Episode 5: Legal Ops...Real Stories with Phillip Norah
The difficulties of strategic planning for legal functions when they are too busy fighting fires.
In recent months we have seen a number of new arbitration related developments across the globe. In this article, we look at a few of the most significant and highlight key points of interest.
The English Commercial Court has held that the Court of Justice of the European Union’s (CJEU) decision in Allianz SpA v West Tankers Inc (Case C-185/07) (West Tankers) remains good law under the Recast Brussels Regulation (Nori Holding Ltd v Bank Otkritie Financial Corporation  EWHC 1343 (Comm)).
English courts therefore remain prohibited from issuing anti-suit injunctions in respect of court proceedings before EU Member State courts. As such, the court granted an anti-suit injunction to restrain court proceedings commenced in Russia (i.e. outside the EU) in breach of an arbitration clause but refused to issue an anti-suit injunction to restrain similar court proceedings commenced in Cyprus (i.e. inside the EU) on grounds that it was bound by the CJEU’s decision. The position post-Brexit was not commented upon by the court, though it is likely that English courts will no longer be constrained this way post-Brexit.
The English court has dismissed a party’s application to set aside an award on grounds of serious irregularity pursuant to s68 of the Arbitration Act 1996 because that party had failed to exhaust any available remedies under s57 of the Arbitration Act for clarification/correction of the award before making its application to set aside (X v Y  EWHC 741 (Comm)).
In response to the claimant’s application to set aside the award, the defendant submitted inter alia that s70(2)(b) of the Arbitration Act obliges the claimant to exhaust any available recourse under s57 (correction of award or additional award) before applying to set aside the award, but had not done so. The court agreed, and rejected the claimant’s argument that in light of Article 27.1 of the LCIA Rules 1998 (correction of awards and additional awards), s57 of the Arbitration Act did not apply.
The court held that Article 27 of the LCIA Rules does not exclude the arbitral tribunal’s powers under s57 of the Act, and therefore the claimant should have sought clarification of the award pursuant to s57, but, having failed to do so, could not now bring an application to set aside.
The International Chamber of Commerce (ICC) have achieved a breakthrough in gender diversity with the composition of its supreme governing body now achieving gender parity (88 women and 88 men). Alexis Mourre, President of the ICC called this a “major milestone in the history of international arbitration”. Recent gender statistics also revealed growth in the number of women arbitrators appointed in ICC proceedings for the second year running, with women representing 14.8 percent of all arbitrators appointed by ICC Arbitration parties, co-arbitrators or directly by the ICC Court in 2016.
Efforts have also been made in respect of regional diversity within the ICC Court’s Council appointments for the 2018- 2021 term, with 176 members being appointed from 104 countries, including previously unrepresented countries such as Kyrgyzstan and Uzbekistan.
Norton Rose Fulbright’s global co-head of international arbitration, Pierre Bienvenu, has been renewed as an alternate member of the ICC Court for a second term.
ICSID has published proposals for amending its rules and regulations, which will be the fourth update to the ICSID rules and the most extensive review to date. The overarching goals are to modernize, simplify, and streamline the rules.
France recently codified the regime governing enforcement procedures against foreign states in a statute known as the “Sapin 2 law” of December 9, 2016. The provisions of the Sapin 2 law were integrated into the French Civil Enforcement Proceedings Code under Articles L-111.1-1, L.111.1-2 and L.111.1-3 relating to sovereign immunity from enforcement.
Detractors of these provisions have referred to them as the Poutine amendment as the law was voted in the wake of the multiple enforcement proceedings against Russia following the award in the Yukos case.
The Sapin 2 law introduced the obligation for creditors of foreign states to obtain a prior authorisation from a French court before they can seek enforcement measures against foreign states. The law provides that enforcement measures on assets belonging to a foreign state can only be granted if one of the following conditions is met
The Sapin 2 law clarifies that unless the state has given an “express and specific waiver”, no enforcement measures can be granted on assets of foreign states’ diplomatic missions in France (including bank accounts of diplomatic missions).
Previously, the French Supreme Court had wavered on this issue, sometimes requiring an express waiver only and thereafter ruling that an express and specific waiver was required. In two recent decisions rendered in the framework of the Commisimpex v Republic of the Congo saga, the French courts rendered decisions aligned with the rules of the Sapin 2 law to claims pertaining to the legality of enforcement measures taken before the coming into force of such law. In a judgment of January 10, 2018, the French Supreme Court ruled that enforcement measures on assets of diplomatic missions require an express and specific waiver (as opposed to an express waiver only). On May 5, 2018, in yet another decision relating to enforcement measures taken in the Commisimpex case before the coming into force of the Sapin 2 law, the Court of Appeal ruled that this double requirement applies to assets of diplomatic missions only and not to the other assets of the state.
The Dutch Supreme Court (Hoge Raad der Nederlanden) has ruled that an arbitral award might be recognized and enforced in the Netherlands on the basis of the New York Convention, even if the arbitral award has been annulled by a competent authority pursuant to article V(1).
