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Posted on Jun 4, 2018 in Law & Jurisprudence

EXAMS MODULE A

1.Assuming that the parties have failed to choose a law to govern the merits of their dispute, how is the law to be determined by an arbitral tribunal in the following circumstances:

a.In an arbitration in England under the ICC Rules.

The arbitration will take place in England in accordance with the ICC Rules. Therefore, the English Arbitration Act 1996, s.46 and ICC Article 17, should inform arbitrators in their task to identify the applicable rules to the merits of the dispute. There is a slight discrepancy between the approaches taken by the EAA and the ICC on this matter: while the EAA in s.46 calls for the application of conflict of laws rules which will direct the arbitrators to the law applicable to the merits of the dispute (a method that is also known as voie indirecte), ICC Article 17 opts for the direct application (i.e. without any conflict of laws guidance) of the ‘rules of law which [the tribunal] determines to be appropriate’. Nonetheless, the preferable view would be that the tribunal should apply the ICC provision, as this is not matter of public policy/mandatory relevance (in which case the national arbitration law (here the EAA) would take precedence).

The term “appropriate”, in conecction with teh rules of law, has a broad meaning anad can be applied in a wide sense. A national legal system can be appropriate:

·Because it is highly developed and sophisticated and suitable for the contracto r dispute, although it is no closely connected to the dispute; or

·Because are directly or closely connected with the transaction.

b.In an ad hoc arbitration in England.

In an ad hoc arbitration the main point of reference for arbitrators should be the national arbitration law, here EAA and s.46 again. One could note that in ad hoc arbitrations parties/tribunals will often adopt the UNCITRAL Arbitration Rules, which provide in Article 35 (which was revised in 2010) that the tribunal will apply the law (rather than the conflict of laws) which it considers appropriate.

The choice of the phrase “rules of law” is significant as it means that the tribunal is not limited to choice of one national law, understood as the laws of one particular country. For instance Art 21 of the ICC 2012 Arbitration Rules provides that in the absence of an agreement of the parties regarding the applicable law to the merits of the dispute, “the arbitral tribunal shall apply the rules of law which it determines to be appropriate”.

On the other hand, article 35(1) of the UNCITRAL Arbitration Rules (2010) opts for the choice of a concrete law: “[f]ailing such designation by the parties, the arbitral tribunal shall apply the law which it determines to be appropriate”.

The arbitration soft rules should take precedence over the national arbitration law.

c.In an arbitration under the 2010 UNCITRAL Arbitration Rules in a Model Law country.

The relevant rule is again Article 35 of the UNCITRAL Arbitration Rules (discussed above) and Model Law Article 28(2). Here the same discrepancy, and thus conflict, arises between the revised UNCITRAL provision and the approach taken by the Model Law. Again, the correct view is for the arbitration (soft) rules to take precedence over the national arbitration law.

2.What significance, if any, should tribunals give to mandatory rules of law which do not form part of the law governing the merits of dispute between the parties?

Mandatory rules of law are not part of the law that governs the substance; they limit the parties’s choice and must be applied to certain situations. Various sets of laws should be reviewed here: the law of the seat of the arbitration, the law of the potential place of enforcement of the arbitration award, the law of the parties and the law which has the closest connection with the merits of the dispute.

There is no consensus in legal literature and arbitration practice on the relevance of mandatory laws in any of the above places, but it seems that the mandatory laws of the seat as well as the mandatory laws of the potential place of enforcement are the most important for a tribunal to take into account, since otherwise the award might face the risk of annulment by the courts of the seat (see Model Law Article 34(2)(b)ii), or the risk of not being enforced (see NYC Article V(2)b).

The decisión in Eco Swiss v Benetton, was a landmark judgement in this área. The ECJ in passing found that EU legislation relating to anti-trust and competition legislation is mandatory, and that national courts at the stage of enforcement or annulment must review whether the award has failed to properly take this mandatory law into account. A similar decisión was taken by the US Supreme Court in Mitsubishi v Soler.

3.Give examples of circumstances where tribunals may rely on non-legal standards to determine the dispute.

This part relates to the standards against which a dispute may be determined by arbitral tribunals. National courts, in accordance with the prevailing positivist view, may only state laws. By contrast, as is generally accepted, tribunals may apply non-national legal rules or non-legal standards. This is expressly provided by a number of arbitration provisions.

For example, ICC Article 17(2) provides that ‘in all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages’. Other examples of non-national laws applicable by tribunals are general principles of law, or transnational law, or lex mercatoria. Transnational law has a constantly evolving content, which makes it difficult if not risky for tribunals to apply. Therefore, tribunals need to be very careful not to apply it unless the parties have expressly elected them; or in case the parties have failed to provide for the applicable law to govern the merits of the dispute and the dispute has a clear international character which makes it unsuitable to be determined by a national law; or finally in order for the tribunal to fill gaps of the applicable national law. Of course, the power of the arbitrators to apply transnational law or lex mercatoria also depends on the applicable arbitration laws and rules. The majority of the institutional rules and the national arbitration laws would allow arbitrators to apply the lex mercatoria even if the parties have not expressly provided for them (note the wording ‘rules of law’). See, for example, the Swiss PIL Article 187, French NCCP Article 1496 and the ICC Rules Article 17.

However, there are some national laws and rules that would not allow for the application of lex mercatoria in such a case. Note, for example, the English AA Article 46; Model Law Article 28 or UNCITRAL Rules Article 33.3, under which lex mercatoria is only possible if the parties have chosen it. Equally, there are risks associated with the application of lex mercatoria, mainly the fact that some national laws and national courts are still hesitant to accept awards that have applied the lex mercatoria, on the basis that lex mercatoria does not constitute a coherent set of legal rules.

Finally, another form of non-legal standards is the case of amiable composition or ex aequo et bono.

·Amiable composition has the aim to restore the harmony between the parties and to achieve a new workable relationship between them

·Ex aequo et bono bases the judgement on considerations and fairness, not of existing law.

This set of standards makes it possibly even riskier for tribunals to act as an amiable compositeur than applying lex mercatoria. This is because when acting as amiable compositeur, tribunals are not bound to apply any legal rule at all, let alone any national law. This makes the decision of the arbitrators difficult to review in terms of public policy, in particular. Therefore, tribunals should act as amiable compositeur only in cases where the parties have expressly given them the power to do so rather than in case the parties have merely failed to provide for an applicable law (i.e. ICC Article 17(3)).

4.Discuss the Decision of the European Court of Justice in Eco Swiss v Benetton concerning the application of mandatory rules of European Law to arbitration, as well as the arbitrability of anti-trust disputes.

The holding of the European Court of Justice in Eco Swiss v Benetton (1999) was a landmark decision and one of the few that has touched upon arbitration.

Benetton International and Eco Swiss China entered into an exclusive licence agreement. Benetton International terminated the licence prior to the termination date, and accordingly, Eco Swiss (i.e. the licensee) submitted the matter to arbitration. Although Benetton argued that the agreement was in fact void as it was violating EU competition law, the tribunal found in favour of the licensee. Benetton challenged the award before Dutch courts on the grounds that it violated European mandatory law, which the tribunal had failed to properly examine. The Dutch courts referred the matter to the European Court of Justice, requesting it to determine whether the limitation period of three months provided by Dutch law for the annulment of arbitral awards was excessively short.

The ECJ in passing found that EU legislation relating to anti-trust and competition legislation is mandatory, and that national courts at the stage of enforcement or annulment must review whether the award has failed to properly take this mandatory law into account (but note that the ECJ did not annul the award). The ECJ also noted that the annulment of the award must be effected within the period of limitation of the relevant national law, so that it does derogate from the public policy of finality of awards, but that national Member States cannot impose shorter statutes of limitation periods that unreasonably hinder the rights of a party to seek annulment on grounds of violation of community mandatory laws. The ECJ’s decision on Eco Swiss has some noteworthy similarities with the earlier decision of the US Supreme Court in Mitsubishi v Soler.

5.How should tribunals find the proper meaning of the law applicable to the merits of the dispute? Discuss the different approaches to proof and interpretation of the applicable law in arbitration.

Once tribunals have designated the national law or rules that will apply to determine the merits of the case, they then need to ascertain the proper content of that law or those rules. Unlike national courts, which have a forum and which are ex hypothesis familiar with the lex fori, tribunals have no forum. Accordingly, international tribunals may take different approaches to prove and interpret the substantive law that is applicable to disputes before them. There two basic approaches that tribunals may take:

First, the approach taken by tribunals influenced by common law tradition: here the tribunal will have to apply an adversarial procedural style where law is treated as a fact and it is for the parties to furnish sufficient evidence (either in the form of expert reports or in the form of academic treatises and scholarly writing) in order to prove the content and meaning of the foreign law.  

Second, the approach taken by tribunals influenced by civil law tradition: here, in accordance with the maxim iura novit curia, arbitrators have a duty to know or ascertain the appropriate content of the applicable law relying on their own research and knowledge.

In practice, tribunals take a mixed approach: they will ask the parties to make full legal argument (in writing and orally) about the applicable rules. Parties may even support their arguments with independent expert reports. The tribunal may request further specific details about the applicable law. It will, however, decide itself what the specific applicable rules are rather than rely on any expert. This approach leaves considerable discretion to the tribunal and is increasingly the norm in international arbitration. It reflects a neutral and international expectation that the applicable law or rules must be ascertained and applied. It recognises that in international arbitration there is no domestic forum or foreign law; there is only the applicable law for the particular case.  

6.Discuss the method that arbitrators should employ to determine the law governing the merits of the dispute in each of the following scenario:

a.an ad hoc tribunal is sitting in Geneva, Switzerland.

The relevant national law is that of Switzerland, i.e. the Swiss Private International Law Act (PILA), as the arbitration law of the seat of the arbitration. Here Article 187 authorises the tribunal to decide the dispute ‘according to the rules of law with which the case has the closest connection’. Swiss PILA thus, takes a liberal approach leaving wide discretion to the tribunal first to identify which is the law with the closest connection to the dispute, and secondly to apply ‘rules of law’ which would include transnational substantive rules or lex mercatoria rather than state law. Apart from the Swiss PILA, you could note that in ad hoc arbitrations, parties very often adopt the UNCITRAL Arbitration Rules, in which case Article 35 would come into play, which however is a narrower provision than Swiss PILA Article 187, as it only allows the tribunal for the application of a national ‘law’ – rather than rules of law. In case of a clash between the rules of an institution and national rules, the rules of the institution should take precedence, except in the case where a provision of a national law is of mandatory nature, which does not seem to be the case with regard to provisions concerning applicable law.

7.A dispute arises out of a distribution agreement, to be performed in the USA, between a US party and a Japanese party. The parties agree the dispute will be resolved by arbitration in France and in accordance with Swiss substantive law. The US party appoints a US arbitrator, the Japanese party appoints a Japanese arbitrator, and both party-appointed arbitrators agree on an Australian Chairman. The arbitration proceedings commence, and it soon becomes evident to the arbitrators that the distribution agreement at hand is contrary to the US Sherman (Anti-trust) Act and Article 101 TFEU (again an anti-trust provision). However, it seems that, under the Swiss applicable law, the distribution agreement is likely to be valid and enforceable.

a.Are the arbitrators in the above scenario bound by the US Sherman Act? Would your answer differ if the award is likely to be enforced in the US?  

b.Are the arbitrators bound by Article 101 TFEU?  

c.Should the arbitrators examine the applicability of the US Sherman Act and the Article 101 TFEU ex officio, i.e. even if neither party relies on these above provisions?  

The question refers to the application of mandatory law of the seat or the possible place of enforcement. The question is all the more interesting as the seat here is France, which has no obvious relevance or connection with the contract and the dispute that arises out of it: indeed, the distribution agreement was signed by a US and a Japanese party and was to be performed in the USA. Further, the parties had expressly agreed for Swiss law to govern their dispute. Thus, the issue for arbitrators here is whether they have to take into account the mandatory rules of a law other than the law determined by the parties in their contract.

Question (a) refers to the law of possible place of enforcement as well as the place of performance of the contract, namely the US. Here, there is a strong argument that although the arbitrators are not strictly speaking bound to take US mandatory law (the Sherman Act) into account, because arbitrators are not like national judges bound by the law of any state, they should nevertheless make sure that the Sherman Act is not contravened in their award. This is really for practical purposes, namely if the award contravenes US mandatory law its enforceability in the US will be undermined – see New York Convention 1958, Article V(2)(a) and (b), which would provide sufficient ground to resist enforcement. The well-known decision of the US Supreme Court in Mitsubishi v Soler (1985), which introduced the so-called ‘second look’ doctrine according to which, arbitrators are free to decide a dispute that is closely connected with the USA in accordance with any law they think relevant, but if the award seeks enforcement in the USA, US courts will review such an award and will deny enforcement in case US public policy or mandatory law has been violated.

Similar considerations underpin question (b): here the question is whether the mandatory law of the seat must be taken into account by the arbitrators, and the answer is yes. As the European Court of Justice held in Eco Swiss v Benetton, EU law relating to anti-trust (see Article 101 TFEU) constitutes mandatory law, the correct application of which national courts must review at the stage of challenge of enforcement of the award. Therefore, if arbitrators fail to apply EU mandatory law in this case, the award would be exposed for challenge before French courts (being the law of the seat), and it will be unenforceable in other EU countries.

Finally, for (c) it is necessary to refer back to the comments made under (a) and (b), which indicate the importance for the arbitrators of not violating relevant mandatory law – this demonstrates that arbitrators should apply the relevant mandatory law ex officio, and even if neither party relies on it.

8.What is meant by amiable composition? Give examples of arbitration laws and rules referring to amiable composition. 

Except where some other criteria is expressly stated by the parties, a tribunal mustt determine the issue between the parties taking into account the contract terms, trade usages and the applicable law. One such exception is where the parties agree the tribunal should determine the issues in accordance with its view of what is right and fair in the circumstances.

The term amiable composition is developed originally in france, and aims to restore harmony between the parties and to achieve a new workable legal relaionship between them. Nonetheless, there is a prerequisite to this rule: the parties must have expressly authorised the tribunal to act in this way.

For example, Model Law in article 28(3) establishes the posibility of the tribunal to decide by amiable composition (only if the parties have expressly authorised to do so). In the same terms ICC Rules, article 13(4) establishes this possibility.

9.What is the theory of ‘delocalisation’ and what are its main features? Is the theory espoused fully or partially by any jurisdiction currently?

The concept of “delocalized arbitration” has not been precisely articulated. With some caution, delocalized arbitration may be defined as “… a species of international arbitration not derived or based on a municipal legal order”. The main characteristics of delocalized arbitration are:

·It is detached from the procedural rules of the place of arbitration,

·It is detached from the procedural rules of any specific national law,

·It is detached from the substantive law of the place of arbitration,

·It is detached from the national substantive law of any specific jurisdiction.

The delocalized arbitration therefore may be seen as a form of arbitration independent any national legal order.

Fundamental feature of delocalized arbitration is that it is based on parties’ agreement (otherwise the award could not be eligible for enforcement).

Second characteristic of de- localized arbitration is that the procedure must not violate the fundamental norms of inter- national arbitral procedure, acknowledged in every country where arbitration is practiced. These norms include the notion of natural justice (or due process) and “other minimum norms of transnational currency… reflected in major international conventions”.

Limitations of sovereignty are not uncommon within the national and international legal systems. Internatio- nal conventions that pose such limitations are for example: New York Convention on the Enforcement and Re- cognition of Foreign Arbitral Awards, and ICSID agreement (1965).

