What the process of unification and harmonization of private substantive law can learn from the 2016 IBA Annual Conference

 

The ideology of the legal profession critically shapes the law,[1] and transnational arbitration, litigation and commercial law is not an exception. Last week the 2016 Annual Conference of the International Bar Association (IBA) took place in Washington, DC. The IBA is the “world’s leading organization of international legal practitioners, bar associations and law societies”.[2] Its 2016 annual conference gathered more than 6.000 delegates coming from jurisdictions all around the world to discuss, over one week, about their professional experience, current legal developments in their fields of practice and enlarge and strengthen their international networks. The conference hosted more than 200 working sessions, workshops, panels and other activities, covering almost all areas of the legal profession, including general interest topics, legal practice and public interest lawyering.[3] Hence, the IBA Annual Conference provides a unique insight into the legal culture of international attorneys and its interplay with the development of the law, including international commercial law and dispute resolution (i.e., international litigation, arbitration and mediation).

Probably the most apparent phenomenon reflected by the 2016 IBA Annual Conference in this area of legal practice is the difference in the attention that international practitioners devote to international commercial dispute resolution law vis a vis international substantive uniform and model law. Excluding investment arbitration and mediation, the conference hosted at least four sessions directly concerned with international dispute resolution, including hot topics in international arbitration, the public policy and arbitrability exceptions under Article V (2) of the New York Convention, soft law in international arbitration and the Uncitral draft treaty on the enforcement of settlement reached through mediation. Moreover, frequent remarks on international dispute resolution were made by speakers and delegates in sessions not directly addressing this subject, evidencing a deep involvement of many assistants in this field, particularly in international arbitration. Remarkably, speakers and delegates in the Dispute Resolution Section showcase on effective advocacy for all modes of disputes resolution, especially addressed the challenges of panels conformed by arbitrators educated in different legal traditions. Indeed, how to achieve a meaningful and successful communication among civil law and common law educated attorneys seems to have been one of the most recurring topics at the conference, as evidenced by the many working sessions that directly addressed this subject (e.g., “Natural resources agreements: common law provision in civil law jurisdictions” and “Creating lawyers who can work across civil and common law jurisdictions”). This strongly suggest that, despite their global practice, international lawyers -including those dedicated to international dispute resolution- are still overwhelmingly attached to their domestic legal education and training.

The attention devoted by the IBA Annual Conference and its attendees to international dispute resolution highly contrast with the situation of uniform substantive law and model law. No working session was primarily concerned with uniform substantive law, the only one on model law addressed the developments of an instrument of a nature close to procedural law (the Uncitral model law on cross-border insolvency) and most sessions on related subjects did not refer in a relevant manner to the process of unification or harmonization of private substantive law. Informal opinions of different delegates attending the conference were illustrative of the reasons for this lack of interest: uniform substantive law remains relatively unknown compared with domestic law, it is rarely applied by courts and, when applied, it normally results in a completely unexpected surprise for the parties, arising from awards by national courts relying in the iura novit curia doctrine[4]. These views might be expected for many common law lawyers,[5] but it also holds true for practitioners of German speaking countries, despite that these jurisdictions evidence the most extensive and sophisticated case law on one of the most widely accepted instruments of uniform substantive law, the CISG.

This disparity in the importance of international commercial arbitration and uniform substantive law at the IBA Annual conference is not surprising. International commercial arbitration is a dispute resolution form normally agreed in contracts between highly sophisticated parties, counting with skilled professional legal assistance. Counsels normally advise their clients to exclude any applicable uniform law, e.g. the CISG,[6] and parties normally end up making a choice of law in favor of the domestic law of the one with stronger barging power or the law of a neutral mayor global commercial forum (e.g., the law of New York; England and Wales, Switzerland, etc.). The previous stresses that international attorneys still feel much more confident with the law of the tradition in which they were educated and explains that the challenge of communicating among common law and civil law lawyers remains one of the most recurring topics of the IBA Annual Conference.

This way, the 2016 IBA Annual Conference evidences that the professional ideology of international lawyers still distrust the process of harmonization and unification of private substantive law. Despite the relative success of Uncitral and Unidroit in obtaining the accession or enactment by many States to its most emblematic instruments, without a relevant change in the culture of the legal profession, this process will remain incomplete.[7] Hence, international organizations in this field not only need to target States to make them parties to the relevant international instruments. These organizations must also address the underlying legal communities in order to convince them that the process of unification and harmonization of private substantive law is useful and valuable for international lawyers and their clients: uniform and model law can provide them with a common language that helps them to face one of the most defying challenges of international legal practice: how to bridge the cultural gaps between lawyers educated in different legal traditions.

 

Ernesto Vargas Weil

LL.M. New York University, International Finance and Development Fellowship ‘14. LL.B. University of Chile. Partner at Anriquez Novoa Abogados (Santiago, Chile). Instructor at the Private Law Department of the University of Chile. He attended the 2016 IBA Annual Conference thanks to the “IBA Scholarship Programme for Young Lawyers from Developing Countries”.

[1] See Max Weber, Economy and Society. Berkley, California: University of California Press, 1978, pp. 784-808.

[2] http://www.ibanet.org/About_the_IBA/About_the_IBA.aspx.

[3] IBA 2016 Annual Conference of the International Bar Association Final Programme, available at http://www.int-bar.org/Conferences/conf664/binary/Washington-2016-final-prog-FULL-FOR-WEB-14-SEPT.pdf.

[4] See Roy Goode, Herbert Kronke and Ewan Mc Kendrick. Transnational Commercial Law: Text, Cases, and Materials. Oxford, UK: Oxford University Press, 2007, p. 264. For a classic example, see Tribunale di Vigevano, Italy, 12 July 2000 (Rheinland Versicherungen v. Atlarex), English translation available at http://cisgw3.law.pace.edu/cases/000712i3.html.

[5] E.g., on the familiarity of common law lawyers with the CISG, see Ingeborg Schwenzer and Christopher Kee, Global Sales Law – Theory and Practice”, in: Schwenzer and Spangolo (Eds.). Towards Uniformity. The Second Annual MAA Schlechtriem CISG Conference, March 13 2010, Hong Kong. International Commerce and Arbitration, vol. 8. The Hague, The Netherlands: Eleven International Publishing, 2011, p. 158.

[6] See Ingeborg Schwenzer and Pasacal Hachem. The CISG – Successes and Pitfalls. 57 American Journal of Comparative Law (Spring 2009), pp. 464 and Ulrich Magnus, Sales of Good, International (Uniform Law), in: Jürgen Basedow, Klaus J. Hopt and Reinhard Zimmermann (eds.), The Max Plank Encyclopedia of European Private Law. Oxford; New York: Oxford University Press, 2012, vol. II, p.1508; Peter Mankowski, Peter. Artikel 6 CISG und Abbedingung der CISG, in Festschrift für Ulrich Magnus zum 70. Geburtstag. Munich, Germany: Sellier European Law Publishers GmbH, 2014, pp. 257, 258.

[7] See José Antonio Moreno Rodriguez, Contracts and Non-State Law in Latin America. Uniform Law Review. NS – Vol XVI, 2011, p. 877.

Professor Ferrari to give talks in the Dominican Republic at a conference hosted by the Center

Professor Ferrari will give several talks on matters related to the United Nations Convention on Contracts for the International Sale of Goods (CISG) and arbitration at a conference organized by the Center, to be held in Santo Domingo on 10 October 2016. Professor Marco Torsello, two-time Global Professor of Law at NYU, will also give a talk on CISG related topics. For the full program, please click here.

The Latest Decisions of Madrid’s High Court of Justice Setting Aside Arbitral Awards Scare the Arbitral Community

On January 28, 2015, the High Court of Justice of Madrid (“HCJ of Madrid”) rendered a decision[1] setting aside an award dated January 14, 2014 that dealt with an interest rate swap agreement signed between a retail company and a bank. The HCJ of Madrid concluded, after reviewing the law applicable to the merits of the dispute, that the award was contrary to economic public policy and, therefore, according to article 41(1)(f) of the Spanish Arbitration Act, it should be annulled.

