Ever since the Supreme Court’s 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc. that question has vexed lower federal courts. Although the Supreme Court did not address international arbitration directly, its reasoning appeared to support a broad interpretation that would encompass arbitral tribunals, which likewise act as “first-instance decision-makers” that render “dispositive rulings” subject to limited national court review. Moreover, in describing the scope of Section 1782, the Court found that Congress amended the statute in 1964 to “provide the possibility of U.S. judicial assistance in connection with administrative and quasi-judicial proceedings abroad” and quoted scholarly commentary that defined the term ‘tribunal’ to include “investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.”

In the wake of Intel, federal courts have struggled to apply the Court’s liberal Section 1782 standards to the context of international arbitration. Lower courts are divided on the question of whether a contract-based private international arbitral panel satisfies the statutory definition of “international tribunal.”

A majority have concluded that arbitral tribunals established by private contract are “foreign or international tribunals.” As the federal district court in In re Babcock Borsig AG, 583 F.Supp.2d 233 put it, addressing a Section 1782 petition involving an ICC arbitration, “[t]here is no textual basis upon which to draw a distinction between public and private arbitral tribunals, and the Supreme Court in Intel repeatedly refused to place ‘categorical limitations’ on the availability of § 1782(a).” Under this analysis, the functional approach adopted by the Supreme Court in Intel suggests that contract-based arbitral tribunals are first-instance decision-makers that issue decisions both responsive to the complaint and reviewable in court. As the court in Roz Trading, 469 F.Supp.2d 1221 put it, “it is the function of the body that makes it a ‘tribunal,’ not its formal identity as a ‘governmental’ or ‘private’ institution.”

Other federal district courts have concluded that private arbitral tribunals are not “international tribunals” within the meaning of Section 1782. These courts focus on arbitration as an alternative to litigation, foreclosing a key element of Intel’s analysis: judicial review. “[T]he very narrow circumstances in which [arbitral] decisions may be subject to review does not allow for judicial review of the merits of the parties’ dispute,” opined the federal district court in Norfolk Southern Corp., 626 F.Supp.2d 882. “Accordingly, the ‘arbitral tribunal’ at issue here does not fall within the definition the Supreme Court embraced in its Intel dictum.” Moreover, according to some courts, the fact that the source of judicial authority is derived from private agreement likewise militates against classifying it as a foreign or international proceeding under § 1782. Finally, pragmatic concerns have loomed large in the analysis. As one court put it, “[i]nterpreting § 1782 to apply to voluntary, private international arbitrations would be a body blow to such arbitration, since it would create a tremendous disincentive to engage in such arbitration wherever, as here, such a reading would create substantially asymmetrical discovery obligations.”

Whatever doubts there may be about the application of Section 1782 to contract-based international arbitration, federal courts uniformly agree that an arbitral tribunal established pursuant to a bilateral investment treaty constitutes an “international tribunal” within the meaning of the statute. Since Intel, over twenty federal courts have considered motions to compel Section 1782 discovery in aid of proceedings before treaty-based investment arbitration tribunals. Not a single federal court has held that such arbitral tribunals fall short of the statutory definition of an “international tribunal.”

Rather than take a functional approach that analyzes whether the investment tribunal is a first-instance decision-maker rendering decisions subject to judicial review, these courts either assume that such arbitral panels are “international tribunals,” or focus on the fact that the arbitral tribunal has its origins in a bilateral investment treaty. Although the absence of judicial review in the investment context is even more pronounced than in private commercial arbitration, this factor has not featured in any of the decisions applying Section 1782 to investment arbitration. In short, federal courts take a functional approach in defining an “international tribunal” in the commercial arbitration context, and a formalist approach in the investment arbitration context.

