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YEAR 8 | Ed. 33

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YAR YOUNG ARBITRATION REVIEW

The First Independent International Arbitration Review

APRIL | 2019 • YAR • 2



EDITION 33 • APRIL 2019

www.yar.com.pt

FoundeRs And diRecToRs

Pedro Sousa Uva

Gonçalo Malheiro

business mAnAgeR

Rodrigo Seruya Cabral

ediTing

Rita Pereira

web designeR

Nelson Santos

subscRiPTions

Thank you for being a Subscriber of YAR. This Publication is available only to our Subscribers

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AuThoRs

Sherina Petit

Pedro Sousa Uva

Himanshi Gupta

Johannes Tropper

Vishakha Choudhary

Harshad Pathak

Anirudh Krishan Gandhi

Philip Teo

Sílvia Bessa Venda

Alok Vajpeyi

APRIL | 2019 • YAR • 3


1. Introductory Noteby Sherina Petit and Pedro Sousa Uva page 4

2. Anglia case and the Investment Tribunal,by Himanshi Gupta page 6

3. Investment Arbitration under the Energy Charter Treaty after Achmea, by Johannes Tropper page 11

4. Cairn v. India - The Continuing Saga of India’s Rendezvous with Investment Arbitration of Tax Disputes, by Vishakha Choudhary page 17

5. Enforceability of interim orders issued by foreign-seated arbitration tribunals under the Indian Arbitration & Conciliation Act 1996, by Harshad Pathak and Anirudh Krishan Gandhi page 25

6. . The Emergency Arbitrator in Malasya, Singapore, Hong Kong and Brunei, by Philip Teo page 31

7. The Applicability of Arbitration Clauses in Antitrust Damages Actions,by Sílvia Bessa Venda page 37

8. Party Appointed Arbitrators: Time to Rethink?by Alok Vajpeyi page 40

[ARTicles]

APRIL | 2019 • YAR • 4


[inTRoducToRY noTe]

By Sherina Petit and Pedro Sousa Uva

Once upon a time, a brave navigator sailed through the

waters of the Atlantic Ocean in search of a new way to reach

the East by sea. Those were times when sailors wishing to

reach India, amongst other countries, had to share a disputed

Mediterranean Sea and face the dangers of the Arabian

Peninsula. The will to change the status quo was enormous,

particularly by the Portuguese. On command of his vessels,

this sailor circumvented a dangerous cape in the south of

Africa known before as Cabo das Tormentas - due to its heavy

storms - and landed shore in a beautiful beach in India, called

Kappakadavu, near Calicut. That Cape became universally

known as Cabo da Boa Esperança, or Cape of Good Hope.

This brave explorer had just commanded the first trip from

Portugal to India via the Atlantic Ocean, thus opening the

European sea route to India for the first time. These were

times of uncertainty and the world as we know it was yet

to be discovered. Considered to be one of the most remarkable

voyages of the Age of Discovery, this achievement consolidated

the Portuguese maritime presence over the Indian Ocean and

Portugal’s dominance of global trade. The year was 1498. Vasco

da Gama was his name.

521 years after, Portugal stands as a small country yet the

Portuguese preserve the same adventurous spirit of old times.

There is a profound interest and respect between India and

Portugal. Indeed, the commercial relationships between the two

countries have never been stronger. Several agreements and MOUs

have been signed in the past few years by the representatives of

both countries towards the development of trade, science and

technology, along with other sectors.

Like India, Portuguese Lawyers have invested massively

indiA And PoRTugAl in The inTeRnATionAl ARbiTRATion ARenA

APRIL | 2019 • YAR • 5


March, 12 2019

Sherina Petit and Pedro Sousa Uva

in turning Portugal into a strategic seat for resolving disputes

through arbitration. With an increasing arbitration culture

for at least the past two decades, Portugal sent a strong and

clear signal to the arbitration community when on 14 March

2012, a modern arbitration law - inspired on the UNCITRAL

Model Law - entered into force, after much debate. Benefiting

from arbitration-friendly courts, Portuguese lawyers frequently

resort to institutional arbitration in effective and international

arbitral facilities, some with state-of-the-art Rules. Portugal

has a number of prominent practitioners and arbitrators with

sound experience in the field of international arbitration.

