The facts of the case are easy. There was a dispute over a charter party and an arbitration seated in London had issued an award against Glory of Wealth Shipping Pte Ltd (“Glory of Wealth Shipping”). Glory of Wealth Shipping applied to challenge the award before the English High Court on grounds of irregularity (“the first English application”). The opposing party, Galsworthy, applied for security of costs, which was granted by the English High Court. Glory of Wealth Shipping failed to furnish security, leading to a dismissal of their application without a hearing on the merits. Glory of Wealth Shipping also appealed against the arbitral award on a point of law, but the appeal was heard and dismissed by the English High Court.

Subsequently, Galsworthy obtained permission from the Singapore courts to enforce the award in Singapore. Glory of Wealth Shipping applied to set aside the order granting permission to enforce the award. The application was heard and dismissed by an Assistant Registrar, and failed again on appeal.

But the view of the learned Judge hearing the appeal at the High Court differed from the Assistant Registrar’s on one preliminary issue. That issue was whether Glory of Wealth Shipping was entitled to apply to set aside the order granting permission to enforce the arbitral award when it had already challenged the award before the English courts.

The Assistant Registrar was of the view that Glory of Wealth Shipping was still entitled to take up the application to set aside the leave to enforce the award and had proceeded to hear the application on its merits. The learned Judge, however, held that Glory of Wealth Shipping was not entitled to make the application because it had “elected” to proceed in the English courts and the application in the Singapore High Court amounted to “an abuse of process”.

The reasoning of the learned Judge can be summarised as follows:

(a) Glory of Wealth Shipping’s application to set aside the order granting leave to enforce was a “considered decision on its part to avoid the need to furnish security to the English court”.

(b) Glory of Wealth Shipping had “elected their forum of challenge and they ought to be bound by it”.

(c) There were no exceptional circumstances permitting the derogation from the principle of comity of nations requiring the Singapore courts to be slow to undermine the orders of foreign courts.

(d) If the application was allowed, it could result in a “duplication or conflict of judicial orders”.

(e) If the first English application was heard on the merits and failed, Glory Wealth Shipping would be entitled to challenge the enforcement of the final award in the enforcement court if the grounds and standards between the supervising and enforcement jurisdiction are different.

The learned Judge consequently held that a party seeking challenge of an arbitral award can either apply to the curial court to set aside the award, or, apply to the enforcement court to set aside any leave granted to the opposing party to enforce. These options were, as he described, “alternative and not cumulative”.

This phrasing is inadequate because it covers too much and too little at once. It over-includes because it lends itself to the mistaken impression that the options are mutually exclusive, such that one option can no longer be exercised once the other has been elected. It under-includes because it does not explain whether one option can still be exercised if the legal grounds relied upon for the second option are different from the first.

It may be useful to set out with precision how the options of an unsuccessful party in an arbitration interact. Generally, under the New York Convention, three general principles, which are by no means exhaustive, can be set out:

a) The unsuccessful party in the arbitration can resist enforcement at the enforcement jurisdiction, without having to first apply to set aside the award at the seat (see Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, per Lord Mance at [28]).

(b) The unsuccessful party in the arbitration can apply to set aside the award at the seat, whilst at the same time, resist enforcement if enforcement is being sought in another jurisdiction. That explains why Art. VI of the New York Convention allows an enforcement court to order a stay of the enforcement proceedings if setting aside proceedings are pending at the curial court.

(c) Regardless of whether the setting aside of an award is successful at the seat, the ruling of the curial court can create an issue estoppel in jurisdictions where such a doctrine (or its equivalent) exists (see Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, per Lord Collins at [98]). However, even if there is a successful annulment, the unsuccessful party in the arbitration may still find itself having to defend enforcement proceedings because certain courts may still enforce an award that had already been set aside (see Pabalk Ticaret Sirketi v Norsolor, Cour de cassation, 9 October 1984, 1985 Rev Crit 431; Hilmarton Ltd v OTV, Cour de cassation, 23 March 1994 (1995) 20 Yb Comm Arb 663; République arabe d’Egypte v Chromalloy Aero Services, Paris Cour d’appel, 14 January 1997 (1997) 22 Yb Comm Arb 691; Soc PT Putrabali Adyamulia v Soc Rena Holding, Cour de cassation, 29 June 2007 (2007) 32 Yb Comm Arb 299; Chromalloy Aeroservices v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996).

The foundation of these principles stems from the way setting aside proceedings and enforcement proceedings are in fact designed as two separate and independent juridical proceedings. One may, and more critically, may not affect the other if, for instance, a result has already been reached in one or if setting aside proceedings are already pending.

Consequently, if a party aborts a setting aside proceeding before it is heard, that should not prejudice its application to defend enforcement proceedings in another jurisdiction. It is fully within that party’s prerogative to take the view that any security for costs ordered against it in the setting aside proceedings would not justify carrying through with the setting aside proceedings. In such a circumstance, it is entirely within that party’s option to terminate the setting aside proceedings, and respond to enforcement proceedings only when enforcement proceedings are commenced by the successful party in the arbitration.

It is therefore difficult to see how an “abuse of process” happened in Galsworthy. A possible abuse of process could arguably be made out in the rare instance where the unsuccessful party withdraws setting aside proceedings at the very last minute after a hearing of the merits when it became clear that it was losing that application, so as to avoid a final judgment which may have preclusive effect on subsequent enforcement proceedings. But even then, any abuse was of the process in the court of the seat, and not at the court of enforcement.

By dint of reasoning, the language of “election” used by the Singapore High Court in Galsworthy was unfortunate. There was no obligation on Glory Wealth Shipping to challenge the award in England, and even if it did so but aborted it ostensibly because of a security for costs order, that in itself does not affect its separate and independent right to defend enforcement proceedings in Singapore.

Darius Chan (Wilmer Cutler Pickering Hale & Dorr, London)

Overview

The new Ordinance will be of considerable interest (and importance) to all parties and practitioners dealing with or considering arbitration in Hong Kong. In this blog we provide a brief overview of certain key features of the new regime including:

1. the abolition of the distinction between ‘domestic’ and ‘international’ arbitration (and the transitional provisions which apply in the context of domestic proceedings);

2. the influence of the Model Law;

3. the availability of interim measures (including the basis on which the Hong Kong Courts may grant interim measures in support of foreign arbitral proceedings);

4. the new codified obligation of confidentiality;

5. the promotion of alternative dispute resolution (including the specific provisions of the Ordinance relating to so-called ‘med-arb’ and ‘arb-med’); and

6. the particular provisions which apply with regard to the enforcement of arbitral awards (including awards rendered in Mainland China).

