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The Commercial, Shipping & Investment
ARBITRATION WATCHApril-June 2013 Issue no. 18
________________________________________
1. NEWS
Permanent Court of Arbitration (PCA)
Releases 2012 Annual Report
The PCAs International Bureau has released its
2012 Annual Report. The report has a new
format and presents the facts and figures
related to the PCAs activities in a more
readable format. The Report highlights that the
PCA administered an increased number ofcases. During 2012, 88 cases were administered;
6 cases were state-to-state arbitrations; 54
investor-state arbitrations; 27 arbitrations and 1
expert determination, under contracts or otheragreements to which at least one party is a State,
State-controlled entity, or inter-governmental
organization, including 1 case under the PCA
Optional Rules for Arbitration of Disputesrelating to Natural Resources and/or the
Environment. Download 2012 Annual Reviewhere.
KLRCA to more than double the number of
arbitration cases per year by 2016
The Kuala Lumpur Regional Centre for
Arbitration (KLRCA) will aim to strengthen its
role as a regional hub for arbitration by
adjudicating 250 cases per year by 2016. A
panel of 700 arbitrators, 500 of whom are
international arbitrators, will be given the task
to reach this goal from last years figure of 100
cases. These goals have been set by the centres
director Datuk Sundra Rajoo who also boasted
"Kuala Lumpur is 20% more cost effective (inarbitration proceedings) compared with other
arbitration institutions in the region".
The annual review of Investor-State Dispute
Settlement Cases (ISDS) has been released by
UNCTAD
UNCTADs annual review of Investor-State
Dispute Settlement (ISDS) cases has been
released, providing statistical data on cases andan overview of arbitral decisions issued in 2012,
including a briefing of systemic challenges
made. 62 new cases were initiated in 2012, thehighest ever filed in one year, confirming
foreign investors are increasingly resorting to
investor-State arbitration. The review also
addresses legal developments in investment
arbitration with reference to the specific cases
and issues. The review can be downloaded here.
India becomes one of the top three seats for
arbitration
A survey by Pricewaterhouse Coopers India hasshown that 91% of companies in India with a
dispute resolution policy prefer to use
arbitration, and not litigation, in any future
disputes. Confidence in this alternative disputeresolution mechanism in India means it is in the
top three seats for arbitration along withSingapore and England.
International Arbitration could be used in
the case of Ethiopias Blue Nile Dam
International Arbitration could be an option for
Egypt and Ethiopia over Ethiopias
CONTENTS
1. News
2. Laws & Treaties
3. Court cases
4. Notes
5. Contributors
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controversial Blue Nile Dam project. A
mechanism used successfully by Egypt to settlea dispute with Isreal over the town of Taba,
managing to retrieve it in the early 1980s.
IBA Council approves new guidelines on
Party Representation in International
Arbitration
The IBA council has approved new guidelines
on Party Representation in International
Arbitration, aiming to preserve the integrity and
fairness of the arbitration procedures through
transparency and predictability of the
proceedings. The guidelines seek that partyrepresentatives should act with integrity and
honesty, and they should not engage in activities
designed to produce unnecessary delay or
expense, including tactics aimed at obstructingthe arbitration proceedings. These can be
adopted in whole or partly, on a consent basis,
by both parties to the arbitration, or by the
arbitral tribunals, if deemed they can do so. Theguidelines were adopted on 25 May 2013.
New name for the ICC
The ICC Executive Board has announced the
new name of the Commission as the ICC
Commission on Arbitration and ADR. This aims
at better reflecting the activities of the
commission, which encompass not only
international arbitration but all other disputeresolution services offered by ICC.
New arbitration centre in Seoul
Seoul looks to become the leading centre for
international arbitration with the opening of the
Seoul International Dispute Resolution Centre.The facility, financed by the citys municipal
government and the Korean Bar Association, is
state-of-the-art, modelled on SingaporesMaxwell Chambers. Deals have already been
made to host arbitrations under the InternationalChamber of Commerce, American Arbitration
Association, London Court of Arbitration
Association, Singapore International Arbitration
Centre and Hong Kong International Arbitration
Centre.
