International arbitration

October 2011

Contacts

Editorial

In this issue we take the opportunity to focus on Africa after expanding our presence there on 1 June 2011 with Norton Rose South Africa (incorporated as Deneys Reitz Inc). Cape Town partner Matt Ash looks at the development of Mauritius as an international arbitration centre for disputes with an African connection. And our back page Q&A features Durban partner, Malcolm Hartwell.

Stephen L. Drymer, co-chair of international arbitration and Rachel Bendayan, a lawyer in the Montréal office of Norton Rose OR LLP, consider the topical question of repeat appointments of arbitrators. The merits of mediation-arbitration (med-arb), a hybrid dispute resolution process still in its infancy, are evaluated by Joseph Tirado and Lori Maragou.

Leading Canadian firm, Macleod Dixon, will merge with Norton Rose OR LLP and join Norton Rose Group on 1 January 2012. Macleod Dixon is well known for its expertise in energy and mining and its strong international arbitration practice. It has more than 260 lawyers based in Calgary, Toronto, Colombia (Bogotá), Venezuela (Caracas), Kazakhstan (Almaty) and Moscow.

Pierre Bienvenu
Global practice leader - international arbitration
Norton Rose OR LLP
Joseph Tirado
Head of international arbitration EMEA
Norton Rose LLP

Legal update

New ICC rules

The ICC has published its new arbitration rules which come into force on 1 January 2012. Joe Tirado was co-chair and Sherina Petit was secretary of the ICC UK Task Force involved in reviewing the changes to the rules. Our London office will host the official UK launch of the rules on 29 November. Notable changes include the ability to appoint an emergency arbitrator to deal with urgent applications and a range of measures designed to improve case management. Full details of the changes will be set out in our January issue.

Australian court refuses enforcement against non-party to arbitration

The Victorian Court of Appeal has allowed an appeal by IMC Aviation Solutions Pty Ltd (formerly IMC Mining Solutions Pty Ltd) (IMC), and refused the enforcement of an arbitral award made against IMC on the ground that IMC was not a party to the arbitration agreement. Adopting the approach of the UK Supreme Court last year in Dallah Real Estate & Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, it held that an enforcement court can revisit jurisdiction in full, even when the arbitral tribunal or the courts of the seat of arbitration had already determined the issue. Please read our briefing.

Jivraj v Hashwani [2011] UKSC 40

The UK Supreme Court has overturned the decision of the Court of Appeal and unanimously ruled that arbitrators are not employees and so discrimination law does not apply to arbitrators. The Court of Appeal decision last year had raised concerns about the validity of many standard arbitration clauses providing for a nationality requirement, including those in existing contracts. The Supreme Court decision lays those concerns to rest and has been widely welcomed by the arbitration community in England and abroad. Please read our briefing and watch our webcast.

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The Mauritian arbitration initiative – an African practitioner’s perspective

By Matt Ash

Mauritius is taking centre stage in the contest to become Africa’s centre for international dispute resolution, thanks to two ‘watershed’ events which have taken place in the last few years.

The bold practical steps Mauritius has taken to establish itself as a regional centre for resolving cross-border disputes match its ambition to become a regional business hub and an international financial centre. It can preserve regional connection to matters, where appropriate, and address African perceptions of Eurocentric international arbitration as inherently biased and costly. At the same time they seek to reassure foreign parties of the legitimacy of the alternative process proposed.

The country’s ambitions to establish itself as a seat of international arbitration began to materialise in April 2007 when it was agreed that a regional dispute resolution centre for determining cross-border disputes within the South African region should be set up and run by the private sector. Administrative structures were then established to support Mauritius in attaining its objective to manage international arbitration disputes with an African element. These encompass commercial disputes between African litigants and investment disputes in Africa, including those involving the many foreign companies based in Mauritius which invest in India or China.

The attractions of Mauritius as an arbitral seat are numerous, among them its stable democratic government and mature political and social institutions with colonial origins in France and England.