1. Abolition of the distinction between domestic and international proceedings

One of the most significant changes introduced by the new legislation, and one which will be celebrated by most practitioners and parties alike, is the abolition of the dual regime for ‘international’ and ‘domestic’ arbitrations. Under the previous legislation, and in keeping with the practice adopted in many other major arbitral centres (including Singapore), a distinction was drawn between ‘international’ and ‘domestic’ arbitrations, with different provisions of the previous Arbitration Ordinance (Cap. 341) applying accordingly.

In practice, what this new reform means is that practitioners no longer need concern themselves with analysing the characteristics of the parties and the dispute in order to work out which particular provisions apply to any given arbitration. Instead, the intention is that all arbitrations in Hong Kong will be governed by a single unified regime based on the Model Law, and the drafting of arbitration agreements seated in Hong Kong need not differentiate international from domestic proceedings.

There is a caveat to this. Under pressure from certain sectors (most notably the construction industry), Hong Kong legislators chose to retain the key features of the ‘domestic’ regime in a series of ‘opt-in’ provisions set out in Schedule 2 of the new Ordinance. These will apply in place of certain of the Model Law-based provisions, where parties so choose. These specialised ‘opt-in’ provisions include, for example: (i) the ability of the courts to determine preliminary points of law; (ii) appeals to the courts allowed on questions of law arising from arbitral awards; (iii) challenges to awards permitted on grounds of serious irregularity; and (iv) provision for the consolidation of arbitrations or hearings. These features may, of course, be of use to many users of arbitration depending on their particular circumstances, but a distinguishing feature of the Hong Kong legislation (and one which sets it apart from other jurisdictions, notably England & Wales) is that these are ‘opt-in’ provisions; parties will only be subject to the greater court intervention prescribed under Schedule 2 if they expressly provide for this in their arbitration agreement.

A further caveat which is important to note – albeit one which is transitional in nature – is that the various ‘opt-in’ provisions set out in Schedule 2 will apply automatically to all arbitration agreements which provide for ‘domestic arbitration’ and which are entered into before or within six years of the new Ordinance coming into effect. In the longer term, however, it is anticipated that parties in the construction industry will be the primary users of the ‘opt-in’ system, albeit that other international parties may choose to avail themselves of this regime should they wish.

2. The influence of the Model Law

As noted above, the drafters of the new Ordinance have opted to rely heavily on the internationally-recognised and accepted framework of the Model Law. The new Ordinance generally follows the Model Law’s headings and chapters, which, in turn, mirror the chronological steps of a typical arbitration procedure. The Ordinance states clearly which features of the Model Law have been adopted (whether in whole or in part) and which aspects of the Ordinance are unique to Hong Kong.

The fact that the Ordinance draws heavily on the Model Law is a positive development which reflects Hong Kong’s position as a leading centre for arbitration. The Model Law (which was last updated in 2006) establishes certain minimum standards for national arbitration legislation. Amongst other things, the Model Law describes the (limited) circumstances in which domestic courts should be permitted to intervene in the arbitral process, confirming that arbitral tribunals are empowered to grant a wide-range of interim measures and rule on their own jurisdiction (the principle of kompetenz-kompetenz). The Model Law also provides that parties should be free to agree upon the procedure of any arbitration (subject to certain fundamental safeguards) and provides an outline framework which can be adopted in the absence of agreement (including provision for what is to happen in the event of default by any party). These features can all be found in the new Hong Kong Ordinance.

It would not be correct, however, to suggest that the Ordinance follows the Model Law slavishly. In certain instances, the language of the Model Law has been modified in order to impose a slightly different standard. For example, Article 18 of the Model Law provides that parties should have a “full” opportunity to present their respective cases, whereas the equivalent provision in the Hong Kong Ordinance (Section 46) provides that parties should have a “reasonable” opportunity to do so. In other instances, the provisions of the Model Law have been replaced entirely with bespoke clauses which reflect the peculiarities of arbitration in the region (the regime for the enforcement of arbitral awards being one such example, as described in greater detail below). Generally speaking, however, Hong Kong has adopted many of the salient features of the Model Law with little or no amendment. In that respect, the new Ordinance can be said to reflect best international practice.

3. Interim measures

One of the central themes underpinning the new legislation is the notion of minimal court intervention, with provisions of the new Ordinance vesting as much power as possible with arbitral tribunals. Adopting the Model Law’s provisions regarding interim measures, arbitral tribunals seated in Hong Kong are able to grant temporary measures, for example, to preserve assets or evidence, or to maintain or restore the status quo – and the Ordinance expressly confirms that this power includes the granting of injunctions. In addition, and again in line with the Model Law, Hong Kong arbitral tribunals can award preliminary orders preventing parties from frustrating any interim measure.

Separately, arbitral tribunals seated in Hong Kong are empowered inter alia to award security for costs and direct the discovery of documents or delivery of interrogatories – retaining the ‘general powers’ of an arbitral tribunal provided under the previous regime. Moreover, and an important feature of the new legislation, arbitral tribunals may make peremptory orders, which in other jurisdictions are a useful but underused resource of arbitral tribunals, specifying time limits for parties’ compliance in order to assist with the enforcement of their orders or directions.

Section 45 of the Ordinance also empowers the Hong Kong Courts to grant certain interim measures in support of arbitral proceedings – whether seated in Hong Kong or not – albeit that the Courts may decline to grant such relief if it is considered more appropriate for the interim measure sought to be granted by the arbitral tribunal. Furthermore, the Hong Kong Courts may only grant interim measures in support of proceedings seated outside of Hong Kong if: (a) the arbitral proceedings are capable of giving rise to an arbitral award which may be enforced in Hong Kong; and (b) the interim measure sought belongs to a type or description of interim measure which may be granted in Hong Kong.

4. Confidentiality

A feature of the new legislation likely to prove attractive to many parties is the inclusion of express provisions in relation to confidentiality. Although confidentiality is often perceived as a major advantage of arbitration, it is not always guaranteed. In certain jurisdictions (including, for example, Singapore and England & Wales) an obligation of confidentiality is said to be ‘implied’ into the arbitration agreement between the parties, albeit that the precise boundaries of this obligation are somewhat uncertain. In other jurisdictions, notably Australia, the concept of imposing any obligation of confidentiality in arbitral proceedings by law has been rejected by the national courts.

The new Hong Kong Ordinance expressly prohibits parties from disclosing any information relating to the arbitral proceedings or the award, subject to the usual exceptions regarding disclosure to professional advisors or disclosure required by law. In addition, and marking another significant change from the previous regime, the default position under the new Ordinance is that court proceedings relating to arbitration are to be conducted in closed court. Parties with arbitrations seated in Hong Kong can therefore assume that duties of confidentiality will bind their proceedings without the need for any additional drafting in this regard.