Law Society welcomes new arbitration
centres
The Law Society of England and Waleswelcomed two of Africas newest arbitration
centres at a reception held on 8 July. Guests
were able to learn more about The Lagos Court
of Arbitration and the Kigali International
Arbitration Centre, also learning the benefits
and opportunities of international arbitration.
Chinese courts conflicting decisions.
The newly rebranded sub -commissions, SHIAC
(Shanghai International Arbitration Center) and
SCIA (Shenzhen Court of International
Arbitration), which broke away from CIETAC
(China International Economic and TradeArbitration Commission), have had their
validity and jurisdiction put into question.
Awards issued by these bodies have beenrefused enforcement.
Latin American states meet over
transnational companies
Twelve Latin American states held a meeting to
discuss an ever-increasing number of legal
disputes brought against Governments by
transnational companies. The objective is tocreate a mechanism for settling investor-State
disputes in a fair and balanced manner. The fulldeclaration can be viewed here.
________________________________________
2. LAWS & TREATIES
Transatlantic Trade and Investment
Partnership (TTIP) negotiations begin
The US and the EU have agreed to startnegotiations for their ambitious free-trade
agreement. The first round took take place in
Washington on 8 July 2013, with the hope of an
agreement by the end of 2014.
Sao Tome and Principe and Montenegro
Ratify ICSID Convention
Montenegro signed the ICSID Convention onJuly 2012 and has deposited with the WorldBank an instrument of ratification of the
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convention on 10 April 2013 entering into force
10 May 2013. The Democratic Republic of SaoTome and Principe signed the ICSID
Convention on 1 October 1999, depositing an
instrument of ratification with the World Bank
on 20 May 2013, entering into force 19 June
2013.
Updated list of BITs between EU Member
States and Third Countries
On 8 May 2013, the European Commission has
published the list of BITs signed by Members
States with Third parties. This list has been
compiled pursuant to Regulation 1219/2012 of
12 December 2012, establishing transitionalarrangements for BITs between Member States
and third countries.
Myanmar becomes 149th
State party to the
New York Convention.
Myanmars membership is due to be enforced
from 15 July 2013. The accession to the
convention is a significant step by the Myanmar
Government, creating a legal environment that
would be seen as attractive to foreign investorsand instil confidence in the Government. Since
2011 the Government has made substantial
political, economic and legal reforms; theseinclude a new Foreign Investment Law, in force
since 2012. Concern with corruption in
Myanmar was highlighted in the 2012
Transparency Internationals Corruption
Perception Index, ranking it 172 out of 176
countries.
India to renegotiate its 82 Bilateral
Investment Protection Agreements (BIPAs)
India will renegotiate its 82 bilateral investment
treaties, safeguarding the countrys interests, as
many foreign investors, facing adverse policy
action, have turned to international arbitration
for a solution. The government asserts that
around seventeen investors have announced
arbitration actions to the government, invokingprovisions of various BIPAs to protect their
investments, among others Deutsche Telekom,
Germany, Vodafone International Holdings BV,
Sistema of Russia, Children`s Investment Fundand TCI Cyprus Holdings.
Belgium modernises Arbitration Act.
As of 1 September 2013, Belgium will adopt a
new and modernised Arbitration Act, based on
the UNCITRAL Model Law. As Belgiums
main Institute of Arbitration, CEPANI hopes
through modernisation makes itself a more
attractive seat for arbitration. Through themodernised Arbitration Act: electronic notices
of arbitration can be sent to the defendant;
annulment proceedings will be decided in one
instance only, without an appeal; if an arbitral
award can be saved from annulment, the court
can remit a case to the arbitral tribunal to
eliminate the grounds for the annulment; partiescan choose a procedure for any challenge,
referring to arbitral rules of institutions, such as
the ICC or CEPANI, which typically provide
for such procedures. The new Arbitration Actbrings the Belgian arbitration practice more in
line with most international practices and
therefore more accessible for arbitration users.
