Communities, without detriment to others that the laws of ordinary rank may assign to it. With these commitments, at the time of interpreting constitutional rules and the adequacy of the ordinary ones to these, the Constitutional Court is definitely in a position to, among others, rule in terms that affect the validity of rulings given, in civil and commercial disputes, by ordinary courts, and/or uphold constitutionally protected rights in case of breach of the same by ordinary rulings.

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Mechanisms for dispute resolution The Spanish legal system basically foresees two ways of resolving disputes in civil and commercial matters: on the one hand, judicial proceedings; and on the other, voluntary proceedings, the latter being an alternative to the first with two types of instruments: mediation; and arbitration. Judicial proceedings In civil and commercial matters, Law 1/2000 of January 7th, on Civil Procedural Law (hereinafter, “LEC”), basically foresees two types of declaratory judgments for the resolution of disputes: the so-called “small claims procedure” (procedimiento sumario) and the ordinary procedure (procedimiento ordinario); and an abbreviated procedure without a properly declaratory character, the order for payment procedure (procedimiento monitorio). • The small claims procedure, regulated in arts 437 to 447 of the LEC, is a type of declaratory procedure for claims of up to €6,000, and for the prosecution of matters expressly mandated by that legal body, regardless of their amount. This procedure begins with a claim, which is followed by the defendant’s written response, and a sole hearing in which decisions are made about procedural issues and the admission of evidence. Evidence is then taken before trial and it ends with the issuance of a ruling. • The ordinary procedure, regulated in arts 399 to 436 of the LEC, is applicable to certain matters expressly contemplated in the law (for example, in competition law matters, and claims of amounts of over €6,000, as long as this matter is not to be dealt with by a small claims procedure). This procedure is similar to a small claims procedure, except for the fact that instead of a sole hearing, it is developed by two trials, namely: a pre-trial, in which procedural issues are resolved and evidence is proposed and admitted; and a main trial, in which the evidence is produced and conclusions, on the evidence and the law applicable to it, are drawn by the parties. Once the trial has been held, the case ends with the issuance of a ruling. • The order for payment procedure, ruled in arts 812 to 818 of the LEC, is an expediting procedure foreseen for the settlement of disputes which, as discussed above, does not have a declaratory nature and does not end with the declaration of the law to be applied to the claim it is dealing with. Like the aforementioned declaratory judgments, it is heard by a court of first instance and is intended for monetary claims of any amount, provided that the claimed amount is liquid and determined, the deadline for its settlement has expired and that it is backed by any evidence means admitted in law (invoices, delivery notes, etc.). The procedure is initiated by an initial petition in which the court is asked to require the debtor to pay or make the pertinent allegations. If the debtor pays or does not answer the court’s request, the judge will issue a payment order, which has executive character and ends the procedure; if the requested party opposes, the requesting party has to file a declaratory claim, to be dealt with in a small claims court or ordinary procedure, depending on the amount claimed by the plaintiff. Voluntary proceedings Arbitration and mediation are currently regulated, respectively, in Law 60/2003, as of December 23rd, on Arbitration, in the Spanish Arbitration Act, which repealed the first Spanish arbitration law enacted in 1988, and in Law 5/2012, of July 6th, on mediation in civil and commercial matters.

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As provided in Law 60/2003, submission to arbitration is always voluntary and responds to an agreement – previous or contemporary to the dispute – between the parties, to choose the arbitrator, the language of the proceedings, the place, and whether the arbitration is to be governed by rules of law or equity. An arbitrator (or several) will be in charge of resolving the dispute through an arbitral award. Although submission to arbitration is voluntary, the resolution issued in the arbitral proceedings is, in any case, mandatory for the parties. Once the award has been issued, neither party can go to court to obtain a different resolution, since an arbitration award is deemed to be judged. In the event that the parties fail to comply with the award voluntarily, the party benefitting therefrom may request the enforcement of the same before the courts of the State, by filing a suit for execution, under the terms provided by the LEC for judicial resolutions liable to execution. With the approval of the aforesaid laws on arbitration and mediation, the legislator has tried to encourage the use of mediation and arbitration to solve private disputes. However, for the time being, partly due to lack of knowledge from the justiciables and partly due to the costs that they may entail, voluntary proceedings are not heavily used in Spain. Procedural management From a procedural point of view, Spain has a special characteristic, insofar as the law provides for the existence of a professional other than the lawyer (hereinafter, abogado or “lawyer”); the Procurador de los Tribunales (hereinafter, Procurador), to whom it entrusts the representation of each of the parties in civil and commercial proceedings. In her capacity as representative of the party, the law assigns the Procurador, among others, powers to serve the pleadings of the party she represents and to receive notifications of the pleadings served by the other, as well as the decisions issued by the judicial body before which the case is being heard. Her intervention is mandatory in all civil proceedings, with the exception of the order for payment procedure and in proceedings where the amount does not exceed €2,000, or where the parties do not need to appear in court with the assistance of a Procurador. At the same time, the abogado is responsible for the client’s assessment and technical defence. As with the Procurador, her intervention is mandatory, except with regard to the initial request for payment procedure and in proceedings where the amount does not exceed €2,000. In recent years, with the approval of Law 18/2011, of July 5th, which regulates the use of information and communication technologies in the administration of justice, and Royal Decree 1065/2015 which develops it, an electronic system (“LEXNET”) was set up, through which all the procedural documents must be served and all the notifications made in the proceedings must be received. Although its introduction means progress, so far the use of LEXNET has not significantly invigorated the procedural management system, as it suffers from technical deficiencies and its participation in this process is still limited.1 Efficiency of the system In general terms, the Spanish legal system adequately protects the rights of the justiciables, who see their disputes resolved in an independent and professional manner within a period of time that is usually not too long. The time it takes to resolve a dispute in the first instance, that is, from the filing of the claim to the sentencing, is usually around one year.2,3 In case of appeal, it would be necessary to count on one more year until the matter is ruled in the second instance. Once an appellation

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, SLP Spain ruling has been issued, and if this resolution is to be revised by the Supreme Court (in those scenarios where this is allowed), the procedure may be extended for another two years. This average timespan, which does not seem excessive, at least in comparison with other countries in our legal and cultural vicinity, can, however, be extended in certain situations, as there can be other delaying factors, such as difficulties with the service of the claim to the defendant, excessive workload of the court or tribunal in charge of the case, or the request for legal aid by one of the parties, with consequent damage to the interests of one or more of the parties. Notifying the defendant of the claim can be problematic when the defendant does not reside at the address the plaintiff is aware of, since, in that case, the law imposes the burden on the plaintiff of finding an address where the claim can be served to the defendant. In our opinion, this is a bad solution, especially in the area of contractual disputes, in which, like in other countries, it would be possible for the law to consider the inclusion in contracts of a domicilium citandi for each of the parties, to the effect that the party to whom the court has to notify the filing of the claim is considered notified as of the moment at which the judicial notice has been sent to the address included in the contract.

Integrity of process In Spain, access to the judicial system is fully granted by the CE. In effect, art. 24 of said legal body establishes, as a constitutional principle, the right of individuals to effective judicial protection in the exercise of their rights and legitimate interests without ever being defenceless. Likewise, art. 117 of the CE guarantees respect for certain essential principles, undoubtedly necessary for the proper functioning of the Judiciary, such as the principles of impartiality, independence, job stability and responsibility of judges and magistrates and of legality, according to which the work of these must always be based on the law. In addition, as established in the LEC (arts 99 et seq.), judges and magistrates must refrain from hearing any lawsuit in which, objectively, they may have some type of interest; the parties may request their exclusion if they believe that the judge or a certain magistrate appointed to hear the case is not in a position to do so impartially, and the affected judge or magistrate has not recused themselves ex officiofrom hearing such case.

Privilege and disclosure Privileged communication Legal privilege is a right and an essential duty in the Spanish legal profession, extending to communications between lawyer and client and between lawyers themselves. In Spain, legal privilege in the legal profession is regulated in different legal bodies, especially in the LOPJ, the General Statute of the Spanish Practice of Law, approved by Royal Decree 658/2001, of June 22nd, and the Code of Ethics of the Spanish Practice of Law. According to the aforementioned regulations, lawyers are to keep secret all facts or news they know through any of the modalities of their professional performance, so that the relationship between abogados and their clients is protected by a duty of confidentiality imposed on the legal practitioner. As a rule, abogados are not forced to declare on matters in which they have been professionally involved. Legal privilege encompasses the conversations of the lawyer with her clients, opposing parties or their lawyers, and as such, these conversations cannot be recorded without prior

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, SLP Spain consent of the parties involved, and will always be protected by legal privilege. Likewise, communications between the lawyer and her client, and between lawyers, must be considered confidential and reserved. The duties that imply legal privilege will remain even after the abogado has ceased to provide services to her client. The breach of legal privilege by lawyers can have different disciplinary consequences that, depending on their severity, can range from the imposition of a minor penalty to the disqualification of their position for a specific time, or even expulsion from the Bar Association to which they belong. Disclosure 1. In civil proceedings, an essentially accusatory model of evidence applies, so it is the parties who are obligated to collect and prepare the evidence they consider appropriate to prove their claims, with very limited intervention from the judge, who, as far as not admitting evidence he does not consider pertinent, can do little more than invite the parties to propose certain evidence to prove certain facts, if he believes the evidence proposed by them is insufficient. Although, as we have pointed out, the Spanish evidence system is essentially accusatory, it is only possible in a limited way for each party to develop an intense probative activity (discovery) which the other party cannot refuse, under the supervision of a judge and prior to the inception of contentious proceedings, unlike what happens in several common law countries and especially in the United States of America. However, recently the legislator has chosen to include in Law 15/2015, of July 2nd, on non- contentious proceedings, a procedure applicable in commercial matters under which, within certain terms, a person legally obliged to keep accounting may be required to display the corresponding books, documents and accounting support. In the event that she does not do so without justification, the court will apply a coercive fine of up to €300 per day until the requested evidence is submitted. 2. In May 2017, Royal Decree-Law 9/2017, of May 26th, came into effect, which transposed, among others, Directive 2014/104/EU, of the Parliament and of the Council. It establishes certain rules to govern, under national law, actions for damages resulting from infringements of the competition law of the Member States and the European Union. In procedural matters, this transposition was carried out through the addition of new provisions, on procedures for claiming damages for breach of competition law, to the LEC (arts 283bis a to 283bis k). The new regulations are intended to prevent the obstruction of evidence by the opposing party, adopting a series of measures to those effects, such as, for example, the possibility of having a hearing for such purpose. The court may adopt measures to order a document production. However, it is by no means a true “discovery” mechanism, since the request for production to third parties or to the opposing party is only allowed for certain documents, and in all cases under certain proportionality requirements which significantly limit its use.

Evidence The hearing of evidence is ruled by the LEC, which provides for the necessary requirements and deadlines. They vary according to the declaratory procedure. As for the admitted evidence, the LEC includes several types, such as, among others, witnesses’ testimony, the declaration of the other party, and the contribution and examination of documents, public or private, including electronic documents of any type (art. 299.1 LEC).

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General provisions According to the mentioned rule, the purpose of the evidence shall be those controversial facts that are related to the judicial protection it is intended to obtain from the proceedings (the subject of the evidence shall also include custom and foreign law) (art. 281 LEC). Facts that the parties fully agree to are exempt from evidence, except in cases in which the object of the proceedings is beyond the power of the parties (non-renounceable rights). The same rule also applies to acts of public knowledge, which are thus excluded from any sort of evidence provision. The evidence shall be examined at the request of the party. However, the court may rule ex officio that certain evidence be examined or that documents, opinions or other means of evidence and instruments be provided when this is foreseen by the law (art. 282 LEC). Proposal and admission Evidence shall be proposed by the parties in a timely procedure (according to the correspondent type of procedure) and the court shall decide on the admission of each piece of evidence proposed. No evidence that is deemed irrelevant – in the sense that court that deems it irrelevant or with no relation to the objects of the proceedings – shall be admitted by the court (art. 282 LEC). Evidence that, according to reasonable and secure rules and criteria, can in no case contribute to clarifying controversial facts, must not be admitted owing to their useless nature. In addition, no activity forbidden by law can be admitted as evidence (art. 283 EC). Taking of evidence Pursuant to the provisions set forth in the LEC, any means to record words, sounds and images shall also be admitted, as shall any instruments that allow words, data and mathematical operations carried out for accounting purposes or any other purposes, which are relevant to the proceedings, to be saved, known or reproduced (art. 299.2 LEC). Where certainty about relevant facts may be attained by any other means not expressly set forth in the LEC, the court may, at the request of a party, admit such means as evidence and shall adopt any measures that may turn out to be necessary in each case (art. 299.3 LEC). Burden of proof As a rule, it is up to the plaintiff to provide evidence of the facts from which, according to the legal rules applicable to them, the legal effect foreseen by such party is ordinarily inferred. The same is to be said of the facts alleged by the defendant from which, according to the applicable rules, the legal effect foreseen by such party –i.e. , the impairment of those alleged and proven by the plaintiff – is ordinarily inferred (art. 217 LEC). If, at the time of ruling on the case, the court understands that certain facts relevant to the decision are uncertain, it shall dismiss the lawsuit filed by the plaintiff or the counter-claim defendant, or those of the defendant or the counter-claim plaintiff, depending on the party to whom corresponds the burden of proof of the facts that remain uncertain and constitute the ground for the suit (art. 217.1 LEC).

Costs In Spain, procedural costs are all those verifiable expenses that originate during a legal process, the most important of which are the fees charged by professionals (Abogados, Procuradores, experts), translation of documents, publication of notifications in official gazettes, and the court fees.4

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The costs are imposed in the ruling, in accordance with a general principle according to which the costs are imposed on the party losing the lawsuit, who, therefore, is liable for the payment of her own costs and those of the winning party (art. 394 LEC). Also, as a rule, if the claim is upheld partially, each party will bear its own litigation expenses, the common ones being borne by each of the parties equally. Once the court imposes costs on one of the parties, the same must be assessed in a separate proceeding (cost assessment proceeding), initiated at the request of the winning party, although its amount as a rule shall not exceed one-third of the amount of the main lawsuit.

Litigation funding To litigate in Spain, each party must pay for their own lawyer’s and Procurador’s5 fees; nevertheless, as discussed above, such fees may be recovered by either party according to the judgment of costs. Under the rule whereby the loser pays the costs (art. 394 LEC), and as costs are usually to be paid long before a final ruling is given, they must actually be paid by the party that has incurred said costs; only after such final ruling is given will the wining party be in a position to claim her costs from the losing one. However, nothing prevents the costs of a lawsuit being financed by a third party, despite the fact that, so far, no legislation specifically covering this type of financing has been approved. The truth is that, in recent years, in Spain, as in other countries, several non- financial companies and even law firms have begun to finance lawsuits, notably those where the disputed amounts are substantial and the uncertainty regarding the terms of the outcome of the case is high, at least from the party’s perspective, by providing what is now widely known as “litigation funding”. This funding is not an ordinary one, where compensation due to the financier is an interest, but a funding where the “financier” actually acts more as a business partner of the litigator or the assignee of the litigator’s position than a true financier. Therefore, what is peculiar about “litigation funding” is the type of compensation sought by the provider of the funds: actually, instead of being entitled to receive interest and to be paid back the loaned funds at the end of the loan period, the provider of litigation funding assumes the risk of the outcome of the case by accepting to be paid nothing but a share of the proceeds won by the funded party in case this party wins the case. In case of assignment of the litigator’s credits, a transaction permitted by the Spanish contract law and notably covered by art. 1535 of the Civil Code, the scenario is even more extreme, as the provider buys the litigious credit for a certain amount and assumes the full risk of losing the case as the price for keeping the proceeds of this in full, if, in the end, she wins the same.

