Arbitration, litigation, Mediator, Study Guides, Projects, Research of International Law

Download Arbitration, litigation, Mediator and more Study Guides, Projects, Research International Law in PDF only on Docsity!

An introduction to international arbitration:

a guide from Stephenson Harwood LLP

b

Contents

1. Introduction 1
2. Quick reference guide 2
3. Arbitration or litigation? 5
4. Drafting an arbitration agreement 8
5. Investment treaty arbitration 9
6. An overview of the major 10 arbitration centres
7. Specialist centres 17
8. Why Stephenson Harwood LLP 20

”The firm has scored

many wins when it

comes to arbitration-

related litigation […] it is

considered a ‘go-to’ firm.”

Global Arbitration Review 2017

What is arbitration?

Arbitration is an alternative to litigation. It is primarily used to resolve disputes arising from commercial contracts, especially contracts with an international element. Arbitration is also the designated default dispute resolution process in disputes between governments and companies under international trade or investment treaties. By agreement between the parties (usually contained in a clause of the contract in dispute), an independent arbitrator, or a panel of three arbitrators (the tribunal), is appointed to hear the dispute and to produce a ruling (the award) on the merits. The tribunal may award damages or other relief against the losing party. Awards can be enforced in the 156 signatory countries to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (see http://www.uncitral.org/ uncitral/en/ uncitral_texts/arbitration/ NYConvention_ status.html).

How does arbitration differ

from other methods of dispute

resolution?

Arbitration shares some of the traits of litigation and mediation but has features which are distinct from both. Similar to litigation, the award made by the tribunal in an arbitration is binding on the parties. However, unlike going to court, the process is usually less formal and is confidential. Although mediation is informal, it requires both parties to reach an agreed settlement rather than having a decision imposed on them; this means that, subject to an award being challenged in court, there is greater finality to the arbitration process.

How do I commence arbitration

proceedings?

How and where to arbitrate is determined by the parties’ arbitration agreement, usually contained in the contract in dispute. The agreement sets out how many arbitrators are to be appointed, how they are to be appointed, where the arbitration will be held, in what language it will be conducted and under which institutional rules (if any). It is also possible for both sides to agree to go to arbitration after the dispute has arisen, but this is much less common because the agreement of both parties is necessary. This is often not possible when a commercial relationship has already broken down.

Before litigation starts

2. Quick reference guide

Who runs arbitrations?

There are a number of well-established organisations that administer international arbitrations and each has its own set of rules. Some well-known institutions include the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Singapore International Arbitration Centre (SIAC). There is also a range of organisations specific to particular industries (shipping or commodities, for example) which administer arbitrations. Other administering bodies include the dispute resolution mechanisms attached to international trade and investment treaties such as the International Centre for the Settlement of Investment Disputes (ICSID). Although these organisations have fixed geographical bases (the ICC, for example, is based in Paris), many of these bodies will run arbitrations in any country chosen by the parties. It is far from compulsory, however, for arbitrations to be administered by one of these organisations. Ad hoc arbitrations can be established by agreement between the parties and these arbitrations are often run using the United Nations Commission on International Trade Law (UNCITRAL) rules. Arbitrations are also subject to the laws of the country which is the ‘seat’ of the arbitration, regardless of the governing law of the contract in dispute. Although many countries have implemented the UNCITRAL Model Law (which provides an arbitration- friendly legislative framework) into their national law, there can be significant differences between jurisdictions.

“It’s a sharp team with a panache for

making a solid and comprehensive analysis

of issues, and for providing succinct and

practical advice in complex matters. Their

research skills are simply outstanding.”

Chambers UK 2018

It is a fundamental principle of almost all countries’ arbitration law that there must be an agreement between the parties to refer a dispute to arbitration. If this is not the case, then arbitration will not be available as a means of dispute resolution. Otherwise, the main factors to consider include:

• Cost and time
• Selection of arbitrators
• Procedure
• Confidentiality
• Neutrality
• Appeals process
• Enforcement

Cost and time

Arbitration is sometimes said to be quicker and cheaper than litigation. This may be true, but is normally only the case in respect of small to medium-sized disputes. For larger, more complex disputes, arbitration can be more expensive and time-consuming than litigation. There are several reasons for this. First, a judge in court proceedings is not paid by the parties. Arbitrators’ fees are borne by the parties. This can be expensive, particularly where there are three arbitrators. Their fees are usually paid (in part at least) in advance, may be proportionate to the value of the dispute and may be non-refundable in the event of settlement. Second, arbitration may take longer than litigation because there is no system to regiment the availability of arbitrators. Especially with a three-person tribunal, it can be difficult to book hearing times which all the arbitrators can attend. In addition, a lenient tribunal may permit the parties more extensions of time to meet deadlines than would be permitted by the courts. Finally, in arbitration, the parties have to find and pay for a hearing venue, whereas the use of a court is free. A factor which may affect the parties’ decision to arbitrate is the level of court fees in the relevant jurisdiction. In many jurisdictions, court fees are modest, but in others, court fees can be significant.