Remarkably, the decision has not been an exception. In the past months, more judgments with a similar factual background (the purchase of an interest rate swap by a retail company) and analogous reasoning and outcome have been lodged by the HCJ of Madrid—Judgments of April 6, 2015, April 14, de 2015, and June 1, 2015—, pleasing those who blame the financial entities for the country’s economic crisis, but alarming Spain’s arbitral community.

Until recently, Spanish courts had respected that arbitral awards cannot be reviewed on their merits, and had interpreted the concept of public policy restrictively, applying it only when there had been a clear violation of a fundamental constitutional right. Do these decisions represent a change in trend?

 

  1. The Award of January 14, 2014

In 2008, the sole administrator of a retail company negotiated and agreed with BBVA (Spain’s second largest bank) the novation of a mortgage loan. During the negotiations, the company expressed its concern regarding the possible increase of interest rates and asked the bank if there was any product that covered such risk. The bank then offered the company to subscribe an interest rate swap.

Before contracting the financial product, the bank applied the convenience test[2] to the sole administrator, from which it resulted that he had passed 4 out of 5 years of the degree in business administration. Moreover, a BBVA worker explained to him the terms of the interest rate swap[3]. After the explanation, the sole administrator subscribed the mortgage novation as well as the interest rate swap agreement.

Six years later, the company initiated arbitration proceedings (under the administration of the Court of Arbitration of the Official Chamber of Commerce and Industry of Madrid) against BBVA requesting the arbitral tribunal to annul the interest rate swap agreement due to an error in consent. In this regard, the company alleged that, at the time of the agreement, the sole administrator thought he was contracting an insurance agreement that could be cancelled at any time; that BBVA had not applied the suitability test[4], as it should have due to the complex nature of swaps, and that the bank had advised him to contract the product before having him take the convenience test.

The arbitral tribunal rejected all of these arguments. In summary, the tribunal concluded that the product had characteristics that clearly distinguished it from an insurance (the company had never paid a premium); that a swap could not be qualified as a specially complex product for a person with a minimum formation and experience in commercial and financial activities; that the information provided by the bank was clear, true, impartial and non-fraudulent, allowing the client to be conscious of the essential terms of the agreement; and that the anticipated cancelation of the product had a cost that had to be paid. Hence, the award determined that the company had to comply with the terms of the interest rate swap in order to cancel it.

Disappointed with the award, the company sought its annulment under two grounds: (1) the partiality of the Court of Arbitration[5] and the absence of independence and impartiality in the co-arbitrator; and (2) the infringement of public policy due to the misinterpretation and misapplication of the standard of conduct rules imposed by the Spanish Securities Act and the national and European Union case law that applies those rules[6].

 

  1. The decision of the HCJ of Madrid of January 28, 2015

In the application to set aside the award, the company alleged that the award infringed public policy for four reasons: (1) it disregarded article 79(8) of the Spanish Securities Market Act when considering the swap a non-complex product; (2) it did not apply the statute of protection of retailers; (3) in view of the evidence, it could not be concluded that BBVA informed the company of the high risks and costs associated to the swap nor its probability of occurrence and possible range; and (4) it did not sanction the fact that the suitability test was not applied to the sole administrator.

BBVA rejected both grounds for the annulment of the award and, in relation to the second one, it held that the action to set aside awards does not open a second instance and could not allow the courts to review the merits of the case.

Although the decision seemed to agree with BBVA when quoting the Preamble of the Spanish Arbitration Act —“the grounds for setting aside an award must be appraised and must not allow, as a general rule, a review of the arbitrators’ decision on the merits”—, the fact that it underlined the words “as a general rule” gave a hint of what it would later dispose. The HCJ of Madrid stated that article 41(1)(f) of the Spanish Arbitration Act comprised not only the protection of fundamental rights (contained in the Spanish Constitution) but also, due to the imperative mandate of European Union Law, the protection of economic public policy.

In view of the court, “the distinguished paradigm of economic public policy is the principle of contracting in good faith (…), the observance of which is specially unavoidable when, in a particular transaction, a situation of unbalance, disproportion or asymmetry takes place between the parties due to the complexity of the product that is being bought and the disparate knowledge that parties have of such product”.

In order to determine if the award had breached economic public policy, the HCJ of Madrid reviewed the circumstances of the case in the light of the Judgment of the Supreme Court of January 20, 2014[7] —which contained essential doctrine that delimited the scope of the principle of contracting in good faith in relation to financial products—, and then concluded that the award erred in the following three aspects:

  1. The award disregarded the facts of the case that proved that the tasks carried out by the bank “implied advice and not only commercialization”, which should have led BBVA to apply both the test of convenience and the test of suitability to the sole administrator.
  2. The award ignored article 79 bis (8) of the Spanish Securities Market Act, which forbids to consider swaps as non-complex financial products.
  3. The award failed to analyze whether the bank informed the company of the possibility of early terminating the interest rate swap agreement and its related costs.

In view of the aforementioned errors, the court concluded that the award’s motivation, based on legal grounds that are contrary to imperative applicable law, was arbitrary and that it, therefore, contravened public policy.

 

III. The decision of the HCJ of Madrid violates article 41(1)(f) of the Spanish Arbitration Act

While an appeal allows a court to re-examine the decision rendered in first instance, the action of annulment of an award is limited to the numerus clausus grounds listed on article 41 of the Spanish Arbitration Act. This grounds allow a three level control: (1) the existence and validity of the arbitral agreement; (2) the regularity of the proceedings; and (3) respect of public policy.

But, what is public policy and in what particular cases does it allow tribunals to review the merits?

Spanish courts have always interpreted and applied the concept of public policy in a very restrictive manner, respecting the fact that an arbitral award cannot be, as a general rule, reviewed on its merits. This limitation implies that the proven facts, the assessment of the evidence and the interpretation given to the applicable law should, in general, remain out of the scope of the action of annulment.

In other words, courts cannot replace the criterion of the award by their own. The court may disagree with the final decision of the award but that does not allow it to dispense justice when the parties have attributed jurisdiction to an arbitral tribunal. The courts role is reduced to verify if the award is reasoned and if it is not flagrantly incompatible with the practiced evidence, and not to verify if another conclusion could have been reached out of the evidence.

As the Provincial Court of Pontevedra clearly stated in its decision of January 21, 2010[8], through the action of annulment the courts may only challenge awards that absolutely ignore the rights and principles that form public policy (i.e. fundamental constitutional rights), but not the particular interpretation and application that of those rights and principles the arbitrator does.

In view of the above, it is not a surprise that the decision of the HCJ of Madrid, which bypassed the arbitral tribunal’s reasoning, has been harshly criticized in every arbitral forum. This decision has unlawfully taken advantage of a broad concept of public policy to expand the scope of the action of annulment and reverse an award that is perfectly reasoned, just because the court disagrees with the outcome.

This new tendency has led to subsequent judgments like the decision of 14 April, 2015 of the HCJ of Madrid[9] in which the court even affirms that law grants judges an “extraordinary control” that has the goal of “revoking any excess of the arbitral award”. Indeed, this view is mistaken. As it is alleged in the dissent of Judge Francisco Javier Vieira Morante, the powers of the annulment tribunal are not the ones of an appellate one; thus, the annulment tribunal may not replace the conclusions of the award for others it considers to be more just[10].

In order to respect the principle of party autonomy and avoid any abuse of discretion in the future, it would be advisable to determine and narrow a definition of economic public policy, bearing in mind that public policy should only be considered where there is a clear and serious violation of a fundamental right. Otherwise, the ability to set aside an award would be boundless.

The absence of certainty and precision of such an important concept menaces the exceptional scope of the action of annulment, which could become a forbidden second instance. However, even if a definition is not found, courts cannot ignore that an award cannot be set aside when it is reasoned and the assessment of the evidence does not result irrational.

