Professor Ferrari lectures at Bayreuth University on forum shopping

Professor Franco Ferrari, the Center’s Director, will give a talk in German on “forum shopping and the new rules of the German Arbitration Institution” (DIS) on the occasion of a two-day conference focusing on the new arbitration rules that came into force on 1 March 2018. In his talk, Professor Ferrari, who is an arbitration law and private international law expert, will focus on what characteristics of the new DIS rules may lead parties to choose the new rules over the rules of other arbitration institutions when opting for arbitration over litigation in courts. For the full program of the conference (held entirely in German) please click here.

Third-Party Funding in Singapore: The Quest for an Ethics Code in International Arbitration

I.              INTRODUCTION

Singapore’s Parliament recently passed the Civil Law Bill (Bill No. 38/2016) legalizing third-party funding in international arbitration and related proceedings.[1] In a bid to strengthen Singapore’s position as “a premier international commercial dispute resolution hub and a key arbitration seat in the world”,[2] the move is a positive one for Singapore’s burgeoning arbitration scene with the first third-party funded arbitration already underway.[3] A year on, the ethical issues raised by the potential involvement of third-party funders have not gone unnoticed,[4] and professional bodies and institutions were quick to issue guidance in the aftermath of the legislative changes. It was in this context that the former Attorney-General of Singapore on 1 November 2017 urged Singapore to assume “thought leadership” in forging an ethics code in international arbitration.[5] The contemporary ethical issues of third-party funding have led to increased calls for regulation within the international arbitration community,[6] though at the same time a cautious approach has been advocated to ensure that overzealous regulation does not stymie the benefits of third-party funding altogether.[7] The effectiveness of Singapore’s approach to ethical regulation – specifically the need for disclosure in third-party funding agreements – is worth examining, and leaves insights for the international arbitration community at large.

The relationship between the funded party, the funder, and the funded party’s counsel raises certain ethical problems unique to third-party funding. As a preliminary point, there is the perception that ethical issues are best dealt with by competent bar associations rather than by the arbitrators themselves.[8] Accordingly, while many regulatory bodies already require lawyers to respect the conduct rules at the seat of arbitration,[9] there is a dearth of regulation concerning third-party funders.[10] While the United Kingdom has a Code of Conduct for litigation funders, this has been criticized for its “voluntary and self-regulatory” nature, as well as being silent on the need for disclosure regarding any third-party arrangement.[11] More significantly, not only are these rules inapplicable to arbitration, it is unclear even if they did apply whether it is desirable to transplant litigation-regulating rules to begin with.[12]

Singapore’s approach to the need for regulation has been multi-faceted. The Law Society of Singapore (“Law Society”) and the Singapore Institute of Arbitrators (“SIArb”) make reference to each other as well as the Singapore International Arbitration Centre (“SIAC”) in their respective practice notes, directing parties to “review all of these guidelines together to obtain a comprehensive overview of current issues pertaining to third party funding”.[13] Specific issues dealt with include the ethical issues of confidentiality, exercise of control by the funder, conflicts of interest, as well as more practical considerations such as the funder’s liability for adverse cost orders and the termination of the funding agreement by the funder.[14]

On one hand, one questions whether it would have been more effective for a single institution or body to have enacted a comprehensive set of rules which apply to all funding arrangements. On the other hand, it is undeniable that each entity has its own interests and target audience, and to this end requires its own set of rules. The effect of this tapestry of rules is that it behooves all relevant stakeholders to be aware of the relevant rules which apply to their own funding arrangement.



The panacea to the ethical complications surrounding third-party funding – and indeed much ink has been spilled on the topic – appears to be disclosure of the funding arrangement.[15] Arguments against disclosure, which include the prolonging of proceedings and giving the opposing party a tactical advantage,[16] while not without merit, have to be weighed against the potential negative effects of non-disclosure.[17] Disclosure is generally favored given its salutary effects on resolving conflicts of interest at the outset,[18] and the loss of confidentiality is deemed to be outweighed by the potentially “catastrophic” effects that belated disclosure can otherwise have – not only on the proceedings, but at the enforcement stage as well.[19] That said, an empirical study on funders’ perspectives has revealed that the aversion to disclosure stems from funders not being parties to the arbitration agreement and the fear that the case will be treated differently simply because a funder is involved.[20] Critics of disclosure also argue that raising the issue sua sponte is “unnecessary and counter-productive”.[21] Accordingly, in crafting ethical rules for disclosure, a reasonable balance should be struck between the default position that the funding agreement is a private matter between the funder and the funded party, and the need for sufficient reasons to justify disclosure.[22] An attendant issue is the scope of disclosure – to whom and to what extent disclosure must be made. It is generally accepted that disclosure of the existence of the funding arrangement, as opposed of the terms of the agreement, [23] is sufficient.[24]

A.      Singapore’s approach

In Singapore, this has been resolutely addressed by amendments to the Legal Profession (Professional Conduct) Rules (“Professional Conduct Rules”), which now require practitioners to disclose any third-party funding relationship to the court or tribunal. Practitioners are obliged to disclose not only the existence of any funding contract, but also the identity and address of the funder.[25] Such disclosure must be made either at the date of commencement of dispute resolution proceedings or as soon as practicable after the funding contract is entered into. Disclosure of the termination of the funding is also stated as a “good practice”.[26] Additionally, the SIAC became the first major arbitration center to address the issue of third-party funding directly.[27] Under the 2017 SIAC International Arbitration Rules, the tribunal has the power to order disclosure of funding arrangements.[28]

B.      Unresolved issues

For one, the applicability of national ethical rules is attenuated in international arbitration settings, a fortiori if the advocate is not regulated by local law.[29] It is therefore unclear how this requirement will apply where no local or foreign regulated counsel is acting in the arbitration.[30] Second, while it appears that legislation compels counsel to disclose the existence of the funding agreement as the baseline, it does not go further in prescribing further disclosure. It thus suggests that lawyers are allowed to withhold information on the terms of the agreement, when disclosure of the terms may well be necessary to consider whether there are any conflicts of interest which impinge upon arbitrators’ impartiality and independence.[31] In order to deal with this, it has been argued that the role of considering these conflicts falls on institutions, which will conduct an “automatic conflicts check”.[32] To this end, institutions like the SIAC have additional powers to order disclosure of a funding arrangement and details “where appropriate”.[33] It appears then that disclosure, while possible, would require reasonable grounds before it is deemed “appropriate”.[34] This standard has naturally hitherto not been tested.

Further, ethical issues remain unresolved when arbitrations are conducted without institutional support, and the issue of extent of disclosure is further complicated by the question of to whom this disclosure is to be made. As Trusz concedes, the “automatic conflicts check” is not possible without institutional support, and her proposal of disclosure only to the arbitral institution (as opposed to the tribunal or the opposing parties) would have to be modified to making disclosure to the appointing authority.[35] Since arbitrators do not typically disclose information to the appointing authority prior to their appointment, the request for additional information by the appointing authority invariably leads to the tribunal finding out about the funding arrangement.[36] This then obviates the purported benefit of such limited disclosure – to avoid prejudicing the tribunal by making them aware of the funding arrangement – to being with. Of course, the premise that knowledge of a funding arrangement ipso facto means that arbitrators treat cases differently can be challenged.[37] Trusz’s proposal also ostensibly encourages funders seeking to avoid disclosure to opt for ad-hoc arbitrations where the disclosure requirements are less robust.

Admittedly, the SIArb’s Guidelines provide that a funder shall cooperate in disclosing to an arbitral tribunal or court “any information concerning the funding if any applicable rules or order of arbitral tribunal or court so require[s]”.[38] However, since the SIArb Guidelines are non-binding, it follows that sua sponte disclosure is not mandatory for funders under current legislation, and is only necessary at the request of the arbitral tribunal under the auspices of certain institutional regimes, like that of the SIAC. The only requirements imposed on funders are ab initio qualifying criteria.[39] As such, it appears that disclosure is far more likely to occur with rather than without institutional support.

C.       Where does this leave us?

Nonetheless, the fact that there is soft law for funders and legislation mandating legal practitioners – both local and foreign-regulated lawyers – to disclose funding arrangements, is promising. It is generally accepted that regulation has to come from national policymakers by way of legislation rather than from the creation of more “soft law”.[40] To this end, Singapore has chosen an approach which imposes the primary obligations of disclosure on legal practitioners. Comparatively, the recent amendments to the Hong Kong Arbitration Ordinance[41] place the obligation of disclosure on the funded party rather than on counsel.[42] It remains to be seen whether this difference will have any effect on incentivizing disclosure. One significant difference is that non-compliance with disclosure requirements in Hong Kong does not “render any person liable to any judicial or other proceedings”,[43] whereas failure to comply with the Professional Conduct Rules in Singapore obviously subjects the practitioner to disciplinary action.[44] This comports with the “light touch approach” recommended by the Hong Kong Law Reform Commission,[45] which was based on the approaches adopted in Australia (statutory regulation of financial and conflicts issues) and the United Kingdom (self-regulation).[46] One questions whether this is necessarily the best approach, especially since ethical considerations vary from jurisdiction to jurisdiction. Other differences with Hong Kong include the fact that its third-party funding regulations (1) apply equally to domestic and international arbitrations;[47] (2) are not limited to professional funders;[48] and (3) propose a non-obligatory code of practice to monitor funders’ compliance.[49]



Regulating issues like the disclosure of third-party funding ensure that international arbitration no longer remains an “ethical no-man’s land”.[50] In doing so, recognizing that “[d]omestic standards for ethical conduct cannot be imported wholesale” is integral to upholding the integrity of international arbitration.[51] If Singapore is truly to adopt “thought leadership” in this area, it should not shy away from laying down a jurisdiction-specific approach to ethical regulation, confident in the strength and neutrality of its institutions to attract adherents. The current regulations on third-party funding represent a step in the right direction.


Ian Choo

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

[1] The Civil Law Act (Amendment) Act 2017 entered into force on 1 March 2017, introducing new sections 5A and 5B to the Civil Law Act (Cap. 43, Rev. Ed. 1999) which abolished the torts of maintenance and champerty and allowed third-party funding.

[2] Singapore Parliamentary Debates, Official Report vol 94 (Ms Indranee Rajah, Senior Minister of State for Law) (10 January 2017).

[3] K. C. Vijayan, “First third-party funding for Singapore arbitration case”, The Straits Times (1 July 2017).

[4] V. Frignati, Ethical Implications of Third-Party Funding in International Arbitration, 32 Arbitration International 505 (2016).

[5] K. C. Vijayan, “S’pore urged to take lead in Ethics Code for Arbitration”, The Straits Times (14 November 2017).

[6] See, e.g., J. A. Trusz., Full Disclosure? Conflicts of Interest Arising from Third-Party Funding in International Commercial Arbitration, 101 Georgetown Law Journal 1649 (2013), arguing for changes to institutional arbitration rules to facilitate disclosure of third-party funding.