Class actions Strictly speaking, one could say that the LEC does not allow class actions, if by these we understand any actions where the plaintiff sues a defendant not only in her own name but also in that of a class of persons who are absent in the procedure, but who somehow form a group or class or have a common position before the defendant. As a matter of fact, in Spain, a plaintiff cannot sue on behalf of a group of persons who are not parties to the procedure and, as a rule, a ruling passed in a certain procedure can in no way generate rights or obligations to persons who were absent from that procedure. Nonetheless, arts 11 (2) and (3) of the LEC provide for any consumers’ association that sufficiently represents a set of consumers affected by a certain consumer matter (a class

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, SLP Spain of consumers)6 to file a lawsuit on behalf of all persons who can be deemed so,no matter whether they are actually members of such an association or not. Under certain circumstances, rulings passed in such procedures would bind not only the members of the plaintiff association but also all other members of the class represented by this association (art. 221 LEC).7 Although in Spain a consumer is not entitled to file a lawsuit or to act in court on behalf of any other consumers of the same class, as mentioned previously, a consumers’ association can do so and, as such, a lawsuit filed by such an association on behalf of any consumers of a certain class should somehow be deemed a true class action, in the sense that the ruling given in the corresponding procedure is enforceable by any affected consumer, even if she is not a member of the plaintiff association. Nonetheless, the solution devised by art. 11 of the LEC raises many doubts at the time of preparing a class action lawsuit, notably on the ground that it does not set forth a special regime on the petition to be made to the court, and the ordinary one, which requires the plaintiff to determine exactly what the court should order the defendant to do (such as pay a certain amount or to do or not to do a certain thing), may not be appropriate for class action lawsuits. In addition, even the issue of the effects of the rulings given in this sort of lawsuit is not uncontroversial, as the regime devised thereto by the mentioned art. 221 of the LEC, paragraph (1), determines that certain types of class actions – those where the remedy sought by the plaintiff is a declaration of voidness or invalidation of an act or contract – would bind those consumers absent from the procedure only in the cases foreseen in the consumer protection legislation.8 Based on the above, class action activity in Spain is still very limited and the fact is that many consumer disputes that could give ground to class action lawsuits have not done so. As a matter of fact, so far, most of those disputes have led to independent lawsuits filed by each of the affected consumers who decided to sue on their own, something that has generated a dramatic increase in the workload of the courts, for which these have shown not to be prepared.

Interim relief In Spanish legal proceedings, the claimant has the power, if she deems it appropriate, to request precautionary measures, in order to ensure the effectiveness of the legal protection that may be granted to her in the ruling. These measures may never be adopted ex officio by the court. In civil proceedings, these measures are ruled in arts 727 et seq. of the LEC, which foresee a series of specific precautionary measures that may be adopted (liens, intervention or administration of productive assets, movable property deposit, etc.); notwithstanding that, when appropriate, the plaintiff may request the court to adopt certain measures not specifically foreseen in the law. The judge shall decide by an order and in separate proceedings, wherever she upholds the precautionary measures requested by the plaintiff or, by contrast, dismisses them. The granting of precautionary measures must be grounded and comply with a series of requirements established by law. Unless expressly provided otherwise, the enforcement of precautionary measures is subject to the provision by the plaintiff of a surety bond which covers the damages that those measures could impose on the defendant’s estate.

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Enforcement of judgments/awards Under Spanish legislation, the enforcement of rulings falls under the authority of the Judicial Power (art. 117.3 of the CE). Likewise, the LEC regulates the enforcement procedure in civil matters in its arts 5, 45 and 551 et seq. In the event that the condemned party does not voluntarily comply with the judgment, the winning party may, by suit for execution, request the enforcement of such ruling. The law establishes that the suit for execution must be based on an enforceable title. Final judgments,9 arbitral awards and mediation agreements made through a deed issued by a notary public are all deemed enforceable titles. As a general rule, the enforcement is requested by application and at the request of a party before the judge of the court of first instance who has issued the judgment or resolution that is intended to be executed, or who has heard the case in the first instance. The suit for execution must express the title on which the enforcement is based, as well as the court protection sought from the court, the property of the condemned or obliged party that is to be seized, the investigation measures necessary to identify seizable assets, and the name of the person or persons against whom the judgment is to be enforced. Once the necessary procedures have been carried out and provided that all assumptions and procedural requirements are met, the court shall dictate a general enforcement order followed by a decree, which will detail the specific appropriate enforcement measures, including those concerning the investigation of the assets of the condemned or obliged party. The condemned or obliged party may oppose the enforcement on several grounds, in which case a limited contradictory procedure is opened. In this limited procedure, the court allows the hearing of evidence, after which a court order maintaining the enforcement or dismissing it is issued; the said resolution is appealable. In the event that, in the enforcement, assets subject to seizure10 are found, the claimant may request that the court orders their seizure. Awards given within an arbitration seated in Spain are enforceable in this country in the same terms as a court-given ruling would be (arts 44 of the Spanish Arbitration Act and 517.2, 2nd, of the LEC). Foreign awards, i.e., those given within an arbitration seated outside of Spain, are enforceable here once they have received the exequatur, as foreseen by art. 46 of the Spanish Arbitration Act, which rules that recognition and enforcement of any foreign awards follows the New York Convention of the Recognition and the Enforcement of Foreign Arbitral Awards, of 1958. In all matters not covered by this Convention, the enforcement of a foreign award will be subject to the provisions on enforcement foreseen by the LEC as if it were an award given in an arbitration seated in Spain.

Cross-border litigation According to the provisions of the LOPJ (art. 21), as a general rule, Spanish courts will hear claims that arise in Spanish territory in accordance with the provisions of international treaties and conventions that Spain is part of, in the rules of the European Union and in Spanish laws. Likewise, the aforementioned rule establishes a series of matters on which the Spanish courts shall have exclusive jurisdiction, regardless of whether the dispute presents elements of connection with other jurisdictions.11

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Recently, the Spanish Parliament enacted Law 29/2015, as of July 30th, on international legal cooperation in civil matters (hereinafter, “LCJI”), which rules on international legal cooperation between Spanish and foreign authorities in civil and commercial matters. Among other matters, the LCJI covers the serving of court and other official documents, including notifications, as well as the request for execution of letters rogatory, at the request of foreign authorities. The LCJI is governed by a principle of cooperation12 – under which our authorities are to cooperate with foreign authorities on said matters, even in situations where the existence of reciprocity by these in similar cases has not been determined. The Ministry of Justice of Spain is the department in charge of applying the LCJI and, as such, is obliged to collaborate with the requesting authorities and resolve any difficulties that may arise in the processing of cooperation requests. Notification of documents According to the LCJI, the Spanish authorities may make notifications abroad (or receive notifications therefrom) by mail addressed to the recipient, provided that the legislation of the destination State13 does not exclude such practice. In the event that the defendant does not appear in the proceedings, it will be suspended as long as it has been proven that the document has been regularly served; likewise, six months after the date of dispatch of the document, the competent authority shall deem the party’s request duly addressed, even if it has not been able to verify that the notification has taken place. As for the documents issued by a notary public and other authorities, the LCJI provides that they can be notified abroad, when the requesting authority is Spanish, or in Spain, when the issuing authority is foreign, for formalities concerning court documents, as long as such formalities are suitable for these documents. Hearing and obtaining of evidence internationally: Evidence of foreign law The LCJI allows the obtaining of evidence in Spain for a foreign procedure or abroad for a procedure taking place in Spain, provided that the requested evidence is directly related to this procedure and, if such evidence is to be produced at a pre-trial phase, then it must be suitable for such purpose under Spanish legislation. Likewise, the LCJI establishes that the evidence must observe the due process guarantees foreseen in the Spanish legislation and be carried out in accordance with Spanish procedural provisions, but without establishing a listing of evidence that may be heard in Spain at the request of a foreign court. Finally, concerning the evidence of foreign law that is to be applied to a lawsuit being heard in Spain, there is a general principle according to which the party invoking foreign law in court must prove its content and validity. In the absence of evidence, the judge must apply Spanish law (art. 281.2 of the LEC). Recognition and enforcement of foreign judicial decisions According to Regulation (EU) 1215/2012, of December 12th, of the European Parliament, in matters of jurisdiction and recognition and enforcement of judgments in civil and commercial matters, judgments issued in a Member State of the European Union will be recognised without the need for any recognition proceedings, and may be fully enforced once the court verifies that none of the grounds for denial of the recognition, expressly foreseen in such piece of legislation, apply. Likewise, the LCJI establishes that foreign judicial resolutions can be recognised and enforced in Spain. In principle, all foreign resolutions that comply with the requirements

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© Published and reproduced with kind permission by Global Legal Group Ltd, London SCA LEGAL, SLP Spain set forth in the LCJI will be recognised, provided that they are deemed res judicata, in case they have been issued in a contentious procedure, or anyhow definitive resolutions, in case they have been issued in a non-contentious procedure. For the recognition of resolutions issued in non-EU countries, the LCJI has opted to keep the traditional exequatur procedure. Once the exequatur has been granted, the foreign judicial resolution will merit recognition and will be enforced as if it were Spanish. Likewise, the LCJI contains a list of grounds to refuse the granting of the exequatur, such as the fact that the ruling is contrary to public order, that it has been issued with an obvious breach of the rights of defence of any of the parties, that it rules on a matter over which only the Spanish courts have jurisdiction, or that there is no reasonable connection between the dispute and the foreign court country that has issued the judgment. In addition, the LCJI establishes that no special process will be required for the registration in official Registries of foreign judicial resolutions that are deemedres judicata. However, the Registrar must verify the regularity and authenticity of the documents presented to her and also the absence of any grounds under which the exequatur should be denied. In those cases in which the registration is denied, the interested parties must apply for the granting of the exequatur by the competent court. Foreign judicial decisions that are enforceable in the country where they were issued are enforceable in Spain once the exequatur14 has been obtained, the same rule applying to foreign court settlements. For other official documents, the law does not foresee a prior recognition procedure, provided that a series of requirements are met (being enforceable in the country of origin, not being contrary to public order, and having at least the same or similar effectiveness of similar documents issued by Spanish authorities).

International arbitration As mentioned above, arbitration is currently regulated by Law 60/2003, of December 23rd, on Arbitration, the mentioned Spanish Arbitration Act, as revised in 2009, 2011 and 2015; this legal body is applicable to purely internal arbitrations as well as to arbitrations that present elements of connection with more than one legal system (international arbitrations). It covers all relevant issues in arbitration, including the arbitration agreement and its effects, the arbitrators and their powers, the arbitration proceedings, and the award and its effects and validity. As a rule, the Spanish Arbitration Act is applicable to domestic and international arbitration that takes place in the territory of Spain (art. 1). Nonetheless, this piece of legislation contains certain provisions that are applicable to international arbitration only (arts 2.2, on limitation of the prerogatives of the parties that are sovereigns or companies, 9.6, on the requisites of validity of the arbitration agreement, 34, on the rules applicable to substance of dispute, etc.). Pursuant to art. 3 of the Spanish Arbitration Act, an arbitrage is deemed international if any of the following circumstances occur: (i) the parties reside in different countries at the time of the making of the arbitration agreement; (ii) the place of arbitration, the place where a substantial part of the obligations arising out of the commercial relationship is to be performed, or the place with which the subject matter of the dispute is most closely connected is different from the country where the parties reside; or (iii) the relationship from which the dispute arises affects the interests of international trade.

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The Spanish Arbitration Act follows the 1958 UNCITRAL Model Law on International Commercial Arbitration. However, the amendments to this Model Law adopted in 2006 have not been passed to Law 60/2003 in the three amendments enacted since 2009. International arbitrations that take place in Spain are also ruled by the provisions of the European Convention on International Commercial Arbitration, of 1961, of which Spain has been a party since 1975. In case of contradiction between this Convention and the Spanish Arbitration Act, the former would prevail on the ground that, in Spain, international law prevails over the ordinary internal law. Likewise, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, of 1958, of which Spain has been a party since 1977, applies to the recognition and enforcement of foreign arbitration awards and would prevail over any Spanish domestic legislation on the subject in case of contradiction.

Mediation and ADR With the approval of the aforementioned Law 5/2012, of July 6th, which incorporated into Spanish law with Directive 2008/52/EC, of May 21st, 2008 of the European Parliament and of the Council, on cross-border mediation in civil and commercial matters, the Spanish legal system has a new mechanism for voluntary dispute resolution – mediation – for disputes in matters or business, including so-called “cross-border disputes”.15 Mediation is a dispute resolution mechanism in which, regardless of its name, two or more parties try voluntarily to reach an agreement to resolve a dispute between them with the assistance of a mediator (art. 1 of Law 5/2012). As a rule, according to Law 5/2012, mediation is possible when the dispute concerns rights that can be renounced by the parties, as is usual in commercial disputes, and this is regardless of whether the mediation takes place out of or during a judicial procedure. The agreement reached in mediation is enforceable whenever it is made in a deed issued by a notary public or once it has been homologated by a court (art. 25 of Law 5/2012). In 2013, Royal Decree 980/2013, of December 13th, was passed, which Law 5/2012 implemented in several aspects, such as the training required for mediators to do their job, the creation of mediator records, the introduction of a simplified electronic mediation procedure, and the possibility to enter into agreements with the Ministry of Justice and the Autonomous Communities to promote the circulation of the information contained in the different mediator records. As for ADR, itself a form of mediation, the only piece of Spanish legislation approved so far on this is Law 7/2017, of November 2nd, which transposed to Spanish law Directive 2013/11/EU, of May 21st of the European Parliament and of the Council, on alternative dispute resolution for consumer disputes. Nonetheless, nothing in the law prevents the parties engaged in non-consumer disputes from informally using mechanisms devised by this piece of legislation as an instrument for the settlement of such disputes.

Regulatory investigations In Spain, there are several independent agencies and bodies in charge of enforcing the regulations applicable to certain sectors of activity where regulation and control by the authorities is considered of utmost interest for the economy, the consumers and the general interest (banking, electricity, natural gas, telecommunications, ports, railways, securities markets, among others).16,17

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Each of these agencies and bodies is vested with the authority to carry out investigations aimed at determining the breach of certain mandatory legislation by companies operating in the sector under its supervision. These agencies count on extensive investigative powers, although all investigations must comply with the proceeding rules foreseen in the law, whose framework is based on a balance between the public interest behind the investigations and the interests of the investigated operators. Investigation powers include, among others, those of making dawn raids, checking books and other documents, obtaining copies of any documentation, and enquiring the staff of the operator under investigation. The performance of some of them (e.g., that of making a dawn raid) depends on the express prior consent of the affected operator or, failing that, on a court authorisation. Though this sort of proceeding is non-contentious, in the sense that proceedings are managed at an administrative level, in case they end up with the application of a sanction or somehow determine that there existed some wrongdoing, the sanctioned business operator can always bring the case to the courts in charge of hearing these sorts of disputes.