5. Mediation

A further specialised feature of the new Ordinance, and one which has been borrowed and enhanced from the old regime, is that express provision is made for both ‘med-arb’ (where a mediator is appointed to try and resolve the dispute before arbitral proceedings are commenced) and ‘arb-med’ (where the arbitral tribunal assumes the role of mediator part way through the proceedings in an effort to bring about an early settlement). These provisions follow the spirit of the recent Civil Justice Reform in Hong Kong in promoting ADR (at present, if a litigant in the Hong Kong courts fails unreasonably to engage in mediation, they face potentially adverse costs consequences) and set Hong Kong apart from other leading arbitration centres.

Under the Ordinance, a member of an arbitral tribunal is permitted to serve as a mediator after arbitration proceedings have begun, provided that all parties give their written consent. The Ordinance provides that, in these circumstances, the proceedings are to be stayed in order to afford the mediation the maximum chance of success – although if the mediation fails, the arbitrator-mediator is required to disclose to all parties any confidential information obtained during the mediation which he considers to be “material to the arbitral proceedings”. This latter requirement may deter some parties from engaging in frank discussions during any mediation (particularly during any caucus sessions with the arbitrator-mediator), which may impede the effectiveness of the overall process. Furthermore, parties should also be wary of anything which might jeopardise the enforceability of a subsequent arbitral award; whilst the Ordinance states that the existence of the ‘arb-med’ process will not in itself give rise to a ground for challenge if the relevant provisions of the legislation are respected, recent case law from the Hong Kong Courts illustrates that awards may be set aside on grounds of public policy if the ‘arb-med’ process is conducted in such a manner as to create an impression of bias (Gao Haiyan v Keeneye Holdings Ltd [2011] HKEC 514).

6. Enforcement of arbitral awards

One final feature of the new Ordinance which is worth flagging concerns the regime for the enforcement of arbitral awards, which departs from the provisions of the Model Law in favour (largely) of the enforcement procedure established under the previous regime. The key point is that arbitral awards are enforceable in the same manner as a court judgment but leave of the court is required. Moreover, separate provisions in the new Ordinance distinguish between: (i) awards rendered in Mainland China; (ii) awards rendered in New York Convention states (referred to in the Ordinance as “Convention Awards”); and (iii) other awards (e.g. awards rendered in Taiwan). Whilst the evidentiary requirements are the same for all three categories of award (the party seeking enforcement must produce an original or certified copy of both the award and the underlying arbitration agreement), the rules which govern enforcement will depend on the place in which the award was rendered. For example, subject to certain limitations, awards rendered in Mainland China may not be enforced in Hong Kong if an application for enforcement is also outstanding on the Mainland (Section 93 of the Ordinance). These features illustrate that, whilst the Hong Kong Ordinance largely reflects international practice, there are certain aspects of the legislation which are tailored to the particular circumstances of the region.

Conclusion

Hong Kong is already a major centre for international arbitration in Asia. As the gateway to China, enjoying the rule of law and New York Convention signatory status, Hong Kong is a natural option for international parties looking to trade in the region. The reforms introduced by the new Ordinance, couple with the recently promulgated HKIAC Administered Arbitration Rules and the opening by the ICC of a branch of its Secretariat in Hong Kong, are likely to enhance further Hong Kong’s position as a major hub for dispute resolution in the Asia-Pacific region and as an important centre for international arbitration more generally.

Justin D’Agostino, Simon Chapman and Ula Cartwright-Finch
Herbert Smith

In Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] SGCA 21, the Singapore liquidators of an insolvent Cayman Islands company, Petroprod, sought to avoid a number of payments made by Petroprod to the appellant, Larsen, on the statutory grounds that those payments amounted to unfair preferences or undervalue transactions and/or was made with the intent to defraud. Larsen applied for a stay of those avoidance proceedings on the basis of an arbitration agreement between the parties that stipulated Singapore as the seat of arbitration.

After a comparative jurisprudential analysis characteristic of prevailing judicial practice, VK Rajah JA writing for the Court of Appeal astutely laid down three key principles:

1) Disputes involving an insolvent company that arise only upon the onset of the insolvency regime, such as disputes concerning transaction avoidance and wrongful trading, are non-arbitrable.

2) Disputes involving an insolvent company that stem from its pre-insolvency rights and obligations are non-arbitrable when the arbitration would affect the substantive rights of other creditors.

3) Disputes involving an insolvent company that stem from its pre-insolvency rights and obligations are arbitrable when the arbitration is only to resolve prior private inter se disputes between the company and other party.

In so far as the first principle is concerned, the Court incisively reasoned that many of the statutory provisions in the insolvency regime are enacted to recoup for the benefit of the company’s creditors losses caused by the former management, and this objective would be compromised if a company’s pre-insolvency management had the ability to restrict the avenues by which the company’s creditors could enforce the very statutory remedies which were meant to protect them against the company’s management. Some of these remedies may include claims against former management who would not be parties to any arbitration agreement.

There is perhaps another way the Court could have arrived at the same result. One could say that the insolvency provisions the Court was concerned about, such as transaction avoidance due to unfair preference, are not claims that are derivative of the debtor’s rights; they can only be brought by a liquidator (or a trustee or debtor in possession; or one of their assignees), none of whom were parties to the arbitration agreement: see In re Bethlehem Steel Corp. v. Moran Towing Co., 390 B.R. 784 (Bankr. S.D.N.Y. 2008), citing Allegaert v. Perot, 548 F.2d 432 (2d Cir. 1977); Hagerstown Fiber Ltd. P’ship v. Carl C. Landegger, 277 B.R. 181 (Bankr. S.D.N.Y. 2002); Hays and Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149 (3d Cir. 1989); OHC Liquidation Trust v. American Bankers Insurance Co. (In re Oakwood Homes Corp.), 2005 WL 670310 (Bankr. D. Del. 2005); Pardo v. Pacificare of Tex., Inc. (In re APF Co.), 264 B.R. 344 (Bankr. D. Del. 2001).

This is not novel and has already been foreshadowed by the Court in its earlier precedent of Ho Wing On Christopher and ors v ECRC Land Pte Ltd (in liquidation) [2006] SGCA 25, albeit in a different context concerning the recovery of costs by a successful litigant against an insolvent company in liquidation.

