W4: Arbitration Agreements II

Question 1

Interim Relief wrt Parallel Proceedings

Answer 1

Turf War: Anti-Arbitration Injunctions by Courts of the Seat/Award

CASE LAW:
- *Himpurna v PLN & Indonesia Case (US): Seat shift from Indonesia to The Hague
- How Tribunal can seem to avoid injunctions in extreme cases:
1. Seat (UNCITRAL case) can be held ‘at any place (tribunal) deems apt’ THUS, physical transfer permitted by Rules [also ICC Rules Art. 14(2)]
- UNCITRAL Rules Art. 28: allows tribunal to proceed w arb. notwithstanding one party’s default w out showing ‘sufficient cause’ for default.
2. Existence of arb. agreement, and involvement of State party - entitles tribunal to apply int’l law.
* Benteler v Belgium
3. Tribunal NOT ‘unconditionally sub:’ jurisdiction of courts of the Seat.
- ‘adjudicatory authority’ of an int’l tribunal ‘does NOT emanate from a discrete sovereign, but rather from an int’l order
*Addis Ababa case (EU v Ethiopia): ICC Rules Art. 14(2)
GROUNDS:
1. Tribunal NOT State organ, but creature of contract
2. Agreement to arbitrate - NOT anchored exclusively in legal order of seat, but is validated by range of int’l sources and norms extending beyond domestic Seat. (e.g. NYC)
3. ICC Rules Art. 35: duty on tribunals to ‘ensure’ enforcement does not mean abdication of a case - tribunal must follow its own judgment (of what is fair and right), even if it requires non-compliance w a court order.
4. Complying w injunction = denial of justice

• *National Grid v Argentina
• *SGS v Pakistan

Such cases are RARE. Vast majority are pursued w/out interference from domestic courts.

Question 2

Judicial Control of Proceedings and Award (At the End of Arbitration)

Answer 2

Whether national courts should exercise judicial control over the conduct of int’l arbs. and the resulting awards:

POSITIONS

1. NO: Unwarrantably interfere w parties’ right to conduct their affairs as they choose.
2. YES: Justice is integral part of civilised democratic society, courts should NOT hesitate to intervene as and when necessary, to ensure justice is done in pvt. AND public tribunals.

Question 3

Use of Arbitration to Further Criminal Purposes

Answer 3

1. If an arbitrator has grounds for suspecting a criminal offence, each party should be given an opportunity to provide an explanation
2. Sufficient justification = evaluate facts (fraud/corruption) likely to impact dispute
   - in case of money laundering/other process-manipulation by parties, tribunal should TERMINATE proceedings - basis of no genuine dispute (consent award - tribunal may issue ruling refusing approval of settlement)

Reporting Offences to Authorities > Retaining Parties’ Trust

THREE distinct circumstances of Bribery and Corruption:
1. Q. of corruption of the arbitrator
2. Dispute arises out of contract for bribery (of state officials, i.e. ‘consultancy agreements’)
Decision by Judge Gunnar Lagergren
3. Contract procured by bribe
*World Duty Free v Kenya (ICSID)

• Addl. Protocol to the Criminal Law Convention 2005:
  Requires state parties to create a criminal offence of bribery of a domestic/foreign arbitrator, whether bribery is instigated by individual (active bribery) or an arbitrator (passive bribery).

Question 4

Jurisdiction

Answer 4

1. Challenges
2. Autonomy/separability of the arb. clause
3. Court Control
4. Procedural aspects of resolving jurisdiction issues
5. Options open to respondent
6. Int’l agreements on jurisdiction of national courts

Question 5

Jurisdiction: Challenges

Answer 5

1. Partial: Scope - new claims by submission agreements
   - French Law, NYC
2. Total: Basic Elements

Question 6

Jurisdiction: Autonomy/Separability

Answer 6

Doctrine of Separability:

1. For a tribunal decide on own jurisdiction, must first assume jurisdiction.
2. For which, arb. clause is separate and independent from contract terms
   - Exacting Test: Requires direct impeachment of the arbitration agreement (not only the contract) before it can be set aside.

*Fiona Trust and Holding Corp. and Ors. v Privalov and Ors.

1. Who Judges?
2. Competence-Competence
3. Limitations on Jurisdiction
4. Award made w/out Jurisidction

Question 7

Doctrine of Separability: Who Judges?