10.A major natural resources company from France operating through a Canadian subsidiary has been in negotiation with a Russian regional government concerning a mining concession contract for the exploration of natural resources in Siberia. In 2003 the Canadian subsidiary, acting on behalf of the French parent company, entered into a memorandum of understanding with the Russian regional government, and subsequently in 2006 into the main mining concession contract. Both the memorandum of understanding and the concession contract contain an arbitration clause providing for arbitration under the ICC Rules of Arbitration and the seat in Stockholm. However, while the memorandum of understanding contains a choice-of-law clause providing that Swiss law will govern the merits of any dispute between the two parties, the concession contract contains no choice-of-law clause.  In 2013, a dispute arose out of the concession contract between the two parties. What law should arbitrators apply to determine the dispute?  

In order to establish which law arbitrators should apply to determine the dispute, in commercial arbitration, parties have the advantage to select the law governing the resolution or merits of the dispute. The ICC Rules, Article 21, states the possibility of arbitrators determining the rules of applicable law. In this case, the parties chose Swiss law to govern the arbitration agreement (however, there might be restrictions to this party autonomy: Soleimany v Soleimany). Because the parties failed to choose any applicable law in the concession contract, their dispute will be subject to the arbitral tribunal to decide.

In this concrete case, article 21 of the ICC Rules establishes the direct determination (voie directe) allows a tribunal to select the applicable substantive law or rules relevant for the particular case without reference to any conflict of laws rules.

Nonetheless, in certain cases the tribunal shall take into account the mandatory rules, as well as the public policy.

Taking as an example the EAA, it establishes in article 4 a list of mandatory rules that shall be applied to the arbitration, despite any agreement on contrary.

11.Under which circumstances can arbitrators decide a dispute on the basis of equity  and fairness?  

The arbitrators have the power to decide ex aequo et bono as an exception to the sources of law normally relied upon the court. A judgement made ex aequo et bono is based on consideration on fairness and justice, equity and conscience.

Nonetheless, there is a prerequisite for its application: the parties must have expressly authorised the tribunal to act in this way.

For example, Model Law in article 28(3) establishes the posibility of the tribunal to decide ex aequo et bono (only if the parties have expressly authorised to do so). In the same terms ICC Rules, article 13(4) establishes this possibility.

12.Would you, as a legal counsel, advise your client to enter into an arbitration  agreement that would allow arbitrators to act as amiable compositeurs?  

There are several advantages and disadvantages to consider in allowing arbitrators to act as amiable compositeurs. On the one hand, it should be considered the parties’ need for certainty and predictability of the outcome of a possible dispute; on the other hand, they should consider the flexibility of arbitrators to solve a particular dispute. Advice to clients should vary under the circumstances of the contractual relationship that the client is entering into: Is it a highly complex relationship? Have the parties done business before, and was it successful?  

13.Are arbitrators bound by legal precedence (or any other form of stare decisis) when  deciding a legal matter in arbitration?  

Arbitrators are not bound by legal precedents; instead, arbitrators are bound by general principles of res judicata and lis pendens – with decisions binding or pending between the same parties. All arbitral awards only have effect inter partes. Although arbitral tribunals are increasingly invoking previous arbitral awards for their authoritative value – especially in investor-state arbitration (de facto precedent) – there is no precedent in international arbitration.  

14.Can national courts review, either in annulment or in enforcement proceedings, whether arbitrators have applied the ‘correct law’ to the dispute before them? Further, can national courts review whether arbitrators have ‘correctly’ applied the law to the dispute before them?  

There are two distinct questions to be answered. First, arbitrators are under the duty to determine the applicable law. If parties have chosen to apply a particular law to their dispute, arbitrators are bound by their decision, and failure to comply with the parties’ agreement can be challenged in front of the courts. That is, however, more difficult if parties did not agree to applicable law but the arbitral tribunal applied the law it deemed appropriate (s.46 English Arbitration Act; Article 28(1) UNCITRAL Model Law; Article 21 ICC).  

Second, with regard to the court’s power to revise whether the arbitral tribunal correctly applied the law, there are different approaches in different jurisdictions. In general, courts do not have the power to check the ‘correct application of law’ – as courts do not act as appeal bodies to arbitral tribunals. That being said, the broadest power for national courts to check the correct application of law exists under s.69 of the English Arbitration Act. This provision is not mandatory and can be excluded by parties, either expressly or impliedly by choice of institutional rules such as LCIA or ICC (Sanghi v International Investor). This appeal is only possible on questions of law (Reliance Industries v Enron; Geogas v Trammo Gas) and a further appeal is severely restricted (s.69(3) EAA). On the very other end of the spectrum are  countries of minimum control (e.g. France and Switzerland) where this power of the court does not exist. An exceptional approach can be seen in the USA, where s.10 of the Federal Arbitration Act permits the courts to check whether there was ‘manifest disregard of law’ (Wilko v Swan).

15.What are the different methods employed by arbitrators to determine which law to apply in assessing the merits of a dispute? Discuss by reference to national laws and arbitration rules.  

The question relates to the law applicable to the merits of the dispute. The principle of party autonomy gives parties the power to determine the law that applies to their dispute. This is expressly provided in many national laws (e.g. Model Law, Art.28 or English Arbitration Act 1996, s.46) and arbitration rules (ICC, Art.21 or UNCITRAL, Art.35).

However, if the parties have failed to identify the law to apply to their dispute, arbitrators will then have to seek guidance from the lex arbitri, namely the applicable institutional rules and the national law of the seat of the arbitration. There are two different possible methods the arbitrators can employ to identify the applicable substantive law:

·determine the applicable law indirectly through the applicable conflict of laws rules (voie indirecte); or

·determine the applicable law directly, applying the law they consider the most appropriate (voie directe).

In the voie indirecte method arbitrators will have to identify the applicable substantive rules by applying a set of conflict of laws rules first. This method is provided by arbitration laws such as the Model Law, Art.28(2) or the English Arbitration Act 1996, s.46(3). It used to be the preferred method of the UNCITRAL Rules too, but the new version of the UNCITRAL Rules has shifted to voie directe (see the new Art.35).

Direct determination (voie directe) allows a tribunal to select the applicable substantive law or rules relevant for the particular case without reference to any conflict of laws rules. This method is provided by many arbitration laws, such as the Swiss PILA, Art.187, and arbitration rules, such as the ICC, Art.21.

Additionally, there is a distinction between unlimited voie directe and limited voie directe: in the former the tribunal has the discretion to apply any appropriate rules or standards (this is provided, for example, by the French Code of Civil Procedure or the LCIA Rules, Art.22(3)); in the latter a tribunal is limited to applying the national or non-national rules which have the closest connection to the transaction (see for example the Swiss PILA, Art.187(1)).

16.To what extent should an arbitrator (whether sitting in or outside the European Union) apply the law of the European Union to parties in a contractual dispute before him or her? Would your answer differ if one of the parties or the place where the contract is to be performed is outside the European Union and the applicable law is that of New York?  

The question refers to the application of mandatory law of the seat of arbitration. It is always difficult for arbitrators to decide whether they have to take into account the mandatory rules of a national law other than the law determined by the parties in their contract. Of course, arbitrators will have to apply mandatory provisions of European Union law (especially provisions on prohibition of competition which is considered mandatory law) when the parties are domiciled in Europe and the contract is to be performed in Europe, since then European law is closely connected to the contractual relationship and the dispute.

But the question is less straightforward when the parties are non-European domiciliaries and the contract has no connections to Europe or European law. There is no general consensus here, with some authorities arguing differently. Some scholars take the view that arbitrators are not obliged to apply mandatory law of the seat of arbitration, as arbitrators have a different role from that of national judges, and arbitrators are not bound by the mandatory rules of the seat. Other commentators, however, argue that arbitrators should always apply the mandatory rules of the seat not least for practical reasons; otherwise, if the award contravenes mandatory law of the seat (here European law) the award may be annulled.

A relevant case is the decision of the European Court of Justice in Eco Swiss v Benetton which held that European law relating to anti-trust (see Art.101 TFEU) constitutes mandatory law. Accordingly, the Court held, national courts must always examine whether European mandatory law has been violated when the courts review arbitral awards at the stage of challenge or enforcement of the award. If arbitrators fail to apply European mandatory law in this case, the award would be exposed for challenge before French courts (being the law of the seat), and it will be unenforceable in other European countries.

17.In what circumstances can arbitrators apply transnational substantive rules (instead of a state law) to determine a dispute?

The first part of the question relates to the standards against which a dispute may be determined by arbitral tribunals. As is generally accepted, tribunals may apply non-national legal rules or non-legal standards. This is expressly provided by a number of arbitration provisions. For example, ICC, Art.21(2) provides that ‘in all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages’. Other examples of non-national laws applicable by tribunals are general principles of law, or transnational law, or lex mercatoria.

Transnational law has a constantly evolving content, which makes it difficult if not risky for tribunals to apply. Therefore, tribunals need to be very careful not to apply transnational rules unless the parties have expressly elected them. Alternatively, tribunals may apply transnational rules only if the dispute has a clear international character which makes it unsuitable to be determined by any national law; or in cases where tribunals need to fill any normative gap of the applicable national law.

Of course, the power of the arbitrators to apply transnational law or lex mercatoria also depends on the applicable arbitration laws and rules themselves. The majority of the institutional rules and the national arbitration laws would allow arbitrators to apply the lex mercatoria even if the parties have not expressly provided for them (note the wording ‘rules of law’). See for example the Swiss PILA, Art.187, the French CCP, the ICC Rules, Art.21 and the new UNCITRAL Rules, Art.35.

However, there are some national laws and rules that would not allow for the application of lex mercatoria in such a case. Note, for example, the English Arbitration Act 1996, s.46 (EAA) and the Model Law, Art.28, under which lex mercatoria is only possible if the parties have expressly chosen it. It is also worth noting that the application of lex mercatoria by tribunals may raise issues of validity of the award, as some national laws and national courts are still hesitant to accept awards that have applied the lex mercatoria, on the basis that it does not constitute a coherent set of legal rules.

Finally, another form of non-legal standards are the amiable composition or ex aequo et bono. Tribunals acting as amiable compositeurs also raises considerable risks for the validity of the award because when acting as amiable compositeur, tribunals are not bound to apply any legal rule at all, let alone any national law. This makes the decision of the arbitrators difficult to review in terms of public policy, in particular. Therefore, tribunals should act as amiable compositeur only in cases where the parties have expressly given them the power to do so rather than in cases where the parties have merely failed to provide for an applicable law (see for example ICC, Art.21(3)).

18.How should arbitrators fill the gaps, in a case in which the state law which the parties have agreed to govern their dispute fails to cover all the legal issues arising?

The arbitrators have a general mandate to resolve the dispute submitted by the parties. In cases where the law, which the parties have agreed to govern their dispute, fails to cover some issues concerning the dispute at hand, the arbitrators still have both the duty and the power to examine and decide these issues.

In such cases, the arbitrators will first see whether some provisions of the designated law can apply by analogy in order to fill the gap. If this is not possible, arbitrators can try to identify relevant transnational rules or soft law, such as the UNIDROIT Principles. The tribunal should also try to ascertain whether any customary rules exist in certain areas of international trade, such as the INCOTERM rules or the UCP rules for documentary credits. In all cases, the provisions of the parties’ contract should be taken into account by the arbitrators (see for example ICC, Art.21).

19.In a dispute arising out of sales of goods contract between parties from different countries and different legal systems the dispute resolution clause provides for arbitration in London under the 2012 ICC Rules. The applicable law clause provides that Swiss law will be the law governing the substantive issues, but only to the extent that there are no other more appropriate rules.

When a dispute arises one party argues that Swiss law should apply to determine the substantive issues. The other party disagrees arguing that transnational law rulesare more appropriate to apply in this case on the basis that (i) both parties come from countries which are signatory parties to the 1980 UN Convention on the International Sale of Goods (CISG), although England, i.e. the country of the seat of arbitration, is not a signatory to CISG (ii) the contract has no connection with Switzerland or Swiss law (iii) under Swiss law the sales of goods contract may be null which is not the case under transnational law rules(iv) in any case, the provisions of the UNIDROIT Principles of International Commercial Contracts are clearly more appropriate in an international contract than any national law.

Discuss the application of transnational law rulesby the Tribunal in these circumstances.

This question is on lex mercatoria and its relevance in international business transactions. The main issue here is whether lex mercatoria, because of its anational character, is more suitable than national laws to apply to international contracts. The factual circumstances in question indicate that the particular transaction is a truly international one: parties are from different countries, whereas the seat of arbitration is in a neutral country. So naturally the question of whether lex mercatoria would be applicable here arises under the circumstances.

However, in order to address this question, it is necessary first to examine whether the parties have made any choice regarding the applicable law. This is important because the applicable arbitration rules here are UNCITRAL rules, where Article 35(1) provides that ‘the arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute’. Thus, only if the parties have failed to designate a law, will the arbitral tribunal ‘apply the law which it determines to be appropriate’ (see Article 35.1 second line).

The parties have indeed made a choice, but it is not a clear one: ‘Swiss law to govern substantive issues to the extent only that there are no other more appropriate rules’. It leaves room to argue that the application of lex mercatoria is more appropriate than Swiss law in the particular case. One important issue is that lex mercatoria would apply in accordance with the choice of the parties. It would apply within the terms of the parties’ reference to applicable law, i.e. within UNCITRAL rules Article 35.1, first line. Thus, the Article 35.1, second line would not be applicable here and, therefore, conflict of rules (which can never lead to lex mercatoria) cannot be applicable.

Within the above lines, the fact that the parties come from different countries, or that the contract has no connection with Switzerland are important factors weighing in favour of lex mercatoria over Swiss Laws. On the other hand, neutrality is also an argument favouring the application of Swiss law here. Also, Swiss law is traditionally a law applicable to many international transactions since it is considered comprehensive and commercially oriented.

20.Are there any circumstances that would allow arbitrators to apply a different law than the one expressly chosen by the parties?

Here the question is: even if the parties have agreed on a certain national law, or the arbitrators have designated a certain law that is the most appropriate to apply to the dispute at hand, nevertheless can another law be taken into account?

Mandatory rules (and even public policy) which are not part of the law that governs the substance may be applied. Indeed, many scholars and tribunals have argued that the mandatory laws of a country that has an interest in the dispute at hand can and should be applied. However, there is no consensus about the mandatory rules of which national law would be relevant. Various laws should be reviewed here: the law of the seat of the arbitration, the law of the potential place of enforcement of the arbitration award, the law of the parties and the law which has the closest connection with the merits of the dispute. As was said, there is no consensus in the legal literature and arbitration practice on the relevance of mandatory laws in any of the above places, although it seems that the mandatory laws of the seat as well as the mandatory laws of the potential place of enforcement are the most important for a tribunal to take into account. This is because, otherwise, the award might face the risk of annulment by the courts of the seat (cf. here Model Law Article 34(2)(b)(ii), or the risk of not being enforced (cf. here NYC Article V(2)b).

21.How do general principles of law differ from lex mercatoria and transnational rules?  

In the absence of the parties’ agreement to the contrary, the tribunal has discretion to determine the applicable law (s.46 English Arbitration Act; Article 28 UNCITRAL Model Law; Article 22.3 LCIA).

Arbitrators have broad discretion to determine applicable law, and that includes the general principles of law. General principles of law (due process, res judicata, lis pendens, etc.) are different to lex mercatoria (for example, UNIDROIT Principles, as to its content) and transnational rules, which are non-state law, generated through custom and in a particular sector. Arbitrators can apply the latter either with the parties’ agreement or if the relevant procedural rules permit them to (for example, Article 28(1) UNCITRAL Model Law; LCIA Article 22.3) – rules referring to ‘rules of law’ (and not the ‘law’, which refers to ‘state law’).

