MC Magazine | AEW Roundtable International Arbitration

AN EVENING WITH...

magazine YEAR 4 | May 2018 | no.82 | www.avdr.nl

Roundtable about International Arbitration

Taking the procedure by the scruff of its neck

Rogier Schellaars, Partner | Simmons & Simmons LLP; Lucy Greenwood, International Arbitrator | GreenwoodArbitration; Kate Corby, Partner | Baker McKenzie; Deborah Ruff, Partner, International Arbitration | Pillsbury; Stephen Jagusch QC, International commercial and investment treaty arbitrator | Quinn Emanuel Urquhart & Sullivan, LLP; Garreth Wong, Partner (London) | Bird & Bird LLP

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THE INTERVIEW May 2018 | Magna Charta

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Taking the

procedure by the scruff of its neck Arbitration is becoming more and more popular, because of its time- and cost efficacy. But what are the downsides of these proceedings? How do civil law and common law relate to each other in international arbitration and do the arbitrators themselves properly reflect the ethnic (and gender) diversity of the people in front of them? These topics were discussed by a panel of experts on arbitration.

Rogier Schellaars, CHAIR, Partner | Simmons & Simmons LLP; Lucy Greenwood, International Arbitrator | GreenwoodArbitration; Kate Corby, Partner | Baker McKenzie; Deborah Ruff, Partner, International Arbitration | Pillsbury; Stephen Jagusch QC, International commercial and investment treaty arbitrator | Quinn Emanuel Urquhart & Sullivan, LLP; Garreth Wong, Partner (London) | Bird & Bird LLP

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Rogier: The first topic that I want to discuss with you is the proliferation of different fast track arbitral proceedings.

Is there actually a down side, potentially, in terms of due process, to efforts to make proceedings faster, cheaper and more efficient?

For example, is your right to due process properly guaranteed, when you respond to an application for fast track proceedings?

Deborah: I think the position is easier when parties have agreed to a form of rules where they have expressly signed up for expedited arbitration. That issue is a lot more difficult when one party is making an application for it to, without warning, be brought for the expedited procedure.

Lucy: Often, when parties are drafting their arbitration clause, they are very keen on speeding up the process, for example, they may include a requirement to have an award rendered within 120 days of the last arbitrator being appointed. And then there is a certain amount of buyer’s remorse when they are hit with the reality of the disputeand the difficulties of pleading their case in such a short time. As a tribunal member, it is very important to make sure that all parties are given a full and fair opportunity to present their case and this can be difficult when you are faced with a very speedy proceeding. But that said, you do have to give great

credence to the agreement that was reached. The parties wanted a quick resolution of their dispute and you must respect that. There is a real difficulty in balancing those competing interests.

Emergency versus fast track arbitrations Garreth: I have an anecdote to contribute to this. I was asked by a client whether they could propose an arbitration clause which provided for a final award to be rendered within seven days of the arbitration commencing. In this regard, there is a fundamental difference between emergency arbitrations and fast track arbitrations as regards due process. Emergency arbitrations are aimed at preserving the status quo or obtaining some other interim relief before the final decision is made. Fast track arbitrations, on the other hand, are aimed at reaching a final award on the merits within a compressed time frame. The fundamental difference here is that in many emergency arbitrations, the decision can be overturned by the full tribunal.

In most institutional rules the emergency arbitration award can be revisited by the full tribunal.

Therefore, maybe due process considerations should not be as acute in those circumstances. Yes, they are important, but if there is an emergency arbitration decision taken which arguably breaches due process rights, the losing party has some comfort that they can try to overturn the decision before a full tribunal. Whereas with a fast track arbitration, if

one has agreed to whatever it is - a two week, two month, or six month time frame - the decision that is reached is the final award.

Kate: Obviously, how fast track arbitration runs depends a lot on the circumstances. We had this experience in the context of a long term contractual arrangement for delivery of services. Our clients needed a quick decision. We didn’t like who was appointed, we didn’t think that we got a fair go, but actually it was better to just take that decision and have the business keep, because having a normal arbitration clearly would not have worked in that scenario.

Rogier: But if you look at 'emergency arbitration proceedings', you do see that there is a lot to be distinguished, in terms of finality. Look at certain common law countries: it is very provisional in nature, whereas in some civil law countries, it is quite definitive what you get out of an emergency arbitration. That can be an enforceable award, which can be challenged in proceedings on the merits, but doesn’t have to be. And it is also not temporary in validity. So, it depends where you are, and what you are facing, isn’t it?

Garreth: I completely agree with that.

Occasionally, for some interim measures applications, the outcome of that application may in practice be determinative of the dispute between the parties, commercially

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or legally. In such cases, the fact that one has had an interim injunction in one's favor, or against one, effectively means a full hearing will never happen. And in those interim applications, I dare say that the emergency arbitration procedure needs to approximate more closely the procedure of, and the due process safeguards of, a full arbitration. Simply because the emergency arbitrator is or should be aware that how they decide the application may well make the whole dispute go away.