Mauritius is number one in the Ibrahim Index of African Governance, which ranks 53 African countries according to delivery of public goods and services by the state and NGOs to citizens.

The country has a mature legal system influenced by both the common law and civil law traditions and it is supported by good infrastructure, particularly in logistics and communications. Its business environment is considered sound, stable and supported by a reasonably sophisticated financial and banking system: the World Bank’s 2010 “Doing Business” report ranked Mauritius first in Africa and 20th worldwide and the Wall Street Journal’s Economic Freedom Index ranks it 12th in the world.

The extensive network of double taxation agreements between Mauritius and a large number of investors and developing nations has attracted significant international investment; Mauritius is now the primary investment conduit into India. Underpinning this position is the country’s enviable reputation for neutrality as demand grows from within Africa for a non-Euro/American-centric mechanism and framework for dispute adjudication which is not perceived as exclusionary or partisan. Demand from foreign developers, sponsors and financiers for an alternative to domestic courts to resolve disputes is rising in step with investment in Africa.

However, the development of Mauritius as a regional arbitration centre was hindered by the absence of a bespoke arbitral law and the absence of a credible arbitration centre. The process initiated in 2007 stalled, especially after South Africa decided to proceed with its own programme. But the following year, the situation moved on. The Mauritian International Arbitration Act (MIAA) was adopted in 2008, based on the UNCITRAL Model Law on International Commercial Arbitration. The legislation has adopted best-practice modifications and improvements drawn from the English Arbitration Act, UNCITRAL’s work on the Arbitration Rules, and from the experiences of other Model Law jurisdictions, according to those who drafted it.

Notable features of the MIAA include:

  • provision that all court applications made under the MIAA go directly to a panel of three Supreme Court judges, with a direct and automatic right of appeal to the Judicial Committee of the Privy Council. This is designed to give international users confidence that interlocutory issues will be determined swiftly and decisively.
  • an amended form of article 34 of the Model Law, following the Singaporean principle, to allow for an award to be set aside in the event of a breach of the rules of natural justice during the arbitral proceedings or the rights of a party being substantially prejudiced by an award.
  • specific provisions for the doctrine of competence-competence, where the legislation stipulates that a court of law must refer the parties to arbitration where one party asserts that the dispute is subject to arbitration, unless an opposing party is able to show a very strong probability that the agreement to arbitrate may be “null and void, inoperative, or incapable of being performed” (thereby avoiding the penchant of domestic courts to decide jurisdiction for themselves, and so nullifying the competence-competence principle).
  • a unique mechanism that disconnects the arbitral process from the domestic courts by granting jurisdiction for all appointments and several administrative functions to the Permanent Court of Arbitration at the Hague (PCA).

The conclusion in 2009 of a host country agreement with the PCA, and the creation in Mauritius this year of a permanent PCA presence in Port Louis under the auspices of the MIAA, was the second watershed development. And to address concern about the PCA’s ability to adequately fulfil an arbitral role, the LCIA Mauritius International Arbitration Centre was set up in July 2011 through an agreement with the London Court of International Arbitration. The infrastructure for international arbitration in Mauritius now exists – all it needs are referrals of disputes.

The infrastructure for international arbitration in Mauritius now exists – all it needs is referrals of disputes.

Comparisons between Mauritius and other contenders to lead Africa-based international dispute resolution are inevitable. South Africa, for one, has the most sophisticated infrastructure and financial and legal systems on the African continent. However, it has missed the opportunity because its system and jurisprudence on international arbitration lag far behind most other international jurisdictions, according to a report published by the South African Law Commission (now the South African Law Reform Commission) in 1998.

South Africa has not yet adopted the Model Law. And Africa ADR, a cross-border arbitral administration in South Africa which counts the Mauritian Chamber of Commerce and Industry as a founding member, does not appear to have conducted any international arbitrations since it opened in 2009.

