On 19 March 2012 India confirmed that it will add the Peoples’ Republic of China (including the Special Administrative Regions of Hong Kong and Macao) to the list of so-called “gazetted” states. Only arbitral awards rendered in states notified via the Government of India Official Gazette will be recognised and enforced in India under the New York Convention. This condition flows from s.44 of the Indian Arbitration and Conciliation Act 1995. The list of 45 or so gazetted states (out of 144 ratifying New York Convention states) has arisen piecemeal and throws up some odd results. For example, San Marino, a tiny European republic of 32,000 souls, was gazetted – but China, the world’s second largest economy, was not.

Singapore (gazetted by India several years ago) has benefited greatly from its membership of the “gazette club”. The fact that Singapore was gazetted – and China was not – was actively promoted by Singapore as a reason to select Singapore (over Hong Kong) as the seat of an arbitration having an Indian connection. After all, an award rendered in Singapore would be enforceable in India – but a Hong Kong award would not. The same parties, the same facts, the same outcome in the arbitration – but an “ungazetted” Hong Kong award was worthless in the Indian courts. And all this despite the fact that India, China and Singapore have all ratified the New York Convention.

China’s (and therefore Hong Kong’s) omission from the list of gazetted territories coincided with Singapore’s ambitious push for arbitration market share. The Singaporean government, assisted by the highly accomplished Singapore International Arbitration Centre, has taken Singapore to a point where it is the only viable Asian rival to Hong Kong as an arbitration seat. Both have excellent infrastructure, strong independent courts, sensible arbitration legislation, and (generally) a pro-arbitration environment. Both are easy places in which to do business and to conduct hearings. In terms of arbitration seat selection, the two cities are now arguably neck and neck, although each has perceived strengths in certain market sectors. Finance/banking institutions tend to favour Hong Kong while shipping/insurance disputes have gravitated towards Singapore.

Like any business, arbitration hubs need distinctive ways of differentiating themselves. One such differentiation was the China/India axis. Hong Kong seems to command a lead in PRC-related disputes. Hong Kong is seen as a natural and neutral alternative to an arbitration on the Mainland. As regards India, however, parties looked to Singapore. This is partly historical/cultural (Singapore is much more “Indian” than Hong Kong) and partly economic/diplomatic (Singapore and India have closer trade accords). But the omission of China from India’s list of gazetted states has also had a profound practical impact on Hong Kong as an arbitration seat. At a stroke it took Hong Kong out of the running for most Indian-connected arbitrations.

The Hong Kong International Arbitration Centre has been quick to spot the implications of Delhi’s decision to gazette China. HKIAC’s Secretary-General, Chiam Bao, commented on 11 April that “with Sino-Indian trade on the increase, this long-awaited clarification is welcomed by the HK arbitral community. We look forward to showcasing to India the many attractive features that Hong Kong has to offer as a seat of arbitration”. By contrast, Singapore (at least in official circles) has been silent about Hong Kong’s piece of good news.

What does this mean in practical terms? HKIAC is right – Sino-Indian trade is on the rise, and it was always artificial for Sino-Indian parties to opt for Singapore automatically because Hong Kong was not (in Indian eyes) a “recognised” seat. Indian-connected agreements with no PRC connection will probably continue to gravitate to Singapore – old habits die hard. But Indian parties with potential disputes against Singaporean entities/governmental agencies now have a viable alternative seat to Singapore – a fact they may exploit by opting for Hong Kong. And multi-party contracts with some Indian content will no longer exclude Hong Kong merely on the ground that China is not a gazetted state.

HKIAC and the HK Government must explain the implications of the Indian notification to users of arbitration. HKIAC will need to go on a charm offensive – especially in Indian commercial and official circles – to sell Hong Kong as the attractive alternative that it is. Singapore has done this very effectively to date. Hong Kong now needs to make a concerted effort to broaden its appeal in the previously challenging Indian market.

Granted, any flow of Indian-connected work from Singapore to Hong Kong will be slow and gradual. Arbitration clauses revised in Hong Kong’s favour today may not yield references for months or even years. Above all, Hong Kong must alter arbitration users’ habits and mindset in order to explode the notion “think India, think Singapore”. India’s notification of PRC/Hong Kong is a golden opportunity for Hong Kong as a seat and venue – let’s see if Hong Kong capitalises on that opportunity.

The publication of the 2012 Rules comes at a time when CIETAC’s influence is perhaps greater than it has ever been. Whilst many alternatives exist, CIETAC maintains a dominant position in China, where PRC law restricts offshore arbitration in certain circumstances. Furthermore, even where offshore arbitration is available, there is an increasing trend amongst PRC parties to seek to negotiate CIETAC clauses (with a Mainland seat) in their international contracts. As explained further below, the new rules will allow CIETAC to increase its influence still further, providing for the administration of proceedings outside of Mainland China for the first time, and purporting to allow CIETAC to administer proceedings brought under the rules of other arbitral institutions.

Some of the major amendments include:

1. Arbitral tribunals empowered to grant interim measures in certain circumstances

Under the PRC Arbitration Law and the PRC Civil Procedure Law, the power to grant conservatory measures – including orders for the preservation of property or the protection of evidence – is reserved to the competent Chinese court. The current position under the CIETAC Rules, therefore, which is reflected in Article 21.1 of the 2012 Rules, is that, wherever a party applies for conservatory measures pursuant to the laws of the PRC, “the secretariat of CIETAC shall forward the party’s application to the competent court designated by that party in accordance with the law“.

