International arbitration report - Norton Rose · PDF file27 LCIA on good conduct ... International arbitration report Issue 3 – October 2014 Inside this issue Signs of Indonesia’s

Inside this issue

Signs of Indonesia’s push-back on foreign investment

A Q&A with the LCIA’s new director general

‘Hybrid’ clauses in China

Overhauling arbitration in South Africa

International arbitration reportIssue 3 – October 2014

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Norton Rose Fulbright is a global legal practice. We provide the world’s pre-eminent corporations and fi nancial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: fi nancial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offi ces and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members (‘the Norton Rose Fulbright members’) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

References to ‘Norton Rose Fulbright’, ‘the law fi rm’, and ‘legal practice’ are to one or more of the Norton Rose Fulbright members or to one of their respective affi liates (together ‘Norton Rose Fulbright entity/entities’). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a ‘partner’) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifi cations of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specifi c legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright.

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International arbitration reportPublished by Norton Rose Fulbright – issue 3 – October 2014

Editors-in-chief – Mark Baker, US; Pierre Bienvenu Ad. E., CanadaEditor – James Rogers, Hong KongAssistant editor – Tim Robbins, Singapore

Contents

02 BIT by BIT in Indonesia Signs of a push-back on foreign investment

05 Arbitration agreements Becoming involved despite not being a party

08 The Q&A Dr Jacomijn van Haersolte-van Hof LCIA director general

11 Hong Kong Court of First Instance Dismisses action against arbitration institution

14 Emergency arbitrators in Singapore The SIAC rules

17 ‘Hybrid’ clauses in China Ningbo court upholds validity of hybrid clause

20 Mediation Choosing a mediator

24 Federal Court of Australia A pro-enforcement judiciary

27 LCIA on good conduct LCIA guidelines address conduct of counsel

28 Overhauling arbitration in South Africa South Africa needs law reform

31 Escalation clauses Fresh support in the English courts

34 South Asia maritime disputes Delimiting the maritime boundaries of India and Bangladesh

37 Norton Rose Fulbright Our review of 2014 (II)

39 Contacts

International arbitration reportIssue 3 – October 2014

Inside this issue

Signs of Indonesia’s push-back on foreign investment

A Q&A with the LCIA’s new director general



About the cover

The 2014 IBA Annual Conference will be held in Tokyo, Japan. Our cover for this issue features a true Japanese icon, the Great Buddha of Kamakura. At over 13 metres tall, the Great Buddha commands an impressive presence in the grounds of the Kotokuin Temple, where it sits.

Editorial

Welcome to issue 3 of Norton Rose Fulbright’s International arbitration report.

In this issue, we discuss the implications of Indonesia’s decision to terminate its bilateral investment treaties with the Netherlands. We have practical guides on the reach of arbitration agreements over non-signatories, on how to appoint a mediator, and the increasingly popular use of emergency arbitrators. We speak with Dr Jacomijn van Haersolte-van Hof, new director general and executive director of the LCIA; provide an overview of the new LCIA guidelines for counsel conduct in arbitration; and cover South Africa’s current efforts to update its arbitration legislation.

Our case law updates discuss the English Commercial Court’s decision in Emirates Trading Agency LLC v Prime Mineral Exports Private Limited on the validity of tiered dispute resolution clauses; the Federal Court of Australia’s decision in Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd, in which the court refused to set aside an UNCITRAL award on grounds of public policy; and the recent award rendered under the United Nations Convention of the Sea which determined the maritime boundaries between India and Bangladesh.

We also examine some interesting judicial developments in Asia: the case of Gong Ben Hai v Hong Kong International Arbitration Centre which saw the dismissal of claims against the HKIAC, and a recent Chinese court decision on the validity of a ‘hybrid’ arbitration clause.

Mark Baker and Pierre Bienvenu Ad. E. Co-heads, International arbitration Norton Rose Fulbright

BIT by BIT in IndonesiaSigns of a push-back on foreign investment

Rick Beckmann, Remco Smorenburg, Jessica de Rooij and Kayla Feld

Indonesia has recently announced plans to terminate its bilateral investment treaty with the Netherlands. It is likely to be the first of many such treaties to be ended, and potential investors in the country may be put off by what they see as the removal of a key

means of protection.

02 Norton Rose Fulbright – 2014

International arbitration report 2014 – issue 3

Indonesia jumps on the bandwagon

In March 2014 Indonesia joined South Africa, Ecuador, Venezuela, the Czech Republic and Bolivia in terminating bilateral investment treaties (BITs) when it announced to the Dutch embassy in Jakarta its intention to terminate the two countries’ bilateral investment treaty (IND–NL BIT) with effect from July 2015. Under the treaty’s ‘sunset clause’, its provisions will remain in force for current investors for 15 years from the date of termination, or until July 1, 2030.

Shortly after the announcement, Indonesia’s Vice President Boediono pledged that Indonesia would negotiate a new BIT that would be ‘adjusted to recent developments’. These ‘recent developments’ may have included a series of arbitration decisions favouring investors, amendments to model BIT frameworks, and a growing perception among less-developed nations that tribunals at ICSID favour investors, even where the government has attempted to act in the interests of its people.

The IND–NL BIT is unlikely to be the only BIT that Indonesia terminates. The Indonesian government has indicated that it will terminate all 67 of its BITs and has not yet revealed when or whether it would seek to renegotiate them. Most BITs provide for a period during which they are in force, at the expiry of which either contracting party may signal its intention to terminate the treaty. If no notice of termination is issued, the BIT will remain in force for a further set period. The IND–NL BIT provides that if either contracting party wishes to terminate the BIT, it must denounce it in writing one year before the expiration date, which is July 1, 2015.

Benefits of BITs for investors and host countries

BITs – of which there are currently over 2,860 – are intended to protect and promote reciprocal investments in their respective contracting states. The more general provisions commonly found in BITs concern fair and equitable treatment of investors and (physical) protection and security of investments. Most BITs also include protection from expropriation or nationalisation by the host state.

Vital to the success of BITs as a measure to promote investments are the arbitration provisions, which provide investors with an effective tool to enforce their rights under the treaty. Like many BITs, the IND–NL BIT includes an ICSID arbitration clause. Arbitral awards rendered in ICSID arbitrations can be enforced in all 150 contracting states; pecuniary obligations in these awards must be treated by contracting states as final judgments of the relevant national courts.

Well-timed termination

In the context of current events in Indonesia, the government’s termination of the IND–NL BIT has been perceived as more than an accident of timing. Pre-election nationalism, the recent implementation of a ban on the export of raw mineral ore and investment treaty claims have all been cited as reasons for the eagerness to terminate BITs.

Election season A surge of nationalism swept Indonesia in the months leading up to the parliamentary and presidential elections of April and July 2014. Politicians used increasingly nationalistic themes in their speeches, and the presidential front-runners emphasised the need to reduce dependence on foreign investment and increase domestic use of Indonesia’s minerals.

Raw mineral ore export banThe Indonesian government appeared proactive in responding to claims arising from a recently implemented ban on the export of unprocessed mineral ore. The law originally contemplated an onshore processing requirement and a ban on the export of all mineral ore less than 100 per cent pure. However, the night before the ban was due to come into force, President Susilo Bambang Yudhoyono relaxed the ban slightly to allow mining companies to continue exporting unrefined minerals until 2017. By then, all companies are required to have built smelters to process mineral ore domestically.

‘…the government’s termination of the IND–NL BIT has been perceived as more than an accident of timing. Pre-election nationalism, the recent implementation of a ban on the export of raw mineral ore, and investment treaty claims have all been cited as reasons for the eagerness to terminate BITs.’

Norton Rose Fulbright – 2014 03

BIT by BIT in Indonesia

The implementation of the ban was immediately followed by an announcement by one of the two largest mining companies in Indonesia that it would initiate international arbitration against the Indonesian government for breach of contract.

Looming litigationThe prospect of additional BIT-related litigation due to the implementation of the raw mineral ore export ban seems particularly ominous after an ICSID tribunal rejected Indonesia’s jurisdictional challenge and allowed a US$1 billion investment treaty arbitration to proceed. In Churchill Mining plc v Indonesia, UK-listed Churchill Mining initiated an ICSID arbitration against Indonesia in 2012 under the Indonesia–Australia and Indonesia–UK BITs, claiming damages sustained due to the revocation of mining concessions.

Position of the Netherlands

The Netherlands is one of the five largest investors in Indonesia. Aside from the historic ties between the two countries, the Netherlands has long been an attractive jurisdiction for foreign investors, who often place their investments via holding structures in the Netherlands, with its favourable tax climate. It is also valued by investors for its plentiful and extensive investment protection treaties, and currently has 98 BITs in force.

The Lisbon Treaty, which came into effect in 2009, established the EU’s exclusive competence in respect of foreign investments as part of the common commercial policy. This provides the EU with the ability to draw up an investment policy which is set to determine the applicability of existing member state BITs, the competence of member states to conclude BITs, and the outlines of future EU investment agreements. This development is likely to influence the ability of the Netherlands to enter into or renew BITs in the future.

Options for investors

Owing to the sunset clause included in the IND–NL BIT, the protection afforded under the BIT will not immediately come to an end for existing investors. It is mainly new investors that will be considering their options to protect their investments.

For now, Indonesia still appears committed to its multilateral investment treaties, including the ASEAN Comprehensive

Investment Agreement (ACIA). ACIA came into force on March 29, 2012 and provides ASEAN nations with similar standards of protection to those provided under the BITs with Indonesia.

An alternative could be to structure investments via Indonesia’s existing BITs which have recently been renewed and therefore cannot be terminated in the near future, including those with Australia, China and South Korea.

Whether these options will provide a viable alternative is a question of protection measures and tax implications. In light of this and the current political climate in Indonesia, some investors may decide to look elsewhere for investment opportunities.

Predicted outcomes

Predicting Indonesia’s next move – renegotiation of the IND–NL BIT, termination of other BITs, or a decision to reverse the mineral ore export ban – remains difficult. Mahendra Siregar, chairman of Indonesia’s investment co-ordination board, signalled that the government’s aim was not to weaken investor protection but to ensure consistency between local and international regulations.

Investors might not be so easily persuaded. Investors tend to view BITs as providing key protective measures for their investments and the steady dismantling of all of a country’s BITs would be viewed as a sign of greatly elevated risk. Investors after July 2015, who would not be covered by a BIT, will certainly consider the lack of a BIT in their risk calculations when determining whether to invest in Indonesia.

