Arbitration: The United States and India - PowerPoint Presentation

1. Arbitration: The United States and IndiaCILE/ICFAI WebinarJuly 17, 2020Drafting the International Commercial Arbitration AgreementRonald A. BrandChancellor Mark A. Nordenberg University ProfessorJohn E. Murray Faculty ScholarAcademic Director, Center for International Legal Educationrbrand@pitt.edu 1

2. Drafting the International Commercial Arbitration AgreementDefining ArbitrationConsent as the Foundation of ArbitrationAdvantages and Disadvantages of ArbitrationThe Basic Legal Instruments for International ArbitrationInstitutional Arbitration v. Ad Hoc ArbitrationThe Text of the Arbitration AgreementApplicable Law and Arbitration2

3. International Commercial ArbitrationBasic Concepts:I. Defining arbitration: -consensual means to resolve disputes -non-governmental decision-maker -parties may choose the decision-maker(s) -a final and binding decision -adjudicatory proceedings3

4. International Commercial ArbitrationForum Selection Clauses: -choice of court agreement -arbitration agreement4

5. International Commercial ArbitrationBasic Concepts:Arbitration does not occur without the consent of all parties involved in the proceedings-Consent is expressed in the arbitration agreement5

6. International Commercial ArbitrationNew York Convention Article II1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.6

7. International Commercial ArbitrationBasic Concepts:Arbitration has been championed on the basis of a number of advantages, both real and perceived7

8. International Commercial ArbitrationAdvantages of Arbitration: 1) Neutrality 2) Centralized Dispute Resolution 3) Enforceability of Agreements and Awards 4) Commercial Competence and Expertise of the Arbitrators8

9. International Commercial ArbitrationAdvantages of Arbitration: 5) Finality of Decisions 6) Party Autonomy and Procedural Flexibility 7) Cost and Speed 8) Confidentiality and Privacy of Dispute Resolution 9) Ability to have States and State Entities as Parties9

10. International Commercial ArbitrationDisadvantages of Arbitration: 1) Inability to join non-consenting parties 2) Lack of availability of appeal for wrong decisions 3) Confidentiality can prevent access to prior decisions of arbitrators 4) Independence of arbitrators prevents the track record of a court 5) Greater difficulty in obtaining preliminary relief 10

11. International Commercial ArbitrationBasic Concepts:A set of basic international arbitration instruments is fundamental to understanding international arbitration11

12. International Commercial ArbitrationBasic Legal Instruments of Arbitration Instruments1) TreatiesThe United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)The Inter-American Convention on International Commercial Arbitration (Panama Convention)12

13. International Commercial ArbitrationBasic Legal Instruments of International ArbitrationThe Lex Arbitri U.S.: Federal Arbitration Act (9 U.S.C.) India: Arbitration and Conciliation Act, 1996 (with 2019 amendments) UNCITRAL Model Law13

14. International Commercial ArbitrationBasic Legal Instruments of International ArbitrationThe Lex Arbitri U.S.: Federal Arbitration Act (9 U.S.C.) State Law: UNCITRAL Model Law Uniform Revised Arbitration Act14

15. International Commercial ArbitrationBasic Legal Instruments of International Arbitration3) Institutional Rules -AAA/ICDR -ICC -LCIA -UNCITRAL Arbitration Rules etc.15

16. International Commercial ArbitrationBasic Legal Instruments of International Arbitration4) Contract Law -basic rules of contract formation -may be domestic law -may be an international treaty (CISG)16

17. International Commercial ArbitrationBasic Concepts:The choice between ad hoc and institutional arbitration is an important one17

18. International Commercial ArbitrationInstitutional Arbitration issues: -rules -default procedures -fees -other issues -preliminary/emergency relief -rules on taking of evidence -administrative assistance -joinder of parties -consolidation of claims18

19. International Commercial ArbitrationBasic Concepts:The text of the arbitration agreement is crucial and must be drafted carefully19

20. International Commercial ArbitrationElements of the Text of the Arbitration Agreement: 1) party consent to arbitrate (the agreement) 2) scope of the arbitration agreement 3) choice of institutional rules 4) choice of the seat (place) of arbitration 5) choice of the number and method of selection of arbitrators 6) choice of the language of arbitration 7) choice of the substantive law governing the parties’ relationship 8) choice of the law governing the arbitration agreement20