Under Article 21.2 of the 2012 Rules, however, an arbitral tribunal may also now order “any interim measure it deems necessary or proper in accordance with the applicable law“. This provision will apply, for example, in any CIETAC arbitration seated outside of Mainland China where the law of the seat permits arbitral tribunals to grant interim measures (such as in Hong Kong, where CIETAC has already announced plans to establish a new sub-commission later this year). It is also possible that Article 21.2 will apply to arbitrations in the Mainland wherever the type of interim relief sought falls outside of the exclusive jurisdiction of the Chinese Courts. It remains to be seen, however, whether Article 21.2 will be invoked in Mainland arbitration proceedings and, if so, whether any interim measures granted by an Arbitral Tribunal can be enforced in practice.

2. Expert witnesses required to give oral evidence if called to do so by the Arbitral Tribunal

One feature of CIETAC arbitration which has attracted plaudits and criticism in equal measure is the limited use of witness evidence in some cases. Both the existing and new CIETAC Rules afford a broad discretion to the Arbitral Tribunal to conduct the proceedings “in any way that it deems appropriate“. Article 42.3 of the 2012 Rules, however, now stipulates that expert witnesses must participate in any oral hearing and “give explanations” on their written reports if called to do so by the Tribunal. There is no similar provision for factual witnesses, but the new rules may nevertheless be of assistance in cases where the examination of experts would otherwise be limited.

3. New rules on consolidation

Currently, the CIETAC Rules make no provision for the consolidation of parallel proceedings dealing with related issues (whether between the same parties, or, for example, multiple parties under a suite of related contracts). The 2012 Rules now provide a mechanism for parallel proceedings to be consolidated into a single arbitration.

To some extent, the new CIETAC Rules mirror the provisions of the recently revised ICC Rules, which also contain detailed provisions on consolidation. Under both sets of rules, for example, consolidation will only be possible with the consent of all parties (Article 17.1 of the 2012 Rules and Article 10 of the ICC Rules). Equally, under both sets of rules, the decision as to whether to consolidate the proceedings will be taken by the institution rather than the Arbitral Tribunal. Unlike the ICC Rules, however, which provide clear guidance on the criteria which must be satisfied before any application for consolidation will be granted (Article 10, ICC Rules), the 2012 Rules provide a broad discretion to the CIETAC to take into account “any factors it considers relevant” in making the decision (Article 17.2). This may include: (i) whether all of the claims are made under the same arbitration agreement; (ii) whether the arbitrations are between the same parties; and (iii) whether one or more arbitrators have been nominated or appointed in the arbitrations (although this list is non-exhaustive). The introduction of consolidation provisions is to be welcomed: it can prove particularly useful in complex disputes involving multiple parties or multiple contracts. Users of CIETAC arbitration will therefore watch with interest to see how the institution exercises its discretion under the new Rules moving forward.

4. New rules for determining the seat of arbitration

Under the current Rules, where parties have not agreed on the seat of arbitration, it is deemed to be the city where CIETAC (or any of its sub-commissions) is located, namely a place inside Mainland China. The 2012 Rules now allow CIETAC to decide that the seat shall be a city other than the location of CIETAC (or any of its sub-commissions), which could be a city outside Mainland China (Article 7.2).

This is a significant change, at least on paper, given that the seat determines both the law governing the arbitration procedure and the courts which will retain supervisory jurisdiction over the arbitration. It remains to be seen, however, how often CIETAC will exercise its new discretion in favour of a seat outside of Mainland China.

It is worth noting, however, that arbitration outside of Mainland China is only permitted for “foreign-related” disputes. Whether a dispute is “foreign-related” is therefore a key question. The Supreme People’s Court has published two judicial interpretations which indicate that disputes with one or more of the following three elements will be considered as “foreign-related” (and it should be noted that Hong Kong is deemed a “foreign” jurisdiction for these purposes): (i) at least one of the parties is “foreign“; (ii) the subject matter of the contract is or will be wholly or partly outside Mainland China; and (iii) there are other legally relevant facts “as to occurrence, modification or termination of civil rights and obligations” which occurred outside Mainland China.

5. Broader provisions on the language of the arbitration

Under the current Rules, in the absence of party agreement on the language of the arbitration, the arbitration must be conducted in Chinese. The 2012 Rules allow CIETAC to determine that the language of arbitration shall be “any other language… having regard to the circumstances of the case” (Article 71.1). This is a welcome development, particularly for disputes where all of the relevant documents (including the underlying contract) may have been written in a language other than Chinese. As with the other changes to the rules, however, only time will tell how often this discretion is invoked in practice.

6. Default provision for administration by CIETAC Beijing

Unlike many other arbitral institutions, CIETAC proceedings are administered by different “sub-commissions“, located in various cities in Mainland China (and which will soon include a sub-commission in Hong Kong). Parties are advised to stipulate in their arbitration agreement which particular sub-commission they wish to administer their dispute. Previously, where the clause did not include any such designation, the party commencing proceedings was entitled to express a particular preference. The other party, however, had the right to object, which would occasionally cause delay as parties would often prefer for the dispute to be administered by different entities. The 2012 Rules, therefore, provide that if a CIETAC arbitration clause does not specify a particular sub- commission, CIETAC Beijing will administer the arbitration (Article 2.6). The new provision is welcome, and serves as a useful reminder that it is important to state the relevant CIETAC entity expressly and in full when drafting a CIETAC clause (and in this regard it is important to refer to the relevant sub-commission explicitly; a simple reference to “CIETAC arbitration in Shanghai” may not be enough and, under the 2012 Rules, may lead to the dispute being administered by CIETAC Beijing).