Likewise, India has boosted its interest in international

arbitration and invested seriously in trying to become an

arbitration friendly jurisdiction with real experts in the field. In

2015, India passed major reforms to its Arbitration Act which

were aimed at streamlining the arbitral process by reducing

delays, introducing interim measures and aligning the rules

on enforcement of arbitral awards with other jurisdictions. For

India there is still some way to go in terms of reform but it is

however moving in the right direction. Prime Minister Modi

has spoken publicly about his desire for India to become an

arbitration hub and this has been reflected by the setting up

of the Mumbai Centre for International Arbitration and the

Indian cabinet’s recent approval of the creation of the New

Delhi International Arbitration Centre while also introducing

sweeping arbitration reforms. Additionally, the international

arbitration institutions ICC and SIAC have continued to

increase their presence in India.

The development of India as an arbitration friendly

jurisdiction is not a foregone conclusion. In order for India to

build upon the success of its 2015 reforms it needs to continue

to align itself with international arbitral norms and take active

steps to integrate in the global arbitration space. The current

bill before parliament although it reflects the political will

to rapidly reform the dispute resolution landscape of India,

contains some provisions which appear out of step with the

rest of the international arbitration community and should

be reconsidered by the legislature to protect India’s already

significant development as an arbitration hub.

YAR - Young Arbitration Review follows history as well

as the trend. In this edition, the directors of YAR decided

to dedicate part of it to the topic and include five authors

originally from India. The subject matters hereon published

are diverse and of international interest. Ms. Himanshi Gupta

writes about the Anglia case and the Investment Tribunal. Mr.

Harshad Pathak and Mr. Anirudh Krishan Gandhi approach

the topic of enforceability of interim orders issued by foreign-

seated arbitration tribunals under the Indian Arbitration &

Conciliation Act. Ms. Vishakha Choudharry writes about

the continuous Saga of India’s Rendez-Vous with investment

arbitration of Tax Issues. Mr. Alok Vajpeyi raises the question

whether the time has arisen to rethink about Party Appointed

Arbitrators.

Last but definitely not least, and in name of diversity,

this edition also includes a variety of other hot topics in

international arbitration, from other jurisdictions around

the world. An example of that is the interesting article on

investment arbitration under the Energy Charter Treaty in

light of the CJEU’s Achmea judgment, where Mr. Johannes

Tropper writes about the matter and shares the responses of

arbitral tribunals and recent declarations by EU member states.

Mr. Philip Teoh disserts about the Emergency Arbitrator in

several Asian jurisdictions. His comparative approach seeks at

examining the recourse and role of the Emergency Arbitrator

under the Rules of Arbitral Tribunals of Malaysia – Asian

International Arbitration Centre (AIAC), Singapore – Singapore

International Arbitration Centre (SIAC), Singapore Chamber

of Maritime Arbitration (SCMA), Hong Kong International

Arbitration Centre (HKIAC) and Brunei – Brunei Darussalam

Arbitration Centre (BDAC). Finally, Ms. Silvia Bessa Venda, a

Portuguese lawyer, closes the edition by addressing the topic

of arbitration clauses in antitrust damage actions, thus raising

interesting questions duly addressed as per the recent case-law

of the Court of Justice of the European Union (CJEU).

APRIL | 2019 • YAR • 6


AngliA cAse And The invesTmenT TRibunAl

By Himanshi Gupta

1. Introduction

The road to future, post Achmea decision is new talk of the town.

Seminars, conferences, talk shows are being organized just to

discuss the implications of this judgment in approaching decisions

by the arbitral Tribunals and Courts alike. Much similarity has

been noted in the present case of Anglia Auto Accessories Ltd. v.