[7] S. Khouri, K. Hurford & C. Bowman, Third party funding in international commercial and treaty arbitration – a panacea or a plague?, 8:4 Transnational Dispute Management 1, 11 (2011); J. Clanchy, Third Party Funding in Arbitration: Breaking down Barriers and Building Bridges, 23 Croatian Arbitration Yearbook 53, 56 (2016).

[8] S. Perry, Third-party Funding: An Arbitrator’s Perspective, Global Arbitration Review (23 November 2011), available at http://globalarbitrationreview.com/article/1030794/third-party-funding-an-arbitrators-perspective.

[9] See, e.g., Article 8.5(a) of the American Bar Association Model Rules of Professional Conduct (2000), Articles 4(1) and 6(1) of the European Commission Directive 98/5/EC of 16 February 1998.

[10] B. Osmanoglu, Third-Party Funding in International Commercial Arbitration and Arbitrator Conflict of Interest 32:3 Journal of International Arbitration 325, 337 (2015).

[11] J. E. Kalicki, A. Endicott & N. Giraldo-Carrillo, Third Party Funding in Arbitration: Innovation and Limits in Self-Regulation, Kluwer Arbitration Blog (14 March 2012), available at http://arbitrationblog.kluwerarbitration.com/2012/03/14/third-party-funding-in-arbitration-innovations-and-limits-in-self-regulation-part-2-of-2/.

[12] See, e.g., M. C. Scherer, A. Goldsmith & C. Fléchet, Third-Party Funding in International Arbitration In Europe: Part 1 – Funders’ Perspectives, 2 International Business Law Journal 207, 218 (2012), where a funder sought to draw “a clear distinction between arbitration and litigation cases” as “the parties’ agreement governs the issue of disclosure and should only be disregarded in cases of possible conflicts of interest”.

[13] SIArb Guidelines for Third Party Funders, para. 1.4 (18 May 2017); Law Society Guidance Note 10.1.1, para. 3 (25 April 2017).

[14] Law Society Guidance Note, id, para. 23.

[15] Trusz, supra note 6, 1672; cf Clanchy, supra note 7, 56, querying “whether it is fair or constructive to single out the new providers for regulation while long established funders are left alone”.

[16] G. J. Shaw, Third-party funding in investment arbitration: how non-disclosure can cause harm for the sake of profit, 33 Arbitration International 109, 115 (2017).

[17] Frignati, supra note 4, 516.

[18] Ibid.

[19] S. Seidel, Third-party Investing in International Arbitration Claims: To Invest or Not to Invest? A Daunting Question in B. M. Cremades & A. Dimolitsa (eds.) Third-Party Funding in International Arbitration 16, 22 (ICC Publication, 2013).

[20] Scherer et. al,, supra note 12, 218, where funders expressed a fear of having adverse cost orders awarded against them.

[21] L. Lévy & R. Bonnan, Third-party funding: Disclosure, joinder and impact on arbitral proceedings in Third-Party Funding in International Arbitration, supra note 19, 81.

[22] J. H. Suh, Disclosure of third party funding: Hong Kong and Singapore setting the trend?, Arbitration Blog (2 October 2017), available at http://arbitrationblog.practicallaw.com/disclosure-of-third-party-funding-hong-kong-and-singapore-setting-the-trend/.

[23] In Godfrey Waterhouse v Contract Bonding Limited [2013] NZSC 89 at para. 76, the New Zealand Supreme Court overturned the Court of Appeal, holding that a funder only needed to disclose its identity, location and amenability to the court’s jurisdiction; there was no need to disclose the terms of the funding agreement or the financial standing of the funder.

[24] Frignati, supra note 4, 516, arguing that disclosing the existence of the funding agreement “level[s] the playing field”.

[25] Rule 49A(1), Legal Profession (Professional Conduct) Rules 2015.

[26] Law Society Guidance Note, supra note 13, para. 52.

[27] J. Mackojc, SIAC’s 2017 Investment Arbitration Rules: An Overview and Key Changes, Kluwer Arbitration Blog (4 February 2017), available at http://arbitrationblog.kluwerarbitration.com/2017/02/04/siacs-2017-investment-arbitration-rules-an-overview-and-key-changes/.

[28] Rule 24(l) of the SIAC Investment Arbitration Rules (2017).

[29] C. A. Rogers, Ethics in International Arbitration, 199 (Oxford University Press, 2014).

[30] Note, however, that Part 5A of the Legal Profession (Professional Conduct) Rules 2015 applies to all “regulated foreign lawyer[s]”: Rule 3(8)(iii) of the Legal Profession (Professional Conduct) Rules 2015.

[31] M. C. Scherer, Third-party Funding in International Arbitration: Towards mandatory disclosure of funding agreements? in Third-Party Funding in International Arbitration, supra note 19, 99.

[32] Trusz, supra note 6, 1676.

[33] SIAC Investment Arbitration Rules (1 January 2017); SIAC Practice Note, para. 5, (31 March 2017).

[34] Suh, supra note 22, ibid.

[35] Trusz, supra note 6, 1680.

[36] Ibid. Trusz also acknowledges that this problem is exacerbated when parties do not specify an appointing authority.

[37] Scherer et. al,, supra note 12, 218, where funders raised the concern that disclosure may lead to what the funder perceived as frivolous defences thereby raising the cost of the proceedings.

[38] SIArb Guidelines, supra note 13, para. 8.1 (emphasis added).

[39] Under section 4 of the Civil Law (Third-Party Funding) Regulations 2017 (Singapore), funders must (a) be in the “principal business” of funding dispute resolution proceedings; and (b) have a paid-up share capital or managed assets of not less than S$5 million (or foreign currency equivalent). The purpose of these criteria is so that “only professional funders whose principal business is funding claims, will be allowed” (per Senior Minister of State for Law, at note 2).

[40] W. H. van Boom, Third-party Financing in International Investment Arbitration, 52 (2011), available at https://ssrn.com/abstract=2027114.

[41] Hong Kong’s Legislative Council passed the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 on 14 June 2017.

[42] Section 98U, Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017 [HK Arbitration Ordinance].

[43] Section 98W(1), id.

[44] Section 71(14) of the Legal Profession Act (Cap. 161, Rev. Ed. 2009) (Singapore).

[45] Hong Kong Law Reform Commission, Report on Third Party Funding for Arbitration, para. 2.10 (October 2016), available at http://www.hkreform.gov.hk/en/docs/rtpf_e.pdf.

[46] Ibid, para. 4.14.

[47] Section 98N of the HK Arbitration Ordinance, supra note 41, extends the application of its regulations to arbitrations outside Hong Kong.

[48] Section 98J, id, allows any “person” who “does not have an interest recognized by law in the arbitration” to be a funder.

[49] Section 98P, 98Q, id, sets out a number of suggested practices and standards in the proposed code of practice.

[50] Rogers, supra note 29, 18.

[51] SIArb Guidelines on Party-Representative Ethics (Consultation Draft), para. 2 (16 October 2017).


Case Note: KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another [2017] SGHC 32

I.  Introduction

As Singapore continues to promote itself as an arbitration hub[1], “an unequivocal judicial policy of facilitating arbitration has firmly taken root in Singapore[2]. This policy of “minimal curial intervention[3] is founded in the “need to respect party autonomy (manifested by their contractual bargain) in deciding both the method of dispute resolution (and the procedural rules to be applied)[4].  In line with this, Section 6 of the International Arbitration Act (“IAA”)[5] (Singapore’s codified regime governing international arbitrations) provides that the Singapore Courts must stay proceedings in respect of matters that are the subject of a valid arbitration agreement, unless it is satisfied that the arbitration agreement is “null and void, inoperative, or incapable of being performed[6]. The Singapore High Court in KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another (“KVC v Asian Mineral”) [7] took a further step in advancing this pro-arbitration policy by enforcing a bare intention to arbitrate, notwithstanding that the arbitration agreement was “devoid of details[8].

II.  KVC v Asian Mineral

In KVC v Asian Mineral, the issue before the Singapore High Court, on appeal, was whether the bare arbitration clause in the parties’ contracts were “incapable of being performed” such that the proceedings before the High Court need not be stayed in favor of arbitration pursuant to Section 6(2) of the IAA.

a.  Background

The Plaintiffs (KVC Rice and Tanasan Rice) were companies incorporated in Thailand, while the Defendant (Asian Mineral) was a company incorporated in Singapore[9]. The Plaintiffs had separate contracts for the sale of rice to the Defendant, to be delivered from Thailand to Africa (the “Contract(s)”), whereby payment was to be made in Singapore in United States Dollars[10]. Both contracts between the Plaintiffs and the Defendant contained almost identical arbitration clauses. One stated that disputes would be “referred to and finally resolved by arbitration as per Indian Contract Rules”, while the other provided that disputes would be“referred to and finally resolved by arbitration as per Singapore Contract Rules[11] (collectively referred to as the “Arbitration Clause(s)”).  Both Arbitration Clauses were silent as to the seat of arbitration and the law governing the arbitration procedure, including the means for constituting the arbitral tribunal[12]. Both Contracts did not contain a clause that provided for the governing law of the Contract[13].

Disputes arose under the Contracts, and the Plaintiffs eventually commenced the present suits against the Defendant, which the Defendant then applied to stay in favor of arbitration. The Defendant’s case was that the arbitration clauses were not unworkable, as the details of the arbitration could be agreed between the parties. In this regard, the Defendant contended that Article 11(3) of United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (the “Model Law”)[14], as incorporated Singapore law by the IAA[15] gave the president of the Singapore International Arbitration Centre (“SIAC”) power to intervene to break any deadlock between the parties on the appointment of arbitrators.[16] The Plaintiffs’ case, in challenging the stay application, was that the Arbitration Clauses were “incapable of being performed”, since it did not refer to any existing or known set of procedural rules, and there was no designated seat of arbitration or governing law for the arbitration[17].

b.  The Court’s Decision in KVC v Asian Mineral

The Court’s decision was founded on its view that “a bare arbitration clause which merely provides for submission of disputes to arbitration…remains a valid and binding agreement[18] even if the place of arbitration or method for establishing the arbitral tribunal are not specified, as long as “parties have evinced a clear intention to settle any dispute by arbitration[19].

The Court found that these obstacles preventing the workability of the Arbitration Clauses could be removed, as a reading of Section 8 of the IAA and Article 11(3) of the Model Law[20] would not preclude the SIAC from  “step[ping] in to make the necessary appointment if parties are not able to agree on the sole arbitrator or presiding arbitrator” even where the place of arbitration was “unclear or not yet determined[21]. The Court also found that it retained “residual jurisdiction to assist with the appointment of arbitrators…to ensure that the parties’ intention to have their dispute settled by arbitration is not defeated[22] where there was “truly no other way to prevent injustice[23].