Basically, the Managing Editor would report directly to me and would liaise with the ITA Board of Reporters, who represent some of the leading international arbitration practitioners from around the world. The essential duties of the ITA Managing Editor consist of (1) collecting, editing and organizing online submissions of materials relevant to international arbitration submitted periodically by members of the ITA Board of Reporters, as well as materials identified through his or her own initiative, for publication online in the ITA Arbitration Report at KluwerArbitration.com; (2) identifying, editing and organizing materials for publication in World Trade and Arbitration Materials; and (3) maintaining the ITA Scoreboard of Adherence to Transnational Arbitration Treaties for publication online and in ITA’s quarterly newsletter, News & Notes.

Pay is commensurate with qualifications and experience. Anticipated work load is 20-25 per week and the Managing Editor either can be based at ITA’s headquarters in Dallas or work remotely from other geographic locales.

If you are interested, please submit a resume, writing sample, references and cover letter/email ASAP to ITA Staff Assistant Krishonne Johnson at kjohnson [at] cailaw.org, +1-972-244-3414. The deadline for receiving applications is May 1, 2012, or thereabouts.

With almost $5 billion in annual trade between Palestine and Israel, it is imperative to establish a neutral forum for resolving business disputes. JAC is established under the auspices of the International Chamber of Commerce. Zahi Khouri and Yara Asad of ICC Palestine and Oren Schachor and Baruch Mazor of ICC Israel were on hand to announce the partnership. JAC’s goal is to establish, in John Beechey’s words, “a truly neutral and independent forum.”

Catherine Rogers at Penn State has been actively involved in JAC’s creation, and she expressed to me her desire for arbitration to impact real people on the ground in conflict zones. As she put it,

“Israel is by far Palestine’s largest trading partner and, according to some estimates, Palestine is Israel’s second largest trading partner after the United States…. [W]hile politicians on both sides seem locked in an intractable battle against peace, peaceful exchanges occur every day between ordinary Palestinians and Israelis. Of course, some disputes arise out of these commercial transactions. In those disputes, Israelis have full access to the machinery of civil justice under Israeli law. Meanwhile, it can be exceedingly difficult for Palestinians to participate in the judicial proceedings in Israel, and Palestinian court judgments are generally unenforceable…. The JAC could provide a better alternative for Israeli-Palestinian exchanges.”

A video introducing JAC is available here. Kudos to all those involved in creating this new joint venture, which the ICC evocatively describes as the “merchants of peace” in the Middle East.

The tribunal was at pains to emphasize the interim award was final and binding under Article 32 of the UNCITRAL Rules, which means that Chevron could pursue recognition and enforcement of the award in jurisdictions around the world. It could do so offensively by seeking declaratory relief in Ecuador (or elsewhere), or defensively in response to an attempt by the Ecuador plaintiffs to seek enforcement of the Ecuador judgment. Of course, the Interim Award is only binding on Ecuador and Chevron, so it is not clear what a domestic court outside Ecuador would do with an award imposing injunctive relief on Ecuador.

Meanwhile, on Thursday the Second Circuit issued its long-awaited opinion in Chevron v. Naranjo. The Second Circuit’s crucial holding was that New York’s Uniform Foreign Money-Judgments Recognition Act precludes declaratory injunctive relief by a foreign judgment debtor. “There is … no legal basis for the injunction that Chevron seeks, and, on these facts, there will be no such basis until judgment-creditors affirmatively seek to enforce their judgment in a court governed by New York or similar law.”

The Second Circuit had little sympathy for Chevron’s attempt to pursue an antienforcement injunction, particularly given the comity concerns at stake.

“[W]hen a court in one country attempts to preclude the courts of every other nation from ever considering the effect of that foreign judgment, the comity concerns become far greater. In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also those of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which it emanates. The court presuming to issue such an injunction sets itself up as the definitive international arbiter of the fairness and integrity of the world’s legal systems.”

But at the same time, the Second Circuit emphasized that it expressed “no views on the merits of the parties’ various charges and counter-charges regarding the Ecuadorian legal system and their adversaries’ conduct of this litigation, which may be addressed as relevant in other litigation before the district court or elsewhere.” It also avoided any decision with respect to the underlying RICO claims that Chevron has filed against the Ecuador plaintiffs and their lawyers, focusing simply on the improper procedural device that Chevron sought to employ to enjoin enforcement of the Lago Agrio judgment abroad.

Where does the case go from here? In Ecuador, Chevron has appealed to Ecuador’s highest court to review the case. No word yet as to whether Chevron will seek to have the arbitral tribunal’s Interim Award recognized and enforced in Ecuador. The arbitral tribunal is scheduled to hold hearings on February 11-12 to determine what steps Ecuador is taking to prevent enforcement of the Lago Agrio judgment.

As for the Ecuador plaintiffs’ efforts to enforce the judgment, there is no indication that Chevron will post an appeal bond, which means that the Ecuador plaintiffs are free to pursue enforcement anywhere in the world where Chevron has assets.

It appears that the Ecuador plaintiffs will not seek to have the judgment enforced within the United States. Ecuador Plaintiffs’ lawyer James Tyrrell stated yesterday that “The Ecuadorean plaintiffs are not coming to New York to enforce this judgment.” Given the locus of Chevron’s assets, it is not obvious why the plaintiffs have adopted this strategy, unless they have reason to believe that there is a high probability that the judgment would not be enforced.

There is, of course, the option of pursuing enforcement abroad. If the Invictus Memo is reliable, the Ecuador plaintiffs have identified twenty-seven nations where Chevron has substantial activities, including countries that are friendly with Ecuador, such as Colombia and Venezuela. That memo candidly states the ultimate end game strategy for the Ecuador plaintiffs:

“After approximately seventeen total years of litigation in the United States and Ecuador, the case against Chevron now enters its most critical, multi-faceted, and labor intensive…. With the ultimate goal of effecting and swift and favorable settlement, the strategy of the Plaintiffs’ Team will incorporate the following components: … managing the public relations impact of Chevron’s manipulation of the Cabrera narrative … [and] identifying jurisdictions globally that are most hospitable to an enforcement action.”

As most of you know, the CPR Institute is a nonprofit think tank and alliance of global corporations, law firms, scholars, and public institutions dedicated to the principles of commercial conflict prevention and alternative dispute resolution. The “Best Electronic Media Award” is presented annually to “a company, group, or individual that has produced exceptional electronic media that was focused on the field of Alternative Dispute Resolution.”

CPR presented the award at a wonderful dinner in New York last week as evidenced by the photo.

(Tali Finkelstein (left), Roger Alford (center), and Leslie Alford (right))

Without sounding cliché, the award recognizes the outstanding work of all of our permanent and guest contributors, and the tireless support from Kluwer Law International (with a special shout out to KLI superstars Gwen de Vries, Eleanor Taylor, Vincent Verschoor, and Raymond Blijd).

Others CPR winners include:
ADR Center in Italy for Outstanding Practical Achievement;
Roselle Wissler for Outstanding Professional Article;
Stacie Strong for Outstanding Short Article;
Michael Diamond and Nate Mealey for Outstanding Student Articles;
Douglas Noll for Outstanding Book.

Congrats to all!

As for the invalidity of the trial “for procedural fraud and violation of the guarantees of due process” it must be said that the record of the trial court reflects that the Defendants have exercised a vigorous and ample defense in the trial—the thousands of pages that bloat the trial have already been mentioned, in addition to this appeal and litigation; insinuating expert witnesses; requestioning and reexamining these same judicial auxiliaries, and to witnesses, visiting each and each one of the formalities given in the first trial. As such, the trial has been public and, from what can be seen, also transparent, with a horrifyingly uncommon temporal duration, and without a doubt, affecting the interests of those that drive the case, as since the action, more than eight years have passed in Ecuador alone; definitely putting into process the proof and the performances—all of them—requested by the parties in the investigative procedures….

Fraud and corruption were also mentioned, of officials, attorneys, and representatives, the issue of which this Court should not make any reference, only to leave emphasized that the same accusations can be found pending before authorities of the United States in the denouncement that has been presented the same here by the Defendant Chevron, under the RICO act, and the Court does not have competence to resolve the conduct of attorneys, expert witnesses, or other government employees or administrators and judicial auxiliaries, if that is the case….

The logical anticipated consequence, in the case of carrying out the request, was that it was impossible to rely on any expert, and resulted in not being able to have expert proof which paralyzed the trial; thus Chevron has acted up until the outer limits of its defense and the Court considers the particularly precarious situation which could doom the administration of justice should it be allowed during the controlling procedural moments and stages of the suit, making it depend on its decision in the advancing of the cases. The deeds made public considered in the judge’s decision at the first instance, and Chevron was condemned to pay trial costs for manifest bad faith, notorious and obvious; so much so that now suffice it to say that the procedural conduct of the defendant, few times seen in the annals of the administrator of Justice in Ecuador, were abusive to the point that, in terms of attitude, that the Court will not even dedicate any more writings to this portion of the decision, it would be an example of disastrous precedent for other litigants.

Following the judgment, plaintiffs’ attorney Pablo Fajardo indicated that Chevron is authorized to request clarifications of the appellate court decision within the next month or so. According to my conversation with plaintiffs’ representative Karen Hinton yesterday, if Chevron wishes to appeal to the Ecuador National Court in Quito, Chevron must post an appeal bond of approximately 10%, or $1.8 billion. Chevron itself contends that the appeal bond could be 100% of the judgment, forcing it “to deposit, with no likelihood of recoupment, billions into the very court system whose corruption and bias … render the Lago Agrio judgment unenforceable.“

Meanwhile Chevron has filed a motion with the Second Circuit this morning asking the Second Circuit to lift the temporary stay on the district court’s antisuit injunction. The Second Circuit’s principal concern that an antisuit injunction was not ripe has been obviated by the Ecuador Appeals Court judgment. “Without such relief, the [plaintiffs] will be able immediately to commence their extortionate plan to harass Chevron through multiplicative, vexatious enforcement proceedings expressly intended to disrupt the operations of Chevron’s affiliates in foreign countries.”

In its motion, Chevron argues that “The Ecuadorian appellate decision … does not purport to explain or even mention the extensive evidence that the Lago Agrio Judgment was ghostwritten by parties other than Judge Zambrano, who had secret access to the LAP’s internal, unfiled work product.” Among other things, Chevron argues that the Ecuadorian appellate judgment ignores (1) the extensive verbatim overlap between the judgment and the LAP’s unfiled “Fusion memo”; (2) the overlap between the judgment and the LAP’s unfiled record summary; (3) the LAP’s internal emails evidencing their plan to draft the judgment; and (4) expert linguistic testimony that the judgment was not written by Judge Zambrano.

Yesterday Chevron has also filed a motion with the UNCITRAL arbitration tribunal in The Hague requesting that panel to order Ecuador to inform the tribunal of the steps it intends to take to comply with the tribunal’s February 2011 order requiring Ecuador to prevent the Lago Agrio judgment from being enforced.

After almost two decades of litigation, the Chevron Ecuador judgment has reached the critical enforcement stage. The $18 billion question is whether the Second Circuit will stay enforcement of the Ecuador judgment, and if not, whether foreign courts will recognize and enforce the Ecuador judgment. Overshadowing it all is an investment arbitration that may require Ecuador to pay Chevron for any damages it has incurred from the enforcement of a judgment in violation of the Ecuador-United States bilateral investment treaty.

Bederman was a prince of a guy, and a great international law scholar who loved the life of the law. I’ve known him for over twenty years and always appreciated his thoughtful analysis and kind words.

When I asked him several years ago what sustained him as he was battling cancer, he said that, in addition to his family, he loved to wake up every morning and think about his latest writing project. He wrote until his dying days, finishing his last great book, Custom as a Source of Law, just last year. Among his passions was international arbitration, especially the history of international adjudication.

Just to give you a taste of his work, here’s a choice excerpt from a book chapter he wrote:

What made international claims tribunals the preferred method of claims settlement until the end of the Second World War? One factor not to be underrated is the psychology of international arbitration. It makes for a superb face-saving device in the conduct of international relations. Contentious disputes are submitted to what appear to be a neutral authority which adjudicates them on the basis of a respect for law. The highly-charged political circumstances which gave rise to the claims—whether wars or political upheavals—are neutralized with (usually) years of dispassionate legal analysis and adjustment. If nothing else, international claims settlement is a superb political soporific.

David Bederman gave a “Final Lecture” in September 2011, but it was not a self-reflective journey on the meaning of life. Rather it was the Inaugural David J. Bederman Lecture.

Interim Dean Robert Schapiro introduced David by stating “Please join me in welcoming … our friend and colleague, and a hero of mine, Professor David J. Bederman.” After a standing ovation, David said, “I’m glad to be here, in so many respects. I look out in the audience and see so many friends and I’m going to try and spend a few minutes with each of you after the lecture. I am deeply touched that you would spend your afternoon with me. It means a lot to me.” Then he spent the next hour discussing his latest work on the role of custom in law.

That was David Bederman. Always thinking, always excited about the life of the law, always looking to his next great project. A scholar and friend to the very end.

Welcome Annalise!

Topics will include: Do arbitrators have the power to give Chevron what it wants? Are there any limits left on U.S. discovery in aid of arbitration? What will the endgame look like, and will it advance human rights?

Moderators:
• Michael D. Goldhaber, The American Lawyer
• Professor Robert Howse, NYU Law School
Commentators:
• Professor Roger Alford, Pepperdine Law School & Notre Dame Law School (Jan. 2012)
• Stuart Newberger, partner Crowell & Moring
• Oliver Armas, partner Chadbourne & Parke
• Catherine Amirfar, partner Debevoise & Plimpton
• Eric Bloom, partner Winston & Strawn (counsel to Ecuador)
• Steven Donziger (counsel to the Ecuadorian Plaintiffs)

Should be very interesting for anyone following one of the most fascinating and controversial transnational cases in the world.

Articles 3 through 10 and other provisions that qualify or create exceptions to these Articles are self-executing. With the exception of these Articles, the Treaty is not self-executing. None of the provisions in this Treaty confers a private right of action.

Articles 3 through 10 of the BIT address traditional substantive guarantees for investors, such as national treatment, MFN treatment, and compensation for expropriation. The other non-self-executing provisions deal with issues such as dispute settlement mechanisms, including dispute resolution of investor-state claims and state-to-state claims.

The Senate hearing on the treaty made clear that the purpose of this language was to respond to Medellin.

“Following the Supreme Court’s decision in Medellin v. Texas, 552 U.S. 491 (2008), the committee has taken special care to reflect in its record of consideration of treaties its understanding of how each treaty will be implemented, including whether the treaty is self-executing…. The resolution of advice and consent contains a statement reflecting the committee’s understanding of the extent to which this Treaty will be self-executing. This provides that Articles 3-10 of the Treaty are self-executing and do not confer private rights of action enforceable in United States courts. The remaining provisions of the Treaty are not self-executing and do not confer private rights of action enforceable in United States courts.”

I’m glad to see that the Senate is carefully addressing the issue of domestic implementation of treaties following Medellin. The dispute settlement mechanisms in the treaty are not self-executing and any arbitration award rendered pursuant thereto must be enforced using either the New York Convention or the ICSID Convention. Makes sense. But I’m curious what impact a treaty declaration will have in the future for substantive treaty guarantees that are self-executing but do not confer a private right of action. Beyond protecting the United States as a litigant, what does self-execution achieve for the substantive provisions of the BIT that are designed to protect investors?