On the other hand, it can be understood as lex mercatoria as the law proper to international economic commercial relations (Goldman), composed by general principles of commercial law, principles common to several legal systems and international trade usages. The lex mercatoria is created by and for the participants in international trade.

Of course, the power of the arbitrators to apply transnational law or lex mercatoria also depends on the applicable arbitration laws and rules. The majority of the institutional rules and the national arbitration laws would allow arbitrators to apply the lex mercatoria even if the parties have not expressly provided for them (note the wording ‘rules of law’). See, for example, the Swiss PIL Article 187, French NCCP Article 1496 and the ICC Rules Article 17.

EXAMS MODULE B

1.What are the options available to a tribunal if one of the parties refuses to provide documents crucial for the determinarion of the dispute?

Most crucially, it should be noted that arbitration laws and rules accord tribunals wide discretion to conduct the proceedings as long as the sacrosanct principle of due process (i.e. the right of the parties to be heard and the principle of equal treatment of the parties) is not violated. As regards the options available to a tribunal when one party refuses to provide documents crucial for the determination of  the dispute, one should pay particular attention to the IBA Rules on the taking of evidence (the new 2010 version). These rules, although non-binding, are quite popular with international tribunals and usually provide solutions within the general expectations of international parties. Article 3 of the IBA Rules provides useful guidance as to how arbitrators may order the production of a document. The conditions for the production of a document are:

a.that the document is relevant to the case and materials to its outcome;  

b.that the requested document is in the possession of the party, rather than in the possession of a third party; and  

c.that the request for production is specific enough and refers to a narrow class of documents.

Excluded from production are of course documents that are protected by legal privilege or confidentiality (s.43(4) EAA). Now, if a party – despite a tribunal’s order for production ‒refuses to comply, tribunals may either draw adverse inferences or request national courts to enforce the order for production of the documents.  

2.Discuss the appointment and role of party-appointed and tribunal-appointed experts in arbitration.  

With regard to the appointment of experts, the IBA Rules on the taking of evidence provide the following. First Article 5 in relation to the Party-Appointed Expert provides that the tribunal may allow both parties to rely on a party-appointed expert as a means of evidence (Article 5 also provides a list of the issues that the expert report should contain, including a statement of the expert’s independence and a description of their qualifications). It is crucial here to note that party-appointed experts may, if the tribunal so decides, appear before the tribunal to be examined by it and cross- examined by the other party. If a party-appointed expert fails to appear before the tribunal, their report shall be disregarded by the tribunal. 

Party-appointed experts are usually preferred by tribunals that subscribe to the common law legal tradition where, in accordance with the adversarial system, parties lead the evidentiary process. By contrast, civil law-influenced tribunals will usually prefer the appointment of a tribunal-appointed expert. Here Article 6 of the IBA rules provides that the tribunal may, after consultation with the parties, appoint one or more independent experts to report on specific issues designated by the tribunal. Unlike party-appointed experts, experts appointed by a tribunal will have to report directly to the tribunal. It is then a duty of the tribunal to send a copy of the expert’s report to each party (see Article 6(5)), which may then request that the expert appears before the tribunal to be questioned by the parties or by a party-appointed expert on issues raised in their report. 

3.Are parties always entitled to call and examine witnesses irrespective of the circumstances and nature of the dispute? What is the procedure for hearing witness evidence in arbitration proceedings?  

The question relates to procedural fair hearing, and whether the examination, and more crucially the cross- examination, of a witness is an unfettered due-process right of the parties. Again, the starting point here should be the IBA Rules:  

Article 4(1) provides: ‘within the time ordered by the Arbitral Tribunal each Part shall identify the witnesses on whose testimony it intends to rely and the subject matter of that testimony’, and 4(7) that ‘if a witness whose appearance has been requested… fails without a valid reason to appear for testimony at an Evidentiary Hearing, the Arbitral Tribunal shall disregard any Witness Statement related to that Evidentiary Hearing by that witness’.

These provisions allow the conclusion that the calling and cross- examination of witnesses is a crucial procedural right of the parties. This is not an unfettered right of the parties. Many of the applicable rules and laws give tribunals the right to direct the procedural hearing (provided they do not violate equality and fairness). For example, ICC Article 20(3) provides: ‘The Arbitral Tribunal may decide to hear witnesses, experts appointed by the parties or any other person, in the presence of the parties, or in their absence provided they have been duly summoned.’ Similarly, EAA s.34(2)(e) and (h) provide respectively: ‘it shall be for the tribunal to decide… whether any and if so what questions should be put to and answered by the respective parties and when and in what form this should be done’ and ‘whether and [to] what extent there should be oral or written evidence or submission’. How the tribunal should exercise this discretion in allowing parties to call, examine and cross-examine witnesses depends on the factual circumstances.

4.What is the “seat‟ or “place‟ of arbitration? How it is to be determined? What is the importance of the seat?  

It should be distinguished the legal seat from the physical seat (which can be any venue where oral hearings can take place as a matter of convenience). This distinction is recognised in many arbitration rules and laws (e.g. ICC Article 14.1 (legal), 14.2 (physical); LCIA 16.1(legal), LCIA 16.2 (physical)).

Legal seat or place is a legal fiction and refers to the link between a certain arbitration and a national arbitration law. The seat of the arbitration is either determined by the parties in their arbitration agreement or before the arbitration commences, or, failing such agreement, by the tribunal (but note the default provision of LCIA Article 16, where in case the parties have not provided for a venue, London will be the seat of the arbitration). The legal importance of the seat has been debated for many years. However, it is now commonplace that the choice of the seat does matter (and this view has been supported by empirical surveys, notably the Empirical Studies conducted by the School of International Arbitration at Queen Mary, University of London). Union of India v McDonnell Douglas and the following aspects of the legal importance of the choice of arbitration seat:

First, the seat determines the nationality of the award: it is the place where the award is deemed to be issued (see Model law art 31(1), English Arbitration Act 100(2), ICC 25.3). This in turn means that this will also be the place where the award can be challenged. Nationality of the award also plays a role at the enforcement stage; see New York Convention, Article I (scope of application) and V(1)(d) and (e).  

Second, although the place of the award is less important nowadays in the determination of the applicable substantive rules (see Article 17 ICC, which has omitted the previous reference to the place of the seat), it is still important for the application of the mandatory rules of the seat.

5.What are the factors that the parties should take into account when choosing the seat of an arbitration?  

Factors that the parties should take into account when choosing the seat of an arbitration break down into legal and practical considerations. Legal considerations include how arbitration friendly the national arbitration law and the courts of the seat is, whether the seat is a signatory member of the New York Convention, and so on. Practical considerations include how far the seat is from the crucial evidence of the case; whether it is convenient for the arbitrators, the parties and their counsel to travel to the seat; the general infrastructure of the country; and so on.  

6.What is the theory of delocalisation? Give examples of delocalised arbitration.  

The issue of delocalisation is a well-known and recurrent topic in arbitration. It relates to the degree of autonomy that arbitration can enjoy from national legislation and intervention.

·It is detached from the procedural rules of the place of arbitration,

·It is detached from the procedural rules of any specific national law,

·It is detached from the substantive law of the place of arbitration,

·It is detached from the national substantive law of any specific jurisdiction.

The delocalized arbitration therefore may be seen as a form of arbitration independent any national legal order.

Fundamental feature of delocalized arbitration is that it is based on parties’ agreement (otherwise the award could not be eligible for enforcement).

7.What is the meaning of “lex arbitri”?  

Lex arbitri is the body of laws and rules that governs and regulates the arbitral procedure. Although there are divergent views on the exact scope of lex arbitri, most authorities agree that lex arbitri comprises, first, the provisions of the arbitration agreement, second, the provisions of the institutional rules (which may be incorporated into the arbitration agreement), third, the national arbitration law of the seat, and finally, the rules of international public policy (mainly, the rule of equal treatment of the parties, and the right of the parties to be heard).

Lex arbitri thus regulates all issues relating to the arbitration process, from the initiation of the arbitration proceedings until the enforcement of award, and covers matters such as appointment of the arbitrators, requests for interim relief, conduct of hearings, taking of evidence, issuance of award, and so on.

8.A tribunal is sitting in London. Parties have provided in their arbitrationagreement that “the arbitrators will need to follow the Indian Arbitration Act to determine any procedural issue that arises during the arbitration.” Can the arbitrators give effect to this provision of the parties?  

a.Would your answer under (8) differ if the seat of the arbitration was in France?  

b.Would your answer under (8) differ if the seat of the arbitration was in a Model Law country?

The question here is whether the parties may agree to the application of a different national arbitration law from the arbitration law of the seat. The answer depends on the approach taken by the national law of the seat. In this scenario, the English Arbitration Act 1996 (EEA) applies as the law of the seat. EAA ss.2–4 do not allow for any other national law to apply, and parties can only derogate from the non-mandatory English arbitration procedural rules. For the EAA, the seat is an important factor that determines the national procedural law and thus parties do not have the authority to import the laws and the rules of a foreign national arbitration law.

This position was confirmed by the decision of the English courts in Union of India v. McDonnell Douglas Corpn. 1993, in which the arbitration clause provided that seat of arbitration proceedings to be in London and arbitration procedure to be conducted in accordance with Indian Arbitration Act 1940. It was discussed whether law governing arbitration proceedings English or Indian law. The conclussion was supported by the EAA, which establishes that the law to be applied was the one of the seat of the arbitration, this is, the English one.

a. As commented above, the EEA applies as the law of the seat. EAA ss.2–4 do not allow for any other national law to apply, and parties can only derogate from the non-mandatory English arbitration procedural rules. Parties do not have the authority to import the laws and the rules of a foreign national arbitration law.

On the other hand, and in case the seat of arbitration was in France, the French Decree of 2011 reforming the arbitration law establishes in article 1509 that, unless the parties have defined otherwise, the arbitral tribunal shall decide the procedure as required.

In this case and taking into account that the seat of the arbitration would be in France, the Indian Arbitration Act would determine the procedural issues.

b. in case the seat of the arbitration was in a Model Law country, and in accordance with article 1(1), the Model Law shall apply, subject to any agreement in force btween this state and other State or States. This approach is similar as the one provided by the EAA.

9.How should arbitrators decide on the following procedural issues: 

a.First, whether to adopt inquisitorial or adversarial proceedings; 

This would depend on the legal background of the parties, of their counsel and of the arbitrators too. Common law lawyers are more familiar with the adversarial style of proceedings, where the judge or the arbitrator has more limited involvement in the hearing – the judge/arbitrator’s role is to facilitate the efficiency of the proceedings and ensure that the requirement of due process is preserved; whether the evidence is proved or not is mainly the role of the counsel.

On the other hand, civil lawyers are more familiar with an inquisitorial style of proceedings with the judge or the arbitrator taking a more active role in the hearing – here the arbitrator has to find the law and can also take a role in the taking of evidence, for example by appointing an independent expert to assist them in understanding complex factual or legal issues relating to the case.

Thus, if most or all of the parties, legal counsel and arbitrators come from the same legal tradition (be that common or civil law) it would make good sense to adopt the procedural style prevalent in that legal tradition. In practice though, parties, counsel and arbitrators come from both legal traditions, which usually calls for a hybrid procedural style – thus, for example, the arbitrators will usually take the initiative and put questions to the witnesses, while at the same time counsel will be given the right of cross- examination, and the right to party-appointed experts.

b.Second, whether to conduct the proceedings orally or on the basis of documents;

As a matter of practice, and in the absence of an agreement to the contrary, oral hearings will be held in the majority of the arbitration proceedings. This is also provided by most arbitration laws and rules: Model Law Article 24, EAA s.33, UNCITRAL Rules Article 28, LCIA Article 19(1), ICC 24–26. Other factors that a tribunal will usually take into account in order to decide on this matter are: the legal background of the parties and counsel (common law jurisdictions are more familiar with oral proceedings), the required length of the hearings and the costs associated with oral hearings  

c.Third, how to fix the place and language of the proceedings.

The place of the actual hearings of the proceedings should be distinguished from the legal seat of the arbitration. While there is only one legal seat, hearings can in theory be held in different places, depending on the location of the evidence. The following factors will usually influence the determination of the place of the hearings:

·location of evidence  

·place of performance of the contract

·the location of the law firms, and the arbitrators

·costs associated with the hearings.  

Finally to determine the language of the proceedings, arbitrators should consider the:

·language of the contract and the arbitration agreement  

·language in which the parties and counsel are fluent  

·language in which all members of the tribunal are fluent  

·language of the evidence (documents, witnesses etc.).

In any case, it must be borne in mind that where possible the proceedings should be conducted in one language, and that translation may significantly increase the costs of the proceedings. Relevant provisions which you should refer to: Model Law Article 21(1), UNCITRAL Rules Article 19, ICC Article 20.  

10.What happens when a party refuses or fails to take part in the arbitration proceedings (default proceedings)?

The question relates to default proceedings in arbitration. In general, there are four circumstances which can be classified as failure to participate in the proceedings:  

·when a party denies the jurisdiction of the tribunal

·when a party refuses to reply to communications from the  tribunal or any procedural direction

·when a party adopts dilatory tactics that effectively delay the proceedings  

·when a party disrupts the hearing so that it becomes impossible to conduct it in an orderly manner.

Consequences of default proceedings depend on whether the party in default is the claimant or the respondent. In the former case, arbitrators are likely to terminate the proceedings (see Model Law Article 25(a)), although the arbitrators must warn the claimant at least once before they proceed with such an extreme measure. In the latter case, the tribunal will continue the proceedings, but it should not treat the failure of the respondent in itself as an admission of the claimant’s allegations; rather the tribunal should look into the evidence before it and determine the case accordingly (see Model Law Article 25(b)). In addition, the EAA, s.41(4) provides in similar terms (although it provides that the tribunal may continue rather than terminate the proceedings in case any party, including the claimant, defaults).   

11.What is the meaning of ‘due process’ and what is its role in international arbitration? Discuss by reference to case law and arbitration laws.

Due process in the context of arbitration refers to the fundamental procedural right of a party to be heard (i.e. present its case) and be treated equally to the other party.

There is a plethora of arbitration laws enshrining the requirement of due process, albeit in slightly different terms. For example, Article 18 of the Model Law provides that ‘parties shall be treated with equality and each party shall be given a full opportunity to present his case’, whereas the English Arbitration Act 1996 provides that each party must be given ‘a reasonable opportunity of putting its case and dealing with that of its opponent’. There are several arbitration rules such as ICC, Art.19 which provides that ‘In all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case’, or LCIA, Art.14.1 which provides that the arbitral tribunal has a general duty ‘to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent’.

The 1958 New York Convention, Art.V(1)(b) provides that recognition and enforcement of an award may be refused if ‘the party against whom the award is involved was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case’.

Given that tribunals enjoy a wide discretion to conduct proceedings, it is only in exceptional circumstances that a tribunal can be found to have violated the right of a party to present its case. Examples include when a party has been deprived of its right to participate in the taking of evidence or in discovery proceedings, or when a party has been denied the opportunity to comment on an expert’s report. Relevant case- law here includes Generica Limited v Pharmaceuticals Basics (7th Cir, 1997) or Parsons and Whittemore Overseas (2d Cir, 1974). Finally, it should be noted that unless a party has actually raised its objection before the tribunal promptly, there is always a risk that the party is estopped from raising a due process objection at the enforcement proceedings.

12.In what circumstance do parties have the right to demand an oral hearing?