Investors who have missed or will lose coverage by the IND–NL BIT may still be able to obtain the same protections from ACIA or Indonesia’s BITs with other countries, provided they have some basis for claiming such protection. However, the government’s recent actions indicate a level of uncertainty that will raise concerns for the prospects of significant long-term investments.

Rick Beckmann is a senior foreign counsel in Norton Rose Fulbright’s associate office in Jakarta; Remco Smorenburg is a partner and Jessica de Rooij is a senior associate in the Amsterdam office of Norton Rose Fulbright; and Kayla Feld is an associate in the Singapore office.



Arbitration agreementsBecoming involved despite not being a party

Jim James and Ben Ridgeon

There are instances where parties have been bound by arbitration agreements to which they were not originally party.

We give an overview of some of the more common scenarios and examples including the ‘group of companies’ doctrine, assignment, universal succession and rights of third parties

statutory provisions.


The usual rule is that only parties who have executed an arbitration agreement are bound to resolve their disputes by way of arbitration. Arbitration is a consensual process and the arbitration agreement acts to waive a party’s right to invoke the jurisdiction of otherwise competent courts in favour of arbitration.

But there are cases where parties have been allowed recourse to or have been bound by arbitration agreements to which they were not originally party. Even in the context of an arbitration agreement, it is not always the case that the concepts of separate legal personality of corporate entities and privity of contract are sacrosanct.

The ‘group of companies’ doctrine

As a general rule, the English courts have shown great reluctance to lift the corporate veil (i.e. to treat two related separate corporate entities as one legal entity) unless exceptional circumstances exist.

One rare example was the 1978 decision in Roussel-Uclaf v GD Searle & Co Limited and GD Searle & Co in which a stay of court proceedings in favour of arbitration was granted under section 1 of the Arbitration Act concerning a subsidiary company whose parent was party to an arbitration agreement. In 2008 this decision was overturned in City of London v Sancheti by the English Court of Appeal, which held that Roussel-Uclaf was wrongly decided.

In some other jurisdictions the corporate veil has been lifted in the arbitration context in what has become known as the ‘group of companies’ doctrine following the ICC decision in Dow Chemical v Isover Saint Gobain, which was subsequently approved by the Paris Court of Appeal. A feature of the claim in that case was that the third party parent company effectively and individually participated in the conclusion, performance and termination of the relevant contract containing the arbitration agreement.

The doctrine has been applied in cases involving arbitrations in Singapore, Egypt, Brazil and Switzerland.

The group of companies doctrine is seen to have no place in English law. This was confirmed in Peterson Farms Inc v C&M Farming Ltd, in which the English High Court was asked to consider an application to set aside an ICC tribunal’s award. The tribunal had decided it did have jurisdiction, by application of the group of companies doctrine. Langley J in

his judgment held: ‘English law treats the issue as one subject to the chosen proper law of the Agreement and that excludes the doctrine which forms no part of English law.’

Assignment

The benefit of contracts may be assigned for various reasons as security for loans, as part of a corporate restructuring or acquisition or in settlement of a claim. A common question that arises is whether the assignee thereby becomes bound by an arbitration clause contained in the contract and what rights are assigned to them as they were not an original contracting party.

The Court of Appeal case of Shayler v Woolf established that arbitration agreements and agreements containing arbitration agreements were capable of assignment. Section 82(2) of the English Arbitration Act 1996 provides that references to a party to an arbitration agreement include any persons ‘claiming under or through a party to the agreement’, which allows an assignee to pursue a claim under an assigned arbitration agreement.

Universal succession

In some civil law jurisdictions, it is common for mergers and reorganisations to take place by means of universal succession which results in the full assignment of all assets, rights and liabilities from one entity to another entity by operation of law. This may be carried out without requiring the participation of the transferor entity’s creditors or counterparties.

Whilst universal succession cannot occur under English law, English law does recognise the effect of merger by universal succession with respect to foreign companies domiciled in jurisdictions that apply the concept. In Eurosteel Ltd v Stinnes AG, the High Court considered what the effect of a merger of a

‘Even in the context of an arbitration agreement it is not always the case that the concepts of separate legal personality of corporate entities and privity of contract are sacrosanct.’



German party by universal succession would be on arbitration proceedings that were current at the time. It was upheld that as a matter of English law, all matters relating to the rights and obligations of a new merged company were governed by the law of the country of domicile and, if the law of the domicile clothed the new company with the rights and liabilities of the old company, that part of the status of the new company should be recognised by the English court.

Rights of third parties in the United Kingdom

The Contract (Rights of Third Parties) Act 1999 abolished the long-standing doctrine of privity of contract (that only a party to a contract can enforce its terms). Under the Act, a third party can enforce a term of the contract if the contract provides that the third party can do so (section 1(a)), or if the term provides a benefit to the third party (section 1(b)).

Section 8 of the Act makes limited provision for arbitration agreements to have a binding effect upon third party claims. A third party is required to bring a claim by way of arbitration to enforce the obligations owed to it by a party to the contract. However, where the third party is a defendant it is entitled to elect whether to submit to the jurisdiction of an arbitration tribunal or that of the court. The application of the Act to third parties in the context of contracts containing arbitration provisions was confirmed in Nisshin Shipping Co Ltd v Cleaves & Co Ltd and others.

Ironically, it is now quite common for commercial contracts in the UK to exclude the applicability of the Act. Several other common law jurisdictions, including Australia, New Zealand and Singapore, have introduced similar legislation restricting the ambit of the doctrine of privity of contract.

Rights of third parties in Hong Kong

In Hong Kong, the Contracts (Rights of Third Parties) Bill was gazetted on February 28, 2014 and will be introduced into the Legislative Council this year. It is proposed that if a third party and the promisor have a dispute regarding the enforcement of a term in a contract, the third party is to be treated as a party to the arbitration agreement for the purposes of the Arbitration Ordinance (Cap 609), unless the third party is not intended to be so treated according to the contract (section 12 of the Bill).

Shareholder disputes

In Fulham Football Club (1987) Ltd v Richards the English Court of Appeal confirmed that the unfair prejudice remedy for shareholders is not an unalienable statutory right and that shareholders and companies themselves can agree to refer disputes which might otherwise support unfair prejudice petitions to arbitration provided that third parties are not bound by the award and that the relief sought is of a type that an arbitrator can grant. The Court of Appeal upheld the lower court’s decision that the unfair prejudice proceeding should be stayed in favour of arbitration.

An interesting feature of the case was that the arbitration agreement in question was not contained in a shareholder agreement to which the shareholder was a party but was included in the Football Association rules which applied to the club by virtue of its membership of the league.

Jim James is a partner and Ben Ridgeon is a senior associate in the Hong Kong office of Norton Rose Fulbright.


Arbitration agreements

The Q&ADr Jacomijn van Haersolte-van Hof

LCIA director general Sherina Petit and Marion Edge

We speak with Dr Jacomijn van Haersolte-van Hof who has replaced Adrian Winstanley as director general of the London

Court of International Arbitration (LCIA). She is the first woman to be appointed to the role and took up her post on July 1, 2014.



‘Having a pool of good experts who understand arbitration is essential to the successful functioning of the arbitration process. I want to see the LCIA strengthen its relationship with experts.’

1 | What are the key challenges facing you as the new director general of the LCIA?

I am taking over at a time when the LCIA is already a strong organisation. It saw an enormous amount of growth during the 17 years of Adrian Winstanley’s leadership. Now is the time to consolidate what has already been achieved and to develop plans for the next five to ten years. I need to focus on our priorities and get to grips with the structures and procedures already in place.

Our strategy will be to focus on the regions and industry sectors where we are strong. For example, South Korea is an important area to develop. The Seoul International Dispute Resolution Centre opened in May, and to support the strong links with the LCIA we will shortly have a secondee in place. Our interest in South Korea ties in with our industry sector focus; in that region shipbuilding will be a particular focus. The energy industry also offers lots of opportunities.

In terms of areas of geographical interest, obviously London is our home and we have successful arrangements in place in India (LCIA India), Dubai (DIFC LCIA Arbitration Centre) and Mauritius (LCIA–MIAC Arbitration Centre). We have a growing number of users in Russia and America too and I want to focus on expanding our services in those countries. I will be travelling a lot over the coming months, meeting our users and learning more about what they want from the LCIA. My next trip will be to Delhi, a city I love.

2 | Your appointment coincides with the launch of the new LCIA rules. What are the most important changes?

The new rules will be launched on October 1 and I am busy speaking to our stakeholders about the changes that have been

made. One of the most important changes is the introduction of the new emergency arbitrator process. Although there may be few cases initially where an emergency arbitrator is appointed, in the right case it is a very useful tool.

I’m aware that there has been some reluctance to see the value of appointing an emergency arbitrator when you have the option to go to court for quick relief. As a Dutch practitioner I saw this in the Netherlands when emergency arbitrator provisions were introduced more than 20 years ago. The courts there are also very supportive but I have seen how an emergency arbitrator can assist and have sat as an emergency arbitrator myself. It is exciting work.

An emergency arbitrator can sometimes deal with the big issues and take out the sting in a case, so that settlement is possible. On other occasions there are different circumstances and a series of supportive measures are needed. Usually a new panel will be appointed to deal with the remainder of the arbitration proceedings, but on one occasion when I sat as emergency arbitrator both parties agreed to appoint me as chair of the panel for the whole process. That’s not always going to be appropriate but it allows a continuity that the parties would not see if they went first to court and then to arbitration. I am looking at creating a pool of emergency arbitrators to draw on quickly when the need arises.

3 | How do you see the role of experts in international arbitration developing?

I am interested in the role that experts play in international arbitration. Expert evidence, particularly on quantum issues, plays an important part in dispute resolution. Having a pool of good experts who understand arbitration is essential to the successful functioning of the arbitration process. I want to see the LCIA strengthen its relationship with experts.

I can see the use of experts on panels of arbitrators becoming more common over time. Including an arbitrator with technical expertise can bring real benefits to an arbitration process. Their knowledge of technical issues can save time and costs in the proceedings and facilitate the deliberations of the whole panel.

There are also a number of provisions giving tribunals the power to manage arbitration proceedings better. I will be looking closely at how the LCIA monitors the work of tribunals to ensure that parties receive an excellent service. The introduction of arbitrators’ statements of availability will assist.