7. Use of other arbitration rules in CIETAC administered arbitrations

One potentially controversial development in the 2012 Rules concerns Article 4.3, which provides that: “where the parties agree to refer their dispute to CIETAC for arbitration but have agreed on … the application of other arbitration rules” CIETAC “shall perform the relevant administrative duties“. In other words, CIETAC will not only administer ad hoc arbitrations under, for example, the UNICTRAL Rules, but will also administer proceedings commenced under the rules of other arbitral institutions. This potentially brings CIETAC into conflict with, for example, the ICC, which has recently amended its rules to make clear that only the ICC Court is authorised to administer ICC arbitration proceedings (Article 1(2) ICC Rules). It is best practice, in any event, to avoid arbitration clauses which seek to allow one arbitral institution to administer proceedings brought under the rules of another institution. This may not only lead to uncertainty in the conduct of the proceedings, but can also expose the award to challenge (as evidenced by the case of Insigma Technology Co Ltd v Alstom Technology Ltd [2009] SGCA 24, where SIAC purported to administer a dispute brought under the ICC Rules).

8. Changes to the appointment of arbitrators in multi-party disputes

CIETAC has also amended its rules regarding the appointment of arbitrators in multi-party cases. Under the new Rules, where there are multiple claimants and/or multiple respondents in any proceedings, and the multiple claimants and/or respondents are unable to jointly nominate an arbitrator, CIETAC will appoint all members of the tribunal and designate the presiding arbitrator (Article 27.3). Previously, CIETAC would only appoint the arbitrator for the party in default. The objective of the new rule – which also reflects current practice at the ICC and SIAC (amongst others) – is to minimise the risk of a challenge to the arbitral award on the grounds of unfair treatment (as occurred in the well-known decision of the French Cour de Cassation in Siemens AG/BKMI Industrienlagen GmBH v Dutco Construction Company).

9. New provisions regarding mediation in CIETAC arbitrations

Article 45.8 of the 2012 Rules allows CIETAC to “assist” with the settlement of disputes through the process of mediation part-way through arbitral proceedings, if requested to do so by the parties. It is not yet clear how this rule will operate in practice, however, as the new Rules do not provide any indication of who will be responsible for the mediation (i.e. whether this is to be conducted by the administrative staff of CIETAC or whether professional mediators will be engaged by CIETAC on the parties’ behalf).

It is common practice in China for arbitral tribunals to facilitate the settlement of disputes by way of mediation or conciliation. Under both the new and existing CIETAC Rules, arbitral tribunals have a wide discretion to conduct so-called ‘arb-med’ procedures in any manner they consider appropriate. Arb-med can be effective in helping parties to settle complex disputes at a relatively early stage, saving considerable time and costs as a consequence. Although many common law practitioners remain sceptical of such processes, they can work well in particular cases, albeit that an evaluative rather than facilitative mediation may be more appropriate depending on the circumstances of the dispute.

10. New criteria for the selection of arbitrators by the CIETAC Chairman

Article 28 of the 2012 Rules describes the criteria which the Chairman of CIETAC may take into consideration when appointing arbitrators in the absence of party agreement. In addition to the law of the contract and the place and language of the arbitration (and any other factors considered to be relevant), the Chairman will also be able to take into account the “nationalities of the parties“. The 2012 Rules do not, however, require that the presiding or sole arbitrator be of a different nationality to the parties. If this is desirable, therefore, parties should make express provision for this in their arbitration agreements.

11. Increased threshold for CIETAC’s summary procedure

Under the existing CIETAC Rules, parties may apply for a “summary procedure” (effectively a form of fast-track arbitration) if the amount in dispute falls below a certain threshold (currently RMB 500,000). Cases heard under the summary procedure will be determined by a sole arbitrator unless otherwise agreed by parties and the time limit for rendering an award is 3 months from the constitution of the tribunal, as opposed to 6 months under the standard procedure.

Under the 2012 Rules, the relevant threshold for the summary procedure has been increased to RMB 2 million. Furthermore, if the amount in dispute later exceeds the threshold because of, for example, amendments to claims or counterclaims, the summary procedure will continue to apply unless otherwise agreed by the parties. This marks a departure from the existing Rules, where cases exceeding the RMB 500,000 threshold would automatically be transferred to the standard procedure unless otherwise agreed.

Conclusion

The changes introduced with the 2012 Rules seek to address the growing complexity of contemporary arbitration proceedings, affording parties greater autonomy and flexibility in some respects such as more freedom for parties to agree on the seat and language of arbitration, whilst also codifying and clarifying several important aspects of CIETAC’s existing practice. The new Rules reflect CIETAC’s ambition and its desire to compete with other major international arbitration institutions, all of which have witnessed a significant increase in China-related business over recent years.

Only time will tell how the new provisions will be applied in practice. Whilst many of the changes are welcome, it remains important to draft CIETAC arbitration clauses carefully. Amongst other things, it is important to make express provision for the language of the arbitration and the CIETAC sub-commission which will administer the proceedings (preferably Beijing or Shanghai, which have more experienced case administrators). In cases involving non-Chinese parties, it is also helpful to provide expressly that the sole arbitrator or chairman be of a nationality different from the parties and that the parties be permitted to appoint arbitrators from outside of the CIETAC panel.