Answer 7

Tribunal:

• (essential) power to investigate own jurisdiction, inherent in appointment
• Look at:
  1. Arbitration Agreement
  2. Terms of Appointment
  3. Relevant Evidence
• May be subsequently reviewed by competent national court - BUT commonly accepted that does not prevent tribunal from making award.

Question 8

Doctrine of Separability: Competence-Competence

Answer 8

• Usual practice: expressly spell out terms of power of tribunal to decide upon its on jurisdiction, i.e., competence to decide upon its own competence
• UNCITRAL Rules Art. 23(1)
• ICC Rules Art. 6(9)
• Model Law Art. 16

BUT:
- ICC Process: possibility of provisional check on prima facie existence of arbitration agreement by the ICC Court @ discretion of the Secretary-General, who may refer case to Court for decision. If YES, then arbitration should proceed, and competence-competence doctrine applies.

• The 2 doctrines are interrelated, not identical.
• EAA 1996:
  1. S.7: Doctrine of Separability
  2. . S.30: Doctrine of Competence Competence

Question 9

Doctrine of Separability: Limitations on Jurisdiction

Answer 9

1. Parties should carefully examine law of the seat to establish extent to which powers may be limited by public policy
2. Tho int’l conventions and rules define ‘jurisdiction’, it is not itself derived from these, but from the arbitration agreement - which can only confer powers permissible u/laws applicable to agreement, and u/lex arbitri

Question 10

Doctrine of Separability: Award Made w/out Jurisdiction

Answer 10

Absence of Valid Arbitration Agreement = Nullity of Award

Possible Challenges:

• Model Law: ‘the arb. agreement is not valid u/law to which parties have subjected to it’
• NYC: ‘is not valid u/law to which parties have subjected to it/failing any indication thereon, u/law of country award was made
• Dallah v Pakistan
• SC of England and Wales: Refused to enforce award - tribunal incorrectly assumed jurisdiction over GOP (no signature on relevant arb. agreement)
• Paris Cour d’Appel: Upheld tribunal’s jurisdiction, based on determination that GOP was a party to the arb. agreement - Rejected GOP’s application for annulment of award.

Question 11

Jurisdiction: Court Control

Answer 11

Competence-Competence Decision = Sub: control by courts of law (final word), likely to take place at one of three stages:

a) beginning of process,
b) during process, and
c) following award

1. Concurrent Control
2. Choices Open to the Tribunal

Question 12

Court Control: Concurrent Control

Answer 12

• During the course of proceedings
• Tribunal decides whether to:
  1. Bifurcate Proceedings: Interim Award (Concurrent Control)
  2. Joint Proceedings: Final Award
• ICSID Regime allows only Joint - ‘deal w every q. submitted to the tribunal’
• Annulment process open only wrt negative jurisdictional decisions that finally dispose of the dispute
• Concurrent Control
  PROS: saves cost and time
  CONS:
  1. No encouragement of ‘outside interference’
  2. Likely to encourage delaying tactics on part of reluctant respondent

Question 13

Court Control: Choices Open to Tribunal

Answer 13

Usually,

1. Tribunal requires claimant to plead full case (incl. witness statements and expert reports)
2. Then allows respondent to indicate whether it wishes to seek bifurcation of proceedings - if YES, claimant given opportunity to respond - THEN tribunal will rule

DEPENDS ON:

1. Objection = Self Contained Legal Q. (properly addressed w/out detailed knowledge of underlying facts) THEN bifurcation and interim award.
2. Q. linked to merits and facts (more efficient to address jurisdiction and merits together) THEN joint and final award

Final and Binding - BUT may be set aside by competent court, or refused recognition/enforcement

Question 14

Jurisidiction: Procedural Aspects of Resolving Issues

Answer 14

• Most institutional rules require objection be raised NO LATER THAN statement of defence, or (for counterclaims) in reply to counterclaim.
• EAA 1996 S.31(1)
• Venezuela: W/in 5 Business Days (of procedural hearing)

Question 15

Jurisidiction: Options Open to Respondent

Answer 15

1. Boycott the Arbitration
2. Raise Objections w/Tribunal
3. Apply to National Courts
4. Challenge Award
5. Combined Approach

Question 16

Options: Boycott

Answer 16

Arbitration proceeds ex parte - respondent will seek setting aside/resist enforcement
*Libyan Oil Nationalisation cases
*Letco v Liberia (ICSID)
Award = Enforceable despite non-participation
Costs - against recalcitrant parties is likely

Question 17

Options: Raise Objections w Tribunal

Answer 17

Raise objections, and request bifurcation.