Ex parte relief

for making the same interim application before a court. Of course there may be jurisdictions where that sort of relief wouldn’t be available in the court, and I imagine that is one of the reasons why arbitral institutions have decided to include it. It does raise questions of what are the circumstances in which it would have been preferred to go in front of an emergency arbitrator rather than to a court. Do parties have the perception it may be less likely that there will be ex parte relief from an emergency arbitrator? It might be interesting to find out.

Deborah: I am not sure the situation is substantially different, though,

Lucy: Often one is precluded from going to court, unless the

ROGIER SCHELLAARS curriculum vitae Rogier heads the arbitration practice at Simmons in Amsterdam.

He acts as counsel in, and advises on, a range of commercial

disputes and investment claims, including M&A, joint venture and

finance disputes. He is dual educated in common law and civil law

and has experience in dealing with matters under most of the leading arbitration institutes' rules and major arbitration laws. In addition,

Rogier acts as arbitrator, publisher on arbitration law and is a Dutch member of the ICC Court of Arbitration.

Rogier regularly publishes and lectures on arbitration and civil

procedure. His publications include the 2012-2018 IBA Arbitration Country Guides for the Netherlands, articles on the IBA Rules of

Evidence, the LCIA Arbitration Rules and annulment proceedings.

He has also contributed to chapters in the Guide to the NAI Arbitration Rules (KLI, 2009). Rogier was a (founding) board member of the

Dutch Arbitration Association and currently sits on the IBA and ICC Arbitration Committees. Rogier is also a member of the NAI’s Supervisory and Advisory Council.

Legal 500 describes Rogier as "an absolute pro in this field, always has clients' goals in mind, and is well connected". He is ranked in Band 1 as arbitration counsel in Chambers Global 2018.

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remedies that may be available before the emergency arbitrator have been exhausted. So, there is always a tension, isn’t there?

It is important to make sure you have squared everything away before you choose the route you go down. That said, I am a big fan of emergency arbitration.

I think it is a great addition to the arsenal of available relief. You see its popularity in the way that the institutions have taken this on board and added it to their rules, since the ICDR added it to their rules in 2006. And I have seen it work well in practice. In my view, the availability of emergency relief gives the parties greater options, and more cost-effective options than going to a national court.

Rogier: You do see the numbers picking up quite spectacularly, maybe at the ICC it is now over 50 since the rules were amended to use the emergency arbitration. And I have done some research at the Netherlands Arbitration Institute, where they have over 200 summaries of the proceedings registered since 1999. In my view, it can be very effective in terms of a remedy to get things going again. And it can deal with specific performance, enforced with penal sums.

Stephen: The point about damages is, that it is only provisional. That suggest to me that those who drafted the rules considered that a damages award requires further consideration.

"YOU DO SEE THE NUMBERS PICKING UP QUITE SPECTACULARLY" Rogier Schellaars

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'Summary proceedings' Rogier: We have to see how other forms of fast track proceedings work. Do you have experience with such proceedings?

Stephen: I have experience with fast track, in the sense that you take all the steps and condense the time period. The competent

tribunal will ask at the end the parties if they have complaints about the procedure, and, in my experience, nine times out of ten they don’t complain. What we don’t see much is summary proceedings. I think there is a real problem with using the word “summary” in arbitration, because people will think that you are taking shortcuts. I think that there is plenty of opportunity for speeding up arbitration

proceedings in all sorts of ways, including fast track, but without using the provocative word “summary”. One of my big frustrations with contemporary arbitration is that arbitrators don’t make better use of their ability to determine important questions in advance. To take issues that may be determinative.

Issues, the outcome of which could either terminate or narrow the proceedings, or leave the

"MAKE SURE YOU HAVE SQUARED EVERYTHING AWAY BEFORE YOU CHOOSE THE ROUTE YOU GO DOWN" Lucy Greenwood 12

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parties to settle or pursue a different strategy. Some people wrongly label this as “summary” proceedings, but it is no such thing. Consider taking determinative issues and dealing with them early. Not in a summary fashion, but in a way that gives both parties time to present their arguments and have a hearing. When you strip away everything else that may be unconnected with those issues, you could end up being able to have a complete hearing on them, with the full opportunity to be heard by both sides, in a very short space of time. Now the real question for us is this: why doesn’t this sort of thing happen more frequently? You might say that not every case has determinative issues, but in fact most of them do. Read through almost any award, and there will be points where the tribunal is going to go one way or the other, depending on the determination of specific issues. The challenge is to try and find those issues, and then work out whether you need extensive evidence, and document disclosure, and consider which evidence overlaps with other issues. If they discrete issues, then they are candidates for preliminary determination.

Kate: That is a very good point, and I guess it probably fits into the wider issue around tribunals taking the procedure by the scruff of its neck.

It could be interesting to hear people's experiences as to whether they are seeing that in action or whether tribunals are still defaulting to the standard "Procedural Order No. 1" pulled from the drawer and filling the blanks in.