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Endnotes 1. This is so on the grounds that the abogados cannot access the system in those proceedings in which the representation of the parties by a Procurador is mandatory – a great majority – and also due to the fact that, instead of offering an integrated view of the proceedings (with access to all the documents that have been generated at any time in each proceeding, organised by dates and parties), the system is limited to being a mere platform for the service of documentary communication. 2. The 2020 edition of the Report on “Doing Business”, published by the World Bank in October 2019, to which the first of the authors has contributed, estimates that 510 days is the time required on average to enforce a contract in Spain. Though this figure is close to a year-and-a-half, this period of time includes not only the time required to obtain an enforceable first instance ruling but also the time necessary to enforce such ruling, in case the condemned defendant does not voluntarily comply with the same. 3. At the time of writing this chapter (early June 2020), Spain is still in the state of emergency (estado de alama) declared by the Government in March 2020 as a response to the wake of the COVID-19 epidemic which has been affecting Europe since February. As courts were closed for non-urgent matters during part of this period and only recently have they resumed their activity, significant delays in the courts are expected in the months ahead, with a foreseeable increase in the time required on average for a contract to be enforced in Spain. With a view to reduce tensions in the management of court cases but with dubious effects on commercial litigation, including bankruptcy and insolvency proceedings, the Government has passed Royal Decree-Law 16/2020, of April 28th, which, among others, adopts temporary measures on procedures, deadlines and formalities, and reinforces the use of telematic facilities on court hearings. 4. In terms of costs, abogados’ fees are usually calculated according to the Guiding Criteria of the professional association to which they belong, while the Procuradores’ fees are calculated through the application of tariffs approved by law. 5. In addition, the plaintiff is also bound to pay the court fees, in cases foreseen by the law where such payment is mandatory. 6. The concept of representativity of a consumers’ association is developed by art. 24 (2) of the Restatement of the Consumers Protection Act (Texto Refundido de la Ley

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General para la Defensa de los Consumidores y Usuarios) approved by Royal Decree Law 1/2007, of November 16th. 7. A Law passed in 2007 added paragraph (5) to art. 11 of the LEC, which allows for the public prosecutor to also file a lawsuit on behalf of any consumers for the defence of their interests, in terms quite similar to those foreseen for consumers’ associations. 8. This matter is covered by art. 53 of the Consumer Protection Act mentioned in note 5 above, which rules on the injunction aimed at the protection of the collective interests of consumers, in accordance with Directive 2009/22/EC, of April 23rd, 2009 of the European Parliament and of the Council, on injunctions for the protection of consumers’ interests. 9. In certain cases foreseen by the LEC, the law allows the provisional enforcement of judgments that are not final, in the sense that an appeal filed against them is still pending. 10. In order to protect the debtor, the LEC establishes immunity for seizure of certain assets, as well as proportional quantitative limits, in case of seizure of wages and pensions. 11. This is the case, among others, of matters such as the rights over real property located in Spain, the setting up, validity, voidness or winding up of companies organised under the laws of Spain, and the validity or voidness of any registrations carried out by a Spanish Registrar. 12. The principle of cooperation allows for exceptions, as the LCJI contains a wide range of situations, very similar to the grounds for denial of the exequatur, which can be grounds for the dismissal of requests for international legal cooperation. 13. Along with the documents subject to notification or transfer abroad, there must be a translation to the official language of the destination State or in a language that the recipient understands, and all foreign documents subject to notification in Spain must be translated into Spanish or, where appropriate, into the official language of the Autonomous Community where the documents are to be served. 14. The procedure for the enforcement of foreign resolutions in Spain will be governed, in any case, by the provisions of the LEC, including those relating to the expiration of the right of enforcement of the resolution. 15. A dispute is considered cross-border when at least one of the parties is domiciled in a State different from that of the other party at the time when both agree to use mediation or when they are required, under the applicable law, to accept mediation as the method for solving their dispute (art. 2 of Law 5/2012). 16. Of those agencies and bodies, the most significant are Spain’s central bank Banco( de España), in charge of the banking sector, the Commission on Markets and Competition (Comisión Nacional de los Mercados y de la Competencia), in charge of several regulated sectors (electricity, natural gas, telecommunications, ports, railways, among others), and the Securities Exchange Commission (Comisión Nacional del Mercado de Valores), in charge of the securities market. 17. In addition to controlling several of the mentioned sectors, the Comisión Nacional de los Mercados y de la Competencia is also in charge of enforcing competition rules, both EU and domestic, in Spain. As a competition watchdog, it is also vested with significant investigation powers.

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Pedro Moreira Tel: +34 91 781 50 40 / Email: [email protected] A founding partner of SCA LEGAL, SLP, Pedro Moreira has almost 20 years of experience as a litigation lawyer, specialising in civil, commercial and corporate law disputes. Thanks to his expertise in those areas of law and his background in economics and business administration, he regularly advises clients, from different jurisdictions and sectors, in complex litigation cases (in relation to the breach of commercial contracts, damage claims, shareholders’ conflicts and other corporate law issues, bankruptcy and insolvency matters, etc.), some of them multijurisdictional and/or heard by a court of arbitration. Mr. Moreira also advises on a regular basis on non-contentious matters, mostly in commercial and corporate law. Mr. Moreira graduated in Law from the Complutense University of Madrid and has a B.A. in Law from the Catholic University of Lisbon, an M.A. in Economics (Diploma de Estudios Avanzados en Economía) from the Complutense University of Madrid and an M.B.A. from the Camilo José Cela University (Madrid). He is a member of the Madrid Bar Association, speaks fluent Spanish, Portuguese and English and has a working knowledge of French and German.

Isabel Álvarez Tel: +34 91 781 50 40 / Email: [email protected] Isabel Álvarez is a partner of SCA LEGAL, SLP. She has almost 10 years of experience as a litigator, her practice focusing on civil, commercial and labour law disputes. She regularly advises Spanish and foreign clients in complex litigation cases (in relation to breaches of contract, damage claims, real property and inheritance disputes, termination of labour agreements with directors and other senior staff, etc.). She also advises on a regular basis on non-contentious matters, mostly in civil and commercial law. Ms. Álvarez holds a B.A. in Law from the Complutense University of Madrid and is a member of the Madrid Bar Association. She speaks fluent Spanish and English.

SCA LEGAL, SLP C/ Castello 82 – 28006 Madrid, Spain Tel: +34 91 781 50 40 / Fax: +34 91 781 50 41 / URL: www.sca-legal.com

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Balz Gross, Claudio Bazzani & Julian Schwaller Homburger AG

Introduction Located in the heart of Europe, Switzerland is a civil law country with a long tradition as one of the major global venues for international commercial arbitration and commercial litigation. Switzerland has a reliable court system and its judges are known for their impartiality and independence. Civil proceedings in Switzerland are comparably fast and not overly complicated or costly. Broad pre-trial discovery proceedings, jury trials and long hearings are foreign to Switzerland. State court proceedings State court proceedings in civil matters are primarily governed by the Swiss Civil Procedure Code of 1 January 2011 (the CPC).1 A partial revision of the CPC is currently pending. The primary goal of the revision is to improve practicability and law enforcement. After the Swiss Federal Council had sent the amendments to the consultation process, the draft of the new CPC and the Federal Council’s corresponding message were adopted on 26 February 2020. Some of the main objectives of this revision are addressed below. The CPC, as well as Switzerland’s substantive civil law, is federal law, whereas the organisation of the judicial system on a cantonal level remains the responsibility of the cantons. Federal law, however, provides for certain guidelines as to the organisation of the judiciary. In particular, the CPC as a general rule requires the cantons to establish a court system with two cantonal instances: a court of first instance; and an appellate court as a second instance for first (and usually full) appellate review. In international cases, State court proceedings are also regulated by the rules of private international law of Switzerland set forth in the Swiss Private International Law Act (the PILA) and other bilateral and multilateral instruments. Switzerland has ratified a large number of international treaties that are relevant in an international context, including but not limited to the following: • the Hague Convention of 1 March 1954 on Civil Procedure;2 • the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents;3 • the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Service Convention);4 • the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters;5 • the European Convention of 16 May 1972 on the Calculation of Time-Limits;6 • the European Agreement of 27 January 1977 on the Transmission of Applications for Legal Aid;7

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• the Hague Convention of 25 October 1980 on International Access to Justice;8 and • the revised Lugano Convention of 30 October 2007 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Lugano Convention).9 As a general rule, civil proceedings before State courts must be preceded by an attempt at conciliation before a conciliation authority, although the CPC also contains certain exceptions to this requirement. One such exception applies where the respondent is domiciled abroad, in which case the claimant may waive conciliation proceedings. Conciliation proceedings are initiated by an application for conciliation containing, among other things, the prayers for relief and usually a brief description of the matter in dispute. Upon filing the conciliation application, the case becomes pending lis( pendens) and the statute of limitations is interrupted. Conciliation proceedings are confidential and rather informal. Within two months of receipt of the application, an oral hearing takes place at which the conciliation authority attempts to reconcile the parties in an informal manner. If no agreement is reached, the conciliation authority issues the authorisation to proceed, allowing the claimant to file the claim before the competent court of first instance within three months after issuance of the authorisation to proceed. Court proceedings are initiated by filing a fully substantiated statement of claim. The statement of claim must contain, among other things, the prayers for relief, a statement regarding the value in dispute, all relevant allegations of facts, and a specific notice of the evidence offered for each allegation of fact. Along with the statement of claim, the claimant has to submit the original copy of the authorisation to proceed as well as the available physical records (documents) to be offered in evidence. Upon receipt of the statement of claim, the court usually orders the claimant to pay an advance on costs. At the request of the respondent, the claimant must also provide security for party costs where the claimant is not domiciled in Switzerland, appears to be insolvent, owes costs from prior proceedings, or where there otherwise appears to be a considerable risk that the respondent’s party costs, if awarded, would not be paid. Thereafter, the court serves the respondent with a copy of the statement of claim and sets a deadline for the respondent to submit a statement of defence. If the respondent is domiciled abroad, service is effected in accordance with the applicable bilateral or multilateral conventions, namely the Hague Service Convention. The court may order a second exchange of written submissions if the circumstances so require, or directly summon the parties to the main hearing. State court proceedings are generally structured in three stages. In the first stage, the factual assertions are pleaded and the evidence is offered. The second stage is the actual evidentiary phase during which the evidence is taken by the court (e.g. witness testimony, filing of expert reports, production of documents, etc.). The last phase of the proceedings is the post-hearing stage where the parties may comment on the result of the evidence-taking and, thereafter, the judgment is rendered. In principle, civil proceedings before Swiss courts follow an adversarial model. Accordingly, it is up to the parties to present the court with the relevant facts in support of their case and to submit the respective evidence, unless the law provides that the court has to establish the facts and to take the evidence ex officio.10 Conversely, pursuant to the principle iura novit curia, the courts always apply the law ex officio. As an exception to the principle of double instance, the cantons are granted the option of establishing a specialised commercial court for commercial and corporate disputes. These courts serve as the first and sole cantonal instance. Where a dispute is heard by a commercial court, the claimant has to file his statement of claim directly with the court, without the

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland need to first participate in conciliation proceedings. Challenges to judgments rendered by a commercial court are handled directly and exclusively by the Swiss Federal Supreme Court. Four cantons in the German-speaking part of Switzerland (Aargau, Bern, St. Gallen and Zurich) have established such a specialised commercial court. The commercial courts, in particular the commercial court of the canton of Zurich, are frequently chosen as a legal venue by international contracting parties. An important feature of the procedure before the commercial court of the canton of Zurich is the built-in conciliation/settlement hearing, during which the majority of cases are settled. The purpose of such a hearing is to assist the parties in settling their dispute amicably. To this end, a delegation of the commercial court usually presents its preliminary and non-binding analysis of the case to the parties and comments on the strengths and weaknesses of their respective allegations. Settlement hearings take place at an early stage of the proceedings (usually after the first exchange of written briefs) and prior to the taking of evidence. On average, about 65% of all cases are settled by the parties in the course of such a hearing. Proceedings before Switzerland’s State courts are conducted in one of Switzerland’s official languages (German, French or Italian, depending on the canton). However, some judges at the commercial court of Zurich are sometimes willing to conduct the settlement hearing in English if a foreign party is involved and provided that no party objects. Furthermore, in proceedings before the Federal Patent Court (a federal court having exclusive jurisdiction in Switzerland with regard to patent infringement and validity disputes), the parties are entitled to submit their briefs in English if both parties so agree. Decisions of the cantonal appellate courts (or the commercial courts) may then be appealed to the Swiss Federal Supreme Court in Lausanne, provided that the amount in dispute is at least CHF 30,000.11 Proceedings before the Federal Supreme Court are governed by the Federal Act on the Federal Supreme Court. The grounds for appeal are limited to violations of federal law, international public law or constitutional law (including violations of a cantonal constitution). As a general rule, the Federal Supreme Court is bound by the facts established by the lower cantonal court, unless they were established in a manifestly erroneous manner, and new facts and evidence may not be submitted. In 2019, the Swiss Federal Supreme Court heard 7,884 new cases (7,798 in 2018) and concluded 7,937 cases (8,041 in 2018). Out of these 7,937 cases, 1,689 cases concerned civil/commercial matters including cases relating to the Federal Debt Enforcement and Bankruptcy Act (the DEBA). Out of these 1,686 cases, 36 cases were appeals against an international arbitral award. In 2019, the average duration of proceedings in civil matters before the Swiss Federal Supreme Court was 128 days until judgment and 145 days until the issuance of the reasoned judgment in writing. Partial revision of the Swiss CPC In March 2018, the Swiss Federal Council launched the process of a partial revision of the CPC with the consultation process. This lasted from March to June 2018. On 26 February 2020, the Swiss Federal Council took note of the consultation process and adopted the corresponding message. In the consultation process, the strengthening of collective redress for mass and diffuse damage was highly controversial. Therefore, the Federal Council has decided to remove the questions of collective redress from this proposal and deal with them separately. The following is an overview of the most important changes: Costs The revision of the CPC is intended first of all to facilitate access to the court. So far, the court could demand advances from the plaintiff up to the amount of the presumed court costs. Now

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland this advance is to be no more than half of that amount. This is intended in particular to enable the middle class (which are normally not entitled to receive free legal advice and assistance) to have access to the court. However, the draft of the CPC provides for exceptions to this rule. A further innovation is the transfer of the collection risk to the State. Under current law, the advance payment of court costs must be paid by the plaintiff. The prevailing plaintiff had to recover this amount from the losing party and thus bore the collection risk. With the revision, court costs are now only to be offset against the advances if the party who paid the advance is liable to pay costs. This is particularly the case if the plaintiff is unsuccessful. In all other cases, the advance on costs will be refunded to the plaintiff and the State must claim the amount from the party liable to pay the costs. Language Previously, the procedure had to be conducted in the official language of the responsible canton. Pursuant to the current draft CPC, cantonal law can provide that another national language or English is also possible at the request of all parties. Cantonal judgments could then also be in English. If proceedings before the lower cantonal court were conducted in English, it should be possible to submit legal documents to the Federal Supreme Court in English as well. However, the language of proceedings would still be an official language. Law of evidence Three important innovations are also introduced in the law of evidence. Firstly, under certain conditions, in-house counsel are not obliged to cooperate in the gathering of evidence. This means that they have no obligation to hand over documents. Furthermore, witnesses can now be questioned by video conference or similar means. And finally, private expert opinions will be regarded as evidence. Conciliation proceedings As a new rule also in the event of disputes before a single cantonal instance or the commercial court, a conciliation procedure should be carried out. However, there will be exceptions to this rule, so that the plaintiff can still file the claim directly with the court. This applies in particular to disputes concerning intellectual property law and company law, if the amount in dispute exceeds CHF 30,000. Under the current law, no conciliation proceedings have taken place if the court has set a deadline for the claim to be filed. Future conciliation proceedings will no longer be necessary for actions that are combined with a time limit for bringing an action, provided that the actions have a factual connection. In addition, the conciliation authority will be able to submit proposals for decisions to the parties up to a value in dispute of CHF 10,000 (instead of the previous CHF 5,000). Deferment of the enforcement of decisions The court may now, upon application by the losing party or ex officio, postpone enforcement until the decision of the appellate instance or the expiry of the time limit for appeal. The prerequisite is that the losing party is threatened with a disadvantage that cannot be easily remedied in the event of immediate enforcement. A similar provision exists if only the operative part of a judgment, but not the underlying reasoning, is communicated to the parties in a first step. Thus, enforcement can also be postponed (if there is a threat of a disadvantage that is not easily remedied) until the expiry of the deadline for the written statement of reasons. Coordination of State courts and arbitration tribunals Until now, if a claim is filed with an arbitral tribunal and a State court for the same subject matter in dispute, the court last seized had to suspend the proceedings until the court first

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland seized had decided on its jurisdiction. At the same time, however, the State court could, in principle, refuse jurisdiction in the case of an arbitration agreement. With the revision, the court of arbitration no longer has to suspend the proceedings until the State court has decided. Extension of the jurisdiction of commercial courts According to the current law, commercial courts are only competent if the parties are entered in the Swiss commercial register or a comparable foreign register. The purpose of the revision is to give parties the opportunity to establish the jurisdiction of a commercial court by agreement. In addition to consent (e.g. by means of a jurisdiction agreement), the prerequisites for this are that the dispute concerns the business activity of at least one of the parties, that the amount in dispute is at least CHF 100,000, and that at least one of the parties is not domiciled in Switzerland at the time of consent (domicile/usual residence). If these prerequisites are met, a court cannot decline jurisdiction. Commercial courts can thus now function as international commercial courts. Arbitration The Swiss cities of Geneva and Zurich are among the world’s leading venues for international commercial arbitration, with approximately 300 arbitrations commenced in these cities annually. In addition, Switzerland is home to several specialised arbitration centres, such as the Tribunal Arbitral du Sport Court of Arbitration for Sport (TAS/CAS), with its steadily increasing number of new arbitration requests each year (599 in 2016).12 Traditionally, cities in Switzerland have been among the top venues for arbitration proceedings conducted under the International Chamber of Commerce (ICC) arbitration rules worldwide. In a survey conducted on behalf of the European Parliament, arbitration practitioners were asked to recommend the five most-favoured States as the seat of an international arbitration. Of the participating practitioners, 85.62% recommended Switzerland, more than any other State included in the study, and 13.6% more than the next most-recommended State.13 One of the factors that has contributed to Switzerland becoming one of the world’s leading international arbitration jurisdictions is its arbitration-friendly legislation. Other factors include an excellent arbitration infrastructure and high professional standards in the legal profession, as well as Switzerland’s reputation for neutrality and political stability. In principle, international arbitrations seated in Switzerland are governed by Chapter 12 of the PILA,14 which is currently being revised to reflect the latest developments in international commercial arbitration. The PILA’s rules on international arbitration provide for a short and concise legal framework that affords the parties maximum flexibility and recognises the principle of party autonomy to the fullest extent possible. The parties are free to agree on all aspects of the arbitral procedure, and to tailor the arbitration to the specific needs of their case, subject only to the principle of due process (the parties’ right to be heard and to equal treatment). The PILA only provides for a very limited number of grounds to challenge the award. Unless the award violates public policy, there is no review on the merits of the award. Challenges to an award are heard exclusively by the Swiss Federal Supreme Court (the highest court in Switzerland) and are generally adjudicated within a time period of four to six months from the date of the challenge. The Swiss courts have a well-established, arbitration- friendly practice, and both legal and commercial infrastructure are well suited to serve the needs of international arbitration proceedings. Switzerland has ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention),15 and foreign arbitral awards are enforced in Switzerland as a matter of course.