Question 18

Options: Apply to National Court

Answer 18

1. Anti-Arbitration Injunction
2. Declaration as to Lack of Jurisdiction of Tribunal
3. Commence Litigation (go on the offensive)
   CLAIMANT’S DEFENCE: Enforcement of Award u/NYC Art. II/Relevant Domestic Provisions

Usually, at courts of the Seat - if they have Concurrent Control
RISK: Arbitral Proceedings being UPHELD. Enhance standing of arbitration = more difficult to challenge award/resist enforcement on grounds of lack of jurisdiction

Question 19

Options: Challenge Award

Answer 19

Respondent: remain passive until after final award issued, then challenge in courts at Seat, or refuse implementation and await for enforcement by (successful) claimant

DISADVANTAGE: Considered waiver of objection is objection wrt jurisdiction after award is issued.

Question 20

Options: A Combined Approach

Answer 20

Continue to participate in arbitration, having expressly reserved its position wrt jurisdiction issue, so it may be considered again at later stage after final award is issued - by challenge in Courts @ Seat, or resisting attempts to obtain recognition/enforcement

Question 21

Option: Form of Court Intervention

Answer 21

1. Procedural Arbitrability: Failure to comply w procedural precondition, i.e., admissibility
   - Arbitrators be given DEFERENCE
   * BG v Argentina
2. Substantive Arbitrability: Alleged absence of arbitration agreement, exceeding scope, lack of arbitrability wrt nature of dispute
   - Court may exercise de novo review (ultimate authority w court to determine arbitrability)

Question 22

Jurisdiction: Int’l Agreements on Jurisdiction of National Courts

Answer 22

EU:-
2001 Brussels Regulation:
1. Art. 1(2)(d): specifically excludes arbitrations from application of Regulation
2. Art. 2: est. basic rule (sub: ltd. exceptions) that persons shall be sued in the courts of the state in which they are domiciled
3. Arts. 21-23: no concurrent proceedings
4. Art. 31: app. may eb made to courts of a Contracting State for such provision - incl. protective - measures as available u/law of that State, even if u/this Convention, courts of another Contracting State have jurisidiction as to the substance of the matter.

CASE LAW:
1. Marc Rich case (UK)
ECJ Held: Arbitration exclusion of the (then) Brussels Convention (now Art. 1(2)(d) of the 2001 Brussels Reg.) extended to litigation before national court wrt the arbitrator
THUS, admissible for English courts to intervene in appointment of arbitrator, notwithstanding domicile of Defendant (Italy)

2. Van Uden Maritime v Deco-Line
   ECJ Held: Provisional measures ate not in principle ancillary to arb. proceedings but are ordered in parallel, intended as measures of support. Concern NOT arbitration as such, but “protection of wide variety of rights”.
3. Allianz SpA and Anr. v West Tankers Inc.:
4. House of Lords (UK SC): Anti-suit injunction addressed to Italian court would not infringe the regulation - BUT stayed its proceedings, pending preliminary ruling to address the Q.
   ECJ:
5. Courts FIRST seised of dispute (Italian Courts) determine validity of arb. agreement relied upon - OTHERWISE, amount to stripping courts of power to determine own jurisdiction u/Brussels Reg.
6. Consistent w NYC Art. II(2), vests courts seised of a matter wrt an arb. agreement exists w the power to refer matter to arbitration.
   - CRTIQUE: not taking a/c of
   a) fundamental principles of arb. law
   b) reality of arb. practice

NOTE: app. for interim measures from an EU national court IN SUPPORT of an arbitration can be enforced u/the Regulation in any other court in the EU.

Court Powers to Enforce Agreement:

1. Declaring Validity
2. Ordering Specific Performance
3. Awarding Damages for Breach

Question 23

Brussels Recast Regulation:

Art. 1(2)(d), Recital 12

Answer 23

Regulation does not prevent courts from:

1. Referring parties to arbitration
2. Staying/dismissing proceedings
3. Examining validity of arbitration agreement

• excludes: rulings from member state courts on validity of arbitration agreements from recognition and enforcement regime of the Recast Regulation, regardless if issue was decided as principal or incidental
• not applicable to: action/ancillary proceedings wrt est. of tribunal, powers of arbitrators, conduct/other aspect of procedure, nor, action/judgment regarding annulment/review/appeal/recognition/enforcement of arbitral award.

HOWEVER: NYC > Brussels Recast Regulation