Indeed, in the present case the Court expressly considered the origin of the claim in elucidating the next two principles set out above. The Court observed that there were two policies militating against giving effect to arbitration agreements for disputes stemming from pre-insolvency rights and obligations.

First, because the insolvent regime is for the benefit of creditors who are not parties to the arbitration agreement, it is difficult to justify why the liquidator (or trustee) who represents the creditors should be compelled to arbitrate instead of pursuing the statutory remedies.

Second, allowing an insolvent company’s creditor to arbitrate its claim against the company in effect allows the creditor to contract out of the proof of debt process. It arguably falls foul of the principle that a company cannot contract with some of its creditors for the non-application of certain insolvency rules.

Weighing the competing policies, the Court took the final position that the right balance to be struck for disputes involving an insolvent company that stem from its pre-insolvency rights and obligations was to hold that if the resolution of a dispute through arbitration would “affect the substantive rights of other creditors”, then the dispute is non-arbitrable. Conversely, the dispute is arbitrable when it does not.

The Court reasoned that circumvention of the proof of debt process is tolerable because the process does not create new rights in the creditors or destroy old ones. Even if the claim is subsequently proved to be valid and enforceable against the liquidator (or trustee), the pool of assets available to all creditors at the time of the liquidation of the company is not affected.

The Court’s view that the proof of debt process should not operate as a complete barrier against arbitrability must be right as a matter of legal symmetry and consistency, since the Court has been granted the statutory power to permit certain actions or proceedings against a company in a liquidation, thereby allowing those creditors to derogate from the proof of debt process: see s 262(3) Companies Act (Cap. 50, 2006 Rev. Ed.) and s 148A Bankruptcy Act (Cap. 20, 2009 Rev. Ed.).

Darius Chan (Wilmer Cutler Pickering Hale & Dorr, London) &amp

Recently, the Singapore High Court in Doshion Ltd v Sembawang Engineers and Constructors Pte Ltd [2011] SGHC 46 (“Doshion”) rightly held that no injunction would lie in such an instance. It is a decision to be welcomed.

In that case, the two parties were parties to arbitration proceedings under certain construction contracts (“the Sub-Contracts”). The arbitration was scheduled to start on 28 February 2011. The claimant contended that an oral settlement was reached between the solicitors for the parties on 15 February 2011 and the arbitration proceedings should be terminated as of that date. The defendant denied the existence of any settlement.

The defendant characterised the claimant’s argument as one where the tribunal had become functus officio because of the settlement. The defendant cited a recent English High Court decision of Martin Dawes v Treasure & Son Ltd [2010] EWHC 3218 (“Dawes”) and contended that the issue of whether an arbitrator was functus went to the jurisdiction of the arbitrator, which was a matter for the arbitrator to decide.

In finding for the defendant, the Singapore High Court’s reasoning was built on three pillars:

(a) the arbitrator was not functus since the tribunal had not even begun to hear the dispute;

(b) adopting the commercially sensible approach in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, that an dispute over the existence of an settlement agreement would be caught by the ambit of the arbitration agreement in the Sub-Contracts; and

(c) in any event, any dispute about the scope of an arbitration agreement was a matter for the arbitral tribunal based on the doctrine of kompetenz-komptenz.

It was not strictly necessary for the defendant to characterize the plaintiff’s argument as one relating to functus officio – the plaintiff faced an uphill task from the get go. Section 6 of Singapore’s International Arbitration Act (the Act incorporates the Model Law) requires a court to refer the dispute to arbitration unless the agreement was “null and void, inoperative or incapable of being performed”. In Tjong Very Sumito v Antig Investments Pte Ltd [2009] SGCA 41, the Singapore Court of Appeal astutely held that in line with its prevailing philosophy of judicial non-intervention in arbitration, the Court would interpret the word “dispute” in Section 6 broadly, and would readily find that a dispute existed unless the defendant had unequivocally admitted that the claim was due and payable. In circumstances where the defendant prevaricates (ie, first making an admission and then later purporting to deny the claim on the ground that the admission was mistaken, or fraudulently obtained, or was never made), the matter would ordinarily still be referred to arbitration. The Court’s approach is commendable in giving full effect to the parties’ specified mode of dispute resolution.

When we apply this reasoning to Doshion, whether any alleged settlement was reached before or during the arbitral hearing would not, as a matter of principle, affect the question of which fora decides whether the settlement exists. It is important to ask the right question. That question is whether the underlying dispute remains unresolved. Any settlement would be in relation to the underlying dispute arising out of the Sub-Contracts. Accordingly, any dispute about the settlement originates from the underlying dispute. To answer the question, any dispute about the settlement means that the underlying dispute remains unresolved. So unless the defendant unequivocally admits the claim or acknowledges that there has been a settlement such that there is no longer a dispute, the Court will refer the matter to arbitration. Conceptually, since any prevarication by the defendant on the admission of the claim would be a matter to be referred to arbitration, any prevarication by the defendant on the settlement of the claim must have the same outcome.

This reasoning based on first principles would have been sufficient to dispose of Doshion. The claimant did not, and presumably could not, show that there had been a waiver of the arbitration agreement or an agreement to end the tribunal’s jurisdiction.

The going only gets tougher for the claimant if it embarks on the functus officio route. Akenhead J in Dawes rejected the argument that a tribunal becomes functus once a settlement has been reached during arbitral proceedings.

In Dawes, the claimant (Dawes) engaged a contractor (Treasure) to carry out construction works at his country estate. Disputes arose and Treasure commenced arbitration proceedings before Mr Ian Salisbury. After the parties had pleaded their respective cases, they agreed upon a settlement. However, the scope of the settlement was not documented in a consent order or final award. Subsequently, Dawes issued his own arbitration notice in respect of related disputes but appointed a different arbitrator. Treasure asked Mr Salisbury to rule that he retained jurisdiction in relation to the “new” dispute, and that it had been compromised by the settlement agreement. The first arbitrator ruled in favour of Treasure on both points, which was challenged by Dawes on the ground that Mr Salisbury was already functus officio after the settlement.

In dismissing Dawes’ application, Akenhead J relied on, inter alia, Section 51 of the English Arbitration Act 1996. Section 51 provides that if parties settle the dispute during arbitral proceedings, the tribunal shall terminate the substantive proceedings and, if so requested, produce a consent award. Accordingly, Akenhead J held that the settlement of a dispute after it had been referred to arbitration, but before any final award, did not generally bring an end to the arbitrator’s jurisdiction and make him functus officio. Even if the dispute was settled “there remains a jurisdiction to terminate the substantive proceedings and to resolve issues of costs or any other matters in dispute”. That jurisdiction was otherwise not statutorily limited, and neither did parties preclude or limit such jurisdiction in their settlement.