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Privilege and disclosure Document production Broad (pre-trial) discovery proceedings, as known in common law jurisdictions, do not exist in Switzerland. The scope of document production under the CPC is rather limited. Generally, the court will order a litigant or a third party to produce documents requested by a party where: a material allegation of fact is disputed; the requested documents are suitable to prove the alleged and disputed facts; the documents are sufficiently described; and the documents are in the custody of the requested party (or arguably, where the documents are not in the custody of the requested party, the requested party is entitled to retrieve them from a third party). Such production orders are issued at an advanced stage of the proceedings when the court takes evidence. Additionally, the CPC provides for “precautionary evidence-taking” (pre-trial production of documents or witness questioning) that may be initiated before an ordinary proceeding is pending. This procedure is available where a specific statutory right so provides, or where the requesting party credibly demonstrates either that the evidence it seeks is at risk or that it has a legitimate interest worthy of protection. Notably, the need to assess the prospects of potential litigation does not itself constitute such a legitimate interest and without more, will not justify precautionary evidence-taking. Rather, in order to justify a legitimate interest, the requesting party must credibly demonstrate that certain particular facts, if proven, would give rise to a claim against the opposing party, and that the evidence it is seeking through precautionary evidence-taking would enable it to prove such facts. If these facts are pleaded in a sufficiently substantiated manner, a party may be able to obtain the relevant evidence in order to assess the prospects of litigation. However, where the party is seeking the production of documents, it should be recalled that the particular prerequisites for document production mentioned above also apply in the case of precautionary evidence-taking. Court orders for document production against the opposing party are not enforceable. Rather, where the opposing party refuses without valid reason to comply with a production order, the court will take this into account when appraising the evidence. On the other hand, court orders ordering the production of documents by third parties may be enforced under the threat of criminal sanctions. Given the limited possibilities of obtaining documents in civil proceedings, parties often attempt to collect information through criminal proceedings, or based on the right to access arising out of data protection law. Regarding the latter, the Swiss Supreme Court has held that requesting access to one’s personal data from a bank with a view to potential litigation against that bank does not constitute an abuse of a person’s (data protection) rights, among other things. This broad interpretation of the right to access personal information, together with the broad definition of personal data contained in the Data Protection Act – encompassing all information relating to identified or identifiable individuals and legal entities – renders the right to access arising out of data protection law a potentially powerful tool for the gathering of evidence with a view to potential litigation. Privilege Registered lawyers (excluding in-house counsel) are subject to a duty of professional secrecy. This duty of professional secrecy covers all confidential information connected with a particular lawyer-client relationship, provided that the mandate does not relate to mere ancillary activities such as asset management or board member activities. A lawyer’s duty of professional secrecy is reflected in the relevant Swiss procedural codes, which provide that lawyers, clients and third parties may invoke legal privilege to refuse the disclosure of

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland privileged documents. These procedural provisions thus complement the lawyers’ duty of professional secrecy by providing comprehensive legal privilege encompassing lawyers’ documents. In recent decisions, however, the Swiss courts held that factual reports prepared by attorneys in the course of internal investigations may not always be covered by attorney- client privilege. The decisions are heavily criticised in legal writing. In contrast, in-house counsel are not covered by a duty of professional secrecy under Swiss law. As a result, in-house counsel cannot withhold information from the courts and authorities, and their documents are not protected by legal privilege. To some extent, this will change with the revised CPC, according to which in-house counsel, under certain conditions, may refuse to cooperate in the gathering of evidence.

Evidence As a rule, it is for the parties to present the court with the relevant facts in support of their case and submit the related evidence. Evidence is only required to prove facts that are legally relevant and disputed. With regard to undisputed or publicly known facts, no evidence must be taken. Parties to the proceedings as well as third parties have a duty to cooperate in the taking of evidence, e.g. by making truthful depositions as witnesses or by producing physical records in their possession (subject, however, to statutory privileges). Admissible means of evidence are oral witness testimonies, oral examination of the parties, physical records (such as papers, drawings, plans, films, audio recordings or electronic files/data), inspection of objects, court-appointed expert opinions and written statements of official authorities. Under the procedural rules that are currently in force, private expert opinions (i.e. expert opinions commissioned by the parties) are not considered to be admissible evidence (DFT 141 III 433). To the extent necessary, experts are appointed by the court and have to submit their expert report to the court. The parties have the right to ask additional questions or to comment on the expert’s written opinion. However, in connection with the currently ongoing revision of the CPC, it is planned to introduce private expert opinions as a further means of evidence. Likewise, written witness statements are normally also not admitted as evidence. Rather, witnesses have to appear in front of the court and give oral evidence under the threat of criminal sanctions in the case of a false testimony. There is no cross-examination of witnesses by the parties or their attorneys; however, following the examination of a witness by the court, the parties are allowed to put additional questions to the witness, either by addressing the witness directly or by asking the court to put further questions to the witness. The purpose of such additional questions is to clarify certain issues on which the court examined the witness before.

Costs Procedural costs include court costs (judgment fee, the costs of evidence-taking, etc.) and party costs (the costs of legal representation and expenses). Generally, the losing party must bear the procedural costs. If neither party is deemed to have entirely prevailed on the merits of the dispute, the procedural costs are allocated in accordance with the outcome of the case. In case of a settlement, the costs are usually charged to the parties according to the terms of the settlement agreement. Both the court costs and the party costs are determined and allocated ex officio according to the tariffs for the procedural costs. Each

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland canton has its own rate scale that is normally based on the amount in dispute. Procedural costs, therefore, differ from canton to canton. In the canton of Zurich, for example, the following rates apply in ordinary civil proceedings: • if the value in dispute amounts to CHF 100,000, the party costs are about CHF 11,000 and the court costs CHF 9,000; • with a value in dispute of CHF 1m, both court costs and party costs amount to approx. CHF 31,000 each; and • where the value in dispute is CHF 10m, party costs amount to approx. CHF 106,000 and court costs to CHF 120,000. Court costs may be increased (by one-third or, in exceptional cases, up to a maximum of 200%) or decreased, depending on the complexity of the case and the time spent by the court on the matter. If a case is settled in court, the parties are usually granted substantial reductions in their court costs. Similarly, party compensation may be increased or decreased by one-third, depending on the complexity of the case, the responsibility of the lawyer, and the time and effort spent by the lawyer on the matter. In practice, however, the compensation paid by the losing party rarely covers the actual legal costs incurred by the prevailing party. Reduced rates for court costs and party costs apply in summary proceedings, in proceedings concerning real estate leases and tenancy disputes, and non-pecuniary disputes. Employment law proceedings with a value in dispute of up to CHF 30,000 are free of charge. The procedural costs of appellate proceedings before cantonal courts and the Federal Supreme Court are determined pursuant to similar rules. As explained, courts may order the claimant to make an advance payment up to the amount of the expected court costs. With the revision of the CPC, this advance should only amount to a maximum of half. In practice, it is standard procedure for courts to request advance payments, although certain exceptions apply. The court costs, which are generally fixed in the final decision, are set off against the advance paid by the claimant and the balance is collected. If the claimant prevails, it will be granted the right to recover the costs from the respondent. As a result, the claimant bears the risk of the respondent becoming insolvent. With the revision of the CPC, the court costs should only be offset against the advances if the party who paid the advance is liable to pay the costs. This is particularly the case if the plaintiff is unsuccessful. In all other cases, the advance on costs will be refunded and the State must demand the amount from the party liable to pay the costs. With respect to the taking of evidence, each party has to advance the costs for taking the evidence it has requested. Further, at the request of the respondent, the claimant may be required to provide security for potential party compensation where the claimant has no residence or registered office in Switzerland, appears to be insolvent, owes costs from prior proceedings, or where there otherwise appears to be a considerable risk that such compensation, if ordered, will not be paid. If the claimant does not provide the ordered advance or security, the court will declare the action inadmissible. Claimants, and in particular foreign claimants, therefore face significant financial hurdles in initiating civil litigation before the Swiss courts.

Litigation funding Court proceedings in Switzerland are usually funded by the parties themselves. However, a party may seek legal aid if it lacks the financial resources to fund the proceedings and if the case does not seem devoid of any chance of success. Legal aid can comprise an exemption from the obligation to pay an advance on costs and to: provide security; provide an exemption from court costs; or provide the appointment of a legal representative (attorney) by the court, if necessary, to protect the rights of the party. In theory, legal aid

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland is also available to companies, provided, among other things, that the object in dispute is the company’s only remaining asset. According to the Federal Supreme Court’s practice, third-party litigation funding is, in principle, protected by the fundamental right of economic freedom. Litigation funding by an independent third party is thus permitted in Switzerland, provided that the (funded) party’s lawyer acts independently from – and free from any instructions of – the third- party funder. The attorney representing the party in court is, however, prohibited from participating in the funding. This is due to the fact that attorneys in Switzerland are generally not allowed to make arrangements with their clients pursuant to which their fees are determined exclusively by reference to the proceeds in the case of a success (pactum de quota litis). These principles have been confirmed by the Federal Supreme Court (decision 2C_814/2014 of 22 January 2015). Despite its permissibility, litigation funding is still not very common in Switzerland. The conditions for obtaining third-party litigation funding are usually rather strict. It may therefore be difficult, but not impossible, to obtain litigation funding in Switzerland. The funding party usually requires a success fee. While the fees vary from case to case, a fee of about 30% of the outcome of the litigation is not unusual.

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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland party will only be served with the protective brief if it initiates the anticipated ex parte proceedings for interim relief. If no application for interim relief is filed within six months, the protective brief becomes ineffective.

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

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

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland of such order as well as a declaration of enforceability in Switzerland. As a rule, freezing orders are deemed to be judgments within the meaning of the Lugano Convention (and can thus be recognised in Switzerland), provided that the defendant was granted the right to be heard before the foreign court prior to the application for recognition and enforcement in Switzerland. By contrast, a foreign ex parte order (i.e. an order issued without the respondent being heard) cannot be recognised in Switzerland. In a remarkable decision of 27 November 2017 (DFT 143 III 693), the Swiss Federal Supreme Court held that: (i) a so-called “conservatory attachment” issued by a State court in Athens can be recognised and declared enforceable in Switzerland under the Lugano Convention; and (ii) the appropriate measure to actually enforce the foreign judgment in Switzerland is an attachment order pursuant to Article 271 of the DEBA, given that the Greek “conservatory attachment” operates in rem (rather than ad personam). In passing, the Federal Supreme Court also found that an English freezing order would have to be enforced in Switzerland as a preliminary measure pursuant to Article 340 of the CPC and thus not in the form of an attachment pursuant to the DEBA.

International arbitration Switzerland continues to be one of the most frequently chosen venues for international commercial arbitration. Over the last decades, Swiss arbitrators have been among the most frequently chosen arbitrators, two cities in Switzerland, Zurich and Geneva, have been among the most frequently chosen venues, and Swiss law among the most frequently chosen applicable laws. In addition to ICC proceedings, a number of other international arbitration proceedings are conducted in Switzerland, including: ad hoc proceedings; proceedings under the Swiss Rules; and proceedings under the rules of one of the specialised arbitration centres such as the TAS/CAS. International arbitration proceedings – defined as proceedings in which at least one party had its domicile in Switzerland at the time the arbitration agreement was executed – are generally governed by the rules of the PILA. However, the parties are free to opt out of the PILA and choose the rules of the CPC, which in principle govern domestic arbitrations. The rules of the CPC are much more detailed than those of the PILA and differ in certain relevant points. Currently, Chapter 12 of the PILA is undergoing a review process. Since the existing provisions of the PILA remain a widely accepted standard for modern arbitration legislation, the review aims at brushing up the arbitration framework by adopting certain best practices as well as some of the most important decisions of the Swiss Federal Supreme Court. Among other things, the released draft bill contains provisions relating to the possibility of pleading in the English language in appellate proceedings before the Swiss Federal Supreme Court. Under the PILA, there is only one instance of appeal in international commercial arbitration. All appeals must be brought before the Federal Supreme Court. The grounds for appeal under the PILA are very narrow: the award may only be set aside if the arbitral tribunal was constituted irregularly; wrongly accepted or declined jurisdiction; ruled ultra or infra petita; violated the parties’ right to equal treatment or to be heard; or if the award itself violates public policy. In practice, only very few awards are set aside, and these have primarily been based on the grounds of lack of jurisdiction or violation of the right to be heard. Only one arbitral award has been successfully challenged on the ground that it breached substantive public policy (decision 4A_558/2012 of 27 March 2012, relating to a dispute between a Brazilian football player and FIFA, Francelino da Silva Matuzalem vs. the Fédération Internationale de Football Association). An appeal to the Federal Supreme Court is normally adjudicated within four to six months.16

