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.

Compiling a list of the ‘main’ institutions has been an interesting and somewhat political task. There are the undisputed ‘global’ institutions which have almost universal recognition (which I shall not name for fear of missing any out), yet there are many more smaller local institutions competing in this space. Most practitioners will probably have their favourites, likely to be based on prior experience, familiarity with their rules and procedures and, quite probably, geographic convenience to their office.

Exactly how many arbitration institutions exist and how many arbitrations they actually administer is unclear. We know the statistics of the major institutions (see for example Arbitration Online), but what of all the others? As a first step, I have started to compile a list of organisations that claim to administer arbitration or claim to be a part of the arbitral process. It is a long list, and growing, with 118 organisations identified to date and the list is certainly not complete (I am certain that we have only captured a fraction of the institutions that exist in the People’s Republic of China for example).

In addition to the sheer number of institutions, there are some very old and very young members. Of those where their date of creation is identified, the earliest was formed in 1853, comfortably beating the LCIA by 39 years. Since then, growth of the number of institutions has been exponential. Before 1940 only ten percent of the institutions around today existed. Seventy percent of the institutions have been created in the last thirty years; fifty percent in the last twenty and twenty percent in the last ten years. Although the rate of growth is now slowing, at least two new institutions have been created in each of the last three years (although for some reason no institution was formed in 2008).

A good number of the institutions have their own rules but a great deal more do not; unsurprisingly the UNCITRAL Rules make the most appearances as the preferred rules of institutions.

I cannot tell you how many arbitrations each institution has each year since most do not appear to publish such statistics. From Queen Mary’s School of International Arbitration statistics (see the link above), of the twenty-two institutions listed as reporting their number of arbitrations, there were on average 3,050 arbitrations in total each year between 2003 and 2007. That works out at an average of 139 per institution per year (in 2007 the number of arbitrations per year per institution actually ranged from one (ACICA) to 621 (AAA/ICDR)). If one assumes institutions publish statistics on the basis that it shows they are busy and the less busy institutions tend to choose not to publish, this suggests that there are many institutions that are not terribly busy.

One has to accept that there is a slow start for any institution setting up in this apparently crowded market. First you need to exist, you need an infrastructure, an office, staff (although this might be just one person), and possibly some rules, along with your constitutional documents you might want to have a conference to mark your launch followed by a drinks reception, and only then can you invite parties to include your ‘standard’ arbitration clause into their contracts or submit their disputes to arbitration under your rules. You might then have to wait years before a party actually has a dispute, during which time the ‘president’ and other representatives will have to do the rounds of conferences plugging their new institution.

Do we need this many institutions? I have mixed views about this. Diversity is generally a good thing and increasing the number of institutions should bring with it competition, innovation and a general advancement of standards. More choice might encourage more parties to choose arbitration and good institutions should thrive, assuming users will show preference for those institutions. Many of the newer institutions are from developing economies (Africa has at least 19 institutions, with most of the sub-saharan institutions being formed after 1990), which might also have the effect of encouraging more stable and predictable legal systems. More regional institutions should generally encourage the use of international arbitration, allowing disputes to be dealt with (and administered) locally and encourage more local lawyers to undertake international arbitration work. What is of concern is the risk that harm could be done to the profile of international arbitration by institutions that have neither the expertise nor resources to administer arbitrations properly. This probably justifies some self-policing. Growth of institutions that are well managed, adequately resourced and largely transparent in their operations is a positive development for international arbitration generally.

There is help at hand. In 1985 an organisation was formed called the International Federation of Commercial Arbitration Institutions (IFCAI). This organisation’s purpose is establishing and maintaining relations between commercial arbitration institutions while seeking to promote greater understanding of arbitration and ADR. It is open to not-for-profit commercial and investment arbitration bodies (and other organisations working to promote international arbitration and ADR). Its website needs some work and it should promote itself more widely, but judging by the quality of its board of directors, it has very good prospects.

For arbitration lawyers thinking of recommending arbitration institutions to their clients, the following list of considerations might be a useful starting point:

(1) Is the institution not-for-profit?
(2) Does it publish its annual case load and average case duration?
(3) Does it appoint arbitrators from an open list?
(4) Does it have a transparent arbitrator challenge procedure?
(5) Does it operate within an established set of arbitral rules?
(6) Does it operate within a model law or similar jurisdiction?
(7) Is it a member of IFCAI?

Based on reported numbers it looks unlikely that the major players will lose significant ground any time soon, but the growth of new institutions should keep them all on their toes, striving to deliver a first class service to users (and their lawyers). Should they fail to do so, you know where to go.

Arbitral institutions have devised a range of different solutions to this problem – from summary arbitral proceedings for interim relief (e.g. NAI) to expedited formation of the arbitral tribunal (e.g. LCIA) – but many have alighted on the use of “emergency arbitrators” to determine applications for interim relief before the arbitral tribunal is constituted (e.g. SCC Rules, SIAC Rules, new ICC Rules). In this blog, we examine some of the practical issues raised by the use of emergency arbitrators, as an increasingly popular tool of (pre-)arbitral procedure.

The first of these is: who to call in an emergency? In order to determine whether a party is entitled to rely on emergency arbitrator procedures, it is necessary to look at how those procedures are incorporated into the applicable arbitral rules and when they are to be invoked.