III.  Clothing the Bare

While the Court-constructed framework that effectuated the otherwise unworkable Arbitration Clauses may be driven by the judiciary’s pro-arbitration policy[24], it was not supported by sound legal reasoning.

 a.  Presuming the applicable law  

First, the Court skipped over the critical preliminary choice-of-law analysis. It merely noted that the dispute “had some connection with Singapore[25], but failed to articulate what, how, and why these connections led to its adoption of Singapore law as the legal lens for determining the validity of the Arbitration Clauses and the stay application.

An application of the prevailing choice-of-law rule in Singapore, which directs Courts to consider the “implied choice of parties as gleaned from their intentions at the time of contracting”, and the “system of law with which the arbitration agreement has the closest and most real connection[26] in the absence of an express choice, does not indubitably point to Singapore law as the law governing the Arbitration Clauses. As the Court acknowledged itself, “the connecting factors in both [contracts] point in different directions[27]. There is a compelling case, at least in the Contract that referenced “Indian contract rules”, that parties may have intended Indian law to govern that Arbitration Clause.

The implications of failing to properly address the threshold issue of the proper law to the Arbitration Clause on a principled basis (whether by the prevailing choice-of-law approach[28] or otherwise) are potentially far-reaching. An application of a third country’s law (whether India, or otherwise) to measure the parties’ obligations in respect of the Arbitration Clause(s)[29] may not have tolerated the strides of judicial intervention which the Singapore High Court took to circumvent the inoperative Arbitration Clauses. In fact, there is indication, from an unrebutted legal opinion tendered by the Plaintiffs’ counsel, that the Arbitration Clause which provided for arbitration per “Indian Contract Rules” would not have been enforced under Indian law[30].

With the benefit of hindsight, one may speculate that the Court simply applied the lex fori to the Arbitration Clause as neither party raised the applicable law as an issue in dispute, or could arguably be said to have consented to the applicability of Singapore law and/or waived its right to object the same: (i) the Defendant had applied for a stay pursuant to Section 6(2) of the IAA; (ii) the foreign Plaintiffs had asked the Court to impose the condition that arbitration proceed on the basis of Singapore law if the Court granted the stay[31]. Justice Vinodh Coomaraswamy recently questioned the soundness of such an approach in Dyna-Jet v Wilson Taylor Asia Pacific Ltd, where he noted that “it would be unduly parochial…to examine the parties’ arbitration agreement purely through the lens of Singapore law simply because this application is made under Singapore legislation to a Singapore court[32]. In any event, there was no articulation or indication from the Court’s decision in KVC v Asian Mineral if this was indeed the choice-of-law analysis the Court had applied, if at all.

b.  Bending backwards to enforce bare arbitration clauses

It is trite that pathological arbitration clauses are not void ab initio[33]. Singapore Courts have given effect to arbitration agreements on the basis of an intention to arbitrate, notwithstanding that “certain aspects of the agreement may be ambiguous, inconsistent, incomplete or lacking in certain particulars[34]. Yet, this exercise of “effective interpretation[35] has not been without its limits. As the Singapore Court of Appeal has previously held, such agreements must be “workable agreed arbitration arrangements”, and cannot result in an “arbitration that is not within the contemplation of either party” or “prejudice to the rights of either party[36].

KVC v Asian Mineral was the first instance where the Singapore Courts enforced an arbitration clause that was silent on the place of arbitration and mechanics for establishing the tribunal. By presuming Singapore law as the legal lens which it relied on in finding that SIAC was not precluded from invoking its “statutory appointing authority[37], the Court arguably exceeded the limits of ‘effective interpretation’, putting in effect an arbitration process which may not necessarily have been within the contemplation of the parties at the time when they agreed on the Arbitration Clauses.

While the principle of party autonomy and in favorem validitatis are the cornerstone of the Singapore judiciary’s approach to arbitration, this is no reason to exempt arbitration agreements from the substantial requirements and principles governing contractual formation and validity in Singapore[38]. It is over-simplistic and presumptuous to rely on the mere indication of a preference for arbitration to presume the validity of an arbitration agreement[39]. In fact, as the effect of a valid arbitration agreement in international contracts mandates the displacement of the Singapore Court’s jurisdiction in favor of the tribunal[40], it is imperative that Courts only enforce the arbitration clauses that meet a minimum standard of a “sufficient model of the process …to be certain and enforceable[41], and are “well established as to require no further affirmation[42] as to how the parties have elected to depart from the default forum.

Moreover, the notion that a bare intention to arbitrate, without more, may be enforced with the Court’s assistance in constructing the mechanics for enforcing that intention, contradicts the cornerstone of party autonomy in arbitration that affords primacy to the party’s right to choose how they wish to resolve their disputes[43]. However desirable, Courts are not in the business of rewriting contractual bargains[44], and cannot afford to be sympathetic to slips in drafting, especially “orphan[45] clauses that are entirely void of content or framework. In the long run, this will reduce the incentive for parties to be precise about their intentions in their agreements[46], clog the arteries of judicial administration[47], and open the floodgates for any semblance of an arbitration clause, from which the Court can find an intention to arbitrate, to suffice in staving off a stay application[48].


Rachel Chiu Li Hsien

Rachel Chiu Li Hsien is an LL.M. Candidate in the International Business Regulation, Litigation, and Arbitration Programme at the New York University School of Law, and advocate and solicitor from Singapore. She obtained her first degree in law from the University of Warwick in England and previously trained in the commercial disputes practice at PK Wong & Associates LLC (An Independent Member Firm of the EY’s Global Network) in Singapore.

[1] Singapore Parliamentary Debates, Official Report (31 October 1994) vol. 63, cols. 625-627. See also Harisankar, International Commercial Arbitration in Asia and the Choice of Law Determination (2013) 30 JIA 621, 625.

[2] Tjong Very Sumito v Antig Investments [2009] 4 SLR(R) 732, [28].

[3] Michelle Lee, Existence of Arbitration Agreements: The Tension between Arbitral and Curial Review (2014) 10 AIAJ 67, 88.

[4] Supra 2.

[5] International Arbitration Act Cap. 134A (Revised Edition 2002).

[6] Id., Section 6(2). See also Article 8 of the United Nations Commission on International Trade Law (“UNCITRAL”) on International Commercial Arbitration (1985) (the “Model Law”). A copy of the Model Law may be accessed here: <https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf> (last accessed December 1, 2017).

[7] KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another [2017] SGHC 32.

[8] Id., [23], [29].

[9] Id., [3].

[10] Id., [4], [6], [32].

[11] Id., [50].

[12] Id., [7].

[13] Id..

[14] A copy of the Model Law may be accessed here: <https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf> (last accessed December 1, 2017).

[15]  Section 3(1) of the IAA incorporates the Model Law. Section 8(2) of the IAA reads as follows: “The President of the Court of the Singapore International Arbitration Centre shall be taken to have been specified as the authority competent to perform the functions under Article 11(3) and (4) of the Model Law”. Article 11(3) of the Model Law allows for the appointment of arbitrator(s) by the “Court or other authority” as specified by the state.

[16] Supra 7, [23].

[17] Id., [18].

[18] Supra 7, [29]. The Singapore High Court’s finding here is consistent with the Singapore Court of Appeal’s holding in Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR(R) 936 (“Insigma”) (at [31]).

[19] Supra 7, [29].

[20] Supra 15.

[21] Supra 7, [34], [45] – [46], [62].

[22] Id., [67].

[23] Id., [71].

[24] Alastair Henderson, et al., ‘Bare’ arbitration clauses and the extent to which the Singapore Court may assist (March 9, 2017). A copy of the article may be accessed here: <http://hsfnotes.com/arbitration/2017/03/09/bare-arbitration-clauses-and-the-extent-to-which-the-singapore-court-may-assist/> (last accessed December 1, 2017).

[25] Supra 7, [45], [71].

[26] BCY v BCZ [2017] 3 SLR 357, [40]. The Singapore High Court in Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd [2017] 3 SLR 267 also adopted the approach of English Court of Appeal in Sulamerica Cia National de Seguros S.A. v Enesa Engeharia S.A. [2012] EWHC 42 (Comm). But cf.: FirstLink Investment Corp v GT Payment Pte Ltd [2014] SGHCR 12, where the Assistant Registrar of the Singapore High Court held (at [16]) that decisive weight should be given to the law of seat of arbitration in determining the parties’ implied choice of law.

[27] Supra 7, [32].

[28] Supra 26.

[29] See generally: Julian D.M. Lew, Loukas A. Mistelis, et al., Comparative International Commercial Arbitration (2003) Walters Kluwer, 411. See also A.F.M. Maniruzzaman, Choice of Law in International Contracts: Some Fundamental Conflict of Laws Issues (2000) 16(4) JIA 141, 150.

[30] Supra 7, [21].

[31] Id, [21].

[32] [2016] SGHC 238 at [31]. But cf.: Julian D.M. Lew, Loukas A. Mistelis, Stefan M. Kroll, Comparative International Commercial Arbitration (2003) Wolters Kluwer, 415: Arbitrators have found there to be an implied choice of the law applicable where parties argue their case on the basis of the same law, even though they have not expressly agreed on its application.

[33] See generally: Emmanuel Galliard, John Savage, Fouchard Galliard Goldman on International Commercial Arbitration (1999) Kluwer Law International, 262, 263. But cf.: Gary B. Born, International Arbitration: Law and Practice (2nd Ed) (2015) Wolters Kluwer, 766.

[34] Insigma, [31].

[35] Id.

[36] Id., [31] – [34].

[37] Supra 7, [54].

[38] Nicholas Poon, Reconsidering the Enforceability of Bare Intention to Arbitrate (2017) 29 SAcLJ 540, 546.

[39] Stavros Brekoulakis, The Notion of the Superiority of Arbitration Agreements over Jurisdiction Agreements: Time to Abandon It? (2007) 24(4) JIA 341, 358.

[40] Supra 5, Section 6(2).

[41] Sulamerica Cia National de Seguros S.A. v Enesa Engeharia S.A., [2012] EWHC 42 (Comm), 10.

[42] Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd [2017] SGCA 32, [23].

[43] Supra 39, 359-360. See also Supra 2.

[44] TMT Co. Ltd v The Royal Bank of Scotland plc [2017] SGHC 21, [64] – [66].

[45] Supra 7, [81].

[46] Supra 38, 549.

[47] Supra 2.

[48] Supra 38.

IAA and the Center Hosted 7th Annual NYU Vis Practice Moot at Hogan Lovells

On February 24, 2018, NYU’s International Arbitration Association and the Center for Transnational Litigation, Arbitration and Commercial Law held the 7th Annual NYU Vis Practice Moot at Hogan Lovells US LLP.

The 7th Annual Vis Practice Moot welcomed 12 teams from selected law schools from the United States and Europe as well as many distinguished professionals and academics who acted as arbitrators, including Professor Franco Ferrari, the Center’s Director.

The Practice Moot rounds aim to provide a helpful forum for the Willem C. Vis International Commercial Arbitration Moot participants to practice their oral advocacy skills by pleading before, and receiving constructive feedback from, panels of experienced arbitrators from all around the world. The Practice Moot also enables the participant teams to meet and have a chance to plead against each other before the final rounds in Hong Kong and Vienna, where more than 3000 students from about 370 law schools from around the world will compete.

