BRIEFING & ROUNDTABLE

FRAMEWORK OF INTERNATIONAL ARBITRATION

Marie Stoyanov, YIAG Co-chair – Freshfields Bruckhaus Deringer LLP, Paris

Warsaw, Poland – 16 June 2011

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THE FRAMEWORK OF INTERNATIONAL (COMMERCIAL) ARBITRATION

1. Introduction2. Legal regime3. Arbitration agreement

4. Applicable law5. Arbitral Tribunal6. Enforcement

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1. INTRODUCTION

1.1 Key elements of international commercial arbitration

• Dispute settlement mechanism• Consensual – Party autonomy• Private – confidential?• Leads to a final, binding and enforceable decision – easy

circulation• “International”• “Commercial”

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1.2 Disputes resolved through arbitration

• Commercial disputes between private parties in various industries, involving e.g.: – JV and shareholders’ agreements– Sales and distribution agreements– Construction projects

• May involve application of mandatory laws, e.g. EU competition law

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• Mixed arbitrations where a state or state entity is a party, e.g. investment disputes. Main rules applied:– ICSID Rules– UNCITRAL Rules– PCA Rules

• “Arbitration without privity”

• Inter-state arbitration: border disputes; diplomatic protection disputes; treaty disputes

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1.3 Advantages of international commercial arbitration

• Finality and binding nature of outcome - in principle• Enforceability under international conventions • Neutrality: no involvement of possibly hostile “foreign”

judiciary• Expertise of arbitrators• Procedural flexibility• Speed and costs?

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1.4. Legal Regime

• International conventions• National laws• Arbitration agreement• Arbitration rules• Soft laws/custom/practice

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1.5 International Conventions

• Convention on the Execution of Foreign Arbitral Awards (Geneva 1927)

• UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)

• Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington 1965)

• North-American Free Trade Agreement (San Antonio, Texas, 1992)

• Energy Charter Treaty (Lisbon, 1994)

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2.1 New York Convention (NYC)• Art II NYC: recognition of arbitration agreement

– Positive : courts to refer parties to arbitration– Negative : courts must decline jurisdiction - in principle

• Recognition and enforcement of awards• Limited grounds of refusal (Art V NYC)• 145 Member States – no equivalent for court decisions

2. LEGAL REGIME

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2.2 National arbitration laws

• Law of the seat – in principle

• Law of the place of enforcement

• UNCITRAL Model Law (Model Law)

• Equality of the parties and limited intervention of the courts (in principle)

• But court assistance in aid of arbitration

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2.3 Arbitration Rules

• Institutional arbitration rules:– ICC Rules; LCIA Rules; ICDR/AAA Rules; CIETAC– Swiss Chambers; Vienna Chamber; Stockholm Chamber; DIS;

CEPANI; NAI– Specialised rules: WIPO; CAS; ICSID

• Ad hoc arbitration rules: UNCITRAL Rules - option of appointing authority

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2.4 Arbitration practice

• Filling the gaps

• Different legal cultures

• IBA Rules on the Taking of Evidence, on Conflict of Interests

• What to expect: the UNCITRAL Notes on Organising Arbitral Proceedings

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2.5 What is the legal regime applicable to your arbitration?

• What does the Arbitration Agreement say?

• What do the Arbitration Rules provide?

• What is the procedural law?

• Do mandatory rules apply?

• What is the relevance of international instruments (NYC or other)?

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3. ARBITRATION AGREEMENT

3.1 Concept and enforcement

• Arbitration clause / Submission agreement• Negative effect: lack of jurisdiction of the courts • Positive effect: obligation to submit dispute to arbitration • The ideal world: enforcement under NYC or more

favourable (Art VII NYC)• Remember national differences: e.g. France v Model Law,

UK v India – seat v enforcement (Dallah v Pakistan)

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3.2. Principle of Compétence-Compétence• Arbitral Tribunal first judge of its own jurisdiction • Principle recognised by NYC (Art II(3))• Principle recognised by most arbitration laws and rules,

e.g.:– Art 16 Model Law – Art 23.1 LCIA Rules

• Jurisdiction of the Arbitral Tribunal reviewed by the state courts: setting aside proceedings / enforcement proceedings – review de novo?

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• Separability from main contract

– unaffected by invalidity of main contract

– may be governed by a different law

• Principle recognised by most arbitration laws and rules, e.g.:

– Art 16.1 Model Law

– Art 23.1 LCIA Rules

3.3 Autonomy

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3.4 Key requirements & Drafting guidelines

• Elements and choice– Scope of dispute(s)– Arbitration rules: track-record and neutrality– Arbitrators: number, qualification, appointment -

• NB: Jivraj v Hashwani• NB: CIETAC

– Seat: arbitration law; track-record; neutrality– Language of arbitration: costs, convenience and neutrality– Rule of law/amiable compositeur / reasons– The simpler the better

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3.5 Model arbitration clausesLCIA recommended clause:

“Any 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 under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause.The number of arbitrators shall be [one/three].The seat, or legal place, of arbitration shall be [City and/or Country].The language to be used in the arbitral proceedings shall be [ ].The governing law of the contract shall be the substantive law of [ ]. ”

ICC recommended clause:“All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. It is desirable for the parties to stipulate in the arbitration clause itself:the number of arbitrators the place of arbitration; the language of the arbitration; and the law governing the contract.”

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4. APPLICABLE LAW

4.1 Procedural law

• Arbitration agreement; subject to

• Arbitration rules; and

• Law of the seat

• Which one prevails? Party autonomy v Mandatory rules

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4.2 Substantive law

• Express choice

• Conflict of laws or voie directe – LCIA Art 22.3/UNCITRAL Art 35.1/ICC Art 17.1)

• Terms of the Contract; trade usages– Lex mercatoria; UNIDROIT Principles?

• International public policy and mandatory rules

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5. ARBITRAL TRIBUNAL

5.1 Appointment

• Agreement of the parties

• Arbitration rules and role of institution (different appointment procedures, e.g. LCIA, ICC)

• National arbitration law and role of national courts of the seat (ad hoc)

• Right of the parties or delusion?

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5.2 Qualifications Criteria for selecting arbitrators

• Nationality

• Expertise and experience / legal culture

• Language ability

• Reputation and temperament – interaction with panel members

• Independence and impartiality

• Availability

• Location

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5.3 Challenge to arbitrators

• Disclosure obligations (national laws; IBA Guidelines on Conflicts of Interest)

• Grounds for Challenge (bias – other misconduct? issue conflict?)

• Time limit for challenge (e.g. LCIA: 15 days)

• Role of the institutions (e.g. LCIA, ICC)

• Control by state courts (depending on national procedural law)

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5.4 Decision-making and immunity

• Secrecy and confidentiality?

• Truncated Tribunal

• Dissenting opinions

• Immunity of arbitrators?

6. Enforcement

• Main purpose of getting an arbitral award – recovering damages (or getting injunctive relief)

• Facilitated by NYC• Bear location of assets (and possible immunities) in mind• Look at national laws and court practice at place(s) of

enforcement• Good news: most awards are complied with voluntarily