The relevant arbitral award was rendered by the ICAC (Moscow) in a dispute between Mr Maximov and Novolipetsk Metallurgical Plant (NLMK). Mr Maximov claimed payment of the remaining purchase price for the shares in Maxi Group that he sold to NLMK. The ICAC partly awarded Mr Maximov’s claim in its award dated March 31, 2011 (the Award). The Award was annulled by the Moscow Arbitrazh Court and the annulment was upheld by Russia’s appellate courts.
Despite the annulment, Mr Maximov sought to enforce the Award in the Netherlands. Both the Amsterdam District Court (rechtbank) and the Amsterdam Court of Appeal (gerechtshof) denied Mr Maximov’s request, but both courts also found that annulment of an award would not necessarily mean that it cannot be recognized and enforced in the Netherlands.
The Supreme Court came to the same conclusion. In doing so it first had to decide on the correct interpretation of article V(1) of the New York Convention. The Supreme Court concluded that under article V(1) recognition and enforcement can be allowed even if a ground for refusal exists, because the article only establishes a discretionary power (but not an obligation). The court applied the Vienna Convention on the Law of Treaties and so took into account the wording of article V(1) of the New York Convention (in various languages) and the ultimate goal of the New York Convention as a whole. However, the court noted that even though article V(1) establishes a discretionary power, that power must be applied cautiously. It is for a competent authority of the country in which (or under the law of which) an award was made to rule on the validity of the award, including the right of annulment. If the courts before which parties seek recognition and enforcement fully reviewed annulment decisions, then it would interfere with that principle. Therefore, the discretionary power to allow recognition and enforcement of an award annulled at the seat can only be used in exceptional circumstances.
The Supreme Court gave two examples of such exceptional circumstances: (i) the arbitral award was annulled on grounds that are not listed in article V(1) (a)–(d) of the convention, or on grounds that are not internationally accepted, and (ii) the annulment judgment itself would not be enforceable in the Netherlands because it does not meet the relevant criteria established in Dutch international private law. In this case, the Supreme Court concluded that there were no such exceptional circumstances, which meant that recognition and enforcement of the annulled Award had to be refused. In a more recent case, the Supreme Court confirmed this formulation of the exception.
The International Arbitration Centre (IAC), a part of the Astana International Financial Centre (AIFC), was officially launched on July 4, 2018. Together with the AIFC Court, it provides AIFC members with an alternative mechanism of dispute resolution, using unique procedural rules modelled on English common law procedures and leading international practice. The entire AIFC legal framework is based on the principles, legislation and precedents of the law of England and Wales and the standards of leading global financial centres, and the AIFC Court’s bench includes some prominent members of the UK judiciary.
Both the AIFC Court and the IAC are independent legal entities, entirely separate from the courts of the Republic of Kazakhstan. The AIFC Court, with Lord Woolf as its Chief Justice, has exclusive jurisdiction over disputes arising out of the activities and operations of the AIFC and jurisdiction in the case of other disputes in which all parties agree in writing to give the AIFC Court jurisdiction. The IAC, chaired by well-known international arbitrator, Barbara Dohmann QC, has its own procedural rules, modelled on leading international arbitration practice, and its own panel of worldleading arbitrators and mediators with significant experience in multiple areas of commercial law areas including oil and gas, trade, construction, energy, Islamic finance, banking, and copyright.
The launch of the AIFC Court and the IAC reflects the growing popularity of English law in transactions conducted by businesses that are active in the Republic of Kazakhstan and/or the surrounding Eurasian region, and may prove an attractive dispute resolution procedure given it results in an award which can be expediently enforced in the jurisdiction.
The Arbitration and Conciliation Act (Amendment) Bill 2018 (the Bill) has been cleared by the Union Cabinet, and will be scrutinized by Parliament. The Bill stems from the recommendations of the Report of the High Level Committee to Review the Institutionalisation of Arbitral Mechanism in India, aiming to foster a pro-arbitration environment in India. The key amendments include
The New Delhi International Arbitration Centre Bill 2018 was put before the lower house of India’s bicameral parliament by the central government in January 2018. This proposed to inter alia establish the New Delhi International Arbitration Centre to encourage foreign investors to resolve their disputes in India.
The Supreme Court of Western Australia has confirmed the availability of freezing injunctions to prevent the dissipation of assets outside of the jurisdiction, in order to protect the enforceability of a future arbitral award, even in circumstances where the arbitration had not been commenced (Trans Global Projects Pty Ltd (In liq) v Duro Felguera Australia Pty Ltd  WASC 136). The court held that it had the power to make such an order pursuant both to its inherent jurisdiction and by virtue of Article 17J of the UNCITRAL Model Law which has the force of law in Australia pursuant to s16 of the International Arbitration Act.
The court approached the analysis in three parts: (i) whether the plaintiff had shown a good arguable case on accrued or prospective causes of action; (ii) whether, on the evidence before the court, there was a danger that a prospective arbitral award and any judgment in respect of it will be unsatisfied because assets are removed from Australia, or disposed of, or dealt with, or diminished in value; and (iii) whether in all the circumstances this was a case in which it was in the interests of justice to grant a freezing order. The court answered the first two questions in the affirmative, and as such found the third question was also satisfied.