Tierce Opposition Against International Arbitral Awards – Story of Non-Signatories Recent Decisions of the Tribunal de Grande Instance de Paris and the Cour Constitutionelle Belge

Introduction. It has been said and repeated over and over again: The arbitration is a creature of contract. A person, legal or natural, may be compelled to arbitrate only if that person consented to arbitration. No matter how often said and repeated, the international arbitration practice tells another story with almost the same amount of enthusiasm: Story of non-signatories – of those who did not sign the arbitration agreement but are somewhat affected by the results of it. Courts, arbitral tribunals, and scholars came up with different theories either to justify or to reject the extension of the arbitration agreement to those non-signatories.[1] An extensive legal literature on the issue of when and how a non-signatory may be forced to arbitrate, or force the signatories to arbitration agreement to arbitrate with the non-signatory itself, exists and continues to expand. However, the concern is not limited to the non-signatory initiating or participating in the arbitration. Despite attracting much less attention, the issue is also whether a non-signatory has any means to avoid the negative effects of an award rendered in an arbitral proceeding to which it was not party.[2] Two recent decisions from two different European countries – Belgium and France – recently opened a path for the non-signatories to initiate the extraordinary recourse of “tierce opposition” (third party opposition) either to challenge the international arbitration award itself or the court decision enforcing that award.

Belgian Decision. First, by a judgment of February 16, 2017, the Belgian Constitutional Court found that Article 1122 of the Belgian Judicial Code (JC)[3] was in violation of the Belgian Constitution in that it limited the tierce opposition to national court judgments and excluded arbitral awards. The Belgian Constitutional Court based its decision on the principles of equality and non-discrimination.[4]

In this case, a Greek company had initiated, before the Court of first instance francophone of Brussels, a tierce opposition for the annulment of an international arbitral award rendered by an ICC arbitration tribunal. One of the parties to the arbitral award challenged the admissibility of the action on the basis that the Greek company had not been party to the arbitration proceedings. The Court decided that the tierce opposition was prima facie not admissible, because the law did not provide for the possibility of tierce opposition against arbitral awards. However, the Court opined that there were sufficient elements that let the Court to refer the question to the Belgian Constitutional Court.

According to Article 1122 of the JC, any person may oppose a decision of a civil court, or of a criminal court if the decision is given on civil interests. The article does not mention arbitral awards, which appeared to mean that the tierce opposition was not possible against them. The Belgian Constitutional Court found that the difference of treatment between third parties to a court judgment and non-signatories to an arbitral award was not justified. In reaching this decision, the Belgian Constitutional Court emphasized that the non-signatories had not chosen this mechanism of settlement of disputes and could not be considered to have accepted the consequences of the award on their rights.

French Decision. A couple of months later, in a decision rendered on April 25, 2017, the Tribunal de Grande Instance de Paris admitted the right of a non-signatory to challenge the enforcement decision of an international arbitral award that affected the non-signatory negatively. The French Court based its decision on the general principles of right of access to justice and due process.[5]

A French company, producer and seller of sugar beet seeds, had business relations with a German group company. One of the companies belonging to the group had a dispute with a Belgian company as regards their sugar beet selection activities. The dispute was submitted to CEPANI arbitration. The award ordered the German company to pay damages to the Belgian company and to return to the Belgian company all germplasm and any information relating to it that were in its possession, in the possession of its subsidiaries or a third-party subcontractor. The Belgian company enforced the award in France. Upon attempts of the Belgian company to seize documents at the place of business of the French company and to get a court order against the French company to hand over the “germplasm”, the French company initiated tierce opposition against the enforcement decision.

In France, Article 1501 of the Code of Civil Procedure (CPC) gives a non-signatory the possibility to object to a domestic arbitral award before the court that would have had jurisdiction to adjudicate the dispute if there had not been any arbitration. Article 1506 of the CPC, which enumerates the provisions of the CPC to be applied also in relation to international arbitral awards, does not refer to Article 1501. This lack of reference has been construed as excluding “tierce opposition” to international arbitral awards.[6] The French Cour de Cassation had renounced the possibility of tierce opposition in the context of international arbitration in 2009, when it had stated that the tierce opposition was not open once it had been deducted that the arbitration was international.[7] A new attempt to extend tierce opposition to international arbitral awards has found life with the decision of the Tribunal de Grande Instance de Paris: By way of accepting the admissibility of a tierce opposition against enforcement decisions.[8] The French court relied on the provisions of the CPC with regard to enforcement decisions. Article 1524 of the CPC states that the enforcement decision of an international arbitral award made in France may not be subject to any recourse other than the ones exhaustively enumerated under Article 1522, which does not include tierce opposition. However, contrary to Article 1524, Article 1525, which provides for the appeal of the enforcement decision of international arbitral awards made outside France, does not prohibit other types of recourses. The French court relied on this lack of prohibition to extend tierce opposition to decisions enforcing international awards made outside France.

Tierce Opposition – General Rule. As per Article 582 of the French CPC, tierce opposition is a means to retract or reform a decision for the benefit of a third person. Article 591 of the French CPC further states that only the issues affecting the third person are retracted or reformed, and that the original decision between the parties continues to have its effects on these parties. Article 1130 of the Belgian JC, in a similar way, provides that the court annuls the decision in whole or in part, but only with regard to the third party. However, both legal systems provide an exception to the rule of relative annulment: The original decision will be annulled if the decision rendered upon tierce opposition is irreconcilable with the enforcement of the original decision.[9]

Under French law, per application of Article 583 of the CPC, any interested person may initiate tierce opposition as long as she has not been party to or represented in the proceedings that led to the decision. According to this article, two conditions should be satisfied. First, the non-signatory must have an interest in attacking the decision. Second, not only should the non-signatory not have been party to the proceedings, but the non-signatory should not have been represented in them either. The requirement of not being represented limits substantially the number of persons who may oppose arbitral awards. The French courts refused tierce opposition initiated by certain persons as they had been, according to the French courts, already represented by one of the parties to the proceeding:[10] An insurer was deemed represented by the insured, unsecured creditors by the debtor, shareholders by the company or its director, a co-debtor by the other co-debtor, joint and several guarantors by the debtor.[11] The creditors or assignees could initiate tierce opposition pursuant to Article 583 of the CPC only if the decision had been rendered in fraud of their rights or if they could invoke new grounds that the party deemed representing them could not invoke. French case law has been criticized on its approach to the issue of representation in tierce opposition, and eventually the French Cour de Cassation, in a domestic arbitration case, decided on May 5, 2015, that the guarantor, as a non-party to the arbitral proceedings, had a right to initiate tierce opposition against an arbitral award, which determined the amount of debt of the principal debtor.[12] The French Cour de Cassation, in its decision, relied on the guarantor’s right of access to a court.[13] This decision was welcomed as it had a more restrictive approach to the representation[14] and as it was considered to give hope for the extension of tierce opposition to international arbitration. [15] Article 1122 of the Belgian JC has been drafted in a different way than Article 583 of the French CPC. According to the former provision, any person who has not been duly joined to or intervened in the proceedings may oppose a decision that frustrates his rights or interests. The article clearly states that in principle, the creditors, successors in title, assignees, and persons represented in the proceedings do not have the right to tierce opposition. They may initiate tierce opposition only in exceptional circumstances.[16]

Tierce Opposition – Possible Extension to International Arbitration Awards. Even before the Belgian and French decisions, the likelihood of extending this protection to non-signatories facing an international award by use of general principles of law had been questioned.[17] Some authors had given a negative response on the basis that such extension would give the national courts a power of review that is not acceptable within the context of international arbitration and that would be against the intention of the parties,[18] legal certainty, and confidential character of the international arbitration.[19] These authors further argued that “the privity of the arbitration agreement and the res judicata effect of the arbitrator’s decision” provided enough protection for the non-signatories.[20] However, as underlined by others, the power of review of the court is legitimate as the non-signatory has never been party to the arbitration agreement and, moreover, such review will ensure the protection of the interests of the non-signatory by preventing the award from producing effects only against the non-signatory.[21] This review will not affect the situation between the parties created by the international award.[22] Moreover, the authors suggesting that the res judicata effect of the award provides enough protection to non-signatories were criticized, because the res judicata effects of the award do not preclude it from being used against[23] the non-signatories and therefore the award may still harm them. [24]

As rightly pointed out, closing the doors to a non-signatory, who has a legitimate interest in the outcome of the dispute, by both refusing its intervention to the arbitral proceedings and its right to challenge the arbitral award once it is made will leave the non-signatory without any protection vis-à-vis its rights and interests that are frustrated by the award.[25] Extension of the arbitration agreement to non-signatories is not automatic. A non-signatory may participate in an arbitral proceeding only if the non-signatory is deemed to be party to the arbitration agreement by one of the theories developed to this purpose or if all parties accept its participation. When both of these possibilities are eliminated, it is hard to provide any protection for the rights of a non-signatory closely affected by the dispute. Even though the tierce opposition action grants the national court more power than it has in respect of the request for annulment lodged by the parties as it will have the possibility to make a substantive review of the award,[26] the higher degree of scrutiny may be legitimized by the fact that the non-signatory could not participate in the arbitral proceedings and defend its own rights and interests. Moreover, the legislation along with the courts have assumed a restrictive stance as regards the persons who can initiate tierce opposition. Pro-arbitration views should not disregard the rights of non-signatories to access to justice or due process. Neither the character we wish to bestow to the international arbitration nor our doubts about the intervention of the national courts should shadow most important rights relative to the right of defense.

Duygu Kiyak

Duygu Kiyak is an LL.M. candidate in the International Business Regulation, Litigation and Arbitration program at the NYU School of Law and a Ph.D. candidate in Private International Law at Istanbul Bilgi University. She obtained her first degree in law at Galatasaray University Law Faculty. She later obtained a Master II degree in the Private International Law and International Commercial Law program at Paris 1-Sorbonne University. She also works as of counsel attorney for Guner&Tapsin Law Firm in Istanbul, Turkey.

[1] Theories such as “assignment”, “third party beneficiary”, “apparent or ostensible authority”, “equitable estoppel”, “implied consent”, “group of companies”, “alter ego”, “lifting the corporate veil”.

[2] Stavros L. Brekoulakis, The Relevance of the Interests of Third Parties in Arbitration: Taking a Closer Look at the Elephant in the Room, 113(4) Penn. St. L. Rev. 1165, 1170 (2009).

[3] Article 1122: “Toute personne qui n’a point été dûment appelée ou n’est pas intervenue à la cause en la même qualité, peut former tierce opposition à la décision, même provisoire, qui préjudicie à ses droits et qui a été rendue par une juridiction civile, ou par une juridiction répressive en tant que celle-ci statue sur les intérêts civils.”

