Introduction to International Commercial - PowerPoint Presentation

1. Introduction toInternational Commercial ArbitrationSteven LimManaging Partner, Singapore, Nabarro LLPEurocham Breakfast Talk – Commercial Arbitration22 September 2015

2. OverviewRise in international arbitrationFoundations of modern international arbitrationGetting your arbitration clause rightSelecting a place (seat) for arbitrationChoosing institutional or ad hoc arbitrationChoosing the the right institutionInvestment treaty arbitration

3. Rise in use of international arbitration

4. Prevalence of Arbitration Preferred Mechanisms for Resolving International DisputesSource: PricewaterhouseCoopers Survey 2013

5. Prevalence of Arbitration Preferred Mechanisms for Resolving International DisputesSource: PricewaterhouseCoopers Survey 2013

6. Prevalence of Arbitration Preferred Mechanisms for Resolving International DisputesSource: PricewaterhouseCoopers Survey 2013

7. Why arbitrate international disputes?International neutralityInternational enforcement: New York ConventionFlexibility / party autonomyExpert arbitrators Privacy / ConfidentialityFinality of decisions

8. Limitations of arbitrationNo appealThird parties / no joinder of parties

9. ArbitrabilityNot all types of issues can be submitted to arbitrationNational laws determine arbitrability and what is arbitrable in one jurisdiction may not be arbitrable in anotherMay be necessary to examine the following:the national laws of the parties involvedthe law governing the arbitration agreementthe law of the seat of arbitrationthe law of the likely place of enforcementPossible examples:Antitrust and competition lawsPatentsBankruptcy

10. Foundations ofModern International Arbitration National LawsNew York ConventionUNCITRAL Model LawEstablished Arbitration Rules / Institutions

11. New York ConventionDates back to 1958Over 140 signatory countriesPredates the formation of UNCITRAL but promotion of the convention is part of UNCITRAL’s work

12. New York ConventionNew York Convention requires national courtsto recognize the validity of arbitration agreements subject to specified exceptions to refer parties to arbitration when they have entered into a valid agreement to arbitrate to recognize and enforce foreign arbitral awards subject to a limited number of specified exceptions Procedure for enforcing an award varies from state to state since a state enforces awards according to its own rules but must not be contrary to the New York Convention

13. Grounds for Non-Enforcement under the New York ConventionIncapacity of partyInvalidity of the arbitration agreementLack of notice or lack of fairness in the processArbitrator acting in excess of authorityConstitution of the tribunal or the arbitral procedure was not consistent with the agreement of the partiesAward not yet bindingAward has been set asideSubject matter of the dispute is not arbitrablePublic policy

14. UNCITRAL Model LawUNCITRAL Model Law on International Commercial ArbitrationA model law for adoption as part of domestic legislationStates enacting legislation based upon a model law have the flexibility to depart from the textOver 60 countries have arbitration legislation based on the UNCITRAL Model LawModel Law designed to work in conjunction with the party autonomy and the arbitration rules – “unless the parties have agreed otherwise.”In case of conflict between the arbitration rules and the Model Law, generally the chosen arbitration rules will prevail

15. Party AutonomyGENERAL RULE: If parties have agreed on a particular matter, that agreement will control and prevail over arbitration rules, national law, international arbitration practice or international conventions and treatiesEXCEPTION: Where arbitration rules, national law, international arbitration practice or the international convention or treaty is mandatoryGenerally, few mandatory requirements in arbitration rules and national arbitration laws

16. Arbitration RulesOne of the significant ways parties exercise their autonomy is through the inclusion, in their commercial contracts, of arbitration agreements incorporating institutional or ad hoc arbitration rulesE.g. UNCITRAL Arbitration Rules, ICC Rules, SIAC Rules, HKIAC RulesArbitration rules can usually be varied by party autonomy

17. Role of national laws in international arbitrationLaw governing the parties’ capacity to enter into an arbitration agreementLaw governing the arbitration agreement and the validity of that agreementLaw governing the procedure of the arbitration (i.e. lex arbitri, usually the law of the seat of the arbitration or the legal place of the arbitration)Law, or the relevant legal rules, governing the substantive issues in dispute (i.e. applicable law, governing law or substantive law) Law governing recognition and enforcement of the award

18. Getting Your Arbitration Clause RightIssues to consider when drafting arbitration clauses:ScopeChoice of Law (governing the dispute / arbitration agreement)Number and Choice of ArbitratorDomestic or InternationalPlace of Arbitration (seat)Ad hoc or InstitutionalThird partiesPrerequisites to commencement

