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International Arbitration2015 in review
ContentsForeword 3
Efficiency in arbitration 4
Arbitration practice 6
Drafting arbitration clauses 7
Innovations and new developments 8
Enforcement of arbitration awards 9
Investment treaty arbitration 10
Looking forward to 2016 12
Ashurst arbitration publications in 2015 13
Ashurst contacts 14
2 InternatIonal arbItratIon | 2015 in review
ForewordWelcome to the Ashurst review of international arbitration news over the past 12 months. In this review, we highlight the main developments in international arbitration during 2015 from across the globe.
These developments include:
• newinitiativesthatareintendedtomakearbitrationfasterandcheaper;
• thelatestadviceondraftingarbitrationclauses;
• newarbitrationinstitutionsandrules;and
• radicalnewproposalsforinvestmenttreatyarbitration.
These are relevant to all who engage in international trade and investment, and who encounter disputes along theway.Internationalarbitrationisacommonlanguagethatfacilitatestheimplementationofcontractsbetweenbusinesspeoplefromdifferentpartsoftheworld.Ourreviewhighlightsthewayinwhichthatlanguagehasdevelopedandevolvedinthepastyear.
2015wasalsoabusyyearforAshurst’sarbitrationteam.HighlightsincludedsecuringmajorvictoriesforclientsinAsia-Pacific,Europe,AfricaandtheAmericas,amongwhichwerewinsfortwosuperoilmajorsinmulti-milliondollararbitrationsconcerningpre-emptionrightsandequityredetermination.WeaddedarbitrationcapabilitytoourDubaioffice,andexpandedourarbitrationofferinginofficesinEuropeandAsia-Pacific;andwe contributed to efforts led by the principal arbitral institutions in relation to gender diversity and securing highethicalstandardsforarbitralpractice.
Wehopethatyoufindthisreviewusefulandinteresting.Ifyouhaveanyquestionsaboutanythinginit,pleasegetin touch (our contact details are set out on page 14).Wewouldliketothankallofourclientswhohaveplacedtheirconfidence in us to represent them in arbitrations in 2015, and we wish you a happy and successful year in 2016.
AnniversAries in 2015
The Chartered Institute of Arbitrators (CIArb) celebrated its 100th anniversary.
Ben Giaretta Partner
Ronnie King Partner
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Efficiency in arbitration There has been a continued focus on ways to make arbitration more efficient during 2015: ways to make arbitration quicker and cheaper, without compromising on quality.
National initiatives The most striking reforms in 2015havebeenmadeinindividualcountries.InIndia,theArbitrationActwasamended to include a requirement that arbitrations be completed within 12 months (with up to six months’ extensionoftimebyagreementoftheparties,andanyextensionsthereafterrequiringcourtapproval).IntheUS State of Delaware, a Rapid Arbitration Act was introduced, under which arbitrations must be completed within 120 days (which can be extended to 180daysupontheagreementoftheparties).UnderboththeIndianand the Delaware laws there could be financial penalties for the arbitrators, and in India costs consequences fortheparties,ifthesetime-limitsarenotcompliedwith.Thiscouldbeatrendthatcontinuesin2016 and beyond, with more countries setting strict timelines for arbitration and specifying consequences for parties and arbitratorsifthereisadefault.
Expedited procedures Arbitration institutions continue to promote expedited procedures, which mandate specific timings (typically sixmonthsforthewholearbitration)ratherthanleavingthistothediscretionofatribunal.Variousinstitutionshavealreadyintroducedexpeditedprocedures,suchastheSCCinStockholmandtheSIACinSingapore.Inthe past year, ACICA in Australia has revised its expedited procedures, and the Arbitration Club in the UK has publishedexpeditedarbitrationrulesforuseinthefinancialservicessector.AcaseinSingapore(AQZ -v- ARA) also confirmed that if parties have incorporated rules which include an expedited process with a sole arbitrator, thisoverridestheparties’choiceofthreearbitratorsintheirarbitrationclause. The inclusion of a simplified process for smaller value claims was supported by 92 per cent of respondents to a survey conducted by School of Arbitration of Queen Mary University of London (QMUL) in 2015,soweexpectthistrendtocontinueaswell.