[4] Belgian Constitutional Court decided that the impossibility imposed by Article 1122 of the Judicial Code upon a third party to oppose an arbitral award was in violation of Article 10 of the Constitution as regards the principle of equality and Article 11 of the Constitution as regards the principle of non-discrimination.

[5] “Le droit effectif au juge et l’exigence d’un procès équitable, méconnues par l’impossibilité pour le tiers lésé de faire tierce opposition à une sentence arbitrale internationale, ne peut être assuré que par cette voie de recours exceptionnelle.”

[6] Charles Jarrosson, L’autorité de la chose jugée des sentences arbitrales, Procédures nº 8-9, 2007, étude 17, § 49; Jean-Louis Delvolvé, Gerald H. Pointon, Jean Rouche, Part III, Chapter 8: Challenge of Arbitral Awards in French Cours d’Appel, in Jean Rouche, Gerald H. Pointon, et al., French Arbitration Law and Practice: A Dynamic Civil Law Approach to International Arbitration (Second Edition), 2nd edition (Kluwer Law International 2009) pp. 199, 278; Sylvain Bollée, Les effets des sentences arbitrales à l’égard des tiers, Revue de l’Arbitrage, Comité Français de l’Arbitrage 2015, Volume 2015 Issue 3) pp. 696, 701, 721-722; Christophe Seraglini, Les effets de la sentence, Revue de l’Arbitrage, Comité Français de l’Arbitrage 2013, Volume 2013 Issue 3, pp. 705, 710.

[7] The French Cour de Cassation, Chambre Civile 1, 8 October 2009, N° de pourvoi: 07-21990: “…les juges du fond, qui ont écarté la fraude reprochée à la SHLP et qui ont constaté que l’arbitrage rendu l’avait été relativement à la propriété de l’immeuble et du fonds de la Bibliothèque polonaise de Paris ainsi qu’à son exploitation à l’aide de capitaux étrangers, en ont exactement déduit son caractère international, ce dont il résultait que la voie de recours de la tierce opposition n’était pas ouverte”

[8] The extension of the tierce opposition to international arbitral awards will be valid as long as a higher French court decides otherwise.

[9] Article 591 of the French CPC and article 1130 of the Belgian JC. See also Kristof Cox, Chapter 3. Dépeçage or Consolidation of Disputes Resulting from Connected Agreements: The Role of the Judge, in Bernard Hanotiau and Eric A. Schwartz (eds), Multiparty Arbitration, Dossiers of the ICC Institute of World Business Law, Volume 7 (Kluwer Law International; International Chamber of Commerce (ICC) 2010) pp. 57, 58.

[10] Pierre Callé, L’autorité de la chose jugée et les tiers, Revue de l’Arbitrage, Comité Français de l’Arbitrage 2016, Volume 2016, Issue 1, pp. 77, 87.

[11] Sylvain Bollée, p.731.

[12] Cour de Cassation, Ch. Comm., 5 May 2015, n° 14-16.644. A subsidiary (assignor) had assigned its shares in another company to a third company (assignee). The contract for the assignment included an arbitration agreement. The parent company of the assignor provided a guarantee to the assignee for the obligations of the assignor. The guarantee did not have an arbitration clause. Upon failure of its obligations by the assignor, the assignee sued the assignor before an arbitral tribunal. The arbitral tribunal ruled in favor of the assignee. The assignee wanted to enforce the award against the parent company, joint and several guarantor of the assignor. The guarantor challenged the arbitral award by initiating tierce opposition.

[13] “[L]e droit effectif au juge implique que la caution solidaire, qui n’a pas été partie à l’instance arbitrale, soit recevable à former tierce opposition à l’encontre de la sentence arbitrale déterminant le montant de la dette du débiteur principal à l’égard du créancier”.

[14] Pierre Callé, p.89.

[15] Sylvain Bollée, p.729 ; Benoit Le Bars, Droit effectif au juge et recevabilité de la caution solidaire à former tierce opposition à l’encontre d’une sentence arbitrale, Revue des sociétés, 2016, p. 317, §17.

[16] Per Article 1122 of the Belgian JC, the successors by general title may initiate tierce arbitration if they have a different and personnel right; the assignee if there is fraud or if they have acquired the right before the date of the decision; the creditors if their debtors acted fraudulently or if they can invoke a lien, privilege, or any other right different than their credit right; persons represented if their legal, judicial, or contractual representatives acted fraudulently.

[17] Charles Jarosson, §49; Benoit Le Bars, §17.

[18] Emmanuel Gaillard and John Savage, Part 6: Chapter I – French Law, Fouchard Gaillard Goldman on International Commercial Arbitration, (Kluwer Law International 1999), §1598.

[19] Alexis Mourre, L’Intervention des Tiers a L’Arbitrage, Revista Brasileira de Arbitragem, (Comitê Brasileiro de Arbitragem CBAr & IOB; Comitê Brasileiro de Arbitragem CBAr & IOB 2007, Volume IV Issue 16) p.87.

[20] Emmanuel Gaillard and John Savage, p. 918, §1598

[21] Jean-Louis Delvolvé, et al., p. 279.

[22] Id.

[23] For the difference between relative res judicata (la relative autorité de la chose jugée under French law) and opposability (opposabilité under French law), see Pierre Callé and Sylvain Bollée.

[24] Pierre Callé, p.86.

[25] Alexis Mourre, p.88. Alexis Mourre does not support the extension of tierce opposition to international arbitration but indicates a problem that would be faced if the non-signatory with a legitimate interest is not allowed to intervene to an arbitral proceeding. He further argues that this outcome may be considered against the due process right provided by Article 6 of the European Convention of Human Rights.

[26] As the French court only recognized the admissibility of a tierce opposition to the enforcement decision, it is likely that the review in France will be limited to the enforcement decision, unless the tierce opposition is extended to international arbitral awards.

Hague Academy to start holding “Winter Sessions”

Founded in 1923, the Hague Academy is a center for research and teaching in public and private international law, with emphasis on further scientific and advanced studies of the legal aspects of international relations. Because the Academy does not have a permanent teaching staff, its scientific body, the Curatorium, invites academics, practitioners, diplomats, and others to give courses in the form of lectures. Up to now, the Hague Academy has held courses that take place in summer, over a period of six weeks. The lectures are usually published in the Collected Courses of the Academy of International Law. Starting 2019, the Hague Academy will offer “Winter Sessions”, thus allowing a much larger student body to benefit from the insights offered by the lecturers. For the program of the first Winter Session, please click here.

Book co-edited by Professor Franco Ferrari wins award from the American Society of International Law

In mid-January, the American Society of International Law (ASIL) announced that it would award its 2018 Certificate of Merit for High Technical Craftsmanship and Utility to Practicing Lawyers and Scholars to the Encyclopedia of Private International Law co-edited and co-authored by Professor Franco Ferrari, the Center’s Director. In a memorandum, ASIL’s Book Awards Committee stated that “[t]he value and timeliness of this work to academics, international lawyers and others is difficult to over-state.” Bringing together 195 authors from 57 countries, including Professor Linda Silberman, the Co-Director of the Center,  the Encyclopedia sheds light on the current state of Private International Law around the globe, providing unique insights into the discipline and how it is affected by globalization and increased regional integration. The role and character of Private International Law has changed tremendously over the past decades. With the steady increase of global and regional inter-connectedness the practical significance of the discipline has grown. And so has the number of legislative activities on the national, international and, most importantly, the European level. The Encyclopedia is a rich and varied resource in four volumes. The first two volumes provide comprehensive coverage of topical aspects of Private International Law in the form of 247 alphabetically arranged entries. The third volume provides insightful detail on the national Private International Law regimes of 80 different countries. The fourth volume presents invaluable, and often unique, English language translations of the national codifications and provisions of Private International Law in those countries. As for its key features, here is a summary: • 247 substantive entries organized alphabetically for ease of navigation and fully cross-references, • 80 national reports; • Entries and National Reports written by the world’s foremost scholars of Private International Law; • National codifications in English collected together into a single volume for quick reference. For more information, please click here.

Professor Ferrari co-edits and co-authors book on international contract law in German

Professor Ferrari, the Center’s Director, has just published the third edition of a book on international contract law in German. Over the years, the book, co-authored with six German colleagues, has become the go-to-book for all things relating to international contract law, since it governs not only the most important conflict of laws instrument in force in Europe in the area of contract law (the so-called Rome-I Regulation), but also the most important uniform substantive law instruments dealing with specific types of international contracts (such as the United Nations Convention on Contracts for the International Sale of Goods [CISG] and the Convention on Transport of Goods by Road [CMR]). The earlier editions of this book have often been cited by courts of German speaking countries, including the German Supreme Court.

Professor Ferrari to give a talk at an arbitration conference to take place in Singapore

Professor Ferrari, the Center’s Director, will give a talk on entitled “The Hague Principles on Choice of Law in International Commercial Contracts in International Commercial Arbitration” at a conference on “Soft Law in International Arbitration” to be held at the National University of Singapore on 11 January 2018. Professor Ferrari, an expert on European private international law and international arbitration, will be joined by various colleagues, most of whom have links to NYU and the Center: Professors Giuditta Cordero-Moss, Gary Bell and Diego Fernandez Arroyo, all former scholars-in-residence of the Center; Professor Marco Torsello, a two-time visiting professor at NYU as well as a Global Professor of Law at NYU Law in Paris, and Dr. Friedrich Rosenfeld, a Global Adjunct Professor of Law at NYU Law in Paris. For the conference program, please click here.

Professor Franco Ferrari and Dr. Friedrich Rosenfeld publish a paper on “The Limits to Party Autonomy in International Arbitration”

Professor 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 Spanish on “Limits to Party  Autonomy in International Arbitration”. The English language abstract reads as follows: The paper examines the limitations to party autonomy in international commercial arbitration. As such, it challenges the liberalist premise that arbitration is purely a dyadic process between two rational parties based on an expression of party autonomy. The authors submit that arbitration creates a web of relationships involving the parties, the arbitrators, arbitral institutions, and the public at large. While the interests of these different stakeholders overlap in some cases, they diverge in others, thus creating tensions that at times can only be solved by limiting party autonomy. Against this background, the authors develop a taxonomy of limitations by distinguishing between limitations to party autonomy in the interest of the parties, the arbitrators, arbitral institutions as well as the public at large. It is the authors’ position that a clear understanding of these limitations is necessary to protect arbitration against legitimacy challenges and to uphold its role as the primary instrument for the resolution of business disputes.

Eiser Infrastructure Ltd. et al v. Kingdom of Spain and the sole effects doctrine: A convergence of indirect expropriations and the FET standard?

Jan Bischoff

The application of the fair and equitable treatment (‘FET’) standard – i.e. the host State’s promise contained in almost all modern international investment agreements (‘IIAs’) to accord to the investor’s investment a fair and equitable treatment – frequently leads to problems in relation to the host State’s right to regulate. It is undisputed that, under international law, the sovereign State has a right to regulate[1]. On the other hand, it is clear that the right to regulate cannot free the host State from its obligations voluntarily entered into under IIAs concluded by it[2], to the extent the State’s freedom to legislate is compromised in some way by international law instruments (i.e., a stabilization clause). A rigid application of the FET standard could reduce the legislator’s leeway to nil if it had to fear that all later changes of legislation could violate investors’ legitimate expectations.

