The first questions to address, perhaps, is why not a female? A fellow colleague of mine, a male, who is active in the international arbitration arena asked me this very question. From a male’s perspective – is there anything that a male arbitrator or even male counsel representing a party could do which the female counterpart could not? Honestly, I cannot think of one thing. Yet, referrals seem – and this is purely based on anecdotal evidence – go more to males than the female counterparts. In fact, after recently attending a conference in Dublin, I overheard one female practitioner saying to another female practitioner, “Women simply do not refer cases to other women.” Are we then the culprits ourselves? It would be rather ironic if the women are contributing to holding women back. I actually can imagine this being the case. There are a few women out there who have worked exhaustingly to build up a reputation landing them in this prestigious male-dominated club and for those of you having appointed female arbitrators or referred cases to a female practitioner, it is likely one of very very few.

This leads back to a former post of mine on this blog, Choosing the Young Buck or the Weathered Veteran, which looked how clients can take the lead in making changes to their bottom line by going outside the standard circle of names. This occurs amongst the female arbitration circle as well. What referrals do go to females, go to the very same core small group of females. It’s a double hit to the rest – females are underrepresented in international arbitration and what does come in may go predominantly to the very same ones. These females presumably have referrals to pass out on occasion – I ask them – do you refer them to females or males? All things being equal of course, would you choose the male? Naturally, these are rhetoric questions and not ones I would expect anyone to have to publicly address, but it would have been interesting to see those statistics.

Clients themselves can help level the playing field for women by also giving equal thought – not just to the young bucks in order to get fresh ideas and truly rein in costs – but also to diversity. Many in-house counsel are women. How many of them are in the position to choose the arbitrator or outside counsel, I do not know as I do not have these statistics, but I wonder whether the “best” candidate is ever female? Women are sufficiently and perhaps even over represented at arbitral institutes. This could imply that the arbitration community is at least comfortable with women administering arbitrations.

There is no easy answer to this concern. Many female attorneys are flocking to conferences, getting on arbitral institute arbitration lists, working hard at firms of all sizes and statures to break into the fold. Therefore, the availability of ambitious, intelligent and experienced female arbitration practitioners exists. It is not a lack of supply and quality candidates that stands in the way. What is then? Is it us, the females ourselves? I certainly do not think there is an active movement against women (and surely not by women themselves) – indeed there are wonderful organizations sprouting up to assist females in networking and growing their careers, including in the arbitration industry. Those key, famous female arbitration practitioners are some of the best mentors to many. I only wonder, when it comes down to providing the actual work and opportunities whether we hesitate to choose a fellow woman. If so, how can we overcome this?

Conventionally, legal education has been confined to the classroom. In England it was left to the Inns of Court and the Law Society, and in the civil law systems to the Bar authorities, for bridging the gap between ‘legal education’ and learning the science (or art) of ‘lawyering’.

The concept of compulsory continuing legal education (CLE) after qualification came about as a result of a number of elements that indicated an increasing need to ensure that practitioners keep themselves up-to-date with changes in the law. It is surprising that this was not introduced earlier, as (for example) the medical profession has been doing it for many decades, if not centuries. One of the results of this development is that practitioners and post-graduate/pre-qualification lawyers feel the pressure of increasing tuition costs.

The full effects of this have yet to be seen and analysed. However, it can be predicted with some confidence that increasing student demands, together with the requirements for compulsory continuing post-qualification legal education, will witness a corresponding rise in the need for modern ‘skills-learning’ methods – such as the use of ‘mock’ scenarios for dispute resolution and negotiation, rather than the classical model of classroom teaching. By analogy, when you learn to drive a car you may start by learning the rules of the road in a classroom, but you do not get your licence without spending time ‘behind the wheel’ with an instructor sitting in the passenger’s seat. Thus, teaching substantive law in a classroom is not be enough; students must learn ‘lawyering skills’ as well.

The compulsory CLE system was designed to ensure that practising lawyers would be up-dated with latest developments in their specialised fields (and more widely for the few remaining general practitioners). However it confused newly qualified lawyers and employers alike – especially the latter because they could not fathom the need for new recruits to waste precious billing hours in a classroom. Skills learning was introduced partly in order to avoid the potential problem of qualified lawyers being mere wallflowers at lectures. For instance, dispute resolution techniques were taught by using mock cases supervised by career practitioners. Course leaders would brief the students on the mock case before the action began, and would ‘de-brief’ them afterwards to help them analyse what they did right, and what they did wrong. While the longer established universities experienced difficulty in creating faculties for this purpose, comprised primarily of individuals who had not acquired the required academic qualifications and/or a suitable publications list, the new universities found it relatively easy to conform to this method of instruction as a result of the flexibility contained in their statutes to award chairs to suitably qualified retired or semi-retired practitioners). Commercial providers also took advantage of this ‘gap’ in the market.