In contrast to the approach of previous regimes, most modern provisions for emergency arbitrators apply to a dispute automatically, by virtue of the parties selecting the relevant arbitral rules (indeed, the “opt in” nature of the ICC’s 1990 Rules for a Pre-Arbitral Referee Procedure is often cited as a reason for their limited use). Typically, where arbitral rules offer emergency arbitrator procedures, parties must therefore expressly “opt out” of those provisions if they do not wish them to apply. The SCC Rules go one step further, by applying the opt out feature in respect of the emergency arbitrator provisions retroactively (i.e. parties arbitrating under the SCC Rules can use the emergency arbitrator procedures even if their arbitration agreement was concluded before those procedures came into effect, on 1 January 2010). By contrast, and in recognition of the dramatic change introduced by the new provisions, the new ICC Rules contain ‘transitional provisions’ exempting the application of the new Emergency Arbitrator Provisions where the arbitration agreement was concluded before the new Rules come into force (i.e. on 1 January 2012) (Article 29(6)(a) of the new ICC Rules). It is anticipated that this automatic inclusion / opt out formulation will encourage the uptake of emergency arbitrator procedures under the arbitral regimes in which they appear.

A divergence may be seen, however, in the approach of arbitral institutions at the stage at which parties may seek to invoke emergency arbitrator provisions. For example, under the rules of certain institutions, parties are required to submit a Notice of Arbitration before (or concurrently with) a request for emergency relief (e.g. Schedule 1(1) of the SIAC Rules). Others, in contrast, offer even greater flexibility, allowing a party to apply for interim relief before a Request for Arbitration has been filed (e.g. Appendix V, Article 1(6) of the new ICC Rules). However, in those instances, the party seeking interim relief is typically required to submit a Request for Arbitration within a certain time period after their application for relief, failing which the emergency arbitrator proceedings will be terminated.

Another issue of interest is the impact of emergency proceedings on the concurrent jurisdiction of a competent court or the arbitral tribunal. As for court proceedings, emergency arbitrator procedures are not envisaged to represent an exclusive remedy and, in general, the option of (or indeed submission to) those proceedings does not operate as a waiver of judicial authority over the matter. Indeed, certain arbitral rules expressly recognise the preservation of judicial remedies despite the availability of emergency arbitrator procedures (e.g. Article 29(7) of the new ICC Rules; Article 32(5) of the SCC Rules). However, the provisions of mandatory local law may curtail recourse to the courts where parties have an option to seek relief from another source (such as an emergency arbitrator). For example, under the English Arbitration Act (1996), the English courts will grant orders in support of arbitration “if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively” (section 44(5) of the English Arbitration Act). (It is noted, however, that the qualification of “unable…to act effectively” may dilute the restrictive effect of this provision on the English courts’ jurisdiction as a consequence of emergency arbitrator procedures.)

In respect of the arbitral tribunal, jurisdiction is entirely protected. Arbitral rules are clear that orders or awards of emergency arbitrators do not bind the subsequently-constituted arbitral tribunal, and that those tribunals are empowered to reconsider, modify, terminate or annul the order or award (e.g. Article 29(3) of the new ICC Rules; Schedule 1(7) of the SIAC Rules).

There are, however, important limitations on the interim relief emergency arbitrators are able to grant. For example, since the same principles of jurisdiction apply to emergency arbitrators as to the arbitral tribunal, they are not able to grant interim orders over third parties to the (eventual) arbitral proceedings. This rule is expressly recognised in the new ICC Rules, which state that the Emergency Arbitrator Provisions apply only to signatories to the arbitration agreement or their successors (Article 29(5) of the new ICC Rules). (It is noted that this particular provision also precludes the use of ICC emergency arbitrators in investor-state disputes.) In addition, ex parte applications – where the element of surprise is vital to their success – are not suitable for submission to emergency arbitrators (e.g. Mareva or freezing injunctions). This important limitation on the powers of emergency arbitrators partly reflects the centrality to arbitration of the opportunity for each party to present its case, but also the draconian nature of ex parte orders, such that they ought to be reserved solely for the national courts.

As a side note, one concern that has been voiced in relation the powers of emergency arbitrators to grant interim relief in arbitral proceedings is the potential damage their orders may cause if wrongly granted against innocent parties. However, arbitral institutions go some way to addressing this concern by giving emergency arbitrators the power to require the applicant to provide “appropriate security” as a pre-condition for the granting of relief (e.g. Appendix V, Article 6(7) of the new ICC Rules).

Assuming that the basic threshold requirements have been met (e.g. standing, urgency, prima facie entitlement to the relief sought, threat of irreparable loss), and a party is awarded the relief it seeks, the next key issue that arises is enforcement: how may provisional measures ordered by an emergency arbitrator be enforced and what are the sanctions for non-compliance? The form of the relief granted by an emergency arbitrator varies across arbitral institutions: some require provisional measures to be granted as “orders” (e.g. Article 29(2) of the new ICC Rules), whilst others permit interim “awards” to be rendered (e.g. Schedule 1(6) of the SIAC Rules; Article 32(3) of the SCC Rules). However, questions remain regarding the applicability of national arbitration laws to pre-arbitral procedures and the extent to which courts will enforce orders or awards made by emergency arbitrators. Ultimately, this is likely to turn upon whether emergency arbitrators are deemed to be “arbitrators”, for the purposes of arbitration legislation, granting relief in the course of “proceedings”. Unfortunately, there is a paucity of case law with which to illuminate this question. However, a purposive approach – which recognises that the primary purpose of arbitration legislation is to respect the parties’ agreement to arbitrate their disputes – would appear to lend support in favour of the enforcement of emergency arbitrators’ orders and awards.

