Transnational Notes

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, 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, 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 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.

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.

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.

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.

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, 9^th 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 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, 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.

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. 

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 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 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:

https://academic.oup.com//ulr/article/22/1/244/3091168/Autonomous-Interpretation-versus-Homeward-Trend?guestAccessKey=e3e54fd0-6b34-4c04-80fc-cd3a40c834d4

Professor Ferrari, the Center’s Director, has just edited a book on the impact of EU on international commercial arbitration. For many years, it seemed almost a truism to state that EU law and the law of international arbitration were two very distinct areas of law that did not intersect. Most scholars believed each area pursued its own course without impacting on the other. The papers published in the book edited by Professor Ferrari, which were presented at a conference hosted by the Center for Transnational Litigation, Arbitration and Commercial Law on October 31 and November 1, 2016, show that, today, these areas of law are becoming ever more interconnected and that the impact of EU law on the law of international arbitration can be felt over the course of all stages of an international arbitration, from the pre-award stage to the post-award stage. Furthermore, and the papers authored by scholars and practitioners from both sides of the Atlantic make this abundantly clear, EU law has not only impacted international arbitrations seated in EU Member States, but has also influenced arbitrations seated around the world, a fact practitioners and arbitrators must come to acknowledge.

Professor Ferrari, the Center’s Director, will give a talk during the arbitration session of the third edition of the Global Law Week, this one to be held at the Free University of Brussels from 15-19 May 2017. The arbitration session will be moderated by Alexandre Hublet, a graduate of NYU’s LL.M. program on International Regulation, Litigation and Arbitration. For the full program click here.

One of the goals of the Center is capacity building in the areas on which the Center focuses. Over the years, the Center has hosted many capacity building events around the globe. On 15 and 16 June, the Center, together with the Thailand Arbitration Center and UNCITRAL Asia Pacific, hosts another such event, this one aimed as practitioners and government lawyers operating in Thailand and surrounding countries. The speakers include Professor Franco Ferrari, the Center’s Director, Dr. Friedrich Rosenfeld, a Global Adjunct Professor at NYU Law in Paris, as well as Dr. Joao Ribeiro, Head of UNCITRAL Regional Centre for Asia and the Pacific, and Professor David Halloway from City University of Hong Kong. For the full programme click here.

Professor Franco Ferrari, the Center’s Director, who specializes in international commercial law and international commercial and investment arbitration, has just been added to the panel of arbitrators of the China International Economic and Trade Arbitration Commission. This appointment comes after recognition of Professor Ferrari’s work by the Thailand Arbitration Center, which appointed Professor Ferrari as President of its Arbitrator Committee a year ago.

Professors Franco Ferrari and Clayton P. Gillette, two experts on the United Nations Convention on Contracts for the International Sale of Goods (“CISG”), have just published an anthology (in two volumes) on the CISG. This authoritative collection presents carefully selected scholarly articles that describe and examine the principles of international sales law, as set forth in the United Nations Convention on Contracts for the International Sale of Goods (CISG). These seminal pieces reflect various viewpoints of authors from different countries and legal systems, and offer a range of distinct methodological approaches to legal analysis. Together with an original introduction by the editors, these volumes provide the reader with both an international and an interdisciplinary perspective on many CISG topics. As for the 41 articles included in the two volumes, they are divided into 12 parts, entitled “Introduction”, “The CISG and the Unification of Law”, “Sphere of Application: When Does the CISG Apply?”, “Issues Excluded from the CISG”, “General Principles and Interpretation”, “Trade Usages and Other Sources of Law”, “Form, Formation and Pre-Contractual Liability”, “Obligations of the Parties”, “Risk of Loss”, “Exemption”, “Breach of Contract” “Remedies”, and “Final Provisions”. For more information, please click here.

In his Opinion in cse C-54/16 dated 3 March 2017, Advocate General Szpunar cited several papers authored and edited by Professor Ferrari, the Center’s Executive Director. The Opinion addresses, among other matters, the issue of what qualifies as an “international” contract. In doing so, Advocate Szpunar also refers to the Regulation on the law applicable to contractual obligations (Rome I), even though it was not applicable to the specific contract (given the date of the contract’s conclusion). And it is in this context that Advocate Szpunar cites the work by Professor Ferrari to conclude that the fact that a contract agreed upon between two companies registered in one and the same country containing a choice of law in favor of the laws of a different country renders the situation international enough to trigger a conflict of laws approach.