Clearly Mauritius has decided to go it alone, first ensuring that the legal framework is in place for the adjudication of cross-border disputes through arbitration under a regime familiar and acceptable to the international community. This, together with the country’s promise of neutrality and lower costs, means it is well placed to become the region’s seat of arbitration.

Arbitration in Africa

We will be publishing a second edition of our manual Arbitration in Africa in 2012, a practical guide to arbitration across the continent. Matt Ash has recently updated the chapter on South Africa and we are grateful to Dr. Samir Abdelly of Abdelly & Associés Maghreb for updating the chapter on Tunisia. These country guides to arbitration can be found in our online global arbitration manual www.nortonrose.com/arbitrationmanuals

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Med-arb revisited

As demand grows for more flexible and effective forms of dispute resolution, we revisit the use of “Med-arb” (for mediation-arbitration) and consider its potential.

by Joe Tirado and Lori Maragou

What is med-arb?

Med-arb is a hybrid alternative dispute resolution process designed to combine the benefits of mediation and arbitration. It can be used where mediated negotiations do not lead to a settlement. In those circumstances the parties can agree that the mediator becomes an arbitrator and renders a final and binding award on the outstanding matters. It can also occur within the framework of arbitration with the parties being encouraged to explore mediation at appropriate stages of the arbitration. Typically, should the parties agree to mediation, the arbitration proceedings will be suspended pending the outcome of the mediation or a ‘mediation window’ provided for in the procedural timetable.

Generally, med-arb will involve the same neutral third party acting as both mediator and arbitrator, which avoids the need to educate two different people on the background facts and legal submissions. This can lead to significant time and cost savings.

However, this dual role raises the risk of undermining the benefits of mediation and arbitration. It may inhibit the parties from engaging in full and frank discussions with the mediator if there remains the possibility that he/she may later become the arbitrator who will determine the dispute. It may also risk exposing the arbitrator and the award to challenge on ethical and due process grounds.

If the cap doesn’t fit

It is a fundamental principle in international commercial arbitration that an arbitrator remains impartial and independent. So the key concern is that the mediator arbitrator may lose his/her impartiality by becoming privy to information about the motivations and interests of the parties which would otherwise be privileged and/ or confidential, or which might separately influence an arbitrator’s judgment in considering the issues in dispute in the award.

In reality, it is difficult (if not impossible) for an arbitrator (like a judge) to close his or her mind to information acquired while wearing the mediator’s cap when determining an issue as arbitrator.

This tension was recognised in the CEDR Commission Settlement in International Arbitration Report of November 2009. It concluded that whilst this form of med-arb has been successful in some cases, the arbitral process is potentially jeapardised as is the enforceability of any arbitral award in the event that settlement is not achieved in the mediation phase. The report emphasised that this form of med-arb can result in a mediation phase which is less effective than if it were conducted by a third party mediator.

Squaring the circle

The CEDR Commission report does not specifically recommend a med-arb process which involves private meetings with the parties. Instead, it sets out safeguards in section 7 of Appendix 2 to the report which can be used to minimise the risks involved. For ease of reference they are reproduced below.

CEDR Commission safeguards

“7.1 The parties’ consent to the mediator/conciliator resuming as arbitrator should include consent as to the way the arbitrator is to deal with information learned in confidence by the arbitrator during the mediation/conciliation. This may require the arbitrator to disclose any such information to all parties and provide them with an opportunity to comment on it. Alternatively, it may provide that the arbitrator should disregard any confidential information that may have been disclosed during private meetings, and he or she should be under no duty to disclose it.