Separately, claims may lie in breach of contract where parties are required by the governing arbitral rules to give an undertaking to comply with the orders of emergency arbitrators (e.g. Article 29(2) of the new ICC Rules; Schedule 1(9) of the SIAC Rules; Appendix II, Article 9(3) of the SCC Rules). Accordingly, arbitral tribunals are empowered to reflect non-compliance with the orders of emergency arbitrators in the final Award of damages (e.g. Article 29(4) of the new ICC Rules). (Added incentives derive from provisions which allow arbitral tribunals to revisit an emergency arbitrator’s decision about the costs of the emergency proceedings.)

In addition (and of greater practical effect than might, at first, be imagined), orders granted by emergency arbitrators are “morally binding” on the parties. Whilst it may be true that parties are less incentivised to comply with the orders of emergency arbitrators (on the basis that those arbitrators are usually prevented from sitting on the arbitral tribunal, and consequently the risk of adverse inferences from non-compliance may be perceived to be lessened), in practice, arbitral institutions report very high levels of voluntary compliance with those orders.

As the rules of arbitral institutions evolve to reflect modern practice and respond to commercial pressures, there appears to be an increasing convergence in approaches to the provision of pre-arbitral emergency relief. Although there may be certain practical limitations on the operation and enforcement of these provisions, the ultimate aim of emergency arbitrator procedures is the same: to increase party autonomy and reduce the role of the courts in arbitral proceedings, taking arbitration one step further to becoming a one-stop shop for the comprehensive and effective resolution of disputes. The proven track record of parties who have deployed these procedures successfully to date is an encouraging sign of the utility of emergency arbitrators and a likely indicator of future trends. Those institutions whose rules are currently silent on the use of emergency arbitrators are bound to follow suit.

Justin D’Agostino and Ula Cartwright-Finch
Herbert Smith

Although the Tribunal’s finding that it can hear mass claim has garnered the most interest, various aspects of the Decision have sparked debate.  The Tribunal held that the Claimants’ security entitlements in Argentinean bonds are investments for the purposes of Article 25, ICSID Convention and protected under the Argentina-Italy BIT.  Another controversy arises from the fact that the Decision was issued by the majority of the Tribunal without the simultaneous release of the dissenting opinion. The dissenting opinion, which the Decision states is “Forthcoming”, has yet to be released.

On 15 September 2011, the Argentine Republic filed a request for the disqualification of the majority of the Tribunal (Professors Pierre Tercier (President) and Albert Jan van den Berg), alleging that the two arbitrators could not be relied on to exercise independent judgment.   The disqualification request criticizes the two arbitrators in particularly strident language, arguing that the transmission of the Decision: “(a) without the dissenting opinion of the other arbitrator, (b) without his consent, and (c) without even waiting for a draft of said opinion” together with the majority’s rejection of Argentina’s request for provisional measures “is a manifestation of an absolutely inappropriate conduct” (para. 20).

Although the Decision raises a series of interesting issues (for example, see Sarah Ganz‘s post on the Decision’s treatment of the 18-month litigation requirement in the BIT), in this post I focus on the majority’s distinction between jurisdiction and admissibility, a subject of one of my previous posts.  In its Decision, the majority of the Tribunal (the Tribunal) states that it is appropriate and necessary to distinguish issues relating to jurisdiction and admissibility (para. 248) and that the “guiding thought of the Tribunal for distinguishing issues of jurisdiction from issues of admissibility has been the following cornerstone consideration:

 If there was only one Claimant, what would be the requirements for ICSID’s jurisdiction over its claim? If the issue raised relates to such requirements, it is a matter of jurisdiction. If the issue raised relates to another aspect of the proceedings, which would not apply if there was just one Claimant, then it must be considered a matter of admissibility and not of jurisdiction.” (para. 249)

The Tribunal’s analysis thus takes a two-fold approach.  First, it analyzes the mass claims issue within the context of the Parties’ consent to arbitration (a question of jurisdiction) and second, it analyzes the admissibility of mass claims.

The Decision is perhaps the clearest example of an investment treaty tribunal distinguishing between jurisdiction and admissibility.  The Tribunal highlights at para. 247 that:

 (i)            While a lack of jurisdiction stricto sensu means that the claim cannot at all be brought in front of the body called upon, a lack of admissibility means that the claim was neither fit nor mature for judicial treatment;

(ii)            Whereby a decision refusing a case based on a lack of arbitral jurisdiction is usually subject to review by another body, a decision refusing a case based on a lack of admissibility can usually not be subject to review by another body;

(iii)            Whereby a final refusal based on a lack of jurisdiction will prevent the parties from successfully re-submitting the same claim to the same body, a refusal based on admissibility will, in principle, not prevent the claimant from resubmitting its claim, provided it cures the previous flaw causing the inadmissibility.