Arbitral tribunals have a wide discretion to conduct the arbitration proceedings as they see fit, subject only to the parties’ agreement. See for example s.34 of the English Arbitration Act 1996 (‘It shall be for the tribunal to decide all procedural and evidential matters’) or Art.18(2) of the Model Law (‘… the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate’).

One important procedural issue is whether an oral hearing on the merits will be held. In cases where the parties fail to agree that an oral hearing on the merits is necessary, it will be for the tribunal to decide on this matter. Thus, even when one party demands an oral hearing the tribunal may, in theory, decide that it would be more cost-efficient to conduct the arbitration on the basis of documents only. Of course, in practice tribunals will be hesitant to disregard the request of a party for an oral hearing – otherwise a party may challenge the award or resist its enforcement on the ground that its right to be heard has been undermined. In common law jurisdictions in particular, oral hearing on the merits allowing for extensive cross-examination is traditionally considered an important element of due process.

13.What is the process for the production of documents in the IBA Rules on the Taking of Evidence?

it should be noted that arbitration laws and rules accord tribunals wide discretion to conduct the proceedings as long as the sacrosanct principle of due process (i.e. the right of the parties to be heard and the principle of equal treatment of the parties) is not violated.

Turning to the issue of production of documents, and in cases where one of the parties refuses to provide documents that are considered crucial for the determination of the dispute, the IBA Rules on the Taking of Evidence, although non-binding, are quite popular with international tribunals and usually provide solutions within the general expectations of international parties. Article 3 of the IBA Rules provides useful guidance as to how arbitrators may order the production of a document. IBA Rules, Art.3 establish the conditions for the production of a document are that:

·the document is relevant to the case and material to its outcome the requested document is not in the possession of a third party

·the request for production is specific enough and refers to a narrow class of documents.

Of course, documents excluded from production are those that are protected by legal privilege or confidentiality (see for example EAA, s.43(4)). Now, if a party – despite a tribunal’s order for production – refuses to comply, tribunals may either draw adverse inferences or request national courts to enforce the order for production of documents.

14.How is evidence of fact usually introduced in international arbitration?

Although the parties are free to agree how to introduce evidence in international arbitration, the typical way that evidence of fact is introduced in international arbitration is in the form of a written witness statement.

The 2012 QMUL/W&C Empirical Survey on the Process of Arbitration confirmed this by finding that in a significant majority of arbitrations (87 per cent), fact witness evidence is offered by exchange of written witness statements – together with either direct examination at the hearing (48 per cent) or limited or no direct examination at the hearing (39 per cent). In contrast, fact witness evidence is offered solely by oral testimony in only 13 per cent of arbitrations. The presentation of fact witness evidence by oral testimony only is more common in civil lawyers’ arbitrations (21 per cent) than in common lawyers’ arbitrations (6 per cent).

Article 4 of the IBA Rules on the Taking of Evidence gives guidelines on a number of issues concerning evidence of fact, such as which persons may or may not provide evidence of fact, whether the witnesses should also appear before the tribunal, etc.

15.Is there an independent and autonomous international arbitration process? What are the effect and character of institutional and ad hoc arbitration rules, instruments such as the IBA Guidelines on Conflict of Interest for Arbitrators, the IBA Rules on the Taking of Evidence, and the IBA/ABA Ethics for Arbitrators? To what extent do and can these (and other) instruments override the procedural and practice rules that may be found in national law?

This is an essay type of question, and indeed an open-ended one. There are many ways to approach this question, which is basically on the autonomous standing of arbitration. Whether one agrees on the independent and autonomous nature of international arbitration process depends on whether one considers arbitration autonomous of the constraints of national laws. But does arbitration qualify as an autonomous legal system, namely a system that is capable of producing binding rules even at a procedural level? Many scholars have argued to that effect, including Julian Lew (in his article ‘Achieving the Dream: Autonomous Arbitration’) and Stavros Brekoulakis (in his article ‘International Arbitration Scholarship and the Concept of Arbitration Law’); but this view is contested. In reality, the arbitration process will very often be independent of national law procedures: arbitrators will only need to apply the institutional rules, such as ICC rules or LCIA rules, and best practice, such as the IBA rules on the Taking of Evidence.

Only in exceptional circumstances will arbitrators or the parties need to resort to national arbitration law, for example to obtain interim relief in case the tribunal is not in a position to offer such relief. Of course, whatever the rules applicable by the tribunal, arbitrators should always observe the general principle of procedural public policy, namely to treat both parties equally, and afford them sufficient opportunities to present their case.

16.What is the role of ‘terms of reference’ under the ICC Arbitration Rules? How do Terms of Reference differ from procedural timetables? In your view, are ‘terms of reference’ a help or a hindrance for the arbitration procedure?

Terms of reference (ToR) are a special characteristic of an arbitration conducted in accordance with ICC rules: see ICC Article 18. Some other institutions have followed ICC rules providing also for Terms of References (see for example CEPANI or JCAA).

Terms of Reference determine the agenda of the arbitration: they contain a summary of the parties’ respective claims and of the relief sought by each party with an indication to the extent possible of the amounts claimed or counterclaimed (see ICC Article 23.1(c)). ToR also provide for a list of issues to be determined by the tribunal. It follows that unlike procedural timetables that refer only to procedure and hearings, ToR define the contours of the discussion on the merits. As Article 23(4) provides, after the terms of reference have been signed or approved by the Court no party shall make new claims or counterclaims, which fall outside the limits of the ToR. According to my point of view, the ToR are beneficial for the arbitration procedure, as certain matters are settled and the procedure may follow their guidelines.

A possible advantage of the ToR is, for example, that they clearly set out a framework for an arbitration, which enhances predictability and effectiveness, clears up the tribunals role, improves parties’ understanding of the subject matter and the procedure of the proceedings.

A possible disadvantage is that they may be a source of disagreement between the parties and, therefore they may result in unnecessary delay. It is also possible that ToR unnecessarily restrict the subject matter of the dispute, as they are drawn at a very early stage of the proceedings where neither the parties nor the arbitrators may have the whole picture of the dispute.

17.‘The seat of arbitration is no longer of major significance.’ Do you agree with this  statement? If not, explain why not with reference to relevant laws and arbitration  rules.  

18.How should an international tribunal decide how to take evidence in an international arbitration? Is it for the parties or can the Tribunal seek evidence, expert advice and documents of its own volition?

There are considerable differences between common and civil law prcedures in relation to the takin of evidence:

·Civil law countries: it is traditional that a tribunal will take the initiative in directing the ascertainent of facts and the law, including the examination of witnesses

·Common law countries: the principle is that the parties arrive a the truth by each leading the evidence and each testing the evidence ked by the other through cross-examination of the relevant witnesses.

Often a mixture of both traditions is used in international commercial arbitration.

A formal attempt to reconcuke differences bewtween common and civil law approaches and to develo pan internationally aceptable standard was made in the IBA Rules of Evidence. They provide a mechanism for the presentation of documents, witnesses of fact, expert witnesses and inspecons, as well as for the conduct of evidentiary hearings.

19.What is meant by the phrase ‘the party against whom the award is invoked was…unable to present his case’ in Article V(1)(b) of the New York Convention? Does the meaning of this provision differ from the provision of Article18 of the UNCITRAL Model Law pursuant to which ‘The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case’ and the provision of section 33 of the 1996 Arbitration Act pursuant to which the tribunal has a duty to ‘act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent’?

In modern arbitration laws, it is essential to guarantee that the parties have the opportunity to present their case and answer the case against them. This is generally known as due process. This is refferred in article V(1) of the NY Convention, and confirmed by article 27(1) of the UNCITRAL Rules: ‘Each party will have the burden of proving the facts relied on to support its claim or defence.’ The same meaning is given in Model Law.

The scope of the due process is discussed in Internatinal Association of Heat v Pipe Covering, in which the union’s business agent here notified defendants some ten days before the hearing that the union had decided to press its claims before the Trade Board. By their own admission, defendants received notice of the time and place of the meeting at least “one to three days” beforehand. Defendant’s Memorandum in Support of Motion to Vacate Trade Board Award at 4. The head of the Contractors Association, who was also a Trade Board member, went so far as to call Donna Dingley the morning of the hearing to remind her of it. She simply declined to attend.

This case establishes that due process, however, only requires the arbitrator to give a party notice of the hearing and an opportunity to be heard.

20.How has the UNCITRAL Model Law influenced the development of international arbitration practice?

a.Discuss this question with reference to relevant national laws and arbitration rules.

Not all countries implemented the UNCITRAL Model Law in its entirety – EAA (UK) has some specifics, which makes it unique in international arbitration (s.69 for example). Generally speaking, UNCITRAL Model Law increased the acceptance of international arbitration and, together with the New York Convention, assisted its current success. Importantly, therefore, UNCITRAL Model Law plays an indirect, harmonising role in international arbitration, bringing national laws – which govern the role of national courts in arbitration, either by way of assistance or enforcement – closer together.

Unlike the New York Convention, however, UNCITRAL Model Law cannot be called an international minimum standard. It establishes a legal framework supporting arbitration in an increasing number of States (97 jurisdictions and 67 States) and was amended in 2006.  

b.What are the implications for parties that fail to include a specific seat in their arbitration agreement?

Agreement on seat of arbitration is best practice and an important feature of an arbitration agreement. However, if not agreed between the parties, it will be determined either by the arbitral tribunal or the national courts (for example, under EAA, if the arbitration agreement is in writing (ss.5– 6), s.3 applies).

If parties have chosen arbitration rules, these will govern the choice of the seat (see Article 16.2 of LCIA and Article 14 of ICC). Better answers will also note the consequences if the choice of the seat is left to uncertainty (e.g. court assistance, enforcement) and that in some circumstances EAA can be of assistance, even if the seat is not in the UK (ss.9–11, 66, 43 and 44).  

21.Can a party to a dispute, where the underlying contract contains an arbitration agreement, apply to a national court for interim relief? Is there a difference when the arbitration has begun and the Tribunal has been appointed?

During the course of an arbitration it may be necessary for the arbitral tribunal or a national court to issue orders intended to preserve evidence, assets or any other economic interest, pending the outcome of the arbitration.

Generally, the power to order interim relief depends on the authority of the tribunal agreed by the parties. This may be done: (i) expressly in the arbitration agreement or (ii) by the choice of the arbitraton rules which allow arbitrators to such order.

UNCITRAL Model Law, Article 17(2)(a)(b) and (c): Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.

An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:

·Maintain or restore the status quo pending determination of the dispute;

·Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;

·Provide a means of preserving assets out of which a subsequent award may be satisfied; or

·reserve evidence that may be relevant and material to the resolu- tion of the dispute.

Other arbitration rules contain a general empowerment with special rules for certain issues. This is the case of article 26 of the UNCITRAL Rules, whcih provides that “the arbitral tribunal may take the interim measures it deems necessary in respect of the subject matter of the dispute. In similar terms article 28 of the ICC Rules permits the taking by the tribunal of interim measures.

The requirements for the application of interim measures are: (i) that the measure is requested by a party; (ii) that the tribunal has jurisdiction and (iii) that the tribunal hears both parties.

Nonetheless, there are several cases where the provisional measures are ordered by the court in support of arbitration, which is the case that the tribunal has not been yet composed. This is not incompatibe with the arbitration agreement, or regarded as a submission to the national courts (article VI(4) European Convention; article 9 Model Law).

22.To what extent can arbitrators grant interim relief in an international arbitration? What are the limitations of such interim relief?

PREVIOUS QUESTION.

According to Ali Yesilirmak, the type of provisional measures are:

(1) measures for preservation of evidence (2) injunctions (3) security for payment (4) security for costs (5) provisional payment.

23.To what extent can (and should) arbitrators order discovery or production of documents in an international commercial arbitration? In your answer consider leading arbitral rules, laws and soft law.

Document production often faces difficulties, when documents are not produced voluntarily. In particular, when parties come from different legal backgrounds production of documents at the request of the arbitral tribunal can be complicated.

For example, common law lawyers are used to the discovery stage, while civil law lawyers may believe that it is malpractice to disclose documents to the opposing party.

The IBA Rules on Taking Evidence in International Arbitration, where there are a body of useful soft-law provisions that internationalise the document production culture and blend civil and common law approaches. The IBA offers – both to the parties and to the arbitral tribunals – useful steps on how to request all the documents relevant to the disputed issues.

EXAMS MODULE C

1.What is multiparty arbitration? What are the advantages and the possible risks of having multiparty arbitration proceedings? When should arbitrators agree to join cases in each of the following scenarios:

a.A dispute arises out of a single contract involving several parties;  

b.Adispute arises out of a web of several interrelated contracts involving several parties.  

While the traditional paradigm of arbitration was bi-party (i.e. one claimant and one respondent), complex multiparty business transactions often result in disputes that affect several parties, which of course raises the question of whether several parties may appear before a single arbitral tribunal.

Advantages of multi-party arbitration include preservation of procedural resources, time, evidence, and avoidance of the risk of irreconcilable or even conflicting awards.

Risks, on the other hand, are associated with the violation of consent (as discussed below) and confidentiality.

The question of multi-party arbitration is directly related to consent. As is generally accepted in arbitration theory and practice, several parties can appear before a single tribunal if arbitrators are satisfied that they have all manifested their consent to arbitration proceedings. It is important to explore different aspects of consent:

1.consent through a single arbitration agreement,

2.or consent through several interrelated arbitration agreements with similar terms;

3.consent through arbitration laws (e.g. EAA s.35, or Netherlands Articles 1045 and 1046),

4.or institutional rules (e.g. LCIA Article 22(h) or Swiss Rules Article 4);

5.or consent through legal doctrines, such as the group of companies doctrine and the famous Dow Chemical Award.

This discussion of consent should also inform the answer regarding when arbitrators should agree to join cases. Where there is a single contract involving several parties, consent should be easier to ascertain, especially if the several parties have also signed a single arbitration clause. While there have been some cases where tribunals have not allowed signatory parties to join proceedings that have already commenced, it is now generally accepted that all parties that have signed a single arbitration agreement should be allowed to intervene or join multi-party proceedings.

But where there is a web of interrelated contracts, consent seems more problematic. Again the various techniques of consent (see above) should be relied upon by arbitrators to satisfy them that all parties that want to be joined in multi-party proceedings have actually consented to arbitration. Otherwise, the award runs the risk of not being enforced or being annulled.

2.Electrica, an American company, and Viviena, a French company enter into an exclusive distribution agreement, containing a clause that provides for arbitration in London under the LCIA Rules. Two years later, Viviena starts having financial difficulties and stops paying royalties to Electrica, which commences arbitration proceedings in London. After the file of the arbitration is transferred to the tribunal, Viviena is declared bankrupt in France and a bankruptcy administrator is appointed there. The bankruptcy administrator writes to the arbitral tribunal, requesting the discontinuation of the arbitration proceedings in London. The bankruptcy administrator relies upon the French Bankruptcy law which reads:  “Any arbitration clause concluded by the bankrupt shall lose its legal effect as of the date bankruptcy is declared and any pending arbitration proceedings shall be discontinued.”  

a.Should the tribunal continue the proceedings or not? Which law should the tribunal apply to determine this matter?  

The question here relates to the arbitrability of insolvency disputes, as Viviena is declared insolvent after the arbitration commences.

The arbitrability of disputes with an insolvent party has been an issue in a number of cases in various countries. In this respect we have to distinguish between the ‘pure’ bankruptcy issues, such as the appointment of an administrator or opening of proceedings and other issues.  It is beyond doubt that the ‘pure’ bankruptcy issues are generally not arbitrable. Their purpose is not so much the settlement of disputes between the parties as establishing proceedings for the collective execution or reorganisation of the debtor. In this cases, the arbitration agreement would not be valid and the national courts would have jurisdiction to determine this issue.