Institutional costs and costs awardsIn 2015, the LCIA analysed arbitrations conducted under its rules and found:
• on average, an LCIA arbitration with one arbitrator takes 18.5 months, and an LCIA arbitration with three arbitrators takes 21months;and
• thearbitrators’feesandtheLCIA’sadministrativefeesinanLCIAarbitrationtotaljustunderUS$200,000 on average.ThisislessthantheICCandtheSIAC,butmorethantheHKIAC.
The ICC also reviewed costs awards in ICC arbitrations, and found that arbitral tribunals mostly adopt a “loser pays”approach,regardlessoftherulesusedortheseatofthearbitration.However,appropriateadjustmentsare made depending on how the case has run, the complexity and importance of the dispute, and whether thewinningpartyhassucceededonallpartsofitsclaim.Thisfrequentlymeansthatthewinningpartydoesnotrecoverallofthecoststhatithasclaimed.Conductisalsotakenintoaccount,andinitsreporttheICCencouraged tribunals to make greater use of costs awards to sanction improper conduct by parties, including conductthatimpactsonefficiency.
4 InternatIonal arbItratIon | 2015 in review
Third party funding of arbitration casesArbitration cases being funded via funding agreements with finance providers has become increasingly high-profile over the last 12months.Suchthirdpartyfundinghasfeaturedprominentlyininvestmenttreatyarbitration in recent years, and funders are increasingly marketing themselves to parties in international commercialarbitrationaswell.Theyaretargetingnotonlypartieswhomaynothavesufficientfundstopursueaclaim,butalsopartieswhooperateundertightbudgetsandwhoprefertobringinfundsfromelsewhere.Theincreasing use of third party funding might also have a positive impact on the efficiency of arbitration, given funders’requirementforproperprojectmanagementandbudgetingofcasesbypartiesandtheirlawyers.
That said, international practice and attitudes towards third party funding remains inconsistent: there is no consensusonhowtodealwithsuchfunders.Australia,theUK,andUShavepermittedthirdpartyfundingforsometime;incontrast,Singaporemaintainsthepositionthatthirdpartyfunderscannotbeinvolvedindisputesbecauseofthedoctrinesof“champerty”and“maintenance”.HongKongissuedaconsultationpaperaboutthirdparty funding in arbitration in 2015: it is expected that legislation permitting this will be introduced there in 2016.
Tribunals are also grappling with the issues that third party funding present, and in particular the potential forconflictofinterests,andtherecoverabilityofcostsifthefundedpartyloses.Notably,inJune2015 the ICSID tribunal in Ticaret -v- Turkmenistan ordered the claimant to name the funder that was supporting it, citing the importanceoftransparencyinsuchcases.Disclosureoffundingarrangementsislikelytoberequiredinotherarbitrationsinfuture.
In response to these issues, and the differences of opinion, QMUL has set up a task force to look at third party fundinginarbitration.Itshouldreportonthisin2016.
AnniversAries in 2015
The Federal Arbitration Act in the USA was first enacted 90 years ago, in 1925.
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Arbitration practice Guidance notes Several institutions issued guidance in 2015onbestpracticeininternationalarbitration.Thesepubliclyavailabledocumentsmaycontributetothestandardisationofinternationalarbitrationpractice.
• TheCIArbhasbegunrevisingitsInternationalArbitrationPracticeGuidelines.Theguidelinesrevisedsofarincludethoseonjurisdictionalchallenges,applicationsforinterimmeasuresandsecurityforcosts;andworkis continuing on the revision of the CIArb guidelines on topics such as interviewing arbitrators, multi-party arbitrations,draftingawards,etc.
• TheLCIAissuednewGuidanceNotesforpartiesandarbitrators,andforuseinemergencyarbitration.
• The SIAC issued new guidance on the use by arbitrators of tribunal secretaries to assist them in administratinganarbitration.
Ethics in arbitration Ethicshasremainedahottopicininternationalarbitration.Aftercodesofconductwereissuedforarbitratorsand counsel in previous years, in 2015 the Swiss Arbitration Association proposed that a Global Arbitration Ethics Councilshouldbeestablished.Thiswouldbeatransnationalbody,taskedwithpolicingunethicalconductinarbitration.Theproposalwasdiscussedbyvariousstakeholdersbutnoconsensuswasreached;furthertalksmay be held in 2016.
Diversity in arbitration As confirmed by surveys in 2015 conducted by QMUL and the International Bar Association (IBA), the trend continuesofpartiesusingagreaterrangeofseatsofarbitrationthroughouttheworld.Notonlyarearbitrationstaking place in the established arbitration centres in Asia, Europe and the USA, but also in new seats in Africa, SouthAmericaandtheGulfConventionCountries.
Withagreatergeographicalspread,amorediverserangeofparticipantsareengaginginarbitration,andthisisdriving (in part) the move towards standardisation of ethical codes and best practices in arbitration, described above.Nonetheless,thereremainimbalancesamongtheparticipants–includinganunder-representationofwomenasbothcounselandarbitrators.ThattopicwashighlightedintheArbitralWomen/TransnationalDisputeManagementeventhostedbyAshurstinJuly2015,inLondon.Weexpectthistogeneratefurtherdebatein 2016.
AnniversAries in 2015
The ICSID Convention, which established the International Centre for the Settlement of Investment Disputes (ICSID), had its 50th anniversary.
6 InternatIonal arbItratIon | 2015 in review
Drafting arbitration clausesChoosing the seat of the arbitrationAspartofitscentenarycelebrations,theCIArbpublishedguidanceonchoosinga“safe”seatofarbitration.Calledthe“CIArbLondonCentenaryPrinciples”(afterbeinglaunchedataconferenceheldinLondoninJuly2015), these are ten factors that parties should look out for when they are choosing a seat for their arbitration:
1. Amodernarbitrationlaw.
2. Anindependent,competentandefficientjudiciarythatrespectsthechoiceofarbitration.
3. Anindependent,competentlegalprofessionwithexpertiseininternationalarbitration.
4. Animplementedcommitmenttoeducationandthefurtherdevelopmentoflearninginarbitration.
5. Arightforpartiestoberepresentedbyanyonetheychooseinarbitration(fromwithinoroutsidethecountry).
6. Easyaccessibilitytothecountry,andsafetyfortheparticipants,theirdocumentsandinformation.
7. Functionalfacilities(e.g.hearing-rooms)forinternationalarbitration.
8. Ethicalnormswhichrecognisediverseapproachesandthedevelopinginternationalethicalprinciples.
9. Adherencetotheinternationaltreatiesfortherecognitionandenforcementofawards.
10. Arighttoimmunityforanarbitrator,foranythingdoneingoodfaithintheircapacityasarbitrator.
Wording of arbitration clause A number of arbitration institutions introduced amendments to their standard clauses in 2015.TheHKIACrecommendedthatpartiesspecifythegoverninglawofthearbitrationclause;whiletheSIACadvisedpartiestostate that the arbitration was “administered by” the institution, in particular so as to comply with the arbitration lawinChina.
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Innovations and new developmentsNew institutions, rules and lawsTwo new arbitration institutions were created in 2015:
• theChinaAfricaJointArbitrationCentre(CAJAC)wasannouncedinJohannesburginAugust2015, with a mandatetoresolvedisputesinvolvingpartiesfromChinaandAfrica;and
• the Abu Dhabi Global Market, the new international financial centre in Abu Dhabi, issued draft Arbitration RegulationsinOctober2015, with a view to establishing an arbitration centre in 2016.