In addressing the plaintiff’s delay in commencing arbitration (which had been threatened in mid-2015, amounting to a delay of three years), the court noted that circumstances had changed in the intervening period including that the respondent’s financial position had deteriorated and that the plaintiff (through its liquidators) had recently entered into a third party funding agreement to pursue the arbitration. The presence of third party funding was thus an important factor. While not setting a specific timeline, the court ordered that the arbitration be commenced “expeditiously”.
This is a welcome decision furthering the arbitration friendly reputation of the Australian courts, and demonstrates an increasing desire to protect the integrity of the arbitral process not just at merits stage but also through to enforcement, a matter of significant interest to parties.
On May 17, 2018, British Columbia became the second Canadian province to modernize its international arbitration law, under the impetus of the Uniform Law Conference of Canada (ULCC). British Columbia has amended its International Commercial Arbitration Act, RSBC 1996, to adopt the 2006 amendments to the UNCITRAL Model Law. This follows Ontario updating its international commercial arbitration regime in March 2017, as reported previously in issue 9 of the International Arbitration Report.
Under the US Federal Arbitration Act (FAA), notice of a motion to vacate, modify or correct an arbitral award must be served within three months of the award’s issuance. Courts have applied this deadline to motions to vacate international arbitral awards issued in US-seated proceedings. There is substantial overlap between the grounds for vacatur set forth in the FAA and the defences to recognition and enforcement in the New York Convention. However, the FAA also permits the filing of a petition to confirm a New York Convention award within three years after the award is issued. This raises an important timing question: if the losing party in a US-seated international arbitration does not serve a motion to vacate within three months of an award’s issuance does that party forfeit its similar New York Convention grounds to revisit enforcement and recognition of that award?
The courts have answered this question both ways. Certain recent cases – applying a rule that originated for domestic awards – have held that a party resisting confirmation of an award will forfeit its New York Convention defences by not serving a motion to vacate within the three-month period prescribed by the FAA. However, other cases have held that the three-year period for the filing of the petition to confirm also applies to a motion to vacate filed in opposition to that petition.
Until this issue is conclusively resolved, parties should be acutely aware of this risk of potentially forfeiting New York Convention defences to enforcement and recognition of a US-seated international arbitrational award if a motion to vacate is not served within time.
California has signed into law a new bill allowing foreign lawyers (i.e. not licensed in the US) and out-of-state lawyers (i.e. licensed in a US jurisdiction other than California) to represent parties in international arbitrations seated in California, subject to certain conditions. Senate Bill (SB) 766, Representation by Foreign and Outof- State Attorneys will take effect on January 1, 2019. For more information about this development, please read our article California loosens restrictions on counsel in international arbitrations as published by International Law Office (ILO).
On July 4, 2018, the Argentine Chambers of Deputies approved its new International Arbitration Act which incorporates the Model Law of the United Nations Commission for International Trade Law (UNCITRAL) with only minor changes. It was published on July 26, 2018 in the official gazette.
In 2017, Ecuador announced 16 Bilateral Investment Treaties (BITs). On March 8, 2018, Eucador’s foreign minister, María Fernanda Espinosa, presented a new model BIT which will form the basis for future negotiations. Although the draft is currently confidential, apparently with regards to dispute resolution it imposes a duty for investors to exhaust local remedies before initiating an arbitral proceeding in a Latin American country in accordance with the Ecuadorian Constitution.
On July 27, 2018, Mexico ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), becoming the 162nd signatory to that convention and the 154th to have also ratified it. On signing, Mexico stated: “The signing of this instrument will strengthen the position of Mexico as a safe, reliable and attractive country for investments, which protects and promotes foreign investment.”
In May 2018, the Chamber of Senators of the Uruguayan Congress approved the draft Law on International Commercial Arbitration, based on the Model Law of the United Nations Commission for International Trade Law (UNCITRAL). In July 2018, the draft was approved by the Chamber of Deputies of Congress. Prior to this approval, Uruguay had no international arbitration law.
After a long period accumulating arbitral proceedings against Venezuela and Venezuelan State companies, various arbitral tribunals have started to hand down awards. This coincided with a decline in oil prices, and as a result, a decline in Venezuela’s capacity to pay the awards rendered against it. As a consequence, in 2018 some creditors have initiated enforcement proceedings in different jurisdictions, particularly in the United States where Venezuela seems to be more vulnerable. This seems to suggest a new chapter in international arbitration proceedings where until now the awards were voluntarily respected and enforced.
With thanks to Khawaja Akbar (trainee) and Eddie Skolnick (summer associate) for their contributions to this article.
The difficulties of strategic planning for legal functions when they are too busy fighting fires.
In this issue, we again cover a broad spectrum of important issues in international arbitration, with a focus on international arbitration developments and important revisions to major arbitral rules and guidance.
© Norton Rose Fulbright LLP 2021