21. International Commercial ArbitrationAdditional (Optional) Elements of an Arbitration Agreement: 9) Allocation of costs 10) Interest and currency of award 11) Discovery rules 12) Fast-track or other preliminary procedures 13) Multi-Tier Dispute Resolution 14) State/Sovereign immunity 15) Confidentiality 16) Waiver of annulment 17) Multi-Party Provisions 18) Provisions for jurisdiction and service for purposes of recognition and enforcement21

22. International Commercial ArbitrationBasic Concepts:It is crucial to understand the applicable law for the arbitration agreement, the arbitration, and the substantive contract, and to exercise clear choice of applicable law in order to avoid procedural disputes -it is also crucial to understand who decides the issues to which each law applies22

23. International Arbitration Agreements : Legal FrameworkTwo Basic Doctrines 1) Separability/Severability 2) Competence-competence23

24. International Arbitration Agreements : Legal FrameworkFive basic issues: 1) Consent/Existence 2) Formal Validity 3) Substantive Validity 4) Scope 5) Exclusivity24

25. International Arbitration Agreements : Legal FrameworkTwo Questions Regarding Each Basic Issue: 1) What law governs the issue? 2) Who decides the issue?25

26. International Arbitration Agreements : Legal FrameworkThe “who decides?” question:UNCITRAL Model Law, Art 16:(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the con-tract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.26

27. International Arbitration Agreements : Legal FrameworkThe “who decides?” question:UNCITRAL Arbitration Rules, Art 23:1. The arbitral tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null shall not entail automatically the invalidity of the arbitration clause. 27

28. International Arbitration Agreements : Legal FrameworkConsent -What law governs? -Who determines whether an agreement to arbitrate exists?28

29. International Arbitration Agreements : Legal FrameworkNew York ConventionArticle I1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.29

30. International Arbitration Agreements : Legal FrameworkNew York ConventionArticle II1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.30

31. International Arbitration Agreements : Legal FrameworkThe New York ConventionArticle II. . .3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.31

32. International Arbitration Agreements : Legal FrameworkUNCITRAL Model LawArticle 8. Arbitration agreement and substantive claim before court (1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.32

33. International Arbitration Agreements : Legal FrameworkPremium Nafta Products, Ltd. v. Fili Shipping Co. Ltd., [2007] UKHL 40:Lord Hope of Craighead: “As everyone knows, an arbitral award possesses no binding force except that which is derived from the joint mandate of the contracting parties. Everything depends on their contract, and if there was no contract to go to arbitration at all an arbitrator’s award can have no validity. [competence-competence] So, where the arbitration agreement is set out in the same document as the main contract, the issue whether there was an agreement at all may indeed affect all parts of it.” [severability]33

34. International Arbitration Agreements : Legal FrameworkBuckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 n.1 (2006):“The issue of the contract’s validity is different from the issue of whether any agreement between the alleged obligor and the obligee was ever concluded.”“It is for courts to decide whether the alleged obligor ever signed the contract, whether the signor lacked authority to commit the alleged principal and whether the signor lacked the mental capacity to assent.”[competence-competence]34

35. International Commercial ArbitrationConsent and the U.S. Supreme Court:GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, U.S. Supreme Court, Case No. 18–1048, June 1, 2020-The New York Convention does not conflict with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by non-signatories-Remanded for consideration of equitable estoppel given the specific facts of the case35

36. International Arbitration Agreements : Legal FrameworkWhen an arbitration agreement exists,-NY Convention, Art II(3): “The court of a Contracting State, . . . shall, at the request of one of the parties, refer the parties to arbitration”-FAA (9 U.S.C. § 206): “A court having jurisdiction under this chapter may direct that arbitration be held in accordance with the agreement . . .” 36

37. International Arbitration Agreements : Legal FrameworkFormal Validity -What law governs? -Who determines whether an agreement to arbitrate is formally valid?37

38. International Arbitration Agreements : Legal FrameworkNew York ConventionArticle II1. . . . .2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.38

39. International Arbitration Agreements : Legal FrameworkUNCITRAL Model Law Option IArticle 7. Definition and form of arbitration agreement(As adopted by the Commission at its thirty-ninth session, in 2006)(1) “Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.(2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. 39