Most cases, however, are not concerned with such ‘pure’ bankruptcy issues but with standard monetary claims against or by an insolvent party. In these cases the question arises whether disputes which are clearly arbitrable as such lose their arbitrability due to the insolvency of one party. 

The lex arbitri comprises the rules of the designated institution, here the LCIA, and the rules of the national arbitration law of the seat, here the English Arbitration Act 1996 as the seat of the arbitration is in London. The question that arises is whether the issue of arbitrability of the insolvency dispute should be determined exclusively by the laws of England (which is part of the lex arbitri) or whether the law of incorporation of Viviena, here the law of France, should have any effect on the determination of arbitrability.

Section 349A of the EAA establishes that he arbitration agreement is enforceable by or against the insolvency party in relation to matters arising from or connected with the contract. The English Arbitration Act 1996 (EEA) applies as the law of the seat.

Nonetheless, interpretation of the EC Council Regulation on Insolvency Proceedings, since the arbitration was seated in a EU Member State. Article 4 of the Regulation provides that the law applicable to the insolvency proceedings, the lex concursus, should be applied to determine the effects of insolvency proceedings on current contracts to which the debtor is a party and the effect on proceedings brought by individual creditors – with the exception of lawsuits pending. Article 15 of the Regulation states: “The effects of insolvency proceedings on a lawsuit pending concerning an asset or a right of which the debtor has been divested shall be governed solely by the law of the Member State in which the lawsuit is pending”.

Additionally, it is important to take into account that, within the French legislation, the arbitration tribunal shall declare its incompetence in case an insolvency procesure arises. This is a mandatory rule that shall be taken into account in the arbitration. Mandatory rules or lois de police limit the parties’ choice and must be applied to certain situations. What mandatory law should international arbitrators apply? This could be:

·The law of the place of arbitration or the place where the contract was to be performed

·or the law of the place of enforcement.  

in this case, the mandatory rule shall be applied as the law of the place of enforcement, and the arbitration tribunal shall not continue with the arbitration.

b.If the tribunal decides to proceed with the determination of the dispute, and issue an award what are the legal options available to Viviena in England (place of the arbitration) and in France (potential place of enforcement of the award)?

It is generally acknowledged that national legislators are free to define the arbitrability of a dispute in accordance with their own public policy considerations. This freedom is, for example, reflected in arts II and V(2)(a) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NYC). Article II obliges contracting states to recognise and enforce only written arbitration agreements which concern a “subject matter capable of settlement by arbitration”. Article V(2)(a) provides that the recognition and enforcement of an award may be refused if “the subject matter of the difference is not capable of settlement by arbitration under the law of that country”.

3.Breko, a company registered in Italy, and Kofi, a company registered in Switzerland, conclude an exclusive distribution agreement containing an arbitration clause providing for ICC arbitration in London. After a dispute arises out of the distribution agreement, Breko commences court proceedings against Kofi in Italy. Kofi appears before Italian courts requesting them to decline jurisdiction over the dispute relying on the arbitration clause contained in the distribution agreement. At the same time Kofi commences arbitration proceedings in London. Breko submits at the Italian court that the arbitration clause is invalid and therefore requests the Italian courts to disregard the arbitration clause and proceed with the determination of the merits of the dispute.

a.Can Italian courts review the validity of the arbitration agreement in order to determine whether they have jurisdiction over the dispute or should they wait until the tribunal decides on that matter first?  

b.Does the tribunal in London have jurisdiction according to the ICC Rules to review the validity of the arbitration agreement?  

c.In case the tribunal finds that the arbitration agreement is valid, should it proceed with the determination of the merits of the dispute or should it wait until the Italian courts determine whether the arbitration agreement is valid or not?  

d.Would your answer under (a) change if it was French courts rather than Italian courts?  

This is a problem-type question relating to the allocation of jurisdiction between national courts and tribunals to review and determine the existence and validity of an arbitration agreement. The facts of the problem strongly resemble the well-known West Tankers case:

a.Whether Italian courts can review the validity of the arbitration clause before the tribunal in London has decided on the same matter is an issue that depends on the Italian national law and the New York Convention (Italy is a signatory to the NYC). Italian law and the New York Convention Article II(3) provide that the court will refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. Such a provision thus allows national courts to perform a full review of the validity of the arbitration agreement, without any limitations as to the time that this review should be performed. Italian courts therefore do not have to wait for the decision of the tribunal in London – they can fully look into and determine the arbitration clause. The same happened in the West Tankers case.  

b.Yes. It is well-established that tribunals have the authority to determine the validity. of the arbitration clause by reference to the doctrine of Kompetenz-Kompetenz.

The kompetenz-kompetenz doctrine is a jurisprudential doctrine which establishes that, whereby the tribunal has jurisdiction to rule as to the extent of its own competenceon an issue before it.

This is expressly provided in both the old and the 2012 ICC rules (see Article 6).  

c.Yes. There is no reason why a tribunal should wait until the national courts of a state other than the seat decide on whether the arbitration clause is valid or not. If the tribunal decides that the arbitration clause is valid, then the tribunal is the exclusive forum to determine the dispute.  

d.Here, the answer would change. This is because French law (both the previous law and the new one introduced in 2011) provides for the so-called negative competence-competence, which prevents national courts from looking into the validity of the arbitration clause. This is especially the case when the tribunal has been constituted, but also applies before the tribunal has been constituted unless the arbitration clause is manifestly null and void (a provision which French national courts have construed in very wide terms) – see French Code of Civil Procedure Article 1448.

4.Answer ALL the following questions:

a.Can arbitrators order interim measures of protection?  

The starting point here is to note that it is generally accepted nowadays that arbitrators have the power to grant interim measures. However, there are cases where due to the character of arbitration, tribunals are not in a position to grant interim relief. This would depend on the following factors. First, the time that the interim measure is requested. If interim relief is requested before the tribunal is constituted, only national courts will have jurisdiction to grant interim relief. Second, the type of interim measure requested. Arbitrators have no power to grant interim relief involving a third party to arbitration. Therefore, if a freezing order against the bank account of one of the parties is requested, this will necessarily involve a third party (i.e. the bank), and thus the tribunal will have no jurisdiction to grant such an order. Third, the applicable arbitration rules and national laws.

There are some examples from various arbitration laws and institutional rules and laws. EAA 1996, s.44(5) provides that national courts shall act only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively. Under ICC rules, arbitrators will have a wide discretion to grant interim measures and will have priority over national courts. ICC Article 28(1) gives arbitrators the power to grant interim measures, whereas Article 28(2) provides that only in ‘appropriate circumstances’ may the parties apply to national courts to obtain interim relief after the commencement of the arbitration.

For ICC rules, the new Article 29 providing for an Emergency Arbitrator, who would allow the parties to obtain interim relief even before the tribunal is constituted.

b.In what circumstances should such order for interim measures be made or  refused?  

The two main conditions that arbitrators should examine before granting or refusing a request for interim relief are urgency and irreparable harm.

The party requesting the interim measure should thus prove that the request is urgent and that save for obtaining interim relief that party is faced with the risk of suffering irreparable harm. You should also refer to whether a prima facie contractual right (a good arguable case) is required for the arbitrators to grant interim relief (note here Model Law Article 17A requiring that the tribunal must be satisfied that there is a ‘reasonable possibility that the requesting party will succeed on the merits of the claim’). Of course, arbitrators must not pre- empt the final determination of the case by granting the interim measure.  

c.What are the problems of enforcing such orders for interim measures?  

There is an issue related to the enforceability of the arbitral decisions on interim awards. The main problem here is that tribunals have no coercive powers to impose their decision; they can only draw adverse inferences in case a party does not voluntarily enforce the interim award (see for example, EAA s.41(7)). Also, interim awards cannot bind third parties to the arbitration proceedings, due to the consensual, thus relative, power of an arbitral tribunal, limited only to those parties that have signed an arbitration agreement. It is arguable whether the New York Convention may apply to interim awards: whereas the Australian Courts in Bolwell v Resort Condominiums case rejected the application of the New York Convention to enforce an interim award in Australia, the US Courts in Publicis v True North (7th Cir. US) answered this question in the affirmative.

It shall be taken into account the latest developments in the Model Law: the revised Article 17 on interim measures expressly provides that interim measures granted by tribunals will have to be enforced by national courts.  The procedure to grant an interim measure requires first that the tribunal has general jurisdiction over the dispute and the parties, second, that there is a specific request to the tribunal, third, that both parties are heard before the grant of interim relief (although see new Model law Article 17 which allows ex parte interim relief).

The interim measure can be granted either in the form of an award or in the form of a procedural order. The form of the interim relief may affect the enforceability of the measure. Procedural orders are not enforceable as they don’t fall under the New York Convention 1958. However, the enforceability of an interim relief will be determined by the national courts, and it does not depend on whether the arbitrators have labelled the relief as an order or an award.

In Bolwell v Resort Condominiums, for example, the Australian courts held that an interim measure was not enforceable despite the fact that the arbitrators had issued it in the form of an ‘award’.

d.Should arbitrators require a party to provide security for the other party’s costs?

Here you should here distinguish between an interim request for security of the claim, which is requested normally by the claimant and aims to ensure that there will be enough money to enforce the award at the end of the arbitration, and a request for security of legal costs, which is requested normally by the respondent, aiming to ensure that there is enough money to recover the legal expenses in case the claim is dismissed.

Now, security for costs requests – although well-known in common law countries – are controversial in arbitration and are rarely granted, even in cases where the tribunal has the power to grant them. This is because of their harsh consequences, which is that of dismissal of the claim in case the claimant fails to provide security. Further, most arbitration rules provide that the claimant has to pay a sum in advance of the arbitration, which should usually be adequate to prevents frivolous claims. Before the 1996 English Arbitration Act, in the House of Lords decision in Coppee Lavalin it was held that English courts could order security for costs in arbitration. This decision was criticised, and thus EAA 1996 s.38(3) expressly takes this power of the courts and places it with tribunals, which have exclusive power to grant security for costs – note also the LCIA which expressly allows tribunals to grant such a relief in Article 25.2.

5.Answer BOTH parts of this question:

a.Can a party to an arbitration apply to a national court for interim relief? Under which circumstances? Will the national court accept jurisdiction to grant interim relief to a party in an arbitration?

It is generally accepted nowadays that arbitrators have the power to grant interim measures. However, there are cases where due to the circumstances of the case, tribunals are not in a position to grant interim relief. This would depend on the following factors:

·the time that interim measure is requested. If interim relief is requested before the tribunal has been physically constituted, only national courts will have jurisdiction to grant it

·the type of interim measure requested. Arbitrators have no power to grant interim relief involving a third party to arbitration. Therefore, if a freezing order against the bank account of one of the parties is requested, this will necessarily involve a third party (i.e. the bank), and thus the tribunal will have no jurisdiction to grant such an order

·the applicable arbitration rules and national laws.

The English Arbitration Act 1996, s.44(5) provides that national courts shall act only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively. Under ICC Rules, arbitrators will have a wide discretion to grant interim measures and will have priority over national courts: ICC, Art.28(1) gives arbitrators the power to grant interim measures, whereas Art.28(2) provides that only in ‘appropriate circumstances’ may the parties apply to national courts to obtain interim relief after the commencement of the arbitration.

New Art.29 provides for an Emergency Arbitrator, who would allow the parties to obtain interim relief even before the tribunal is constituted. Similarly, UNCITRAL Arbitration Rules provide in Art.9 that ‘a request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement’, and LCIA Rules provide in Art.25.3 that:

The power of the Arbitral Tribunal under Article 25.1 shall not prejudice howsoever any party’s right to apply to any state court or other judicial authority for interim or conservatory measures before the formation of the Arbitral Tribunal and, in exceptional cases, thereafter. Any application and any order for such measures after the formation of the Arbitral Tribunal shall be promptly communicated by the applicant to the Arbitral Tribunal and all other parties.

b.To what extent can arbitrators grant interim relief in an international arbitration?

It is now generally accepted that arbitral tribunals have the power to grant measures of interim relief under certain circumstances. The two main conditions that arbitrators should examine before granting or refusing a request for interim relief are urgency and irreparable harm. The party requesting the interim measure should thus prove that the request is urgent and that save for obtaining interim relief that party is faced with the risk of suffering irreparable harm.

Whether a prima facie contractual right (good arguable case) is required for the arbitrators to grant interim relief (see for example Model Law, Art.17A requiring that the tribunal must be satisfied that there is a ‘reasonable possibility that the requesting party will succeed on the merits of the claim’).

Of course, arbitrators must not preempt the final determination of the case by granting the interim measure. However, the power of arbitral tribunals is limited in certain ways. The main problem here is that tribunals have no coercive powers to impose any interim decision; they can only draw adverse inferences in cases where a party does not voluntarily enforce the interim award (see for example EAA, s.41(7)). Also, interim awards cannot bind third parties to the arbitration proceedings, due to the consensual – and thus relative – power of an arbitral tribunal, which is limited only to those parties that have signed an arbitration agreement.

It is arguable whether the New York Convention may apply to interim awards: whereas the Australian Courts in the Bolwell v Resort Condominiums case rejected the application of the New York Convention to enforce an interim award in Australia, the US Courts in Publicis v True North answered this question in the affirmative.

Developments in the Model Law: the revised Art.17 on interim measures expressly provides that interim measures granted by tribunals will have to be enforced by national courts.

6.In January 2012, Drown Ste, a French parent company of a multinational group, entered into a Memorandum of Understanding (MoU) with Sunny Ltd, an English company, after three months of intense negotiations. The MoU provided that in six months Drown Ltd, an English subsidiary of Drown Ste, and Sunny Ltd would enter into a contract of sale and purchase for 1,000 tonnes of virgin olive oil, which Sunny Ltd would then distribute to supermarkets in London. Indeed, in June 2012, Sunny Ltd and Drown Ltd signed the sale and purchase agreement, according to which Drown Ltd would deliver to Sunny Ltd 500 tonnes of virgin olive oil in September 2012 and 500 tonnes in December 2012.  

The agreement included an arbitration clause providing that any dispute arising out of the sale and purchase agreement would be resolved by a three-member arbitral tribunal in accordance with the 2012 ICC Arbitration Rules. Drown Ste signed neither the sale and purchase agreement nor the arbitration clause therein. However, Drown Ste insisted that the arbitration clause should provide that the seat of the arbitration would be in Paris. Sunny Ltd reluctantly agreed, only after Drown Ste had agreed to sign a separate contract, guaranteeing the performance of its subsidiary vis-à-vis Sunny Ltd. The guarantee contract between Sunny Ltd and Drown Ste contained no dispute resolution clause.

In August 2012, hit by the financial crisis in Europe, the Drown group of companies decided to undergo an extensive restructuring, with a number of its subsidiaries, including Drown Ltd, filing for bankruptcy. After this unfortunate development, Sunny Ltd repudiated the sale and purchase contract with Drown Ltd. Sunny Ltd is considering commencing an ICC arbitration in Paris against Drown Ltd but is concerned that even if it wins the arbitration, it will not be able to recover the award, given that Drown Ltd is in a state of bankruptcy.

Can Sunny Ltd successfully join Drown Ste in the ICC arbitration against Drown Ltd?