 

  1. Conclusion

Some authors[11] believe that the commented decision (as well as the ones that have followed it) “undermine the basis of arbitration and put in danger arbitrations with a seat in Madrid, which from now on are subject to appeal before the HCJ.” Others[12] believe “these judgments to be exceptional decisions on a very specific matter based on the specific circumstances of these cases [that] cannot be extrapolated to other types of controversies or disputes of a different nature.

In this author’s opinion, the nature of the case should not justify the fact that courts go beyond their authority and, unless we want to detriment arbitration proceedings with a seat in Madrid, the concept of public policy should remain interpreted in a restrictive manner.

A broad interpretation of public policy, even if tied to arbitrations related to swap agreements, may (rectius, will) influence negatively in investors who will become reluctant to include arbitration clauses with a seat in Madrid in their agreements, because when deciding upon a dispute settlement clause, parties want to ensure an absolute legal certainty.

If the HCJ of Madrid misinterpreting article 41(1) of the Spanish Arbitration Act puts an end to the main virtues of arbitration —finality of the decisions, lower cost, enforceability of the award and speed—, by creating the possibility of reviewing awards on the merits, arbitrations with a seat in Madrid may be in danger. For now, these decisions have only affected a certain type of cases (arbitrations related to financial products acquired by retails companies), but what counsel can guarantee its clients that this reasoning will not be applied to other type of cases in the future?

As it was stated by a well-known dissertation, “the binding nature of the award, or indeed any legal instrument, cannot exist in isolation, but must stem from a legal system which recognizes that binding quality.”[13] In this regard, efficiency of arbitration proceedings does not only rely on the arbitrators but also on the support given to it by the courts. Only an intervention that shows a true support of the arbitral proceedings will allow arbitration to be a successful method of dispute resolution.

 

Lara Rodríguez Mulet

Class of 2016 graduate in the International Business Regulation, Litigation, and Arbitration (IBRLA) LL.M. program at New York University School of Law. Foreign Associate of the International Arbitration Practice Area at Freshfields Bruckhaus Deringer in New York.

[1] Civil and Criminal Chamber of the High Court of Justice of Madrid, decision number 13/2015, dated January 28, 2015 (Westlaw JUR\2015\79489).

[2] Test used to evaluate the knowledge and experience of the client in relation to the product being offered or requested.

[3] In summary: the bank would pay the company a 12 month EURIBOR rate and the company would pay the bank a fixed rate of 4.64% during a period of 13 years, being the amount equal to the one of the loan. Or, in other words, that he would have a fixed rate for the loan equal to 5.29%.

[4] Test used to evaluate the knowledge of the client in relation to the concrete product, his experience with such product, his financial situation and the objectives of his investment.

[5] The company alleged that the Court’s neutrality was jeopardized by the fact that at least one third of the arbitrators listed by the Court had had a direct relationship with BBVA or other banks who offer swaps.

[6] The HCJ of Madrid rejected the former ground, so we shall focus on the analysis of the latter.

[7] Note that this judgment was passed 6 days after the award was rendered.

[8] Provincial Court of Pontevedra, decision number 41/2010, dated January 21, 2010 (La Ley 8466/2010).

[9] Civil and Criminal Chamber of the High Court of Justice of Madrid, decision number 30/2015, dated April 14, 2015 (Westlaw JUR\2015\136198).

[10] In words of Judge Vieria, “it is true that when legal issues have been debated we may not agree with the judgment of the award, especially when it contradicts the Supreme Court’s decisions. But that does not allow us to impart justice in the particular case, since it is impeded by the decision of the parties to exclude tribunals of the dispute settlement.”

[11] Conthe, M., Swaps de intereses: la sentencia del Tribunal Superior de Justicia de Madrid de 28 de enero de 2015, Diario La Ley, n. 8515 (April 9, 2015).

[12] Ardila, G. and Fernandez-Miranda, B., No rain forecast for arbitration in Spain, LexisNexis (July 14, 2015).

[13] Fouchard, P., Gaillard, M., and Savage, J., Fouchard Gaillard Goldman on International Commercial Arbitration, Savage and Gaillard (1999).

Prof. Silberman to give a talk on the implications of Daimler AG v Bauman at the National University of Singapore

Prof. Silberman, the Co-Director of the Center, will give a talk on the implications US court decisions can and do have abroad, both in the international litigation and arbitration contexts. The starting point of  Prof. Silberman’s remarks will be the US Supreme Court’s decision in Daimler AG v Bauman, on the occasion of which the US Supreme Court stated that as a constitutional matter, general jurisdiction over a corporation is limited to the state in the US where the defendant can be regarded “at home”. For more info, please click here.

Professor Ferrari and Dr. Rosenfeld publish a comment on the Dutch Yukos annulment decision

Professor Franco Ferrari, the Director of the Center, and Dr. Friedrich Rosenfeld, a Global Adjunct Professor at NYU Law in Paris, Visiting Professor at the International Hellenic University in Thessaloniki and Lecturer at Bucerius, have just published a comment on the decision rendered on 20 April 2016 by the District Court of The Hague (the Netherlands), which set aside six arbitral awards that had been rendered in the proceedings Yukos Universal Limited (Isle of Man) et. al. against Russia. The arbitral tribunal had ordered Russia to pay compensation for its breach of the Energy Charta Treaty. According to the District Court of The Hague, the arbitral tribunal had erroneously found that the Energy Charta Treaty was provisionally applicable. For this reason, the arbitral tribunal could not base its jurisdiction on the arbitration clause set forth in Art. 26 Energy Charta Treaty. The case comment note examines the set-aside decision of the District Court of The Hague as well as its implications for ongoing enforcement proceedings.

Professor Ferrari named President of the Thailand Arbitrator Committee established at the Thailand Arbitration Center

On June 7, 2016, Professor Ferrari, the Director of the Center, was appointed President of the Thailand Arbitrator Committee established at the Thailand Arbitration Center (THAC). The tasks of the President of the Arbitrators Committee are outlined in the Arbitrator Committee Rules. In light of these Rules, Professor Ferrari will preside of the meetings in which the Thailand Arbitrator Committee will take decisions of the challenges to the arbitrators. As President of the Arbitrator Committee, Professor Ferrari will, however, be the sole responsible for appointments and removals of arbitrators.

The EU Proposal for an Investment Court System

The Center is pleased to announce this September’s session of the Forum of the Center for Transnational Litigation, Arbitration and Commercial Law, entitled “The EU Proposal for an Investment Court System”. The event will take place on Monday, 12 September 2016, from 6.00 – 8.00 pm, in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that on the occasion of this session Dr. Inka Hanefeld will give a talk on the aforementioned topic and that Professor Robert Howse and Barry Appleton agreed to act as commentators.

Dr. Inka Hanefeld LL.M. (New York University), Attorney-at-law (New York), is a German and New York qualified lawyer specialized in dispute resolution and, in particular, in arbitration. Inka is the founding partner of the German dispute resolution law firm Hanefeld Rechtsanwälte, Hamburg, Germany. In 2013, Inka was appointed as arbitrator to the panel of arbitrators at the Centre for Settlement of Investment Disputes (ICSID) by the German Government. In 2015, Inka became Vice-President of the ICC International Court of Arbitration. Since 2015, she is also court member of the London Court of International Arbitration (LCIA) and designated member of the ICDR International Panel of Arbitrators. Inka primarily acts as arbitrator and counsel in domestic and international arbitration proceedings in the fields of international trade, industrial plant and machine building, energy, banking & finance, as well as in post-M&A and investor-State disputes. Her expertise has been recognized in various international rankings.