19. SIAC Model ClauseAny dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for the time being in force, which rules are deemed to be incorporated by reference in this clause.The seat of the arbitration shall be [Singapore].* The Tribunal shall consist of ___** arbitrator(s) to be appointed by the Chairman of the SIAC.The language of the arbitration shall be ___.*Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace “[Singapore]” with the city and country of choice (e.g. “[City, Country]”). **State an odd number. Either state one or three

20. Dealing with Third PartiesArbitration consensual process – limitation with regard to third partiesIs the contract part of or related to one contractual chain or scheme?If non-party interest may be relevant, should provide a mechanism for involving the non-partyConsolidation clausesUmbrella dispute resolution clauses

21. Where do you arbitrate?Usually neutral countryIs it a contracting state to the New York Convention?CIArb London Centenary “Safe Seat” PrinciplesA clear effective, modern international arbitration law – law recognizes, assists but does not interfere e.g. – interim relief / setting asideAvailability of court access and an independent competent judiciary with expertise in international arbitration and respectful of the parties’ choice of arbitration as their method of settlement of disputesAvailability of legal expertise and good counsel and no restrictions on appointment of arbitrators or counselPlace of Arbitration

22. Place of ArbitrationAccessibility and safety – easy access free from unreasonable constraints on entry, work and exit for parties, witnesses, counsel and arbitrators.Facilities – availability of infrastructure for arbitration – hearing rooms, hotels, transcription servicesEase of commuincationEducation – commitment to education of counsel, arbitrators, the judiciary, experts, users and students of the character and autonomy of international arbitration and to the further development of learning in the field of arbitration.

23. Place of ArbitrationEthics – professional and other norms which embrace a diversity of legal and cultural traditions, and the developing norms of international ethical principles governing the behaviour of arbitrators and counsel e.g. – IBA guidelines on Conflicts of Interest / on Third Party RepresentationEnforceability – adherence to international treaties and agreements governing and impacting the ready recognition and enforcement of foreign arbitration agreements, orders and awards made at the Seat in other countriesImmunity – a clear right of arbitrator immunity for civil liability or anything done or ommitted to be done by the arbitrator in good faith in his or her capacity as arbitrator

24. Place of ArbitrationLocation of evidence and witnessCosts – of travel, facilities, arbitrators and counselIf no seat chosen, usually arbitral tribunal (or in under some rules institutions) will decide on seat

25. Choice of LawThree important choices to be made for governing lawlaw governing substance of contract and disputelaw governing the arbitration agreementlaw governing the arbitration (usually law of the seat – recommended)

26. Ad Hoc or InstitutionalAd Hoc ArbitrationNo arbitral institution administers or supervises the arbitrationUsually parties select preexisting set of procedural rules designed to govern ad hoc arbitrations (e.g. UNCITRAL Arbitration Rules)Sometimes an appointing authority is designated (e.g. arbitral institutions, courts, individuals)

27. Ad Hoc or InstitutionalInstitutional ArbitrationProceedings are administered by an organization (e.g. SIAC, HKIAC, ICC)Usually in accordance with its own rules of arbitration

28. Ad Hoc or InstitutionalExample of Ad Hoc – UNCITRALPromulgated by UNCITRAL in 1976UNCITRAL does not act as an administrator or charge feesDesigned for use in ad hoc international arbitrationsProvides a tried and tested procedural framework Rules of many arbitral institutions are based on these rules

29. Ad hoc or InstitutionalIf institutional, ensure institution is correctly named and rules are incorporated – use model clause where there is oneNo excuse for pathological clausesConsider the rules that go with choice of institutionIf ad hoc, consider if clause should include detailed provisions for conduct of arbitration e.g. appointment of arbitrators, default provisions, discovery, interim relief

30. Number and choice of arbitratorsUsually one or threeRules usually have default provisionsProvide for how arbitrators will be chosenAppointing authorityBased on listAlso consider appointment of presiding arbitrator (if there is one)

31. Advantages to institutional arbitration?CostSpeedSupport and GuidanceArbitrator SelectionFinancial ManagementEnforceability

32. Advantages to institutional arbitration?Use of model clauses – avoidance of pathological clausesIncorporation of best practices through continual rules review and developmentAvailability of emergency proceduresChallenges to arbitratorsAvailability of commentary on rules, procedure and practicePublication of awards

33. Choosing the Right Arbitral InstitutionWhich arbitration institution should you choose?Internationally recognised institutionWell developed rules incorporating latest best practicesInternationally experienced supervisory board or institutional courtExperienced and sophisticated case management team