Another development of the ‘learning-by-doing’ process was in the field of mooting. Mooting is an age old skills learning tool. The Willem C. Vis International Arbitration Moot, for example, is presented in the form of a ‘file’ rather than a narrative so, as lend to the competition the feeling of a real live dispute. What adds to the value of mooting is the fact that, as well as knowledge of substantive law gained from the problem scenario itself, participants gain confidence and generally improve their ‘soft skills’ during the exercise. Rapport building is a large component of this, and engaging in a moot makes a student privy to a number of verbal and non-verbal tools that are of great importance to legal practitioners.

However, the mooting scenario does not progress beyond argument and counter argument. There is no scope for presentation of evidence by cross-examination or other confrontational methods. The National Institute of Trial Advocacy (NITA), which is at the forefront of advocacy training in the USA has introduced this element in workshop format. However, the NITA experience is, in general, restricted to jury trial techniques, which is an entirely different ball game from international arbitration, or even a civil trial before a judge alone. In the international scenario, a number of institutions have embarked on advocacy training exercises, for example the Foundation for Advocacy in International Arbitration (FIAA) and the Dubai International Arbitration Centre (DIAC).

Learning-by-doing is by no means the only way to train lawyers, and prospective lawyers, to acquire advocacy skills. However, it is an important element for those infected with a mission to become advocates in the international arbitration context, and – as a later step – to become international arbitrators. Other educational techniques also exist, which due to constraints of space and time must wait for another day. These include mentoring, pupillage and so forth.

The overwhelming conclusion is that the skills needed to become an effective lawyer in the field of advocacy cannot be learned solely in a classroom or lecture theatre. There is an undeniable role for the ‘learning-by-doing’ experience.

Your contributor would welcome debate on the topic in this forum; the international arbitration community needs to examine the ways in which the system can be made to operate better in the medium-to-long term.

Decision

X (a Turkish company) and Y (a Polish company) were in dispute over the question of which party was responsible for the delays in the execution of the contractual work. The dispute was brought before an ICC tribunal seated in Zurich. With respect to the disputed question, each party submitted to the arbitral tribunal a technical expert report.

In an award of 30 September 2010, the arbitral tribunal dismissed X’s claim. It partially granted Y’s counterclaim and ordered X to pay to Y EUR 6,587,442.70. In the award, the arbitral tribunal dealt with the submitted expert reports and found the expert report submitted by Y more persuasive than X’s expert report. It held X responsible for the delays in the execution of the contractual work.

X appealed against the award to the Swiss Federal Supreme Court. It argued that the arbitral tribunal, in its award, only dealt with the expert opinion submitted by Y thereby “completely suppressing” the expert opinion submitted by X. Moreover, according to X, the arbitral tribunal should have appointed an expert to receive the technical expertise necessary for the assessment of the decision-relevant questions. By not doing so, the arbitral tribunal violated X’s right to equal treatment and its right to be heard (Article 190(2)(d) PILA) as well as the public policy (Article 190(2)(e) PILA)*.

The Supreme Court dismissed the appeal. It found X’s complaint that the tribunal only dealt with the expert opinion submitted by Y and thereby “completely suppressed” the expert opinion submitted by X unfounded because, before the Supreme Court, X admitted that the arbitral tribunal on pages 96-114 of its award explained in detail why it did not follow the expert opinion submitted by X but gave preference to the opinion submitted by Y.

Also, in the arbitration, X submitted its comments on the expert report filed by Y without at the same time submitting a request that the tribunal appoint an expert to receive the technical expertise necessary for the assessment of the decision-relevant questions. Confirming its constant practice, the Supreme Court held that, if X, at that time, considered that its right to be heard or its right to equal treatment had been violated, it should have communicated its objection promptly.

Comment

This decision touches on an interesting issue, namely, when is an arbitral tribunal obliged to appoint an expert. In the present case, the tribunal did not have to decide this question (the appeal was rejected because the appellant had not pursued this request in a timely manner during the arbitration).