With thanks for invaluable contributions to May Tai, Jessica Fei and Weina Ye (Herbert Smith, Beijing), Simon Chapman (Herbert Smith, Hong Kong) and Tracy Wu (Herbert Smith, Shanghai)

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.

I am the (proud) editor and a contributor of the book and am delighted to have the opportunity to bring it to the attention of this group. I think it will be of special interest to arbitration practitioners.

The book examines the main existing international dispute resolution bodies in a systematic, comprehensive and accessible way.

To the extent possible, chapters are structured similarly, and each chapter explores a specific dispute resolution forum.

After a short introduction of the forum, each chapter provides essential information of the institution examined, including its composition, seat, operation, costs, applicable law, and detailed analysis of its jurisdiction.

This introduction is followed by a procedural overview, which includes rules of procedure, the structure of the proceedings, role of third parties, interim measures of protection, languages used and available remedies and enforcement procedures.

Uniquely, each chapter also includes an extensive review of the essential jurisprudence of the institution examined, which will be particularly relevant for academics and practitioners in international law alike.

Additionally, the similar structure makes each forum both easily accessible and comparable with other fora included in the book.

International courts and tribunals analyzed in the book include:

- Courts and tribunals of general jurisdiction, such as the International Court of Justice and the Permanent Court of Arbitration;

- Fora of specialized jurisdiction, such as the International Tribunal for the Law of the Sea, the International Centre for the Settlement of Investment Disputes, and the World Trade Organization’ dispute settlement system;

- Human rights courts, such as the European Court of Human Rights, the Inter-American Court of Human Rights and the African Human rights system;

- International criminal courts and tribunals, including the International Criminal Court, the International Criminal Tribunal for the Former Yugoslavia and the International Criminal Tribunal for Rwanda, as well as hybrid and internationalized tribunals;

- Courts and tribunals of regional integration agreements, including NAFTA, the European Union system and by other regional economic integration agreements.

The book also includes a chapter reviewing the administrative tribunals of international organizations, and chapters on the United Nations Claims Commission, the Iran-US Claims Tribunal and the Claims Resolution Tribunal.

The complete table of contents is here.

Many well know practitioners and contributors to this blog have contributed to this book, including the blog’s general editor, Roger Alford, as well as Laurence Boisson de Chazournes, Brooks Daly, Timothy Feighery, Carolyn Lamm, Andrea Menaker, Sean Murphy and Jeremy Sharpe. A complete list of authors is available here.

My hope is that this book will fill a vacuum that I identified when teaching an introductory class on international courts and tribunals for a simple but comprehensive review of the rule and practice of international courts and tribunals.

I would love to hear feedback from readers!

Chiara Giorgetti
White & Case LLP

From the Jay Treaty (1794) to the current investor-state arbitration regime under investment treaties, states have used international arbitral mechanisms to resolve complex disputes involving key areas of national interest.   Although arbitration has often been used to deal with legal disputes arising out of times of crisis, in most cases the arbitral institution in question, whether called a commission or tribunal, has been a bespoke institution, created after the fact and designed to address the specific type of dispute at issue.   In contrast, a defining feature of the investment treaty claims against Argentina resulting from its emergency laws is the use of “all-purpose” tribunals based on a standing offer to arbitrate in an investment treaty, rather than a custom-made mechanism created after the fact.

The modern history of international arbitration is often traced to the Jay Treaty (1794), which established three mixed commissions to decide boundary, debt and shipping related claims.  The Jay Treaty was significant in reviving the state practice of arbitrating claims before mixed commissions, comprising commissioners or arbitrators appointed by the two states.  Further, it is an early example of a Friendship, Commerce and Navigation Treaty, precursor to international investment treaties.   From that early history, claims to injuries to persons and property have often been addressed through arbitral mechanisms.  Indeed, from 1840-1940, states established over sixty arbitral commissions to deal with disputes arising from injuries to foreign nationals.

The Conference will examine three important claims mechanisms in the 20^th century: the Mexican Mixed Claims Commission, the Iran-US Claims Tribunal and the United Nations Claims Commission.  What lessons can be learned from these mechanisms in terms of dealing with mass claims arising out of crises?  How did these institutions manage a large number and variety of claims, the consistency and coherence of awards, and funding and enforcement mechanisms?

The second part of the conference will turn to the investor-state arbitration cases arising out of the Argentine economic crisis.  Unlike the three institutions that will be discussed in the first part of the conference, which were designed after the fact, the investor-state arbitration process under investment treaties was not specifically designed to address mass claims arising out of crises.  At the same time, investment treaties were created in part to provide investors protection in periods of fundamental economic and political change.   Can the investor-state mechanism, which arguably is best suited to address one-off cases of nationalization, expropriation and breaches of other minimum standards of treatment, deal efficiently and coherently with mass claims?  Are the control mechanisms for review of arbitral awards in ICSID and the New York Convention suitable in the case of mass claims?  And, is the mechanism failing the ultimate test because awards are not being paid?

The Conference is co-chaired by Prof. John R. Crook and Prof. Andrew Newcombe and will begin with keynote address by V.V. Veeder, Q.C. on “Economic Crises and Investor-State Arbitrations – A Historical Perspective”.   The Conference will host a stellar faculty of presenters: José E. Alvarez, Mark Clodfelter, L. Yves Fortier, Cymie R. Payne and Jennifer Thornton.