The arbitral tribunal in Eiser Infrastructure Ltd. et al v. Kingdom of Spain[3] constituted under the ICSID Rules was tasked to strike a balance between Spain’s right to regulate and the claimant investors’ right to be treated fairly and equitably. The underlying dispute arose from Spanish legislation guaranteeing operators of solar power plants a fixed remuneration for produced energy (i.e. it subsidized solar power plants). The respective laws were later amended when the tariff deficit (the difference between the subsidy paid to the producer and the revenues generated from the customers) became unbearable for Spain. Similar disputes about Spanish renewable energy legislation and its amendments have arisen in recent years[4].

In my opinion, the tribunal did not manage to strike the balance. The arbitrators came to the conclusion that Spain breached its obligation to treat the claimant investors in a fair and equitable manner. They referred to other awards that considered the stability of the legal framework a part of the FET standard[5]. The tribunal acknowledged host States’ right ‘to modify their regulatory regimes to meet evolving circumstances and public needs’[6] as well as Spain’s ‘legitimate public policy problem with its tariff deficit’[7]. According to the tribunal, Spain was entitled to adopt ‘reasonable measures to address the situation’. However, tribunal stressed that ‘regulatory regimes cannot be altered as applied to existing investments in ways that deprive investors who invested in reliance on those regimes of their investment’s value’[8]. After these few abstract legal remarks, the tribunal discusses the effects the new legislation had on the claimant companies, and it questions the methodology used by the new law for calculating guaranteed remuneration. It concludes that the new law ‘deprived Claimants of essentially all of the value of their investment. Doing so violated Respondent’s obligation to accord fair and equitable treatment’[9].

When reading the award, I cannot escape the impression that the tribunal mainly based its finding (i.e. that Spain breached the FET standard) on the effects the legislative changes had on the claimants’ investments. The arbitrators criticize heavily the way the remuneration is calculated under the new regime because the basis (a ‘hypothetical efficient plant’) does not take into account the claimants’ investment’s specificities[10]. They also question the methodology used to calculate the remuneration on the basis of a hypothetical plant[11]. However, it seems that the tribunal’s elaborations on inconsistencies in respondent’s conduct were not a ground for the tribunal to come to its conclusion; they are rather mere obiter dicta. Instead, the tribunal’s central argument is the effect the new legislation had on the claimants’ investment.

The effect should not be the sole factor to be considered when deciding whether a change of legislation is a breach of the FET standard or not. The so-called sole effects doctrine has been used to determine whether measures taken by a State constitute an indirect expropriation or not[12]. However, as far as general regulatory measures are concerned, the application of the sole effects doctrine has been heavily criticized recently[13], and rightly so. Instead, arbitral tribunals and legal scholars have argued in favor of the application of a proportionality test[14], in order to take into account the legitimate regulatory interest of the State. The reasoning applied by the tribunal in Eiser Infrastructure Ltd. et al v. Kingdom of Spain concerning FET, however, would undermine the attempts to strike a balance between the States’ legitimate regulatory interests and the protection from indirect expropriation. The reasoning also completely overlooks that the objective legitimate expectations of the investors must necessarily incorporate an appreciation that in the absence of stabilizing language, legislation is implemented with a clear likelihood of change.  The Eiser decision seems to ignore this legal and practical reality, which undermines its coherence.]

Instead of focusing on the effects on the investment, a proportionality test is warranted where the host State’s right to regulate and the claimant investors’ right to be treated fairly and equitably are to be balanced. This does not mean that the outcome of the dispute would have been different. Indeed, it was the very purpose of the royal decree, which offered the remuneration, to provide investors a long-term certainty that the decree would not be changed[15]. On the other hand, there is an industry generated its revenue solely on the basis of subsidies. The capital markets and the interpretation of what constitutes a reasonable return changed dramatically during the financial crisis. I therefore wonder whether it was feasible for the government to react in a way that, on the one hand, allowed it to reduce the (allegedly unbearable) fiscal burdens for the State (and hence the community) and, on the other hand, secured the individual financial interests of companies investing in renewable energies. This balancing of interests would have been the task of the tribunal; it is deplorable that it refrained from doing so.


Dr. Jan Asmus Bischoff studied law at Hamburg University from 2000 to 2005. After his graduation, he worked as a researcher at the Max Planck Institute for Comparative and International Private Law until 2010. In 2008, he completed his Master Degree in International Legal Studies at NYU, School of Law as a Hauser Global Scholar. In 2009, he completed his doctoral thesis on “The European Community and the Uniform Private Law Conventions” under the supervision of Prof. Dr. Dr. hc. Jürgen Basedow. In 2010, he passed the Second State Examination at the Hanseatic Regional Appelate Court, Hamburg. He is currently working as inhouse legal counsel at the privately-owned bank M.M.Warburg & CO, Hamburg.

[1] See e.g. AES Summit Generation Limited and AES-Tisza Emrömü Kft. V. Hungary, ICSID Case No. ARB/07/22, Award, 23 September 2010, para.9.3.29; Marc Jacob and Stephan W.Schill, ‘Fair and Equitable Treatment: Content, Practice and Method’ in: Marc Bungenberg and others (eds.), International Investment Law, (Nomos/Hart 2015) 730 seq.

[2] Cf. Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability, 28 April 2011, para. 298; ADC Affiliate Ltd. et al. v. Hungary, ICSID Case No. ARB/03/16, Award, 2 October 2006, para. 423.

[3] Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, 4 May 2017.

[4] Cf. Charanne and Construction Investments v. Spain, SCC Case No. V 062/2012, Award, January 21, 2016, arguing that the legal framework did not create legitimate expectations that it would remain unchanged (para. 504); cf. also Isolux Netherlands, BV v. Kingdom of Spain, SCC Case V2013/153, Final Award, July 17, 2016, para. 807, arguing that there was not a guaranteed rate of return; Portigon AG v. Kingdom of Spain, ICSID Case No. ARB/17/15 (not public).

[5] Eiser Infrastructure Ltd. et al v. Kingdom of Spain (supra n. 3) para. 381 seq.

[6] Id., para. 362.

[7] Id., para. 371.

[8] Id., para. 382.

[9] Id., para. 418.

[10] Id., para. 398 seqq.

[11] Id., para. 392.

[12] See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, 2nd edition, Oxford University Press, Oxford 2012, 112-115.

[13] Id.120-123.

[14]Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12,Award,14 July 2006, 311 seq.; LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc .v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, para. 195.

[15] See Eiser Infrastructure Ltd. et al v. Kingdom of Spain (supra n. 3) para. 112.

Center to co-host two-day arbitration conference in the Dominican Republic

The Center is pleased to announce that it will co-host for the fourth time a two-day conference regarding the intersections between international commercial and international investment arbitrations. The papers presented at the conference are based on papers submitted to the soon to be published Cambridge Compendium of International Commercial and Investment Arbitration, co-edited by Professors Franco Ferrari, the Director of the Center, as well as Andrea Bjorklund and Stefan Kröll, and attempt to address the various topics from both a commercial and an investment arbitration perspective whenever appropriate in order to highlight the commonalities as well as the differences between both fields . The event will take place in Santo Domingo, on 13 and 14 November 2017. For more information, please click here.

“Prayers for Relief in International Arbitration, Plead in Haste, Repent at Leisure” at NYU on 11/10

This is to announce the November 2017 session of the Arbitration Forum of the Center for Transnational Litigation, Arbitration and Commercial Law, entitled “Prayers for Relief in International Arbitration, Plead in Haste, Repent at Leisure”. The event will take place on Friday, November 10th, 2017, from 12.45-2.00, in Vanderbilt Hall 218.

It is a great pleasure to be able to announce that on the occasion of that session, Mr. Klaus Reichert will give a talk on the aforementioned topic and that Mr. Grant Hanessian agreed to act as commentator.


Klaus Reichert SC specializes in international arbitration and has worked on, both as lead counsel and as arbitrator (frequently as chair), in excess of 250 international disputes right across a broad spectrum of complex subject matters, industries and governing laws involving parties (often sovereigns, or state commercial entities) from all over the World. These cases involved Institutions and Rules such as ICSID, ICC, SCC, LCIA, ICDR, CAS, DIAC, DIFC-LCIA, and UNCITRAL. The venues have included Paris, Los Angeles, San Francisco, Helsinki, New York, London, Munich, Seoul, Miami, Geneva, Dublin, Dubai, Stockholm, Nassau, and Zürich. He is a member of the Court of Arbitration for Sport and the International Basketball Federation (BAT) panel of arbitrators. He was counsel for Dallah in the landmark case in the English Courts on the New York Convention against the Government of Pakistan. In 2012 he was elected to the Governing Board of the International Counsel for Commercial Arbitration (ICCA). He has served on a number of bodies in the international legal domain including the IBA (past Co-Chair of the Litigation Committee, and currently a Council Member of the Legal Practice Division), the International Commercial Arbitration Committee of the ILA, the European Users’ Council of the LCIA, and was a founder member of Arbitration Ireland – the Irish Arbitration Association. He was made a Silk (Senior Counsel) at the Bar of Ireland in 2010, and was involved as counsel in a large number of leading cases in the field of private international law before the Irish Courts. In 2008 he chaired the Host Committee for the ICCA Conference in Dublin to mark the 50th anniversary of the New York Convention.


Grant Hanessian, an NYU Law School graduate, heads Baker & McKenzie’s International Arbitration Practice Group in North America.  Mr. Hanessian has extensive experience as counsel and arbitrator in international commercial and investment treaty arbitrations.  He currently serves as US alternate member of the ICC International Court of Arbitration in Paris, chairman of the Arbitration Committee of the US Council for International Business (US national committee of the ICC), and a member of the ICC’s Commission on Arbitration and its Task Forces on Arbitration Involving States or State Entities and on Financial Institutions and International Arbitration (leader of Investment Arbitration and Banking & Finance work stream), Vice President (for US) of the London Court of Arbitration’s North American Users Council and a member of the American Arbitration Association—International Centre for Dispute Resolution’s International Advisory Committee and its Advisory Committee on Brazil, the International Arbitration Club of New York, the Arbitration Committee of the International Institute for Conflict Prevention and Resolution, the New York City Bar Association’s Committee on International Commercial Disputes and Club Español del Arbitraje, and is a founding board member of the New York International Arbitration Center. Mr. Hanessian writes and speaks frequently on international arbitration topics.  He is editor of ICDR Awards and Commentaries (Juris Pub. 2012) and co-editor of Comparison of International Arbitration Rules (American Bar Association Section of International Law), International Arbitration Checklists (Juris Pub., 3d ed., 2015), Gulf War Claims Reporter (ILI/Kluwer, 1998) and Baker & McKenzie’s International Litigation & Arbitration Newsletter.  Mr. Hanessian is recommended by Chambers Global and USA Guides (described as “very experienced, hugely knowledgeable and effective”), Legal 500 (described as ‘a great practitioner’ with a ‘strong commercial profile’), PLC Which Lawyer, The International Who’s Who of Commercial Arbitration and Expert Guide to Leading Practitioners in International Arbitration.