LUCY GREENWOOD curriculum vitae Dual qualified in England and Wales and in Texas, and practicing in

the field since 1998, Lucy now practices as an independent arbitrator.

Lucy began her international arbitration career with Linklaters LLP in

London in 1998 and spent three years specializing in ICC arbitration in Paris with Linklaters from 1999-2002, before returning to London then moving to join the international arbitration practice of Norton

Rose Fulbright US LLP in Houston in 2008. She became a full time

independent arbitrator in 2017. Lucy has particular experience with energy and licensing disputes and questions of interpretation and

construction under English law. Noted as "One to Watch" by Global Arbitration Review, as an Expert in International Arbitration by Legal 500 and as a “Future Leader in Arbitration” by Who’s Who Legal, Lucy is particularly known for her work in Diversity and Inclusion,

having published widely in this field and is the recipient of the 2018 CPR Award for Outstanding Contribution to Diversity.

She received her BA and MA in Law from Cambridge University in

England, is a Fellow of the Chartered Institute of Arbitrators (CIArb)

and is chair of the North America Branch of the CIArb. She is a former board member of ArbitralWomen and a founder of the Alliance for

Equality in Dispute Resolution. Follow her on twitter @intarblawyer.

More information is available at www.greenwoodarbitration.com.

Deborah: In my experience, tribunals are unfortunately very unwilling to impose a preliminary issue absent agreement by the parties. And chances are, there is going to be one party which is not keen on it.

So I certainly would welcome the greater use of preliminary issues.

Perhaps it would encourage tribunals if they are empowered to take a preliminary point of their own, of course by agreement with the parties.

Early disposition of discrete issues Lucy: The US lawyers have something to teach us here, because they really favour motions for summary judgment. These type of motions

are often called ‘summary judgment motions’, but I take Stephen's point that it would be better to call them ‘early disposition of discrete issues’ and I do prefer this in my cases I have had a couple of these motions come up in a case I am involved in at the moment, and it has really lead to a narrowing of issues. It has got the tribunal up the learning curve far quicker in terms of understanding the case at anearlier stage than we would otherwise have done. And it has meant that we have been able to carve out a significant portion of the case, and just deal with that.

So I am very much in favour of it.

Kate: I am involved in an investment treaty case at the moment in

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which the respondent state has made several jurisdictional points, but has not attempted, yet, to plead them. Because we already have a procedure set out, why don’t we just determine these issues first? Then we don’t need to get into all the detailed factual analysis, or have all the damages evaluated, etcetera.

Garreth: At the point at which the tribunal is constituted, the parties have typically already spent a great deal of time thinking about their cases.

Therefore, it is usually a party, rather than the tribunal, who is in the best position to be able to say: we want these points determined as an issue in advance of the hearing

Arbitrators’ paranoia Stephen: I think that the problem is willingness. It is the arbitrators’ paranoia. An enforcement paranoia. A “process paranoia”.

And this overlaps with the diversity question. We are seeking all the time to bring in new arbitrators, but that means you have increasing numbers of arbitrators who aren’t very experienced. The worst thing that can happen to them, or so they think, is to have a judge set aside one of their awards, on the basis of procedure, for example because one of the parties hasn’t been given a fair opportunity to present their case. This creates a paranoia that prevents arbitrators from taking issues by the scruff of the neck. But a related and possibly even more

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controversial point is that too many international arbitrators are just plain lazy. Increasingly, the senior arbitrators. They don’t have to prove anything anymore. Appointments just turn up on their desks and add to their already busy schedules.

Increasingly I sense they are not reading the papers . They are not motivated. A procedural order will issue in a standard form. I think it is for the courts to show that arbitrators will not be penalized for being bold and taking sensible decisions, such as the early resolution of key issues. The concern for lazy arbitrators should be that once we identify them as lazy, we don’t appoint them anymore, we look for others who are keener to show their intellectual prowess and their willingness to engage in the issues in the case earlier on. But the evidence suggests that the lazy arbitrators keep getting appointed!

Garreth: But then there is also the point of due process paranoia, particularly in relation to emergency and fast track arbitrations. In that context, one needs to recall that the parties have signed up to the institutional rules providing for emergency and fast track arbitrations. They therefore have subscribed to limitations regarding the time frame and opportunity to put their case.

We often hear about a party’s right to be heard, that is very different from having the full, unlimited opportunity to take as much time, and use as much paper as you wish in order to advance your client's case.

But it can still be quite a disparity between a claimant who has done his homework, prepared for these fast track proceedings, and the respondent who is not, but is still compelled to participate and to make the best of it.

Stephen: Not taking determinative issues early is as much an injustice to claimants, who have a right to proceed expeditiously, as it is to respondents, who are only being

held to what they have signed up to. We always say that awards are written for losing parties, because winning parties don’t challenge awards. So part of the problem that may be factored into this is, that at a point in time it becomes obvious which party is going to lose. Tribunals might be more lenient to the procedural demands of that party and less concerned with the violation of the winning party’s entitlement to efficiency.

(But of course that presupposes that arbitrators have taken a view on the outcome, at the time that they are dealing with these procedural issues, but as I said, in my earlier remark, increasingly they have no idea what is going on.)

What type of arbitrator?

Lucy: Arbitrators do not and should not reach any conclusion on the

merits at an early stage, but I do believe arbitrators need to signal more strongly to the parties and counsel what type of arbitrator they are, and be more transparent about the way they conduct arbitrations. The big advantage of arbitration is that we, as arbitrators, can be flexible in the procedure. You know the old saying: justice delayed is justice denied. Parties shouldn’t have to wait nine months after the close of proceedings for an award.

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One of the big improvements that I have seen in the last five years, is arbitration institutions requiring that arbitrators render their award in 30 or 60 days after the close of proceedings. As an arbitrator you know that this is the timetable you must adhere to and you clear your schedule for the 30 or 60 days after you close the hearing so that you have sufficient time to render the award.

For me that is a big step forward, but I still think more work can be done in that regard.

Stephen: When you have a three member tribunal, it will proceed at the pace of the slowest arbitrator.

There will be circumstances where a respondent has appointed an arbitrator known to be very busy, known to be slow, in the hope that this will make it much more difficult to find hearing dates and for the arbitrators to find deliberation and drafting time.

Adversarial or inquisitorial?

Rogier: The second topic. Given the wealth of experience around this table it is probably interesting to see what the notion brings out, if we were to ask what can common law lawyers learn from civil law lawyers and vice versa, especially in the arbitration scene? Do you have any thoughts on that, Kate?

Kate: In the construction world, where I do a lot of my work, things are very complicated factually, although the law is often not that complicated. I have had QC panels of arbitrators, who were not very inquisitorial. So they let the parties stand up, make submissions and cross examine, but did not really get to grips with the project that the whole dispute was about. I have had other panels which had civil law arbitrators

KATE CORBY curriculum vitae Kate, a partner in Baker McKenzie's London office, has over 15

years experience of representing clients in complex litigation and

arbitration, with a focus on construction and engineering disputes.

She acts for employers, main contractors, sub-contractors and joint venture partners from across the world on disputes concerning

issues such as project delays, cost overruns and defective work in sectors such as power, water, infrastructure and oil and gas. She has been involved in disputes arising out of projects from Kazakhstan in the East to Panama in the West,

but in recent years has had a particular focus on projects in the

Middle East. Kate has acted in arbitrations under all of the major

arbitration rules, and with seats in London and internationally. Kate is also active in advising clients on project and contract

management and dispute avoidance, including acting as project counsel, and also acts in bilateral investment treaty arbitrations.

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sitting on them. On one occasion we had the first main hearing and there was a couple of issues that were reserved for a second hearing. We got to the second hearing and the arbitrator asked some mindblowingly basic questions, that demonstrated that we might possibly have wasted the first two weeks hearing, because she hadn’t asked any questions despite the fact that the parties had kept saying ‘Do you have any questions about this aspect?’, but nothing was forthcoming.

This may just be anecdotal experience, but also point to something more profound.

We are led to believe that the common law system is essentially adversarial, and the civil law system essentially inquisitorial.

In all my experience in international arbitration, I have never encountered an inquisitive civil law arbitrator though. Those who have been the most inquisitive are retired judges or other common law trained arbitrators.

So that is just an interesting perception paradox.

Lucy: I think that occasionallytoo much is made of this common law/ civil law divide. There has been a great harmonization of the way that international arbitration should be conducted in. Assumptions are made and arbitrators are appointed based on their legal background, and these assumptions perhaps don’t always stand up on further scrutiny. Arbitrators need to be more open about the way they conduct cases. They need to showcase that better than they are currently doing.

"PARTIES TAKE A LEAD FROM THEIR LAWYERS WHEN IT COMES TO APPOINTING ARBITRATORS" Kate Corby

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The best of both legal systems

“IN MY EXPERIENCE, TRIBUNALS ARE UNFORTUNATELY VERY UNWILLING TO IMPOSE A PRELIMINARY ISSUE ABSENT AGREEMENT BY THE PARTIES” Deborah Ruff

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Garreth: I agree that arbitration attempts, on the whole successfully, to take the best of both legal systems.

Speaking more broadly, one of the things that all of us are guilty of is to assume that everybody does things the way we do them.

That is obviously false. One of the major privileges of working in international arbitration is learning from different legal traditions. Common lawyers which by the way are a minority in terms of the population of the world being represented - and lawyers from civil traditions have equally valid contributions to the process.

Stephen: What has always confounded me when this subject has come up, is the assumption that one system must be right, and one system must be wrong. That one must be better than the other.

However both have existed for centuries. Both have survived – if not thrived – in countries where economies grow and societies function. So there is nothing inherently wrong with either. At a conference many years ago, I heard a leading civil law arbitrator tell all that in the early part of his career as an arbitrator he frowned upon cross examination. Thought it lacked any real utility. However, after many years witnessing good cross examinations, he understands it completely differently. He sees the utility of it and now thinks that all evidence should be tested. Not tedious cross examination for

the sake of it, but skilled testing of the evidence. Whenever I think about the subject, I am always drawn to examine my own experience, either as arbitrator or as counsel, and I can say with confidence that, there is not a single case where, had the law or the process been different (civil law or common law), the outcome would obviously have changed.

Rogier: The third topic is about diversity in international arbitration, ethnic diversity more than gender diversity.Is enough being done? Maybe we can also look at it from the perspective of clients.

Stephen: I think this subject should take us to the basic concept of a jury. The argument is that a jury should be representative of society. Most of my clients are all from over the world. So it is wrong that for so long we have been prepared to accept similar looking, similar sounding, and similarly educated arbitrators to be resolving the disputes of those from vastly different cultures and backgrounds.

Deborah: Well, I have never had a client who has, at least expressly, raised any interest in the issue of cultural or ethnic diversity in the choice of arbitrators. So it is, to some

DEBORAH RUFF curriculum vitae Deborah has extensive experience in multi-jurisdictional disputes, specialising in high-value and complex international arbitration, particularly involving clients in the energy, infrastructure and

construction, telecom­munications, financial and corporate sectors.

She has conducted numerous international arbitration cases, under various governing laws, under the various institutional rules and on

an ad hoc basis, in major arbitration centres as well as in a variety of other jurisdictions. She represents clients in arbitrations under the rules of the LCIA, the ICC, the Swiss, Stockholm and DIAC rules, as well as under the UNCITRAL Rules.

She advises on disputes arising out of Bilateral Investment Treaties, dealing with such issues as creeping expro­priation, unfair and

inequitable treatment, Most Favoured Nation (MFN) clauses and windfall taxation.

She also represents clients in arbitration-related litigation, including obtaining freezing orders and other interim relief in support of

arbitrations, enforcement of awards world­wide, sovereign immunity issues and jurisdictional battles.

Deborah conducts her own advocacy in arbitration proceedings.

extent, in the hands of the parties, and they don’t appear to be grasping it by comparison, even though it is indubitably true that the arbitrators are overwhelmingly aged white males.

Not properly reflective Lucy: Parties are, by definition, in a difficult, stressful situation when they get to an arbitration.

The last thing on their minds is going to be criticizing the panel of three who have been appointed to decide their dispute. However, as an arbitral community, we should try to ensure that parties have the opportunity to appoint tribunals that are properly reflective of the people that are appearing before them. And that is what we just don’t have. We don’t have that in terms of gender, not in terms of nationality, not in terms of age, not in terms of ethnicity. There is a huge amount of work to do in terms of addressing this issue. And, as with addressing the underrepresentation of women, we need to start small, by raising awareness of the problem.

Kate: I think parties take a lead from their lawyers when it comes to appointing arbitrators, and when that is combined with affinity bias, we end up with tribunals who look like us, rather than our clients. When it comes to gender diversity, an issue very close to my heart, another contributing factor is that while it is improving, law firms globally, as well as the English

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bar are still predominantly male at the senior level so there are less females arbitral candidates to chose from. It will be very interesting to consider the situation in another 10 years; hopefully there will be many more female arbitration partners in global law firms, and many of them will be sitting as arbitrators, giving a wider pool of female arbitrators to chose from and therefore more balanced tribunals.

Garreth: In the UK, the Judicial Appointment Commission uses objective criteria in selecting judges: the quality of the judgments, or articles one has written, one's abilities as an advocate. I completely agree with Lucy: we should try to eradicate the unconscious biases, which makes us reach for the white male arbitrators from a certain socio-economic background.

As far as selection of arbitrator is concerned, it does need to be the right person, and that judgment needs to be made as far as possible on the objective criteria.

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Lucy: We should try to eradicate the unconscious biases, which makes us reach for the white male arbitrators from a certain socio economic background.

But I do think that at least as far as selection of arbitrator is concerned, it does need to be the right person, and that judgment needs to be made as far as possible on the objective criteria.

Lucy: Just to add one last point: studies have shown that it is very easy to counteract your subconscious bias once you are aware of it. The biggest change we have had, and it has been a huge one, is that this is now openly discussed, in a way that it really wasn’t six years ago. Just having the conversation today has made all of us likely to act in a slightly different way when we need to sit down and think about who we should appoint.

So just having the conversation is really useful and sometimes that gets forgotten when people worry about what can we actively do to address this point. I mean sometimes just talking about it can already be enough.’

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WHATEVER THE WORLD TH

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HROWS AT YOU, TAKE IT ON

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3 questions and answers

ROGIER SCHELLAARS Name an example of an arbitration clause that is wrong and explain why it is wrong.

Such remedy may be available in state courts but to actually obtain in such venue, it in a timely fashion can be very difficult or impossible, especially if one has to wait to complete service of process under, for example, the Hague

“The parties elect to resolve their dispute through

Conventions. Arbitration, in my experience, can avoid

arbitration or the Netherlands Commercial Court (NCC),

justice being delayed and thus denied.

assuming the NCC is operational by 1 January 2019.”