Robert Howse is the Lloyd C. Nelson Professor of International Law at NYU School of Law. Professor Howse received his B.A. in philosophy and political science with high distinction, as well as an LL.B., with honours, from the University of Toronto, where he was co-editor in chief of the Faculty of Law Review. He also holds an LL.M. from the Harvard Law School. He has been a visiting fellow at the London School of Economics and visiting professor at Harvard Law School, Tel Aviv University, Hebrew University of Jerusalem, the University of Paris 1 (Pantheon-Sorbonne), Tsinghua University, and Osgoode Hall Law School in Canada and taught in the Academy of European Law, European University Institute, Florence. He is a frequent consultant or adviser to government agencies and international organizations such as the OECD, the World Bank, UNCTAD, the Inter-American Development Bank, the Law Commission of Canada and the UN Office of the High Commissioner for Human Rights. He was a contributor to the American Law Institute WTO project. He is a co-founder and co-convener of the New York City Area Working Group on International Economic Law and serves on the American Bar Association Working Group on Investment Treaties. Professor Howse serves on the editorial boards of the London Review of International Law, Transnational Legal Theory, The Journal of World Trade and Investment, among others. Professor Howse’s article with Ruti Teitel “Beyond Compliance: Rethinking Why International Law Really Matters” was awarded the Global Policy Best Article Prize 2010 (shared with Joseph Stiglitz et al). Prior to pursuing legal studies, Howse held a variety of posts with the Canadian foreign ministry, including as a member of the Policy Planning Secretariat and a diplomat at the Canadian Embassy in Belgrade.

Barry Appleton is the Managing Partner of Appleton & Associates International Lawyers in Toronto. He is a member of the bars of Ontario, New York, the District of Columbia and the US Court of International Trade.  For more than twenty years, he has practiced international investment treaty arbitration under the NAFTA. bilateral investment treaties, appearing as lead counsel in many international arbitrations He also has represented client submissions at the World Trade Organization. Mr. Appleton is the author of the three volumes of NAFTA: Legal Text and Interpretative Materials, (Thomson West, 2007), the treatise Navigating NAFTA (Carswell,1994) and many articles involving the adjudication of international investment treaty law issues. He is the global editor of Westlaw’s Investor-State Reports and Investor- State Digest. He also acts as the Vice Chair of the International Arbitration Committee of the American Bar Association Section on International Law and co-chairs the International Arbitration Committee’s Investment Treaty Working Group which is currently drafting a Report on the EU Investment Court Proposal.

Please note that the Chatham House rule applies.

Center co-sponsors an evening conference for female arbitration practitioners

The Center co-sponsors an event organized under the auspices of ARBITRALWOMEN. The International Network of Women in Dispute Resolution to be held at the office of Bryan Cave on 15 September 2016, from 6.00 pm to 9.00 pm. The speakers will be Gabrielle Nater-Bass, Homburger (Switzerland), Claudia T. Salomon, Latham & Watkins (New York), Emma Lindsay, Bryan Cave (New York), Anna Tevini, Shearman & Sterling (New York), Rocío Digón, International Chamber of Commerce (New York), Yasmine Lahlou, Chaffetz Lindsey (New York), amd Katie Hyman, Akin Gump Strauss Hauer & Feld (Washington, D.C.). For the program brochure, please click here.

Professor Ferrari and Dr. Friedrich Rosenfeld publish paper on “Bridging the Gap between Investment and Commercial Arbitration at the Enforcement Stage”

Professor Franco Ferrari, the Director of the Center, and Dr. Friedrich Rosenfeld, a former scholar-in-residence at the Center and currently a Global Adjunct Professor at NYU Law in Paris, a Visiting Professor at the International Hellenic University in Thessaloniki and Lecturer at Bucerius Law School in Hamburg, have just published a paper in the NYU Journal of Law & Business (vol. 12: 295) analyzing the interaction of between the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958(New York Convention) and international investment law. The starting point of their analysis are the cases in which the domestic authorities in the country where enforcement of an arbitral award is sought unduly interfere with the enforcement instead of taking the arbitration-friendly stance required by imposed by the New York Convention. In these instances, a success in arbitration proceedings may turn out to be a mere pyrrhic victory. This holds true, in particular, where all of the debtor’s assets are located in one jurisdiction. Here, a contracting state’s compliance deficit with the New York Convention cannot be mitigated by seeking enforcement in a different contracting state. In response to these shortcomings, investors have begun to exploit the linkages between the New York Convention and the regime of international investment law. And it is on these linkages that the authors have focused.

Professor Diego P. Fernandez Arroyo appointed member of the ICSID Panels of Arbitrators and Conciliators by the Republic of Argentina

On July 5, 2016, the Republic of Argentina appointed Professor Diego P. Fernandez Arroyo, a professor of law at Sciences Po Law School in Paris, and formerly a scholar-in-residence of the Center as well as a Global Professor at the NYU Paris Campus, to the ICSID Panels of Arbitrators and Conciliators. The ICSID is a forum for international investment dispute settlement that was established by a 1966 convention.

Professor Arroyo teaches subjects related to international dispute resolution, arbitration, conflict of laws, and comparative law and his books and articles have been published in more than twenty countries. He is actively involved in the practice of international arbitration as an independent arbitrator and an expert. He represents Argentina at the UNCITRAL Working Group on Arbitration. Professor Fernández Arroyo is also a member of the Curatorium of the Hague Academy of International Law, a former President of the American Association of Private International Law, and the current Secretary-General of the International Academy of Comparative Law. Professor Fernández Arroyo is actively involved in the practice of international arbitration as an independent arbitrator and an expert. He has developed several projects in the field of arbitration and international business law for the European Union, the Andean Community, the MERCOSUR, and the Latin-American Integration Association. He has published several books and a number of articles and notes in publications of more than 20 countries.

This appointment brings to four the number of NYU Law community members who have been appointed as arbitrators/conciliators to the ICSID by various governments:

Professor Diego Arroyo, professor of law at Sciences Po Law School in Paris, appointed by the Republic of Argentina

Adjunct Professor Pedro Martinez-Fraga, partner at Bryan Cave, appointed by the United States

Adjunct Professor Brian King, partner at Freshfields Bruckhaus Deringer, appointed by Saint Lucia

Professor Franco Ferrari, Director of the Center for Transnational Litigation, Arbitration and   Commercial Law,  appointed by Saint Lucia

 

Professor Ferrari to speak at the 49th session of the United Nations Commission on International Trade Law

Upon the invitation of the head of the UN Office of Legal Affairs, International Trade Law Branch, who also acts as Secretary to the UN Commission on International Trade Law (UNCITRAL), Professor Ferrari, the Center’s Director, will give a talk on specific aspects of the rule of law at this year’s Commission session. More specifically, Professor Ferrari will address what efforts are being made to avoid that the uniform rules elaborated by UNCITRAL be applied in a way that undermines the very purpose behind the unification efforts leading to those very same rules.

For this year’s Commission session’s program, please click here.

Center co-hosts Tribunal Secretary Accreditation Programme

The Center co-hosts, with the Hong Kong International Arbitration Centre (HKIAC), the world’s first tribunal accreditation programme. As an extension of HKIAC’s award-winning tribunal secretary service, the programme aims to train and accredit a new generation of qualified tribunal secretaries. The programme is organized as a two day workshop featuring practical training by experienced tribunal secretaries, followed by a written exam and oral interview. Those who pass the exam may apply for admission to a list of accredited tribunal secretaries maintained by HKIAC. The programme is taught by an experienced faculty and overseen by an advisory board which includes eminent arbitrators from around the world. For access to the brochure, please click here.

Center co-hosts arbitration seminar at Sciences-Po in Paris

The Center hosts, together with Sciences-Po, a seminar on “how do arbitrators decide” that is to take place on 30 May 2016, from 4.30-6.30 pm. The event’s main speaker will be Eduardo Silva Romero (Dechert Paris), while Prof. Fabien Gélinas (McGill University), Prof. Pierre Mayer (University Paris 1), Ms. Isabelle Michou (Herbert Smith Freehills Paris) and Prof. Franco Ferrari (the Center’s Director)  will act as commentators. The event will be moderated by Prof. Diego Arroyo (Sciences-Po). For more info, click here

How International Should International Commercial Arbitration Be?