Selection of arbitrators

The fact that the parties can select their arbitrators, or at least choose an appropriate arbitration centre which will select the arbitrator(s), often makes arbitration a more attractive option than litigation, where judges are selected without reference to the parties’ wishes. The obvious advantage of selecting your own arbitrator is that you can either choose someone with expertise relevant to the subject matter of the dispute

Before litigation starts

3. Arbitration or litigation?

or, if the matter turns on a point of law, you can select a lawyer or a judge. Once selected, the tribunal will be in charge of the case for its duration. With litigation, a number of judges may deal with a case during its lifetime. Finally, contrary to common belief, it is not true that an arbitrator will be sympathetic to the party who appointed him or her.

Procedure

The arbitration process is more flexible than court proceedings. The parties can choose a procedure which is suitable to the dispute; this takes precedence over the views of the tribunal. Therefore a dispute could be resolved solely by reference to documents or written submissions, without the need for a hearing.

Confidentiality

One of the most attractive aspects of arbitration is that all the proceedings are held in private and are confidential. Hearings in court proceedings are generally heard in public. The principle attraction of arbitration is that oral evidence given by a party’s employees, directors or senior executives will not be heard by the public, and competitors and others will not know about the dispute.

Neutrality

Where parties come from different countries they can choose a neutral forum for the resolution of their dispute. For example, contracting parties from two different countries could choose England as the place of arbitration: a neutral forum that would avoid either party having to submit to the jurisdiction of the other party’s national courts.

Appeals process

In many jurisdictions, the ability to appeal awards to the court is limited. This preserves the principle that the parties are free to agree how their disputes are resolved with minimum court intervention. From a commercial point of view, it means that the rendering of an award by the arbitrators will normally mark the end of proceedings. In order to avoid any uncertainty, parties can exclude the right of appeal in their arbitration agreement. Under a number of institutional arbitration rules, there is no right of appeal. This provides greater finality than litigation in many jurisdictions.

The first step in any arbitration is the drafting of an appropriate arbitration agreement. This usually begins when the underlying contract is negotiated. Careful thought needs to be given to the form of the arbitration agreement. Unfortunately, in many cases the parties’ corporate counsel incorporate boilerplate arbitration agreements which do not take into account the particular circumstances of the contract. It is important to carefully consider what is included in the arbitration agreement because getting it wrong can be extremely costly. Some of the main factors to consider are listed below. Some will be more relevant to individual circumstances than others and there may be additional factors that are relevant to the particular circumstances of each contract. It is always advisable to seek legal advice when drafting arbitration agreements.

Considerations:

• Is arbitration the most suitable form of dispute resolution, bearing in mind the nature of the contract?
• Do the parties want to refer all disputes arising out of the contract to arbitration or only certain types of dispute? - Where do the parties want the ‘seat’ of the arbitration to be? This is important because the seat of the arbitration will also mean that the laws of that jurisdiction will apply to the arbitration’s procedure. Some jurisdictions do not have laws (or courts) which adequately support effective arbitration. - Do the parties want the arbitration to be ad hoc or conducted under institutional rules? - How many arbitrators do the parties want to appoint (one or three)? Three will increase the cost and usually mean that diaries are harder to co-ordinate. - Who will appoint the arbitrators — the parties or an independent body? What happens if the parties cannot agree? There must be a fall-back position. - In what language do the parties want the arbitration proceedings to be conducted? - How many parties are likely to be involved? If there are more than two, then a multi-party arbitration clause may be necessary. - In multi-party scenarios, consideration must be given to whether the tribunal should be provided with a specific power to consolidate connected arbitrations and/ or join additional parties to the arbitration.