This is a question on non-signatory parties, which very frequently arises in arbitration practice. Indeed, while only parties that have signed an arbitration clause can appear before an arbitral tribunal, either as claimants or as respondents (signatory parties), on some occasions a party may bring a claim against a non-signatory party on the basis that it is closely connected with one of the signatory parties, for example, an affiliate or a parent company.

There is a number of well-known arbitration cases that have dealt with non-signatory parties. In Dow Chemical, for example, one of the most celebrated arbitration cases, an arbitral tribunal held that a non-signatory parent company and another non-signatory affiliate were bound by the arbitration clause signed by two other members of the same group on the basis that all companies were part of the same group, and that the non-signatories actively participated in the negotiation, performance and termination of the substantive contract containing an arbitration clause. Other well-known cases are, for example, Peterson Farms and Dallah, which have taken a different approach, refusing to uphold arbitration claims against non-signatories.

On the one hand, it is arguable that Drown Ste can be joined although it is a non-signatory, on the basis that it is the parent company of a signatory and on the basis that it had an active role in the negotiation (it signed a MoU) and performance of the main contract (see Dow Chemical).

Articles 7–11 of the 2012 ICC Rules could also allow for such a joinder. Article 7 establishes that a party that wants to join an arbitration procedure, hall submit its request for arbitration against the additional party (the “Request for Joinder”) to the Secretariat.

On the other hand, it is also arguable that absent clear evidence that Drown Ste has consented to arbitration, it cannot be joined in arbitration proceedings, notwithstanding its active involvement in the performance of the main contract (see here Dallah and Peterson Farms).

7.Answer both questions:

a.‘One of the most important advantages of arbitration for the claimant is the opportunity for obtaining provisional relief from the arbitrator; however, one of the problems with arbitration is that there can be no provisional measures until the arbitral tribunal has been appointed.’

Critically discuss this statement, supporting your answer by reference to all relevant primary legal sources and academic literature.

This is a typical question on interim measures and the power of the tribunal to provide such measures. The starting point here is to note that it is generally accepted nowadays that arbitrators have the power to grant interim measures. However, the issue is whether tribunals are in the best possible position to grant such relief, or whether the parties should obtain interim relief from national courts instead. The answer to this question would depend on the following factors:

1.The time that interim measure is requested. If interim relief is requested before the tribunal is constituted, only national courts will have jurisdiction to grant interim relief.

2.The type of interim measure requested. Arbitrators have no power to grant interim relief involving a third party to arbitration. Therefore, if a freezing order against the bank account of one of the parties is requested, this will necessarily involve a third party (i.e. the bank), and thus the tribunal will have no jurisdiction to grant such an order.

3.The applicable arbitration rules and national laws. For example, EAA 1996, s.44(5) gives priority to the arbitral tribunal over national courts. It provides that national courts shall act only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively. Under the Model Law, national courts and arbitral tribunals have concurrent jurisdiction. Article 9 gives no priority to either national courts or arbitral tribunals, providing only that it is not incompatible with an arbitration agreement for a party to request from a court, before or during the arbitral proceedings, an interim measure of protection and for a court to grant such measure. Under ICC rules, arbitrators will have a wide discretion to grant interim measures and will have priority over national courts. ICC Article 28(1) gives arbitrators the power to grant interim measures, whereas Article 28(2) provides that only in ‘appropriate circumstances’ may the parties apply to national courts to obtain interim relief after the commencement of the arbitration. Similarly, LCIA rules give priority to the tribunal over national courts after arbitral proceedings have commenced. Article 25(3) in particular provides that only in ‘exceptional cases’ may the parties apply to national courts to obtain interim relief after the formation of the arbitral tribunal.

b.How do you assess the system of ‘emergency arbitrator’ now developed under the ICC Rules, the Stockholm Chamber of Commerce Arbitration Institute and Rules and the AAA Arbitration Rules?

The fact that tribunals were not in a position to grant interim relief before they were constituted was thought to compromise arbitration’s efficiency. Therefore, a number of institutions, including the Stockholm Chamber of Commerce, American Arbitration Association and of course the ICC, have now introduced the mechanism of emergency arbitrator. Accordingly, when a party to an arbitration clause is in need of emergency interim relief, before the tribunal is yet constituted it can apply to the institution, which will appoint one person to act as the emergency arbitrator and provide interim relief. His authority of course is limited only to the issuing of interim relief; after that, an emergency arbitrator will step down and the main dispute will be reviewed and decided by an arbitral tribunal that will be constituted pursuant to the applicable provisions of the relevant institution.

The ICC Rules, Article 29 lays down the procedure for the appointment of the emergency arbitrator and its main functions. It establishes that a party that needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal (“Emergency Measures”) may make an application for such measures. Any such application shall be accepted only if it is received by the Secretariat prior to the transmission of the file to the arbitral tribunal and irrespective of whether the party making the application has already submitted its Request for Arbitration.
The emergency arbitrator’s decision shall take the form of an order. The parties undertake to comply with any order made by the emergency arbitrator. The emergency arbitrator’s order shall not bind the arbitral tribunal with respect to any question, issue or dispute determined in the order. The arbitral tribunal may modify, terminate or annul the order or any modification thereto made by the emergency arbitrator.

8.Interim or conservatory measures, also referred to as provisional measures, are an important remedy and tool in international arbitration.

a.Discuss this statement with reference to relevant laws, rules and cases.

During the course of an arbitration, it may be necessary for the arbitral tribunal or national court to issue orders intended to preserve evidence, assets or any other economic interest pending the outcome of the arbitration.

UNCITRAL Model Law, Article 17(2)(a)(b) and (c): Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.

·Maintain or restore the status quo pending determination of the dispute;

·Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;

·Provide a means of preserving assets out of which a subsequent award may be satisfied; or

·reserve evidence that may be relevant and material to the resolution of the dispute.

Other arbitration rules contain a general empowerment with special rules for certain issues. This is the case of article 26 of the UNCITRAL Rules, which provides that “the arbitral tribunal may take the interim measures it deems necessary in respect of the subject matter of the dispute. In similar terms article 28 of the ICC Rules permits the taking by the tribunal of interim measures.

The requirements for the application of interim measures are: (i) that the measure is requested by a party; (ii) that the tribunal has jurisdiction and (iii) that the tribunal hears both parties.

Nonetheless, there are several cases where the provisional measures are ordered by the court in support of arbitration, which is the case that the tribunal has not been yet composed. This is not incompatible with the arbitration agreement, or regarded as a submission to the national courts (article VI(4) European Convention; article 9 Model Law).

b.Explain why the principle of competence-competence is so central to the efficacy of the international arbitration process. Illustrate your answer with

The principle of competence-competence, which is a legal fiction that supports the ability of the arbitrator to decide upon its own jurisdiction.

Candidates can refer to major arbitration rules (e.g. UNCITRAL Rules Article 23(1) and ICC Article 6(9)) and laws (Swiss PIL, Ch.12, s.178(3); Brazilian Arbitration Law, s.8; and English Arbitration Act 1996, ss.7 and 30) to identify this principle.

9.Answer both of the following questions:

a.Is arbitration suitable for multiparty disputes?

Advantages of multi-party arbitration include preservation of procedural resources, time, evidence, and avoidance of the risk of irreconcilable or even conflicting awards.

Risks, on the other hand, are associated with the violation of consent (as discussed below) and confidentiality.

Multiparty arbitration has considerable problems. In particular, it is essential that the parties have consented to this type of arbitration and that they are treated equally. This imply a problem in the appointment of the arbitrators (the right to appoint one arbitrator by each party, and the right to appoint an equal number of arbitrators).

1.consent through a single arbitration agreement,

2.or consent through several interrelated arbitration agreements with similar terms;

3.consent through arbitration laws (e.g. EAA s.35, or Netherlands Articles 1045 and 1046),

4.or institutional rules (e.g. LCIA Article 22(h) or Swiss Rules Article 4);

5.or consent through legal doctrines, such as the group of companies doctrine and the famous Dow Chemical Award.

10.What are the legal theories available to a tribunal to assume jurisdiction over a party that has not signed an arbitration clause but is actively involved in the performance of the underlying contract?

In arbitration only those who are parties to the arbitration agreement expressed in writing can appear in the arbitral proceedings, either as claimants or as defendants.

This rule is essential to the party-autonomy concept of arbitration, and it is recognised internationally by virtue of Article II of the New York Convention (Hanotiau, 2006).

Arbitration doctrine and practice has attempted to respond to these challenges developing a wide range of theories and legal constructs to address issues of no signatory parties. Thus, non-signatories have been allowed or compelled to arbitrate with signatories on the basis of estoppel, alter ego, apparent authority, transfer and assignment, and not least on the controversial group of companies’ doctrine. (Brekoulakis, 2016)

The legal theories available to a tribunal to assume jurisdiction over a party that has not signed an arbitration clause but is actively involved in the performance of the underlying contract:

·Representation or the existence of a principal-agent relationship.

·Theory of apparent mandate or ostensible authority as third- party beneficiaries, or assignees of the contract containing the arbitration clause.

·There are other national legal systems which have accepted the binding of persons other than signatories (in England, for example, estoppel or incorporation by reference of the arbitration clause in a subcontract).

·Conduct of a legal or natural person which is part of the commercial reality of the parties whom received a direct benefit from the commercial transaction, and therefore is bound by arbitration.

11.Answer both parts of this question:

a.Is the concept of arbitrability relevant ininternational arbitration today?  

Arbitrability is one of the issues where contractual and jurisdictional natures of international commercial arbitration meet head on. It involves the simple question of what types of issues can be submitted to arbitration. National laws often impose restrictions or limitations on what matters can be referred and resolved by arbitration, which restricts the party autonomy principle. This restriction is justifies to the extent that arbitrability is a manifestation of national and international policy. Consequently, arbitration agreements covering these maters will not be valid. (

That being said, although arbitrability is no longer an obstacle to certain disputes being decided in arbitration (i.e. developments in intellectual property disputes), there are still some matters which cannot be decided in arbitration (e.g. criminal matters). In some areas, state courts still have exclusive jurisdiction to solve disputes. The latter is also seen from enforcement provisions (see: Article V(2)(a) of the New York Convention and Article 34(2)(b)(i) of UNCITRAL Model Law).

b.Do you think there should be limitations imposed on the parties’ ability to arbitrate a particular dispute?  

Every national law determines which types of disputes are the exclusive domain of national courts and which can be referred to arbitration. This differs from state to state reflecting the political, social and economic prerogatives of the state, as well as its general attitude towards arbitration

From my point of view, and in order to maintain domestic importance of reserving certain matters for exclusive decision of courts, there are certain cases in which it would be advisable to keep the limitation (illegality, fraud, corruption, etc.). Arbitrability affects the validity of the arbitration agreement only in the scope of excluding the subject matter, which is reserved for state courts. If parties were to agree to entrust disputes, which are not arbitrable, to arbitration, such an agreement would not have effect to the exclusion of state courts (see: Article 2060 French Civil Procedure Code and s.9 EAA – stay of proceedings will not be granted).

12.What is the doctrine of Separability and why is it important in international arbitration? How does ‘Separability’ differ from Kompetenz-Kompetenz? Support your answer with reference to arbitration laws and rules.

Separability is found in all arbitration laws (s. 7 EAA, UNCITRAL ML Art. 16(1), also see US (Prima Paint (1967)) and it aims to support the existence, finality and independence of international arbitration. If the validity of an arbitration agreement were bound to the underlying contract, any termination or objection to the validity of the main contract would automatically invalidate the arbitration agreement, making it impossible for parties to arbitrate. Therefore, the principle of Separability ensures that international arbitration can proceed if there is a valid arbitration agreement (irrespective of doubts as to the validity of the main contract).

The legal nature of the principle of competence-competence (or Kompetenz-Kompetenz), is a legal fiction which supports the ability of the arbitrator to decide on its own jurisdiction. International tribunals which have used this principle (i.e. Article 36(6) Statute of the International Court of Justice (ICJ) allows the ICJ to rule on its own jurisdiction; European Convention Article V(3); and ICSID Convention Article 41(1)). For example, the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause (Model Law Article 16(1)). Another example is that, unless otherwise agreed, the arbitral tribunal shall not cease to have jurisdiction by reason of any claim that the contract is non-existent or null and void, provided that the arbitral tribunal upholds the validity of the arbitration agreement. The arbitral tribunal shall continue to have jurisdiction to determine the parties’ respective rights and to decide their claims and pleas even though the contract itself may be non-existent or null and void (Article 6(9) of the ICC Rules).

13.A tribunal is considering the scope of its jurisdiction and the following issues are presented for determination. Which of them may be referred to arbitration:

a.the underlying dispute seems to be influenced by a bribery involved in the procurement of the contract, although there is no evidence that the bribery was involved in the contract before the tribunal;

Traditionally, allegations to bribery in commercial transactions were not particularly suitable to be resolved by arbitration, and often these types of issues were outside the scope of an arbitral tribunal’s competence (i.e. ICC Award 1963 – Case 1110).

It is important to refer to the study of the notion of bribery in commercial disputes, such as in National Power Corp v Westinghouse where the jurisdiction of an arbitral tribunal was challenged due to allegations of bribery to obtain the turnkey contract to construct a nuclear power plant.

Another relevant case that candidates could mention is Westacre v Jugoimport, where despite the allegations of bribery, the arbitral tribunal accepted jurisdiction and issued an award on the merits. This award was later challenged in the UK courts where, under the principle of separability, the arbitral tribunal was able to uphold jurisdiction – and eventually the arbitral award was confirmed.

Lastly, it is also important to mention World Duty Free Company v Kenya where the arbitral tribunal retained jurisdiction, but once bribery was proved, the arbitral tribunal concluded that bribery was an issue against international (transnational) public policy and therefore the contract was void, and the dispute was dismissed by the investment tribunal.

b.the dispute arose between the two contracting parties but the claimant wishes to bring into the arbitration the parent company of the respondent which, although not a signatory to the contract and the arbitration agreement, was actively involved in the negotiations of the contract;

In arbitration only those who are parties to the arbitration agreement expressed in writing can appear in the arbitral proceedings, either as claimants or as defendants.

This rule is essential to the party-autonomy concept of arbitration, and it is recognised internationally by virtue of Article II of the New York Convention (Hanotiau, 2006).

The legal theories available to a tribunal to assume jurisdiction over a party that has not signed an arbitration clause but is actively involved in the performance of the underlying contract:

·Representation or the existence of a principal-agent relationship.

·Theory of apparent mandate or ostensible authority as third- party beneficiaries, or assignees of the contract containing the arbitration clause.

·Conduct of a legal or natural person which is part of the commercial reality of the parties whom received a direct benefit from the commercial transaction, and therefore is bound by arbitration.

c.the respondent party to the arbitration agreement seems to have become insolvent;

Disputes involving an insolvent party might vary according to the applicable law and the jurisdiction in question. For example, in Larsen Oil and Gas Pte Ltd v Petroprod the Court of Appeal set up different criteria in regard to the arbitrability of these types of disputes: when the dispute involving an insolvent company arises only upon the applicable insolvency law, then the dispute is non-arbitrable.

Pre-insolvency disputes are also non-arbitrable as this might affect the right of other creditors when the dispute only relates to a pre-insolvency (i.e. only issues of the contractual relationship between the parties) dispute in relation to private rights, only issues between the parties are arbitrable.

d.the respondent party is subject to UN and EU sanctions.

Economic sanctions are issues which directly come into play with the substantive law applicable to the arbitration proceedings. In the case of EU or UN sanctions, arbitral tribunals have often concluded that a state party cannot rely on their domestic laws to avoid the performance of a contract, and therefore often arbitral tribunals have found jurisdiction over this type of dispute.

A relevant case law in this sense is Fincantieri Navali Italiani Spa and Oto Melara Spa v Ministry of Defence, Armament and Supply Directorate of Iraq, Republic of Iraq, XXI YBCA 594 (1996). It determined that in cases where upon recognition of the “foreign” insolvency proceedings, the insolvency law of the country of the seat becomes applicable to the insolvent party, failure to comply with those laws could be sanctioned as a breach of a mandatory law or public policy by an annulment court.288 This should not be the case where the arbitral tribunal has failed to apply the “foreign” public policy (that is, where insolvency law provisions form part of the public policy of the country where the insolvency proceedings were filed, but not the country of the seat of arbitration).

14.Before which forum can the jurisdiction of an arbitral tribunal be challenged or determined? In your answer consider the UNCITRAL Model Law, French Law, English Law and Swiss Law. What are the time limits for such challenge?

According to UNCITRAL Model Law, grounds for refusing the recognition of an arbitral award applies irrespective of the country in which it was made (Articles 35 and 36). The grounds to apply for an award to be challenged are:

·incapacity of the parties

·invalidity of the arbitration agreement

·due process

·tribunal exceeding its mandate

·irregularity in the constitution of the arbitral tribunal (i.e. deviation from the procedure agreed upon the parties).

Article 36 of the UNCITRAL Model Law does not impose a time limit for such challenge.

Under the English Arbitration Act (EAA), s.103 applies to international arbitral awards. There is not, as such, a deadline for the challenge; however, the EAA, s.10 says that an award debtor then has 14 days (or longer if outside the jurisdiction) in which to challenge the order to pay the award.

Another example is the challenge of awards under Swiss Law. Here, the jurisdiction of the arbitral tribunal involving an economic interest is always arbitrable (PIL, Article 177). It is also important to mention that arbitral tribunals with their seat in Switzerland are called to rule upon their own jurisdiction, and that according to PIL, Article 190(2)(b) the Supreme Courts can review an arbitration agreement when there is an application to challenge the arbitration award (NYC, Article II). Under Swiss Law (PIL, Article 191) awards rendered by arbitral tribunals with their seat in Switzerland can be challenged (Federal Supreme Court Act, Article 44) in the Supreme Court and this should be filed within 30 days of notification of the award.

According to the French Civil Code (FCC), Article 1518 an award rendered in France may be subject to set aside. The deadline is one month from notification (FCC, Article 1519)

EXAMS MODULE D

1.What is meant by international public policy and what are its sources? How does it affect international commercial arbitration? Are there any differences in the approach of a national court and an international arbitration tribunal to international public policy applicable in international arbitration?  Illustrate your answer with reference to national laws and international instruments and decided cases.  

There are considerable differences between the approach taken by national courts and international arbitral tribunals to international public policy. In particular, tribunals will apply a more restricted notion of international public policy, the so-called transnational public policy or truly international public policy (ordre public international). Ordre public international applied by arbitrators has no references to national legislation, as arbitrators owe no allegiance to any national legal system.

When an award is reviewed by national courts in the context of annulment and enforcement proceedings, they will apply a wider notion of international public policy oriented to their domestic legislation. This is in line with New York Convention Article V2(b), which refers to the public policy of the law of the ‘enforcement court’. However, national courts will give a different meaning to public policy when the case at hand has international implications from when it is purely domestic. In the former case, the standards will be higher (domestic-domestic) in the latter, lower (international-domestic). Case law relevant to international public policy:

·Westacre Investments v Jugoimport [1999], English Court of Appeal, where an award enforcing a contract for illegal commission was considered not to violate the English notion of international public policy.  

·Soleimany v Soleimany [1993], English Court of Appeal, where an arbitral award enforcing a contract for smuggling carpets was considered to violate the English notion of international public policy.

2.Breko plc is a state-owned company based in Ruritania with branch offices in several countries around the world. Breko‟s CEO has just received an arbitration award after a long and bitter ICC arbitration procedure which took place in a Model Law jurisdiction. Breko‟s CEO is extremely disappointed with the result of the dispute, as the arbitral tribunal has ordered Breko plc to pay Kofi Co Ltd, a company incorporated and doing business in Utopia, the sum of US$ 5 million. Breko has no intention of paying up.  Assume that each of the following situations has arisen during the proceedings, and advise Breko of possible grounds for avoiding enforcement of the Award, and their likelihood of success:

a.During the procedure Breko‟s CEO noticed that Dr Leaner, the arbitrator nominated by Kofi Co, seemed very friendly with counsel for Kofi Co, both in the hearing room and in the corridors outside. Kofi Co‟s counsel and Leaner were seen conferring together and seemed to be sharing jokes. Dr Leaner also seemed rather antagonistic to Breko‟s lawyer, asking questions aggressively and making sarcastic comments during the hearing, but frequently nodding and smiling in the direction of Kofi Co‟s counsel. Breko had challenged Dr Leaner, but the challenge was refused by the ICC Court and Dr Leaner remained on the panel;

b.Although the contract expressly stated that it was to be governed by Utopian law, the tribunal applied Ruritanian law because it considered that Ruritanian law was most closely connected with the subject matter of the contract, and because the tribunal determined that the contract would be unenforceable under Utopian law, whereas it was perfectly valid under Ruritanian law;  

c.Without consulting the parties, the tribunal made a site visit (without counsel present) to view the subject matter of the dispute. During this visit, tribunal members chatted with workers on site about the problems they had encountered and which had given rise to the arbitration;  

d.On the last afternoon of the hearing, while counsel were making closing submissions, Professor Frail, the co-arbitrator named by Breko, suddenly collapsed and died. The remaining two arbitrators deliberated, then signed and issued the Award.  

This is problem-type question relating to the enforcement of arbitral awards under the New York Convention. The New York Convention has established a pro-enforcement policy of arbitral awards internationally. Article V provides for a limited and exhaustive list of grounds upon which recognition and enforcement of arbitral awards may be refused. In general, enforcement of international arbitral awards may be refused only in exceptional circumstances and on grounds relating to jurisdiction, procedural irregularity or public policy. As regards the factual scenarios of the question, the following can be noted: the relevant legal framework of the analysis is Article V of the New York Convention, but also the provisions of the Model Law (as the place of arbitration) and ICC Arbitration Rules (which set out the arbitral procedure).

a.The first complaint against the enforcement of the award is of due-process nature and will be determined on the basis of Article V(1)(b). The principle of due process stablishes that the parties (i) shall be treated equally, and (ii) shall have the opportunity to present their case.

Whether the arbitrator nominated by Kofi Co is indeed biased or not will be decided against the standards of Article 12 of the Model Law (i.e. whether it raises justifiable doubts as to his impartiality or independence); the IBA Rules on conflicts of interest should also provide some useful guidance.

b.The second complaint relates to composition of the tribunal and the arbitration procedure followed by the tribunal, and so will be determined by reference to Article V(1)(d) of the New York Convention. It establishes that: “The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place”

The standards here are set by Model Law Article 28: it establishes that the tribunal shall decide taking into account the rules chosen by the parties,

According to the foregoing, the tribunal here shall decide the dispute according to the law chosen by the parties.

c.Another due process complaint: New York Convention Article V(1)(b). It also touches upon the violation of procedure (V(1)(d)). The refusal of recognition and enforcement shall be made only if the party furnishes to the competent authority.

d.Again, issues in relation to the procedure followed by the tribunal are raised here. Article V(1)(d), Model Law establishes that: “The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place”.

It is also important to take into account that article 31 of the NY Convention establishes that the award shall be made in writing and shall be signed by the arbitra- tor or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated. In this case, the signature of the decease arbitrator is not necessary.

3.Consider whether an award can be refused enforcement under the New York Convention in the following circumstances:

a.The arbitration agreement provided for three arbitrators. After the hearing, which was attended by all three arbitrators, and before the award was made, the arbitrator appointed by the Claimant ceases to communicate with the tribunal. Although copied on all inter-arbitrator communications, invited to attend their deliberations, asked by the Chairman to give his view on the main questions in dispute and sent copies of the draft award, this arbitrator does not respond or otherwise explain his absence and failure to communicate with the other members of the tribunal. Telephone calls are not answered.

b.After many attempts to involve this co-arbitrator, the chairman and other co- arbitrator agree the content, finalise and sign the award. Just prior to the final hearing, the arbitration tribunal offers to tell the parties, informally, its view on the merits at that stage. The tribunal stresses that this view is on the basis of its review of all the evidence and argument to date.

c.The parties accept the offer and both finally stipulate that they will not challenge the tribunal or its award for having expressed views prior to the final submissions from the parties.

The Tribunal states that it considers the Claimant’s case to have little merit. The allegations made have not been supported by the evidence and the legal arguments raised are not supported, in the tribunal’s view, by the law. Furthermore, in any event, the damages claimed are grossly exaggerated and have not been shown to be the result of the respondent’s alleged breaches.

After the parties fail to settle their dispute, the Tribunal continues with the arbitration. It hears final oral submissions and receives post-hearing briefs from the parties. It then makes an award, signed by all three arbitrators, which largely follows the conclusions expressed as the tribunal’s preliminary opinion.

This is a problem-type question which relates to potential grounds for a party to resist enforcement of an award under the New York Convention. There are two different issues to consider:

a.Does the fact that one of the arbitrators ceased to communicate and deliberate preclude the other two arbitrators from proceeding? This is a case of truncated tribunals and different views have been taken here. In some cases an award has been set aside on the grounds that of irregular composition of the tribunal, which would fall under Article V(1)(d) of the New York Convention.  

b.The fact that the tribunal has disclosed to the parties its preliminary views on the dispute is also a ground for potential non-enforceability of the award. Tribunals are usually advised not to reveal their views on the dispute at any stage prior to the issuance of the award in order to avoid being perceived as biased. This ground would fall under Article V(1)(b) of the New York Convention.  

4.Answer ALL the following questions:

a.What is a final award and how is to be distinguished from a partial award and an interim award? You need to include examples of the different types of awards in your answer.

A final award disposes of all the substantive claims between the parties and marks the end of the proceedings. It produces a res judicata effect between the parties and can be challenged or enforced without necessarily terminating the complete arbitration proceedings. An interim award (also known as an interlocutory or provisional award) is an award which does not definitively determine an issue before the tribunal. Thus, an interim award does not finally settle a separate part of the proceedings. A typical example of an interim award would be an award making orders for interim relief (see for example Article 26(2) UNCITRAL Rules which expressly states that interim relief can be ordered in the form of an interim award). You should also refer to the issue of enforceability of interim awards, which is disputed (see the Australian case of Condominium v Bolwell).  

b.What is a procedural order and how is to be distinguished from an interim award?

Arbitration tribunals make many decisions during the arbitration process. While all awards are decisions of the tribunal, not all decisions are awards. The difference between an award and a procedural order is that the former is a decision affecting the rights between the parties, whereas the latter is a decision of a tribunal which relates to the organisation of the procedure, to technical and procedural matters, and which is rendered without any formality or reasoning. In other words, while awards determine the merits of a dispute, procedural orders do not decide the dispute – they simply make arrangements for the proceedings. For example, a procedural order may fix the hearing at a place different from the seat of arbitration, order or refuse to order disclosure of documents, set deadlines for the submission of documents, and indicate to the parties the issues on which the tribunal would like to hear arguments. It is not always clear whether a decision of a tribunal is an award or a procedural order (see Brasoil: Decision of the Cour d’appel Paris, 1 July 1999). The distinction is, however, crucial as, unlike awards, procedural orders cannot be challenged or enforced.

5.Answer BOTH parts of this question.

a.What are the formal requirements for a valid arbitral award under the 1996 English Arbitration Act?

This issue is determined in Section 52 of the EAA, which concretes the form that the award shall have:

1.The parties are free to agree on the form of an award.

2.If or to the extent that there is no such agreement, the following provisions apply.

3.The award shall be in writing signed by all the arbitrators or all those assenting to the award.

4.The award shall contain the reasons for the award unless it is an agreed award or the parties have agreed to dispense with reasons.

5.The award shall state the seat of the arbitration and the date when the award is made.

b.What are the types of recourse against an international arbitral award available under the UNCITRAL Model Law?

According to article 34 (2) of the Model Law, an arbitral award may be set aside by the court only if:

i.the party making the application furnishes proof that:

·a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

·the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceed- ings or was otherwise unable to present his case; or

·the award deals with a dispute not contemplated by or not fall- ing within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

·the composition of the arbitral tribunal or the arbitral proce- dure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or

ii.the court finds that:

·the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

·the award is in conflict with the public policy of this State.

6.Can an award issued under the 2012 ICC Arbitration Rules be refused enforcement under the New York Convention in the following circumstances?

a.In a dispute arising out of a sale of goods contract, the seller brings a claim against the buyer who has failed to pay the purchase price. In his statement of defence, the buyer admits liability, and accepts that he has to pay the contract price. He only disputes the amount due to the seller. Nevertheless, the tribunal relied upon a clause in the contract (which the buyer had not relied upon in his submission) and found that the buyer was not liable at all.  

This is a typical problem question in which the three different scenarios to the ICC rules and the provisions of the Model Law with regard to award annulment shall be applied.

All three scenarios raise issues on procedural irregularity and due process. For example, in the first scenario, the question is whether the tribunal has violated the principle of ‘contradiction’, whereby the tribunal must put before each party any legal or factual matters which the tribunal wishes to rely upon, so that each party has an opportunity to make submissions or comments. In this case, the tribunal relies on a clause to exonerate the respondent, although the respondent itself has admitted liability. The claimant therefore has not had the opportunity to provide comments on the clause which the tribunal relied upon, and as a result the claimant’s right to present its case has arguably been violated. Relevant provisions here are Article 19(2) of the ICC rules, as well as Article 34(2)(a)(ii) of the Model Law.

b.In a dispute arising out of a joint venture agreement, a party requested the tribunal to determine whether it had rightfully exercised its right to buy-out the other party, in accordance with the terms of the joint venture agreement. After considering the facts in the case and the history of the dispute between the two parties, the tribunal found that the joint venture was in fact no longer sustainable due to insurmountable differences between the two parties. The tribunal thus issued an award dissolving the joint venture.   iii) In a dispute concerning a buy-out arrangement under a share-purchase agreement, the claimant first requests that the tribunal instructs an independent expert to calculate the value of the shares in dispute. The tribunal rejects the request on the basis that two members of the three-member tribunal are economists with the necessary expertise to calculate the value of the shares. Secondly, on the final day of the hearing the tribunal ruled that each party would have one hour for closing submissions. The claimant demands the right of reply on the basis that he has the burden to prove the claim and therefore he must be given the “final word”. The tribunal rejects the request of the claimant.

In the same vein, the second scenario raises a similar issue: here the tribunal awards a relief not requested by the claimant, and in this respect it has, arguably, acted beyond its authority (ultra petita), violating Article 34(2)(a)(iii) of the Model Law. Finally, in the third scenario, the tribunal has rejected requests from one of the parties in respect of the organisation of the proceedings. But this is an area in which a tribunal enjoys wide discretion (see provisions 19 of the Model Law and 19 of the ICC rules). Thus, here, the tribunal has arguably not violated any rule on due process.

7.Answer ALL parts of this question.

a.Can parties validly agree to expand the scope of a national court’s review of an international arbitral award by providing that the national court may look into the way in which the arbitrators decided the merits of the dispute?  