This is to announce a conference organized by the Center, together with the Brazilian Arbitration Committee, entitled “How International Should International Commercial Arbitration Be?” The conference will  bring together speakers from the United States and Brazil and will take place on 19 April 2016, from 2.30 -7.30 pm, , in the Lester Pollack Colloquium Room, Furman Hall 900, 245 Sullivan Street, New York, NY 10012. For the full program, please click here.

 

Personal Jurisdiction and Forum Non Conveniens: Are the Two Shores of the Atlantic Getting Closer?

This is to announce this March’s session of the Forum of the Center for Transnational Litigation, Arbitration and Commercial Law, entitled “Personal Jurisdiction and Forum Non Conveniens: Are the Two Shores of the Atlantic Getting Closer?” The event will take place on Monday, 28 March 2016, from 6.00 – 8.00 pm, in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that on the occasion of that session, Professor Andrea Bonomi will give a talk on the aforementioned topic and both Professors Linda J. Silberman and Franco Ferrari will comment.

Andrea Bonomi, who received his LL.B from Padua University, holds two Ph.d. degrees (one from Innsbruck University and one from Bologna University), is Professor of Comparative Law and Private International Law at the Faculty of Law and Criminal Justice of Lausanne University (since 2002). Since 2006, Andrea Bonomi is also the Director of the Centre for Comparative, European and International Law at Lausanne University. Andrea Bonomi, who is a former Member of the Swiss delegation at the Hague Conference of Private International Law and the Rapporteur of the Hague Protocol on the Law Applicable to Maintenance Obligations of 23 November 2007, is a Member of the European Group of Private International Law (GEDIP), an Associate Member of the International Academy of Comparative Law, and a member of several other professional associations. He is a prolific author and is currently also the Editor of the Yearbook of Private International Law.

Linda J. Silberman is the Martin Lipton Professor of Law at New York University and Co-Director of the Center. She is a leading figure in the United States in private international law and transnational litigation, and her academic and scholarly interests range from numerous areas of commercial law to personal and family matters. At NYU, Professor Silberman teaches a range of courses, including Civil Procedure, Comparative Procedure, Conflict of Laws, International Litigation/Arbitration and International Commercial Arbitration. She is co-author of an important Civil Procedure casebook (now in its 3rd edition) and of a recent book on Comparative Civil Procedure. She was the co-Reporter for the American Law Institute Project–Recognition and Enforcement of Foreign Judgments: Analysis and Proposed Federal Statute, and an adviser to two other American Law Institute projects: Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes and the Restatement Third on International Commercial Arbitration. Professor Silberman is also a Member of the State Department’s Advisory Committee on Private International Law and has been a member of numerous U.S. State Department delegations to the Hague Conference. Professor Silberman combines her scholarship and academic work with other roles, such as special referee, expert witness and consultant in a number of important cases. Her work was cited by the Supreme Court of the United States on several occasions.

Franco Ferrari, who joined NYU on a full-time basis in September 2010, after serving as visiting professor for various years, is also chaired professor of international law at Verona University School of Law in Italy. Previously, he was chaired professor of comparative law at Tilburg University in the Netherlands and Bologna University in Italy. After serving as member of the Italian Delegation to various sessions of the United Nations Commission on International Trade Law (UNCITRAL) from 1995 to 2000, he served as Legal Officer at the United Nations Office of Legal Affairs, International Trade Law Branch (2000-2002), with responsibility for numerous projects, including the preparation of the UNCITRAL Digest on Applications of the UN Sales Convention (2004 edition). Professor Ferrari has published more than 270 law review articles in various languages and 17 books in the areas of international commercial law, conflict of laws, comparative law and international commercial arbitration. Professor Ferrari is a member of the editorial board of various peer reviewed European law journals (Internationales Handelsrecht, European Review of Private Law, Contratto e impresa, Contratto e impresa/Europa, Revue de droit des affaires internationales). Professor Ferrari also acts as arbitrator both in international commercial arbitration’s and investment arbitration’s.

Please note that the Chatham House rule applies.

NYU Arbitration Forum on “Arbitrator Power: A Transatlantic Divide” – 29 February 2016

This is to announce the February 2016 session of the Arbitration Forum of the Center for Transnational Litigation, Arbitration and Commercial Law, entitled “Arbitrator Power: The Transatlantic Divide”, which will take place on Monday, 29February 2016, from 6.00 – 8.00 pm, in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that Professor Margaret Moses will give a talk on the aforementioned topic and that Dr. Monique Sasson and Mr. Christian Alberti agreed to act as commentators.

Margaret L. Moses is Professor of Law and Director of International Programs at Loyola University Chicago. A scholar in the field of international commercial arbitration, the second edition of her treatise on international commercial arbitration was published in May 2012 by Cambridge University Press. Her teaching and writings are informed by her participation as an arbitrator or advocate in arbitrations under the auspices of the International Chamber of Commerce, Court of Arbitration and the American Arbitration Association’s International Centre for Dispute Resolution, as well as in ad hoc arbitrations. In addition to arbitration, her areas of interest and research include international business transactions, international letters of credit,  and international trade finance. Her articles on arbitration, international letters of credit, good faith, and other topics have appeared in many U.S. law reviews, as well as in foreign and  international journals. She has been an invited speaker at national and international conferences in many different countries. Professor Moses heads Loyola Chicago’s Vis Moot Arbitration program, which sends students to compete in both Vienna and Hong Kong. She has a J.D. degree from Columbia University School of Law and a Ph.D. degree from Indiana University.
 
Dr.  Monique Sasson initially qualified as an Italian Avvocato and practiced in Rome (with Studio Legale Chiomenti), where she appeared before arbitral tribunals and Italian courts. In 2000, she joined Herbert Smith’s international litigation/arbitration practice group in London, qualified as an English solicitor (and subsequently as a solicitor advocate), and acted for clients in a number of international arbitration cases as well as litigation matters. In 2009, Monique obtained her Ph.D. degree from Cambridge University, and the following year Kluwer published a revised version of her doctoral thesis under the title Substantive Law in Investment Treaty Arbitration: The Unsettled Relationship Between International Law and Municipal Law. In 2015, Monique joined JAMS as a full time arbitrator, dividing her time between New York and London. Monique currently resides in New York City, is a member of the New York Bar, and serves on the New York City Bar Committee on Arbitration.  She is an associate editor of Kluwer Arbitration Blog, and is the Co-Managing Editor of several ITA publications, including the ITA Arbitration Report and World Trade and Arbitration Materials.  Monique is a Member at Large of the ITA Advisory Board and its Executive Committee.
 
 
Christian P. Alberti is the AVP/Director of the International Centre for Dispute Resolution (ICDR), the international division of the American Arbitration Association (AAA). He supervises the ICDR’s staff and center management activities and oversees hundreds of large complex multi-party arbitrations and mediations covering all types of disputes and industries each year. Prior to joining the ICDR in 2005, Christian headed the Italian Desk of a mid-size law firm in Germany. Christian is the former President and Honorary Member of the Alumni Association of the Willem C. Vis International Commercial Arbitration Moot (MAA). He is regularly invited to speak at international conferences and guest lectures at various law schools about international arbitration and mediation in the United States and abroad. He successfully coaches New York University’s Vis Moot Team since 2007 and its Foreign Direct Investment Moot Team since 2008. He is a founding member of the International Arbitration Club of New York, a member of the Arbitration Committee of the New York City Bar (2012-2015), an associate of Pace University’s Institute of International Commercial Law, as well as a member of various international ADR associations. After studies at the Philipps-University of Marburg, the German University for Administrative Sciences Speyer (DHV) and the University of Queensland he was admitted to practice law in Germany in 2003 and in the State of New York in 2011. He obtained an LL.M. from Tulane University Law School in 2002.
 