Before litigation starts

4. Drafting an arbitration agreement

One type of international arbitration which has seen a significant increase in popularity in the last decade is investment treaty arbitration. Most investment treaty arbitrations are conducted under the auspices of the International Centre for Settlement of Investment Disputes (ICSID). ICSID was created by the 1965 Washington Convention, which has been ratified by 161 states. It is a division of the World Bank, which administers arbitrations under its own rules. ICSID was created to promote international trade and investment, by providing a neutral and specialised forum for the settlement of disputes between a host state and an investor from another state, which has arisen out of an investment made in the host state. ICSID arbitration has a number of distinguishing features. First, unlike other international arbitrations, arbitrations conducted under its rules are delocalised; the arbitration has no seat. Second, ICSID awards are directly enforceable in signatory states as if they were judgments of the courts of the state of enforcement. Third, enforcement of ICSID arbitration awards is governed by the Washington Convention, not the New York Convention. As with other types of arbitration, there must be an agreement to arbitrate. This may be a specific contractual agreement to resolve disputes by ICSID arbitration. However, more commonly, the agreement is contained elsewhere, as the investor is generally not suing its contractual counterparty but the state in which the investment was made. The arbitration agreement is therefore usually found in the host state’s national investment legislation, a multilateral investment treaty or a bilateral investment treaty (BIT). BITs provide a framework agreement between two states for the protection and fair treatment of investments made by nationals of either state in the territory of the other state. There are currently more than 2,800 BITs in force globally. Investment treaty arbitration may provide an aggrieved party with an additional or alternative means of recovering its losses. Investment treaty arbitration is therefore a useful and significant type of arbitration in an increasingly globalised world.

Before litigation starts

5. Investment treaty arbitration

Stockholm:

Stockholm Chamber of

Commerce (SCC)

Hong Kong:

Hong Kong International

Arbitration Centre (HKIAC)

Singapore:

Singapore International

Arbitration Centre (SIAC)

Mauritius:

LCIA – MIAC

Rwanda:

Kigali International

Arbitration Centre

(KIAC)

China:

China International Economic and

Trade Arbitration Commission

(CIETAC)

American Arbitration

Association (AAA)

www.adr.org Established in 1926, the AAA is a well- recognised provider of administered arbitration proceedings. In 1991, it formally adopted a set of rules to govern its increasing load of international cases. The AAA International Arbitration Rules, which are based on the UNCITRAL rules, were revised in 2008. Long a leader in domestic arbitration services in the United States, the AAA is becoming increasingly prominent in international arbitration. The AAA also has expedited procedures that apply when no claim or counterclaim exceeds a specified amount. Parties can agree to use these procedures even if their claims and counterclaims are of greater value. The Stockholm Chamber of Commerce is the only other major arbitration institution with a set of rules specifically designed for expedited proceedings. Other institutions are considering whether to introduce such rules.

China International Economic

and Trade Arbitration

Commission (CIETAC)

www.cietac.org.cn Arbitration in mainland China is dominated by CIETAC which was established (as the Foreign Trade Arbitration Commission of the International Trade Promotion Commission) in April 1956. CIETAC is an independent non-governmental arbitration institution. It maintains a panel of over 1,000 arbitrators from more than 30 countries who possess extensive professional knowledge in various industries. Originally it only had jurisdiction to deal with disputes involving a foreign party. Subsequently, its jurisdiction has expanded to both domestic and international arbitrations. CIETAC is now the most important arbitration institution in China. It has administered more than 10,000 international disputes since its establishment. On average, around 1, new disputes are filed each year.

Kigali International Arbitration

Centre (KIAC)

www.kiac.org.rw KIAC was established in 2013. It aims to take advantage of Rwanda’s increasingly business friendly reputation to establish itself as the leading arbitral institution for the resolution of African disputes.

Lagos Court of Arbitration (LCA)

www.lagosarbitration.org Founded in November 2012, the LCA aims to become West Africa’s premier arbitral institution, offering a credible local alternative to the LCIA and ICC, which currently administer the majority of arbitrations relating to Africa’s largest economy.

London Court of International

Arbitration (LCIA)

www.lcia-arbitration.com The LCIA is one of the oldest major international arbitration centres. Although based in London, it is an international institution and a large proportion of the members of the LCIA Court are not from the United Kingdom. In 2011, the LCIA and Mauritius government jointly established a new arbitration centre in Mauritius, LCIA- MIAC, with its own set of rules. The LCIA offers international arbitration anywhere in the world. However, if the parties have not stipulated a venue in their arbitration agreement (and unless the LCIA determines there is some reason why another venue should be chosen), London will be the seat of the arbitration. The LCIA deals with a variety of commercial disputes, including those relating to energy, foreign trade, transport, distribution, technology, construction and engineering. In order to provide and to maintain its services and to meet the needs of the international business community, the LCIA has formed Users’ Councils which cover the major trading areas of the world. Each Users’ Council has its own officers and devises its own programme of activities appropriate to the needs of the region. The LCIA’s latest rules came into effect in October 2014. Notable changes include provisions on the conduct of parties and legal representatives, as well as greater scope for emergency relief (including the appointment of emergency arbitrators).