On the one hand, the fundamental principle of party autonomy would support an agreement allowing national courts to look into the merits of the dispute. The English Arbitration Act 1996, s.69 expressly allows for such a possibility, albeit in limited circumstances and only if the award is issued in England and arbitrators have applied English law. However, most national laws do not allow national courts to review the merits of an award: the UNCITRAL Model Law for example provides national courts can review only if an arbitral award has violated public policy or the right of a party to be heard – but not whether the arbitrators have correctly applied the law or have correctly evaluated the evidence before them. The same is provided in the US Federal Arbitration Act in s.10.

Relatedly, the US Supreme Court held in the well-known Hall v Mattel case, that the parties cannot deviate from the US Federal Arbitration Act in order to allow for national courts to review the merits of an arbitral award – as the US Supreme Court held, s.10 of the US Federal Arbitration Act is mandatory law. Whether this is the preferable policy choice or whether the US Supreme Court decision is incompatible with the principle of party autonomy is questionable.

b.What is the difference between an arbitral award and a procedural order? What is the legal relevance of this distinction?  

For example, a procedural order may fix the hearing at a place different from the seat of arbitration order, refuse to order disclosure of documents, set deadlines for the submission of documents or indicate to the parties the issues on which the tribunal would like to hear arguments. It is not always clear whether a decision of a tribunal is an award or a procedural order (see Brasoil: Decision of the Cour d’appel Paris, 1 July 1999). The distinction eventually is an important one as procedural orders, unlike awards, cannot be challenged or enforced.

8.Answer ALL parts of this question  In an arbitration conducted in London under the rules of the 2012 ICC Arbitration Rules, the following incidents occurred:  

i. During the procedure, the respondent’s CEO noticed that the arbitrator nominated by the claimant seemed very friendly with counsel for the claimant, both in the hearing room and in the corridors outside. Counsel for the claimant and the arbitrator appointed by the claimant were seen conferring together and seemed to be sharing jokes. The same arbitrator also seemed rather antagonistic to counsel for the respondent, asking questions aggressively and making sarcastic comments during the hearing, but frequently nodding and smiling in the direction of claimant’s counsel. The respondent challenged the arbitrator appointed by the claimant, but the challenge was refused and the arbitrator remained on the panel.

The applicable provision here is Article V(1)(b) of the New York Convention: ‘the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case’. Whether the relationships between the arbitrator nominated by the claimant and the counsel of the claimant can raise justifiable grounds of impartiality will be determined by reference to ICC Rules, Art.11, and the English Arbitration Act 1996, s.24 in light of the jurisprudence of English courts (see for example AT&T v Saudi Cable).

ii. Although the contract expressly stated that it was to be governed by Asiatican law, the tribunal applied Mediterraneo’s law because it considered that Mediterraneo’s law was most closely connected with the subject matter of the contract, and because the tribunal determined that the contract would be unenforceable under Asiatican law, whereas it was perfectly valid under Mediterraneo’s law.

The applicable provision here is Article V(1)(d) of the New York Convention: ‘the arbitral procedure was not in accordance with the agreement of the parties’. Indeed, it seems that the arbitrators have wrongfully deviated from the arbitration procedure set out by the parties in their arbitration agreement: if the parties agreed that Asiatican law would govern their contract, the arbitrators have no power to disregard their agreement and apply a different law, even if this law would appear to be a more reasonable or effective choice. ICC, Art.21 also provides that the parties ‘shall be free to agree upon the rules of law to be applied by the arbitral tribunal to the merits of the dispute’ and only ‘In the absence of any such agreement, the arbitral tribunal shall apply the rules of law which it determines to be appropriate’.  

iii.Without consulting the parties, the tribunal made a site visit (without counsel present) to view the subject matter of the dispute. During this visit, tribunal members chatted with workers on site about the problems they had encountered and which had given rise to the arbitration.

Advise the respondent whether it can successfully resist the enforcement of this award in a country which is a signatory member of the 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards.

The applicable provision here is Article V(1)(d) of the New York Convention: ‘the arbitral procedure was not in accordance with the agreement of the parties’. However, here it seems questionable whether the tribunal has violated the procedure. As a rule, tribunals have wide discretion when deciding issues in relation to the taking of evidence, and more generally in relation to the conduct of the arbitration proceedings. The English Arbitration Act 1996, s.34 provides ‘It shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter’. Therefore, and unless the parties have agreed that no visits to the site would be permissible, it is arguable that the tribunal has the right to order a site visit if the tribunal believes that this would be necessary for it to ascertain the facts of the case.  

9.What is meant by international public policy and what are its sources? How does it affect international commercial arbitration? Are there any differences in the approach of a national court and an international arbitration tribunal to international public policy applicable in international arbitration?

The question refers to the role of international public policy in the field of international arbitration. The following points should be made. First, international public policy comprises the most fundamental moral principles common to all nations. Public policy comes into play both at the stage when a dispute is before a tribunal and at the stage when an award is reviewed by national courts in the context of annulment and enforcement proceedings. In the former case, arbitrators have a duty to take international public policy into account when determining a dispute. International public policy will be relevant both in the context of arbitrability and the context of the applicable substantive law. There are considerable differences between the approach taken by national courts and international arbitral tribunals to international public policy. In particular, tribunals will apply a more restricted notion of international public policy, the so-called transnational public policy or truly international public policy (ordre public international). Ordre public international applied by arbitrators has no references to national legislation, as arbitrators owe no allegiance to any national legal system.

In the latter case, national courts will apply a wider notion of international public policy, oriented to their domestic legislation. This is in line with the NY Convention Article V2(b) which refers to the public policy of the law of the ‘enforcement court’. However, national courts will give a different meaning to public policy when the case at hand has international implications compared to when the case at hand is purely a domestic one. In the former case the standards would be higher (domestic–domestic) in the latter lower (international–domestic). Case law relevant to international public policy:

Westacre Investments v Jugoimport [1999] English Court of Appeal, where an award enforcing a contract for illegal commission was considered not to violate the English notion of international public policy  

Soleimany v Soleimany [1993] English Court of Appeal, where an arbitral award enforcing a contract for smuggling of carpets was considered violating the English notion of international public policy.  

10.Answer ALL the following questions.

What are the main different types of an arbitral award?

The main types of award are final, interim, partial, default and award on agreed terms (Lew, Mistelis and Kröll, 2003).

·A final award can be used at the end of the proceedings and/or when it settles all claims and disputed issues between the parties.  

·An interim award does not definitively determine an issue before the tribunal (i.e., an award making orders for interim relief).

·A partial award solves a preliminary issue of the arbitral proceedings.  

·An award on agreed terms is a settlement to which the parties have commonly agreed during the arbitration proceedings.  

·A default award is used when, despite the parties having the same opportunity to present their case, one of them fails to appear at the proceedings.  

·An additional award is used for additional or incidental issues solved in the arbitration proceedings.  

What is the necessary content of an arbitral award?

Article 31 of the Model Law to mention some of the requirements of a final award. The final award must:

·be in writing and be signed

·state the reasons upon which it is based  

·state the date and the place of arbitration

·be delivered to each party.  

The major arbitral rules which indicate the form and content of the arbitration proceedings. For example, according to Lew, Mistelis and Kröll (2003), a typical award in international commercial arbitration will invariably contain basis for the jurisdiction of tribunal, background to the arbitration, the relationship between the parties, their respective businesses and the essential terms of their agreement, the claim and counter-claim, the tribunal’s analysis and conclusions on each of the issues listed, and the final decisions on damages, interest and costs.  

What is a dissenting and what is a concurring opinion? Can dissenting and concurring opinions be included in an arbitral award?

An arbitrator who disagrees with the majority of the tribunal may wish to (and actually can) express his opinion in the award or an annex to it.

According to Lew, Kröll and Mistelis (2003): ‘A concurring opinion is the opinion of an arbitrator who agrees with the majority of the tribunal as far as the dispositive part of the award is concerned but disagrees with the reasoning. This can be annexed to the award.

A dissenting opinion is an opinion which disagrees both with the result and the reasoning.’ The dissenting opinion cannot be attached to the final award.

11.Answer BOTH parts of this question

In your view, has the New York Convention enhanced the success of arbitration as the dispute resolution option of choice for international business transactions?

Lord Mustill’s vision of the New York Convention, was described as ‘the most effective instance of international legislation in the entire history of commercial law’. However, modern literature (Marike Paulsson, 2016) has stated that the Convention has proved itself to be unreliable, unpredictable and inconsistent.

The NY Convention has simplified the enforcement of foreign awards, and also harmonised national rules in this matter.

How have national courts interpreted the concept of ‘public policy’ in Article V(2)(b) of the New York Convention?

Public policy grounds to resist enforcement, as all other grounds in Article V of the New York Convention, must be constructed narrowly. In public policy, the only grounds to set aside an international award might be ‘where the enforcement would violate the forum state’s most basic notions of morality and justice’. Most importantly, the public policy exception set out in Article V(2)(b) is an acknowledgment ‘of the right of the State and its courts to exercise ultimate control over the arbitral process’.

In Soleimany v Soleimany and Westacre Investments Inc), it was determined that the court is concerned to preserve the integrity of its process, and to see that it is not abused. The parties cannot override that concern by private agreement. They cannot by procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an illegal contract. Public policy will not allow it.’ and ‘In our view, an enforcement judge, if there is prima facie evidence from one side that the award is based on an illegal contract, should enquire further to some extent. . . The judge has to decide whether it is proper to give full faith and credit to the arbitrator’s award. Only if he decides at the preliminary stage that he should not take that course does he need to embark on a more elaborate enquiry into the issue of illegality.’

12.‘The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has now achieved its original purpose, and it is time it was amended to comply with contemporary concepts of international arbitration.’

The New York Convention provides an international minimum standard by which all courts of signatory states are to recognise and enforce awards made (seat of arbitration) in another signatory state. Nonetheless, it is undeniable the enormous success of the New York Convention, as achieved to harmonise the national rules for the enforcemet of foreign awards, as well as the intention to make the enforcement of awards simpler.

A key feature of the New York Convention was the abolition of the ‘double exequatur’ requirement under the Geneva Convention (on the Execution of Foreign Arbitral Awards) 1927, ie the need, before a Convention award could be enforced in any other jurisdiction, for it to be shown that it had first been rendered enforceable in the jurisdiction whose law governed the arbitration.

Article v. of the New York Convention, which sets out the circumstances in which recognition and enforcement of an arbitral award ‘may’ be refused. These circumstances include where the award has been set aside or suspended by the competent authority of the country in which the award was made (Article V(1)(e)). On a plain reading of the language of the New York Convention, the word ‘may’ denotes an option and, therefore, there should in theory be no bar to a state recognising and enforcing an arbitral award if it has been set aside at the seat of the arbitration. Indeed, a number of states take such view. However, a significant number of states also take the contrasting view and will not recognise or enforce such awards. The reason for this is that the central issue in this debate does not turn on the language of the New York Convention alone. Rather, it depends on the response to a much more basic (and arguably more controversial) question, namely: what is the role of the seat of the arbitration?

There are two main views. The first view is that the seat of the arbitration is chosen for little more than the sake of convenience. Arbitral tribunals need not operate like the national courts of a particular state simply because they have their seat there. Arbitrators do not derive their powers from the state in which they have their seat, but rather from the sum of all the legal orders that recognise, under certain conditions, the validity of the arbitration agreement and the award. It is for such reasons that it can be said that arbitrators have no forum per se and it follows, therefore, that decisions of the national court at the place of the arbitration should have no (or very little) bearing on the validity of the underlying award.

This first view is dominant in a number of civil law countries, most notably France. The Dutch courts take a similar approach to the French. The best known example is the case of Yukos Capital v. Rosneft.

In contrast, the second view is that the seat of the arbitration is almost equivalent to the municipal jurisdiction’s forum. Under this view, the law of the seat governs the arbitration agreement and will govern the formation and composition of the tribunal as well as the procedure and form of the award. The courts at the seat oversee the proper functioning of the procedural aspects of the arbitration and, therefore, at the end of the process have the power to confirm or set aside the award. In other words, under this approach, the seat anchors the arbitration to the legal order of the state in which it takes place. This second view is similar to the position taken by the English courts.

13. Answer ALL the following questions

Should a court recognise and enforce an award when:

a.The arbitrator refused to give the respondent the same time exactly as the claimant to present his case;

This question goes to the heart of arbitration, the principle of equality, due process and the parties’ right to be heard. Jurisdictions across the world all recognise this as an essential characteristic of the arbitration process (and it is even reflected in Article 6 of the European Convention of Human Rights; a similar duty is recognised in s.33 of the EAA).

Parties’ equality and the right to be heard are not overly formalistic – it is therefore irrelevant whether or not the exact time (down to a minute) has been given to both parties. Instead, the relevant consideration of the court will have to be whether both parties had ‘an opportunity to present their case’ (Article V(1)(b) of the New York Convention).

It is also important to distinguish between impartiality and independece:

·Independence ordinarily relates to relationships, for example, whether an arbitrator is professionally or personally related to one of the parties, or has a familial or business connection to or with that party.

·Impartiality relates to a state of mind, sometimes evidenced through conduct demonstrating that state of mind. An arbitrator is partial towards one party if he displays preference for, or partiality towards one party or against another, or whether a third person reasonably apprehends such partiality.

b.The arbitrator did not allow the respondent to comment on an expert’s report submitted to the tribunal;

This procedural irregularity would fall under the lack of due process and a party’s reasonable opportunity to present its case. This ground for challenge can be found in Article V(1)(b) of the New York Convention.

It should be taken into account the difference between having all of their evidence accepted (i.e. evidentiary choices made by the arbitral tribunal) and the party’s right to express its opinion about the evidence (here, the expert) that the arbitrator accepted in the arbitration proceedings.

In this case, the challenge is most likely to succeed.

c.The arbitrator awarded punitive damages against the respondent;

This question is vexed in international arbitration. Punitive damages are available in some jurisdictions (USA) but not in all (especially civil law jurisdictions). The position of whether or not these awards will be enforceable will not be assessed from the perspective of the correct application of the law, but rather whether or not the enforcement of such an award would run against public policy (Article V(2)(b) of the New York Convention – to be interpreted restrictively, however – in the UK, for example Minmetals Germany GmbH v Ferco Steel [1999]).

d.The award has been set aside by the national courts of the country where the arbitration took place.

The approach is not the same in all jurisdictions – and there is a discretion of courts of signatories to the New York Convention (the Article V wording states ‘may refuse’). There is a spectrum of jurisdictions; on one end are those in which courts will not enforce an award which has been set aside in the jurisdiction of the seat. On the other end of the spectrum, however, there are jurisdictions in which courts will enforce an international award if the conditions in the New York Convention are met, irrespective of any developments, challenges or setting aside of the award in the country of the seat.

14.Discuss the importance of public policy as a ground to resist enforcement of foreign arbitral awards. Provide examples of decided cases and illustrate in your answer divergent trends between arbitration-friendly jurisdictions and jurisdictions which are more hostile to international arbitration.

The best answers might refer to Lord Mustill’s scholarship about his vision of the New York Convention, which was described as: ‘the most effective instance of international legislation in the entire history of commercial law’. However, modern commentators (e.g. Marike Paulsson, 2016) has mentioned that the Convention has proved itself to be: (i) unreliable, (ii) unpredictable, and (iii) inconsistent.

The public policy ground to resist enforcement, as all other grounds in Article V of the New York Convention, must be constructed narrowly. In public policy the only ground to set aside an international award is ‘where the enforcement would violate the forum state’s most basic notions of morality and justice’.

Most importantly, the public policy exception set out in Article V(2)(b) is an acknowledgment ‘of the right of the State and its courts to exercise ultimate control over the arbitral process’ (Soleimany v Soleimany, Westacre Investments Inc).

A

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Publicidad