Please note that the Chatham House rule applies.

Center Event “Dialogue with the US delegation to the Hague Conference on the proposal for a world-wide Judgment Convention” at NYU on 10/23

The NYU Center for Transnational Litigation, Arbitration and Commercial Law is pleased to announce a special event to be held on Monday, October 23, 2017, at NYU School of Law in Furman Hall, 245 Sullivan St., Lester Pollack Colloquium Room, 9th floor, from 6:00-9:00 PM.  There will be a Dialogue with the US delegation to the Hague Conference on the proposal for a world-wide Judgment Convention.

The event is an opportunity to provide members of the US delegation, who will be in attendance, with comments about the present Draft proposal as well as the desirability of having the United States join such a Convention. The delegation is also interested in issues that lawyers and their clients have faced with respect to recognition and enforcement of foreign judgments both here and abroad and how a Convention might address some of those issues. There will be an upcoming meeting of delegations at the Hague in mid-November, and this discussion will be of great assistance to the US delegation in those negotiations. The latest (Feb. 2017) proposed draft of the Convention is attached here.

The event is being co-sponsored by the University of Pittsburgh’s Center for International Legal Education headed by Professor Ronald Brand, who is a member of the U.S. delegation. It is also being organized in cooperation with the International Commercial Disputes Committee of the New York City Bar. A number of Committee members, along with others who have special expertise in cross-border recognition and enforcement, have agreed to actively participate in the Dialogue. It should be an exciting and informative evening, and we hope that you will be able to join us.

Professor Ferrari co-edits and co-authors the Encyclopedia of Private International Law

Professor Franco Ferrari, the Executive Director of the Center for Transnational Litigation, Arbitration and Commercial Law, has just published the Encyclopedia of Private International Law of which he is a co-editor and a co-author. The Encyclopedia, the first of its kind in the area of private international law, represents the definitive reference work in the field. Bringing together 195 authors from 57 countries, including Professor Linda  Silberman, the Co-Director of the Center,  the Encyclopedia sheds light on the current state of Private International Law around the globe, providing unique insights into the discipline and how it is affected by globalization and increased regional integration. The role and character of Private International Law has changed tremendously over the past decades. With the steady increase of global and regional inter-connectedness the practical significance of the discipline has grown. And so has the number of legislative activities on the national, international and, most importantly, the European level. The Encyclopedia is a rich and varied resource in four volumes. The first two volumes provide comprehensive coverage of topical aspects of Private International Law in the form of 247 alphabetically arranged entries. The third volume provides insightful detail on the national Private International Law regimes of 80 different countries. The fourth volume presents invaluable, and often unique, English language translations of the national codifications and provisions of Private International Law in those countries. As for its key features, here is a summary: • 247 substantive entries organized alphabetically for ease of navigation and fully cross-references, • 80 national reports; • Entries and National Reports written by the world’s foremost scholars of Private International Law; • National codifications in English collected together into a single volume for quick reference. For more information, please click here.

Professor Diego Fernandez Arroyo elected to the Institute of International Law

Professor Diego Fernandez Arroyo, a returning scholar-in-residence at the Center for Transnational Litigation and Commercial Law and professor of law at Sciences-Po Law School in Paris as well as a former Global Professor at the NYU Paris Campus, has been elected to the Institute of International Law. The organization was founded in 1873 to examine and adopt normative resolutions on international law which it then brings to the attention of governmental authorities, international organizations, and scientists.

Professor Arroyo, who is also a member of the Curatorium of the Hague Academy of International Law and the current Secretary-General of the International Academy of Comparative Law, is the second scholar-in-residence of the Center elected to the Institute of International Law, Professor Jürgen Basedow, a director of the Max Planck Institute for Comparative and International Private Law, being the other one.

Conflict of laws in international commercial arbitration – call for papers

In 2010, Professors Franco Ferrari and Stefan Kroell organized a seminar on “conflict of laws in international commercial arbitration”, conscious of the fact that every arbitration raises a number of ‘conflict of laws’ problems both at the pre-award and post-award stage. Unlike state court judges, arbitrators have no lex fori in the proper sense, providing the relevant conflict rules to determine the applicable law. This raises the question of which conflict of laws rules apply and, consequently, the extent of the freedom arbitrators enjoy in dealing with this and related issues. The papers presented at that conference were later published in a book co-edited by the two organizers of said conference. Professors Ferrari and Kroell are now preparing a new edition of the book, which has attracted a lot of attention over the years. Apart from updated versions of the papers published in the first edition (with the following titles: “Conflicts of law in international arbitration: an overview” by Filip De Ly, “The law applicable to the validity of the arbitration agreement: a practioner’s view” by Leonardo Graffi, “Applicable laws under the New York Convention” by Domenico Di Pietro, “Jurisdiction and applicable law in the case of so-called pathological arbitration clauses in view of the proposed reform of the Brussels I-Regulation” by Ruggiero Cafari Panico, “Arbitrability and conflict of jurisdictions: the (diminishing) relevance of lex fori and lex loci arbitri” by Stavros Brekoulakis, “Extension of arbitration agreements to third parties: a never ending legal quest through the spatial-temporal continuum” by Mohamed S. Abdel Wahab, “The effect of overriding manadatory rules on the arbitration agreement” by Karsten Thorn and Walter Grenz, “Arbitration and insolvency: selected conflict of laws problems” by Stefan Kröll, “Getting to the law applicable to the merits in international arbitration and the consequences of getting it wrong” by Franco Ferrari and Linda Silberman, “Manadatory rules of law in international arbitration” by George A. Bermann, “Conflict of overriding mandatory rules in arbitration” by Anne-Sophie Papeil, “The law applicable to the assignment of claims subject to an arbitration agreement” by Daniel Girsberger, “The laws governing interim measures in international arbitration” by Christopher Boog), the new edition seeks to include papers on new topics, such as the law governing arbitrators’ liability, the law governing issues of characterization in commercial and investment arbitration, the law governing limitation periods (including their characterization as procedural or substantive), the law governing the taking of evidence (including the characterization of evidence as procedural or substantive, its admissibility and weight), the law governing damages (including whether different laws govern heads of damages and quantification), the law governing issues fees and costs, the law governing res iudicata, the law governing privilege, the law governing ethical obligations (both of arbitrators and counsel), the role of the Hague Principles on Choice of Law in international arbitration).

The editors welcome the submission of papers on any of the aforementioned topics as well as other topics related to the relationship between conflict of laws and international commercial arbitration. If interested, please submit an abstract (2000 words) and a basic bibliography to Professors Ferrari (franco.ferrari@nyu.edu) and Kroell (stefan.kroell@law-school.de) for acceptance by 1 October 2017. If accepted, the paper will need to be submitted (in blue book format) by 1 February 2018. 

Comments on the CJEU case ‘Gazprom’ OAO v Lietuvos Respublika

I. Introduction

On May 13, 2015, the Court of Justice of the European Union (CJEU) delivered the highly anticipated ruling Gazprom. [1] The main issue of the case is whether Regulation 44/2001 may preclude the court of a Member State from recognizing and enforcing an arbitral award containing an anti-suit injunction. The purpose of paper is to analyze the case in light of the CJEU case law and the new Regulation 1215/2012. In so doing, it begins with a presentation of the background of the case. Then, it addresses the Gazprom case. Finally, it concludes with some comments on Regulation 1215/2012.

II. Background

The Gazprom case involves Regulation 44/2001 and its relationship with the anti-suit injunction mechanism and arbitration. These elements are examined in turn.

A. Regulation 44/2001 in a Nutshell

Over the past decade, the European Union (EU) has adopted two sets of regulation on the rules governing the jurisdiction of courts in civil and commercial matters: Regulation 44/2001[2] (also referred as Brussels I) and Regulation 1215/2012[3] (also referred as Brussels I Recast), which repealed Regulation 44/2001 on January 10, 2015.

Their objective is to reduce and/or eliminate certain differences between national rules governing jurisdiction and recognition of judgment that hamper the sound operation of the internal market. In so doing these regulations seek to unify the rules of conflict of jurisdiction and to ensure rapid and simple recognition and enforcement of judgments given in a Member State through mechanism of automatic recognition and enforcement of judgments. [4]

B. Regulation 44/2001 and Anti-Suit Injunction

In parallel to these developments, arbitration as an alternative dispute resolution, has gained importance as cross-border trade significantly increased. Through an agreement, parties may decide to arbitrate instead of resolving their dispute before the national court of one party.

A problem may arise when one of the parties, despite an arbitration agreement, commence an action in a court. Based on legitimate or tactical (torpedo action) motivations, this parallel proceeding may result in high cost, inefficiency and delay. One way to prevent such action is for the court of the seat of arbitration to issue an anti-suit injunction.

Under English law, the anti-suit injunction is an order made by a court requiring a party to the jurisdiction of the court not to bring or advance particular claims before a national court or tribunal or arbitral tribunal established in another country.[5]

In the EU context, in Gasser[6] and in Turner[7], the CJEU held that anti-suit injunctions issued by a court of a Member State and directed against court proceedings in another Member State were contrary to Regulation 44/2001. More recently, in West Tankers, it held that, despite the express exclusion of arbitration of the Regulation 44/2001, an anti-suit injunction issued by a court of a Member State in support of arbitration was not compatible with the Regulation.[8]

This decision has been severely criticized. In particular, the English arbitration community argued that the West Tankers could jeopardize the position of the English arbitral forum, as without the safeguard of anti-suit inunction parties may be inclined to chose other forum than England as their seat of arbitration.[9] As a result West Tanker raised the question of the application of Regulation 44/2001 to arbitration.

C. Regulation 44/2001 and Arbitration

Article 1(2)(d) expressly excludes arbitration from the purview of Regulation 44/2001. However, the provision does not provide for further guidance on the precise scope of the exclusion.

The Anglo-Saxons and the continental Europeans have opposing views on the issue. [10] For the Anglos-Saxons, as soon as it is claimed that there is an arbitration agreement all dispute arising out the legal relationships are exclusively subject to arbitration. Accordingly, only the arbitral body and the courts at the seat are entilted to examine jurisdiction. In contrast, for continental Euopean lawyers, if the subject-matter on the case falls within the scope of the Regulation 44/2001, a court has jurisdiction to determine whether the exception under Article 1(2)(d) applies and, according to its assessment, decide whether it adjudicates the matter itself or whether it refers the case to the arbitral body. [11]

The CJEU adopted the continental European approach for the first time in Rich[12] and confirmed it in Van Uden[13] and West Tankers[14]. Accordingly, the fact that parties have entered into an arbitration agreement does not rule out the application of Regulation 44/2001, which depends on the substantive subject-matter of the case. For instance, if the claim is tort or contract damages, the subject-matter is covered by the Regulation, which should apply. In contrast, issues related to the selection of arbitrators, the choice of the seat of arbitration does not fall within the sope of the Regulation.[15]

Therefore the crucial question is not whether the anti-suit injunction is compatible with Regulation 44/2001. After West Tanker, we know, it is not. Rather it is to determine whether Regulation 44/2001 is applicable or not to the case. If yes, the injunction would breach EU law and should not be taken into consideration. Conversely, if Regulation 44/2001 would not apply, the validity of the injunction should be assessed in the light of other legal instruments.