Elsewhere, there were revisions, relaunches and new arrangements:
• the CIArb revised its arbitration rules, with effect from 1 December 2015;
• inNovember2015,theDIFC-LCIAarbitrationcentreinDubaiwasrelaunchedintheDIFCGateBuilding;
• PRIME Finance, which specialises in complex financial disputes, signed an agreement in December 2015 with the Permanent Court of Arbitration (PCA), under which the PCA will administer disputes under the PRIME FinanceArbitrationRules;
• in Australia, the International Arbitration Act 1974(Cth)wasrevised,andACICApublishednewrules;and
• theArbitrationActwasamendedinBrazil.
New international court processes TheHagueChoiceofCourtConventioncameintoforceon1October2015.Itoffersthepossibilityofreciprocalrecognitionofcourtjurisdictionclausesandenforcementofcourtjudgments,inasimilarmannertotheNewYorkConventioninarbitration.Itisnowinforcein28 countries: all the states in the EU (with the exception of Denmark)andMexico.SingaporesigneditinMarch2015,andisexpectedtoratifyitsoon;whiletheUSAsignedit in 2009andmayratifyitinthefuture.Otherjurisdictions,includingAustraliaandHongKong,arecurrentlyconsideringit.
TheSingaporeInternationalCommercialCourtwaslaunchedinJanuary2015, and the ADGM Courts, supporting thenewfinancialcentre,wereestablishedintheAbuDhabiGlobalMarketinOctober2015.
AnniversAries in 2015
The Panama Convention (the Inter-American Convention on International Commercial Arbitration) was signed 40 years ago, in 1975.
8 InternatIonal arbItratIon | 2015 in review
Enforcement of arbitration awards New parties to international conventionsTheNewYorkConventiongainedthreenewsignatorystatesin2015:Palestine,ComorosandAndorra.Therearenow 156parties.IraqandSanMarinoratifiedtheICSIDConvention,whichbringsthenumberofICSIDpartiesupto 160.Incomparison,theUnitedNationshas193memberstates.
Transnational arbitration The debate continued in 2015overthe“transnational”natureofarbitration–i.e.whetherornotarbitrationisindependentofnationallegalsystems.Oneoftheconsequencesofindependenceisthatarbitrationawardsmaybeenforcedregardlessofwhethertheyhavebeensetasideattheseatofthearbitration.Inhigh-profilelectures,LordManceandChiefJusticeSundareshMenonarguedagainstsuchindependence,whileGaryBorn(thePresidentoftheSIACCourtofArbitration)arguedinfavour.ItwasplayedoutinpracticeintheAstro -v- Lippocase,inwhichenforcementwasrefusedinSingaporebutgrantedinHongKong(thisisnowbeingappealedinHongKong).
Principles of enforcement AlsoinHongKong,theCourtofFirstInstanceinKB -v- S set out the following ten principles for the enforcement of arbitration awards in that territory:
1. Theprimaryaimofthecourtsistofacilitatearbitrationandassistwithenforcementofawards.
2. Thecourtsshouldinterfereonlyasexpresslyprovidedforinthearbitrationlaw.
3. Subjecttopublicinterestsafeguards,partiesshouldbefreetoagreeonhowtoresolvetheirdisputes.
4. Enforcementofanarbitrationawardshouldbe“asmechanisticaspossible”.
5. Thepartyopposingenforcementhastoshowarealriskofprejudiceandthatitsrightshavebeenviolatedinamaterialway.
6. Any conduct during the arbitration that is complained of must be “serious, even egregious” before the courts willfindthattherewasanerrorsufficientlyseriousastohaveundermineddueprocess.
7. In considering whether or not to refuse the enforcement of an award, the courts do not look into the merits orattheunderlyingtransaction.
8. Failuretomakeapromptobjectiontothetribunalorthesupervisorycourtmaymeanapartylosesitsrighttocomplain.
9. The courts have residual discretion, and may enforce an award even if sufficient grounds are made out to refuseenforcement.
10. Parties to an arbitration have a duty of good faith and must act bona fide, and an award might not be enforcedifthishasnotbeencompliedwith.
AlthoughonlybindinginHongKong,thecourtsofothercountriesmayalsolooktotheseprinciplesasguidance.
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Investment treaty arbitration 2015 was a turbulent year for investment treaty arbitration. In the 50th anniversary year of the ICSID Convention, more treaties were signed containing arbitration provisions (also referred to in this context as Investor-State Dispute Settlement, or ISDS), and more arbitrations were started; but more protests were also raised about the use of arbitration. Even Bill Gates and Michael Bloomberg became involved, by pledging US$4 million to a fund intended to assist poorer countries in defending ISDS claims brought against them by tobacco companies.
In the USA, 135academicswroteajointletterinMarch2015totheleadersofUSSenateandHouseofRepresentatives,criticisingISDSas“threateningdomesticsovereigntyandweakeningtheruleoflaw”.Inresponse, in April 2015, 50academicswrotetotheUSSenateandHouseofRepresentativesinsupportofISDS,calling for a “robust, even-handed and careful discussion based on facts and balanced representations, rather thanerrorsorskewedinformation”.TheIBAalsoissueda“fact-correctingstatement”inApril2015, to counter the misconceptionsandinaccurateinformationthatcommonlyfeatureindiscussionsaboutISDS.
The protests have been galvanised in particular by advances in the negotiation of two multilateral treaties, the Trans-PacificPartnership(TPP)andtheTransatlanticTradeandInvestmentPartnership(TTIP).
The TPP was signed on 5October2015,aftermanyyearsofnegotiation.Itisoneofthebiggestmultilateraltrade treaties ever signed, involving 12 countries and almost 40percentoftheworld’sGDP.TheTPPcontainsISDS provisions, giving investors from one state the right to commence arbitration against the government of anotherstateiftheirinvestmentsarediminishedinbreachofthetermsoftheTPP.TheISDSprovisionsbuildonwhathasgonebefore,takingintoaccountlessonslearnedfromearlierinvestmenttreatycaselaw.TheTPPalsoprovidesfortransparencyintheprocess,forexamplebymakingtranscriptsofhearingspubliclyavailable.TheTPPstillhastoberatifiedbyeachcountry;thatmaytakesometime.
AnniversAries in 2015
The UNCITRAL Model Law on International Commercial Arbitration and the QMUL had their 30th anniversaries.
10 InternatIonal arbItratIon | 2015 in review
WhileISDSundertheTPPwasmarkedbyevolutionnotrevolution,therewasaradicaldepartureintheEUproposals for ISDS in the TTIP, released in September 2015.TheEUCommissionarguedthatarbitrationshouldbeabandoned altogether in the context of investment treaties, and instead a standing investment court should be createdtodealwithanydisputes.ItremainstobeseenwhetherthisproposalwillbeacceptedbytheUSA,andthere are also open questions about how it will work in practice, for example in the relationship between the investmentcourtandtheEuropeanCourtofJustice.Inthemeantime,itwasannouncedinDecember2015 that VietnamhasagreedtotheEUinvestmentcourtbeingincludedintheEU-VietnamFreeTradeAgreement:thismayprovideusefulguidanceonhowsuchacourtwouldworkintheTTIP.
The end of the year saw the conclusion of one of the most hotly-debated ISDS cases, Philip Morris -v- Australia.Philip Morris had started a claim against Australia in 2011 under the investment treaty between Australia and HongKong,asaresultoflossesthatitsaidithadincurredfollowingtheintroductionofplainpackagingfortobaccoproductsinthatcountry.Thetribunaldecideditdidnothavejurisdictiontoheartheclaim,aresultthat was an anti-climax in the context of the debate about ISDS: both opponents and supporters of ISDS would probablyhavepreferreditifthetribunalhadproceededtoruleonthesubstantiveissues.