Singapore International

Arbitration Centre (SIAC)

www.siac.org.sg Many significant commercial arbitrations in Singapore take place under the auspices of SIAC. Created in 1991, SIAC is recognised as one of the leading arbitration institutions in Asia. Having been initially funded by the Singapore government, SIAC is now entirely self sufficient and is affiliated with the Singapore Business Federation, the apex organisation of the business community in Singapore. Since its inception, SIAC has administered over 1,000 disputes involving parties from the Americas, Europe, Asia and other parts of the world. Over 80% of these disputes were international.

Stockholm Chamber of

Commerce (SCC)

www.chamber.se The Arbitration Institute of the SCC is a prominent national arbitration institution that has become increasingly significant in international arbitration circles, particularly for east-west commercial disputes. The SCC administers arbitrations under its own rules and also under the UNCITRAL rules. The Arbitration Rules of the SCC requires the tribunal to render an award within six months of the date the matter is referred to the tribunal (although this period can be extended). Unlike most of the other major arbitration institutions whose standard rules can be modified to accommodate requests for expedited decisions, the SCC has designed a separate set of rules specifically for expedited arbitrations, which can be modified by the parties. The use of the Expedited Rules of the SCC is recommended to resolve relatively minor disputes in a speedy and cost-effective manner.

In addition to the generalist arbitration centres, there are a number of important specialist centres. In this section, we provide an overview of some of these.

Commodities

The majority of international trade in soft commodities (rice, sugar, wheat, grain, cocoa, coffee, animal feed and edible oils) is carried out under standard form contracts drafted by trade associations which specialise in particular commodities. A number of trade associations in London provide standard form contracts and arbitration facilities for the settlement of disputes which arise out of sales incorporating those contracts. Even if the parties have not stipulated the relevant association in their contract, they can later agree to settle any dispute which might arise via the facilities of these associations. Most of the associations listed below have their own arbitration rules, codes of conduct and panels of qualified arbitrators. They are all based in London and although arbitrations under the associations’ rules can be held anywhere in the world, most are heard in London.

Federation of Cocoa Commerce

Ltd (FCC)

www.cocoafederation.com The Federation represents the interests of cocoa growers in countries in South America, Africa and Asia; of traders and brokers in Europe; and of chocolate producers. It handles arbitrations in relation to the quality of goods and other disputes.

Federation of Oils, Seeds & Fats

Associations (FOSFA)

www.fosfa.org The Federation, which represents over 1, members in 84 countries deals with edible oils, including oil seeds such as soya beans and oilseed rape. It overlaps with the Dutch association, NOFTA, and has a similar set of rules.

Before litigation starts

7. Specialist centres

Grain & Feed Trade Association

(GAFTA)

www.gafta.com GAFTA is an international organisation with more than 1,400 members in 86 countries. Members of the association are involved in trading grain, animal feed, pulses and rice at all stages of the supply chain from production to final consumption. The members are made up of trading companies and brokers. GAFTA is recognised worldwide for its expertise in contracts and arbitration relating to these commodities. Contractual disputes are heard by experienced, qualified arbitrators.

London Metal Exchange (LME)

www.lme.co.uk The LME is the world’s leading futures market for base metals. It provides an arbitration service for the settlement of all types of dispute relating to the trade of base metals.

London Rice Brokers’

Association (LRBA)

www.lrba.co.uk This is an association of firms of rice brokers in London, Paris and Antwerp which provides a standard form contract requiring arbitration under the LRBA Rules. The LRBA maintains a panel of persons qualified to act as arbitrators. Since August 1997, its rules have been developed in accordance with the GAFTA rules.

Sugar Trade Associations

(SAL & RSA)

www.sugarassociation.co.uk/sal www.sugarassociation.co.uk/rsa There are two sugar trade associations, run by the same personnel from the same office. One deals with raw sugar from origin and is called the Sugar Association of London (SAL) The other deals with refined sugar and is called the Refined Sugar Association (RSA). They have identical arbitration rules. Members of the associations, together with other experienced sugar traders nominated by members, act as arbitrators. They use their trading experience and knowledge of the rules to settle disputes referred to the associations. Companies throughout the world use the associations’ rules and arbitration services.

Intellectual property

World Intellectual Property Organization (WIPO) www.wipo.int The WIPO was established in 1967 as a specialised agency of the United Nations. It was established by the WIPO Convention as a means of promoting the protection of intellectual property worldwide. The WIPO Arbitration and Mediation Centre was formed in 1994 to offer arbitration and mediation services in the resolution of international commercial disputes between private parties. The procedures offered by the Centre are specifically aimed at disputes involving intellectual property. An increasing number of disputes are being filed with the Centre, including a mixture of contractual disputes (such as patent and software licences and trademark agreements) and non-contractual disputes (such as patent infringement).