The Belgium forum expects, therefore, to beconsidered more often for international
arbitration.
Romania: New provisions regarding the
written form of the arbitration agreement
Earlier this year, new civil procedure rules
entered into force, offering a new, more flexible
appearance to both internal and international
arbitration. First of all, it should be noted that,according to the previous legal provisions, the
only acceptable form of the Arbitral Agreementwas the written form, which was stipulated in a
single article. At present, the new Romanian
procedural law provides a more flexible,
advantageous approach, inspired by the New
York Convention on the Recognition andEnforcement of Foreign Arbitral Awards,
establishing alternative ways for the fulfillment
of the written form condition. A cleardistinction is made between national and
international arbitration, affecting variouselements of the arbitration procedure, including
the form of the Arbitral Agreement which is
currently regulated by two separate articles
(article 548 and article 1.112 of the New Civil
Procedure Code), corresponding to each type of
arbitration. Thus, in internal arbitration, thewritten form of the Arbitral Agreement is also
deemed to be fulfilled when the agreement was
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reached by correspondence or exchange of
procedural documents, while in internationalarbitration a valid agreement may also be
reached by telegram, telex, telecopy, email or
any other means of communication that may
constitute an evidence of the transmission. A
setback of the new regulations is also to be
noted, namely, the mandatory written form,authenticated at the notary public, for the
arbitration agreements regarding litigation in
relation to the transfer of the property right
and/or the constitution of other real rights over
immovable assets. It is our opinion that, in
practice, this provision is prone to generate
several issues. Given that most internal arbitralprocedures are the result of an arbitration clause
and not the result of a compromise, arbitration
will only be possible if the parties previously
sign an authenticated document comprising thearbitration agreement.
_______________________________
3. COURT CASES
Canada
Class action waiver in arbitration agreement
bars claimant from bringing action in
Canadian courts and moving to certify class
On February 14, 2013, the Federal Court ofAppeal confirmed that Canadian courts will
hold parties to their agreement to arbitrate,
unless there is express legislative language in a
statute that excludes or prohibits arbitration
agreements or class action waivers. KerryMurphy (Murphy) brought a proposed class
action proceeding against the respondent,
Amway Canada Corporation (Amway).Murphy claimed that Amways business
practices violated various sections of theCompetition Act, alleging that Amway was
running a multi-level marketing plan, that it had
failed to provide its distributors with accurate
information concerning compensation, and that
it operated an illegal pyramid-selling scheme.
Murphy sought to have the action certified as aclass. In response, Amway brought a motion to
stay the court proceedings and compel
arbitration, pursuant to the arbitration agreement
between Murphy and Amway, which included aclass action waiver. The Federal Court of
Appeal found that the class action waiver in the
arbitration agreement barred Murphy from
bringing a motion to certify the action as a
class. Further, it held that Murphys claims
under the Competition Act were arbitrable, asthere was nothing in the Competition Actwhich
could be interpreted or read to exclude or
prohibit arbitration. The Court echoed the
Supreme Courts decision in Seidel v. Telus
confirming that express legislative language in a
statute is required before a court will refuse to
give effect to the terms of an arbitrationagreement. In Seidel, the Court held that claims
under section 172 (read together with section 3)
of the British Columbia Business Practices and
Consumer Protection Act (BPCPA) were notarbitrable because section 3 provided that any
waiver of a persons rights, benefits or
protections under theBPCPA is void, unless the
waiver or release is expressly permitted in theBPCPA. The Federal Court of Appeal found
that the BPCPA is not analogous to theCompetition Act, which contains no language
evidencing the intent of the legislature to
invalidate an arbitration clause. The Kerry
Murphy decision thus confirms the non-
interventionist approach of Canadian courts
asked to stay court proceedings in favor of a
valid arbitration clause and to stay class
proceedings where there is a valid class actionwaiver.Murphy v. Amway Canada Corporation,
2013 FCA 83.
Germany
Remittal of a case in enforcement
proceedings does not affect provision ofsecurity
The decision concerns enforcement proceedings
between the insolvency administrator of the
German construction company Walter Bau and
the state of Thailand. After having obtained anaward for damages in the amount of almost
EUR 30 million in arbitral proceedings under
the Bilateral Investment Treaty between
Germany and Thailand, the insolvency
administrator of Walter Bau currently seeks toenforce the arbitral award in Germany. In the
course of the enforcement proceedings, the
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Higher Regional Court of Berlin issued an order
for provisional attachment and, the insolvencyadministrator of Walter Bau, seized the Thai
crown princes private jet at the Munich airport.
The jet was released only upon provision of a
guarantee in the amount of EUR 38 million.
Subsequently, the Higher Regional Court of
Berlin declared the arbitral award enforceable.When the state of Thailand appealed the
decision, the Federal Court of Justice ordered a
stay of execution upon increase of the guarantee
to the total amount of EUR 42 million. In
January 2013, the Federal Court of Justice
finally remitted the case to the Higher Regional
Court of Berlin for it to determine whethersovereign immunity applies (see enforcement
and sovereign immunity in Issue 17). Due to the
remittal of the case, the state of Thailand
requested that the insolvency administrator ofWalter Bau be ordered to agree to the
termination of the guarantee and subsequently
appealed the adverse decision to the Federal
Court of Justice. The Federal Court of Justicerejected the state of Thailands appeal. It held
that the remittal of a case does not affect theprovision of a guarantee since it does not render
it useless. Rather, the party having obtained an
award has a legitimate interest in the provision
of security already prior to the decision on the
enforceability of the award. This legitimate
interest remains unaffected even if the decision
granting enforcement is later appealed, revoked
and remitted to the lower court. The court heldthat this applied in particular where, it is
undisputed, that there are no further assets inGermany and any continuance of the
enforcement proceedings after the termination
of the guarantee would therefore make no
economic sense. Especially under these
circumstances, the purpose of the guaranteecontinues to exist. The Higher Regional Court
of Berlins final decision on the enforcement of
the insolvency administrators Swiss arbitralaward in Germany is still pending. German
Federal Court of Justice, Walter Bau v.Thailand, Docket No. III ZB 40/12, Decision of
14 May 2013
India
No public policy exception to theenforcement of a Gafta arbitration award
The judicial mindset, in recent times, has seen a
significant shift in favour of internationalcommercial arbitrations. In continuing with this
trend the Supreme Court while considering the
question of enforcement of an arbitral award
passed by Grain and Feed Trade Association
(GAFTA), seated in London, has narrowed
down the scope of the expression public policyas found under Section 48(2)(b) of the
Arbitration and Conciliation Act, 1996 (Act)
and thereby limiting the scope of challenge to
the enforcement of awards. Disputes arose
between the parties when certain goods sold by
an Indian seller to an Italian buyer did not match
the contract standards. The buyer sued the sellerbefore a London Arbitral Tribunal, GAFTA,
which passed an award in favour of the buyer.
On appeal the award was confirmed by the
Board of Appeal of GAFTA, and further by theHigh Court of Justice, London. Subsequently,
the buyer sought the enforcement of the award
before the Delhi High Court, which was
allowed, giving rise to an appeal before theSupreme Court. Relying on the broad
interpretation of the term public policy, as laiddown in the Supreme Court judgment of Saw
Pipes and Phulchand Exports, the seller argued
that the award was contrary to provisions of the
sale contract and hence contrary to the public
policy of India. On the other hand, the buyer
relied on the Supreme Court judgment of
Renusagar, which had put forward a narrower
interpretation of the term public policy. TheSupreme Court drew a distinction between the
scope of enquiry under s. 34 of the Act, whichprovides for grounds of setting aside an arbitral
award, to that under s. 48 of the Act, which
provides for grounds of rejecting enforcement
of an arbitral award. One of the grounds under
both these sections is the award being contraryto the public policy of India. The Court further
said that under s.48 of the Act it is concerned
with an award which has become final and itcan reject enforcement, only if it is against (i)
fundamental policy of Indian law; (ii) theinterests of India; or (iii) Justice and morality. In
particular, the court expressly declined to allow
a challenge on the grounds of patent illegality.
The court further said that role of the court in an
award involving conflict of laws is much lesser
than as compared to that in a domestic award.Hence, while enforcing awards of foreign-
seated arbitral tribunals the narrower
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interpretation of the term public policy would
be applicable. Shri Lal Mahal Ltd v Progetto
Grano Spa; Civil Appeal No. 5085 of 2013; 3rd
July 2013, Supreme Court of India
Ireland
Application to set aside an award for excess ofjurisdiction is dismissed
In Snoddy & Others v. Mavroudis the Irish High
Court dealt with an application to set aside part
of an award under Article 34(2)(a)(iii) of the
UNCITRAL Model Law on the basis that the
arbitrator exceeded his authority in reference tohim. The UNCITRAL Model Law has the force
of law in Ireland under the Arbitration Act
2010. Ms Justice Laffoy noted that there had
been little, if any, judicial comment in Irelandon the articles invoked by the applicant here and
she said that the proper course was to set out
some basic principles. She expressly relied
primarily on Mansfields text, Arbitration Act2010 and Model Law: A Commentary. She
specifically noted that there is very limitedjurisdiction to set aside an award under the
Model Law and the Arbitration Act 2010 and
cited Mansfields text to the effect that an
award may not be satisfied for some reason not
specified in the Model Law as a result of the
courts inherent jurisdiction. The judge stated
that this passage correctly reflects the current
law in Ireland, and the heading to Article 34, inthat an application to set aside thereunder
represented the exclusive recourse against anarbitral award. With regard to the contention
that the award was outside the scope of the
arbitrators authority, Judge Laffoy cited
Brekoulakis & Shore from Mistelis Concise
International Arbitration that a strongpresumption should exist that a tribunal acts
within its mandate. She also drew an analogy
with the correspondent provision in the NewYork Convention (Article V(1)(c)) and section
68 of the English Arbitration Act 1996 andquoted Lord Steyn in Lesotho Highlands
Development Authority v Impregilo SpA and
Ors, [2006] 1 AC 221 to the effect that it was
well established that article V(1)(c) must be
construed narrowly and should never lead to re-
examination of the merits of the awards.Judge Laffoy felt what the court was being
asked to do here was to second guess, and
therefore usurp, the arbitrators construction of
the arbitration agreement. Ultimately, the HighCourt ruled that the application to have part of
the award set aside on the ground of excess of
jurisdiction under article 34(2)(a)(iii) was
wholly misconceived and the application was
refused. The decision is an important statement
that, under Irish law, Article 34 represents theexclusive recourse against an arbitral award and
that, in considering the question of an
arbitrators authority, the Court will be reticent
to second guess an arbitrator on questions of
construction. Snoddy & Others v. Mavroudis
[2013] IEHC 285.
Peru
Disputes over minors assets may brought to
arbitration proceedings
The ruling of March 6, 2013 - incorporated in
the official gazette El Peruano was issued in
the context of a judicial process requesting theannulment of corporate decisions adopted by the
General Board of Directors of the financialinstitution Playa Paz Soldan S.A.. The
Supreme Court of Justice of the Republic of
Peru has determined that the arbitration
agreement adopted and incorporated in the
statutes of the society, by the shareholders, is
binding upon all the partners and therefore
extends to the successors of the original
shareholders. The Supreme Court has alsorecognized that the statutory arbitration is
applicable, not only to the challenge ofagreements reached within the society, but also
to disputes arising from the formalities in which
those agreements were convened in the General
Meeting. Finally, being the complainant a minor
who acted as successor of a deceasedshareholder, the Supreme Court has made it
clear that the claims or disputes over minors
property may be subject to arbitration wheneverthere is prior judicial authorization. In response
to these provisions, the Supreme Court declaredunfounded the appeal brought by the guardian
of the minor against the judgment of the First
Civil Chamber, in Commercial matters of the
Superior Court of Justice of Lima. Corte
Suprema de Justicia de la Repblica del Per,
Casacin n 5089/2011.
Spain
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Arbitration Clause in Adhesion Contract is a
valid agreement to arbitrate
On 23 January 2013, the Court of First Instance
No. 3 of Melilla rules in favor of the Claimant
D. Pablo in the Ordinary case against Banco
Bilbao Vizcaya Argentaria, nullifying a SwapContract concluded between the parties. The
condemnation forced the bank to return to the
Claimant the amount of EUR 21,500.00 plus the
related legal interests and to pay the judicial
costs. The Bank appealed the judgment on the
basis that Court lacked jurisdiction to hear the
case, due to an arbitration agreement included inthe Swap Contract, which stated: "The parties
agree that any dispute, disagreement, question
or claim resulting from the execution or
interpretation of this contract or transactionrelating to, directly or indirectly, be finally
solved under arbitration procedures, by a sole
arbitrator, and will be administered by the
Arbitration Court of the Official Chamber ofCommerce and Industry of Madrid, which is
entrusted with the appointment of the arbitratorsin accordance with its regulations and statutes,
without further exceptions than the ones
referred to in this arbitration clause. The place
of arbitration will be Madrid and the language
Spanish." The Provincial Court addressed two
issues of vital importance to elucidate the
appeal: firstly, the Court sought to determine
whether the claim of the invalidity of thecontract was within the scope of arbitration
agreement. Secondly, whether the arbitrationagreement contained in a adhesion contract -
was abusive. With regard to the first question,
the Court decided affirmatively, as the terms of
the arbitration agreement were sufficiently clear
because I think that the terms used in thearbitration clause were sufficiently clear. In
regard to the second question, the Claimant
maintained that in the case of adhesioncontracts, which contained the arbitration
agreement, there exists an imbalance betweenthe parties. The Court concluded that such
arbitration clause did not imply any prejudice to
the complainant, because the designated
institution is a means to solve disputes based on
the autonomy of the will of the parties. On the
basis of these fundaments, the Provincial Courtof Melilla admitted the appeal brought by the
Bank, and revoked the judgment in the first
instance, without costs for any of the parties in
both instances. Sentencia de la Audiencia
Provincial de Melilla, Seccin Sptima, N
36/2013,5 de junio de 2013.
Switzerland
First Swiss episode in the saga of the disputebetween the Nationally Iranian Oil Company
("NIOC") and the State of Israel
As most of you know by now, in a contract
signed in 1968 (therefore well before the Iranian
revolution) NIAC and Israel agreed to construct,
use and maintain a pipeline carrying Iranian oilthrough the territory of Israel. The agreement
contained an arbitration clause and in 1994
NIAC started arbitration proceedings. Israel
refused to appoint an arbitrator and this led to along judicial battle in the French Courts, at the
end of which the French _Cour de Cassation
_issued a judgment on February 1, 2005
generally considered as a historical judgment.Dean Thomas Clay, for instance, has
characterized it as worthy of the "Pantheon ofthe great judgments of arbitration law". The
arbitrator appointed previously by NIAC is
Mohsen Agha Hosseini and on behalf of the
State of Israel the French courts have appointed
Tho Klein. I am not aware that there is a
chairman yet. In late 2003, the parties agreed
that the venue of the arbitration would be in
Geneva and the arbitrators ratified theiragreement in July 2004. The "seat" of the
arbitration is therefore now in Switzerland.While NIAC is seeking a large amount in
damages, Israel takes the view that the arbitral
tribunal has no jurisdiction because, in its view,
arbitrator Tho Klein was improperly appointed.
Israel also questioned the independence and theimpartiality of the other arbitrator as to one of
the heads of claim at least. On February 10,
2012, the two arbitrators issued an award inwhich they rejected Israel's objections to the
appointment of its arbitrator and that of theRespondent's, thus effectively stating that the
arbitral tribunal is properly constituted. An
appeal was made to the Federal Tribunal and the
following are very interesting in the opinion: (i)
Although the irregular composition of the
arbitral tribunal is one of the specific groundson which an interlocutory (or interim, or
preliminary) award can be appealed to the
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Federal Tribunal immediately, the Court will
not reconsider the appointment of an arbitratorif he was appointed by a foreign Court after the
other party sought the assistance of the State
Court when faced with a refusal to appoint one's
own arbitrator. The view expressed by the
Federal Tribunal here is categorical (see section
3.3.2 of the opinion in this respect). (ii) Undernormal circumstances, the decision by which an
arbitrator is appointed by a State Court
(generally a Swiss Court but in this case the seat
of the arbitration was not yet in Switzerland
when the arbitrator was appointed), such a
decision is deemed issued in non-contentious
proceedings and does not become -res judicata-,so that the arbitrators retain the capacity to state
their own views as to jurisdiction and as to the
composition of the arbitral tribunal. When they
do so, an appeal is possible to the FederalTribunal. However, this cannot be simply
transposed to the situation in which the highest
court of a foreign country (France in this case)
reviewed the matter in separate proceedings anddecided the appointment of the arbitrator (see
section 3.3.2 of the opinion in this respect). (iii)The Court also confirmed that arbitration
clauses should be interpreted like any contract:
first the common intent of the parties must be
ascertained; if it is unclear, the wording of the
clause and the circumstances surrounding it
must be interpreted on the basis of the principle
of legitimate expectation (see section 3.4 of the
opinion in this respect). (iv) In the case at handthere was no support for the Appellant's view
that the parties would have intentionally giveneach other the power to paralyze the arbitration
simply by refusing to appoint an arbitrator (see
section 3.4.3 of the opinion in this respect). The
case will certainly generate quite a bit of
attention and it has already been the object of acommentary by Hansjrg Stutzer in the
Thouvenin newsletter (www.thouvenin.com).
Hansjrg praises both the decision of the French_Cour de Cassation_ in 2005 and that of the
Federal Tribunal. It would be hard to disagree asboth certainly reflect a broad acknowledgment
of international arbitration as being the normal
way of settling transnational disputes as
opposed to forcing one party to submit to the
jurisdiction of the courts of the state in which
the other one operates. Tribunal federal,4A_146/2012, Arrt du 10 janvier 2013, Ire
Cour de droit civil.
United Kingdom
A challenge to the severability doctrine under
English law
In a recent case, Hyundai Merchant Marine
Company Limited v Americas Bulk TransportLtd, an English Commercial Court agreed to set
aside an arbitration award where they held that
there was no binding contract. The case
challenges the well-established principle of
severability under English law as enshrined in
Section 7 of the Arbitration Act 1996. The
severability doctrine under English law holdsthat an arbitration clause is severable from the
rest of the contract; that the arbitration clause is
a distinct agreement that will not necessarily be
invalid even if the underlying agreement is heldto be so; and that an arbitration clause in a
contract can be impugned only if there are
independent factors relating directly to the
arbitration clause. However, in setting aside theHyundai Merchant award, the English courts
appear to be challenging this well-developeddoctrine. The issue before the English
Commercial Court was whether the parties had
entered into a contract at all; and if they did,
whether it contained an arbitration clause. The
Court found that since there was no contract,
there was no arbitration clause either; and
because there was no arbitration clause, the
arbitration tribunal did not have jurisdiction ofthe claim. Hyundai Merchant Marine Company
Limited v Americas Bulk Transport Ltd [2013]EWHC 470 (Comm).
United States
Challenges to the validity of a contract arefor the arbitrator to decide and challenges to
the formation of a contract are for courts to
decide.
Defendant Bayside Resort, Inc. was thesponsoring investor of a condominium and,
having run into financial difficulties, sought to
assign its right to provide water to the
condominium to the water provider, Defendants
TSG Technologies, Inc. and TSG Capital, Inc.