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Looking forward to 2016We anticipate a number of developments in international arbitration in 2016. These include:
• NewarbitrationrulesfortheSIACareduetobelaunchedinMay2016.
• HongKongmaypermitthirdpartyfundinginarbitration,andtheQMULtaskforcemayissueitsreportonthesametopic.
• The TPP may come into force, if it is ratified by the member states (however, the US elections at the end of 2016mayproveastumbling-block).
• NegotiationsovertheTTIPwillcontinue.
• SouthAfricaisexpectedtoreviseitsarbitrationlaw.
• TheYukosshareholderswillcontinueintheireffortstoenforceaUS$50billionawardagainstRussia.
• SeppBlatterandMichelPlatiniwillappealtheirbansfromfootballtotheCourtofArbitrationforSport.
• The arbitration between Philippines and China over China’s claim over the South China Sea will continue, and an award should be issued in 2016.
Wealsoexpectthedigitaldisruptionofnewtechnologyininternationalarbitrationtogatherpacein2016 and inthecomingyears–withgreateruseofonlinedisputeresolution,inparticular,andimprovementsinvideoconferencingperhapsreducingtheneedforphysicalhearings.
AnniversAries in 2015
In the UK, the Departmental Advisory Committee issued its revised report and draft Bill twenty years ago, in 1995, which led to the Arbitration Act 1996.
12 InternatIonal arbItratIon | 2015 in review
Ashurst arbitration publications in 2015We have published a range of articles about international arbitration in 2015.
These are available at www.ashurst.com/arbitration2015. Highlights within this resource include
• Questions from the C-Suite
• Known unknowns in international arbitration
• Pleasebeseated–choosinganeffectiveseatofarbitration
• Onearbitratororthree?
• Know your arbitrator
• Howtohelpwriteanarbitralaward
• AnatomyofanarbitrationPartVII:arbitrationprocedure
• AnatomyofanarbitrationPartVIII:documentproductionandevidence
• Observationsonkeytrendsininternationalarbitration
• EnforcingawardsundertheNewYorkConvention–tipsandtraps
• LCIA Rules one year on: emergency arbitrator procedures
• The Indian arbitration ordinance: five things you need to know
You may also be interested in these webinars, available at www.ashurst.com/online-training
• Dispute resolution clauses and how to make them work for you
• Looking East: resolving disputes outside Europe following EU sanctions
• Investment treaty arbitration 101
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Ashurst contactsEMEA
United KingdomRonnie King +44 (0)20 7859 1565 [email protected] Clarke +44 (0)20 7859 1562 [email protected] Cummins +44 (0)20 7859 1051 [email protected] Reid +44 (0)20 7859 1548 [email protected]
France Eric Bouffard +33 1 53 53 54 73 [email protected] Farges +33 1 53 53 53 71 [email protected]
GermanyPhilipp Beckers +49 89 24 44 21 129 [email protected]
SpainGonzalo Jiménez-Blanco +34 91 364 9845 [email protected]é Antonio Rodríguez +34 91 364 9431 [email protected]ía José Menéndez +34 91 364 9867 [email protected]
DubaiDyfan Owen +971 (0)4 365 2032 [email protected]
Asia Pacific
AustraliaJeremy Chenoweth +61 7 3259 7028 [email protected] Quick +61 2 9258 6141 [email protected] Voss +61 2 9258 6090 [email protected] Ward +61 8 9366 8163 [email protected]
Hong Kong Gareth Hughes +852 2846 8963 [email protected]
Indonesia Debby Sulaiman +62 212 996 9200 [email protected]
Papua New Guinea Ian Shepherd +675 309 2030 [email protected] Derek Wood +675 309 2006 [email protected]
Singapore Ben Giaretta +65 6416 3353 [email protected] Palmer +65 6416 9504 [email protected]
14 InternatIonal arbItratIon | 2015 in review
AnniversAries in 2015
The Hague Choice of Court Convention was published ten years ago (and finally came into force in 2015).
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