I have multiple examples of succeeding in this regard.

The (main) reason why this clause is pathological is that it

Second, in my practice, I have come across numerous joint-

does not present a choice for arbitration that could lead

venture disputes that are cross-cultural and involve multiple

to a lack of jurisdiction on the part of the state courts.

legal regimes (applicable to the joint-venture entity, the

It is not unequivocal in respect of the parties’ choice

joint-venture contract and the parties’ backgrounds). In

to decline access to the state courts. Parties are best

most instances, arbitrators can take the time and do make

advised to adopt standard clauses offered by the main

the effort to ensure that these issues get resolved in a

arbitration institutes to avoid, often inadvertently, creating

correct fashion and also provide the parties with a sense

a problematic arbitration clause.

that the dispute has been properly heard.

Why choose arbitration when creating a contract?

Third, and steering away from the common notions on investor-state arbitration, I should mention that arbitration in my experience provides investors with a level playing

In a general sense, I find this question difficult to answer.

field in serious disputes with states. Absent arbitration - the

Much depends on the nature of the contract, the identity

case would be in the state courts of the host state - where

of the parties to the contract and the interests of such

one lacks that. Proceedings at the Peace Palace, often

parties. A choice in favour of arbitration often follows

under UNCITRAL Rules, present a good example of a fair

from (i) anticipation of complex disputes, including at the

setting for both states and investors.

enforcement stage, (ii) language and evidentiary issues; and (iii) a desire to resolve disputes in a confidential and neutral forum (as opposed to a competent court in the home jurisdiction of one of the parties).

Name three examples of arbitration.

LUCY GREENWOOD Name an example of an arbitration clause that is wrong and explain why it is wrong.

Often the worst example of an arbitration clause being

First, In my practice, arbitration is often used to compel

wrong is an arbitration clause that is absent. A historic

an international party to specifically perform a contract.

example of this is the 1901 contract between Guffey

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Petroleum and Shell, which was the biggest oil agreement

breach, violation or termination thereof, if not finally

in the world at the time, with a duration of twenty-one

settled by mutual agreement of the parties with thirty

years delivering oil from Spindletop oilfield in Texas

(30 days), shall be finally settled under the Rules of

at a guaranteed price to Shell. When in 1903 Guffey

Arbitration of the ******** by one or more arbitrators

Petroleum refused to honour this contract due to the

appointed in accordance with the said Rules. The parties

rising price of oil caused by a decline in production from

also agree that: i) The number of arbitrators shall be three

Spindletop, Shell served it with a notice of arbitration,

with the third acting as the umpire; ii) The appointing

but there was no arbitration clause in the contract. All the

authority shall be the *******; iii) The arbitration shall

contract said was that both parties agreed to reach an

have its seat in London and iv) the language of the

agreement in the event of a dispute, which is of course

arbitration proceedings shall be English.”

meaningless. The only options open to Shell were to fight in a Texas court (which put Shell at a huge disadvantage) or

This is an example taken from a signed contract.

negotiate. An arbitration clause would have given Shell a

The clause illustrates the dangers of using a standard

neutral forum to argue its case.

form contract, but without filing in the blanks. Failing

Why choose arbitration when creating a contract?

Enforceability. Confidentiality. Neutrality.

Name three examples of arbitration.

Arbitration is a creature of contract so almost everything

to include all the necessary elements of an arbitration clause can be fatal, and result in the parties having to resolve any dispute before a national court, which is likely to run contrary to the intent of the parties when they signed the agreement containing the attempt at an arbitration clause.

a dispute. I have been involved in arbitrations involving

Why choose arbitration when creating a contract?

indoor skydiving, coal mining, motor-racing, deepwater

• Neutrality: In circumstances where the contracting

that has been contracted for can be arbitrated if there is

drilling, soccer agency and flotation devices, as well as the

parties come from different countries, with different

more usual commercial arbitrations.

legal traditions and neither wishes to litigate in the national courts of the other party, arbitration offers

KATE CORBY Name an example of an arbitration clause that is wrong and explain why it is wrong.

neutrality both in terms of the place of arbitration and the nationality of the arbitrators.

• Specialist arbitrators: Having an element of control over who hears the dispute in terms of experience and legal and technical background can be advantageous

"11. This Agreement shall be governed by, and construed in

for parties likely to be involved in complex disputes.

accordance with, the laws of London, England. Any dispute

• Enforcement: Since the ability to enforce a successful

or claim arising from this Agreement shall be finally settled

outcome in a dispute is of utmost importance, the

by arbitration in London, England, in accordance with the

enforceability regime of the New York Convention,

Arbitration Acts 1950 and 1979 or any statutory modification

to which over 155 countries are signatories, offer a

or re-enactment thereof for the time being in force, one

significant advantage over litigation.

arbitrator being appointed by each Party…

On the receipt by one Party of the nomination in writing

Name three examples of arbitration.