7.3 The parties should give their consent in writing before the mediation/conciliation phase. Where parties wish to adopt a more robust protection against the risks inherent in the arbitrator acting as mediator, they should insert a requirement that consent is also required after the mediation/conciliation has concluded and prior to the mediator/conciliator resuming in the role of arbitrator. The consent given after the mediation/ conciliation phase is particularly important because it is given in the knowledge of developments during the mediation. Consent which is given at an earlier stage (for example in a dispute resolution clause, or by reference to the arbitral rules of an institution) may be less effective. In addition, a party knowing that it can withhold consent, may encourage a party to be more open during the mediation/ conciliation phase.

7.5 The consent should include a statement that the parties will not at any later time use the fact that the arbitrator has acted as a mediator/conciliator as a basis for challenging the arbitrator or any award which the arbitrator may make (either alone or as part of a tribunal).

7.6 If as a consequence of his or her involvement in the mediation/ conciliation phase, any arbitrator develops doubts as to his or her ability to remain impartial or independent in the future course of the arbitration proceedings, that arbitrator should resign.”

Conclusion

While the use of med-arb, particularly in Common Law jurisdictions, is relatively uncommon, the adoption of the CEDR Commission safeguards (listed above) perhaps make med-arb a more viable option for parties to consider.

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Better the arbitrator you know?

By Stephen L. Drymer and Rachel Bendayan

An analysis of the IBA Conflicts Guidelines and the recent decision in Universal v Venezuela confirms that repeat appointments of the same arbitrator are permissible.

One of the many benefits of arbitration is that parties can choose their decision maker(s). What happens though if a party consistently appoints the same arbitrator? The appearance of bias or lack of independence where the same person is appointed repeatedly raises problems that are of growing concern in the arbitration community. How many times can an arbitrator be appointed by the same party and still be said to be impartial? Should arbitrators refuse appointments from parties that have appointed them in the past? Should they disclose the details of all prior appointments?

Decision-maker impartiality and independence is a core requirement of procedural fairness. A party may therefore request that an arbitrator be disqualified if it believes there is an objective, justifiable doubt about his or her independence or impartiality.

The IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) are recognised as the pre-eminent set of principles for assessing arbitrator independence. Part I of the IBA Guidelines provides seven “general standards” for impartiality, independence and disclosure. Part II sets out “Application Lists”: three colourcoded “lists of specific situations that… do or do not warrant disclosure or disqualification of an arbitrator.” These guidelines help decide when, what and if any information should be disclosed by an arbitrator to the parties.

A recent decision on a challenge that was part of an important ICSID case – Universal Compression International Holdings, S.L.U. v Bolivarian Republic of Venezuela (Universal v Venezuela) is of particular interest. The claimant, Universal, made the challenge against arbitrator Professor Brigitte Stern on the basis that she had been appointed by Venezuela in at least three other pending ICSID cases. All three cases dealt with foreign investors in the service industry which, like Universal, alleged that Venezuela had expropriated their property. In two of them Stern had been named by the same counsel for Venezuela as in the case at issue. Universal claimed that Stern had failed to disclose these prior appointments, which raised further doubts as to her independence. Venezuela, in turn, challenged the arbitrator appointed by Universal, Professor Guido Santiago Tawil, on his alleged close professional ties with several members of counsel for Universal.

The challenges to arbitrators Stern and Tawil were dismissed, a decision which has significantly raised the bar for disqualification of an ICSID arbitrator and clarified it.

Under the ICSID Convention, persons designated to serve as arbitrators must exercise “independent judgment” and may be disqualified “on the account of any fact indicating a manifest lack” of such judgment. According to the Universal v Venezuela decision, the term “manifest” means “obvious” or “evident”. As a result, a “relatively high burden of proof” lies on the party moving to disqualify an arbitrator. A simple belief that an arbitrator lacks independence or impartiality is insufficient to disqualify him or her; facts must be proven by “objective” evidence.

Although multiple appointments within a three-year period is included in the IBA Guidelines’ “orange list” of situations that may give rise to justifiable doubts about an arbitrator’s impartiality, Stern’s various appointments by Venezuela, on their own, were found not to amount to objective evidence that she suffered from a “manifest” lack of independent and impartial judgment. The decision notes that “Stern has been appointed in more than twenty ICSID cases, evidencing that she is not dependent – economically or otherwise – upon Respondent for her appointments in these cases.” As for Tawil, it was not “evident” that the mere fact of a relationship between him and counsel for Universal, gave rise to a “manifest” lack of impartiality, especially considering that this situation is included in the IBA Guidelines’ “green list” of acceptable relationships which do not require any disclosure. Taken together, this suggests that the IBA Guidelines are to be applied with robust common sense.

The decision’s reference to the scope of the duty to disclose is also insightful. To ensure that parties have complete information and that the appointment process is as transparent as possible, arbitrators should include in their letter of acceptance to the parties details of all prior appointments by an appointing party as well as details of any professional relationships with a party’s counsel. This includes, “out of an abundance of caution,” information that is already in the public domain. However, in assessing whether an arbitrator’s failure to disclose such appointments results in a manifest lack of independence or impartiality, the public availability of that information – such as, in this case, the public knowledge of Stern’s appointment by Venezuela in other ICSID cases – ought to be taken into account.

This decision comes on the heels of two earlier ICSID decisions on requests to disqualify arbitrator Stern due to her repeated appointments by Venezuela. In both cases, it was held that something in addition to multiple appointments was needed to disqualify an arbitrator. Taken together, these decisions lend justification to the argument that limiting the number of times an arbitrator may be appointed by a party restricts that party’s choice and its right to select the best possible arbitrator for any given case. This applies not only to international investment arbitration, but also to other specialised or industry-specific arbitrations. If one of the benefits of arbitration is the ability to choose one’s decision maker, then the possibility of repeat appointments is a necessary corollary.

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Noticeboard

“45 under 45” – Global Arbitration Review

GAR has published a guide to the leading figures of the international arbitration bar under the age of 45. The guide, the first of its kind to be published since 2006, includes Martin Valasek, co-chair of international arbitration at Norton Rose OR LLP, based in our Montréal office, with Renée Thériault, Of Counsel in our Ottowa office, receiving an honourable mention.

The Mauritius International Arbitration Centre – a new arbitral seat

In June Joe Tirado hosted an event organised by The Franco-British Lawyers Society which focused on the Mauritius International Arbitration Project. It featured presentations from Salim Moollan (Essex Court Chambers, Vice-President of the ICC International Court of Arbitration), Judith Levene (Legal Counsel, Permanent Court of Arbitration the Hague) and Matt Ash.

Updates to our global arbitration manual

We are grateful to John Doyle of Dillon Eustace who kindly updated the chapter on arbitration in Ireland in our online global arbitration manual. Following the recent addition of Canada, the manual now covers 55 jurisdictions. www.nortonrose.com/arbitrationmanuals

ClArb London branch – 7th annual joint seminar with LCIA

Our London office hosted the 7th Annual LCIA-CIArb joint seminar, entitled Arbitration in Latin America on 7 September which was attended by more than 100 delegates.

ICC conference in Canberra

In August, our Canberra office hosted an ICC panel discussion called Facing the Present and Predicting the Future – Issues in International Arbitration in Australia. Ben Allen, a partner in the Canberra office was on the panel for a discussion focused on investor-state treaty arbitration in Australia.

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Contacts

Pierre Bienvenu, Norton Rose OR LLP
Global practice leader – international arbitration
Tel +1 514 847 4452
pierre.bienvenu@nortonrose.com

Joe Tirado, Norton Rose LLP
Head of international arbitration EMEA
Tel +44 (0)20 7444 2433
joseph.tirado@nortonrose.com

