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2013,ARBITRATION WATCH

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.

7/30/2019 Issue 18-2013 )

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