By: Susanna Chehata

There are many arbitral bodies and standards, but this post will examine the different standards for arbitrators’ neutrality in four different sets of rules.

Both the Singapore International Arbitration Centre (“SIAC”) and the Stockholm Chamber of Commerce (“SCC”) have direct statements that “arbitrators must be impartial and independent.”  Furthermore, the rules of SIAC and the SCC both state that if the parties in the arbitration are of different nationalities, then the arbitrator shall be of a different nationality from the parties, unless otherwise agreed. In contrast to the rules of these two arbitral bodies, the United Nations Commission on International Trade Law (“UNCITRAL”) and the Permanent Court of Arbitration (“PCA”) have rules which state that “nominees for the role of arbitrator must disclose any circumstances that give rise to justifiable doubts about their impartiality or independence.”

When comparing these different rules, it is notable that the rules of SIAC and the SCC are stricter than the UNCITRAL and PCA rules. The former provide for a blanket refusal of non-neutral arbitrators, but the latter mandates only disclosure of circumstances that would give rise to doubts of neutrality. Presumably, at that point, the other party may accept or reject the nominee based on such information

While these different approaches could potentially lead to the same result of disallowing partial arbitral nominees in some situations, in other situations it is possible that there would be a different result. For example, a questionably neutral arbitrator could be immediately rejected under the SIAC and SCC rules, but be permitted to arbitrate under the UNCITRAL and PCA rules, so long as disclosure was made.

It seems as though the latter system is likely more effective and efficient.  The goal of arbitration is to provide for an alternate way to resolve disputes, without using the court system.  Of course, there must still be procedural safeguards to ensure a just result.  However, disclosure of circumstances that give rise to doubts concerning impartiality would seem sufficient to ensure that the proceeding is fair. Additionally, when parties choose arbitration over the court system, they must be cognizant that they are foregoing some procedural safeguards of the courts, such as an unbiased decision-maker, in exchange for a speedier and cheaper option.  Thus, disclosure of potentially partial arbitrators should suffice to meet the goals of arbitration.

Source:

https://globalarbitrationnews.com/3168-2-20170112/

By: Susanna Chehata

Over the past few decades, London has become a major seat for international arbitration due to the presence of the London Court of International Arbitration (“LCIA”), along with many other arbitral bodies.

However, questions have been raised concerning the United Kingdom’s (“UK”) continued prominence in international arbitration because on June 23, 2016, the UK’s electorate voted to leave the European Union, a decision commonly known as “Brexit.”  Some scholars believe that Brexit will have certain ramifications, mainly because the UK will no longer be bound by EU legislation requirements, so it could create confusion. On the other hand, others believe that Brexit will not impact international arbitration in London because it is not governed by EU law, but rather, by international law.

On the one hand, some believe that Brexit will impact international arbitration in the UK.  Currently, when the parties do not have a choice of law clause in the arbitral clause, the law is determined by the Rome I Regulation, which governs European Union conflict of laws issues, and to which the UK had acceded.  Once Brexit is fully implemented, the regulation will no longer apply in the UK, so English law will govern the choice of law question.  However, there is the possibility that the EU and the UK will reach an agreement in which the UK continues to abide by the Rome I Regulation.

On the other hand, some scholars believe that Brexit will not impact London’s involvement in international arbitration. International arbitration is primarily governed by the 1958 New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards to which the UK is a signatory. After Brexit, the UK will remain a signatory and those enforcement rules will continue to apply.  Additionally, the factors that cause parties to choose London for arbitration largely remain the same and independent of EU membership: a large pool of arbitration specialists, the strong Arbitration Act of 1996, and the opportunity to apply English law (although the arbitral seat does not automatically decide the substantive law).

Regardless of the differing views on this matter, scholars on both sides of the argument will most likely agree on at least one thing: only time will tell.  As with many uncertainties surrounding Brexit, we cannot fully and accurately predict the outcome, until the time comes.

Sources:

https://globalarbitrationnews.com/price-independence-brexit-international-arbitration-20160718/http://www.shearman.com/~/media/Files/NewsInsights/Publications/2016/10/Brexit-Potential-

http://www.shearman.com/~/media/Files/NewsInsights/Publications/2016/10/Brexit-Potential-Implications-for-International-Arbitration-in-London-IA-10182016.pdf

By: Susanna Chehata

As arbitration has vastly expanded across the globe in the recent decades, each county has developed its own attitude and laws concerning the enforceability of arbitration agreements.  And while some countries like the United States favor enforceability, other countries have more stringent standards for arbitration agreements and procedures.  The People’s Republic of China (“PRC”) has seen an increase in commercial litigation in the past few years, and courts can be called on to enforce or vacate the award.