(collectively, TSG). Defendants Bayside andTSG persuaded Plaintiff Sapphire Beach Resort
and Marina Condominium Association, LLC
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(SBRMCOA) to agree to the assignment and
also to an increase in water charges bythreatening to cease providing water to the
condominium. Plaintiff entered into a new
water supply agreement with Defendant TSG,
but subsequently filed suit in the district court of
the Virgin Islands with respect to the water
dispute. The district court upheld Defendantsmotion to dismiss the complaint on the basis
that the new water supply agreement contained
an agreement to arbitrate. On appeal, the Third
Circuit found that Plaintiffs argument, that its
board had exceeded its authority by entering
into the contract with Defendant TSG, was an
issue relevant to the formation of the contractand, therefore, not arbitrable. The Third Circuit
distinguished challenges to contract validity and
contract formationnoting that, consistent with
the Supreme Courts Prima Paint Corp. v.Flood & Conklin Mfg. Co. decision, challenges
to the validity of the contract as a whole are for
the arbitrator to decide, but that challenges to
the formation of a contract are generally forcourts to decide. The Third Circuit noted that
this ruling was consistent with its earlierjudgment in Sandvik AB v. Advent Intl Corp.,
and also with rulings by the Second, Fifth,
Seventh, Ninth and Eleventh Circuits. It noted
that the Sixth Circuit took a different view in
Bd. of Cnty. Commrs of Lawrence Cnty. v. L.
Robert Kimball & Assocs., by determining that
arbitrators could decide a claim that a contract
had been entered into outside of the signatorysauthority. The Third Circuit agreed with the
district court that the additional claim byPlaintiff, that it had been coerced into entering
the contract, was a claim relevant to the validity
of the contract and so an arbitrable issue. The
coercion claim was based on the fact that
Defendants had threatened to stop providing aservice unless Plaintiff consented to the
assignment of the contract and agreed to pay a
higher price for the services. The Third Circuitfound that this threat did not have the effect of
diminishing Plaintiffs capacity to consent sothat no contract was ever formed and that
Plaintiff was not necessarily unable to consent
to the arbitration clause. The Third Circuit
therefore concluded that the coercion claim
went to validity rather than formation of the
contract. SBRMCOA, LLC v Bayside Resort,Inc., Nos. 07-2436, 07-2678 (3d Cir. Feb. 11,
2013).
______________________________________
4. NOTES
The articleAccording to Arbitration -Until You Pay You Are Not in Dispute,
by Alexander Chebotarenko, has been
posted online.
The article New Dutch Arbitration LawProposedby Saloua Hoeve-Ouchan has
been posted online.
________________________________________
5. CONTRIBUTORS:
Behn, Daniel - AACNI (UK) Limited (England& Wales)
Bruninger, Laura - Gleiss Lutz(Germany)Carey, Gearoid Matheson (Ireland)Chebotarenko, Alexander Interlegal(Ukraine)Gatell, David -AACNI(Spain)Harris, Yoav - Doron, Tikotzky & Co,International Law Offices (Israel)
Hoeve-Ouchan, Saloua - Voskamplawyers(Singapore)
Krapfl, Claudia - Gleiss Lutz(Germany)Mukhi, Ashish -Juris Corp (India)Poncet, Charles -ZPG Geneva (Switzerland)Reider Mary Ann - Baker & McKenzie (USA)Tavara, Juan Antonio - AACNI Abogados SLP
(Spain)Vasile, Cosmin -Zamfirescu Racoti & Partners
(Romania)
Zaslowsky, David -Baker & McKenzie (USA)
This is a non-exhaustive review. Do not rely on
its contents without seeking legal advice from
experts in the relevant jurisdiction. New
contributors are aways welcome in the upcoming
issues. We thank those who contributed to the
present edition. Editors: Albert Badia and AnaMaria Daza-Clark.
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7/30/2019 Issue 18-2013 )
10/10
2013,ARBITRATION WATCH
The Commercial, Shipping & Investment
ARBITRATION WATCH
www.arbitrationwatch.com