With respect to consent, the Tribunal rightly held that if, in principle, it had jurisdiction over one claimant, “it is difficult to conceive why and how the Tribunal could loose such jurisdiction where the number of Claimants outgrows a certain threshold.” Further, it highlighted that “the collective nature of the present proceeding derives primarily from the nature of the investment made.”:

The ICSID Convention aims at promoting and protecting investments, without however further defining the concept of investment and leaving this task to the parties through relevant instruments such as BITs … Thus, where the BIT covers investments, such as bonds, which are susceptible of involving in the context of the same investment a high number of investors, and where such investments require a collective relief in order to provide effective protection to such investment, it would be contrary to the purpose of the BIT and to the spirit of ICSID, to require in addition to the consent to ICSID arbitration in general, a supplementary express consent to the form of such arbitration. In such cases, consent to ICSID arbitration must be considered to cover the form of arbitration necessary to give efficient protection and remedy to the investors and their investments, including arbitration in the form of collective proceedings.  (para. 490).

In conclusion, the Tribunal, rightly held that “the “mass” aspect of proceedings relates to the modalities and implementation of the ICSID proceedings and not to the question whether Respondent consented to ICSID arbitration. Therefore, it relates to the question of admissibility and not to the question of jurisdiction.” (para. 492).

The Tribunal took a purposive approach to the interpretation of the ICSID Convention’s “silence” as to mass claims, holding that it would be “contrary to the purpose of the BIT and to the spirit of ICSID to interpret this silence as a “qualified silence” categorically prohibiting collective proceedings, just because it was not mentioned in the ICSID Convention” (para. 519).

With respect to the adaptations, the Tribunal identified the need to adopt mechanisms to allow a simplified verification of evidentiary materials with respect to each individual claim (para 531) and the manner of the representation of the claimants (paras. 531-532).  In finding that it had the power to adapt procedures to address the “mass claims” aspect of the case, the Tribunal states that adaptations must consider the principle of due process and a must seek a balance between the procedural rights and interests of each party (para. 519).  In assessing that balance the Tribunal considered: (i) under what conditions is it acceptable to change the method of examination from individual to group treatment; (ii) to what extent are Argentina‘s defense rights affected in comparison to 60,000 separate proceedings; and (iii) is it admissible to deprive Claimants of certain procedural rights (para. 539).

Argentina’s had argued that there are strong policy reasons why ICSID is an inappropriate forum to address issues with respect to sovereign debt restructuring.   The Tribunal flatly rejected this argument, rightly stating that “Policy reasons are for States to take into account when negotiating BITs and consenting to ICSID jurisdiction in general, not for the Tribunal to take into account in order to repair an inappropriately negotiated or drafted BIT.”

It its disqualification request, Argentina suggests that the procedural mechanisms set out in the Decision are an unjustifiable limit on Argentina’s right of defence and further evidence of the Tribunal’s alleged lack of independent and impartial judgment (paras. 25 et seq.).   Although Argentina has characterized the majority’s Decision as “egregious” and various Tribunal statements as “shocking” and “absurd”, this hyperbole should seen for what is—a regrettable attempt to appeal a tribunal decision through the guise of a disqualification request.  The majority of the Tribunal’s approach to mass claims is correct in principle and practical, objective and fair-minded in practice.  International arbitration can be an effective and efficient system of dispute resolution because of its ability to adopt flexible procedures to address myriad claims and issues.  The majority’s Decision reflects this approach and will stand the test of time.

After the general introduction from ASA President Michael E. Schneider, Lara Bander and Mehtap Tari Hirt, two post-graduate students from the Master of Advanced Studies in International Dispute Settlement (MIDS) in Geneva, presented the results of an elaborate questionnaire directed to arbitral institutions all over the world. Twenty-one institutions responded, including the ICC, Swiss Chambers Court of Arbitration and Mediation, LCIA, WIPO, ICSID and SCC. As examples of the results obtained, the speakers reported that the institutions generally check whether there is an arbitration agreement in existence or that some institutions stated that they have no power to refuse to confirm an appointment on the basis of information that they may possess. It was also reportedly very rare for arbitrators to be removed by the institutions and many institutions were said to ask arbitrators for the reasons for delay where this occurred. Some ask for information as to the availability of the arbitrator before appointment, though this is rare. There is generally no control on procedural decisions, and scrutiny is limited to formal comments if any, the ICC being the exception in that it also provides substantive comments.

In addition, there is general agreement among the arbitral institutions that the split in the costs of the arbitration is very similar to that published by the ICC recently, namely: 82% for counsels’ fees and expenses, 16% for the arbitrators’ fees and 2% for the institutions’ fees. There is generally no offer of liability insurance by the institutions and institutions were reluctant to discuss their budget, and origin of funds.

Regarding the origin and gender of arbitrators, Bander and Hirt stated the institutions had conveyed that the first five favourite nationalities for arbitrators are Swiss, French, American, Dutch and German and less than 10% of arbitrators appointed are women.

A panel followed on the organisation of the arbitral institutions with particular reference to independence, funding, operations, and the role at the commencement of the arbitration.

Urs Weber-Stecher (Wenger & Vieli) kicked-off with a list of eight “basic principles to be respected by arbitral institutions in order to meet proper corporate governance requirements and objective standards of fairness”. Independence from any other body, organization or industry group, the efficient assignment of tasks and the possibility of appeal on important decisions were cited as some of the principles. It was also stated that the body electing the members of the arbitration body supervising and administering the arbitration proceedings must have the legitimacy and acceptance of the arbitration community and the typical users of arbitration as well as being a transparent and objective process.

Anne Véronique Schlaepfer (Schellenberg Wittmer) discussed the role of the institution at the commencement of the proceedings. It was noted that the institution has a key role at this stage and if something goes astray, it may be very difficult or even impossible to bring the proceedings back on track. For instance, if the institution refuses to accept a notice of arbitration because it erroneously considers that there is manifestly no agreement to arbitrate under the Swiss Rules, it will be the end of the proceeding. This, according to Schlaepfer, is a jurisdictional and not an administrative decision.

A debate later ensued between Phillipe Pinsolle (Shearman & Sterling) and Simon Greenberg (Deputy General Counsel, International Court of Arbitration, ICC) as to whether the decision by arbitral institution to disallow a case to proceed to arbitration on the basis of a manifest lack of an arbitration agreement was a jurisdictional decision or not. Greenberg stated that while it may technically be a jurisdictional decision, this was not the terminology used by the ICC. Greenberg recalled a case in which the ICC determined that the case should not proceed to arbitration on the basis of article 6(2) of the ICC Rules, a decision which was then challenged and overturned by the courts of New York. The ICC was thereafter required to allow the arbitration to proceed. Pinsolle stated that such recourse would not have been available in jurisdictions such as France and Switzerland. (On the other hand, the arbitral award itself could be challenged if the arbitral tribunal wrongly accepts or declines jurisdiction, irrespective of a prior decision of the ICC under article 6(2), – see Swiss Federal Supreme Court, 4A_376/2008, ASA Bulletin 2009, 745)

The following panel discussed the appointment, confirmation, removal and replacement of arbitrators.

Juliet Blanch (Weil, Gotshal & Manges) raised a series of very interesting questions on the topic of appointment and confirmation. On pre-appointment disclosure, for example, Blanch noted that WIPO, ACICA and the Cairo Regional Centre for International Commercial Arbitration all allege in the responses to the questionnaire prepared by the MIDS students that they verify the information disclosed by the arbitrator. Blanch noted that this raises the question as to whether these institutions would become liable if they were negligent in such verification.

Blanch referred to the issue of having a barrister on the tribunal who was from the same chambers as a barrister acting as counsel. In Blanch’s opinion this raises real concerns given that a chamber now markets its barristers under its banner and a clerk will market the Chambers to potential clients on behalf of all the barristers in them.

In the ensuing debate, Peter Leaver QC (Chairman of Board, LCIA) suggested a solution in order to avoid last-minute potential conflicts of interest where barristers who were in the same chambers as an arbitrator were requested to act as counsel late on in the proceedings. Leaver would write into a procedural order that the parties must within 48 hours of any change in their legal representation advise the tribunal of the same.

Nathalie Voser (Schellenberg Wittmer) gave a presentation on the removal and replacement of arbitrators. First, Voser discussed the decision of the Swiss Supreme Court of 29 October 2010 (DSC 136 III 605) where the Supreme Court found that the same standard of independence and impartiality applied to a party appointed arbitrator and to a chairperson.

The decision of the Supreme Court of 10 June 2010 (4A_458/2009) was also referred to. This CAS case involved football player, Adrian Mutu, and Chelsea Football Club where a first arbitration decision favoured Chelsea confirming a breach of the employment contract by Adrian Mutu. Chelsea then claimed compensation for breach of employment contract in a second arbitration. The chairman of the first arbitration was appointed by Chelsea as an arbitrator in the second arbitration. Substantial damages were awarded to Chelsea. Mutu requested the Swiss Supreme Court to set the decision aside. Mutu argued that the arbitrators appointed by Chelsea in the second arbitration was partial as he had presided over the first arbitration. Voser explained that the Supreme Court, in dismissing the request for annulment did not address the right issues as it limited its analysis to the issue of pre-judgment by the appointed arbitrator. In particular, Voser asked whether the issue to be looked at was not in fact whether arbitrators where in a position of “equality of information”, a position adopted by the ICC Court when confirming arbitrators and/or deciding on challenges. The Supreme Court, Voser said, went very far in confirming the arbitral award and in her opinion it does appear questionable that Chelsea could appoint the former chair of a panel who rendered a decision favorable to Chelsea in the very same dispute.

The third panel of the day looked into supervision and quality control of the arbitration by the arbitral institutions.

Daniel Hochstrasser (Bär & Karrer) addressed the control of the efficient conduct and quality of the proceedings. He touched upon a range of issues.

For example, as to the question of whether institution should refuse to confirm an arbitrator simply because he or she is known to be subject to a heavy workload, Hochstrasser stated that party appointed arbitrators are rarely the reason for delay and even high-profile arbitrators are usually responsive and provide efficient input.

Time limits imposed on the rendering of an award were remarked to be of little effect. Although institutions insist on the establishment of the schedule at the outset of the arbitration, there is no input from the institutions in the procedure chosen by the tribunal/parties. Hochstrasser suggested that it might make sense for institutions to influence the number of written submissions, the bifurcation of proceedings and document production requests, particularly in small cases. Hochstrasser regretted that institutions are rarely involved in discussions with the tribunal on the procedure chosen. It was suggested that should the institution find that extremely long deadlines are being set, it could intervene.

Greenberg then talked about the specific experience of the ICC in the scrutiny of awards. Greenberg explained that the first level of scrutiny is by the ICC counsel assigned to the case, though it can be carried out by ICC deputy counsel if counsel is away. The next level of scrutiny is carried out by management, normally the deputy secretary general or the secretary general. The award thereafter goes to the ICC Court for a further review. At the ICC Court, the discussion centres on the substantive comments rather than the procedural or formal comments by the Secretariat. It is however not always clear whether the comments are formal or substantial. In any event, three things can occur in relation to the substantive comments when these are communicated to the tribunal: i) the tribunal accepts them; ii) the tribunal informs the ICC that it has made a mistake and the ICC then withdraws the comment; iii) the tribunal does not accept the comment. The second and third possibilities rarely occur.

Greenberg expressed his conviction that the scrutiny process improves awards, though there are two main drawbacks: i) there is delay; the scrutiny process at the ICC should take no more than 2-3 weeks, though it has been the case in the past that it has taken up to 4-5 months; and ii) interference with the tribunals’ liberty of decision. Greenberg stated that in order to improve the scrutiny process there could be more training, further feedback from arbitrators and a continual search for ways to improve our efficiency.

The fourth and last panel related to costs and liability.

Wolfgang Peter (Python Peter) spoke on cost control and the striking the balance between cost efficiency for the parties and fair remuneration of the arbitrators.

As a measure of the disproportion between the arbitrator’s fees and the other arbitration costs, Peter mentioned that it is often the case that experts charge higher fees than arbitrators. Peter also mentioned that in a recent ICSID case counsel had charged more than $40 million for the jurisdictional phase and that in recent case in which he was involved where $140 million was in dispute, the parties had charged $21 million in fees.

Remuneration of arbitrators on an ad valorem basis was said to have to particular problems. The first is that Peter believes that arbitrators have a lot more work on each case than in the past because of the way international arbitration has evolved; yet the system has not taken account of this. The second is that there are issues of allocation of fees between arbitrators where one arbitrator may carry out very little of the work yet still be awarded a substantial portion of the overall fees.

However, a time based system was also said to be problematic. In particular, should there also be a cap on the hourly rate charged by an arbitrator? This would disadvantage younger practitioners in Peter’s view.

Currency fluctuation was said to be a particular issue. From 2005 to today, Peter remarked, the US dollar has dropped in value against the value of all the major currencies in the world. For example against the Swiss franc it has dropped 60% and against the Australian dollar it has dropped 50%.

Michael Moser, in the ensuing debate, referred to the situation of arbitrator remuneration at CIETAC, where arbitrator remuneration is extremely slight. As an example, in a claim for $10 million, $100,000 would go to CIETAC out of which $25,000 would remunerate the arbitrators. Moser stated that as a result, the following words from the Bible were apt to describe potential arbitrator’s willingness to act in CIETAC arbitrations: “Many are called, but few are chosen”.

Professor Hans Van Houtte (Iran-United States Claims Tribunal) spoke of the liability of arbitrators and institutions. He started off by pointing out that the threats of liability are part of the charged atmosphere that exists in international arbitration. Indeed, it is the case that annulment of a decision is no longer felt to be a sufficient remedy.

The liability of an arbitrator will depend on the seat of the arbitration, Van Houtte said. In common law systems it is considered that arbitrators have the same liability as judges which is normally on the basis of wilful misconduct or gross negligence.

In civil law systems, the basis of any liability is based on the contract said to exist between arbitrators and the parties and can derive from a failure to abide by the three tasks entrusted to arbitrators namely: to render a decision; to render a good decision; to behave diligently.

Van Houtte referred to the liability of arbitral institutions. Possible areas in which an arbitral institution could be found liable include where the institution has wrongly refused a case on the basis that the claim lacks a valid arbitration clause or where it accepts the case only for the award to be later annulled because the arbitration clause was invalid.

Richard W. Naimark (Senior Vice President, AAA) remarked that in the United States there has been a long history of attempts at holding institutions and arbitrators liable. A doctrine of quasi-judicial immunity which derives from judicial immunity exists.

The articles by the speakers in this conference will be published by ASA in an upcoming Special Series volume.

By Matthias Scherer and Jaime Gallego

The dispute arose out of an arbitration clause in a joint venture agreement which provided for disputes to be resolved by three arbitrators who “shall be respected members of the Ismaili community and holders of high office within the community”. Mr Hashwani challenged the validity of this requirement on the basis that it was caught by the anti-discrimination provisions contained in the Employment Equality (Religion and Belief) Regulations 2003 (the Regulations).

At first instance, David Steel J rejected this challenge on the ground that arbitrators were not “employees” within the scope of the Regulations (which defined “employment” as “employment under…a contract personally to do any work”). He held that even if the Regulations did apply, the case fell within the GOR exception in the Regulations which applies in cases where an employer has an ethos based on religion or belief and being of a particular religion is a GOR for the position in question.

The Court of Appeal overturned this decision on the basis that an arbitrator was an employee of the appointing parties, providing services under a “contract personally to do any work”. The Court of Appeal also held that the GOR exception could not save the arbitration clause because no particular religious requirements were necessary for the discharge of the function of an English seated tribunal determining the dispute in accordance with English law.

The Supreme Court unanimously overruled the Court of Appeal decision, holding that an arbitrator’s role is not “naturally described as one of employment at all” and he is in effect a “quasi-judicial adjudicator”. The Court explained that although an arbitrator may provide services on a personal basis he “does not perform those services or earn his fees for and under the direction of the parties”; rather an arbitrator is an “independent provider of services who is not in a relationship of subordination with the parties who receives his services”.

Although the Court’s conclusion on the first issue that arbitrators are not employees was dispositive of the matter, the majority considered the GOR issue as it had been fully argued (Lord Mance, who delivered a separate judgment concurring with the majority on the employment issue, preferred not to deal with it).

The issue before the Supreme Court was whether the requirement that arbitrators be of a particular religion or belief (and by extension, other cultural or personal characteristics) can constitute a genuine, legitimate and justified requirement. Observing that this was on objective question for the Court, the majority rejected the reasoning of the Court of Appeal that an English law dispute in London under English curial law does not require an Ismaili arbitrator, as “too legalistic and technical”. The majority quoted with approval the observations of the first instance judge citing ethos of Ismaili community for dispute resolution contained within the Ismaili community, and observed that an arbitrator of the Ismaili community would bring with him or her an understanding of the parties’ conduct and moral and ethical codes which would assure the parties of an acceptable arbitration procedure in which they could have particular confidence.

The Court’s decision demonstrates an understanding that, besides the functional component in terms of application of a given national law to the dispute, arbitration has a very significant process-based dimension which is largely left to the discretion of the arbitrators by most national arbitration legislations, major institutional rules and other international codes (such as the UNCITRAL Model Law), subject only to certain safeguards necessary in the public interest. The exercise of this discretion and an arbitrator’s approach to the resolution of the dispute are bound to be influenced by a number of characteristics linked to his/her nationality, cultural background, ethos, legal training and experience. Indeed, even if, in fact, an arbitrator is not so influenced, the objective perception of the parties would always be otherwise. This point is well illustrated by the different attitudes and practices of arbitrators from diverse legal, cultural and regional backgrounds, which might manifest themselves in a predisposition towards adversarial or inquisitorial or conciliatory approach, or attitude towards confidentiality, written or oral procedures, disclosure, interpretation of contracts, treatment of witnesses and promotion of settlement etc. For instance, it has been observed that in East Asia and Middle East, social norms and values may have a greater role in shaping resolution of disputes and tendency may be to structure arbitration in a conciliatory fashion, in contrast with the Western approach which generally gives primacy to legal formality, set procedures and written agreements.

In practice, and in light of these considerations, it is a common trend for parties to incorporate requirements in their arbitration agreements which decisively influence the choice of a prospective arbitrator, ranging from nationality and language to expert knowledge or training in a specific industry, legal discipline or applicable law. By upholding the arbitration clause in Jivraj, the Supreme Court has acknowledged this practice and thereby strongly endorsed the ethos of consent and choice on which dispute settlement through arbitration is premised.

Matthew Gearing
Partner, Allen & Overy LLP

Manish Aggarwal
Associate, Allen & Overy LLP

(Allen & Overy LLP acted for the International Chamber of Commerce (the ICC) as intervener in the appeal, arguing for the Court of Appeal’s ruling to be overturned)

The revisions are wide-ranging, and represent an effort to codify certain practices already well-established by tribunals, to streamline certain other procedures, to take into account the increasing complexity of arbitrations involving multiple parties or multiple contracts, and to encourage arbitrators and parties to foster efficiency and limit the costs of proceedings.

I had the opportunity to speak with Dan González, Co-Head of the International Arbitration practice at Hogan Lovells US LLP and an experienced advocate/arbitrator throughout the Americas, Europe and the UK, who walked me through the major changes to the revised Rules and some of the implications of these changes. According to Dan, “In the over twelve years since the ICC updated its rules, there’s been an immense growth in the number and complexity of arbitrations. Rather than continue dealing with increasing complex issues as they came up, the ICC affirmatively decided it was time to update the Rules and wisely sought substantial input from practitioners, arbitrators and others over the course of the past several years.”

Dan highlighted some of the major changes to the Rules:

• Multi-parties and multi-contracts arbitration: The revised Rules include a number of new provisions that detail procedures for handling complex disputes, including provisions that facilitate joinder of additional parties, claims between multiple parties, and claims arising out of multiple contracts. These provisions largely reflect practices that have already been used by parties in the past.

• Emergency arbitrators: The emergency relief provisions are entirely new to the revised Rules. Under the 1998 Rules, parties seeking interim or conservatory relief prior to the composition of the Tribunal would seek relief before a local court. The revised Rules now provide procedures for the appointment of an emergency arbitrator to grant interim relief, in the form of an interim Order, before the Tribunal is constituted. When the Arbitral Tribunal is constituted, the interim Order can be maintained, modified or terminated. It remains to be seen how parties will respond to this new provision and if more or less conflicts will exist with local courts. The emergency arbitrator procedure will only apply to arbitration agreements concluded after January 1, 2012, and only to the extent that parties do not opt out of the provisions or have agreed to be bound by other pre-arbitral relief provisions.