Australia

Norton Rose Australia

Rob Buchanan
rob.buchanan@nortonrose.com

Ernest van Buuren
ernest.van.buuren@nortonrose.com

Bahrain

Norton Rose (Middle East) LLP

Adam Vause
adam.vause@nortonrose.com

Belgium

Norton Rose LLP

Michael Jürgen Werner
michaeljurgen.werner@nortonrose.com

Canada

Norton Rose OR LLP

Stephen L. Drymer
stephen.drymer@nortonrose.com

Martin J. Valasek
martin.valasek@nortonrose.com

China

Norton Rose LLP

Jim James
jim.james@nortonrose.com

Czech Republic

Norton Rose v.o.s., advokátni kancelář

Pavlína Beránková
pavlina.berankova@nortonrose.com

France

Norton Rose LLP

Barthélemy Cousin
barthelemy.cousin@nortonrose.com

Germany

Norton Rose LLP

Patricia Nacimiento
patricia.nacimiento@nortonrose.com

Greece

Norton Rose LLP

Marie Kelly
marie.kelly@nortonrose.com

Hong Kong

Norton Rose Hong Kong

Camille Jojo
camille.jojo@nortonrose.com

Italy

Norton Rose Studio Legale

Cecilia Buresti
cecelia.buresti@nortonrose.com

Netherlands

Norton Rose LLP

Yke Lennartz
yke.lennartz@nortonrose.com

Poland

Norton Rose Piotr Strawa and Partners LP

Malgorzata Patocka-Zbikowska
malgorzata.patocka@nortonrose.com

Russia

Norton Rose (Central Europe) LLP

Yaroslav Klimov
yaroslav.klimov@nortonrose.com

Singapore

Norton Rose (Asia) LLP

Guy Spooner
guy.spooner@nortonrose.com

South Africa

Norton Rose South Africa (incorporated
as Deneys Reitz Inc.)

Michael Hart
michael.hart@nortonrose.com

Thailand

Norton Rose (Thailand) Limited

Somboon Kitiyansub
somboon.kitiyansub@nortonrose.com

UAE

Norton Rose (Middle East) LLP

Patrick Bourke
patrick.bourke@nortonrose.com

United Kingdom

Norton Rose LLP

Joe Tirado
joseph.tirado@nortonrose.com

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Focus on Durban: Malcolm Hartwell

Malcolm Hartwell is a director based in Durban, practicing admiralty and shipping law. He is a Master Mariner, having spent ten years at sea with Safmarine and is a qualified South African lawyer and English solicitor. Most of his arbitration work arises out of the many maritime casualties on or near the African Coast.

I am a lawyer because...

I loved life at sea but needed a greater intellectual challenge. Becoming a maritime lawyer allowed me to combine my experience with satisfying that challenge.

What gives you greatest satisfaction, professionally?

Trying to help clients understand whatever legal reef they have run aground on, identifying the challenges they face and solving problems.

And personally?

Helping my children develop all the potential they have, particularly as they face a far more challenging world than the one I grew up in.

How do you spend the weekends?

Mainly catching up with the children and shuttling them from one sporting activity to the next extra mural. We are spoilt down here with year-round easy access to beaches, game reserves and mountains so camping with the kids features in many of my weekends.

If you weren’t a lawyer, what would you be doing?

I have abandoned my early dreams of being the lead guitarist in a female rock band, not least because I am tone-deaf. I enjoy the sciences and problem-solving so would probably have been a mechanical engineer.

What’s on your iPod?

A rather strange mixture of classic rock ranging from Hendrix through Jethro Tull to Journey along with masses of Clapton and a sprinkling of my daughter’s ‘school’ songs.

And your favourite arbitration centre?

Naturally, I am biased and want Durban to develop a much more significant role as a maritime arbitration centre. But for flexibility and consummate professionalism there is little to beat London as an arbitration venue to resolve maritime disputes.

What is your biggest vice?

A weakness for South African wine and lazy Sunday lunches with family and friends.

What is your biggest mistake?

Assuming that everyone I meet is innately honest and good. Fortunately in shipping law I am rarely disappointed in that assumption.

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