The Q&A

4 | You spoke at the ICCA conference in Miami recently on diversity in international arbitration. What do you think can be done to encourage more diversity in arbitration appointments?

This is something that concerns me and there is surprisingly little data available. Many national courts publish statistics on the diversity of their judiciary, but the criteria that they use to put together their reports vary. Gender is always an issue but different approaches are taken to the importance of recording data on, say, age, ethnicity, religion and sexual orientation. The LCIA has reported statistics on the gender of its arbitrators for a number of years now, something I have not seen in other institutions.

The number of first-time appointments is also recorded in the LCIA’s annual report. We are all aware of the conservative approach taken by many clients and lawyers who want to appoint an arbitrator with an established reputation rather than risk appointing a well-regarded potential arbitrator with no track record. It is a difficult area to address. Institutions can help by seeking to encourage a pool of talented arbitrators from diverse backgrounds.

Lawyers can also assist by taking a conscious look at the diversity of the lists of arbitrator names they put forward for appointments. I am aware that some clients, particularly those in the US, are raising this issue and some have diversity criteria in place to control the composition of their legal teams.

5 | If you could give some advice to young lawyers starting out in the field of international arbitration, what would it be?

First, I would say study international arbitration. That wasn’t an option to those of us who entered the profession 20 years ago but there are some great masters courses available now. Then I would say look at what other skills you can bring to the process – consider a degree in economics or engineering. An MBA would also be very useful.

I would seek opportunities to sit as legal secretary to a tribunal. I strongly believe that this experience is invaluable to junior lawyers. It also makes the arbitration process more efficient. This is something I want to discuss with LCIA stakeholders, so that more of these opportunities can be created. Another option is to get experience as an intern or secondee at an international arbitration institute. The LCIA already offers these opportunities.

On top of everything else, you need the right personality to succeed in arbitration. You need to be capable and resilient, ready to stand on your own two feet.

Sherina Petit is a partner and Marion Edge is a senior knowledge lawyer in the London office of Norton Rose Fulbright.



Hong Kong Court of First Instance

Dismisses action against arbitration institutionJames Rogers and Matthew Townsend

For the first time since it was established in 1985, the Hong Kong International Arbitration Centre has been

sued in the Hong Kong courts (Gong Ben Hai v HKIAC). However, the Hong Kong Court of First Instance has struck down

the claim, in a move that highlights both Hong Kong’s robust anti-intervention stance on arbitration and its importance as an

international arbitration venue.


The HKIAC’s operational freedoms

To protect its operational freedom, the HKIAC has incorporated exclusions of liability into its arbitration rules. These provide that – barring instances of dishonesty on the part of the HKIAC – it and associated bodies or personnel are not liable to the parties in respect of arbitrations conducted under those rules. The exclusions are provided in article 40 of the HKIAC 2008 Administered Arbitration Rules (HKIAC 2008 Rules) and article 40 of the updated 2013 rules (HKIAC 2013 Rules).

The HKIAC’s partial immunity is also supported by the provisions of the Hong Kong Arbitration Ordinance (Cap 609) (the Ordinance). Section 105(1) of the Ordinance provides that an arbitration institution is not liable in law for the consequences of exercising its functions unless the function was exercised dishonestly.

By virtue of the above provisions, and its reputation for handling cases effectively, the HKIAC has not been subject to a court challenge since its establishment almost 20 years ago.

The arbitrator challenge process under the Ordinance and HKIAC Rules

As part of its administrative role, the HKIAC’s Council may be called upon to decide challenges to arbitrator appointments (HKIAC 2008 Rules, article 11.7; HKIAC 2013 Rules, 11.9).

Parties may challenge the choice of arbitrator in circumstances where there are justifiable doubts as to the arbitrator’s impartiality or independence (section 25 of the Ordinance, giving effect to article 12(2) of the UNCITRAL Model Law – see also article 11.4 of HKIAC 2008 Rules and article 11.6 of HKIAC 2013 Rules).

A two-step procedure is established by the Ordinance and HKIAC rules. This involves:

• The challenging party applying to the HKIAC within 15 days of the tribunal’s constitution or within 15 days of becoming aware of the relevant circumstances (section 26 of the Ordinance, giving effect to article 13(1) of the Model Law as modified by article 11.5 of the HKIAC 2008 Rules and 11.7 of the HKIAC 2013 Rules).

• The challenging party applying to the courts within 30 days of receiving notice of the HKIAC Council’s decision rejecting any challenge (section 26 of the Ordinance, giving effect to article 13(3) of the Model Law).

It is also important to note that, as in its other decisions, a court is prohibited from interfering in the arbitration of a dispute except where provided in the Ordinance (section 3(2)(b)).

The arbitration and challenge

In Gong Ben Hai v HKIAC, the parties of the original arbitration proceedings were Gong Ben Hai and the Dan Dong Tyre Factory. They entered into an arbitration agreement in August 2012. This agreement referred any disputes to resolution by arbitration in Hong Kong with the HKIAC as administering institution. It specified that a three-person arbitration tribunal would be appointed by the HKIAC.

In September 2012, Gong Ben Hai commenced arbitration proceedings. He claimed repayment of a loan together with interest from his counter-party. The HKIAC duly appointed the three arbitrators for the tribunal which started in February 2013.

However, before the conclusion of proceedings, Gong Ben Hai applied to the HKIAC to challenge the independence and impartiality of two of the appointed arbitrators. The HKIAC Council rejected the challenge for lack of substantive evidence. Gong Ben Hai was notified of this decision on December 24, 2013.

In February 2014, Gong Ben Hai applied to the Hong Kong Court of First Instance requesting several orders, including an order that the HKIAC’s decision be set aside. Gong Ben Hai’s application listed the HKIAC as the only defendant. The challenged arbitrators and respondent did not participate in the proceedings.

The court’s decision

By an order dated March 18, 2014, the court rejected Gong Ben Hai’s application on the following grounds:

• The challenge was procedurally incorrect as it was directed at the wrong defendant. The court held that the proper defendant should be the respondent in the arbitration, not the HKIAC. It was found that Gong Ben Hai’s challenge should have been served upon the arbitration tribunal and the other parties, in accordance with the rules of the High Court.



• The challenge was also found to be made out of time, as it was submitted after the 30-day time limit identified in article 13(1)(3) of the Model Law.

• The court further determined that Gong Ben Hai’s challenge failed to satisfy the burden of article 12(2) of the Model Law and show that circumstances existed to give rise to justifiable doubts as to the arbitrator’s impartiality or independence.

On the basis of the first two points above, the court went so far as to find that under section 3(2)(b) of the Ordinance, it was prohibited from hearing the matter. This would constitute the court interfering in the arbitration of a dispute in circumstances which were not provided in the Ordinance.

In recent years, a number of important decisions have been made by Hong Kong courts which capture a pro-arbitration philosophy. These include refusals to grant anti-arbitration injunctions or overturn arbitration awards. This continued support for arbitration from a strong and independent Hong Kong judiciary is an important factor in maintaining Hong Kong’s pre-eminence as an international arbitration seat.

James Rogers is a partner in the Hong Kong office of Norton Rose Fulbright and Matthew Townsend is an associate working from our Beijing and Hong Kong offices.


Hong Kong Court of First Instance

Emergency arbitrators in Singapore

The SIAC rules KC Lye and Samuel Leong

Emergency arbitrator applications in international arbitration have become increasingly common in Singapore. Since July 2010, there have been 37 emergency arbitrator applications filed at SIAC. Emergency arbitrators, who may be appointed

as quickly as within one business day, are able to hear and, if appropriate, grant urgent interim relief in advance

of the constitution of the arbitral tribunal.



Considering that SIAC has made 37 emergency arbitrator appointments since the inclusion of the emergency arbitrator procedure in the SIAC Rules in July 2010, parties are becoming increasingly familiar with and reliant on such proceedings as a viable means to obtain urgent interim relief. Emergency arbitrator proceedings (at times alongside court proceedings) have led to a high level of compliance in cases where the relief sought was granted – thus confirming the emergence of emergency arbitrator proceedings as an effective means of obtaining swift relief in an increasingly fast-paced world.

Definition of an SIAC emergency arbitrator

An SIAC emergency arbitrator is a person appointed to hear and decide applications for emergency interim relief filed by parties before the constitution of the tribunal in a SIAC arbitration. Under SIAC rules, if an application for emergency interim relief is accepted, the President of the SIAC Court of Arbitration shall seek to appoint an emergency arbitrator within one business day.

The person appointed as emergency arbitrator does not go on to become a member of the arbitral tribunal. The powers of the emergency arbitrator lapse as soon as the tribunal is constituted.

Other than the SIAC Rules, recourse to an emergency arbitrator is also available under the current ICC, AAA–ICDR, SCC, HKIAC and KLRCA Rules.

Interim relief

The SIAC Rules stipulate that ‘the Emergency Arbitrator shall have the power to order or award any interim relief that he deems necessary’. Similarly, the Singapore International Arbitration Act provides that an emergency arbitrator may order any party to take such interim measure of protection as the emergency arbitrator may consider necessary given the subject matter of the dispute.

Among others, SIAC emergency arbitrators have issued asset freezing orders, both prohibitive and mandatory injunctions, orders for the preservation and inspection of evidence as well as anti-suit injunctions in the past.

The value of having recourse to an emergency arbitrator

The option of making an emergency arbitrator application is important as parties (typically claimants) may find themselves in a factual situation where they are in need of urgent interim relief, but the tribunal has not yet been appointed.

Recourse to an emergency arbitrator is particularly important when considering the amount of time the process of constituting a tribunal can take. This timeline may be substantially lengthened by an uncooperative respondent who is determined to delay the proceedings to the claimant’s detriment.

Depending on the type of dispute and the location of the parties, their assets and the subject matter of the dispute, parties may be not be able to approach the courts for the interim relief needed. This could be for several reasons: typical timelines in that court could be too long; because of confidentiality obligations under the contract; or because interim orders in aid of foreign-seated arbitrations (in general) or the specific interim relief needed are not available in the relevant jurisdiction.

The emergency arbitrator route does not necessarily exclude the possibility of making an application to the Singapore courts for interim relief. In addition, an application for interim relief may be made to the relevant foreign court, e.g. the court where the respondent’s assets are located. However, in the event that such recourse to the courts is not practicable or preferable, the option of making an emergency arbitrator application effectively becomes a lifeline for the claimant.