34. Singapore International Arbitration Centre (SIAC)5th Edition 2013 RulesAd Valorem Fee Structure Arbitrators’ fees are based on a fee schedule Administrative fees lower than that of the ICC’s Scrutiny of the AwardInnovationsEmergency ArbitratorExpedited arbitrationSIAC Court of ArbitrationNew Users’ CouncilContinual rule review – 2015 /16 Rules revision announcedAlstom Technology v. Insigma TechnologySIAC / Singapore Courts flexible approach – SIAC administers arbitration using ICC rules

35. Hong Kong International Arbitration Centre (HKIAC)Started out providing facilities and support services for ad hoc international arbitrationsHKIAC Administered Arbitration Rules (2013)based on UNCITRAL Arbitration Rulesemphasis on flexibility and party autonomy (e.g. parties choose whether the arbitrators should be compensated on the basis of agreed rates or in accordance with a fee schedule)‘light touch’ administrationImplements emergency arbitrator procedure / expedited procedure

36. Investment Treaty Arbitration – What is it?Founded in public international law and not private lawHost state (country receiving investment) assumes investment protection obligations in treaty (with investor's home state)Theory – to encourage investmentsHost state makes an open invitation to investors from contracting states to arbitrate disputesOffer found in investment arbitration provision in treatiesDisputes commonly referred to ICSID but UNCITRAL is a popular alternative

37. Investment Treaty Arbitration – Types of treatiesTypes of treatiesMultilateral treatiesASEAN Agreement for the Promotion and Protection of InvestmentsEnergy Charter Treaty (only Asian members: Japan and Mongolia)

38. Investment Treaty Arbitration – Bilateral treatiesBilateral treatiesCambodia has signed 21 BITs, of which 11 are in force(China, France, Germany, Japan, South Korea, Netherlands, Singapore, Thailand)Singapore has 19 BITsThailand has 39 BITsIndonesia has 59 BITsMalaysia has 66 BITsChina has more than 130 BITsIndia has signed 82 BITs, of which about 72 are in force

39. Investment Treaty Arbitration – Who is an investor?Who is an investor?Natural persons who are nationals of a contracting stateCompanies incorporated in a contracting stateCompanies incorporated in the host state but controlled directly or indirectly by nationals of a contracting party

40. Investment Treaty Arbitration – Who is an investor?Broad reach of concept of nationalityCompanies can choose nationality to benefit from a treaty, selecting most favourable regime from potential applicable treatiese.g. in investor-state arbitrations involving Dhabol power plant project in India, multinational companies brought claims under the Mauritius-India BIT by structuring the investment through Mauritius

41. Investment Treaty Arbitration – What is an investment?What is an investment?Usually defined broadly covering every kind of asset or every kind of investmentConcept has evolved from conventional notion of an inflow of funds into the host state and covers direct and indirect investments and contractual and other transactions having economic valueDeutsche Bank AG v Democratic Socialist Republic of Sri Lanka – hedging agreement was an investmente.g. construction contract, acquisition of promissory notes issued by host stateClearly investment in a power plant project, refinery or production sharing contract is an investment

42. Investment Treaty Arbitration – Host state obligationsHost state obligations in investment treaties:Fair and equitable treatmentMay not be reduced to a precise statement of a legal obligationLeaves considerable room for judgment of 'fairness' and 'equity' in light of all the circumstances of the case

43. Investment Treaty Arbitration – Host state obligationsNational and most favoured nation treatmentApplies to substantive rights in other treatiesMay also apply to procedural rights (Emilio Agustín Maffezini v The Kingdom of Spain - Argentine investor could rely on less stringent procedural requirements in Chile-Spain BIT)Free transfer of funds related to investments

44. Investment Treaty Arbitration – Host state obligationsUmbrella clause - observance of specific investment undertakingsSo called because it puts contractual commitments under the treaty's protective umbrellae.g. ASEAN AgreementEach Contracting Party shall observe any obligation arising from a particular commitment it may have entered into with regards to a specific investment of nationals or companies of the other Contracting Parties

45. Investment Treaty Arbitration – Procedural mattersFork in the road provisionsSome treaties contain a clause that if the investor submits a dispute to the local courts of the host state, or to any other agreed dispute settlement procedures, it loses the right to arbitrateFork in the road provisions have been read restrictively by arbitral tribunals to only apply where the same investment protection claims were raised in the earlier action

46. Thank YouIf you have any questions, please do not hesitate to contact:STEVEN LIM 12 Marina Boulevard, #35-01Marina Bay Financial Centre Tower 3Singapore 018982Phone: +65 6645 3281s.lim@nabarro.com

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