Akenhead J also observed that Mr Salisbury “would undoubtedly still have retained jurisdiction if there had been an issue between the parties as to whether there was any settlement at all. He would still have been the arbitrator to resolve the underlying disputes which would include ruling upon a defence that the claim had been settled.”

The Model Law’s counterpart of Section 51 of the English Arbitration Act is found in Article 30 which deals specifically with settlement. The lesson taught by the two cases highlighted here is that if a party wants to put an end to a tribunal’s jurisdiction immediately after settlement, it will generally have to show an agreement to end the tribunal’s jurisdiction, whether as part of the settlement itself or as a separate agreement. Unfortunately for the claimant in Doshion, there is no shortcut.

Darius Chan (Wilmer Cutler Pickering Hale & Dorr, London) &amp

The two main highlights for the SIAC in 2010 were strong case numbers for the year, and the application of the SIAC’s new rules beginning in July 2010. Looking at the caseload first, the number of new cases administered by the SIAC in 2010 was 166, rising from 132 in 2009, and 85 in 2008. This represents a 100% increase over the last two years. Again, these are cases administered by the SIAC, and don’t include ad hoc cases in which the SIAC acted only as appointing authority or otherwise played an incidental role. The increase in cases compared to 2009 suggests that the growing caseload is not something ephemeral connected to the global financial crisis in late 2008 and early 2009. Most of Asia’s economies rebounded strongly in 2010, which one might expect to cool the ardour of parties considering arbitration. That said, improvements in the economic environment may take more time to have an impact on case numbers.

The total amount in dispute for the new cases filed with the SIAC in 2010 was slightly lower than in 2009: SGD 1.35 billion — or a little over USD 1 billion — in 2010 against SGD 1.54 billion in 2009. This is a low number, when one considers the multi-billion dollar claims in perhaps dozens of individual investment and commercial arbitrations around the world — i.e. where the amount at stake in one case is a multiple of the total amount in dispute across the SIAC’s entire 2010 caseload. This is certainly consistent with my experience that there are and have historically been fewer large arbitrations in Asia than there are in Europe and the Americas, and that the big Asia-related cases are, for the time being, not typically referred to SIAC arbitration or to arbitration at other institutions in the region.

My guess is that the SIAC caseload, and the amounts at stake, will continue to rise as SIAC clauses make their way into more contracts. The pace of growth of the number of cases will slow as recent growth rates are unlikely to be sustainable. Why do I say this? My experience, from my own client work and from speaking to other users of arbitration, is that parties based or operating in the region who would previously have insisted on more established and more “international” forms of arbitration (especially ICC and UNCITRAL) are now comfortable with SIAC arbitration. They will propose SIAC arbitration to their counter-parties, or will at least agree to SIAC arbitration when it is offered to them, even in their largest contracts. I’m not talking here about companies from Singapore, most of whom have been open to SIAC arbitration for a while, but about significant investors in the region (such as the oil majors), and companies (including state-owned entities) from around the region. Many of these companies, even two or three years ago, would have resisted SIAC arbitration in their large contracts, and non-Singaporean SOEs would have been particularly hesitant. And it is these recent contracts which generate the bulk of the caseload: 85% of the SIAC’s cases filed in 2010 involve disputes arising from contracts entered into between 2007 and 2010.

Turning to the nationalities of the disputing parties, the trend seems to be one of increasing diversity, although with an unsurprising Asian emphasis. New SIAC cases filed in 2010 involved parties of 45 different nationalities. Singaporean parties were predominant, with 107 Singaporean parties out of a total of 370. The nuance here is that 42 of these were Singaporean subsidiaries of international companies. Next in line was India, with 36 parties, and Hong Kong with 26, suggesting that the SIAC’s hinterland is increasingly Asia as a whole, and not simply South-East Asia. The growing popularity of SIAC arbitration with Indian parties is, in my view, the most important trend for the future. There are huge and growing trade and investment flows into and out of India, Indian parties are rarely afraid to litigate, yet arbitration in India itself is not something that well-advised non-Indian parties (or Indian parties, for that matter) will readily agree to. SIAC arbitration in Singapore provides a decent, nearby alternative. The SIAC is in fact planning to open an office in India in the coming months, although I understand the goal will be to promote SIAC arbitration generally, rather than to function as an arbitral institution based in India handling arbitration seated in India. A new source of cases is Vietnam, which was the fastest growing source of parties to SIAC arbitrations in 2010. I expect this trend to continue, as my take is that Vietnamese parties and their lawyers are more comfortable with arbitration in Singapore than in Hong Kong, and as arbitration in Vietnam is not currently something that foreign parties will accept in a hurry.

All of these statistics and more are set out in the SIAC’s Annual Report for 2010, which has just been released and is available on the SIAC website at http://www.siac.org.sg.

At the SIAC’s drinks the Chairman also provided an update on the application of the institution’s new arbitration rules, which came into force on July 1, 2010. Alongside incremental improvements to the previous rules, the new 4th Edition introduced two more substantial changes: provision for an Expedited Procedure (Article 5.1), and for the appointment of an Emergency Arbitrator (Article 26 and Schedule 1). Both have already been put to use.

A party can apply for the Expedited Procedure where the amount in dispute is no more than SGD 5 million (about USD 4 million), or where the parties so agree, or in cases of exceptional urgency. If the SIAC accepts the application, the case will in principle be heard by a sole arbitrator, the award will be made within six months of constitution of the tribunal, and the award need only give summary reasons. As of late January, the SIAC had received 20 Expedited Procedure applications. Of these, it had accepted 12 under Rule 5(1)(a) (amount in dispute below SGD 5 million), one under Rule 5(1)(b) (agreement of the parties) and its decisions on three requests were pending. So recourse to the Expedited Procedure has been largely driven by the amount in dispute, rather than the parties’ agreement or urgency. We can probably expect increasing awareness of the Expedited Procedure to generate more applications based on the agreement of the parties. What will be most interesting is to see how often and in which situations the SIAC allows an Expedited Procedure on grounds of urgency. There have been no such cases to date.

The Emergency Arbitrator procedure allows a party to apply for emergency relief concurrent with or following a notice of arbitration, but prior to the constitution of the tribunal. If the SIAC’s Chairman accepts the application, he will seek to appoint an Emergency Arbitrator within one business day. The SIAC has received three applications for the appointment of an Emergency Arbitrator to date. In all three cases, the Chairman accepted the application, appointed an Emergency Arbitrator within a day, and the Emergency Arbitrator rendered his decision on the interim relief sought within a week of his appointment. Interestingly, two of the cases were effectively between Indian parties, while the third involved an Indonesian party and a Chinese party.