‘…the option of making an emergency arbitrator application effectively becomes a lifeline for the claimant.’


Emergency arbitrators in Singapore

Recognition and enforcement

While an emergency arbitrator order is legally enforceable in certain jurisdictions, it does not enjoy the status and near-global enforceability of an arbitral award under the New York Convention. Given that both the New York Convention and the UNCITRAL Model Law on International Commercial Arbitration are silent on the definition of an arbitral award, it falls to each jurisdiction’s domestic legislation to set out what it would recognise as an award which it is required to enforce under the New York Convention.

Many jurisdictions require an award to be ‘final and binding’ on the substance of the dispute between the parties before it may be recognised and enforced. An emergency arbitrator order, however, is intended to deal only with the application for interim relief and, under the SIAC Rules, will cease to be binding unless the tribunal is constituted within 90 days of the date of the order. This leads to some doubt as to whether an emergency arbitrator order is enforceable in most jurisdictions.

As an example of Asian jurisdictions leading the way, both Singapore and Hong Kong have passed amendments to their respective arbitration statutes to provide for express recognition of emergency arbitrator orders. The Singapore International Arbitration Act has achieved this by expanding the definition of ‘arbitral tribunal’ in the Act to include an emergency arbitrator. Hong Kong, on the other hand, amended its Arbitration Ordinance by inserting Part 3A, which allows the recognition and enforcement of ‘[a]ny emergency relief granted, whether in or outside Hong Kong, by an emergency arbitrator under the relevant arbitration rules’.

A legislative peculiarity which has arisen, as a result of certain definition differences in each jurisdiction’s legislation, is that a Singapore-seated emergency arbitrator order would enjoy recognition and enforcement in Hong Kong, but not vice versa.

Another notable jurisdiction is the United States, where a number of judicial decisions have recognised and enforced interim relief granted in an arbitration, even interim relief ordered by an emergency arbitrator. A good example of this is Yahoo Inc v Microsoft Corporation.

In India, the Bombay High Court in HSBC PI Holdings (Mauritius) Ltd v Avitel Post Studioz Ltd considered the fact that an SIAC emergency arbitrator order had already been rendered in the arbitral proceedings between the parties in granting HSBC’s application for similar freezing orders before the court.

In practice, the efficacy of the emergency arbitrator process does not depend solely on the legal enforceability of such orders. Often, the most effective incentive to encourage compliance with an emergency arbitrator order is the risk that any uncooperative conduct may cast a negative light on the merits of a party’s case in the main dispute before the arbitral tribunal.

Drawbacks

Emergency arbitrator proceedings do not provide a ‘slam dunk’ for all cases in all jurisdictions. However, this procedure is able to provide some effective solutions in urgent circumstances.

Also, the unavailability of an ex parte procedure before an emergency arbitrator (the SIAC Rules provide for ‘a reasonable opportunity to all parties to be heard’) removes the element of surprise which may be useful to a claimant, e.g. when in need of an asset freezing order. However, this problem is mitigated by the fact that a party’s conduct in the proceedings will be subject to direct scrutiny by both the emergency arbitrator and the arbitral tribunal subsequently.

Another limitation to emergency arbitrator proceedings is the unavailability of interim relief against third parties to the arbitration agreement, unlike in similar proceedings in court.

KC Lye is a partner and Samuel Leong is an associate at the Singapore office of Norton Rose Fulbright.

‘Often, the most effective incentive to encourage compliance with an emergency arbitrator order is the risk that any uncooperative conduct may cast a negative light on the merits of a party’s case in the main dispute before the arbitral tribunal.’



‘Hybrid’ clauses in ChinaNingbo court upholds validity of hybrid clause

James Rogers and Matthew Townsend

A Chinese court has indicated that, notwithstanding the prohibition on ‘ad hoc’ arbitration under Chinese law,

PRC-seated proceedings may be conducted in accordance with the UNCITRAL arbitration rules.


A ‘hybrid’ or compromise arrangement was the ground for a jurisdictional challenge to arbitration proceedings commenced before the China International Economic Trade Arbitration Commission (CIETAC) in Beijing. The respondent disputed the validity of the arbitration clause – which provided for UNCITRAL arbitration taking place ‘at’ CIETAC – asserting that it failed to nominate the administering institution.

In rejecting the challenge, the decision of the Ningbo Intermediate People’s Court (the Ningbo Court) – which is understood to have followed a reference to the Supreme People’s Court of China (SPC) – has provided welcome certainty on the validity of such clauses.

Nonetheless, as this decision will not bind other PRC courts, care should be taken before agreeing to hybrid arbitration clauses. Such agreements may continue to invite jurisdictional challenges which can lead to significant additional cost and delay in arbitration proceedings.

Hybrid clauses

Article 4.3 of the CIETAC 2012 Rules grants parties to CIETAC-administered arbitration the freedom to agree the application of ‘other arbitration rules’. This flexibility applies except where it is ‘inoperative or in conflict with a mandatory provision of the law as it applies to the arbitration proceedings’.

Parties agreeing to CIETAC arbitration proceedings sometimes take advantage of this flexibility by agreeing to the application of UNCITRAL, GAFTA or other rules, albeit under the administration of CIETAC. This compromise arrangement gives a western party comfort in arbitrating under a set of rules that it is familiar with and which promote a less ‘hands-on’ administrative style than the CIETAC rules, while the Chinese party can take comfort in the fact that proceedings will still be administered by an institution with which it is familiar.

Background

INVISTA Technologies Sàrl (INVISTA Technologies) is an affiliate of INVISTA Sàrl, one of the world’s largest integrated producers of polymers and fibres, primarily for nylon, Lycra (spandex) and polyester applications. INVISTA has its headquarters in Wichita, Kansas, in the United States, and is affiliated with Koch Industries Inc., one of the US’s largest privately held companies.

The dispute arose from two technology licence agreements with the Chinese company Zhejiang Yisheng Petrochemical Co. Ltd (Yisheng). Those agreements each contained an arbitration clause providing that ‘[t]he arbitration shall take place at China International Economic Trade Arbitration Centre [sic] (CIETAC), Beijing, P[eople’s] Republic of] China and shall be settled according to the UNCITRAL Arbitration Rules as at present in force’.

In 2012, INVISTA commenced CIETAC arbitration proceedings against Yisheng under the UNCITRAL Rules and pursuant to the parties’ arbitration agreements. In response, Yisheng brought a jurisdictional challenge before its home courts in Ningbo, Zhejiang. The October 2012 application sought a declaration that the parties’ arbitration agreement was invalid.

The Ningbo Court held a hearing in December 2012. In accordance with the ‘reporting system’ implemented by the Chinese courts in such cases, the matter was referred to the Zhejiang High People’s Court (the Zhejiang Court). The Zhejiang Court held a further hearing in August 2013 and it is understood that the case was further referred to the SPC.

Decision

It is generally considered that PRC law prohibits ad hoc arbitration. Articles 16 and 18 of China’s arbitration law require that arbitration agreements stipulate the arbitration commission selected by the parties; failure to do so will result in the invalidity of such a clause.

Yisheng argued that the arbitration agreements entered into between it and INVISTA were invalid. Yisheng contended:

• The arbitration clauses had failed to stipulate an arbitration commission within the meaning of the Arbitration Law.

• By selecting the UNCITRAL Arbitration Rules as the rules governing the arbitration, the parties had reached a typical ad hoc arbitration agreement

• The procedure which the arbitration had followed since its commencement was consistent with ad hoc arbitration.

The Ningbo Court concentrated its judgment on the first of the above three grounds, addressing whether the arbitration clause specifying UNCITRAL arbitration to take place ‘at’ CIETAC in fact provided for administered rather than ad hoc arbitration. In its judgment the court concluded that the clauses did provide for administered arbitration.



While the use of the ‘at’ designation could arguably be understood to refer to the place of arbitration rather than the administering arbitral institution, the court found it was possible in these circumstances to interpret the clauses differently. In particular, the court sought to ‘recognise…the intent and purpose of the parties’, in this case to designate an administering institution so as to ensure a binding arbitration agreement under PRC law.

The court also addressed the reference to the ‘China International Economic and Trade Arbitration Centre’ (‘Centre’ rather than ‘Commission’) contained in the arbitration clause. Again the court relied upon existing powers to reinterpret the provision to give effect to the clear intention of the parties.

Having determined these two points the court did not go on to address the issue of hybrid CIETAC/UNCITRAL clauses under PRC law. Instead, it concluded that the arbitration clauses had designated CIETAC as the administering institution.

Effect of the decision

The decision of the Ningbo Court does not bind other courts under China’s civil law system. Nevertheless it is an important affirmation of the validity of CIETAC/UNCITRAL hybrid clauses under PRC law. It also reflects well on the Chinese judicial system and its growing sophistication in dealing with arbitration matters.

However, this jurisdictional challenge took almost 18 months to reach the decision stage. Parties to China-related contracts should therefore tread with care when drafting China-related arbitration agreements, especially hybrid clauses such as the one in this case.

James Rogers is a partner in the Hong Kong office of Norton Rose Fulbright and Matthew Townsend is an associate working from our Beijing and Hong Kong offices.



MediationChoosing a mediator

Aníbal Sabater and Lucy Greenwood

Highly popular in the US and the UK, mediation remains seldom utilised and barely known about in many other countries.

This is the first in a series of articles offering practical ideas for those considering mediating their disputes.



Companies that have lived through the US litigation system are familiar with jury consultants; those with experience in international arbitration are well aware of the due diligence and analysis that goes into appointing the right arbitrator for the dispute. Having as much input as possible into the identity of the individuals who are going to determine the dispute is just common sense. Despite not ruling on the merits of the dispute, the mediator may have significant influence on the outcome of the case and the mediator’s selection deserves attentive consideration.

What, then, should a party considering a mediation do to place itself in the best possible situation going into the process and, above all, to ensure that the right mediator is appointed for its dispute? Three basic rules apply.

1 | Consider the profile of the mediator as it relates to the dispute

First, the party needs to consider exactly what type of mediator it wants for the case. Parties with limited experience in international mediation often overlook the two broad categories or types of mediator who render services in international matters.