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The CPC, on the other hand, permits the parties to choose to have a cantonal court hear the appeal, rather than the Federal Supreme Court. As to the grounds for appeal, in addition to the grounds set forth in the PILA, the CPC also permits arbitral awards to be set aside where they are arbitrary or based on an obviously incorrect application of the law or determination of the facts, or on a violation of equity. The grounds for appeal under the CPC are thus substantially broader than under the PILA. Another feature of international arbitration proceedings under the PILA is that the parties – provided that no party is domiciled in Switzerland – may, by an express statement in the arbitration agreement or by a subsequent written agreement, fully waive their right to appeal the arbitral award. The parties do not have this right under the CPC. Such a waiver is sometimes made in order to further expedite the resolution of the dispute and to ensure an increased level of confidentiality. While initially the Federal Supreme Court was very reluctant to enforce such advance waivers, requiring that the waiver of the appeal be express and clear, the court appears to have become more liberal in this respect. In its early decisions, the Federal Supreme Court refused to enforce general statements, providing that the award “shall be final and binding”, or general waivers of challenges to the award. In a decision of 21 March 2011 (decision 4A_486/2010), however, the Federal Supreme Court concluded that the following statement, contained in the parties’ arbitration agreement, constituted a valid waiver of the parties’ right to appeal: “The decision of the arbitration shall be final and binding and neither party shall have any right to appeal such decision to any court of law.” Similarly, in a decision of 3 April 2014 (decision 4A_577/2013), the Federal Supreme Court confirmed that a statement pursuant to which “neither party shall seek recourse to a law court nor other authorities to appeal for revision of this decision” could only be understood in good faith as an expression of the parties’ intent to waive their right to appeal the arbitral award, despite the rather unusual wording of the clause. Conversely, the Federal Supreme Court has maintained its position that a mere statement to the effect that the award shall be “final” still does not qualify as a valid waiver of the right to appeal (decision 4A_460/2013). According to the Supreme Court’s practice, the parties’ declaration to waive their right of appeal must reflect their unmistakable will to avail themselves of that opportunity and to opt out of the right to appeal an arbitral award to the Federal Supreme Court. Whether this is the case must be determined by interpretation of the arbitration agreement at hand. In its decisions 4A_444/2016 and 4A_446/2016 of 17 February 2017, the Federal Supreme Court explained that the deadline for the filing of an appeal only begins to run upon receipt of the fully reasoned award, as opposed to the operative part of the award only. In its decision of 27 February 2014 (decision 4A_438/2013), the Federal Supreme Court reiterated its practice regarding the severability of the arbitration clause. The dispute related to a licence agreement that stated that after the expiry or termination of the licence, all rights and obligations of the parties would terminate but for some provisions. The arbitral tribunal accepted jurisdiction despite the termination of the agreement. On appeal, the Federal Supreme Court, by referring to the principle of autonomy of the arbitration clause, confirmed that it must generally be assumed that the arbitration clause contained in a contract is not affected by the expiry or termination of the contract, thereby underscoring the principle of severability of the arbitration clause as a cornerstone of arbitration. On 7 July 2014 (decision 4A_124/2014), the Federal Supreme Court issued a judgment as to whether the pre-arbitration dispute resolution tier in the International Federation of Consulting Engineers (FIDIC) General Conditions is mandatory and, if so, what the legal consequences of a failure to comply with this procedural requirement are. According to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Homburger AG Switzerland that ruling, arbitration proceedings may not be commenced without first completing the Dispute Adjudication Boards (DAB) procedure if the contract so provides. However, if the ad hoc DAB has not been constituted 18 months after it was requested, the responding party in the arbitration may no longer rely on the mandatory nature of the DAB procedure. In a further decision of 16 March 2016 (decision 4A_628/2015), the Federal Supreme Court held that in the case of a party’s failure to comply with a contractual pre-arbitration dispute resolution provision, the arbitral tribunal should stay the proceedings until the pre- arbitration dispute resolution mechanism has been implemented, while the modalities of the stay (notably the time limit of the suspension) are to be determined by the arbitral tribunal. The Federal Supreme Court expressly rejected other options discussed in legal writing, namely the possibility of an award of damages and the option to reject the claim and terminate the proceedings, finding that a stay of the proceedings was the only reasonable solution that properly balanced the parties’ interests. In its decision of 27 February 2014 (decision 4A_438/2013), the tribunal had ordered a stay of one month in order to allow the parties to follow the mandatory mediation proceeding. See also the Federal Supreme Court’s decision 4A_492/2016 of 7 February 2017, according to which a former FIFA employee would have been required to apply to the FIFA dispute resolution chamber before commencing arbitration proceedings. Swiss Arbitration Centres (Swiss Chambers; Court of Arbitration for Sport) The Swiss Chambers’ Court of Arbitration and Mediation (https://www.swissarbitration.org) mostly administers commercial arbitrations, investment arbitrations being the exception. Nearly one-third of the arbitrations are expedited proceedings, in which the award should be rendered within six months from the date the file is transmitted to the arbitral tribunal. The Swiss Rules are widely acknowledged as an alternative to other mainstream rules of arbitration, in particular to the ICC Rules of Arbitration. Under Swiss law and under the Swiss Rules, the parties to an arbitration agreement have the right to request provisional, interim or emergency relief from a State court or from the arbitral tribunal. In the past, parties often had to seek provisional relief from a State court in case of particular urgency – and if the arbitral tribunal was not yet constituted. The revised Swiss Rules address the need to have a choice between the State court and the arbitral process also in these circumstances by clarifying that the arbitral tribunal has the authority to make ex parte provisional orders, and by introducing an emergency arbitrator proceeding. In the case of an ex parte order, the order must be communicated to the other party at the latest together with the provisional order, and the other party must then be immediately granted the right to be heard. The effect of such an ex parte provisional order in practice remains to be seen, since efficient enforcement may be difficult. However, most parties comply voluntarily with the orders of an arbitral tribunal. Under the rules on emergency arbitrator proceedings, parties to an arbitration agreement may opt out of the emergency arbitrator proceeding. If they have not done so, and if there is a need for a provisional measure, and the applying and the opposing party have entered into an arbitration clause providing for the application of the Swiss Rules, a party may apply for emergency relief even before the arbitral tribunal is constituted or even before arbitration proceedings are initiated. Upon receipt of the application (and payment of the advance for the emergency relief proceedings), the Swiss Chambers’ Court of Arbitration will transfer the application to a sole arbitrator, unless it determines that there is manifestly no arbitration agreement, or it concludes that an arbitral tribunal should be constituted first. The sole arbitrator is expected to render the decision on the provisional measure within 15 days from the day the file was transmitted to the sole arbitrator.

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The enforceability of the decision of the emergency arbitrator is unclear – regardless of whether it is called an interim award or an order. Enforcement will hardly be possible under the New York Convention, but it may very well be enforceable under the law of certain jurisdictions, such as Switzerland, where the State court judge will assist in the enforcement (Article 183(2) of the PILA). The most important of the specialised arbitration centres is the TAS/CAS (https://www.tas- cas.org), which handles a large number of sports-related arbitrations.

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Endnotes 1. Swiss Civil Procedure Code of 19 December 2008, SR 272. An unofficial English translation of the CPC is available at: http://www.admin.ch/ch/e/rs/c272.html. 2. SR 0.274.12. The English text of the Convention is available at: https://www.hcch.net/ en/instruments/conventions/full-text/?cid=33. 3. SR 0.172.030.4. The English text of the Convention is available at: https://www.hcch. net/en/instruments/conventions/full-text/?cid=41. 4. SR 0.274.131. The English text of the Convention is available at: https://www.hcch. net/en/instruments/conventions/full-text/?cid=17. 5. SR 0.274.132. The English text of the Convention is available at: https://www.hcch. net/en/instruments/conventions/full-text/?cid=82. 6. SR 0.221.122.3. The English text of the Convention is available at: http://conventions. coe.int/treaty/en/Treaties/Html/076.htm. 7. SR 0.274.137. The English text of the Convention is available at: http://conventions. coe.int/treaty/en/Treaties/Html/092.htm. 8. SR 0.274.133. The English text of the Convention is available at: https://www.hcch. net/en/instruments/conventions/full-text/?cid=91. 9. SR 0.275.12. The English text of the Lugano Convention is available at: https:// www.eda.admin.ch/content/dam/eda/fr/documents/aussenpolitik/voelkerrecht/autres- conventions/Lugano2/02-conv-prot-ann-corr09_en.pdf. 10. This is the case only in a limited number of matters, such as employment law disputes with a value in dispute not exceeding CHF 30,000, divorce proceedings, or disputes between tenants and landlords. 11. In the case of a dispute relating to employment or tenancy law, the minimum value in dispute is CHF 15,000. 12. http://www.tas-cas.org/en/general-information/statistics.html. 13. http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(20 15)509988_EN.pdf. 14. Federal Private International Law Act of 18 December 1987, SR 291. An unofficial English translation of Chapter 12 of the PILA is available at: http://www.arbitration-ch. org/asset/92989ed67945478fc27d8b28ce80276e/iprg-english-version.pdf. 15. SR 0.277.12. The English text of the New York Convention is available at: http://www. uncitral.org/uncitral/de/uncitral_texts/arbitration/NYConvention.html. 16. See the updated statistics for 2013 at: http://www.arbitration-ch.org/pages/en/asa/news- &-projects/details/974.challenges-of-swiss-arbitral-awards-–-selected-statistical-data- as-of-2013.html.

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Balz Gross Tel: +41 43 222 10 00 / Email: [email protected] Balz Gross is the head of the Litigation | Arbitration practice of Homburger. His practice focuses on international arbitration proceedings and complex domestic and international litigation. He has acted as party counsel in more than 100 international arbitrations, and as an arbitrator in numerous international arbitrations. Balz Gross acts as counsel in large, mostly international proceedings before the State Courts in all Swiss cantons, in particular the Commercial Courts, and represents foreign and Swiss clients in proceedings involving criminal law issues. “Leading litigator and arbitration counsel” (Chambers 2010), “quick witted and prudent” (Chambers 2011), “Forceful litigator” (Chambers 2019), Balz Gross is consistently recommended in Chambers in Dispute Resolution (Arbitration Counsel, Band 1; Litigation, Band 1) and Employment (Band 2), in Benchmark Litigation (Lawyer of the Year 2019) and The Legal 500 (Leading Individual, Litigation).

Claudio Bazzani Tel: +41 43 222 10 00 / Email: [email protected] Claudio Bazzani is admitted to practise law in Switzerland and in New York. He is the deputy head of Homburger’s Litigation | Arbitration practice and the White Collar Crime | Investigations practice. Claudio Bazzani has more than 10 years of experience in conducting large-scale internal and regulatory investigations and in advising corporate clients in compliance matters. He represents clients in investigations by Swiss and foreign authorities and in domestic and international litigation proceedings. According to Who’s Who Legal Switzerland, Claudio Bazzani is “a dedicated and knowledgeable practitioner in the investigations space who draws praise for his outstanding work in international corporate and regulatory investigation” (WWL 2019) and “an outstanding lawyer who is widely recognised in the market for his impressive expertise in internal and regulatory investigations” (WWL 2018).

Julian Schwaller Tel: +41 43 222 10 00 / Email: [email protected] Julian Schwaller is a counsel in Homburger’s dispute resolution team and a member of Homburger’s Restructuring | Insolvency practice group. He represents clients before Swiss State Courts and administrative bodies in a wide range of commercial disputes, involving, in particular, insolvency issues, banking matters, M&A disputes, general corporate and contractual matters and insurance law, and in patent disputes. He has broad experience in attachment proceedings and regularly represents clients in proceedings regarding the recognition and enforcement of foreign judgments in Switzerland. According to Who’s Who Legal Switzerland, Julian Schwaller has “impressive practical advice and efficiency”WWL ( 2018) and is praised as “one of the top litigation attorneys in Zurich” (WWL 2019).

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

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E. Benan Arseven, Burak Baydar & Fulya Kurar Moroğlu Arseven

Efficiency of process Turkey’s judicial system has been subject to continuous reforms to enhance its efficiency. The reforms have brought, among others, significant technological and structural novelties. As the most remarkable technological reform, Turkey has implemented the National Judiciary Informatics System (“UYAP”), enabling courts and individuals to carry out procedural acts online. UYAP has received multiple awards, including the 2017 International Data Corporation prize, the 2016 WSIS prize and second place at the 2012 United Nations Public Service Awards. The platform, which has been consistently improved in recent years, eases every legal practitioner’s life in Turkey, meaning lawyers are no longer required to physically visit the courthouse in order to: • review court files appointed to them by their clients; • submit petitions and take copies from documents submitted; • deposit expenses and litigation costs with the court; and • conduct asset research of debtors in insolvency cases. In addition, online hearing at the civil courts through UYAP has been on the agenda of the Ministry of Justice for a while. This opportunity has been available at the criminal courts since 2012 and became an urgency for civil matters as well, due to effects of COVID-19. Accordingly, the Ministry of Justice has accelerated the process. The first trial was conducted in June 2020 by the Minister of Justice and the platform is expected to be made available to attorneys soon. The Judicial Reform Strategy of Turkey adopted in May 2019 also envisages a significant reform, that is the establishment of virtual enforcement offices. Enforcement offices have a very heavy workload in Turkey, and the number of pending enforcement proceedings exceeds 21 million as of March 2020. Due to this workload, a considerable budget is dedicated to the operation of enforcement offices. Therefore, a reform aiming to reduce this workload and budget and to facilitate enforcement proceedings by limiting physical appearance of the parties and their lawyers at the enforcement offices was inevitable. COVID-19 was also an accelerator for this reform. The virtual enforcement offices are expected to be launched soon. Most recently, the Second Judicial Reform Package, introduced in March 2020 and expected to enter into force soon, amends the Code on Civil Procedure, the Enforcement and Bankruptcy Law, the Procedure of Administrative Justice Act, the Law on the Establishment of Duties and Jurisdiction of Courts of First Instance and Regional Courts of Appeal, the Turkish Commercial Code, the Insurance Law, the Law on Consumer Protection, and the

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Industrial Property Law, in order to resolve some issues that were controversial in the practice as well as ensuring more effective and swift proceedings. Within the scope of structural reforms, in July 2016, Turkey introduced regional courts of justice, a new appellate layer aiming to ease the Court of Cassation’s workload. The new layer is expected to turn the Court of Cassation into a superior court that focuses on establishing case law rather than reviewing the material facts of the conflict, which the regional courts of justices are expected to manage. Introducing regional courts of justice has sped up the appeal process as well. Decisions by courts of first instance for pecuniary matters over TRY 5,390 (approximately USD 786) can be appealed to regional courts of justice. Likewise, a regional court of justice’s decision regarding monetary issues over TRY 72,070 (approximately USD 10,510) can be appealed to the Court of Cassation. If a court of first instance’s decision is reviewed by both the regional court of justice and then the Court of Cassation, the process for a decision to become final may take three to four years, depending on the complexity of the case. Regardless of how long the appellate process stretches, the winning party can enforce their decision against the losing party following the first instance court’s decision. To avoid this, a losing party should file an appeal including a specific request to freeze enforcement, by depositing a sum or bank guarantee letter equal to the amount granted by the first instance court. Generally, parties prefer a bank guarantee letter if the amount granted by the first instance court is significant, as it enables them to use their money instead of keeping it idle as collateral in the enforcement office’s bank account while the case is being reviewed by a regional court or Court of Cassation. Parties in Turkey tend to be quite litigious, regardless of the prospects of success. There are no real measures that force parties to think twice before resorting to litigation. For instance, the losing party will not be forced to remunerate the winning party for professional fees incurred due to the proceedings, unless such proceedings are deemed to be initiated in bad faith. If the case can be categorised as a claim for an indefinite amount, the claimant can avoid depositing the pro rata application fee at the beginning of the claim, as well as paying the winning party’s pro rata representation fee in case the claim is rejected. Thus, the workload of Turkish courts continuously increases every year. Within this framework, a simple trial procedure, with only one round of exchange of petitions, has been introduced for commercial cases amounting to or having a value of TRY 100,000 or greater, in order to accelerate especially drawn-out commercial cases and to decrease the workload of commercial courts. There is also a distinction made in accordance with the amount and nature of disputes before commercial courts in order to accelerate the proceedings. Commercial courts usually consist of a panel of three judges. However, only large commercial disputes are handled by a panel of three judges, while other disputes are heard by a single judge. Accordingly, the below disputes are tried by a panel of three judges: • Monetary claims with a value exceeding TRY 300,000. • Arbitration-related matters such as enforcement of foreign arbitral awards, setting aside of arbitral awards, and appointment of, or challenge to, arbitrators. • Declaration, postponement, cancellation and closing of bankruptcy and company reorganisations. • Cancellation of shareholders’ meeting resolutions, liability actions against management and supervision boards, dismissal of corporate organs or appointment of temporary corporate organs, and dissolution and liquidation of companies.