Center Hosts 5th Arbitration Moot at Hogan Lovells

NYU’s  Center  for  Transnational  Litigation,  Arbitration  and  Commercial  Law  will  hold  its  Fifth  Annual Arbitration Practice Moot  on  Saturday,  27  February  2016  and  Sunday,  28  February  2016.    The  event  will  be  co-hosted  by  Hogan  Lovells US  LLP  and  NYU’s  International  Arbitration  Association.    The  principal  objective  of  the  NYU  Practice  Moot  is  to provide  a  forum  within  which  students  participating  in  this  year’s  Willem  C.  Vis  International  Commercial Arbitration  Moot  can  refine  their  oral  presentations  by  pleading  before,  and  receiving  constructive  feedback  from, panels of distinguished arbitrators.

For the program please click here.

No Reservations, Hong Kong: A ‘Choice of Remedies’ If the Tribunal Makes a Preliminary Ruling on Its Jurisdiction?

I. Introduction

The ‘choice of remedies’ in international commercial arbitration refers to an award-contesting party’s freedom to opt, without prejudice, between challenging an award via (1) the passive remedy at the enforcement courts, or (2) the active remedy at the seat of arbitration (hereinafter referred to as the “seat”).[1] The former refers to raising objections to the enforcement of an award,[2] while the latter typically refers to an application to set aside an award, but also includes a challenge to a tribunal’s preliminary ruling affirming its own jurisdiction.[3] This ‘choice of remedies’ has been stated to be consistent with the regime under the New York Convention,[4] and to rest at “the heart of [the Model Law’s] entire design”.[5]

Until early 2015, the courts of Hong Kong, a Model Law jurisdiction, had affirmed the ‘choice of remedies’ available to parties contesting a claim made in arbitration.[6] However, the Hong Kong position is imperilled by the Hong Kong Court of First Instance’s (“HKCFI”) decision in Astro,[7] where it held that a party who did not challenge a tribunal’s preliminary ruling affirming its jurisdiction and only reserved its right to do so is not later entitled to raise jurisdictional objections during enforcement proceedings. Astro runs counter to a decision by a court in another Model Law jurisdiction, PT First Media, where the Singapore Court of Appeal (“SGCA”) addressed the same awards that Astro was concerned with, in the course of parallel enforcement proceedings.

This note examines: (1) Astro’s holding, and (2) the broader question of whether the ‘choice of remedies’ exists if a tribunal has made a preliminary ruling affirming its jurisdiction. Ultimately, this note concludes that there is and should be a ‘choice of remedies’ even when a tribunal has rendered a preliminary ruling on its jurisdiction.

II. Parallel Enforcement Proceedings in Astro and PT First Media

Astro and PT First Media concerned awards (the “Awards”) made against an award debtor (“First Media”) in favour of non-parties to an arbitration agreement. These non-parties had been joined to the arbitration pursuant to Rule 24(b) of the 2007 Singapore International Arbitration Centre Rules (“SIAC Rules”). Although First Media had objected to the joining of the non-parties, it did not invoke Article 16(3) of the Model Law to challenge the tribunal’s preliminary ruling affirming its jurisdiction over the dispute concerning the non-parties (the “Preliminary Ruling”). Instead, First Media continued to participate in the arbitration on the merits, reserving its position on the Preliminary Ruling. First Media also did not subsequently apply to set aside the Awards in Singapore, the seat, within the applicable time limit.

In enforcement proceedings in Singapore, the SGCA held that the Awards had been made in excess of jurisdiction because Rule 24(b) of the SIAC Rules did not grant the tribunal the power to join non-parties to the arbitration.[8] The SGCA thus denied enforcement of the Awards. Importantly, the SGCA held that Singapore’s arbitral framework adopts the Model Law, including the principle of the ‘choice of remedies’.[9] Pursuant to the ‘choice of remedies’, First Media was able to raise its jurisdictional objection at the enforcement proceedings even though First Media had chosen not to challenge the Awards at the seat and instead reserved its position on the tribunal’s jurisdiction. Additionally, the SGCA held that First Media’s conduct did not give rise to a waiver or estoppel, which would otherwise have precluded it from raising jurisdictional objections at the enforcement stage.[10]

The situation in Hong Kong was different. First Media failed to challenge the enforcement of the Awards in a timely manner because it initially thought that it had no assets in Hong Kong.[11] However, First Media subsequently changed its position when the award creditors obtained a garnishee order in respect of a third-party’s debt to First Media. Thereafter, First Media applied for an extension of the applicable time limits and for the enforcement orders to be set aside on the basis of the tribunal’s lack of jurisdiction.[12]

The HKCFI dismissed First Media’s application on two alternative grounds.[13] The first relatively uncontentious ground was that there were no “good reasons” for extending the time limits. This was because First Media’s initial choice to not challenge enforcement was deliberate and had caused a considerable 14-month delay.

The second ground, on the other hand, jeopardises the principle of the ‘choice of remedies’ that the Hong Kong courts themselves had earlier endorsed.[14] Notwithstanding First Media’s reservation on jurisdiction, the HKCFI held that First Media’s conduct breached the principle of good faith under the New York Convention. First Media was thereby precluded from resisting enforcement of the Awards in Hong Kong under Section 44(2) of the Hong Kong Arbitration Ordinance (which gives effect to the New York Convention grounds for non-enforcement).[15]

III. The ‘Choice of Remedies’ and Article 16(3) of the Model Law

The Hong Kong court’s decision effectively abrogates a party’s ‘choice of remedies’ if a tribunal renders a preliminary ruling as to its jurisdiction. The upshot of Astro is that a party’s reservation of its position on the tribunal’s jurisdiction will not preserve its right to raise such objections at the enforcement stage. If Astro is to be followed, a party who objects to the tribunal’s jurisdiction but wishes to continue with the arbitration must challenge the tribunal’s preliminary ruling on jurisdiction at the seat of arbitration under Article 16(3) of the Model Law, or risk being later found lacking in good faith and thereby forfeiting its right to raise its jurisdictional objections during enforcement proceedings. In such a situation, the ‘choice of remedies’ is illusory for a party who wishes to challenge an award both on its merits and on the lack of jurisdiction.

Accordingly, it is difficult to reconcile Astro with the Hong Kong court’s previous position affirming the ‘choice of remedies’.[16] As one commentary notes, “[e]ither [First Media] did have a right to choose its remedies, or it did not”.[17] An application of a ‘good-faith principle’ to restrict the exercise of the right to a ‘choice of remedies’ effectively renders such a right non-existent.

One way to cut the Gordian knot is to argue that the ‘choice of remedies’ becomes unavailable if a tribunal renders a preliminary ruling affirming its jurisdiction.[18] In other words, that a party cannot choose remedies because the failure to invoke Article 16(3) of the Model Law (or its equivalent) to challenge a tribunal’s preliminary ruling on jurisdiction precludes that party from subsequently raising jurisdictional objections, whether at the seat or before an enforcement court. Ghilbrazade, a proponent of this view, argues that the final text of Article 16(3) drew “a clear line between the challenge mechanism under Article 16(3) being the sole recourse” and the availability of the ‘choice of remedies’ where there was no preliminary ruling on jurisdiction.[19] In support of her view, Ghilbrazade cites case law from Canada,[20] Australia,[21] Hong Kong,[22] and particularly, Germany.[23] However, as will be shown in the following paragraphs, there are several flaws in Ghilbrazade’s arguments that undermine her position.

First, the Model Law drafters did not intend a party’s failure to engage Article 16(3) to preclude it from raising jurisdictional challenges before an enforcement court. The discussions on the text of Article 16(3) were only considered in the context of challenges that a dissatisfied party could raise at the seat, and not in the broader context of challenges that could be raised in enforcement courts.[24] This is reflected in the travaux préparatoires on earlier drafts of Article 16(3), where the seat’s intervention under Article 16(3) was regarded as an alternative to setting aside proceedings under Article 34, but was silent as to the position vis-à-vis enforcement proceedings.[25] Thus, it is unsurprising that the Analytical Commentary on an earlier draft of Article 16(3) recognised a party’s right to object to the tribunal’s preliminary ruling on its jurisdiction during enforcement proceedings, even though this was not explicitly mentioned in text of the said earlier drafts.[26] While the Secretariat Note on the final draft of Article 16(3) is silent as to whether this choice remained possible,[27] nothing in the travaux préparatoires indicates that the position expressed in the Analytical Commentary was to be changed. Therefore, it would be disingenuous to suggest that the adopted version of Article 16(3) was intended to be the sole recourse to challenge a tribunal’s preliminary ruling on its jurisdiction.

Second, the cases cited by Ghilbrazade do not corroborate her position:[28] these cases only considered Article 16(3) in the context of (a) setting aside proceedings at the seat;[29] or (b) finding an estoppel at the enforcement stage.[30] These cases are thus consistent with two aspects of PT First Media, namely, the SGCA’s (1) finding that waiver or estoppel could effectively annul the ‘choice of remedies’; and (2) obiter dicta that failure to challenge a tribunal’s preliminary ruling on jurisdiction will likely preclude a party from raising further jurisdictional challenges at the seat but not before enforcement courts.[31]

Lastly, despite Ghilbrazade’s heavy reliance on German case law,[32] German courts appear open to allowing a party to raise jurisdictional challenges at enforcement proceedings even though it failed to challenge the tribunal’s preliminary ruling on jurisdiction. The Oberlandesgericht Hamm (“OLG Hamm”) has previously held that an award debtor could not raise jurisdictional objections at the enforcement stage because it had continued participating in the arbitration on the merits without reserving its position on the tribunal’s preliminary ruling affirming its jurisdiction, and thereby violated the principle of fair conduct of proceedings.[33] Thus, the converse consequence of the OLG Hamm’s holding is that an award debtor who reserves its position on the tribunal’s jurisdiction can raise jurisdictional objections at enforcement proceedings even though it had failed to challenge the preliminary ruling. In fact, the OLG Hamm went further to suggest that if the abovementioned award debtor had made a reservation, the award creditor would have had the burden of applying to the court at the seat to conclusively determine the tribunal’s jurisdiction.[34]

Accordingly, neither the travaux préparatoires of Article 16(3) itself nor case law supports the view that the Model Law’s ‘choice of remedies’ becomes unavailable if a tribunal renders a preliminary ruling affirming its jurisdiction. Therefore, consistent with PT First Media, the notion of a ‘choice of remedies’ remains even if a tribunal renders a preliminary ruling on its jurisdiction, with the consequence that a party in such a situation can raise jurisdictional objections either at the seat or at the enforcement stage.

IV. Policy Reasons for a ‘Choice of Remedies’ Where the Tribunal Makes a Preliminary Ruling on Its Jurisdiction

There are compelling policy reasons for the position taken by the SGCA in PT First Media. If an award-challenging party’s failure to invoke Article 16(3) has a preclusive effect, this would constrain the party to only being able to seek recourse at the seat. Such constraints make little sense if a party objects to the tribunal’s jurisdiction on the ground that there is no valid arbitration agreement; such an objection is tantamount to denying the supervisory jurisdiction of the seat stipulated in the arbitration agreement being challenged.[35]

Moreover, there are legitimate reasons for an award debtor’s reluctance to pursue remedies at a seat he denies agreeing to. For example, the award debtor may have valid concerns as to whether the decisions of the seat would be objective, fair and impartial.[36] If so, the award debtor may want to avoid challenging the tribunal’s jurisdiction at the seat if this could later give rise to an issue estoppel in enforcement proceedings.[37] Alternatively, if the award debtor’s assets are located in a jurisdiction which gives little weight to decisions by the seat, it could consider that setting aside the award at the seat would be costly yet unconstructive.[38] This is because the enforcement courts in such jurisdictions might enforce the award regardless of the decision of the court at the seat of the arbitration.

Thus, the choice between raising jurisdictional challenges before the enforcement courts or at the seat ensures that a party objecting to the existence of a valid arbitration agreement is not prejudiced by limited recourse at a seat that he denies agreeing to. This would also correspond with the Model Law’s intention to be aligned with the New York Convention[39] – which does not regard enforcement courts as unequivocally bound by decisions at the seat.[40]

V. Conclusion

Consistent with the SGCA’s approach in PT First Media, there is and should be a ‘choice of remedies’ even if a tribunal has rendered a preliminary ruling on its jurisdiction, such that a party retains the choice of challenging the tribunal’s jurisdiction at the seat or before the enforcement courts. Although a party’s ‘choice of remedies’ is still subject to the principles of waiver, estoppel or fair conduct, following the position in Singapore and Germany, none will be made out if a party had expressly reserved its position on the tribunal’s jurisdiction. In contrast, until Astro’s appellate ruling, such reservations will have no effect in Hong Kong.[41]

 

David Isidore Tan

David is a candidate for the LL.M. in International Business Regulation, Litigation & Arbitration at the NYU School of Law. He is also a concurrent candidate for the LL.B. (Honours) degree at the National University of Singapore, under the NYU-NUS LLB/LLM Dual Degree Program.

 

[1] PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal [2014] 1 SLR 374 [PT First Media], para. 22; Sir Michael Mustill & Stewart Boyd, The Law and Practice of Commercial Arbitration in England (London: Butterworths, 1982), p. 489.

[2] Based on the grounds in Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 330 UNTS 38 (entered into force 7 June 1959) [New York Convention], replicated in UNCITRAL, UNCITRAL Model Law on International Commercial Arbitration, UNGAOR, 40th Sess, Supp No 17, UN Doc A/40/17, (1985) [Model Law] under Article 36.

[3] The tribunal’s preliminary ruling affirming its jurisdiction can be challenged under Article 16(3) of the Model Law. See also PT First Media, supra note 1, para. 22.

[4] Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 [Dallah], para. 76.

[5] PT First Media, supra note 1, para. 65.

[6] Paklito Investment Ltd v Klockner (East Asia) Ltd [1993] 2 HKLR 39 [Paklito], p. 48, 49.

[7] Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others and AcrossAsia Limited, HCCT 45/2010 [Astro].

[8] PT First Media, supra note 1, paras. 178-185, 191-193, 197 and 198.

[9] PT First Media, supra note 1, para. 143. See also Section 3(1) of Singapore’s International Arbitration Act (Cap 143A, 2002 Rev Ed Sing) (“the Model Law… shall have the force of law in Singapore.”).

[10] PT First Media, supra note 1, para. 224(d).

[11] Astro, supra note 7, para. 37.

[12] Astro, supra note 7, paras. 1, 95.

[13] Astro, supra note 7, paras. 125, 129.

[14] Paklito, supra note 6, p. 48, 49. See also Astro, supra note 7, para. 83.

[15]Astro, supra note 7, paras. 77, 91.

[16] See Tomas Furlong, “Astro v Lippo in Hong Kong: Award Enforced Despite Singapore Court of Appeal’s Finding that the Tribunal Lacked Jurisdiction”, online: Kluwer Arbitration Blog <http://kluwerarbitrationblog.com/2015/03/07/astro-v-lippo-in-hong-kong-award-enforced-despite-singapore-court-of-appeals-finding-that-the-tribunal-lacked-jurisdiction/> (“the judgment appears to go further than the Hong Kong authorities relied on”).

[17] Nicholas Poon, “Issues and Problems in Enforcing Arbitral Awards Across Multiple Jurisdictions: Astro v Lippo, the Hong Kong Edition”, online: Singapore Law Blog <http://www.singaporelawblog.sg/blog/article/102> [Poon].

[18] This is diametrically opposed to the decision in PT First Media, supra note 1. See Nata Ghilbrazade, “Preclusion of Remedies under Article 16(3) of the UNCITRAL Model Law” (2015) 27 Pace Int’l L. Rev. 345 [Ghilbrazade].

[19] Ghilbrazade, supra note 18, p. 384. See also “UNCITRAL Model Law on International Commercial Arbitration: note by the Secretariat” (UN Doc A/CN.9/309) in UNCITRAL Yearbook 1988, vol XIX (New York: UN, 1988) at 117 (UNDOC.A/CN.9/SER.A/1988) [Secretariat Note], para. 25.

[20] Compagnie Nationale Air France v Libyan Arab Airlines [2000] RJQ 717 [Air France]; ARL Regional Print Ltd. and Rene Laporte v George Ghanotakis and Jean M. Won, 2004 CanLII 23270 [Ghanotakis].

[21] teleMates (previously Better Telecom) Pty Ltd v Standard SoftTel Solutions Pvt Ltd [2011] NSWSC 1365 [teleMates].

[22] China Nanhai Oil Joint Service Corporation Shenzhen Branch v Gee Tai Holdings Co Ltd.[1994] 3 HKC 375 [Nanhai].

[23] Bundesgerichtshof (Germany), 27 March 2003, Neue Juristische Wochenschrift, 133, 2003, English summary available online: Deutsche Institution für Schiedsgerichtsbarkeit e.V. < http://www.dis-arb.de/en/47/datenbanken/rspr/bgh-case-no-iii-zb-83-02-date-2003-03-27-id212> [Bundesgerichtshof, 27 March 2003]; Oberlandesgericht (Germany), 4 September 2003 in 15 Y.B. Comm. Arb. 528 (2005) [Oberlandesgericht, 4 September 2003].

[24] “Analytical compilation of comments by Governments and international organizations on the draft text of a model law on international commercial arbitration” (UN Doc A/CN.9/263) in UNCITRAL Yearbook 1985, vol XVI (New York: UN, 1985) at 53 (UNDOC.A/CN.9/SER.A/1985) [Analytical Compilation], Article 16, paragraph (3), paras. 7, 8. See PT First Media, supra note 1, paras. 113, 115.

[25] Analytical Compilation, supra note 24, Article 16, paragraph (3), paras. 7, 8; “Summary records of the United Nations Commission on International Trade Law for meetings devoted to the preparation of the UNCITRAL Model Law in International Commercial Arbitration (UN Doc A/CN.9/SR.330-333) in UNCITRAL Yearbook 1985, vol XVI (New York: UN, 1985) at 458 (UNDOC.A/CN.9/SER.A/1985), 320th Meeting at paras. 16, 17. See also PT First Media, supra note 1, paras. 113, 115, 117. Contra Ghilbradze, supra note 18, p. 383.

[26] “Analytical commentary on draft text of a model law on international commercial arbitration” (UN Doc A/CN.9/264) in UNCITRAL Yearbook 1985, vol XVI (New York: UN, 1985) at 104 (UNDOC.A/CN.9/SER.A/1985), Article 16, para. 12.

[27] Secretariat Note, supra note 19, para. 25.

[28] One qualification bears mention here: this analysis is based in part on English interpretations or summaries of the cases which were originally published in languages other than English.

[29] Air France, supra note 20; Ghanotakis, supra note 20; teleMates, supra note 21; Bundesgerichtshof, 27 March 2003, supra note 23; Oberlandesgericht, 4 September 2003, supra note 23.

[30] Nanhai, supra note 22, p. 387. See also Poon, supra note 17 (“that case had considered the principle of good faith as an aspect of the doctrine of estoppel.”).

[31] PT First Media, supra note 1, paras. 224(d) and 130 respectively.

[32] Ghilbradze, supra note 18, p. 385-387.

[33] Judgment of Oberlandesgericht, 7 September 2005 in 31 Y.B. Comm. Arb. 685 (2006), paras. 5-7.

[34] Ibid, para. 5.

[35] See Dallah, supra note 4, para. 23 (“A person who denies [consenting to an] arbitration agreement has no obligation to… take any steps in the country of the seat of what he maintains to be an invalid arbitration…”). See generally Gary B. Born, International Commercial Arbitration, 2d ed (Kluwer Law International, 2014) [Born], Chapter 11.

[36] A well-known example is the decision by the Russian Arbitrazh Courts to set aside an arbitration award of 13 billion roubles made in 2005 in the favour of Yukos Capital S.a.r.L that has been criticized by numerous courts. See e.g. Yukos Capital S.a.r.L. v OJSC Oil Company Rosneft [2014] EWHC 2188, para. 20 (“both unsatisfactory and contrary to principle [to recognize the Russian court’s decision] which offended… principles of honesty, natural justice and [domestic]  public policy.”). See also Court of Appeal of Amsterdam (Enterprise Division), April 28, 2009, LJN BI2451 s 3.10; Albert Jan van den Berg, “Enforcement of Awards Annulled in Russia (Case Comment on Court of Appeal of Amsterdam, April 28, 2009) (2010) J.Int’l Arb. 179, p. 180.

[37] See e.g. Diag Human SE v The Czech Republic [2014] EWHC 1639 (Comm).

[38] For example, France, where some French decisions have enforced awards even after the awards had been set aside by the seat of arbitration. See e.g. Pablak Ticaret Ltd. Sirketi v Norsolor SA, Cour de Cassation (1st Civ. Ch.), 9 October 1984 (court enforced arbitration award even though seat of arbitration had set aside the award for lack of jurisdiction).

[39] Howard M Holtzmann & Joseph E Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law and Taxation, 1989), p. 1055, 1056.

[40] Born, supra note 35, p. 3427 (“[The New York Convention does not require] Contracting State[s] to deny recognition to an arbitral award.”).

[41] On 8 December 2015, First Media was granted leave to appeal the HKCFI’s decision in Astro. See Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others and AcrossAsia Limited, HCCT 45/2010 (8 December 2015), available online: http://legalref.judiciary.gov.hk/lrs/common/ju/judgment.jsp.

Professor Ferrari publishes a paper on “CISG and the Law Applicable in International Commercial Arbitration”

Professor Ferrari, the Director of the Center, an expert on the United Nations Convention on Contracts for the International Sale of Goods (CISG), has just published a paper on said Convention and its applicability in arbitral proceedings. In the paper, Professor Ferrari examines, on the basis of three common hypotheticals, the difference between the Convention’s applicability in state court proceedings and in the arbitral context. In doing so, Professor Ferrari focuses on how arbitrators get to the law applicable to the merits in international commercial arbitration. The paper is one of many papers published in “A Tribute to  Joseph M. Lookofsky”, an expert on the CISG and two time scholar-in-residence at the Center.

“How Singapore became a successful arbitration centre using the UNCITRAL Model Arbitration Law,” Monday, 23 November 2015

This is to announce the November session of the Arbitration Forum of the Center for Transnational Litigation, Arbitration and Commercial Law, entitled “How Singapore became a successful arbitration centre using the UNCITRAL Model Arbitration Law,” which will take place on Monday, 23 November 2015, from 6.00 – 8.00 pm, in the Lester Pollack Colloquium Room, Furman Hall 900 (245 Sullivan Street, New York, NY 10012).

It is a great pleasure to be able to announce that Professor Gary F. Bell will give a talk on the aforementioned topic and that Ms. Alexandra Dosman agreed to act as commentator.

Associate Professor Gary F. Bell teaches arbitration, Indonesian law and the international sale of goods at the National University of Singapore where he was the founding director of the Asian Law Institute (ASLI). He has law degrees in both civil and common law from McGill, where he was the Editor-in-Chief of the McGill Law Journal.  He clerked for Justice Stevenson of the Supreme Court of Canada. He has an LL.M. from Columbia Law School.  He has acted as sole arbitrator, member of a panel or chair in numerous ICC and SIAC arbitrations. He presently works on a research project on the use of the UNCITRAL Model Arbitration Law in Asia.

Alexandra Dosman is the first Executive Director of the New York International Arbitration Center (“NYIAC”). Prior to joining NYIAC in May 2013, Ms. Dosman practiced commercial litigation and international arbitration at Shearman & Sterling LLP for seven years. She writes and speaks widely on commercial and investment treaty arbitration matters.

To RSVP (required), please send an email to: cassy.rodriguez@nyu.edu

The Center for Transnational Litigation and Commercial Law aims at the advancement of the study and practice of international business transactions and the way to solve related disputes either through litigation or arbitration. As commercial transactions become increasingly international, it is vital to the legal and business communities to understand and analyze the practices and legal principles that govern relationships between firms and between firms and consumers in the international arena