Reports on the Conference, as well as the ASIL Annual Meeting, will be available on ASIL Cables.

This post is written by Andrew Newcombe as a member of the ITA Academic Council.

Conducted by QMUL’s School of International Arbitration and sponsored by White & Case LLP, the 2012 survey aims to examine whether a “harmonised international arbitration procedure is emerging, by canvassing the views of experienced arbitration practitioners from all over the world,” comments Professor Loukas Mistelis, Director of the School of International Arbitration at QMUL.

Entitled “Current and Best Practices in the Arbitral Process,” the survey is the fourth carried out by QMUL since 2006, and seeks to conduct a major investigation into arbitration practices and trends worldwide. Corporate attitudes towards arbitration, recognition and enforcement of foreign awards, and corporate choices in arbitration in key and emerging markets were past survey themes.

There are two significant differences between this survey and those done before. First, this survey concerns the arbitral process itself, rather than corporate user attitudes towards arbitration. Second, this survey reaches out to arbitration counsel and to arbitrators, in addition to inside counsel. This should provide a much broader universe of respondents, along with greater empirical evidence for what actually occurs in arbitration and what works and what does not.

The following topics will be explored in the 2012 survey:

• Arbitrator selection: The preferred methods of selecting arbitrators, experiences in interviewing potential arbitrators and expectations regarding the conduct of such interviews.
• Organising arbitral proceedings: How procedural meetings are convened, the use of the IBA Rules on the Taking of Evidence in International Arbitration, experiences and expectations regarding the role of the tribunal secretary, methods for expediting arbitration proceedings and the use of fast-track arbitration.
• Interim measures and court assistance: The frequency of interim measures applications to tribunals and courts (including security for costs applications), the level of compliance with tribunal-ordered interim measures and the power of arbitrators to order interim measures ex parte.
• Document disclosure: The frequency of document disclosure requests, the standard that applies/should apply for disclosing documents in international arbitration and how to best manage the disclosure process.
• Fact and expert witnesses: The effectiveness of fact witness statements, experiences and views on mock cross-examination of witnesses and witness conferencing, types of expert witnesses most frequently used and the preferred method of appointing expert witnesses.
• Pleadings and hearings: The number and order of delivery of written submissions, methods of expediting pleadings and hearings, duration and mode of hearings and the effectiveness of oral closing submissions and post-hearing briefs.
• Arbitral awards and costs: The frequency of partial, interim and dissenting awards, expectations regarding the length of time to issue an award and experiences and preferences regarding costs allocation.

The questionnaire for this year’s survey can be accessed at www.arbitrationonline.org/survey. Corporate counsel, private practitioners and arbitrators are encouraged to participate.

Those who wish to contribute have until the end of May to complete their responses. Questionnaire responses may be followed by individual interviews for those willing to participate. The report is expected to be launched in September 2012.

By Paul Friedland and John Templeman
White & Case, LLP

The P.R.I.M.E. Finance foundation (Panel of Recognized International Market Experts In Finance) was established with the aim of facilitating dispute settlement, reducing legal uncertainty and fostering stability in the global financial markets. Jeffrey Golden, visiting professor at the LSE, has been a strong advocate for founding an arbitral institute for complex financial disputes. See here. After a round table meeting with leading legal and financial experts organized by the Dutch not-for-profit organization World Legal Forum Foundation in the Peace Palace on 25 October 2010, it was decided that a world financial tribunal would be established in The Hague. See here.

The panel includes internationally renowned experts in the field of both finance as well as dispute resolution. Among the panel members are retired and sitting judges, central bankers, regulators, representatives from private practice and derivative market participants (both dealer and buy side). For the Finance experts list see here and the dispute resolution experts list see here. The composition of the panel is very diverse, in terms of gender and geographic reach (e.g. from England to Nigeria).

These experts are eligible to be appointed as arbitrator under the P.R.I.M.E. Finance Arbitration and Mediation Rules. Also, these experts are available to assist in judicial training and the development of library resources relevant to complex product and standard form financial contract disputes. P.R.I.M.E. Finance aspires to represent the greatest source in the world of collective knowledge and experience of documentation, law and market practice for derivatives and other complex financial products.

Secretary-General of P.R.I.M.E. Finance, NautaDutilh’s arbitration specialist Gerard Meijer, presented the first edition of the institute’s Arbitration Rules during the opening conference. These rules have been inspired by the 2010 UNCITRAL Arbitration Rules and have been adjusted, to tailor to the needs of arbitration in the financial markets. Input has been sought from the dispute resolution experts on the panel, including Johnny Veeder, Judge Stephen Schwebel, Albert Jan van den Berg and Jan Paulsson. The P.R.I.M.E. Finance Arbitration Rules will be published on the website of the institute on 18 January 2012. See here. The Secretary-General announced that the board will take into account feedback from users and may adopt a second edition of the rules after 6 to 12 months.

Distinctive features of the P.R.I.M.E. Finance Rules include the following. First of all, the P.R.I.M.E. Finance Rules provide for an arbitration institute that will administer the arbitral proceedings, whereas UNCITRAL Rules have been written for ad hoc arbitration. The Secretary-General of the Permanent Court of Arbitration (“PCA”) in The Hague has accepted to serve as appointing authority, if so requested by a party. Exclusively persons identified on the panel of experts will be eligible to be appointed as arbitrator, unless otherwise agreed by the parties. See article 8 P.R.I.M.E. Finance Rules. For reasons of transparency, this list of experts is public.