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As part of the efforts to ensure efficiency of the judiciary, alternative dispute resolution (“ADR”) mechanisms are greatly supported by the Ministry of Justice, and parties and attorneys are encouraged to have recourse to those. A notable reform that aims to reduce the workload of the courts was the implementation of a mandatory pre-litigation mediation stage in employment disputes as of 1 January 2018, and in commercial disputes with monetary claims as of 1 January 2019. Accordingly, parties to an employment dispute or commercial dispute pertaining to monetary receivables cannot bring their case before a court unless the mandatory mediation process is completed, and a final report is issued by the mediator putting forth the parties’ failure to settle the dispute. The parties must first apply for mediation; otherwise, the case will be dismissed on procedural grounds without further examination on the merits. Further, apart from the voluntary pre-litigation dispute resolution methods such as mediation, conciliation and dispute adjudication boards, arbitration has seen a significant growth in recent years. In particular, the foundation of the Istanbul Arbitration Centre (“ISTAC”) has played an important role in establishing an arbitration culture and practice in Turkey.

Integrity of process Turkey adopted several legislative changes regarding the rules of natural justice as part of the EU accession process. Significant constitutional changes in 2001 improved Turkey’s rules of natural justice, in line with EU legislation. Accordingly, the constitution protects a fair hearing, the death sentence was abolished, and importance was given to the right to access legal remedies. The constitution protects and guarantees judicial neutrality. Civil Procedure Law (“CPL”) also stipulates several detailed provisions to eliminate the partiality of judges. In this respect, parties may request the abdication of the judge in case any concern arises regarding their impartiality. Judges may abdicate themselves at their own discretion without the need of any party’s request. Turkey is continuously adopting reforms to ensure the independence and impartiality of judges. The latest judicial reform, also aiming to strengthen the independent, objective, accountable and transparent features of the judiciary, was released in March 2020 and is expected to enter into force in 2020. Under the reform, among other novelties introduced to increase efficiency of proceedings, a person who acted as a mediator or conciliator cannot act as judge in the same dispute. In addition, in case the reasons for disqualification are not proved, if their existence is highly likely, the judge can be disqualified. Further, Turkey’s three-layered judicial system allows decisions to be reconsidered by higher courts in terms of both substantive and procedural requirements. As a rule, regional courts review both the facts and the legal expediency of the first instance court’s decision, limited only within the scope of the appealing party’s requests, while the Court of Cassation only reviews the legal expediency of the decisions of regional courts without being limited by parties’ requests.

Privilege and disclosure Turkish legislation outlines several provisions regarding attorney privilege and disclosure obligations (Attorneys Law No. 1136). Accordingly, attorneys cannot disclose information obtained from clients during their duties. Violations of those obligations may cause disciplinary punishments as well as criminal and legal liability. Attorneys cannot testify about facts obtained from clients without prior client consent. Even if a client does consent,

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Moroğlu Arseven Turkey an attorney can still choose to abstain from testifying. However, attorneys must decline to pursue lawsuits or other tasks for a party if they have worked as an attorney or argued in favour of the counterparty in the same matter. Attorneys must retain documents entrusted to them by clients for three years after their power of attorney expires. An important provision regarding non-disclosure obligation is enacted in the Law on Mediation in Civil Law Disputes. Accordingly, except for the final minutes, documents prepared during mediation proceedings cannot be disclosed or used as evidence in court proceedings. If this confidentiality obligation is breached by the parties, their attorneys and/ or any other person who attended the meetings, the authors of the breach can be imprisoned for up to six months upon complaint.

Evidence In general, Turkey has a multi-layered judicial system, addressing two pillars: civil law; and criminal law. Civil proceedings are based on the principle of party preparation, whereas criminal courts apply the inquisitorial system. The evidence collection phase takes the majority of time in both types of proceedings. In civil law proceedings, the claimant bears the burden of proof. However, if it does not have the required tools to collect all evidence to support its case, the court can collect evidence upon the request of the claimant, particularly for evidence held by the counterparty. In this case, the claimant is expected to set out the importance and relevance of the evidence requested to be collected from the court. In addition, attorneys are granted with the power to collect information and evidence from public and private bodies that may be either a counterparty or a third party in the dispute. Accordingly, they may assist their client in the procedure of collection of evidence. With the new CPL, entered into force in 2011 to ensure the effective collection of evidence, the civil procedure is divided into two phases. There is a preliminary investigation stage of the proceedings, where the court takes necessary actions for the collection of evidence. At this stage, the parties should submit all evidence to support their case and/or request the court to collect said evidence. Once this stage is completed, the examination stage where the court may hear witnesses, order examinations on site and/or appoint expert(s) shall begin. Under Turkish law, developed and effective discovery and disclosure procedures as implemented in the common law systems do not exist. If required, the court may conduct an examination on site or appoint an expert panel to do so. If the respondent prevents examination, the court is entitled to execute the proceeding by force and impose an administrative fine and compensation to cover court expenses on the respondent. Courts tend to place the most evidential weight on expert testimony. As criticisms have been raised about inefficiencies in the system to review experts’ competency, legislation has been improved to increase the reliability and efficiency of expert witnesses. Accordingly, the Law on Experts was published in Official Gazette No. 29898 on 24 November 2016, introducing a regime for experts involved in judicial processes, including procedures and principles for experts’ qualifications, training, selection and supervision. With this legislation, Regional Committees located at regional courts of justice were established. Regional Committees establish and maintain lists of experts who can be appointed by the courts, and inspect experts either ex officio or upon application. Such inspections will consider experts’ compliance with the relevant legislation regarding their attitudes and behaviours related to their duties or reports. There are also tools for collection of evidence at the pre-trial stage or early stages of the proceedings. As a precautionary measure, recording of evidence may be claimed from

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Moroğlu Arseven Turkey the court in order to preserve the evidence which may deteriorate over time or due to counterparty’s activities. The court may also avoid notifying the counterparty of the recording of evidence if there is a risk of deterioration of the evidence.

Costs Claimants are expected to deposit various fees before, during and after trials, such as: • Fees (such as court fee). • Attorney’s fee. • Other trial costs (such as viewing, notification costs, charges paid to witnesses and experts, etc.). According to the Law of Fees No. 492, as updated for 2020, when making a claim, a claimant must deposit: • a proportional fee, calculated as a quarter of 6.831% of the claimed amount; plus • a fixed fee of TRY 54.40 (approximately USD 8). Pursuant to the tariff, in cases where the subject matter is decided based on a certain value by conducting examination on the merits of the case, proportional fees shall be collected over the value of the dispute in advance. Claimants must deposit an advance to the court fund office, or their lawsuit will be deemed unfiled (CPL). During proceedings, judges can request an advance on costs from both parties, depending on the actions taken to resolve a dispute. At the end of the trial, the court can decide that the losing party must pay all of the winning party’s litigation costs (including court fees and advance payment deposited by the claimant) along with the attorney’s fee. The attorney’s fee is calculated on a pro rata basis based on the Attorney’s Fee Tariff, revised annually by the Union of Turkish Bar Associations. In a partial decision, the court distributes litigation costs on a pro rata basis. If there are multiple losing parties, the court can distribute litigation costs amongst them, or hold the parties jointly and severally liable.

Litigation funding Third-party litigation funding is currently neither prohibited nor regulated under Turkish law. Turkish courts have not yet had occasion to rule on the validity and enforceability of litigation funding agreements. However, Turkish civil law is built on the principle of freedom of contract which allows the parties to freely tailor their contractual rights and obligations. Accordingly, parties and third-party funders, in principle, are able to enter into and shape their funding agreements, provided that they are in compliance with public policy and mandatory provisions of Turkish law. Despite the lack of prohibition, litigation funding is not sufficiently known or used by Turkish parties. In fact, the number of high-value disputes where the claimants are de facto deprived of access to justice due to litigation costs is substantial. The legal aid provided by the State Treasury to parties without sufficient financial resources to pay for litigation costs in civil matters does not provide an effective mechanism for commercial litigation. This mechanism is mostly available to individuals who evidence their lack of financial capacity with proper documentation, rather than companies and business people that do not have enough funds for litigation or avoid dedicating large sums to litigation. Therefore, there is an increasing need for an established litigation funding practice in commercial matters in Turkey.

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It is fair to say that international arbitration is well ahead of court litigation in terms of third-party funding. Turkish parties having had recourse to, or at least become familiar with, third-party funding have seen a significant increase in recent years, particularly in investment treaty arbitration. While the number of law firms having contact with foreign litigation funders is increasing, funding attempts from domestic actors are rare, but existent nonetheless. Specialisation of lawyers in the matter of arbitration funding is expected to trigger developments in litigation funding as well and pave the way for regulation of funding by Turkish legislative authorities.

Class actions Turkish law does not provide for a special mechanism allowing class action and collective redress, which is comparable to those existing in common law jurisdictions. However, the CPL offers a possibility for collective actions that may be initiated by associations and other legal persons in accordance with their internal statutes and on their own behalf to protect the interests of their members or the group they represent. Accordingly, in the event that a group of individuals is affected, or will be affected, by an existing or future violation, a sole action can be filed by the relevant association or legal person to seek determination of rights of those individuals or to eliminate the illegal situation or violation of the future rights of those individuals. Not only the claimant association or legal person, but also their members, benefit from the decision to be given in the lawsuit as a result of a collective action. Apart from collective action provided under the CPL, there are other class action-like mechanisms in the Law on the Protection of Consumers which allow consumer organisations, public institutions and the Ministry of Trade to file a lawsuit in consumer courts to detect, prevent or suspend unlawful situations.

Interim relief Turkish legislation defines interim relief as temporary legal protection, with interim injunctions and precautionary attachments being the most significant and efficient methods in Turkey. Many types of relief exist, spread across the different laws. In general, though, temporary legal protection is primarily regulated under the CPL and the Bankruptcy and Enforcement Law. The requests for these measures are reviewed and decided by the courts in a speedy manner. The applicant must submit documentary or at least prima facie evidence to convince the court of the necessity of rendering such orders to secure the rights of it. Both can be demanded from the courts where the substantial case is being tried. Interim injunctions Interim injunctions can be requested from the court either before or after filing a lawsuit. An interim injunction claim must raise a concern that: • acquiring a right will become more difficult, or impossible, due to a change that will occur in the circumstances; and/or • damages will be incurred due to any delay. Interim injunction decisions protect the claimant’s interest during trials, provided that no change occurs to the present circumstances. If a claimant files an interim injunction request before filing a lawsuit, the original lawsuit must be filed within two weeks after execution of the interim injunction order, or the injunction will be automatically lifted.

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

Enforcement of judgments/awards Foreign civil judgments are enforceable in Turkey if they are recognised by a competent Turkish court. If there is no bilateral reciprocity agreement between Turkey and the state where the decision was made, an enforcement and recognition action will be subject to the Turkish International Private and Procedural Law (“IPPL”). Accordingly, decisions will be requested from the court at the place of habitual residence of the person against whom enforcement is requested. If such person does not live in Turkey, the Istanbul, Ankara and Izmir courts will be deemed competent. The original decision, duly approved by the relevant country’s authorised departments, together with an approved translation, must be submitted to the Turkish courts. The competent court will enforce the decision subject to the following conditions: • Any agreement that may exist, on a reciprocal basis between Turkey and the state where the court decision is given, or de facto practice, or a provision of law enabling the authorisation of the execution of a final decision given by a Turkish court in that state. • The decision must not be on a matter within the exclusive jurisdiction of the Turkish courts, or being contested by the defendant; the decision must not be given by a state court that has accepted itself as competent in jurisdiction, even if it is not. • The decision must not be clearly contrary to public order. • The person against whom enforcement is requested and whose right of defence has been violated by that foreign state shall not bring forward that violation before the Turkish court. Turkish enforcement offices will enforce recognised foreign judgments as if they were rendered by a Turkish court. If the exequatur is appealed, the execution will stay until the upper court’s decision is finalised. Further, according to Article 48 of the IPPL, foreign individuals or legal persons who file a lawsuit, intervene in a lawsuit, or initiate execution proceedings before a Turkish court

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Moroğlu Arseven Turkey and/or execution office, shall be required to provide a collateral. The collateral amount shall be determined by the court and/or the execution office to cover the adverse costs that may be incurred by the counterparty, as well as losses or damages of the counterparty. The court and/or the execution office shall exempt the claimant, intervening party, or applicant for execution from providing a collateral, on a reciprocity basis. Reciprocity can be established via bilateral or multilateral agreements on mutual judicial assistance in civil matters between the countries. As Turkey is a party to the Hague Convention of 1 March 1954 on Civil Procedure, nationals of other contracting states are exempt from depositing a collateral while filing lawsuits. In case the reciprocity cannot be established, a foreign party can be required to pay collateral to file enforcement proceedings. Interim injunction or attachment can be issued against the counterparty by the enforcement court before or during enforcement proceedings upon the request of the claimant or ex officio, if the criteria are met. Enforcement of arbitral awards in Turkey is governed by the International Private and Procedure Law and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, or “NYC”). Provisions of the IPPL are applicable if the NYC is not applicable. Turkey made two reservations permitted under the NYC: • the reciprocity reservation; and • the commercial nature of disputes. In line with the first reservation, Turkey will only recognise and enforce arbitral awards that are made in other contracting states of the NYC. Secondly, the award must be related to a commercial dispute. As to the enforceability of partial awards, provided that they resolve a separable and independent part of the dispute in a final and binding manner, they are enforceable. Among all the conditions of enforceability, Turkish courts give a specific importance to public policy. The term “public policy” is not explicitly defined by Turkish law and therefore, the standards for refusing recognition or enforcement on public policy grounds mostly depend on legal practice. The most common examples of a violation of public policy are: • Violations of the right to be heard. • Awards being against good morals. • Awards violating foreign trade, customs or tax regulations. • Awards given on non-arbitrable disputes. Despite Turkish courts avoiding revision au fond, if a foreign arbitral award violates the main principles of the public policy and general ethics of the Turkish legal system, the court may review the merits of the dispute as well. It is worth noting that the court fees to be paid in enforcement proceedings are a matter of dispute in Turkey. In enforcement proceedings, no review is, in principle, made on the merits of the dispute, and only a procedural examination is carried out to determine whether the numerus clausus enforcement conditions are met. Therefore, one can conclude that enforcement lawsuits are not subject to proportional court fees. Nevertheless, a large part of the doctrine and the Court of Cassation decisions support the argument that proportional court fees shall be collected in enforcement lawsuits.

Cross-border litigation As part of the rogatory process, Turkish courts assist foreign courts for cross-border litigation in accordance with the terms and conditions set out under numerous international

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Moroğlu Arseven Turkey and bilateral judicial assistance treaties. Turkish courts can collect information, take party statements, carry out site examinations and appoint experts to do reviews if needed, depending on the nature of a request.

International arbitration In line with the general international trend, arbitration is becoming the principle method of dispute resolution for cross-border disputes in Turkey. In particular, in the energy, construction, infrastructure and telecommunications sectors, multi-tiered dispute resolution mechanisms resulting in arbitration are frequently adopted. The International Arbitration Law (“IAL”) outlines principles and procedures regarding international arbitration processes where a foreign element exists, and Turkey is determined as the seat of arbitration. Accordingly, the parties can either agree on the arbitration rules to be applied, or determine these by referring to international or institutional arbitration rules. In case a claim is filed before a court and such claim is subject to an arbitration agreement, any party may lodge an arbitration plea before the competent court as a preliminary objection. If such an objection is accepted by the relevant court, then the lawsuit will be dismissed on procedural grounds. However, the IAL has adopted a limited scope for judicial interference in international arbitrations, only allowing courts to intervene for supportive purposes, such as arbitrator selection, if a dispute arises. Like other contemporary arbitration legislation, the IAL has minimised the scope of judicial intervention into arbitration during the proceedings themselves. Courts can only review mistakes and faults made within arbitration proceedings during actions to set aside the arbitrated decision, filed by the counterparty before regional appeal courts. There are no other legal remedies against arbitration awards. There are two notable arbitral institutions in Turkey: 1. The ISTAC: Established in 2014, it aims to become a regional international arbitration body and increase the demand for arbitration in Turkey. The ISTAC offers services such as fast-track arbitration, emergency arbitrators, and appointments of arbitrators in ad hoc procedures. Parties can determine the arbitration’s seat and language, as well as selecting the arbitrators. Unless the parties agree otherwise, the arbitration seat will be Istanbul and the arbitrator (or tribunal) will determine the arbitration’s language, considering all circumstances and conditions. Recourse to arbitration governed by the ISTAC Rules is also encouraged by the government, which has invited public authorities to consider inserting ISTAC arbitration clauses in their contracts. Accordingly, the Turkish Public Procurement Authority amended the standard contracts annexed to the Regulations on the Implementation of Public Procurements, effective as of 19 January 2018. Pursuant to this amendment, Turkish public authorities may now refer to ISTAC arbitration for both domestic and international contracts. 2. Istanbul Chamber of Commerce Arbitration Centre: Established in 1979, it operates for both domestic and international disputes. Its rules apply the same approach as above regarding the arbitration’s seat, language, and selection of arbitrators. In relation to investment treaty arbitration, Turkey is a contracting party to the International Centre for Settlement of Investment Disputes (“ICSID”) Convention and party to numerous bilateral treaties with other countries providing for arbitration under ICSID, the International Chamber of Commerce (“ICC”), and/or UNCITRAL Rules. There are considerable efforts to increase the number of those treaties in order to encourage foreign investors to invest in Turkey.