III. The Gazprom Case

A. Background

The case concerned a Lithuanian company, Lietuvos diju AB, whose main business consisted in buying gas from Gazprom OAO, conveying and distributing it in Lithuania. The main shareholders of the company concluded a shareholder agreement, which contained an arbitration clause. Later on, one shareholder, the Ministry of the Lithuanian State (the Ministry), made an application to Lithuanian regional Court against the activities of the other shareholders. Another shareholder, Gazprom, took the view that the application had breached the shareholder agreement and filed a request for arbitration in which it sought an order to the Ministry to discontinue the proceedings before the regional court. The arbitral tribunal agreed partially with the claim and ordered the Ministry to withdraw or limit some of the claim it brought before the regional Court. However, the Ministry maintained its claim before the regional Court, which order the initiation of the investigations. Gazprom applied to the Court of Appeal in Lithuania for the recognition and enforcement of the arbitral award. The Court of dismissed the claim. The decision went before the Supreme Court of Lithuania, which in turn submitted the CJEU a request for a preliminary ruling regarding the recognition and enforcement of the arbitration award.

The case gained momentum with the opinion of the Advocate General Wathelet, in which he submitted that West Tankers should be overturned and arbitration law should automatically prevail over EU rules of jurisdiction (hence favoring the Anglo-Saxon approach).[16] While his argumentation is debatable, it aroused the hope for some lawyers that arbitration will be completely excluded from the scope of Regulation 44/2001. [17]

B. The CJEU’s Ruling

After excluding the application Regulation 1215/2012 (because the facts of the case took place prior to its entry into force), the CJEU addressed two issues: whether an arbitral award prohibiting a party from bringing a claim before a national court is contrary to Regulation 44/2001; and whether it is compatible with the Regulation 44/2001 for a Member State’s court to recognize and enforce an arbitral award ordering a party to limit its claim before a court of that Member State is compatible with that regulation.

In the first part of the ruling, the CJEU recalled and reaffirmed its jurisprudence on arbitration and on the anti-suit injunction under Regulation 44/2001. It mentioned that arbitration is excluded from the scope of Regulation 44/2001, unless the subject matter of the dispute falls within the scope of the Regulation. Then it recalled that an anti-suit injunction issued by a Court of a Member State restraining a party – to a proceeding or to arbitration proceeding – not to proceed or continue proceeding before a court of another Member is not compatible with the Regulation 44/2001.[18]

Then, in the second part of the ruling, the CJEU held that the issue at hand is not whether an injunction issued by a Court is compatible with the Regulation 44/2001, but whether the recognition and the enforcement of an arbitral award ordering a party to limits its claim before a court of that Member State is compatible with that regulation. The CJEU went on holding that the Regulation 44/2001 does not govern the recognition and the enforcement of an arbitral award. It held that this issue is rather covered by the national and international law applicable in the Member State. In particular, it suggested that the relevant instrument is the New York Convention. [19]

In light of the foregoing it can be concluded that despite the opinion of the Advocate General, the CJEU reaffirmed its case law, with notably West Tanker. It remains to be seen whether this jurisprudence is consistent with the recently adopted Regulation 1215/2012.

IV. Arbitration under Regulation 1215/2012

As mentioned earlier, Regulation 1215/2012 repealed Regulation 44/2001 on January 10, 2015. It contains two provisions, which specifically deals with arbitration. Article 1 (2) (d) excludes arbitration from the scope of the regulation adopting the wording from Regulation 44/2001. Article 73(2) underlines that the Regulation does not affect the application of the New York Convention. In addition, the Regulation features recital 12, which seeks to clarify its relationship with arbitration. It includes 4 paragraphs that have to be read in line with CJEU case law.

Recitals 12 (1) and (4) remind some well-established principles. Recital 12 (1) deals with the jurisdiction of Member States Court with respect to arbitration. It recalls that the Regulation does not prevent them from taking any measures related to arbitration proceeding in accordance to their national law, such as referring the parties to arbitration, staying or dismissing the proceeding or examining whether the arbitration is null and void, inoperative or incapable of being performed. Recital 12 (4) points out that arbitration-related court proceedings are excluded from the scope of the Regulation.

On the other hand, Recitals 12 (2) and (3) bring some changes. Recital 12 (2) mentions that a ruling by a Member State court on the validity and existence of an arbitration agreement, as principal issue or as incidental question, is not subject to rules of the Regulation. In contrast, according to the CJEU case law, when the subject matter of the case falls within the scope of the Regulation, the decision on the validity and existence of an arbitration agreement as preliminary issue is subject to the Regulation. As a result, following recital 12(2), the ruling of a Member State court on the validity and existence of an arbitration agreement would not circulate within the EU under the term of the Regulation, regardless of the subject matter. This will leave the party who relies on the arbitration agreement, to seek freely a ruling on the validity and existence of an arbitration agreement before other Member State’s court.

Recitals 12 (3) provides nevertheless that the judgment on the merit rendered by the first court, while it had determined that the arbitration agreement is invalid as preliminary issue, falls within the scope of the Regulation and can be recognized within the EU. However, Recitals 12 (3) stressed that the New York Convention takes precedence over the Regulation. This means that if an arbitral award is rendered on the same issue as a Member State court’s judgment, other Member States court should recognize the arbitral award first.

It results from the foregoing that the new Regulation does not change the situation of the anti-suit injunction. At the same time, the recognition of the precedence of arbitration awards over Member State court judgments may arguably rebalance the rejection of the anti-suit injunction mechanism. First, following the CJEU ruling in Gazprom, an anti-suit injunction in an arbitral award rather than in interim relief falls within the scope of the New York Convention. Second, in the event of two competing proceedings on the same issue –one before an arbitration tribunal, the other before a national court– the recognition of the arbitration award takes precedence over the recognition of the national court judgment, which may dissuade the party to start a parallel proceeding despite the existence of an arbitration agreement.

V. Conclusion

The CJEU in Gazprom addressed the issue of whether Regulation 44/2001 may preclude the court of a Member State from recognizing and enforcing an arbitral award containing an anti-suit injunction. The case was highly anticipated by those who had hoped that the CJEU would reverse its jurisprudence on anti-suit injunction developed in West Tankers.It is submitted that the underlying issue in Gazprom was rather on the extent of the relationship between Regulation 44/2001 and arbitration. This latter has been the subject of an intense debate between the Anglo-Saxon and the continental European approach.

In Gazprom the CJEU reaffirmed its case law: anti-suit injunction in support of an arbitration is not compatible with Regulation 44/2001 if the subject matter falls within the purview of the Regulation, endorsing hence the continental European approach. At the same time, it held that the same measure contained in an arbitration award falls outside the scope of the Regulation, which is rather covered by the New York Convention.

Regulation 1215/2012 repealed Regulation 44/2001. It integrates the same elements of the previous Regulation on arbitration, while adding some elements. In particular, it is submitted that Regulation 1215/2012 enshrines the precedence of the New York Convention, which could mitigate the impact of the rejection of the anti-suit injunction.

Gilles Muller

[1] Judgment of the Court of 13 May 2015, Gazprom, C-536/13, ECLI:EU:C:2015:316.

[2] Regulation (EC) No 44/2001 of the Council of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2001 O.J. (L 12) 1.

[3] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2012 O.J. (L 351) 1-32.

[4] Id., Rec. 4.

[5] Opinion of Advocate General Wathelet of 4 December 2014, Gazprom, C-536/13, ECLI:EU:C:2014:2414, at 63.

[6] Judgment of the Court of 9 December 2003, Gasser, C-116/02, ECLI:EU:C:2003:657.

[7] Judgment of the Court of 27 April 2004, Turner, C-159/02, ECLI:EU:C:2004:228.

[8] Judgment of the Court of 10 February 2009, West Tankers, C-185/07, ECLI:EU:C:2009:69.

[9] Daniel Rainer, The Impact of West Tankers on Parties’ Choice of a Seat of Arbitration, 95 Cornell L. Rev., 431 (2010); Jae Sundaram, Does the Judgment of the CJEU in Gazprom Bring About Clarity on the Grant of Anti-suit Injunction Under the Brussels I Regulation?, 27 Denning L. J., 303 (2015).

[10] Margaret Moses, Arbitration/Litigation: The European Debate, 35 Nw. J. Int’l L. & Bus.1, 1 (2012).

[11] Opinion of Advocate General Kokott of 4 September 2008, West Tankers, C-185/07, ECLI:EU:C:2008:466, at 39-45.

[12] Judgment of the Court of 25 July 1991, Rich, C-190/89, ECLI:EU:C:1991:319, at 26.

[13] Judgment of the Court of 17 November 1998, Van Uden, C-391/95, ECLI:EU:C:1998:543, at 33-34.

[14] West Tankers, supra note 8, at 22.

[15] Opinion of Advocate General Kokott, supra note 11, at 48.

[16] Opinion of Advocate General Wathelet, supra note 5, at 157.

[17] Trevor C. Hartley, Antisuit Injunctions in Support of Arbitration: West Tankers Still Afloat, 64 ICLQ 4, 965 (2015).

[18] Gazprom, supra note 1, at 28-34.

[19] Id., at 35-44.

Professor Ferrari to speak to Italy’s High Council of the Judiciary

Professor Franco Ferrari, the Center’s Director, is an expert, among others, on transnational litigation at the European level. And it is in this capacity that he will give a talk at Italy’s High Council of the Judiciary, the institution tasked with guaranteeing the autonomy and independence of Italy’s judiciary from the other branches of the state. In particular, Professor Ferrari will address the issue of whether Italian courts should recognize and enforce US punitive damages awards despite claims that such recognition and enforcement would violate Italian public policy, an issue currently pending before the Italian Supreme Court. For the full program (in Italian) click here.

Professor Ferrari publishes paper on the interpretation of the CISG

Professor Franco Ferrari, the Center’s Director, is known for his work on the United Nations Convention on Contracts for the International Sale of Goods (CISG), one of the most successful uniform contract law instruments. This his most recent paper, Professor Ferrari identifies two trends in case law interpreting the CISG: the homeward trend and the outward trend, both of which are disruptive of the goal behind the CISG. The paper analyses the trends and suggests how to tackle them to promote a uniform application of the CISG. For a link to the paper, please click here: