International Arbitration, 10/1/04 finishing the arbitration agreement today, moving on… UNCITRAL rules IBA rules on taking of evidence: attempt to bridge the procedural gap b/w different legal systems; not binding but good summary of contemporary practice LCIA, AAA, ICC readings for next time include some primary source materials: AAA and ABA code of ethics we’re going to walk through an actual proceeding two weeks on enforcement of awards and provisional awards clash between investment treaty arbitration: private party v. state interstate arbitration last class will focus on some overarching issues For 8 October, review the UNCITRAL Model Law, appendix to the text Article 1: defines international with respect to arbitration; I:3 lists req’s Art. II: definitions; principle that parties can specify rules in their agreement Art III: Receipt of Written communication Art. IV: Waiver of right to object Art. V: Extent of court intervention Art. VII: Definition and form of arbitration agreement: must be in writing Art. VIII: Arbitration agmt. and substantivee claim before the court. Art. IX:Arb. agmt. and interim measures by the court A X. Number of arbitrators: parties can choose; default=3 A XI: Appointment of Arbitrators A XII: Grounds for Challenge A XIII: Challenge procedure A XIV: Failure or impossibility to act A XV: Appointmnet of substitute arbitrator A XVI: Competence of arbitral tribunal to rule on its jurisdiction Art. XVII: Power of arbitral tribunal to order interim measurers A XVIII: Equal treatment of parties A XIX: Determination of rules of procedure A XX: Place of Arbitration (SITUS) A XXI: Commencement of arbitral proceedings A XXII: Language A XXIII: Statements of Claim and Defense A XXIV: Haerings and written proceedings
A XXV: Default of a party 26: Expert appointed by arbitral tribunal 27. court assistance in taking evidence 28. RULES suitable to substance of a dispute 29. Decision making by panel of arbitrators 30. Settlement 31. Form and contents of award 32. Tremination of proceedings 33. Correction and interpretation of award; additional award 34. Application for setting aside as exclusive recourse against arbitral award 35. Recognition and enforcement 36. Grounds for refusing recognition or enforcement
UNCITRAL Rules: www.uncitral.org/english/texts/arbitration/arb-rules.htm UNCITRAL Notes: http://www.uncitral.org/english/texts/arbitration/arb-notes.htm IBA Rules on Evidence. Skim the ICC, AAA, and LCIA Rules for comparison.
For 15 October, when we will talk among other things about the role of the arbitrator, review the IBA Guidelines on Conflicts and the AAA/ABA Code of Ethics. ICC Rules of Arbitration (Link: http://www.iccwbo.org/court/english/arbitration/pdf_documents/rules/rules_arb_english.pdf); AAA International Arbitration Rules (Link: http://www.adr.org/index2.1.jsp?JSPssid=15747&JSPsrc=upload\LIVESITE\Rules_Procedures\National_Intern ational\..\..\focusArea\international\AAA175current.htm#Intl_Arb_Rules); LCIA Arbitration Rules (1998) (Link: http://www.lcia-arbitration.com/arb/uk.htm); IBA Rules on the Taking of Evidence in International Commercial Arbitration (1999) (Link: http://www.asser.nl/ica/IBA%20rules-of-evid-2.pdf); IBA Guidelines on Conflicts of Interest in International Arbitration (Link: http://www.ibanet.org/pdf/InternationalArbitrationGuidelines.pdf); American Arbitration Ass'n/American Bar Ass'n, the Code of Ethics for Arbitrators in Commerical Disputes (2004) (Link: http://www.adr.org/upload/LIVESITE/Rules_Procedures/Ethics_Standards/Code%20of%20Ethics%20for%20A rbitrators.pdf) ************************************today************************************************* Federal Arbitration Act 1920, before Erie, so federal common law presumed to apply Southland was addressing the question of how the FAA should be applied
this case was from a CA course, involved a CA statute that made non-arbitrable agreements involving franchise arrangements; Supreme Court held that this CA law was preempted by the FAA (ie, federal law overrides state law); (supremacy clause of US CONST). reasoning was that congress had been working through the commerce clause rather than legislating solely on federal court jurisdiction Mitsubishi included a claim under the Puerto Rico Dealer’s Day in Court Act, which is similar to a bill that almost got passed by congress, but here, too, the PR law was preempted by the FAA basic contract principles governed by state law; federal law puts a gloss on state law anti-discrimination law: you can’t discriminate against arbitration agreements Southland held 1. Commerce Clause covers basically everything 2. FAA preempts state laws
Stanford and Volt had a dispute, CA had a provision that allowed a court to stay arbitration pending resolution by the courts. Question in this case was whether this CA law was preempted by federal law. Court held that the parties had agreed to be bound by CA state law, including procedural law and specifically this provision. The parties’ right to compel arbitration was governed by CA state law ―intertwining doctrine‖ Matrobono Case: garity rule: arbitrators cannot award punitive damages Has been argued that choice of New York law incorporated Garity Rule…is this unconscionable? Does this mean that you have a separate right to pursue a claim for punitive damages in courts? If you look at this contract, it doen’t make any sense; holds that parties didn’t intend to incorporate that provision How to reconcile Volt and Masterbuono? Parties may agree to be bound by Guaraty if they so choose Court held in Mastrobuono NY Court of Appeals held the day before or after completely opposite the Mastrobuono. Federal policy, according to Volt, is to give effect to the agreement between the parties
PROCEDURAL ISSUES If you don’t have specific agreements, usually the law of the situs will apply Party autonomy is respected here; they usually choose the applicable law by deciding where the situs is held Union of India v. McDonnell Douglas Corporation three questions: law governing the contract, law governing the arbitration agreement, and law governing the arbitration procedures
theoretically, what is the border between the applicable law and the supervisory jurisdiction of the local courts? the courts are going to be there one way or the other, so how do you reconcile this one argument is that ―seat of arbitration‖ is a term of art, which includes the concept of judicial supervision; counterargument is that reference to the Indian Arbitration Act means that Indian procedure should govern. territorial jurisdiction between local courts and the seat of arbitration means there is at least a de minimus connection between the two how did the court reconcile between 2 key phrases? court said English law applies to proceedings, but parties contractually imported some provisions of the Indian law into the arbitration proceedings claimant gets to be heard last; ruling court gets to appoint an arbitrator if necessary in many legal systems, there is a reply for every address
STRONG PRESUMPTION THAT IF PARTIES CHOOSE A LOCATION THEN THEY CHOOSE THE LAW OF THAT SITUS
NATIONAL THERMAL POWER CORP. V. THE SINGER CORP., 7 Mealey’s Int’l Rep. C1 (Supreme Court, India, 1992) page 751 in text question is, do Indian courts have the jurisdiction to set aside an award by arbitration in London under Indian law, the question becomes whether this constitutes a ―foreign award‖ must consider whether courts of India or England have jurisdiction under most law, parties are able to exercise FORUM SELECTION through a specific clause in a contract; arbitration agreements (acc to US v. The Bremen) are treated by US law as a specialized forum selection clause traditional way of reconciling national court jurisdiction and jurisdiction of arbitration agreement is to read an express grant of jurisdiction as containing the phrases, ―with no prejudice to the stipulations of the arb agm,… [and] ...on issues that come before a court of law
Power-point: Model Arbitration Clause (a) Any dispute, controversy or claim arising out of, relating to, or in connection with, this contract, or the breach, termination or validity thereof, shall be finally settled by arbitration. The arbitration shall be conducted in accordance with [identify rules] in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the parties. The seat of the arbitration shall be [city, county], and it shall be conducted in the [specify] language (b) The arbitration shall be conducted by [one or three] arbitrators. [Specify method of selection.] (c) The arbitral award shall be in writing, state the reasons for the award, and be final and binding on the parties. The award may include an award of costs, including reasonable attorneys’ fees and disbursements. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets. Optional Provisions:
1. Arbitrator Nationality 2. Arbitrator independence and impartiality 3. Discovery and production of documents 4. Interim relief 5. Consolidation 6. Expert Testimony 7. Specific Relief 8. Waiver of punitive, exemplary, or similar damages 9. Freedom not to apply law 10. Confidentiality 11. Jurisdiction to determine jurisdiction 12. Mandatory negotiation, conciliation, or mediation: attempt to lay out in the clause a sequential order of ADR, perhaps with mediation with top executives preceding the actual arbitration Major Arbitration Institutions: ICC still the most common deadlock provisions buyout provision HYPO: joint venture agmt. b/w 2 parties (Thai and French) substantial governance disbute, shareholder agmt. that governs ownership, dispute over Thais authority to sell an interest in a mine; not money issue, but rights under the agmt. 1st inquiry—what is the substance of dispute and how does it get resolved (dispute resolution clause?) First of all make sure there is a arbitration agmt.; figure out what should happen there. Also you should look at litigation options so that you understand the lay of the land and what incentives various parties may have…next step is to begin factual investigations and legal analysis at the bottom line, we must understand that arbitration is ultimately a form of litigation. Two very basic skills: 1. identify and gather relevant facts…what do you need to know about what happened 2. Int’l Arbitration Class, 10/15 Obligations of the arbitrator…especially party-chosen arbitrators To what extent can arbitrators introduce issues not raised by the parties ―fork-in-the road clause‖ pre-hearing submissions 1. witness statements, serves as the prehearing testimony 2. for next week…703-880
October 15 If it is a commercial/any dispute, you’re always thinking of the broader set of circumstances the dispute is inside of - amidst a long-standing business relationship both parties want to maintain You must rely on the law when it comes to bringing in 3rd parties (because the arb is based on contract, not jurisdiction) You must deal with the Constitution of the arbitral tribunal. - does a tribunal have authority to police ethical rules? EG: NY lawyer in London seat – should he be held to NY ethical rules? Probably not, unless the arbitrator understood the underlying rationale. The idea that ethics follows a lawyer is more intuitive than logical Most common: each parties picks an arbitrator, the two then pick a third - want the tribunal to be as voluntary as possible o give the other guy 5 potential arbs, take 5 from him, each choose 1 - if they get to choose the judges, they’re happy with the procedure, they’re be more inclined to accept the outcome Don’t want to choose an outright advocate, but want to choose selectively. This person will be 1 of 3 who makes the decision - want somebody of stature, whose opinion is respected, who will be seen and actually be impartial o the ethical route is the right route – the rules are self-enforcing o if you choose somebody who’s clearly partisan, it’ll play against you - at the end of the day, you’re going to have to convince somebody else (one of the other 3) - no reason not to choose somebody who by education, training, expertise or whatever is qualified to understand the particular dispute. But generally the most important thing is to find a good arbitrator (who can put together facts, etc) - look for somebody who will approach the dispute who, given his background, is likely to see the dispute the way you’re going to characterize it o claimant v. state entity, don’t pick somebody who’s been a state worker for years o at the asking stage: ―have you taken a position in this type of dispute that would inhibit your ability to be impartial - Judge/Arbitrator has previously decided a case against a party in your client’s situation. There may be distinguishing characteristics, but the decision may reveal certain instincts Expectation in domestic arbitration is that you choose an advocate for your party, the chair is the decisionmaker. People don’t like this situation, especially the arbitrators You’re appointed by party A. Party B’s counsel is failing to raise a dispositive point in their favor. Or, in the deliberation, the other arbs are fundamentally misunderstanding B’s point. Do you argue against the side that appointed you? - yeah – you owe it to your tribunal as well as the parties to have a full and fair discussion - the arbs don’t have separate obligations to the various parties (says DD)
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but he was in a case where his opponent’s counsel didn’t raise a glaring limitations defense, a new, more sophisticated firm was brought in, who rewrote the pleadings (against his objections), still didn’t mention limitations. Claim can be made that they just missed their shot?
How much contact do you allow between counsel and his potential arbitration? - more than just a fax - in order to get a read of what he’d think about the case, you’d have to talk to him about it for 2 days. o He’s forgotten what side he’s on - Want to ask him about his (particularly recent) history – if there’s anything glaringly conflicting - Its not a big deal, says DD - One of those self policing rules - Easier for unsophisticated parties if they have a face, somebody they met, who probably knows about the process, involved Conflicts check – thick book, have to go through. Big firms can take 1 of 3 cases they’re offered (?) IBA: Guidelines: red list, green list, orange list. DD: they’ll come to be viewed as reflecting reasonable rules. Interestingly, these came out to address concern for over-disclosure - things you should disclose but not be disqualified (orange) - things you should disclose
International Arbitration 10/22/04 role of the advocate is to understand the law as well as the case what is a fair and efficient way to resolve the question? this approach allows one to become an effective advocate & be trusted by the court Enforcement NY Convention addresses enforcement; there is no requirement that an award be confirmed judicially in its place of origin validity of the award can be contested in: 1. the place of arbitration/origin…vacatur/confirmation 2. in place of enforcement, you can challenge under the provisions of the Convention NY Convention does not standardize Charming Betsy principle, from an old US case by that name… Alien Tort Statute Int’l Arbitration 11/5/04 discussion about the recognition of foreign awards Donovan thinks a court in the US has the right to determine the effect—within the US—of conduct has occurred elsewhere
Public Policy under Article V of New York Convention: international public policy, not domestic but international public policy of specific states; as distinguished from transnational public policy such as the norm A. Presumptive Obligation to Recognize International Arbitration Awards 1. Presumptive Obligation Under NY and Inter-American Conventions to Recognize Awards (Art. III) 2. Presumptive Obligation to Recognize Foreign Awards Under National Arbitration Legislation 3. Presumptive Obligation to Confirm Int’l Arb. Awards Under National Arbitration Legislation 4. Proof of Foreign Arbitral Awards 5. B. Grounds for Refusing to Recognize Int’l Arb Awards in National Courts 1. Overview a. arbitration agreement invalid b. improper notice c. difference not contemplated by/not falling within the terms of submission to arbitration d. composition of panel or procedures violated parties’ agmt. or law of the arbitral forum e. arbitral award either not yet binding or has been set aside or suspended f. subject matter non-arbitrable under law of the enforcing nation g. contrary to the public policy of the enforcing nation h. application has been made to a court of the country in which—or under the law of which— that award was made 2. Grounds for Refusing Under National Arbitration Legislation 3. Judicial Review of the Merits of Int’l Arb. Awards 4. Awards Contrary to Public Policy 5. Denial of the Opportunity to Present Party’s Case and Irregular Procedural Conduct of the Arb. a. Denial of opportunity to present a Party’s case b. Irregular procedural conduct of the Arbitration 6. No Valid Arbitration Agmt., Excess of Authority, or Improper Arbitral Procedures 7. Lack of Independence, Bias, and Misconduct of the Arbitrators 8. Disputes ―not Capable of Settlement‖ by Arbitration Think of relationship b/w arbitrability, illegality, and public policy Substantive v. Procedural public policy; we’re focusing on substantive public policy 1. fundamental public policy notions of fair play 2. 3. under what circumstances will a national court refuse to give effect to an award? applicable law of the state in which enforcement is sought, not going back to the law of the contract or the arbitral law Parsons & Whittemore Overseas Co. v. Societe Generale de L’Industrie du Papier, 508 F.2d 969 (2d Cir. 1974) court characterized the argument as relevant to national policy rather than public policy
contract to perform services in Egypt, but as Arab-Israeli Six Day War approached, American workers withdrawn Parsons argued that as a loyal American citizens, it had to follow the lead of US foreign policy Laminoirs-Trefileries-Cableries de Lens, SA v. Southwire Co., 484 F. Supp. 1063 (N.D. Ga. 1980) MGM Productions Group, Inc. v. Aeroflot Russian Airlines, 91 Fed. Appx. 716 (2d Cir. 2004) best way to think about this decision is that court deferred to arbitrators b/c dispute was arbitrable Glencore Grain Rotterdam, BV v. Shivnath Rai Harnarain Co., 284 F.3d 1114 (9th Cir. 2002) In re: Arbitration Between Monagasque, 311 F.3d 488 (2d Cir. 2002). forum non-conviens and tension between Art. III and Art. V of New York Convention Int’l Arbitration 11/09/04 Review of enforcement Albert Jan van den Berg, presentation to Brazilian Arbitration Committee: Why Double Control? Why should the same award be subject to judicial control in both the country of origin and the enforcement country? Judicial control in the country of origin mainly through action for setting aside: annulment, vacatur also possible in enforcement procedure for a domestic award virtually all countries have an action for setting aside the award made within their jurisdiction (country of origin) UNCITRAL Model Law Art. 34=NY convention Art. 5 a. party under incapacity; agmt. not valid under law to which parties have subjected it b. improper notice/unable to present case c. dispute not falling within the terms of the submission effect is erga omnes a. reason 1 Judicial control abroad mainly through grounds for refusal of enforcement of NY Convention of 1958 grounds differ in the various countries some countries have outlandish grounds procedure is different possisbility of appeals differs procedure can take considerable time public policy in most cases governed by NY convention of 1958
Exception: Washington Convention of 1965 for investment disputes ad hoc annulment committee automatic enforcement (no grounds for refusal of enforcement) very few awards fall under this exception Provisional Measures this issue tests the boundaries b/w adjudication and arbitration b/c it gets courts involved during the process of the arbitration the need: informed and considered decisionmaking requires time legal rights
Intl. Arb. 11/19/04 General Electric Co. v. Deutz AG, 270 F.3d 144 (3d Cir. 2001). WL: American manufacturer sued German corporation that had guaranteed obligations of its subsidiary in joint venture to design and manufacture diesel engines for locomotives. Following determination that guarantor was subject to personal jurisdiction and jury verdict finding that guarantor was not entitled to arbitration under contract, the United States District Court for the Western District of Pennsylvania, Sean J. McLaughlin, J., 129 F.Supp.2d 776, enjoined guarantor, which had sought arbitration in foreign forum, from resorting to arbitration panel in the future. Guarantor appealed. The Court of Appeals, Weis, Circuit Judge, held that: (1) appellate jurisdiction existed; (2) specific personal jurisdiction existed over guarantor; (3) finding that joint venture contract's arbitration clause was ambiguous as to whether it applied to guarantor was not clearly erroneous; (4) alleged error in special verdict slip was not reversible error; (5) injunction was not warranted on res judicata grounds, to protect court's jurisdiction, or to preserve sanctity of jury verdict; and (6) interests of comity precluded injunction. Affirmed in part and reversed in part. GE sought to enforce guarantee; jury determined there was no arbitration clause for guarantor; ICC will refuse to go forward with arbitration only if there is manifestly no jurisdiction. Deutz went into London High Court seeking an anti-suit injunction against GE in Pennsylvania; GE goes into Penn to get an injunction against Deutz in London. Basically you had London, Penn., and ICC all considering whether there was arbitrable jurisdiction
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357 (5th Cir. 2003). WL: Energy company appealed from orders of the United States District Court for the Southern District of Texas, Nancy F. Atlas, J., 264 F.Supp.2d 470, 2002 WL 32099401, which issued a preliminary injunction prohibiting it from prosecuting an action it instituted in Indonesia to annul a Swiss arbitration award in favor of private power development company, and which held it in civil contempt for continuing to pursue the Indonesian action in violation of the court's initial temporary restraining order (TRO). The Court of Appeals, Wiener, Circuit Judge, held that: (1) United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards did not divest district court of its inherent authority to issue an injunction; (2) energy company's appeal of preliminary injunction was not moot; (3) district court abused its discretion in granting preliminary injunction; and (4) contempt order did not survive after underlying preliminary injunction was vacated because it was issued erroneously. Reversed; preliminary injunction and order of contempt vacated.
Paramedics Electromedicina Comercial, Ltda v. GE Medical Systems Information Technologies, 369 F.3d 645 (2d Cir. 2004). WL: Background: Brazilian distributor petitioned state court for stay of arbitration invoked by American manufacturer. Manufacturer removed petition to federal district court and counterclaimed for order to compel arbitration and for injunction against distributor's Brazilian lawsuit. The United States District Court for the Southern District of New York, Eaton, United States Magistrate Judge, compelled distributor to arbitrate and enjoined Brazilian lawsuit, and, when distributor did not comply with that order, imposed civil contempt sanctions against distributor and its president. Distributor appealed. Holdings: The Court of Appeals, Jacobs, Circuit Judge, held that: (1) anti-suit injunction was appropriate measure to enforce and protect judgment compelling arbitration; (2) district court did not abuse its discretion in holding distributor in civil contempt; (3) president's notice of appeal was deficient; but (4) remand was required for reconsideration of amount of contempt sanction in light of its purpose and manufacturer's demonstrated loss. Dismissed in part, affirmed in part, and remanded.
Notes from class Exam: Four problems, choose three; Basic familiarity with texts and principles Anti-suit Injunctions Court telling a party that it cannot bring suit in another district; essentially interfering with another court’s sovereignty Brazil case Frequently there can be clashes of jurisdiction outside of arbitration, and often arbitration is seen as avoiding this problem through designating in advance the specialized forum selection US not required to recognize res judicata from foreign jurisdictions; other jurisdictions don’t have to recognize US jurisdiction Presentation by classmate: Copel v. CPL Araucaria Facts: COPEL (government-controlled company); El Paso and Petro bras entered into joint venture agmt. for the construction of a thermo-electrical power plant in Brazil (SPC-UEG) Power Purchase Agmt executed between COPEL UEG filed a request for arbitration before ICC
COPEL filed a suit before the State Court of Parana, Brazil, seeking to declare the arbitration agreement invalid based on the fact that government-controlled companies cannot submit their disputes to arbitration as it involves public-related matters Issues: Arbitrability (does Brazilian law allow public companies) & who is the competent authority to decide the jurisdiction of the …. The reason you set up arbitrability is to avoid the courts of your contracting partner; at the end of the day you are looking down the pipe as enforcement It is easy to underestimate your contacts with a certain jurisdiction…even if you think BREAK Guest Speaker: JD, U of Costa Rica; LLM NYU not going to talk about disputes between two states, which are basically the same as disputes between two private parties
Problems: enforcement under international law, claims must be based on int’l law, contracts between states and private parties, general rule that you have to exhaust local remedies human rights treaties allow claims to be brought directly sovereign immunity
ILS Citibank Login Account Info 467/4X6T6E6P/95678913/nyuils74 Int’l Arbitration, 12/3/04 ICSID: a legal dispute regarding and investment between a national of one member country and another country Autpoista Concesionada de Venezuela v. Bolivarian Repblic of Venezuala arbitration clause specified Venezuelan arbitration unless company was foreign-controlled by a corporation registered in a ICSID member, in which case ICSID arbitration applied specified in agreement that shareholding was criterion for ―foreign-controlled‖ Mexican company was in charge here; created a corporation in Florida and then Venezuelan corporation transferred (w/ Venezuela govt approval) their shares to US subsidiary Panel held that ICSID panel had arbitration Tokios Tokeles v. Ukraine
publishing books by opposition politicians in Ukraine; registered in Lithuania first to European Court of Human Rights then someone realized that Lithuania and Ukraine had a bilateral investment treaty dissent said that ICSID takes precedence over BIT and that the Lithuanian corporation is really controlled by a Ukrainian national
CMS Gas v. Argentina Argentina began violating treaties after the economic crisis contract in this case specified that bills were to be in dollars, converted to pesos at that day’s exchange rate December 2001 was real serious economic crisis; Argentina unpegged their peso from the dollar argument here is that this treatment was tantamount to expropriation now 33 claims are pending against Argentina before ICSID