Last but not least, for those of us who want to study the 2010 SIAC Rules on the go, calculate the estimated costs of an SIAC arbitration, or check out the SIAC Panel of Arbitrators, there’s now an app. The SIAC has just launched an iPhone and iPad application, to be followed shortly by a BlackBerry app for the late adopters amongst us. The app can be downloaded, for free, from the App Store. For reasons still unclear, it has not yet made it into the Top 25 Apps, but I guess it has only been available for a couple of weeks…

After a lengthy and detailed consultation process, the Hong Kong Legislative Council has passed the new Arbitration Ordinance (Cap. 609) (‘new Arbitration Ordinance’), which is anticipated to come into effect later this year. Legislators have opted to base the provisions of the new arbitration regime heavily on the internationally recognised and accepted framework of the UNCITRAL Model Law (‘Model Law’) – but with some modifications and supplements tailored to suit the specific features of the jurisdiction. An immediate attraction of the new legislation is its organisation. It (generally) follows the Model Law’s headings and chapters, making it significantly easier to navigate than its predecessor, the Arbitration Ordinance (Cap. 341) (‘previous Arbitration Ordinance’).

Far and away one of the most significant changes introduced by the new legislation, and one which will be celebrated by most practitioners and parties alike, is the abolition of the dual regime for ‘international’ and ‘domestic’ arbitrations. Under the previous regime (and a source of not inconsiderable woe to many users) a distinction was drawn between ‘international’ and ‘domestic’ arbitrations, with different sets of provisions of the previous Arbitration Ordinance applying accordingly.

In practice, what this new reform means is that practitioners no longer need concern themselves with analysing the characteristics of the parties and the dispute in order to work out which particular provisions apply to any given arbitration. Instead, all arbitrations in Hong Kong are to be governed by a single unified regime based on the Model Law and the drafting of arbitration agreements seated in Hong Kong need not differentiate international from domestic proceedings.

There is a caveat to this. Under pressure from certain sectors (most notably the construction industry), Hong Kong legislators chose to retain the key features of the ‘domestic’ regime in a series of ‘opt-in’ provisions set out in Schedule 2 of the new Arbitration Ordinance. These will apply in place of certain of the Model-Law based provisions, where parties so choose. These specialised provisions include:

- disputes to be determined by sole arbitrators;
- the courts to determine preliminary points of law;
- appeals to the courts allowed on questions of law arising from arbitral awards;
- challenges to awards permitted on grounds of serious irregularity; and
- consolidation of arbitrations or hearings,

all of which may be of use to particular parties depending on their circumstances.

Parties wishing to benefit from the greater court intervention and other specialised provisions of the old ‘domestic’ regime may specify the applicability of any or all of the ‘opt-in’ provisions in their arbitration agreements. In addition, the ‘opt-ins’ will apply automatically where an arbitration agreement entered into before or within six years of the new Arbitration Ordinance coming into effect provides for ‘domestic arbitration’. Although it is anticipated that parties in the construction industry will be the primary users of the ‘opt-in’ system, this inbuilt flexibility may well appeal to other international parties as well.

One of the central themes underpinning the new legislation is the notion of minimal court intervention, with provisions of the new Arbitration Ordinance vesting as much power as possible with arbitral tribunals. Adopting the Model Law’s provisions regarding interim measures, arbitral tribunals seated in Hong Kong are able to grant temporary measures, for example, to preserve assets or evidence, or to maintain or restore the status quo – and the new Arbitration Ordinance expressly confirms that this power includes the granting of injunctions. In addition, and again in line with the Model Law, Hong Kong arbitral tribunals can award preliminary orders preventing parties from frustrating any interim measure.

Separately, arbitral tribunals seated in Hong Kong are empowered inter alia to award security for costs and direct the discovery of documents or delivery of interrogatories – retaining the ‘general powers’ of an arbitral tribunal provided under the previous regime. Moreover, and an important feature of the new legislation, arbitral tribunals may make peremptory orders which in other jurisdictions are a useful but underused resource of arbitral tribunals, specifying time limits for parties’ compliance in order to assist with the enforcement of their orders or directions.

Another feature of the new legislation likely to prove attractive to many parties is the inclusion of express provisions in relation to confidentiality. The new Arbitration Ordinance expressly prohibits parties from disclosing any information relating to the arbitral proceedings or the award. In addition, court proceedings in support of arbitration are to be conducted in closed court as the default. Parties with arbitrations seated in Hong Kong can therefore rest assured that duties of confidentiality will bind their proceedings, and no additional drafting or argument is required in relation to this factor.

Another specialised feature of the new Arbitration Ordinance is the provision for mediator-arbitrators. Under the new regime, a member of an arbitral tribunal is permitted to serve as a mediator after arbitration proceedings have begun, provided all parties give their written consent. In addition, where a third party specified in an arbitration agreement has failed to appoint a mediator (presumably in a tiered dispute resolution clause) the HKIAC may step in and do so, on the application of a party.

These provisions follow the spirit of the recent Civil Justice Reforms in Hong Kong in promoting ADR (at present, if a litigant in the Hong Kong courts fails unreasonably to engage in mediation, they face potential adverse costs consequences), albeit in a much more limited and flexible framework. However, the utility and acceptance of these provisions within the context of arbitration remains to be seen. For example, one drawback of the mediator-arbitrator – which will undoubtedly trouble many parties – is the requirement that, following a failed mediation, an arbitrator disclose to all parties as much confidential information he obtained during the mediation proceedings as he considers ‘material to the arbitral proceedings’. The controversial topic of mediator-arbitrators will be considered further in a forthcoming blog.

The new Arbitration Ordinance departs from the provisions of the Model Law in relation to the enforcement of arbitral awards, and instead retains the enforcement procedure established under the previous regime (i.e. arbitral awards are enforceable in the same manner as a court judgment but leave of the court is required.) However, separate provisions in the new Arbitration Ordinance distinguish between the enforcement of (i) Mainland awards, (ii) New York Convention awards and (iii) non-Mainland and non-New York Convention awards (e.g. Taiwan). These provide a comprehensive system for the enforcement of arbitral awards, removing any ambiguities which existed under the previous regime.

Hong Kong is already a major centre for international arbitration in Asia. As the gateway to China, enjoying the rule of law and New York Convention signatory status, Hong Kong is a natural option for international parties looking to trade in the region. The welcome reforms brought in by the new Arbitration Ordinance are likely to bolster Hong Kong further as a heavyweight competitor for arbitrations in the Asia-Pacific region. It will be interesting to see how the new legislation plays out in practice and whether some provisions are favoured over others.