The P.R.I.M.E. Finance Rules oblige a candidate arbitrator pursuant to article 11 to disclose any circumstances likely to give rise to justifiable doubts as to availability (as well as impartiality and independence). This provision should contribute to an efficient and speedily arbitration process.

One of the conclusions from the market sounding process that took place before the P.R.I.M.E. Finance Rules were drafted was that market participants value a speedily resolution of these type of conflicts. The Rules have been tailored to this need by including rules on interim measures and fast track arbitration.

Article 26 of the P.R.I.M.E. Finance Rules provides that the arbitral tribunal may, at the request of a party, grant interim measures if it finds that it has prima facie jurisdiction to decide the claim. A party in need of urgent provisional measures that cannot await the constitution of the arbitral tribunal may make an application for such measures to be rendered by an emergency arbitrator in the form of an order under article 26a and the Emergency Arbitration Rules attached to the P.R.I.M.E. Finance Rules. Such order shall not bind the arbitral tribunal and shall not prejudice a final decision of the tribunal on the merits. In addition parties may make an application for provisional measures in referee arbitral proceedings, as referred to in article 1051(1) Dutch Code of Civil Procedure. It is noted that the parties should agree that the seat of arbitration is located in The Netherlands, in order to benefit from Dutch law that provides that the referee arbitral award is an arbitral award.

Another distinctive feature of the P.R.I.M.E. Finance Rules is that awards may in principle be made public with the consent of all parties. Also, P.R.I.M.E. Finance may publish an award or an order in its entirety, in anonymised form, under the condition that no party objects to such publication within one month after receipt of the award. These provisions, set out in article 34 of the P.R.I.M.E. Finance Rules, aim to support the overall goal of P.R.I.M.E. Finance, which is to create a vast body of case law in the area of complex financial products to increase legal certainty.

The fact that P.R.I.M.E. Finance has based its Arbitration Rules on the UNCITRAL Rules should form a solid basis for the arbitral proceedings under these rules. These rules have been well-tested and are widely accepted around the world. In combination with the list of internationally recognized experts, this should be a good basis for market participants to start including references to the P.R.I.M.E. Finance Rules in their contracts. At the opening conference Gay Evans, Vice Chairman of the Board and Non-Executive Chairman Europe of the International Swaps and Derivatives Association, Inc., (“ISDA”) stated that although ISDA does not officially endorse the P.R.I.M.E. Finance Arbitration Rules – nor the rules of any other arbitral institute for that matter – ISDA “highly supports” this initiative. Originally bankers were deemed to have an antipathy against arbitration (see here), but recent years have seen a marked increase in the use of arbitration in the financial sector. Last year, ISDA organised a consultation process on the use of arbitration in ISDA Master Agreements. See here. ISDA’s support may be a critical success factor for P.R.I.M.E. Finance arbitration. Should ISDA proceed with including model arbitration clauses for use in conjunction with the ISDA Master Agreement, it would be wise not to limit the model seats of arbitration to each of England and New York, as suggested in its November 2011 consultation memorandum. One of the main drivers of the establishment of P.R.I.M.E. Finance is that many counterparties in emerging countries are increasingly reluctant to accept that any dispute will be resolved in England or the United States. As a result, the Netherlands was elected as base for P.R.I.M.E. Finance, due to its neutral position in the financial markets and it renowned infrastructure for international dispute resolution. Also in view of the fact that the PCA has authorised the conduct of arbitral hearings at the Peace Palace, The Hague would be a logical choice for the seat of arbitration in such arbitration clauses.

While iura novit curia is not widely addressed in investment treaty arbitration jurisprudence, several arbitral tribunals and ICSID annulment committees appear to have accepted that they can render awards based on authorities other than those pleaded by the parties. The 2002 decision of the ad hoc annulment committee in Compagñia de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3, is typical of these decisions in its summary analysis. The Vivendi committee explained that while the reasoning adopted by the underlying tribunal “came as a surprise to the parties, or at least to some of them . . . this would by no means be unprecedented in judicial decision-making” and was not a basis for annulment. The language in Vivendi was quoted and applied by the ad hoc annulment committee in Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, one of the four annulment decisions published during the summer of 2010. As another example, in Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, the tribunal exercised its assumed iura novit curia power in utilizing compound interest to calculate damages, despite the fact that neither party argued for compound interest.

Three important limitations on an investment treaty arbitral tribunal’s iura novit curia power have been identified by ICSID ad hoc annulment committees. First, according to the annulment committee in MINE v. Republic of Guinea, ICSID Case No. ARB/84/4, an ICSID tribunal cannot apply legal authorities outside the law applicable to the dispute. Second, and similarly, the annulment committee in Klöckner v. Cameroon, ICSID Case No. ARB/81/2, recognized that an ICSID tribunal cannot, “by formulating its own theory and argument . . . go[] beyond the ‘legal framework’ established by the Claimant and the Respondent,” for example by deciding the case “on the basis of tort while the pleas of the parties were based on contract.”

Finally, in 2006, the ad hoc annulment committee in Mr. Patrick Mitchell v. Democratic Republic of Congo, ICSID Case No. ARB/99/7, held that while tribunals may have iura novit curia powers, they are not required to exercise them. The Mitchell annulment committee wrote that a tribunal “is not, strictly speaking, subject to any obligation to apply a rule of law that has not been adduced; this is but an option….” A similar delineation was recognized by the tribunal in CME Czech Republic B.V. v. Czech Republic, which was heard under the UNCITRAL rules. In CME, the tribunal made clear that it was not “bound to research, find and apply national law which has not been argued or referred to by the parties and has not been identified by the parties and the Tribunal to be essential to the Tribunal’s decision.”

The 2010 annulment decision in Enron Creditors Recovery Corporation and Ponderosa Assets L.P. v. Republic of Argentina, ICSID Case No. ARB/01/3, seems to have derogated from the rule announced in Mitchell, implying (if not clearly stating) a iura novit curia obligation on investment treaty arbitration tribunals. Curiously, the Enron annulment committee paid lip service to the iura novit curia rule announced in Mitchell, writing that “a Tribunal is . . . certainly not required to address arguments that have not been put by the parties.” Nonetheless, the Enron ad hoc committee proceeded to annul the underlying arbitral decision on the ground that the tribunal failed to apply the applicable law, faulting the tribunal for overlooking arguments and facts that were not raised by the parties.

To the extent the Enron annulment committee believed that iura novit curia is not merely a power but an obligation on the tribunal, such a view would not be unprecedented. Judge Lagergren, in his 1979 decision in BP Exploration Co (Libya) Ltd. v. The Government of the Libyan Arab Republic, 53 ILR 297 (1979), a case arising under a concession contract, found that – at least in the context of a sovereign respondent’s default – an arbitrator is “both entitled and compelled to undertake an independent examination of the legal issues deemed relevant by it, and to engage in considerable legal research going beyond the confines of the materials relied upon by the Claimant” (emphasis added).

The Enron decision may also reflect the approach of the ICJ decisions cited in 2009 by the ICSID ad hoc annulment committee in RSM Production Corporation v. Grenada, ICSID Case No. ARB/05/14. In determining that an ICSID annulment committee has iura novit curia powers, the RSM committee relied on the ICJ decisions in Fisheries Jurisdiction and Military and Paramilitary Activities in and against Nicaragua. These ICJ decisions assume that iura novit curia is not only a power held by the ICJ, but an obligation on the court. In Fisheries Jurisdiction, the ICJ wrote that “ [t]he Court . . . as an international judicial organ, is deemed to take judicial notice of international law, and is therefore required . . . to consider on its own initiative all rules of international law which may be relevant to the settlement of the dispute.” In the Nicaragua case, the ICJ cited to the 1927 PCIJ decision in S.S. Lotus in holding that it was “bound” to apply iura novit curia in order to determine whether it had jurisdiction in the absence of an appearance by the respondent State.

While citing these strongly-worded ICJ decisions, the RSM ad hoc committee did not expressly address whether iura novit curia is a power or an obligation of investment treaty arbitration tribunals. Jan Paulsson, in his article on the generation of legal norms in investment treaty arbitration, attempts to connect the dots by citing to Article 38 of the ICJ Statute and Fisheries Jurisdiction to support his argument that tribunals have a iura novit curia obligation. As Paulsson explains, “a tribunal in an investment dispute cannot content itself with inept pleadings, and simply uphold the least implausible of the two.” J. Paulsson, International Arbitration and the Generation of Legal Norms: Treaty Arbitration and International Law, ICCA Congress Series No. 13 (Kluwer, 2007), at 879.

Before concluding, it is worth noting the effect local rules and practices may have on iura novit curia in non-ICSID investment treaty arbitration. For example, in Bogdanov v. Moldova, SCC Case 93/2004, an investment treaty claim heard under the Stockholm Chamber of Commerce rules, the sole arbitrator found that she “remains free, within the borders of the applicable law . . . to give the legal qualifications and determine the legal consequences that it deems appropriate, even if they were not pleaded by the parties.” Applying Swedish arbitral practice, the Bogdanov arbitrator wrote that if iura novit curia is exercised, the parties should be invited to comment on the new legal authorities, lest the parties be “surprise[d] by the consideration of legal issues that were not taken into consideration in the proceedings.” While this “no surprise” rule was not part of the iura novit curia principle stated by the Vivendi annulment committee, it is consistent with with recent decisions of several European courts in the context of commercial arbitration, as well as with the recommendations of the International Law Association in its 2008 paper, Ascertaining the Contents of the Applicable Law in International Commercial Arbitration.

Unfortunately, the investment treaty arbitral decisions expressly or implicitly addressing iura novit curia deal with the issue cursorily, providing little analysis and scant support. The textual basis for an investment treaty arbitral tribunal to exercise iura novit curia powers remains unclear. To this author’s knowledge, it is not specifically provided for in any bilateral investment treaty, although arguably it may fall under the ex aequo et bono or similar provisions included in some treaties. There is no express provision for iura novit curia in the ICSID rules (as opposed to, for example, the LCIA rules). Furthermore, scholarship sheds little light on the basis for iura novit curia in the specific context of investment treaty arbitration. As recently as 2007, Paulsson described iura novit curia in investment treaty arbitration as a “fundamental issue . . . not yet to have been considered in the depth it obviously deserves.” It is fair to conclude that a theoretical or legal framework for an investment treaty arbitral tribunal’s exercise of iura novit curia powers remains undeveloped. Certainly whether those assumed powers rise to the level of obligation is an unresolved question.

The author, David M. Bigge, is an Attorney-Adviser in the United States Department of State, Office of the Legal Adviser, Office of International Claims and Investment Disputes (L/CID). The views in this article are expressed by the author solely in his personal capacity and do not necessarily represent those of the U.S. Government.

Drawing on US Supreme Court decisions on class arbitration, Professor Abi-Saab finds that there is such a fundamental difference between regular bilateral arbitration and mass proceedings that “special consent” is required for mass proceedings and that this consent cannot be deduced from a simple consent to arbitration.  With respect to ICSID practice, he notes that cases of multi-party arbitration have either proceeded with the consent of the parties or without objection from the respondent.  With respect to mass claims processes in international law, he notes that the practice has been to establish a specific process for the mass claims with the consent of the parties and that the only exception to this uniform practice is the United Nations Compensation Commission, which was established by the Security Council under its Chapter VII powers.

Professor Abi-Saab then turns to a subsidiary objection.  Even if in principle Argentina’s consent to arbitration could be interpreted as consent to mass claims, he finds that the Tribunal does not have the power under the ICSID Convention and Arbitration Rules to adopt procedures for dealing with a mass claims proceeding.  He takes issue with the majority’s distinction between a modification to the arbitration rules without party consent (which, according to the majority, a tribunal may not do) and adopting procedures to address the handling of mass claims (which, according to the majority, a tribunal is entitled to do).  In Professor Abi-Saab’s view, the Tribunal has arrogated itself “the power to set aside, in large measure, the existing Rules of Procedure, and replacing them by another set of rules of its own; acting as a legislator, be it for one case.” (para. 208)

With respect to the concept of admissibility, Professor Abi-Saab appears to affirm that it has a role to play in international arbitration.  He notes that “[g]enerically, the admissibility conditions relate to the claim, and whether it is ripe and capable of being examined judicially, as well as to the claimant, and whether he or she is legally empowered to bring the claim to court.” (para. 18), but goes on to state that “none of these conditions has anything to do with the determination of the scope of consent whether to the general or the  special jurisdiction of tribunals”.  He also notes that “regardless of the classification of the objection as a plea to jurisdiction or to admissibility, the result of the non-fulfilment of the requirements should have been the same, the dismissal of the case.” (para. 25).  He thus takes issue with the approach of the majority, which he views as deciding questions of admissibility in its own discretion based on of its own subjective “balancing of interests” (para. 261).

Although the majority’s decision on consent is certainly controversial, it is sound in principle.  Unlike an arbitration clause in a typical commercial contract, offers to arbitrate in investment treaties are open to the world of qualified investors.  The offer to arbitrate is made to investors with investments.  In principle, this offer to the world should be able to be accepted by a multitude of investors.  If there is consent to arbitrate where one shareholder holds 100,000 shares, why is there not equally consent when there are 100,000 shareholders each holding one share?

Professor Abi-Saab is undoubtedly correct that the existence and scope of a Tribunal’s powers go to jurisdiction.  For example, where an investment treaty provides that a tribunal’s remedial powers are limited to the granting of damages, it would be an excess of jurisdiction for the tribunal to order restitution of property or the specific performance of a contract. However, the Dissent is misguided in finding that the Tribunal exceeded its powers in adapting procedures for a mass claim arbitration.  While it is true that the Abaclat proceedings might diverge from the usual ICSID proceedings, the ICSID Arbitration Rules provide a tribunal significant discretion in how proceedings are organized.  While denouncing the majority’s decision as “replacing” (para. 219) the ICSID Arbitration Rules, the Dissent does not provide any specific examples of where the majority’s proposed adaptation to the proceedings would be contrary to the ICSID Arbitration Rules.  In sum, the Dissent appears to equate what happens in the usual ICSID proceedings with what the ICSID Arbitration Rules require.  For example, the ICSID Rules say very little about the mechanics for taking and considering evidence.

The Dissent expresses valid concerns with the procedures the Majority proposes for the simplification of the examination of claims and whether these procedures satisfy due process.   Nevertheless, it is not possible to say ex ante that simplified procedures for the examination of evidence will necessarily breach the Respondent’s due process rights. The Majority states in conclusion that:

 … the Tribunal remains obliged to examine all relevant aspects of the claims relating to Claimants’ rights under the BIT as well as to Respondent’s obligations thereunder subject to the Parties‘ submissions.  Thus, it is the manner in which the Tribunal will conduct such examination which may diverge from usual ICSID proceedings (para. 533).

Due process is not ignored by diverging from “usual ICSID proceedings”.  The form and mechanics of proceedings are, and should be, a function of the claims to be decided and the evidence to be assessed.  As the Majority notes:

Notwithstanding the high number of Claimants involved, the Tribunal must examine not only the elements necessary to determine its jurisdiction (i.e., the nationality of the Claimants, their status of investor and the existence of their investment, etc.), but also those necessary to establish Claimants‘ claims and relating to the merits of the case (i.e., the existence of a breach by Argentina of its obligations under the BIT, the effect of such breach on Claimants‘ investment, etc.). Thus, the high number of Claimants may not serve as an excuse not to examine such elements and adaptations to the procedure may therefore not affect the object of the Tribunal‘s examination. (para. 529).

The task ahead for the Abaclat Tribunal is gargantuan.  Examining all elements of the claims and ensuring that the Respondent is accorded due process will be extremely time consuming.  Even if one may well wonder if an ad hoc Tribunal of three busy arbitrators is the best mechanism to address this kind of dispute, the majority was correct to find that it can hear a mass claim.

This post is written by Andrew Newcombe as a member of the ITA Academic Council.