Broadly speaking, mediators can be brokers (that is, skilled individuals who help bring the parties together irrespective of who is right and who is wrong) or neutral evaluators (that is, experienced litigators and case adjudicators who, upon summary information, can tell a party the strengths and weaknesses of its case and the advantages and disadvantages of settling it in a certain way). A small minority of experienced mediators can do both things (broker an arrangement after neutrally evaluating the case), but most mediators tend to be either predominantly brokers or predominantly case evaluators. This is a significant distinction the parties need to be aware of so that they can shape their strategy accordingly.

An experienced broker can help the parties reach a settlement, but typically will not be of benefit to a party convinced that it is absolutely right in every claim and that it is not worth making any significant concession or giving away any rights in exchange for a prompt resolution. A good case evaluator, by contrast, may give the parties an honest and trustworthy opinion on their case but lack the negotiation skills to bring the parties closer together. However, in disputes that often have international arbitration as the final method of dispute resolution, it can be difficult to assess how the arbitration tribunal will rule. By comparison with domestic disputes,

international arbitration rulings tend to be more difficult to predict owing to the different legal systems, cultural backgrounds and natures of the parties and arbitrators involved.

This is where time spent in researching the background and levels of previous experience of the international mediator is most valuable. Before offering any names to the other side, or replying to any offer to have a certain person appointed as a mediator, the party should consider whether it predominantly needs a broker or a case evaluator, and then identify only names and profiles of candidates who fall into the desired category.

2 | Understand how the appointment will take place and exercise your rights

Second, it is necessary to be fully cognisant of the mechanism that will be followed for the appointment of the mediator. Typically, the mediator will be the person the parties agree on. But party agreement seldom occurs – and when it does not, it will fall to a judge, the mediation-administering institution or a third-party nominating authority to appoint the mediator. Not all of them will approach the appointment of the mediator in the same fashion, and the parties need to recognise what mechanisms, rules, principles and motivations each of them may follow, for these may vary significantly. Where parties cannot agree on a specific individual, they should at least seek to agree on the mediator’s basic profile.

If the parties, despite their best efforts, are unable to agree on a type of mediator, the party will then need to consider whether it can or should explain to the appointing authority orally or in writing what criteria it considers the mediator should meet. A submission in this vein should be attempted if it is allowed. Its advantages are obvious. With it, a party can make the appointing authority aware of any significant qualifications the mediator should have, such as language proficiency, legal

‘…mediators can be brokers or neutral evaluators…This is a significant distinction the parties need to be aware of so that they can shape their strategy accordingly.’


Mediation

background, area of residency, years of experience or industry expertise. However, there is usually no guarantee that the appointing authority will take these issues into consideration (especially if the parties are not in agreement on the issues).

Another key decision for the party is whether to offer the appointing authority some specific names of suitable candidates. No one-size-fits-all solution exists here. On many

occasions, the fact that a certain name has been offered by a party may be enough incentive for the other party to reject it, thus delaying the process. Also, the more names that are considered and discarded before the institution makes an appointment, the smaller the pool of candidates that the institution can eventually choose from. Thus, if a party has a significant desire that a certain candidate be appointed, it may be better to refrain from offering the name to the institution and to the other party straightaway (thus avoiding the risk of the name being ‘burnt’). Instead the party should simply limit itself to requesting that the mediator eventually appointed fit a profile compatible with that of the party’s desired candidate.

The next question the party needs to ask itself is what procedure is to be followed to appoint the mediator. Certain institutions, such as the ICDR, CPR or JAMS, have mediation rosters from which the mediator, in the absence of party agreement, is ultimately appointed. Parties are advised to become familiar with the candidates on the roster, consider whether there is anyone listed they would prefer to see appointed, and try to anticipate which of the roster members would appear best equipped to resolve the dispute. Not all institutions, however, appoint mediators from a pre-existing roster. The ICC, for instance, does not.

‘…choosing the right mediator requires a good understanding of one’s own case, analysis, due diligence, strategy, and even persuasion. It is not a decision that can be rushed, and it is one that should ideally be prepared before the mediation is even proposed.’



Additionally, it helps to know whether the institution making the appointment will follow the ‘list method’ to appoint the mediator. As a general rule, the ICDR, CPR and JAMS follow this practice, meaning that, where there is no party agreement, the parties receive a short-list of candidates selected from the institution’s panel of mediators. The parties can then strike and rank those candidates in the list, in such a way that the most highly ranked by both will receive the appointment. If no common candidate emerges, the institution can appoint someone directly from its panel of mediators.

(By contrast, in its mediations, the ICC can dispense with the list mechanism if it considers this to be warranted and appoint the mediator directly.)

The list system can often lead to the appointment of someone other than a party’s preferred candidate, but it still gives the party a say in the identity of the appointee, an opportunity not afforded by a direct institutional appointment in which no candidate names are provided.

3 | Be strategic

Third, the party must approach the mediator appointment process with realistic expectations, a flexible attitude and as much information as possible. It is always unrealistic to have just one mediator candidate and to stick with that name through thick and thin – the odds are that the other party will not agree to that candidate. It is always wise to identify in advance a number of candidates with whom the party would be comfortable.

Also, the mediator obviously needs to be independent and impartial; efforts to appoint a mediator who undoubtedly would not survive a challenge are usually nothing but a waste of time.

As part of the effort to identify qualified mediators, a party and its counsel should not hesitate to draw from their own experience, talk to colleagues and peers, and review publicly available information about the mediator – articles, prior rulings (if the mediator candidate comes from the bench or has issued public arbitral awards) etc. Also, many mediator candidates have published CVs that indicate what type of mediation they prefer (brokered or case evaluation) and the protocols that person’s mediations tend to follow.

Some mediators prefer protracted mediations, with written submissions and oral presentations, while others merely summon the parties to a joint session where the case is presented to the mediator for the first time.

Different cases call for different types of mediator; therefore parties are well advised to do as much research as possible to determine whether the candidate they are considering is indeed the person they need for this particular matter.

A question that frequently arises in practice is whether mediator candidates can be interviewed prior to their appointment. Because most cases are mediated by just one mediator as opposed to three, the answer is typically that mediator candidates are not usually comfortable being interviewed unless both parties are present, and even then the mediator should usually, and generally will, refrain from addressing the merits of the case during the interview. One issue, however, that parties – or the appointing institution, if need be – should try to discuss with any mediator candidate is the timeframe of the mediation. (How busy is the mediator? When can a mediation session realistically take place?)

Lastly, it is important to remember that, to a degree largely unknown in court litigation and in arbitration, the effectiveness of a mediation is strongly influenced by the mediator’s personal touch, personality and even charm. A good mediator can convince parties who are worlds apart to settle a dispute if the mediator shows them that settling is in their best interest. In other words, as part of any due diligence on mediator candidates, it is always useful to consider the mediator’s personal style and ability to create consensus in the mediation session.

Selection and timing

Significant time, money, and effort can be saved by the appointment of an effective mediator. Yet, choosing the right mediator requires a good understanding of one’s own case, analysis, due diligence, strategy and even persuasion. It is not a decision that can be rushed, and it is one that should ideally be prepared before the mediation is even proposed, let alone commenced.

Aníbal Sabater is a partner in the New York office of Norton Rose Fulbright and Lucy Greenwood is a foreign legal consultant in the Houston office.


Mediation

Federal Court of AustraliaA pro-enforcement judiciary

Dylan McKimmie and Courtney Furner

In Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd [2014] FCA 414, the Federal Court of Australia dismissed an application to set aside an arbitration award rendered in Australia under the UNCITRAL Model Law on International

Commercial Arbitration on the basis that it was in conflict with the public policy of Australia. The decision inspires confidence in

Australia as a pro-arbitration jurisdiction.



At times, there has been a perception that some Australian courts have earned a reputation of being too interventionist on matters of arbitration. However, a recent run of cases has helped quash this perception, notably that of Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd, which took place in the Federal Court this year.

The case concerned an attempt to set aside an arbitration award published in Australia. The application was on the basis that a breach of natural justice occurred during the course of the arbitration, rendering the award contrary to Australian public policy and therefore liable to being set aside under article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration.

How the dispute arose

Australian company Emerald Grain had entered into a contract with Singapore-based Agrocorp where it agreed to sell Agrocorp canola which was to be shipped in bulk to Bangladesh. The contract included an arbitration agreement requiring any disputes to be resolved under the Grain Trade Australia Dispute Resolution Rules.

A dispute arose over Emerald Grain’s failure to load the full shipment of canola, and the damage incurred by Agrocorp due to delays relating to import permits, which was said to be a consequence of Emerald Grain’s failure to load the full shipment.

Agrocorp commenced an arbitration in Australia against Emerald Grain pursuant to the arbitration agreement and the International Arbitration Act 1974 (Cth). Emerald Grain cross-claimed.

The arbitral tribunal rendered an award under the International Arbitration Act which found substantially in favour of Agrocorp.

Emerald Grain’s challenge

Emerald Grain applied to the Federal Court of Australia to set aside the award under article 34(2)(b)(ii) of the Model Law, which provides that an arbitration award may be set aside if it is in conflict with the public policy of Australia.

The Model Law has force in Australia under provisions of the International Arbitration Act. Australian courts are to regard an arbitration award governed by the Model Law and the International Arbitration Act as binding and are not to set aside such an award other than as provided for under the International Arbitration Act.

Section 19 of the International Arbitration Act declares that an award is in conflict with, or is contrary to, the public policy of Australia within the meaning of article 34(2)(b)(ii) of the Model Law if the making of the award was induced or affected by fraud or corruption; or if a breach of the rules of natural justice occurred in connection with the making of the award.

In its application, Emerald Grain contended that the award was made in breach of the rules of natural justice for two reasons:

• There was no evidence of probative value for the tribunal to have made certain findings (the ‘no evidence’ claim).

• The tribunal’s findings were based on its own opinions and ideas without giving Emerald Grain adequate notice to respond to those views (the ‘no hearing’ claim).

Emerald Grain subsequently sought to rely on the words ‘among other things’ in its written submissions to introduce new grounds for challenge which went beyond those relied upon in its originating process.

The court’s response

The court rejected the ‘no evidence’ claim on the basis that many of Emerald Grain’s complaints were that the tribunal’s finding of facts were wrong, rather than based on a lack of evidence. Noting that a breach of natural justice arises only if there is no relevant and probative evidence capable of supporting a particular finding of fact, the court considered that there was sufficient evidence on which the tribunal could have reached its findings, even if such findings were flawed in logic or were simply incorrect.

The court also rejected the ‘no hearing’ claim. It noted that both parties clearly articulated their positions by way of submissions and supporting materials, and, therefore, each party had been given an adequate opportunity to present and defend its case. On this basis, there was nothing unforeseeable, as Emerald Grain contended, about the tribunal preferring


Federal Court of Australia

Agrocorp’s arguments. Similarly, Emerald Grain failed to establish how it might have persuaded the tribunal to reach a different decision if the tribunal had given Emerald Grain more notice to present its complaints.

In doing so, the court ignored those grounds in Emerald Grain’s written submissions which raised matters not sufficiently linked to a fair reading of the grounds set out in its originating process. It held that, had Emerald Grain been permitted to raise those matters, the three-month time limitation under the Model Law to apply to set aside awards would be frustrated, and further, the policy of upholding arbitral awards would be compromised.

Accordingly, the court dismissed Emerald Grain’s application to set aside the award on all grounds.

Natural justice, public policy and arbitration awards

The decision clarifies the role of Australian courts when called upon to set aside arbitration awards on the grounds of public policy. It shows that:

• The court must be vigilant not to treat a challenge to an arbitration award made on the grounds of conflict with rules of natural justice as if it were a challenge to findings of facts by a first instance tribunal, from which an appeal may lie.

• The court must determine whether the tribunal, in the process of finding the facts (whether correctly or incorrectly), breached the rules of natural justice. In doing so, the court must not examine the facts of the case afresh or fully revisit the questions that were before the tribunal. Instead, it must consider whether the facts found were open to the tribunal on the evidence before it.

The case also provides direction on when arbitration awards may breach the rules of natural justice. It shows that:

• A breach depends on the content of the rule in the context in which the question arises.

• The applicant bears the onus of establishing breach, and that the breach materially bore on the adverse decision.

• Parties to international arbitrations governed by the Model Law and the International Arbitration Act are entitled to expect that the relevant provisions will be construed and applied with some uniformity in the New York Convention countries.

• Decisions from New York Convention countries make clear that arbitration awards should be read generously so that only breaches of the rules that have actually caused prejudice are remedied. Similarly, courts should be reluctant to find an award to be in conflict with, or contrary to, public policy unless the complaint offends fundamental notions of justice and fairness.

Implications of the decision

The case highlights Australia’s pro-arbitration stance and reinforces the finality of arbitration awards. It demonstrates the Federal Court’s willingness to consider relevant decisions of courts in other Convention countries to ensure consistent interpretation of the Model Law.

The case also highlights the difficulties in arguing, at least in Australia, that an award should be set aside on public policy grounds on the basis that a breach of natural justice occurred in the making of that award.

The decision also points to the importance of setting out the grounds for a claim in the originating process, as such grounds will form the parameters of the case if it is subsequently litigated.

Overall, the court’s decision in this case confirms that Australian courts will be reluctant to set aside an arbitration award on public policy grounds unless the court finds that fundamental norms of justice and fairness have been breached in the making of the award.

Dylan McKimmie is a partner and Courtney Furner is an associate in the Perth office of Norton Rose Fulbright.

SourcesThe Hon. Marilyn Warren AC, ‘Australia as a ‘Safe and Neutral’ Arbitration Seat’ (paper presented at the Australian Centre for International Commercial Arbitration’s ‘The Australian Option’ Chinese Tour, Shanghai and Beijing, June 6–7, 2012).



LCIA on good conduct LCIA guidelines address conduct of counsel

Kevin O’Gorman and Mark Stadnyk

The latest version of the LCIA Arbitration Rules comes into force in October 2014. Included in its revisions will be guidelines that

counsel participating in international arbitrations must comply with, making the LCIA one of the first institutions of its kind to promote the

good and equal conduct of parties’ representatives.

Guidelines for parties’ legal representativesThe guidelines on the conduct of party representatives have the purpose of defining and promoting good and equal conduct, and operate to level the playing field for advocates, who frequently come from diverse legal traditions.

Parties will be required to ensure that their legal representatives have agreed to comply with the guidelines, which include prohibitions on unfairly obstructing the arbitration, jeopardising the finality of any award, and knowingly relying on false evidence.

If a party representative is alleged to have breached his or her responsibilities under the guidelines, the tribunal may decide if a violation has occurred and, if so, what sanctions to order. The tribunal has the power to order a written reprimand or caution, as well as ‘any other measure necessary to fulfil within the arbitration the general duties required of the tribunal’. In practice, tribunals may take the conduct of party representatives into account in allocating arbitration costs.

Other notable amendments to the Arbitration RulesThe 2014 Rules will also see a number of important procedural and technological revisions designed to reduce the timescale and cost of arbitrations.

These include:

• Emergency arbitrator provisions: parties seeking urgent interim relief may now apply for the appointment of an emergency arbitrator (Article 9B).

• Standard form filings: requests and responses can now be filed via a ‘standard electronic form’ (Articles 1.3 and 2.3).

• Arbitrator declarations of availability: in addition to declaring their independence and impartiality, prospective arbitrators must now confirm their availability (Article 5.4).

• Consolidation: arbitral tribunals will now have the power to consolidate arbitrations in limited circumstances (Articles 22.1(ix) and (x)). The LCIA Court may also consolidate arbitrations prior to the formation of the tribunal (Article 22.6).

• Final awards: the tribunal must render its award as soon as possible following the last submission, in accordance with a timetable notified to the parties and the Registrar (Article 15.10).

Kevin O’Gorman is a partner and Mark Stadnyk is an advisor in the Houston office of Norton Rose Fulbright.



South Africa needs law reformTimothy Baker

It is almost 50 years since the most recent South African arbitration legislation was enacted. Could a new Act not only

bring South Africa in line with international standards but also pave the way for the country to become an international

arbitration centre for the whole of Africa?



In force for almost half a century, the Arbitration Act 1965 (as amended), which provides the legislative framework for arbitration in South Africa, is in desperate need of reform. The perception of the current laws as ‘inadequate’ and ‘outdated’ dissuades parties from selecting South Africa as their seat of arbitration, with the result that South Africa is lagging behind other developing countries, such as Mauritius, which have taken a more proactive stance. Despite this perception, and the continuous calls for legal reform, an amended Act is yet to be implemented. In the face of renewed criticism with the introduction of the draft Promotion and Protection of Investment Bill, there appears to be no better time to revisit the Arbitration Act, and address its shortcomings. It is, accordingly, significant that a new Arbitration Act appears to be on the agenda, despite being long overdue.

Current statutory framework

Arbitration in South Africa is currently governed by the Arbitration Act and the Recognition and Enforcement of Foreign Arbitral Awards Act 1977. The latter seeks to give effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which was signed at New York in 1958 (New York Convention). By becoming a party to the New York Convention, each state has agreed, subject to limited grounds of refusal, to enforce commercial arbitral awards made in other contracting states.

Shortcomings

An obvious difficulty is that the Arbitration Act was enacted in 1965 – prior to the New York Convention and the introduction of the UNCITRAL Model Law on International Commercial Arbitration. The UNCITRAL Model Law aims to promote uniformity in international arbitration procedures and limit the role of the national courts. Accordingly, the current legislation is not in alignment with international developments, with the situation only worsening over time.

The wording of the Arbitration Act provides no assistance in this regard. What is concerning is the extent to which the enforceability of an arbitration agreement lies within the courts’ discretion. In particular, under section 3(2) of the Arbitration Act, the court can, where good cause is shown, set aside the arbitration agreement or order that any particular dispute referred to in the arbitration agreement shall not be referred to arbitration. In addition, the court may order that

the arbitration shall cease to have effect with reference to any dispute referred. Furthermore, section 6(2) of the Arbitration Act provides that, where there is an arbitration agreement, the court may make an order staying such proceedings (instituted before a court) if it is satisfied that there is ‘no sufficient reason’ why the dispute should not be referred to arbitration. By way of contrast, under the New York Convention a court in such circumstances will refer the parties to arbitration.

These provisions undermine the arbitration process and can lead to costly and frustrating delays. This is because the extensive powers given to the courts can be abused by a recalcitrant party as a delaying tactic. While the latitude given to the courts need not be problematic, provided the courts adopt a pro-arbitration stance, the existence of such latitude leads to uncertainty and a possible resistance to arbitrating in South Africa. Legislation that strikes the correct balance between interventionist and respect for party autonomy is needed in this area.

Process of reform

In July 1998, the South African Law Commission produced a report on an International Arbitration Act for South Africa, in which it recommended that the UNCITRAL Model Law be adopted by South Africa for international commercial arbitrations. This was followed by a report on domestic arbitration, which was submitted in May 2001. Draft bills were also produced for consideration.

Despite the initial progress, further legislative action in this area has been slow. As is to be expected, the debate for reform has not been without political comment. Although there is a clear need for alternative dispute resolution mechanisms, there are those that hold the view that ‘to strengthen arbitration is to weaken the courts’. Further, the situation was not assisted when the Judge President of the Western Cape High Court concluded, in a report in 2005, that arbitration undermines judicial transformation in South Africa – a contention that was rejected by the Cape Bar and the Arbitration Foundation of Southern Africa (AFSA).

Promotion and Protection of Investment Bill 2013

The concerns surrounding the Arbitration Act have gained momentum with the introduction of the draft Promotion and



Protection of Investment Bill 2013. The purpose of the Bill is to provide for the legislative protection of investors and promote investment in South Africa.

However, in terms of the draft Bill, foreign investors no longer benefit from a general right to resort to international arbitration to settle their investment disputes. Instead, a foreign investor that has a dispute in respect of action taken by the government or any organ of state may refer the dispute to mediation facilitated by the Department of Trade and Industry, to the local courts, or to arbitration in accordance with the Arbitration Act.

This appears to be a deliberate decision on the part of the legislature, with reference having been made to the uncertainty of international arbitration and the absence of the doctrine of precedent as two of the reasons why this route was not chosen.

Given the shortcomings of the Arbitration Act, the fact that recourse to international arbitration is excluded is a concern, particularly to foreign investors, who are often more familiar with international arbitration. The end result may be, somewhat ironically, to discourage investment on the basis that an investor may have concerns in relation to dispute resolution.

Time for new arbitration legislation

More recently, however, the South African Law Reform Commission has reconvened, and draft legislation is being reviewed and developed. It is clear that a new (and improved) Arbitration Act is needed. Not only would it bring South Africa in line with international standards but, with the correct legislative backdrop, South Africa (as an economic powerhouse in Africa) would be well poised to become an international arbitration centre for the wider African continent. Arbitration has the potential to be a lucrative foreign exchange earning industry – various parties are involved in an arbitration, which, if held in South Africa, would mean the use of local lawyers, hotels and other venues, and transcription and similar services. The influx of people from outside the country involved in arbitration can only have a positive spin-off effect in terms of boosting business in South Africa. This potential is yet to be realised. It is hoped that a new international arbitration Act will be implemented as soon as possible and, in doing so, that this will position South Africa to take centre stage on the African continent in relation to arbitral disputes.

Timothy Baker is a director in the Cape Town office of Norton Rose Fulbright.



Escalation clausesFresh support in the English courts

Sherina Petit and Andrew Sheftel with Vasanti Selvaratnam QC

A recent decision by the English Commercial Court provides support for the validity of escalation clauses

which require discussions to take place before a dispute can proceed to arbitration.


Tiered dispute resolution clauses require the parties to engage in a series of steps, where they explore more informal methods of dispute resolution, before resorting to the final, usually adjudicative, dispute resolution forum. Typically, the parties agree that they must first embark upon a form of negotiation or mediation and, if the initial stage is unsuccessful, can then commence litigation or arbitration proceedings.

The practical and commercial benefits of such a clause are obvious: it requires the parties to attempt to reach a settlement at an early stage which, if successful, not only avoids having to launch more formal proceedings which will almost inevitably prove time-consuming and costly, but also may enable the parties to restore and continue their business relationship.

Court hostility to the clauses

Until the decision in Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm), the English courts had in recent years treated such clauses with hostility, regularly holding that the purported agreement to engage in preliminary steps was unenforceable.

Much of the courts’ reasoning had stemmed from the general principle of English law that an agreement to agree is unenforceable, as set out in Walford v Miles [1992] 2 AC 128. However, as pointed out by Longmore LJ in Petromec Inc v Petroleo Brasileiro SA Petrobas [2005] All ER 209, in Walford there was no concluded contract at all (since it was ‘subject to contract’) whereas, with an escalation clause, the agreement as to the initial step is one term of an otherwise concluded contract. Moreover, writing extra-judicially in 1997, Lord Steyn considered that the decision in Walford v Miles was ripe for reconsideration as it failed to give effect to the expectations of honest men.

Nevertheless, applying this general principle to escalation clauses, in Wah v Grant Thornton [2013] 1 Lloyd’s Rep 11 the court held that a clause which provided that any dispute should first be referred to a panel of three members of the board of the partnership, and that no party shall commence arbitration until the earlier of such date as the panel determines that it cannot resolve the dispute and the date one month after the dispute has been referred, was too nebulous to be given legal effect. Accordingly, the challenge to the tribunal’s jurisdiction in that case failed.

Similarly, in Sul America v Enesa Engenharis [2012] 1 Lloyd’s Rep 671, the Court of Appeal had to consider whether

an undertaking by the parties that ‘prior to a reference to arbitration, they will seek to have the Dispute resolved amicably by mediation’ was enforceable. Moore-Bick LJ held that although he was in no doubt that the parties intended that the clause should be enforceable, in order for it to be enforceable it must define the parties’ rights with sufficient certainty to enable it to be enforced. He considered that as the clause did not set out a defined mediation process or refer to the services of a specific mediation provider it was not apt to create an enforceable obligation to commence or participate in a mediation process.

A change in attitude

The contract in the recent Emirates Trading Agency case contained a clause providing that the parties shall first seek to resolve any dispute by ‘friendly discussion’ but that if no solution can be arrived at after a continuous period of four weeks, the non-defaulting party can commence arbitration.

The jurisdiction of the arbitral tribunal was challenged on the basis that the parties had not completed the required ‘friendly discussion’. Notwithstanding the authorities referred to above, Teare J took a very different approach to the question of whether the clause was enforceable. He considered the reasoning in Wah v Grant Thornton to be unpersuasive and felt able to distinguish the Court of Appeal’s decision in Sul America on the basis that the absence of a named mediator or an agreed mediation process left the agreement in that case incomplete.

Instead, he largely adopted the reasoning in the Australian decision in United Group Rail Services v Rail Corporation New South Wales (2009) 127 Con LR 202, and also cited favourably the Singaporean authority of International Research Corp plc v Lufthansa Systems Asia Pacific Pte Ltd [2012] SGHC 226 (approved on appeal at [2013] SGCA 55) as well as the approach of certain ICSID decisions to the enforceability of agreements to negotiate in good faith (including ICSID Case No ARB/11/28). Teare J also considered that an obligation to seek to resolve disputes by friendly discussion must import a duty to do so in good faith.

Although the challenge to the tribunal’s jurisdiction was dismissed, with the court concluding that the requisite friendly discussions had indeed taken place, the judge held that the (time-limited) obligation in the present case was indeed enforceable and therefore a condition precedent to the right to arbitrate:



‘The agreement is not incomplete; no term is missing. Nor is it uncertain; an obligation to seek to resolve a dispute by friendly discussions in good faith has an identifiable standard, namely, fair, honest and genuine discussions aimed at resolving a dispute. Difficulty of proving a breach in some cases should not be confused with a suggestion that the clause lacks certainty…Enforcement of such an agreement when found as part of a dispute resolution clause is in the public interest, first, because commercial men expect the court to enforce obligations which they have freely undertaken and, second, because the object of the agreement is to avoid what might otherwise be an expensive and time consuming arbitration.’

The principle that contractual provisions must be sufficiently certain to be enforceable remains firmly a part of the law. However, the application of that principle to escalation clauses has received radically different treatment by Teare J. The decision is clearly significant – in particular for contracts containing agreements to enter into ‘friendly discussions’, which are common.

Care in drafting

Despite the more favourable approach of Teare J, parties considering such a clause must still take care with the drafting

to ensure that their particular agreement complies with the requirement of certainty. If the parties have to go through such a preliminary step, the drafting must also ensure that it does not allow the defaulting party to delay commencement of litigation or reference to arbitration. This can be a particular problem if a limitation period is about to expire.

Even if drafted in the clearest and most certain terms, parties must always consider carefully whether they in fact want such a clause. While such an agreement provides the opportunity to resolve a dispute before embarking on costly litigation or arbitration, inevitably such a clause will result in some degree of delay (if no settlement is achieved) and while that can be minimised by careful drafting, any delay may have detrimental consequences depending on the facts of a particular case.

Further reading

See also International arbitration report issue 2, ‘Escalation clauses: English courts set up stringent test’, pp22–24, on the need for careful drafting of tiered dispute resolution clauses.

Sherina Petit is a partner and Andrew Sheftel is a senior knowledge lawyer in the London office of Norton Rose Fulbright. Veranti Selvaratnam QC is a barrister at Stone Chambers in London.


Escalation clauses

South Asia maritime disputes Delimiting the maritime boundaries

of India and Bangladesh Matt Kirtland and Kate Hunter

A tribunal has delimited the maritime boundaries of India and Bangladesh in the overlapping areas of their territorial seas,

exclusive economic zones and the continental shelf in the Bay of Bengal. Welcomed by both parties, the clarity provided by the decision should accelerate exploration of oil and gas in the area.



In an award issued on July 7, 2014, a five-member tribunal constituted under the United Nations Convention on the Law of the Sea (the Convention) delimited the maritime boundaries of India and Bangladesh. For practitioners, this decision provides several good takeaways regarding the competing methodologies used to decide maritime boundary disputes, what ‘special circumstances’ will be taken into account in setting boundaries and the role of equity in the process.

Background

Under the Convention, a coastal state has sovereignty over territorial seas up to 12 nautical miles (nm) from its coastline. Beyond this and for a distance of up to 200 nm, a state has sovereign rights over its exclusive economic zone (EEZ). Then, up to 350 nm from its coastline (or up to 100 nm past where the ocean reaches a depth of 2,500 metres), a state has exclusive exploitation rights on the continental shelf projecting from its land territory.

With overlapping territorial seas, the Convention provides that the boundary shall be an equidistance line between each state’s coastline unless ‘historical title’ or ‘special circumstances’ indicate otherwise. Within EEZs and the continental shelf, the resolution of any overlapping boundaries ‘shall be effected by agreement on the basis of international law…in order to achieve an equitable solution’.

In the Bay of Bengal, there is overlap between the territorial waters, EEZs and continental shelf of Bangladesh and India – a function of the land boundaries set during the 1947 partition of British India and the maritime boundaries established by the 1982 Convention.

Since 1974, Bangladesh and India engaged in 11 rounds of negotiations to attempt to delimit their maritime boundaries, all unsuccessful. In 2009, Bangladesh initiated the present arbitration proceedings under the Convention to settle the issue.

In 2012, in a separate proceeding, the International Tribunal of the Law of the Sea (ITLOS) resolved a similar maritime boundary dispute between Bangladesh and its opposite coastal neighbour, Myanmar.

Methodology

The tribunal first resolved the appropriate methodology to apply to the dispute. Under the relevant articles of the

Convention, as interpreted by jurisprudence from the ITLOS and the ICJ, the tribunal decided it should construct a provisional equidistance line, and then determine whether any special/relevant circumstances required adjusting this line to achieve an equitable result. As noted by the tribunal, this was the ‘most logical and widely practised approach’ and the one better suited to the ‘paramount objective’ of transparency and equitable results.

In adopting this methodology, the tribunal rejected Bangladesh’s proposed alternative angle-bisector method, which would have drawn straight lines along each party’s coasts, then bisected the angle so formed. The final line set by the tribunal did in fact closely resemble the angle-bisector line proposed by Bangladesh (a result criticised in the partial dissent of India’s appointed arbitrator, Dr PS Rao).

Special/relevant circumstances

Climate change/unstable coastlinesThe tribunal rejected Bangladesh’s arguments that ‘extreme coastal instability in the Bengal Delta’ – allegedly caused in part by climate change and rising seas – constituted a ‘special circumstance’. According to the tribunal, such an argument if accepted would frustrate the objective of determining a permanent and definitive maritime boundary: ‘only the present geophysical conditions are of relevance. Natural evolution, uncertainty and lack of predictability as to the impact of climate change on the marine environment, particularly the coastal front of states, make all predictions concerning the amount of coastal erosion or accretion unpredictable.’ This decision should be of interest to states with a low-lying or unstable coastline.

Fishing rightsThe tribunal also rejected Bangladesh’s argument that its population’s heavy dependence on fish from the Bay of Bengal would exacerbate the inequity of limiting it to the narrow territory produced by the provisional equidistance line. According to the tribunal, Bangladesh did not submit sufficient evidence to meet the stringent test necessary to rely on such a circumstance.

Concavity of its coast/cut-off effectThe tribunal did, however, accept Bangladesh’s argument that the concavity of its coast was a special circumstance that properly should be taken into account. In particular, the tribunal noted that this concavity produced an unreasonable ‘cut-off effect’ that prevented Bangladesh from ‘extending its maritime boundary as far seaward as international law


South Asia maritime disputes

permits’. To ameliorate this effect, the tribunal adjusted the provisional equidistance line so that Bangladesh received a larger share of the overlapping EEZ and continental shelf than it otherwise would have.

Proportionality

In the final step of its analysis, the tribunal considered whether its adjusted delimitation line yielded a ‘disproportionate result’ in the EEZ and continental shelf. Comparing the relevant maritime space accorded to each party to the ratio of their relevant costal lines, the tribunal noted that Bangladesh was allocated approximately 106,613 square km and India approximately 300,220 square km. The resulting ratio – 1:2.81 – was deemed not disproportionate.

‘Grey areas’

The maritime boundary established by the tribunal created a ‘grey area’ within 200 nm of India, but outside 200 nm of Bangladesh. In this area, Bangladesh controls the continental shelf, but India controls the EEZ.

The only precedent for setting a boundary that established such a ‘grey area’ is the 2012 ITLOS Bangladesh/Myanmar decision. Such a grey area results in non-exclusive rights – with Bangladesh having sea-bed rights but India rights to the water column above. As noted by the dissent, this could create conflict between the states in the future – the exact opposite of the stated goals of the Convention and accepted jurisprudence. While eliminating the ‘grey area’ required only a few turning

points in the adjusted equidistance line, the tribunal rejected this approach, arguing that that a line without turning points was easier to administer.

The role of equity in delimiting maritime borders

The overarching goal of the Convention in the resolution of maritime boundary disputes is to achieve an equitable result. This is done, principally, by consideration of ‘special/relevant circumstances’ to adjust a provisional equidistance line. As stated by the majority in the context of the present case:

‘The Tribunal should seek to ameliorate excessive negative consequences the provisional equidistance line would have for Bangladesh in the areas within and beyond 200 nm, but it must not do so in a way that unreasonably encroaches on the entitlement of India in that area.’

The tribunal emphasised, however, the limited extent to which equitable principles could be invoked:

‘The purpose of adjusting an equidistance line is not to refashion geography, or to compensate for the inequalities of nature…equity does not require that a State without access to the sea should be allotted an area of continental shelf, any more than there could be a question of rendering the situation of a State with extensive coastline similar to that of a State with a restricted coastline.’

Matt Kirtland is a partner and Kate Hunter is an associate in the Washington, DC office of Norton Rose Fulbright.



Norton Rose Fulbright Our review of 2014 (II)

Awards and appointments

Norton Rose Fulbright named best US law firm for international arbitration for the second time at the International Legal Alliance Summit & Awards in New York, June 2014. Norton Rose Fulbright outranked nine others in the category for this award.

Pierre Bienvenu (Montréal) won the 2014 Canada Arbitration Counsel of the Year award at the Benchmark and Expert Guides Global Arbitration Awards.

ArbitralWomen Lucy Greenwood (Houston) selected for a two-year term on the board of directors in June 2014.

China International Economic and Trade Arbitration Commission (CIETAC)James Rogers (Hong Kong) appointed to the panel of arbitrators at a ceremony at CIETAC Hong Kong in July 2014.

ILA: Feminism and International Law CommitteeLucy Greenwood (Houston) named as co-chair.

New York International Arbitration CenterAníbal Sabater (New York) named as chair of the Program Committee in September 2014.

Singapore International Arbitration Centre (SIAC)Katie Chung (Singapore) appointed to reserve list of arbitrators.

Activities

HKIAC Road ShowJames Rogers (Hong Kong) participated in a mock arbitration under the HKIAC Administered Arbitration Rules in May 2014.

International Maritime Law MootNorton Rose Fulbright helped finance and organise the moot at Hong Kong University in July 2014. Peter Glover (London) co-wrote the moot problem and Jim James (Hong Kong) acted as an arbitrator.

SIAC training and workshopsKC Lye (Singapore) and Nicholas Thio (Singapore) featured in an SIAC arbitration training video launched in June 2014. KC Lye also spoke on the topic ‘The SIAC emergency arbitrator experience: how does it work?’ at the video workshop in Jakarta, Indonesia.

Vis (East) Moot, Hong KongLucy Greenwood (Houston) helped coach the University of Houston Law Center’s team for this year’s competition. The team won an award for its brief.



Speaking engagements

ABA Annual Spring ConferenceLucy Greenwood (Houston) presented on the ‘Challenges based on gender, race, sexual orientation, and ethnicity’. Miami, April 2014.

Annual Nuts & Bolts of International Law ConferenceLucy Greenwood (Houston) spoke on ‘English law for the American Lawyer’. Houston, March 2014.

Columbia Arbitration DayAníbal Sabater (New York) served as a panelist in a presentation titled ‘Diverging standards of review of arbitral jurisdictional decisions: how do different courts review tribunals’ decisions on jurisdiction in annulment and enforcement proceedings?’ New York, March 2014.

IBA APAC Arbitration Group Training DayJames Rogers (Hong Kong) served as a panelist and discussed IBA guidelines on conflicts in arbitration and on party representation. Tokyo, September 2014.

LACBA + ICDR International Arbitration ConferenceMarsha Gerber (Houston) served as a panelist in a presentation titled ‘Attorney-client privilege, the confidentiality of statements made by in-house counsel and other issues of privilege in international arbitration’. Los Angeles, May 2014.

The Fundamentals of International Legal Business Practice (IBA Course)Nicholas Thio (Singapore) was co-chair of a session on cross-border dispute resolution, June 2014.

Russian Arbitration DayAndrey Panov (Moscow) spoke about online arbitration and its prospects in Russia. Moscow, May 2014.

GAR Live New YorkPierre Bienvenu (Montréal) co-chaired the third annual New York conference, held in September 2014.

Publications

Asian Dispute ReviewJames Rogers (Hong Kong) and Matthew Townsend (Beijing/Hong Kong) contributed an article titled ‘Legality of ‘hybrid’ arbitration clauses upheld in China’. July 2014.

Global Arbitration ReviewAníbal Sabater (New York) co-authored an article titled ‘Why the ‘Sunday’ case does not impact on international arbitration’. July 2014.

International Arbitration Law ReviewTim Robbins (Singapore) contributed an article titled ‘Who pays to play? – a commentary on BDMS Ltd v Rafael Advanced Defence Systems’. August 2014.

Research Handbook on International Energy LawAníbal Sabater (New York) co-authored a chapter with Mark Stadnyk (Houston) titled ‘International arbitration and energy: how energy disputes shaped international investment dispute resolution’.

SIAC websiteNicholas Thio (Singapore) and Kirsty McAllister-Jones (Singapore) contributed an article titled ‘Financial transactions in a borderless world: the movement towards arbitration in OTC derivatives’.

International Arbitration Law ReviewSherina Petit (London) and Andrew Sheftel (London), with Vasanti Selvaratnam QC, contributed a case comment on the English Commercial Court’s decision in Emirates Trading Agency LLC v Prime Mineral Exports Private Limited [2014] EWHC 2104 (Comm), which considered the validity of escalation clauses.

Sherina Petit (London), Marion Edge (London) and Shalini Iyengar (Shanghai) contributed an article titled ‘India: allegations can now be referred to arbitration’. The article analysed the decision of the Supreme Court of India in World Sport Group v MSM Satellite.

Financier WorldwideSherina Petit (London), Matthew Buckle (London) and Sneha Janakiraman (London) contributed an article titled ‘Multiple issues in arbitration’. The article discussed problems with joinder.

The TimesSherina Petit (London) was quoted in an article about the UK government’s recent arbitration against US defence contractor Raytheon.



Contactsnortonrosefulbright.com

International arbitration, Co-heads

Mark Baker Fulbright & Jaworski LLP Houston

Pierre Bienvenu, Ad. E. Norton Rose Fulbright Canada LLP Montréal

CanadaNorton Rose Fulbright Canada LLP

Calgary Mary Comeau Clarke Hunter, QC

Montréal Martin Valasek

United StatesFulbright & Jaworski LLP

Houston Lucy Greenwood Kevin O’Gorman

New York Aníbal Sabater

Washington DC Matthew Kirtland

Latin AmericaCaracas Despacho de Abogados Miembros de Norton Rose Fulbright, S.C. Ramón Alvins Elisabeth Eljuri

EuropeAmsterdam Norton Rose Fulbright LLP Yke Lennartz

Athens Norton Rose Fulbright Greece Marie Kelly

Frankfurt Norton Rose Fulbright LLP Patricia Nacimiento

London Norton Rose Fulbright LLP Sherina Petit Deborah Ruff

Paris Norton Rose Fulbright LLP Christian Dargham

Moscow Norton Rose Fulbright (Central Europe) LLP Yaroslav Klimov

Middle EastUAE Norton Rose Fulbright (Middle East) LLP Patrick Bourke

AfricaSouth Africa Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) Donald Dinnie

AsiaChina / Hong Kong Norton Rose Fulbright Hong Kong Jim James James Rogers

Singapore Norton Rose Fulbright (Asia) LLP KC Lye Guy Spooner

AustraliaNorton Rose Fulbright Australia

Brisbane Ernie van Buuren

Perth Dylan McKimmie

Sydney Rob Buchanan


Contacts


International arbitration

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We deliver experience across all aspects of international arbitration, from commercial arbitrations to investment treaty arbitrations; skilled advocates experienced in arguing cases before arbitral tribunals, who will oversee the dispute from start to final award; and a commercial approach from a dedicated team experienced in mediation and negotiation and skilled in promoting appropriate settlement opportunities.

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Documents

International arbitration report - Norton Rose · PDF file27 LCIA on good conduct ... International arbitration report Issue 3 – October 2014 Inside this issue Signs of Indonesia’s