Justin D’Agostino and Ula Cartwright-Finch, Herbert Smith

If time permits, I may do another list for 2011. But, first I thought I’d take a look back at last year’s list and offer a brief update on those cases. Rather, than do all of the heavy-lifting here, I’ll direct readers of this blog to relevant reporting in my Investment Arbitration Reporter newsletter (not to be confused with Kluwer’s ITA newsletter) where appropriate. (You won’t need a subscription to view the articles that are referenced below, as we’ll make them publicly available.)

Without further ado, here’s a run-down of the ten cases from last year.

Suez, Vivendi, Anglian Water, et al. v. Argentina

In August, decisions on liability were finally rendered, holding Argentina liable for breaching investment protections owed to a Who’s Who of foreign investors in that country’s water and sewage sector. However, for those interested in the running debate about the coherence or fragmentation of public international law, the decisions may be something of a disappointment. While the arbitrators found breaches of Argentina’s bilateral investment treaty obligations, they gave short shrift to Argentina’s invocation of international human rights law obligations in its defence of these claims. Check out our reporting for a fuller run-down of what happened.

Fraport v. Philippines

Next on last year’s list was Fraport’s bid to annul an ICSID jurisdictional decision which had grounded the company’s bid for compensation over an expropriated airport terminal. In 2007, a divided tribunal ruled that the company’s claim should fail due to the fact that the claimant had quietly circumvented local laws designed to limit foreign control of the terminal project.

Well, tell your friends that you read it on the internet: Fraport got an early Christmas present on December 23rd when an ICSID annulment committee annulled the 2007 ruling. The annulment paves the way for a new arbitration, and one imagines that this will land on ICSID’s doorstep early in the new year. Keep an eye on the IAReporter newsletter for the fuller story on this one.

Brandes Investment Partners v. Venezuela

Last year, we noted that a decision should be forthcoming by a panel of arbitrators in a telecoms nationalization claim whose viability hinges on the ambiguous-looking arbitration clause in a domestic investment protection statute. Yeah, that’s a mouthful. But you’ve got time to digest it because, as of this writing, a decision in the Brandes case is still awaited.

Mind you, a different ICSID panel weighed in earlier this year with a notably restrictive interpretation of the same statute at issue in the Brandes case. Our report on that dimension of the Mobil v. Venezuela case is here. Now it remains to be seen what the Brandes tribunal makes of the ruling in the Mobil case.

El Paso v. Argentina

Nothing new to report here. El Paso turned to arbitration against Argentina back in 2003, alleging that the country’s handling of an earlier financial crisis triggered breaches of protections owed to El Paso. Arbitrators are still dotting their ‘I’’s and crossing their ‘t’’s on this long-anticipated decision. El Paso must be thoroughly demoralized given that the most likely outcomes are A) a dismissal of its case or B) a “victory” followed by a protracted annulment process.

AES v. Hungary

There is rather more to report in relation to another claim highlighted in last year’s list. AES was one of three foreign power producers to sue Hungary for allegedly failing to respect the terms of long-term power purchase agreements. However, in September, arbitrators handed down a verdict in favour of Hungary, finding no breaches of the country’s obligations under the Energy Charter Treaty. A fuller accounting of the case can be read here.

Foresti and others v. South Africa

A group of foreign miners drew international headlines when they alleged that South Africa’s Black Economic Empowerment program – and the country’s new BEE-inspired mining regime – had breached protections owed under South Africa’s bilateral investment treaties.

As was noted last December, the politically contentious dispute seemed to be fizzling out after the claimants signaled that they were prepared to lay down their arms. However, the claimants and South Africa could not agree on the peace terms, so it fell to arbitrators to hold a hearing and issue an award which drew a line under the case. Read all about it here.

RosInvestCo v. Russian Federation

On December 19, 2010, we reported that an arbitral award in one of three pending Yukos-related arbitrations against Russia had been quietly rendered back in September. The ruling had remained under lock and key until the Russian Federation moved earlier this month to set aside the award. Here’s our quick run-down of what happened, but keep an eye on our newsletter for a full accounting of the award’s holdings.

Chemtura v. Canada

Canada walked away victorious after arbitrators ruled in August of 2010 that a U.S. chemical company had failed to make out any of its claims under the North American Free Trade Agreement (NAFTA). The case had been watched nervously by public health advocates as Chemtura was attempting to second-guess Canada’s phase-out of the controversial agro-chemical, lindane. But, in the end, Canadians were left only with a hefty legal bill – not an arbitral edict requiring them to put a teapoon of lindane on their morning oatmeal. See this report for the crux of the tribunal’s ruling.

Chevron v. Ecuador (Round One)

While a bruising multi-front legal fight over liability for Amazonian oil pollution gathered pace last year, arbitrators also weighed in with a ruling on a less-publicized under-card battle between the two combatants: Chevron corporation and the Republic of Ecuador.

In what could be a hefty victory for Chevron, arbitrators ruled that Ecuador was liable for delaying the judicial resolution of a series of contract disputes. As we made clear in an analysis of the arbitral ruling, the tribunal appeared to break new ground in ruling that an international tribunal can step into the shoes of domestic courts that are failing to deliver justice in a timely fashion.

Libananco v. Turkey


Various claimants came out of the woodwork to sue Turkey following that country’s winding up of the Uzan family business empire. Libananco, a Cyprus-based entity, has long maintained that it has the most credible claims. The off-shore company insists that it held stakes in two valuable electricity concessions prior to their being taken over by the government. With all of the other known arbitration claims brought by shell-companies now having been dispatched on jurisdictional grounds, a ruling in the Libananco case is the only thing left to be written.

However, if Libananco should prevail, it will have to contend with a recent ruling by a New York judge that any ICSID arbitration winnings must accrue to the benefit of those who suffered a Billion Dollar fraud at the hands of the Uzans. See our story here.

Luke Eric Peterson
Editor
http://www.InvestmentArbitrationReporter.com

In ALC v ALF [2010] S.G.H.C. 231 (“ALC v ALF”), the High Court revoked the issue of a subpoena that had earlier been granted on an ex-parte basis (as is usually the case) on the grounds that the issue of the subpoena had been an abuse of process.

ALC v ALF is a case that fell within the domestic arbitration regime and was governed by the Arbitration Act (Cap 10) (the “Arbitration Act”). Nonetheless, the Court’s observations would likely apply in the international context, given the similarities between the Arbitration Act and the legislation governing international arbitrations, namely the International Arbitration Act (Cap 143A) (the “International Arbitration Act”).