• Acting for a main contractor in an ICC arbitration

of the other Party's arbitrator, that Party shall appoint

seated in London commenced by one of its joint

their arbitrator within 14 (fourteen) days, failing which the

venture partners relating to responsibility for delays,

decision of the single arbitrator appointed shall apply. If

increased costs of construction and defective work at

two arbitrators properly appointed shall not agree, they

a sewage treatment plant in the Middle East.

shall appoint an umpire whose decision shall be final, independently of the criminal actions that could be taken.

• Representing the claimant in a bilateral investment treaty against an EU state concerning unlawful expropriation of the claimant's business through

14. All disputes, differences or questions arising out of or

breach of the state's public international law

relating to this agreement or the validity, interpretation,

obligations to provide investors fair and equal

May 2018 | Magna Charta

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treatment, and not to expropriate their investments without prompt, adequate and effective compensation.

DEBORAH RUFF

international arbitration under the European Development

Name an example of an arbitration clause that is wrong and explain why it is wrong.

Fund (EDF) Rules in defence of a claim brought by a South

This clause from the English High Court case of Kruppa

African contractor for money and extensions of time for

v Benedetti [2014] EWHC 1887 (Comm) is a good

delay and disruption incurred in the upgrading of 3 roads

illustration of what not to do when drafting an arbitration

in the southern Africa country.

agreement:

• Representing a southern African government in an

"I CAN SAY THERE IS NOT A SINGLE CASE I HAVE EVER HAD, WHERE THE OUTCOME WOULD HAVE CHANGED" Stephen Jagusch QC

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Magna Charta | May 2018

between the parties pursuant to this Agreement, the

Why choose arbitration when creating a contract?

parties will endeavor to first resolve the matter through

Enforceability: consider where enforcement is likely to

Swiss arbitration. Should such a resolution not be

take place, and whether you/your client is better off

forthcoming the courts of England and Wales shall have

with an arbitral award (enforceable in the same way as a

non-exclusive jurisdiction.”

local judgment in any jurisdiction (currently 155+ states)

Unsurprisingly, the English High Court held that the

signatory to the New York Convention) or a court

clause did not constitute an arbitration agreement, merely

judgment (where any relevant multilateral or bilateral

an agreement to “endeavour” to arbitrate, despite the

agreements may assist in enforcement outside the

defendants’ submissions that the fact that inclusion of the

jurisdiction in which the judgment has been obtained).

word “arbitration” was sufficient on its own for the court

Time considerations: arbitration can be a speedier and

to find that a valid arbitration agreement existed.

more effective means of resolving disputes – the courts

“Law of England and Wales. In the event of any dispute

of certain jurisdictions can take anywhere up to 10 The English High Court found a number of deficiencies

years or more to reach a final decision.

with the clause:

Confidentiality: possibly the most important feature

• as drafted, the clause envisaged a two-step process (i.e. to

of arbitration for parties. It is important to consider

“first resolve” the matter by Swiss arbitration and, from the

from the outset whether the institutional rules and/

following sentence, should no resolution be forthcoming, referral to the English courts). The Court took the view that “if a dispute has to be referred to arbitration, any award would, in the ordinary way, be binding upon the parties and no second stage would arise”;

STEPHEN JAGUSCH QC curriculum vitae

• it is “logically not possible to have an effective multi-tier clause” consisting of two binding tiers; and

Global Chair of International Arbitration at Quinn

• there was no agreement as to “the number or identity of

Emanuel Urquhart & Sullivan, Stephen specialises in

the arbitrators which would require further agreement on

commercial and investment treaty arbitration. Many

the part of the parties or the appointment of arbitrators

of Stephens cases have been for or against

by a court of the seat of the arbitration”, and, because of

sovereign states or substantial multinational

the way in which Switzerland is divided into cantons, “this

organizations, and he has been lead counsel in many

would require a cantonal court to apply the provisions of

of the world's leading commercial and investment

Swiss law but the clause does not give any cantonal court

treaty cases.

jurisdiction nor specify a cantonal seat”.

It bears repeating, given how regularly we come across

Stephen is recognised as a leader in his field, earning

poorly drafted arbitration agreements, that the main

numerous client and peer-review awards in

ingredients for an effective arbitration agreement are

recognition of his handling of highly complex and

usually as follows:

high value cross-border disputes. He has recently

a) any dispute arising out of or relating to this agreement;

been described as "one of the most impressive

b) shall be finally resolved by arbitration;

advocates around," "a masterful cross-examiner," a

c) administered by [name of institution] under the

"tenacious fighter," the "maestro of strategy," “one

Arbitration Rules of [name of institution]; d) judgment upon the award rendered by the Arbitral

of the gurus in the field,” and "one of the preeminent ICSID arbitration experts in the world."

Tribunal may be entered in any court having jurisdiction; e) the arbitration shall be conducted in [choice of language];

After more than two decades specialising in arbitral arbitration, Stephen has become a recognised expert in all types of arbitration however his

f) in [designated seat of the arbitration; and

emphasis has been on disputes in the energy, mining

g) the Arbitral Tribunal shall be composed of [one/three]

and natural resources, telecoms, converging

arbitrators, appointed in accordance with the above-

technologies, mergers and acquisitions and

designated Rules.

construction sectors.