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Mediation and ADR Mediation has an increasing profile in Turkey and is considered a final chance for parties to settle disputes amicably under Turkish law. Pre-litigation mediation is becoming, step by step, a mandatory stage in different branches of the Turkish judicial system. Mediation first became mandatory for employment law-related disputes at the beginning of 2018. Then, it became a mandatory pre-litigation step for commercial monetary claims as of 1 January 2019. Accordingly, parties must first apply for mediation; otherwise, the case will be dismissed on procedural grounds without further examination of its merits. If mandatory arbitration or ADR methods are prescribed for certain disputes under special laws, or in the event of the existence of an arbitration agreement between the parties, mandatory mediation provisions will not be applied. Mandatory mediation seems to reach the targeted success. According to data published by the Mediation General Office of the Turkish Ministry of Justice, 57% of commercial disputes and 65% of employment disputes have been settled at the mandatory mediation stage so far. Turkish parties are also becoming more familiar with voluntary mediation as an ADR mechanism, and there is a smooth transition from the established litigious culture towards multi-tiered dispute resolution mechanisms. In this transition, the role of legislative developments is crucial. In order to promote mediation, the Law on Mediation in Civil Law Disputes was enacted in June 2012, which also established the Mediation General Office of the Turkish Ministry of Justice. Accordingly, parties may voluntarily choose to refer the dispute to a mediator. If the parties reach a settlement as a result of the negotiations, the minutes to be signed by the parties and the mediator shall carry the legal nature of a court order upon obtaining an annotation from the court. Therefore, the parties shall make a request, to the competent court in the place of business of the mediator, for the annotation of the minutes. In order to grant the minutes with the annotation on enforceability, the court shall review whether the subject matter of the dispute can be mediated and whether the agreement is enforceable. The success rate is 97% in voluntary mediation. As part of the efforts to promote seemingly successful voluntary mediation, on 7 August 2019, Turkey signed the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention on Mediation), which provides enforceability to international settlement agreements. Further, under the CPL, judges are obliged to encourage parties to settle their disputes or refer to mediation at the beginning of each lawsuit. If the judge deems that there is a chance of settlement or mediation, the judge may once postpone the hearing. Other methods of ADR, such as dispute resolution boards and expert determination, are frequently used in large, cross-border construction projects as a pre-arbitration/litigation stage.

Regulatory investigations There is no central authority regulating and conducting regulatory investigations in Turkey. Investigations are conducted by several authorities, such as the Ministry of Customs and Trade and the Ministry of Health. Market regulatory authorities such as the Banking Regulation and Supervision Agency, the Energy Market Regulatory Authority, the Information and Communications Technology Authority, the Capital Markets Authority, the Public Procurement Authority, the Tobacco and Alcohol Market Regulatory Authority, the Competition Authority as well as the Data Protection Authority, carry out regulatory investigations, either ex officio or upon receiving complaints. All regulatory authorities are

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Moroğlu Arseven Turkey affiliated with a Ministry, and their management has administrative and financial autonomy. Activities of those authorities are subject to judicial review. Although the procedure of regulatory investigations for each regulatory body differs, usually the investigations are conducted by a team of specialists appointed by the decision-making body of the regulatory authority. The time frame differs for investigations for different regulatory authorities. Usually, investigations involve written and oral argumentation phases, depending on the subject matter of the investigation. There might be more than one round of each phase. The decisions of the regulatory authorities must be reasoned, and they are usually public. It is worth noting that the Data Protection Authority, which was established in 2016 and delegated with authorities and duties in parallel to European Union legislation within the scope of the EU accession process, is, among others, quite active, and conducts significant investigations as well as imposing administrative fines for illegal data processing. Data controllers that have been subject to administrative fines and measures include famous social media platforms, universities, banks, e-commerce companies, and hotel chains. There are several cases filed against the Authority’s decisions; however, there is much progress to be made for an established case law.

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E. Benan Arseven Tel: +90 212 377 4700 / Email: [email protected] Benan Arseven advises major foreign, local and multinational Fortune 500 companies on all aspects of launching and managing their daily operations in Turkey, as well as end-to-end advice during disputes. He specialises in supporting in-house legal teams around the world, taking the role of an external general counsel. Benan had broad experience in corporate and commercial dispute resolution, with speciality in agency and distributor conflicts. His advice often looks beyond strict black-and-white legal rights and obligations, involving recommendations that consider the commercial and operational realities of operating a business in Turkey. Benan’s broad, business-focused perspective is particularly useful during disputes. It enables Benan to quickly identify the critical commercial risks and negotiation strategies, as well as potential resolution opportunities. He spends a significant portion of time focused on dispute mitigation, settlement, litigation, and enforcement work.

Burak Baydar Tel: +90 212 377 4719 / Email: [email protected] Burak Baydar supports clients with all aspects of dispute resolution in both civil and criminal cases, ranging from the early stages of evolving disputes, through to representing clients in court or enforcing court decisions. He concentrates primarily on commercial litigation, assisting clients in dealing with conflicts related to business crimes, anti-bribery and anti-corruption, unfair trade practices, insolvency and restructuring, and directors’ and officers’ liabilities. He frequently assists in cross-border contexts, orin disputes involving high values, complex liability issues, or heavy penalties. Burak’s experience spans all stages and types of disputes, having represented clients before all levels of national courts and arbitral tribunals, as well as during related judicial procedures.

Fulya Kurar Tel: +90 212 377 4761 / Email: [email protected] Fulya Kurar, LL.M., focuses on dispute resolution, supporting clients at all stages of arbitration and litigation, from pre-trial risk assessments, through to settlement negotiations and enforcement processes. She assists clients on a full spectrum of issues in this context. She has represented clients in a large number of arbitration cases administrated under the rules of major arbitral institutions. Fulya also has experience in advising clients in complex construction projects under FIDIC forms of contract. Fulya works closely with international legal teams, quantum experts, quantity surveyors and third-party funders around the world. Before joining the firm, Fulya worked at the Secretariat of the International Court of Arbitration of the ICC in Paris, among other positions.

Moroğlu Arseven Abdi Ipekci Cad. 19-1 34367, Nisantası, Istanbul, Turkey Tel: +90 212 377 4700 / Fax: +90 212 377 4799 / URL: www.morogluarseven.com

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Chris Paparella & Anthony Pan Steptoe & Johnson LLP

Efficiency of process The United States is a federal union of 50 states. The states have delegated certain powers to the federal government pursuant to the U.S. Constitution. Each state has its own court system, which generally consists of trial courts (courts of first instance) and appellate courts. There is a parallel system of federal courts created pursuant to the Constitution and federal statutes. The federal trial courts are the U.S. district courts, of which there are one or more in each state. Thirteen Circuit Courts of Appeals hear appeals from the district courts. The court of last resort is the U.S. Supreme Court, which reviews a limited number of cases from the federal and state courts. The Federal Rules of Civil Procedure govern procedure in the federal courts. Although the courts of each state have their own codes of procedure, many are based on the Federal Rules. In most fundamental respects, procedure in the federal and state courts is similar. In recent years, the federal and state courts have adopted technology to improve efficiency. Electronic filing has become the norm in most courts and will likely soon be universal. Most courtrooms have audio-visual technology. Judges and their staff generally communicate with lawyers by email. As a result of these technological improvements, most courts and law firms have continued to operate remotely during the COVID-19 pandemic. Given the broad scope of U.S. discovery, the advent of electronic communication and information storage posed challenges for parties in litigation and raised costs significantly. However, after years in which courts and litigants struggled to deal with discovery of electronic information using rules developed when documents were created by typewriter, the federal and state courts have adopted rules intended to make electronic discovery less burdensome. In 2015, rules relating to electronic discovery in the Federal Rules of Civil Procedure were amended, narrowing the scope of data collection from “any relevant” information to a “proportionate” standard, adding the requirement that a response to a document request must specify the grounds of an objection and not use boilerplate, and more clearly defining the consequences of failure to preserve data. See Fed. R. Civ. P. 26(b), 34, and 37(e)(1). Some states, such as Connecticut and Massachusetts, have adopted similar amendments relating to electronic discovery in their own procedural rules. Other states, such as Pennsylvania, suggest parties and courts may consider “tools” such as “electronic searching, sampling, cost sharing and non-waiver agreements to fairly allocate discovery burdens and costs”. See Conn. Practice Book § 13; Mass. R. Civ. P. 26(f)(4); and 231 Pa. Code Rule 4009. The use of predictive coding and other software to review electronic documents is increasingly common. The COVID-19 pandemic has accelerated these trends. Since March of 2020, most court proceedings have been conducted by video or telephone. This includes oral arguments

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Steptoe & Johnson LLP USA on motions and appeals, as well as witness examinations. Private commercial arbitration witness hearings are already being conducted remotely. Certain courts are even examining the possibility of conducting jury trials remotely. Many lawyers expect this trend will continue even after the crisis has passed, especially in cases where in-person appearance is expensive and burdensome. Arbitration is widely utilised. Both the federal government and the states have adopted statutes regulating and encouraging the use of binding arbitration, and the U.S. Supreme Court has issued a series of pro-arbitration decisions. For example, earlier this year, the Supreme Court held that a non-signatory to an arbitration clause could compel arbitration under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (made part of U.S. federal law at 9 U.S.C. § 201, et seq.) where such was supported by state common law theories like estoppel. GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (2020). Mediation is also well accepted, and many courts have mandatory mediation programmes.

Integrity of process The U.S. Constitution and the various state constitutions guarantee due process and fundamental rights in court proceedings. Most importantly, a party has the right to an impartial and unbiased judge and, where applicable, jury. Criminal defendants have the right to a jury trial. Many civil litigants also have the right to a jury trial. Parties have the right to formal written notice of the proceeding and the grounds asserted for it. Parties must also have an opportunity to object to the proceeding, to obtain evidence prior to trial (discovery), to call witnesses and present evidence, and to cross-examine adverse witnesses. Parties have the right to a judgment limited by the evidence presented, to be represented by legal counsel, and to be provided with a record of the proceedings and written findings of fact and the reasons for a decision. These protections are afforded equally to corporations and individuals. Adversarial system Unlike the inquisitorial system used by most civil code jurisdictions, the U.S. system is adversarial. In practical terms, this means that the lawyers for the parties play the predominant role in contested matters. The judge’s role is to ensure fairness and due process, and generally not to shape the case until the end, when judgment is rendered. Judges are bound by precedent from the higher courts in the jurisdiction. Judges do not play an investigative role. Interplay between federal and state law The U.S. Constitution provides that federal law is the supreme law of the land (U.S. Const. Art. VI). Federal statutes therefore pre-empt any contrary provisions of state law. There is a vast body of decisional law interpreting the Constitution and federal statutes. However, when federal courts are called upon to determine state law contract or tort claims, they must apply the common law of the appropriate state, as determined pursuant to the choice of law principles of the state in which the federal court sits. In general, contractual clauses designating applicable state or foreign law are enforced. New York, for example, has enacted statutes that require enforcement of contract choice of law and forum provisions in disputes where the amount at issue exceeds a designated minimum. N.Y. Gen. Obligations L. §§ 5-1401, 5-1402. The state courts are courts of “general” subject matter jurisdiction. This means that they have original jurisdiction over most types of civil suits. They have the power to hear disputes

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Steptoe & Johnson LLP USA involving parties from another state or country where, under the applicable statutory and constitutional principles, the court has personal jurisdiction over those parties. The state courts may apply the law of another state, or federal law, where the applicable choice of law principles makes it appropriate to do so. The state courts are presumptively entitled to apply federal law. However, federal statutes give the federal courts exclusive jurisdiction to hear certain types of cases, such as those arising under the general anti-fraud provisions of U.S. securities laws (see 15 U.S.C. § 78aa). The federal courts are courts of “limited” subject matter jurisdiction. The Constitution and federal legislation provide them with jurisdiction to hear only certain types of cases. Two types of cases account for the vast majority of cases heard by the federal courts, and are therefore most significant for international practitioners. First, pursuant to their “federal question” jurisdiction, the federal district courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States”. 28 U.S.C. § 1331. Second, pursuant to their “diversity” jurisdiction, the federal district courts have original jurisdiction over cases where the amount in controversy exceeds US$75,000 and the dispute is between parties who are “diverse”, i.e.: (1) citizens of different U.S. states; (2) a citizen of a U.S. state and a citizen or subject of a foreign country; (3) citizens of different states in a case where a citizen or subject of a foreign country is an additional party; or (4) a foreign country as plaintiff and one or more citizens of U.S. states (28 U.S.C. § 1332). The jurisdiction of the federal courts over federal question cases and diversity cases is generally not exclusive. It is the plaintiff’s choice whether to bring an action in a state or federal court. However, a defendant sued in a state court may “remove” (i.e., transfer) the action to federal court if the case is of a type that could originally have been filed in federal court; that is, if a federal court would have had original subject matter jurisdiction over the action. It should also be noted that Congress has provided for exclusive federal jurisdiction over cases arising under certain federal statutes. 28 U.S.C. § 1441. As a result of their diversity jurisdiction over disputes between U.S. citizens and foreign citizens or subjects (any of which can include corporations), the federal courts are the forum for a large proportion of the international business disputes heard in U.S. courts. The federal courts also have original jurisdiction over disputes that arise under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been made part of U.S. federal law at 9 U.S.C. § 201, et seq. Rules of professional responsibility Attorneys in the U.S. are bound by rules of professional responsibility that require, among other things, the protection of confidential client communications and the avoidance of conflicts of interest. The specific rules vary by state, although many states have adopted the American Bar Association’s Model Rules of Professional Conduct. Attorneys may only represent clients with potential conflicts of interest after obtaining a written waiver from the affected clients. For instance, if an attorney attempts to represent a party that is adverse to a current or former client in litigation, the court may disqualify the attorney from the representation. In order to appear in a particular court, an attorney needs to be admitted to practise in that court either generally or on a limited basis for the purposes of a case (pro hac vice).

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Privilege and disclosure Attorney-client privilege The U.S. legal system protects communications between an attorney and a client made for the purpose of obtaining legal advice. The purpose of this protection is to allow the client to provide information to enable the attorney to provide effective legal representation. Exceptions to this protection include the “crime-fraud exception” for communications made to assist in committing a crime or fraud. Attorney work product Similar to attorney-client protections, attorney work product is also protected under the U.S. legal system. The attorney work product doctrine protects documents prepared by an attorney in anticipation of litigation, such as “the mental impressions, conclusions, opinions, or legal theories of a party’s attorney or other representative concerning the litigation”. See Fed. R. Civ. P. 26(b)(3)(B). Corporations Corporations generally enjoy the same protections of privilege as individuals. However, the courts have limited the assertion of privilege by corporations in some situations, such as communications with employees not in the control group and communications by lawyers who perform both legal and business functions. Waiver of privilege The client, not the lawyer, “owns” the privilege and can waive it. This can occur if the client discloses the privileged information to a third party or relies on privileged information to support a position in a lawsuit or otherwise. Hence, it is crucial that clients and their lawyers take steps to protect and keep confidential privileged material. Inadvertent or limited-purpose disclosure Most U.S. jurisdictions recognise some form of joint defence or common interest privilege that permits separately represented parties aligned in interest in a litigation or proceeding to share privileged information. It is also common for courts to enter protective orders that require inadvertently disclosed privileged materials to be returned and that can protect confidential business information from public disclosure. This is necessary because, in general, U.S. court proceedings, including the materials filed in such proceedings, are open to the public. Any member of the public can generally access the court file and attend proceedings. Settlement and mediation privilege Federal and state rules of evidence generally prevent a party from using an opponent’s offers of settlement and statements made in the context of settlement negotiations against the opponent to prove liability. See Fed. R. Evid. 408.

Evidence The discovery process can be the most expensive and important aspect of U.S. litigation. There are federal and state procedural and evidence rules governing the access and use of such material. Litigants can require their adversaries and third parties to produce documents and appear for out-of-court examinations under oath in advance of trial. The type of information that can be sought is broad and is not limited to evidence that would be admissible at trial.

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U.S. courts have the power to compel the production of evidence, and exercise significant control over the process. The courts also supervise discovery, but this supervision is, aside from the judge’s power to compel the production of evidence, usually conducted with a light touch; counsel are expected to and do generally resolve most discovery disputes between themselves. Most courts require counsel to attempt to resolve a dispute before they ask the court to intervene.

Costs and litigation funding Parties are responsible for their own costs and fees Unlike in most other countries, litigants in the U.S. system generally bear their own legal fees and expenses, win or lose. There are exceptions to this rule, in instances in which the parties have agreed to fee-shifting in a contract or in which the case is based on a statute (for example, the Sherman Antitrust Act, the RICO statute, and federal employment law statutes) that provides for an award of legal fees to a victorious claimant. Even where fee- shifting is authorised, only reasonable legal fees can be recovered and it is common to have a hearing regarding the fee claim. Contingency fee arrangement The U.S. permits lawyers and clients to enter into contingent (“no cure no pay”) fee agreements for most civil matters under which the lawyer is only paid if there is a success and is paid out of the recovery. The typical arrangement permits plaintiffs to not pay the attorney any fees unless they receive an award or settlement, in which case the lawyer has a right to a percentage (usually 20–40 per cent) of the amount the client recovers. The use of contingent fees has become commonplace in personal injury and other tort cases as well as employment discrimination, securities fraud, and antitrust cases. This arrangement allows parties with few resources to mount expensive litigation against well-funded businesses. Litigation financing The U.S. has long lagged behind other countries in the use of litigation funding. There are several reasons for this. As noted above, the U.S. has long permitted lawyers to work on a contingent fee basis, and the established contingent fee bar essentially provides litigation funding to clients. Another barrier was the fact that many U.S. states had laws, either statutory or case law- based, that prohibited champerty. Champerty, an ancient doctrine that originated in feudal France and made its way to the U.S. via England, is the practice of funding an unrelated party’s lawsuit in exchange for a share of the recovery. New York, for example, is likely the most important venue for commercial litigation in the U.S., and it has an anti-champerty statute that its legislature has amended but declined to abandon. While, historically, case law held that the statute had limited application, two recent decisions, one by New York’s highest state court and the other by a federal district court in Manhattan, dismissed substantial claims because they violated the statute. See Justinian Capital SPC v. WestLB AG, 65 N.E.3d 1253 (N.Y. 2016), and Phoenix Light SF Ltd. v. U.S. Bank Nat. Ass’n, No. 1:14-cv-10116, ECF No. 421 (S.D.N.Y. Mar. 18, 2020). Concurrently, however, other states have abandoned or limited their anti-champerty laws. This year, for example, the Minnesota Supreme Court abolished that state’s law against champerty. Maslowski v. Prospect Funding Partners LLC, 944 N.W.2d 235 (Minn. 2020). Notwithstanding the barriers to entry discussed above, publicly available information indicates that litigation funding is a growing business in the U.S., with funds reporting

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Steptoe & Johnson LLP USA up to US$2.3 billion currently invested in lawsuits. Roy Storm, Litigation Finance Transparency Push Instead Lets Opacity Shine, Bloomberg Law (Nov. 21, 2019), https:// news.bloomberglaw.com/us-law-week/litigation-finance-transparency-push-instead-lets- opacity-shine. This trend is likely to continue, for the reasons cited by the Minnesota Supreme Court in Maslowski. The court held that the modern “rules of professional responsibility and civil procedure address the abuses of the legal process that necessitated the common-law prohibition” against champerty, and that while litigation financing may once have been seen as a perversion of the system of justice, it may now “increase access to justice” by enabling individuals who might not otherwise have the financial means to pursue their claims in court. 944 N.W.2d at 239–40.

Class actions Federal and state laws in the U.S. permit class actions; that is, lawsuits brought by representatives of a class of similarly situated persons when joining all the class members as plaintiffs is impractical because the class is too large. A class action lawsuit that represents thousands or even millions of individuals could result in astronomical damages. Companies that deal directly with consumers were among the traditional targets of such actions representing a whole class of persons who have been injured in the same way. However, these types of companies, which include manufacturers, retailers, and service providers, have in recent times erected substantial barriers through the widespread use of arbitration clauses. See D. Horton & A.C. Chandrasekher, After the Revolution: An Empirical Study of Consumer Arbitration, 104 Geo. L.J. 57 (2015). Arbitration is a creature of contract and thus, this hurdle will only work if a contract is involved. The federal class action statute and many of the state statutes provide for an award of attorneys’ fees to a victorious class. Class actions may be settled and dismissed on a class- wide basis, binding the absent members of the class, but only if the court reviews the settlement and finds the settlement terms are fair, adequate, and reasonable as to the absent class members. See Fed. R. Civ. P. 23(e). The U.S. class action system is “opt out”. In other words, all class members are presumptively included in the lawsuit, but have the right to opt out of the case.

Interim relief Courts in the U.S. have the power in appropriate circumstances to enter preliminary injunctions and other interim relief, such as attaching money or property, to preserve the status quo pending resolution of a lawsuit or arbitration. Fed. R. Civ. P. 65(a). For example, under the rules of the New York Civil Practice Law & Rules, a preliminary injunction can be permissible if the “defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff”. NY CPLR § 6301 (2012). Further, a temporary restraining order can be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss, or damage will result unless the defendant is restrained before the hearing can be had. Id.

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Enforcement of judgments/awards Damages awards In the U.S., damages awards can be relatively high compared to awards in other countries. The question of how much to award a plaintiff in compensatory damages is usually decided by juries. Punitive damages (i.e., amounts meant to punish the defendant and deter future wrongful behaviour) are also determined by juries, but courts must now review these awards to make sure that they are in reasonable proportion to the compensatory damage award. Punitive damages awarded by juries are often reduced or even eliminated by trial and appellate courts. Uniform Foreign-Country Money Judgments Recognition Act Most states have enacted the Uniform Foreign-Country Money Judgments Recognition Act or its predecessor, the Uniform Foreign Money Judgments Recognition Act. These uniform acts permit U.S. courts to enforce final foreign money judgments, with some exceptions. Ohno v. Yasuma, 723 F.3d 984, 991 (9th Cir. 2013). The exceptions include judgments rendered: (i) under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law; (ii) where the foreign court did not have personal jurisdiction over the defendant; and (iii) where the foreign court did not have jurisdiction over the subject matter. See, e.g., Cal. Code Civ. Proc. § 1716(b).

Cross-border litigation Jurisdiction and minimum contacts Generally, a U.S. court has jurisdiction over a person or entity that has at least “minimum contacts” with the forum. Minimum contacts are most commonly established by committing an act while within the state, deriving profit from businesses within the state, or having ownership of property within the state. If a non-U.S. party has sufficient minimum contacts, a U.S. court may assert jurisdiction. A non-U.S. party that does not meet the minimum contacts threshold may also consent to the jurisdiction of a U.S. court, and voluntarily involve itself in a proceeding in the U.S. Once a U.S. court’s jurisdiction is established, the subsequent cross-border litigation would follow the rules of the court. Section 1782 orders Parties to a foreign proceeding can apply to a U.S. court for permission to obtain discovery in the U.S. for use in the proceeding, under federal statute 28 U.S.C. § 1782. The court has the discretion to deny the request, depending on factors such as the identity of the party in relation to the dispute, the nature of the foreign proceeding, the receptivity of the foreign court to U.S. federal court judicial assistance, whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies, and whether the request is unduly intrusive or burdensome. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264–65 (2004). The federal circuit courts are divided on whether Section 1782 discovery can be obtained for private commercial arbitration. The Supreme Court suggested in a footnote in Intel that the statute was available for arbitration, and the Sixth Circuit Court of Appeals held that private international arbitration is a “foreign tribunal” for purposes of Section 1782, and that federal courts can therefore compel parties to turn over evidence to foreign commercial arbitration bodies. Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019); see also Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 210 (4th Cir. 2020). By contrast, the Second and Fifth Circuit Courts of Appeals have held that the “tribunal” referred to in

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Section 1782 includes only governmental or intergovernmental arbitral tribunal courts, or other state-sponsored adjudicatory bodies. See Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999), and National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999). In July 2020, the Second Circuit again held that Section 1782 did not apply to private commercial arbitration, further cementing the split and increasing the likelihood that the issue will be resolved by the U.S. Supreme Court in the near future. See In Re Guo, 965 F.3d 96 (2d Cir. 2020).

International arbitration The Federal Arbitration Act (the “FAA”) Despite its size and its complex dual federal and state legal system, the U.S. is a favourable forum for international arbitration. Federal and state arbitration statutes and decisional law reflect strong public policy in favour of arbitration, especially international arbitration. This pro-arbitration policy is clearly expressed in the FAA, which implemented the New York and Panama Conventions, and in the cases decided under the act; together, the act and these precedents govern international arbitration in the U.S. The FAA governs the scope of arbitration agreements and requires courts to enforce the agreements according to their terms. The FAA overrides or “pre-empts” state laws that conflict with federal arbitration law or undermine its policies. State law generally governs substantive issues, such as the interpretation of an arbitration agreement and its terms. In this regard, U.S. courts will ordinarily honour the parties’ contractual choice of law, whether that of a U.S. state or another country. Court jurisdiction over disputes arising out of arbitration under the FAA is complex. An independent basis for federal court jurisdiction (typically diversity of citizenship) is required for disputes arising out of domestic arbitration governed by Chapter 1 of the FAA. Hence, the venue for many of these disputes is a state court. However, when Congress adopted the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards into federal law, it provided that the federal courts would have jurisdiction over disputes concerning arbitrations governed by the Convention. 9 U.S.C. § 203. Therefore, such disputes may be brought in federal court without showing the independent basis for federal jurisdiction required for domestic arbitration cases. While such disputes can also be brought in state court, the adverse party can remove the dispute to federal court. Arbitration agreements The FAA’s primary focus is to regulate how U.S. courts interact with arbitration proceedings. Unlike arbitration laws in some countries, the FAA does not regulate the necessary components and formalities of arbitration agreements. Instead, subject to the country’s pro-arbitration policy, arbitration agreements in the U.S. are treated like other commercial contracts; courts look to generally applicable principles of contract law to interpret and give effect to arbitration agreements. Both U.S. federal and state courts have developed a body of jurisprudence regarding the scope of arbitration agreements and the division of authority between arbitrators and courts. Arbitrability In determining whether a particular dispute is arbitrable, U.S. courts analyse the language of the relevant arbitration provision. Often, arbitration clauses will provide for the arbitration of all disputes arising out of or relating to the contract. Where an agreement uses this type of language, U.S. courts will construe the arbitration provision “as broadly as possible” to

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© Published and reproduced with kind permission by Global Legal Group Ltd, London Steptoe & Johnson LLP USA allow for arbitration. Although U.S. courts favour arbitration and seek to read arbitration provisions broadly, parties are free to narrow the scope of arbitrable matters through a carefully crafted arbitration agreement. Arbitration procedure The FAA does not contain extensive rules concerning arbitration procedure. Accordingly, in the U.S., the contracting parties are free to choose the mechanisms and procedures in their arbitration agreement. Significantly, some U.S. states have adopted default arbitration procedures. These procedures apply where the arbitration agreement is otherwise silent regarding procedures, rules, or administration. Arizona, California, and Texas are among the states that have adopted default arbitration rules.

Regulatory investigations At the federal level, Congress has created a wide range of agencies to administer statutory responsibilities of various natures. Similarly, individual states have their own agencies that are authorised to enforce specific regulations within their jurisdictions. Federal and state government agencies can launch investigations at their discretion, and many of these investigations are resolved through settlements. Common resolutions In investigations that involve allegations of a criminal nature, two types of resolution are commonly used by U.S. government agencies in settlements. In a Deferred Prosecution Agreement (“DPA”), a government agency brings criminal charges but agrees to dismiss the charges if the company fulfils obligations such as payment of fines and compliance with certain conditions for a designated duration. Non-Prosecution Agreements (“NPA”) are similar arrangements, except that the government agencies choose not to bring criminal charges. DPAs and NPAs are both less severe forms of resolution as compared to a criminal conviction, but they are not equivalent to a declination to prosecute. These agreements are also distinct from a guilty plea. In violations that are administrative or civil in nature, consent orders act as a similar middle ground form of resolution, and often include a cease and desist order and a civil penalty. Interaction between regulatory agencies and the judiciary Because of the wide discretion government agencies have in crafting the terms of these settlements, defendants in these matters often consider a limited waiver of privilege, and in some cases sign an agreement with the agency to extend the limitation of the statutory duration in which the government agencies can enforce the law against a violation, in exchange for more favourable settlement terms. DPAs are subject to judicial supervision while NPAs are not, and the courts are generally deferential to government agencies. However, a government agency’s powers to dictate the terms of settlement in regulatory investigations are not without limits. Government agencies’ enforcement decisions and methods can be challenged in the judicial system, and the rulings on these challenges often provide clarification and guidance to government agencies in future enforcement actions. One recent example is the U.S. Supreme Court ruling relating to the scope of agencies’ authority to use disgorgement as a penalty. In its ruling, the court provided clarification that it is equitable that disgorgement deprives wrongdoers of their net profits from unlawful activity, but the amount of such penalty should not exceed the wrongdoer’s net profits. See Liu v. Sec. & Exch. Comm’n, 140 S. Ct. 1936 (2020).

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Chris Paparella Tel: +1 212 506 3910 / Email: [email protected] Chris Paparella is a partner at Steptoe & Johnson LLP’s New York office. His commercial disputes practice ranges from financial services litigation to international arbitration arising from energy and infrastructure projects. Chris has represented clients in litigation involving claims of benchmark rate-rigging, securities fraud, and lender liability. Among other significant matters, he represents one of the panel banks in the multi-district LIBOR litigation. He has argued numerous appeals, including a recent appeal in the Nevada Supreme Court that affirmed the dismissal of fraud claims against a bank and a ground-breaking case in New York’s highest court that dismissed fraud claims against another bank client on the grounds that the plaintiff violated New York’s champerty statute. Chris has also represented clients in international arbitrations around the world. He has been ranked by Chambers USA, Chambers Global and The Legal 500 as one of the leading international arbitration lawyers in the United States.

Anthony Pan Tel: +852 3729 1803 / Email: [email protected] Anthony Pan is an associate at Steptoe & Johnson LLP’s Hong Kong office. Anthony advises clients on US economic sanctions, export control, anti- corruption, and anti-money laundering laws and regulations, with a particular focus on international financial companies with business interests in the Asia-Pacific region. His experience includes training management and staff at financial institutions on compliance with economic sanctions laws, and working with clients undergoing government and internal investigations. Anthony has experience in a broad range of industries, including financial services, technology, pharmaceutical, sports and entertainment, aviation, and logistics. He has also supervised large teams of attorneys in litigation and internal investigation matters involving criminal defence and civil disputes, export control and anti-corruption allegations, and securities fraud and financial violations.

Steptoe & Johnson LLP 1114 Avenue of the Americas, New York, NY 10036, USA Tel: +1 212 506 3900 / URL: www.steptoe.com

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