In June 2016 in the People’s Republic of China (“PRC”), the Taizhou Intermediate People’s Court refused to enforce an International Chamber of Commerce (“ICC”) award on public policy grounds. The arbitration clause stated that the arbitration would be conducted pursuant to the ICC Rules, but did not specify the seat of the arbitration. Rather, it stated that if one party commenced arbitration, the other party would select the seat. The court held that the arbitration clause was invalid for failure to designate an arbitral institution, and such a result could have been avoided if the parties had specified an arbitral seat in the arbitration clause.

Additionally, in a September 2016 article published on Global Arbitration News titled “Improper Service Poses Risk for Enforcement of Award,” authors Peng Shen and Hailin Cui address how improper service in arbitration proceedings is a ground that PRC courts use to set aside or refuse to enforce arbitral awards made either in China or overseas. Some examples of improper service of process include:  defective process (which could include negligible typographical errors), no reasonable second attempt to serve the other party, intentionally hiding the valid address of the other party, and the receipt of the arbitration papers by a third-party.  One of the authors’ recommendations to avoid this ruling is to draft a highly specific arbitration clause to include specific requirements for service of process.

These incidents demonstrate that the PRC courts strongly prefer highly particular and specific arbitration clauses that fully outline the details of the arbitration. In some respects, it may be advantageous to have such a specific arbitration clause.  For example, specifying the seat of arbitration at the outset may be important, as this factor may have a profound impact on the proceedings. However, in other instances, having such a specific clause may not be necessary to serve the purpose of arbitration, in which parties have the flexibility to determine how to proceed. The goal of arbitration is to provide a form of alternate dispute resolution outside of the confines of ordinary litigation. If courts require such specificity that such that it begins to mirror the specificity of the filings requirements of litigation, the goal of arbitration may become overridden and arbitration may begin to adopt a court-like appearance.

Other resources:

http://globalarbitrationnews.com/improper-service-poses-risk-enforcement-awards/

http://globalarbitrationnews.com/failure-specify-arbitral-seat-arbitration-clause-may-result-unenforceable-award/

By: Susanna Chehata

In 2016, the High Court of England and Wales, in two cases, ruled in ways that could be classified as “pro-arbitration.”  In the first case in February 2016, the Court refused to set aside an arbitral award for the mere taint of corruption and bribery.  In the second case in April 2016, the Court refused to honor the claimants’ request to appoint an arbitrator under Section 18 of the UK Arbitration Act of 1996 because of the nature of the disagreement between the parties, as it concerned party appointment.

In February 2016, the Court refused to set aside an arbitral award in National Iranian Oil Company v Crescent Petroleum Company International Ltd [2016] EWHC 510 (Comm).  The dispute began between the National Iranian Oil Company (“NIOC”) and Crescent Petroleum Company International Limited (“Crescent”) who had entered into a contract for the supply and purchase of gas. The contract included an arbitration clause, requiring arbitration in England and Wales. Crescent commenced arbitration against NIOC for breach of contract for failure to deliver gas, and NIOC raised the defense that the contract had been procured by bribery.  The arbitrators issued an award in favor of Crescent and stated that the contract had not been procured by bribery.  NIOC appealed to the court and argued that there was corruption, and, in the alternative, that the “mere taint” of corruption was sufficient to void the contract and set aside the arbitral award.  The Court disagreed and held that because there was no evidence of corruption, the “mere taint” of corruption was not enough to set aside the arbitral award, and thus, upheld the award, promoting arbitration.

In April 2016, the Court refused to appoint arbitrators, leaving the decision to the parties.  The claimant entered into three, almost identical, insurance policies with three different companies.  In the arbitral proceedings with all three of the companies, each of the companies each appointed different arbitrators.  The claimant, however, appointed the same arbitrator for all three proceedings, who in turn nominated a third arbitrator, Mr. Collins, to chair all three arbitrations.  The three companies opposed this scheme and the claimant petitioned the Court to appoint Mr. Collins as chair to ensure efficiency and consistency.  The Court refused to exercise its authority to appoint an arbitrator. The Court stated that in arbitration, “considerations of party choice, privacy and confidentiality are relevant and important” and thus, the defendants had the right to object.  While a hallmark of arbitration is efficiency, the Court refused to intervene and order the arbitrator to ensure efficiency.  Rather the Court looked to a different hallmark of arbitration, party choice, in making this decision.  Thus, this decision could also be viewed as “pro-arbitration” because although it does not promote efficiency, it promotes party choice.

These two decisions are consistent with one another and the goals of arbitration. Both courts essentially left the arbitration proceedings to play out among the parties, and without court intervention.  After all, arbitration is alternative dispute resolution.

Sources:

http://globalarbitrationnews.com/setting-aside-arbitral-awards-on-the-basis-of-bribery-or-corruption-is-the-taint-of-bribery-sufficient/

http://globalarbitrationnews.com/the-powers-and-limitations-of-the-court-in-arbitration/