40. International Arbitration Agreements : Legal FrameworkUNCITRAL Model Law Option IIArticle 7. Definition of arbitration agreement(As adopted by the Commission at its thirty-ninth session, in 2006)“Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.40

41. International Arbitration Agreements : Legal FrameworkSubstantive Validity -What law governs? -Who determines whether an agreement to arbitrate is substantively valid?41

42. International Arbitration Agreements : Legal FrameworkNew York ConventionArticle II1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.2. . . .3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.42

43. International Arbitration Agreements : Legal FrameworkSubstantive ValidityNote: Article II of the New York Convention contains no provision telling us what law governs the question of substantive validity43

44. International Arbitration Agreements : Legal FrameworkNew York ConventionArticle V. . . . 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that-(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country;44

45. International Arbitration Agreements : Legal FrameworkSubstantive Validity – who decides?20/20 Communications, Inc., v. Lennox Crawford,930 F.3d 715 (5th Cir. 2019)-“class arbitration is a gateway issue for courts, not arbitrators, to decide, absent clear and unmistakable language to the contrary”(joined 4th, 6th, 7th, 8th, 9th, and 11th Circuits)45

46. International Arbitration Agreements : Legal FrameworkScope -What law governs? -Who determines what issues fall within th scope of a given arbitration agreement?46

47. InterpretingThe Arbitration Agreement47What is covered: -tort claims? -statutory claims? -multiple contracts? -multiple parties?

48. International Arbitration Agreements : Legal FrameworkExclusivity -What law governs? -Who determines whether an agreement to arbitrate excludes recourse to the courts?48

49. International Commercial ArbitrationSulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102Moore-Bick LJ at [11]: “It has long been recognised that in principle the proper law of an arbitration agreement which itself forms part of a substantive contract may differ from that of the contract as a whole, but it is probably fair to start from the assumption that in the absence of any indication to the contrary, the parties intended the whole of their relationship to be governed by the same system of law. It is common for parties to make an express choice of law to govern their contract but unusual for them to make an express choice of the law to govern any arbitration agreement contained within it; and where they have not done so, the natural inference is that they intended the proper law chosen to govern the substantive contract also to govern the agreement to arbitrate.” 49

50. International Commercial ArbitrationSulamerica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102 The law applicable to the arbitration agreement is to be determined by applying a three-stage test:is there an express choice of law? if not, is there an implied choice of law? if not, with what system of law does the arbitration agreement have its closest and most real connection?50

51. International Commercial ArbitrationEnka Insaat ve Sanayi A.S v. OOO "Insurance Company Chubb", [2020] EWCA Civ 574 (C.A.) (April 29, 2020)Popplewell LJ at [105]:Where there is an express choice of law in the main contract it may amount to an express choice of the [arbitration agreement] law. Whether it does so will be a matter of construction of the whole contract, including the arbitration agreement, applying the principles of construction of the main contract law if different from English law.. . . . In all other cases there is a strong presumption that the parties have impliedly chosen the curial law as the [arbitration agreement] law. This is the general rule, but may yield to another system of law governing the arbitration agreement where there are powerful countervailing factors in the relationship between the parties or the circumstances of the case.51

52. International Commercial ArbitrationApplicable “Rules of Law” Other than Treaties or National Law: -institutional arbitration rules -IBA rules and guidelines -taking of evidence -ethics -conflicts of interest -drafting arbitration clauses -ICC rules (INCOTERMS, UCP, etc.) -law and “rules of law” (a confusing misnomer)52

53. International Arbitration Agreements : Legal FrameworkTwo Basic Doctrines 1) Separability 2) Competence-competence53

54. International Arbitration Agreements : Legal FrameworkFive basic issues: 1) Consent/Existence 2) Formal Validity 3) Substantive Validity 4) Scope 5) Exclusivity54

55. International Arbitration Agreements : Legal FrameworkTwo Questions Regarding Each Basic Issue: 1) What law governs the issue? -be explicit, and know the first rule of private international law: party choice of law is generally respected 2) Who decides the issue?55

56. Arbitration: The United States and IndiaCILE/ICFAI WebinarJuly 17, 2020Drafting the International Commercial Arbitration AgreementRonald A. BrandChancellor Mark A. Nordenberg University ProfessorJohn E. Murray Faculty ScholarAcademic Director, Center for International Legal Educationrbrand@pitt.edu 56