However, it is worthwhile recalling that the position of the Supreme Court on this point is clear. The parties have a right to the appointment of an expert by the tribunal (such right being a part of their right to submit evidence and be heard) if the following preconditions are met: (i) the party who intends to rely on this right must have expressly requested the appointment of an expert; (ii) the request must be made in proper form and in a timely manner; (iii) if required by the tribunal, the requesting party must advance the costs of such expertise; (iv) the expert evidence must relate to facts relevant for rendering of the award; and (v) the expert evidence must be necessary and proper for proving such relevant facts.

This last precondition is met where the facts concern technical issues or matters which in some other way require special knowledge and cannot be proven otherwise, and where the arbitrators do not have such special knowledge (decision 4P.320/1994 of 6 September 1996).

Where these preconditions are met, and unless its members possess the necessary technical or other special knowledge, an arbitral tribunal violates the right of the parties to be heard if it rejects a request for the appointment of a tribunal-appointed expert (decision 102 Ia 493, unpublished note 8; decision 4P.23/1991 of 25 May 1992 note 5b).

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* Article 190(2) of the Swiss Federal Statute on Private International Law (PILA) permits a final award to be set aside for a limited number of reasons. Under Article 190(2)(d) PILA, an award can be set aside if the parties’ right to equal treatment or their right to be heard was violated and, under Article 190(2)(e) PILA, an award can be set aside if it violates public policy.

Georg von Segesser / Petra Rihar

It was at the opening ceremonies at the opera house in Vienna that the magnitude of the Vis really hit us. We were a small cluster of five students and three coaches, surrounded by a sea of hundreds upon hundreds of sharply dressed students, coaches and arbitrators. We heard an updated version of Harry Flechtner’s CISG song, which could only be fully appreciated by that audience. We got to hear more about Eric Bergsten, the father of the Vis and the writer of a frustratingly clever moot problem. We saw him honoured with a liber amicorum, to celebrate his 80th birthday. I recall thinking at that moment – how could I possibly get a chance to shake his hand and thank him for creating and fostering this moot that had dominated my life the last six months?

We participated in a couple of practice rounds before the competition started in earnest, and we made great friends, particularly the University of Freiburg from Germany and the Victoria University of Wellington from New Zealand. The general rounds saw us face strong schools, including the University of St. Gallen, who eventually won the award for best respondent memorandum. We knew that given that different judges, with varying degrees of generosity when scoring, hearing the rounds, there is an element of subjectivity in making it out of the general rounds. While we were pleased with our performance, we were still very relieved to make the playoffs.

We pulled some tough draws in the playoffs. In the round of 64 we had to get past the University of Zagreb, who have repeatedly finished in the top three schools in previous years at the Vis. In the round of 16 we had a bittersweet collision with our good friends from Wellington, another strong school which won the 16th Vis. This round was definitely one our closest rounds. By the time we learned that we’d won the quarter-finals and would progress to the semi-finals, we were tired. In the span of 24 hours we’d argued four tough rounds, with some of us arguing every round.

The final day, at 8:30am, we squared off against the University of Hamburg. These two young women were another strong team. They were both articulate and compelling. After long moments of anxiously waiting for the results, we learned that we would move to the finals against the University of Montevideo from Uruguay. It was their first time at the competition, and they were causing a stir. We would soon learn the stir was justified.

In the final round I’ve heard other spectators contrast the passion and eloquence of the Montevideo team with our methodical precision. After making our submissions to an esteemed tribunal, in front of over a thousand of our peers and other ICA experts, I was left very uncertain which team would prevail.

Eric Bergsten called both teams to the stage. We were all ecstatic even to be standing there. Then came a few words from Stefano Azzali, the chairman of the final tribunal, and the Secretary General of the Chamber of Arbitration of Milan, whose arbitration rules were the subject of this year’s moot. His final words were to announce that the University of Ottawa had won. You can imagine the jumping up and down and bear hugs that ensued. Montevideo was a classy team who joined us in the celebration because in the words of Stefano Azzali, we were all winners. I think he meant those words for everyone who participated in this year’s Vis.

It was not long after that when I got my chance to shake Eric Bergsten’s hand. In fact he indulged us for quite a while, answering our many questions about what arguments he’d foreseen and how he’d expected us to deal with certain issues.

Over the past few days I’ve often been asked why I think we won. Looking back, I can pick out three assets that I think made the difference.

The first asset is the program we have at the University of Ottawa. We take oral advocacy and thus mooting very seriously. Our university consistently does well at both international and domestic moots. We have excellent coaches like Professor Anthony Daimsis, who know how to bring out the best in students. Our faculty actively encourages oral advocacy because they understand its importance in the legal profession.

The second asset is preparation. We did our research. Anyone on the team could probably name 40 commentators on ICA or the CISG. Our coaches, Professor Daimsis, John Siwiec and Aida Setrakian, along with other guest arbitrators also grilled us mercilessly (and you know I’m not using flowery language if you have seen Professor Daimsis in action) with questions to ensure we had considered the case from every angle. We did the math, and if we were billing, our legal fees would be greater than the value of the claim.

The third asset is the people. Our team consisted of five students who were brilliant, hard working and selfless in favour of the team. Everyone carried their weight. Everyone contributed to every argument. Disagreements just disappeared when the team made a decision or if something was best for the team. This is the kind of team that I dream of working with in practice.

From all of us on the team, thank you to everyone in the community who made this possible and who contributed to this experience of a lifetime.

Marc McLaren-Caux is articling at Fraser Milner Casgrain LLP in Ottawa. Jonathan O’Hara is articling at McMillan LLP in Ottawa. Sherif Foda is working at Lalive in Geneva before studying at Oxford for his LL.M. Diane Laranja is in her 3rd year of her JD and will be summering at Sherrard Kuzz in Toronto. Etai Hilzenrat has just completed his LL.L.

Background

The articles of association of corporation Y (“Y”) contain an arbitration clause which applies in case of a dispute between Y and its members of the board of directors or its shareholders. On 5 January 2004, Y was declared insolvent. In March 2007, Y’s shareholder and creditor A (“A”) filed a liability claim before the commercial court of canton of Bern requesting that the members of Y’s board of directors be ordered to pay CHF 1m. The respondent board member X (“X”), in turn, raised a plea of arbitration based on the arbitration clause contained in Y’s articles of association.

On 7 July 2009, the commercial court of canton of Bern decided that the arbitration clause did not include the dispute at hand and that the court had jurisdiction over the matter. Subsequently, X filed an appeal against the commercial court’s decision before the Swiss Federal Supreme Court.

Decision

The Federal Supreme Court dismissed X’s appeal and confirmed the commercial court’s holding that the arbitration clause did not apply. It held that by filing a liability claim against Y’s board members, A was not enforcing the rights of Y against its board members, but was enforcing the rights of Y’s creditors. For this reason, a board member could not bring forward all defenses it could have brought forward against a claim filed by Y itself. He could only bring forward the defenses he had against Y’s creditors.

The Supreme Court held that the plea of arbitration was not a defense X could bring forward against Y’s creditors. It was a defense X could only bring forward against a claim filed by Y itself. If such a defense could be brought forward against Y’s creditors, there would be a risk that, due to an arbitration clause in the articles of association, the enforcement of liability claims of creditors could be hindered. Since Y’s creditors had no influence on the content of the articles of association, they were not bound by the arbitration clause contained therein.

Comment

Liability claims against members of the board of directors can generally, in domestic and in international cases, be submitted to arbitration. This, however, is only the case where the arbitration clause satisfies the form requirements and where, e.g., the shareholders or board members – later a party to the dispute – validly consent to the respective arbitration clause. The consent requirement can be satisfied if a shareholder, when purchasing the company’s shares, or a member of the board, when accepting the appointment, at least by way of referral to the arbitration clause in the articles of arbitration consent to such arbitration clause. On the contrary, an arbitration clause is neither binding on those shareholders who purchased their shares prior to inclusion of the arbitration clause in the articles of association nor is it binding on the company’s creditors. With respect to the latter, it is established in legal literature that an arbitration clause is in particular not binding in the case of an insolvent company, where a creditor files a liability claim against the board members on behalf of all creditors of an insolvent company. The present case, published in the official Federal Supreme Court Case Reporter, confirms the existing view.

Georg von Segesser / Petra Rihar

Background

In 2006, two ICC arbitrations were initiated. They had the same factual background, but were based on different (yet interconnected) agreements. In the first arbitration (dealt with in the decision 4A_256/2009), AY (“AY”), a company incorporated under the laws of the Czech republic, initiated an arbitration against X (“X”), a Czech citizen. In the second arbitration (dealt with in the decision 4A_258/2009), X (Respondent in the first arbitration) initiated an arbitration against Y (“Y”), a Czech citizen, sole owner of AY (Claimant in the first arbitration).

In both arbitrations, the arbitral tribunal was composed of arbitrator Q (“Q”) (nominated by X), arbitrator P (“P”) (nominated by AY in the first arbitration and by Y in the second) and of the Chairman O (“O”) (nominated by the co-arbitrators). The tribunal decided not to consolidate the proceedings.

After the tribunal rendered the awards, X appealed before the Federal Supreme Court against both awards. In both proceedings, X argued that P and O were biased and that, therefore, there was no guarantee that the arbitral tribunal was impartial and independent of the parties.

Decision

The Federal Supreme Court dismissed both appeals.

As to P’s lack of independence, X argued that, end of Mai 2007, the Czech media reported that P had been nominated as arbitrator by Y or by persons connected with Y in approximately ten different arbitration proceedings. In fact, P had become the “house arbitrator” (“Hausschiedsrichter”) of Y. With respect to two (out of ten) proceedings, X personally knew of such nominations as he was acquainted with the proceedings. X further argued that in one further ICC arbitration between AY and a certain Mr. Z, P’s nomination had not been confirmed.

X had challenged P’s nomination as co-arbitrator in both arbitrations for lack of independence before the ICC Secretariat pursuant to Article 11 of the ICC Rules. The ICC Court nevertheless confirmed P’s nomination without stating the grounds for dismissal of the challenge submitted by X.

The Federal Supreme Court held that X’s appeal was insufficiently substantiated and that X failed to sufficiently show circumstances giving rise to justifiable doubts as to the independence of P. X’s assertion that P had “recently” been nominated in numerous cases of Y or by persons connected with Y was based solely on a newspaper article of 20 May 2007 which was too vague to serve as evidence in an evidentiary hearing purposed to clarify whether or not X’s assertion was true. Whether or not P lacked independence could thus not be decided based on said article. The Federal Supreme Court continued that X should have named the different arbitrations proceedings by specifying the timing and the involved parties, by stating which party had appointed P and by showing what the relationship of that party to Y or to persons connected to Y was. Also the fact that P’s nomination in another ICC arbitration between AY and a certain Mr Z had not been confirmed did not lead to any conclusions as to P’s independence in these proceedings the Federal Supreme Court concluded.

As to O’s lack of independence, X brought forward that, end of October 2008, at the occasion of an arbitration in London between a trust established by X and a company B, X learned of several interconnections of O with companies (where O served as a member of the board of directors) and with persons who were connected to or closely worked with Y. In particular, X argued that O was a member of the board of directors of a company C collecting for Y (or one of the companies controlled by Y) one of the largest claims in the Czech Republic and that said company was receiving instructions from Y. To substantiate his allegations X submitted e-mails showing the described interconnections and dependencies.

The Federal Supreme Court held that X’s arguments were insufficient to show O’s lack of independence. In particular, X had not shown to what extent the connection of the company C to Y was supposed to influence O’s impartiality and independence in these proceedings. Rather, the Federal Supreme Court held, the cooperation described by X did not go beyond an “ordinary business relationship”.

Comment

Switzerland is known as an arbitration friendly place among others because the Federal Supreme Court only rarely interferes with the work of the arbitral tribunals. In these two cases, however, the commentators cannot escape the impression that the Federal Supreme Court circumvented the actual problem by stating that the complainant did not sufficiently substantiate his allegations. It seems somehow unsatisfactory to require a strict proof regarding the question of the number and time frame of previous appointments of an arbitrator by the same party or an affiliate of it . Such proof will not be possible for the complainant. For this reason, at least if it refers to past appointments, the exact fact should be established before the course of the ICC confirmation procedure. It should also be kept in mind that, to the knowledge of the authors, situations of “house arbitrator” do exist which is sometimes used as an argument against arbitration as a method of dispute resolution.

Georg von Segesser / Petra Rihar

Background

On 1/22 December 2004, a Swiss manufacturer of pharmaceutical products (“Manufacturer”) and an Israeli distributor of such products (“Distributor”) entered into an exclusive distributorship agreement (“Agreement”) containing an arbitration clause. On 30 Mai 2006, after having terminated the Agreement, the Manufacturer initiated arbitration proceedings in Switzerland against the Distributor requesting payment of unpaid bills and of penalties. On 20 September 2006, the Distributor filed a claim against the Manufacturer before the district court in Tel Aviv-Jaffa requesting payment based on its claim for goodwill.

Before the district court in Tel Aviv-Jaffa, the Manufacturer requested that the proceedings be suspended due to the pending arbitration concerning identical parties and claims. Before the arbitral tribunal, on 21 June 2007, the Manufacturer requested, among others, a payment of CHF 100’000 arguing that the Distributor, by filing a claim before the district court in Tel Aviv-Jaffa, violated the arbitration clause. As to the violation of the arbitration clause, the Manufacturer later amended its prayer for relief and requested that the arbitral tribunal declare that the Distributor, due to this violation of the arbitration clause, owed the Manufacturer a compensation for damages suffered (Manufacturer’s request no. 4). The Distributor requested, among others, that the tribunal deny its jurisdiction with respect to the Manufacturer’s request no. 4.

On 19 November 2008, in a Partial and Interim Award, the arbitral tribunal declared that it had jurisdiction with respect to Manufacturer’s request no. 4. No appeal was filed against this decision. On 3 August 2009, in a Second Partial and Interim Award, the arbitral tribunal, among others, confirmed its jurisdiction with respect to Manufacturer’s request no. 4. It further held that the Distributor had “breached the Arbitration Clause” contained in the Agreement “by filing its claim for goodwill in Israel on 20 September 2006″ and that the Distributor is liable to the Manufacturer for damages “incurred as a result of this breach”, provided that the Manufacturer, in later arbitral proceedings, can establish the remaining elements of its claim under Article 97 of the Swiss Code of Obligations.

The Distributor appealed against the decision of the arbitral tribunal before the Swiss Federal Supreme Court.

Decision

Before the Federal Supreme Court, the Distributor argued several reasons for setting aside the decision of the arbitral tribunal. As to the Manufacturer’s request no. 4, the Distributor argued before the Supreme Court that (i) the arbitral tribunal did not have jurisdiction and that (ii) it violated Swiss public policy as it dealt with the request for declaratory judgment although the Manufacturer did not show that it had legally relevant interest in such declaratory judgment and, (iii) as it denied the Distributor’s right to address a constitutionally guaranteed state court with its claim.

As to the jurisdiction of the arbitral tribunal regarding the Manufacturer’s request no. 4, the Federal Supreme Court held that the arbitral tribunal’s decision of 19 November 2008, where the arbitral tribunal declared that it had jurisdiction with respect to Manufacturer’s request no. 4, had not been appealed. The Distributor had filed an appeal only against the tribunal’s decision of 3 August 2009, however in this latter decision the tribunal only confirmed its respective decision of 19 November 2008 without deciding the issue of jurisdiction anew. The Distributor should have – but has not – appealed against the decision of 19 November 2008 in order to dispute the tribunal’s jurisdiction regarding the Manufacturer’s request no. 4. The Federal Supreme Court further held that the Distributor should have shown that the issue of violation of the arbitration clause is not covered by the arbitration clause itself and therefore the tribunal did not have jurisdiction to decide that issue. Instead, according to the Federal Supreme Court, the Distributor mixed the issue of the violation of the arbitration clause and of the jurisdiction over the Distributor’s goodwill claim.

The Distributor’s further argument that an arbitral tribunal may not influence the state court’s decision on costs of the proceedings and, in particular, may not punish a party for addressing a state court with its claims, also failed as the tribunal had only decided on its own jurisdiction (and not the jurisdiction of the state court) and did not try to influence the state court’s decision on costs. The Federal Supreme Court held that awarding the counterparty damages for the violation of the arbitration clause is a decision in substance and has nothing to do with the issue of jurisdiction. It could thus not be brought before the Federal Supreme Court.

As to the Distributor’s argument that the tribunal violated Swiss public policy in deciding over the request no. 4, the Federal Supreme Court held that the Distributor was right in alleging that, where Swiss law is applicable, according to the rules developed by Swiss state courts, the admissibility of a request for declaratory relief must be determined in accordance with Swiss law. However, since neither the requirements of Swiss law that need to be met for a request for a declaratory relief to be admissible before Swiss state courts nor the question of which requirements must be applied by an international arbitral tribunal constitute Swiss public policy, the Supreme Court denied to deal with Distributor’s argument that the arbitral tribunal did not properly apply said requirements.

The Distributor also argued that the tribunal violated Swiss public policy because it denied the Distributor’s right to address a constitutionally guaranteed state court with its claim. Here, the Federal Supreme Court held that with respect to arbitrable claims the parties are free to exclude the state court jurisdiction by entering into an arbitration clause. Since the Distributor and the Manufacturer validly concluded the arbitration clause, the exclusion of the state court jurisdiction was binding and the tribunal did not violate the public policy by deciding Manufacturer’s request no. 4.

Comment

With respect to the issue of jurisdiction, this decision clearly shows the importance of a timely complaint against an interlocutory award. Article 190 para. 3 of the Swiss Private International Law Act (“PILA”), which states that the time limit for lodging an appeal shall commence when the interlocutory award is communicated, does not only constitute a party’s right but also a party’s duty to appeal in a timely manner.

A further interesting issue in this case is the issue of claims for damages based on the fact that one party has, in breach of the arbitration agreement, filed a claim in another court. Although the Federal Supreme Court did not have to address this issue because of late filing of the appeal, it stated obiter dictum that an arbitral tribunal has jurisdiction for such claims. Furthermore, regarding the merits of the damage claim, it rejected the ordre public violation claim which was based mainly on the fact that the Israeli courts had accepted their jurisdiction and thus no violation of the arbitration clause could be perceived. This decision might deter parties in arbitration proceedings with seat in Switzerland to file parallel proceedings before state courts.

As to the question of which rules apply to the admissibility of declaratory relief in international arbitration (since such issue does not pertain to the public policy), the Federal Supreme Court left such question unanswered. The following comments, however, are noteworthy:

In the Swiss legal literature it is disputed whether the test for admissibility of declaratory relief pertains to the procedure or to the substance (merits) of the case. If this question is considered a procedural issue, there is some uncertainty for the users of arbitration what test (if any) applies (since the procedural rules at the seat of the arbitral tribunal do not apply automatically). If it is considered a substantive issue, under Swiss law the situation is as follows: Prayers for declaratory relief are limited to seeking a declaration on the existence or non-existence of a certain legal relationship or on the legal consequences of such legal relationship based on certain facts. Where a party is in a position to request specific performance of duties arising from the same legal relationship or payment of a certain amount of money, a request for declaratory relief is inadmissible and must be dismissed without prejudice. More specifically, where a request for specific performance is possible, the party seeking merely a declaratory relief lacks the “legally relevant interest” in such declaratory relief because the uncertainty pertaining to the legal relationship between the parties can be eliminated by way of the performance request and therefore such performance request is a valid option for obtaining an enforceable judgment granting an affirmative relief. Only where the request for performance is not possible and the uncertainty regarding the legal relationship between the parties can only be eliminated by way of a declaratory judgment, an interest in a declaratory judgment is worthy of protection under Swiss law.

Georg von Segesser / Petra Rihar

Which will it be? I think that this depends first and foremost on the terms of the respective treaty, but which option would be desirable in terms of policy? Furthermore, in the absence of specific terms, the determination of liability and the status as respondent to investment arbitration proceedings might also require some deliberation as to the nature of the relationship between the EU and the member states in the context of multilateral investment treaties.

“If arbitration is to commit suicide, it will do so of its own choosing, because the parties have chosen to make it more expensive, time-consuming and more like litigation,” said Joe Profaizer of Paul, Hastings.

“The proliferation of electronically stored information is a major cost driver in U.S. litigation, and it’s becoming a major cost driver in international arbitration,” said Christopher Larus of Robins, Kaplan, Miller & Ciresi. “As more and more companies have to delve into their electronic records, it’s becoming more and more expensive.”

“The U.S. must recognize that international arbitration is international. The system must accommodate a wide variety of traditions and practices. It can’t just accommodate the American model, or people will stop using it,” says Glenn Hendrix of Arnall Golden Gregory.

So if the parties are so concerned about the Americanization of international arbitration, why don’t they fix it? That might mean (1) embracing mediation; (2) avoiding U.S. arbitrators; (3) avoiding U.S. counsel; (4) building in pre-dispute discovery limits into the contract; (5) vesting the arbitrators with greater discretion to limit discovery; (6) imposing more serious deadlines for the different stages of arbitration; (7) adopting expedited arbitration rules; (8) embracing advanced technologies for e-discovery; (9) selecting arbitrators who are particularly adept at case management; and (10) establishing more creative fee structures for resolving disputes.

These are just a few ways that one could avoid the increased costs and delays of international arbitration. I doubt that such concerns are paramount when a billion dollars is in dispute. I don’t accept the premise that the Americanization of international arbitration is always a bad thing. But for many disputes where cost and delay are significant priorities, there are ways to avoid the Americanization of international arbitration.

Roger Alford

Via Article 203 (5) of the Civil Procedure Law (1992), if the parties have agreed to refer a dispute to arbitration, an action on that dispute cannot be brought before the courts.

So let us assume for present purposes that the project in question, or the relevant commercial transaction, does have an arbitration agreement in it, which is recognized by the courts and enforced.

In many ways arbitrating major disputes in the UAE can be a far more complex process than in, say, the USA or UK or Europe.

First, what needs to be understood is that the list of criticism and “adverse” features in modern comercial arbitration, enumerated by Thomas Stipanowich recently in his paper “Arbitration: The New Litigation” (Univ. Illinois Law Review 2010) are all present and accounted for in the UAE. But in the UAE their mix and relative weightings differ.

300 plus years of common law litigation process in both the USA and UK has produced such a detailed set of procedures for litigation, that their almost complete adoption into many major arbitrations, has done arbitration a great dis-service.

In these Western countries, the Medieval processing of the merchants ( the “sniff & smell” arbitrations) have now been replaced by processes quoted by Thomas as being similar to civil litigation – judicialized; formal; costly and time consuming.

We all know what the elements are, in the arbitration process, that lend themselves to this criticism. They include discovery (especially nowadays “e” discovery); accessing 3rd party documents; prehearing procedures; factual and expert reports (for both claimant and respondent); a “hearing” process of some form, including possibly oral testimony and cross- examination.

Next, and quite critically, once an award is delivered while there needs to be a clear pathway to enforcement, in some jurisdictions the relevant arbitation law will permit appeals – allowing time to run on and further costs to be incurred. It is unfair to generalise too much as there are, of course, many examples of successful arbitations. But let us accept for present purposes that in the Gulf most arbitrations over significant sums of money or complex technical issues do involve these traditionally “litigious” style of steps and processes.

Now consider a scenario under which the concept of “judicialized” did not, in effect, exist.

“Judicialized” can of course mean many things, but to western lawyers it is, perhaps, the briefest way of starting with “due process” ; moving though “natural justice and fairness” ; touching upon the independence of experts and the arbitrator(s); having the abitlity to verify facts, and ending with a comprehensive, detailed, judgment, with reasons.

Accordingly, a fair deal of the debate on arbitration reform, especially in the USA and UK has been framed on the baisis of a comparative analysis with the processes in the respective court systems. But what if, in the country of your arbitration, there were not so similar court processes? What would then be the “meates and bounds” of the arbitration debate? I would suggest far less clear and far more open to argument on the fundamentals.

The UAE is a civil law system, but one that has developed in very recent years, comparatively to the USA; UK and Europe. The Federation was only formed in 1972 and the UAE Civil Code first promulgated in 1985. A Commercial Code followed in 1993, a year after the Civil Procedures law.

The court system in the UAE copes with technical or complex construction matters by essentially referring the issues out to court appointed “experts” . In construction matters, those experts are generally engineers fluent in Arabic. The expert will submit his report to the court and the court will decide whether to adopt it or, if the findings are contested, then the court might be persuaded to refer the matter to another expert. This whole process can take 30-60 days and be entirely based on the materials submitted by both parties. Rarely, if at all, is there a hearing with oral testimony in civil cases. Accordingly, there has not been and indeed there cannot really ever be a “judicialisation” of arbitration in the UAE – if by that term we mean the processes of civil litigation in western common law and civil law systems. Accordinly, in the UAE, the responsibilities that then devolve to the relevant arbitration body and arbitrator(s) are, in my view, far more significant than in Western countries.

Put another way, for disputes arising from major projects , or complex commercial transactions , the pressure on the arbitration process to get it right and to deliver an outcome that is just, fair and within an acceptable time frame, is probably no greater anywhere than in the UAE at present – given the sheer size of the UAE’s build and investment programme.

And that is not at all to say that the arbitration institutions in the region have not risen to the challenge. They have, and continue to do so. But the sheer size and volume (and complexity) of many of the disputes in the region have never really had to be addressed by such a small artibration community.

Finally , what the GFC has thrown up in the Gulf, in the context of dispute resolution, is the role and legitimate interests of the finance/banking sector and investors. Unfortunately, the “system” in the UAE has had difficulty coping with the combination of insolvent developers; defaulting purchasers and defacto “mortgagees in possession”.

Add to that the fact that most of the building contracts and real estate sale and purchase agreements included arbitration clauses, and for some developmetns there are literally 100s of disgruntled purchasers who have to initiate individual arbitrations to try to either get their deposits and partial payments back, or to seek some form of remedy.

The challenge therefore, particulary in Abu Dhabi, for the legal profession and for the government seeking to secqure international investment, is to design and implement dispute resolution processes that recognize the relaties and limitations of the underlying court system(s) and respond to the demands for investor certainty and enforceable outcomes.