Stephen was awarded Queen’s Counsel in 2016.

May 2018 | Magna Charta

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GARRETH WONG curriculum vitae

III R epresenting the policyholder (the owner of a mine in the USA) in proceedings before the English courts

With over 15 years of experience, Garreth is

arising from an anti-suit injunction, the issue being

consistently recognised in the legal directories as

whether coverage disputes arising from the closure of

"highly rated", a "rising star" and an "excellent

the mine, following an explosion, should be resolved

strategist" (Legal 500) (GAR100) (Who's Who Legal:

in the US state or federal courts or through arbitration

Arbitration; Who’s Who Legal: Arbitration - Future

in England. The matter was a complex one, involving

Leaders).

several exchanges of evidence on the inter-relationship

An experienced advocate, Garreth represents clients

between US state and federal law on insurance,

in litigation and in arbitrations under various

its relevance to jurisdictional issues and forum non

arbitration rules (including ICC, ICSID, LCIA, SIAC,

conveniens arguments, as well as factual disputes as to

UNCITRAL and WIPO) under a wide variety of

the content of the policies at issue.

national laws. He has particular experience in emerging markets, including Africa, Eastern/Central Europe, Russia, China and Southeast Asia, and South America.

STEPHEN JAGUSCH QC

Garreth's broad experience spans disputes relating

Name an example of an arbitration clause that is wrong and explain why it is wrong.

to joint venture and shareholder agreements, M&As,

Multi-party situations aside, any agreement to arbitrate

telecommunications, oil/gas and renewable energy,

that is more than half a page long is probably unnecessary

natural resources and mining, aviation, financial

and likely will be cumbersome, if not outright contradictory.

services, sports, technology and pharmaceuticals.

Workable agreements can be achieved in a single paragraph. Surplus words create potential for early disputes

Garreth is increasingly sought after as an arbitrator

which can present expensive and time consuming obstacles

and is appointed on LCIA and ad hoc arbitrations as

to the desired arbitration.

sole and co-arbitrator.

Garreth graduated with a BA and an LL.M from Cambridge University.

Why choose arbitration when creating a contract?

One should consider arbitration if one seeks enforcement in one or more foreign jurisdictions, if one desires

or the arbitration law of the seat provide for it. If not,

specialist arbitrators, or a level playing field (neutral

confidentiality will need to be expressly included in the

adjudicators, law, language, venue, procedures), or if one

arbitration agreement.

desires privacy and limited rights of appeal.

Control: party control of the process and the ability to select a tribunal which has the commercial experience,

Name three examples of arbitration.

technical expertise and/or legal background required.

The good, the bad and the ugly.

Name three examples of arbitration.

The below are arbitrations which I have had conduct of on behalf of clients in the energy, financial and insurance sectors respectively: I Advising on a complex dispute in relation to

GARRETH WONG Name an example of an arbitration clause that is wrong and explain why it is wrong.

agreements between two petrochemical plants in the

"All disputes arising out of or in connection with the

MENA region. The claims and counterclaims included

present contract shall be finally settled under the

issues over commissioning, feedstock supply, claimed

Rules of Arbitration of the International Chamber of

force majeure shut downs and long-term pricing issues

Commerce by one or more arbitrators appointed in

II Representing two Russian shareholders in a dispute

accordance with the said Rules.

with another shareholder (arbitration in London and

The seat of the arbitration shall be London.

enforcement of the award in the English, BVI and

The French Civil Code shall apply."

Russian courts).

This is an example of a common situation where parties

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Magna Charta | May 2018

overregulate one or more aspects of the arbitration procedure and, by doing so, introduce unnecessary uncertainty into the arbitration: should the ICC arbitration rules apply or the French Civil Code?

Why choose arbitration when creating a contract?

Ease of international enforcement, neutrality and impartiality of the Tribunal, and confidentiality.

Name three examples of arbitration.

• The Yukos arbitration, because of the size of its award

Netherlands regarding, inter alia, the proper role of Tribunal secretaries; • the recent arbitration I worked on between Nokia and Samsung regarding the terms of Samsung's global licence to Nokia's patents, because it was one of the first very high value technology/telecoms arbitrations regarding the value to be attached to a complex portfolio of telecoms patents; • Essar v Norscot, regarding a claimant's ability to recover its litigation funding costs against a defendant, because it highlights the growing impact and importance of third party funding in arbitration.

and because of the set aside proceedings in the

"ONE OF THE MAJOR PRIVILEGES OF WORKING IN INTER­NATIONAL ARBITRATION IS LEARNING FROM DIFFERENT LEGAL TRADITIONS" Garreth Wong

May 2018 | Magna Charta

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Magna Charta | May 2018

WHO DARES WINS Magna Charta www.avdr.nl

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Magna Charta | May 2018