• Jurisdiction challenges: This is another entirely different provision of the revised Rules. Unlike the 1998 Rules, under which the ICC Court is required to make a prima facie finding on jurisdiction, now jurisdictional issues usually will be determined directly by the Tribunal, unless the Secretary General of the Court decides to refer a case to prima facie decision on the existence of the arbitration agreement. The new provision streamlines the procedure for determining jurisdiction, and also more directly reflects the world-wide notion that the arbitrators should rule on their own jurisdiction.

• Time and Costs: Tribunals and the parties are now expressly required to conduct the arbitration in a cost-effective manner. Tribunals must conduct a mandatory case management conference at the outset, and the provisions now explicitly give arbitrators more liberty in awarding costs to consider how the parties behaved over the course of the arbitration. The new provisions on case management remain purposely broad, giving the arbitrators more latitude to control the parties by means most effective given the particular context of the parties and the specific complexities of the case.

• Impartiality, independence and availability of arbitrators: The Rules now expressly include the requirement that arbitrators remain impartial and independent. Arbitrators are also required to sign a statement attesting to their availability. This broader attestation by the arbitrators demonstrates the ICC’s recognition that arbitrators should maintain a clear appearance of impartiality and independence throughout the proceedings and that they must attest to having the time available to efficiently handle the arbitrations for which they are confirmed. This revision is an effort to manage efficiency and other issues throughout the course of the proceedings, not just when they become a problem.

• Sovereign parties and investment arbitration: With investment treaties on the rise, many investment disputes have traditionally been earmarked for ICSID arbitrations or subject to UNCITRAL proceedings. The revisions in ICC Rules could encourage parties to opt for the ICC as an alternative institution. Only time will tell on the success of the ICC’s revisions in this respect—a client’s experiences and satisfaction (or lack thereof) with other investment arbitration proceedings will affect whether they seek out different institutions in the future.

Hogan Lovells has prepared a number of helpful charts comparing the revised provisions of the Rules to the 1998 ICC Rules, as well as to the current AAA and LCIA rules, which are availablehere.

It has also been correctly stated that “[w]hether or not concerns about international arbitral efficiency are exaggerated, the international arbitration community must face this discontent and, more importantly, take steps to maintain its legitimacy with its users.”³

The problems of cost and delay in high value disputes are not, however, new subjects. In 1989 Lord Mustill posed the following (largely rhetorical) questions with respect to high value commercial arbitrations:

Do the parties work together to achieve a result which is fair and sensible in commercial terms, or do they not rather seek out every procedural advantage to ensure that they win, regardless of the merits? Do the parties really want a speedy decision, or will not the defendant spin out the arbitration for as long as possible? Are the proceedings any longer imbued by informality, or do they not have all the elephantine laboriousness of an action in court, without the saving grace of the exasperated judge’s power to bang together the heads of recalcitrant parties⁴

Building on the foundations laid in the 1985 UNCITRAL Model Law,⁵ the major sets of arbitral rules have gradually evolved over the last 20 years to clarify: (i) the extent to which parties are obliged to conduct arbitrations in a timely and cost efficient manner; and (ii) the circumstances in which arbitral tribunals may in fact be empowered to bang parties’ heads together.⁶

The most recent step in that evolution was the publication of the revised ICC Rules on September 12, 2011, which come into effect from January 2012.

Article 22(1) of the new ICC Rules states:

The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute.

Article 22(1) thus contains an explicit contractual obligation on the parties to conduct their arbitration in a ‘proportionate’ manner. More often than not, however, when large sums of money are at stake and experienced counsel are engaged on both sides, at least one of the parties has a rational incentive to ‘intensively litigate’ the dispute, thus increasing costs and causing delays.

Once a dispute has arisen, it is unrealistic to expect either party to act contrary to its self-interest in pursuit of the ‘higher ideal’ of arbitral efficiency. In such situations, time and costs are best kept in check by empowering tribunals to take ‘proportionality’-based case management decisions. The existence of such a power is common to most modern sets of rules, and is contained in Article 22(2) of the new ICC Rules:

The innovation with regard to case management in the new Rules is Article 24, which makes it mandatory for the tribunal to convene an initial “case management conference to consult the parties on procedural measures” which may be held “in person, by video conference, telephone or similar means of communication”. Article 24 also suggests that the tribunal may adopt one or more of the case management techniques described in Appendix IV.

Appendix IV contains a useful summary of case management techniques (such as bifurcation, limiting document requests, and limiting the length and scope of written submissions and witness evidence). It also emphasizes that “[a]ppropriate control of time and cost is important in all cases. In cases of low complexity and low value, it is particularly important to ensure that time and costs are proportionate to what is at stake in the dispute.”

While the case management techniques set out in Appendix IV will be familiar to all experienced arbitration practitioners, the ‘codification’ fulfils at least two important functions. First, it can reasonably be expected that the explicit encouragement to use such techniques will increase their use by less experienced arbitrators. Second, the explicit enunciation of case management techniques serves further to legitimize their use and hence to insulate awards from challenge on due process grounds.

One member of the CCIAG has suggested that “[t]o fix arbitration, practitioners must return the process to its original state as a streamlined option for dispute resolution.”⁷ In practice, it is likely impossible to reverse the trend by which arbitration has absorbed certain features of litigation, but it remains realistic to hope that tribunals (which, unlike the national court judge, will see through a case from beginning to end) will use their case management powers to ensure that the procedure is as streamlined a possible.

Paul Friedland and Paul Brumpton, White & Case LLP