The issue of a subpoena was sought by the defendant in ALC v ALF, this following immediately after the arbitrator’s decision to deny, after a full hearing, the defendant’s request that the plaintiff’s witnesses provide sworn testimony attesting to the adequacy of the discovery. The arbitrator did reserve the parties’ rights to present further submissions if it should turn out that discovery was inadequate.

Notwithstanding the arbitrator’s ruling, the defendant proceeded to apply for a subpoena in the Singapore High Court for the same purpose – to require an employee of the plaintiff to attend the hearing to give evidence regarding the adequacy of the plaintiff’s discovery.

In its decision to revoke the subpoena, the Court noted that the parties had agreed to a procedure where only the witnesses agreed to by the arbitrator would attend the hearing. The court considered the terms of the procedural order issued by the arbitrator, and found that the parties had clearly agreed that the arbitrator would have final say as to the calling of witnesses to the hearing.

The Court ruled that the defendant ought to have sought direction from the arbitrator before calling the plaintiff’s employee as a witness. The Court held that the defendant’s attempt to circumvent this arrangement was premature, improper and constituted an abuse of process.

ALC v ALF reaffirms the prior decisions of the Supreme Court that upheld the policy of minimal curial intervention in the arbitral process. The Court specifically held that recourse should be had to the parties’ contractual arrangement and agreement on procedures before seeking curial intervention.

The judgment does leave open for consideration the position where there is no applicable contractual arrangement or agreement on procedures – in such an event, should a party still seek the consent of the arbitral tribunal? In some cases, rules and/or legislation answer the point – see e.g., Article 27 of the UNCITRAL Model Law and section 43(2) of the English Arbitration Act 1996. Under the Arbitration Act (or indeed, the International Arbitration Act), the position remains undecided. Section 30 of Arbitration Act (and section 13 of the International Arbitration Act) does not expressly provide that an arbitral tribunal should be consulted before applying to court for a subpoena.

Whilst the judgment in ALC v ALF is undoubtedly correct on the facts, one questions whether the Court would have ruled in similar fashion had there been no agreement on directions relating to the calling of witnesses. Would the Court still have abided by the policy of minimal intervention?

The second decision in this posting concerns the powers of the Courts to order pre-arbitral discovery. In Equinox Offshore Accommodation Ltd v Richshore Marine Supplies Pte Ltd [2010] S.G.H.C 122 (“Equinox”), the Singapore High Court denied an application for pre-arbitral discovery.

The plaintiffs in Equinox had sought pre-arbitral discovery from the defendant to ascertain the viability of commencing arbitration proceedings against the defendant for overcharging the plaintiff under a commission arrangement. This discovery was sought pursuant to a provision in the agreement that allowed the plaintiff to inspect the records of the defendant. The self-same agreement had an arbitration clause.

The Court ruled that legislation did not confer on the Courts the power to order pre-arbitral discovery. Neither did the Court have inherent jurisdiction to grant such discovery. The Court again placed emphasis on minimal interference – if parties had chosen arbitration as their mode of dispute resolution, the entire conduct of the arbitration proceedings should be left to the arbitral tribunal. This ought to extend to pre-arbitral discovery as well.

The decision itself raises interesting questions. Among other issues, it would follow from the decision that the Courts do not have the power to grant pre-arbitral discovery against third parties for the purposes of ultimately commencing arbitration proceedings between the contracting parties – this may be a matter that needs to be addressed by agreement (if not also by legislation).

In fact, the Court in both ALC v ALF and Equinox gave primacy to the contractual agreements and arrangements between the parties. The Court in Equinox echoed the sentiment in ALC v ALF and observed that it “surely is for the parties to make the necessary contractual provision for such a pre-arbitral process of discovery”.

In conclusion, these recent decisions highlight the Singapore Courts’ careful refrain from undue interference in the arbitral process, and ought to be welcome in this regard. There is now greater clarity in the scope of the Courts’ powers in providing interim relief in aid of arbitration and parties should consider this when drafting their arbitration agreements. A failure to do so could leave parties without a proper recourse, given the Courts’ approach to applications for interim relief.

By Nandakumar Ponniya and Dian Chen

Just as BITs have proliferated in recent years, so too have free trade agreements. There are approximately 380 free trade agreements now in existence, and yet the question of dispute settlement in the FTA context has rarely featured in the discussion. Sure, there have been NAFTA Chapter 20 cases, and the occasional ad hoc dispute–such as the Canadian-U.S. Softwood Lumber dispute. But international trade arbitration pursuant to FTAs is still in its infancy.

The recent EU-South Korea FTA signed last month may signal a new era of FTA arbitration. The dispute settlement chapter of this FTA combines features of both investment arbitration and the WTO DSU.

The procedures are similar to investment arbitration. There are provisions for the request for arbitration, establishment of an arbitral panel, rules on arbitrator conduct, rules governing proceedings, evidence gathering and hearings, time limits for the award, etc. There are a few unique provisions, such as drawing arbitrators by lot from a roster of fifteen, and adopting the seat of arbitration as either Seoul or Brussels, depending on which State is the complaining Party. But in most respects the procedures are familiar to other forms of arbitration involving States.

When it comes to remedies, however, the FTA arbitration rules are similar to the WTO. A non-complying State may offer compensation for a violation, or failing that, be subject to retaliatory countermeasures (i.e., increased tariffs). Those tariff increases may not exceed the level applied to other WTO members, but will result in the suspension of duty-free benefits under the FTA. Similar to the WTO, disputes as to compliance measures or deadlines are subject to further arbitration. The traditional recognition and enforcement questions under the New York Convention are irrelevant in this context.

Over 50% of all trade in goods occurs on a preferential basis. Like BITs, FTAs will continue to proliferate. Sophisticated dispute resolution mechanisms in FTAs are long overdue. The future portends a new world of international trade arbitration, and a growing international trade arbitration bar.

Todd Weiler:

As I see Prof Franck is performing the live blog function, I will take the guerrilla blogger role…. Guerrillas strike and retreat. They don’t stand and defend (at least not with this kind of word count limit!).

…

Todd Weiler:

One of the minor ways in which it might be said that China is still a developing country can be seen in men’s washrooms… It reeks of the surreptitious adventures of desperate smokers.

…

Lisa Blomgren Bingham:

The important observation is how investment dispute systems need to provide for public participation and transparency given the important public policy issues at stake.

Jason Yackee:

But nobody actually wants to watch ICSID proceedings. They are boring.

…

Jason Yackee:

African “VIP” next to me is falling asleep. Is that a sign of something meaningful?