The Czech Republic (Anglia for brevity) on the establishment

of investment Tribunals under intra-EU BIT and a co-relation

between investment treaties and the European Union treaties.

Proceeding the debate, the purpose of following article is to imbibe

readers with the knowledge of establishment of the investment

Tribunals under the framework of the intra-EU BIT under the

Anglia case. This article is divided into two parts. The first part

discusses the summary in Anglia case relating to the damages

claimed by the UK for the non-enforcement of arbitral award

under Czech Republic-United Kingdom BIT. The second part will

discuss in general the jurisdiction of the investment Tribunal to

hear claims under Intra-EU BIT.

2. Relevant Facts

The Claimant Anglia Auto Accessories Ltd. company

incorporated in United Kingdom (UK), entered into a joint

venture agreement with the Kyjovan Co. (Czech Republic Co),

called Sprint for manufacture of roof racks in the Czech Republic

(CR). Meantime, new executives replaced kyjovan’s leadership

and declared the earlier agreement as invalid with a majority of

45% stake1.

Due to non-performance of ‘an obligation to provide gas and

electricity to the premises occupied by the sprint’2 in the Joint Venture

Agreement, a dispute arose between the Claimant and the

Respondent and an effort was sought by the Claimant to enforce

award it obtained on 16 December 1997 for a sum of 4.8 million

with 6% interest p.a against Kyjovan. Claimant sought 4 separate

enforcement orders against this award, out of which only two were

duly passed in favour of them. However, Claimant alleged that the

District Court of Hodonin delayed in issuing such orders leading

to Kyjovan’ bankruptcy and further, breach of the expropriation

clause, fair and equitable treatment clause and full protection and security

standards under the applicable BIT.

3. Procedural History

As a consequence, Claimant filed a request for Arbitration

on 6 May 2014 with the Arbitration Institute of the Stockholm

Chamber of Commerce (hereinafter as SCC) under Art.8(2)(b)

of the BIT. It is pertinent to mention here that present dispute

qualifies to be a BIT arbitration. Due to the fact that an investment

Little India, Singapore | Luciano Mortula

APRIL | 2019 • YAR • 7


treaty was signed between the State of United Kingdom and

Czech Republic, being member states of the EU3, for the purpose

of protection and promotion of investments4. Secondly, whether the

claim alleged by the Respondent requires a wider interpretation

for the performance of obligations by UK under the present

Czech Republic-UK BIT irrespective of applying Salini Test under

Convention of the Settlement of Investment Disputes between

states and Nationals of other states5. Respondent challenged the

jurisdiction of the arbitral Tribunal under following objections:

1. Whether the BIT was terminated upon the

Respondent’s accession to the European Union in May 2004;

2. Whether the Claimant Made an Investment under the BIT? and

3. Whether the Tribunal Has Jurisdiction to Determine Alleged Breaches

of Art 2(2) of the BIT?

Following which, a Tribunal was constituted and both the

parties agreed to Stockholm as their seat of arbitration. Further,

parties filed their statement of claims and defense respectively

with exhibits but without any witness statement or expert reports.

Hearing commenced dated 3 October 2016 at the office chamber

of Respondent’s counsel, Zeiler.partners at Vienna. Tribunal

closed the proceedings on 9 February 2017.

4. Position of the Parties

The present article specifically deals with the first

jurisdictional objection raised by the Respondent from the point

of view of interpreting intra-EU BIT.

4.1 Respondent’s Position

Respondent argued that BIT was terminated upon

Respondent’s accession to the EU by the virtue of Art 59 of VCLT

on 1 May 2004. Both BIT and EU treaty relates to the same

subject matter as they protect investment made by the nationals

of the member state and constitute almost identical interpretation

of the provision. Art 14 of the BIT and Art 65(4) of the VCLT,

both applies to ordinary circumstances and dispute under part V

respectively. Whereas, Art 8(1) of BIT is not par with Art 344 of

TFEU as “Member states undertake not to submit a dispute concerning

the interpretation or application of the treaties to any method of settlement

other than those provided for therein” and Art 267 transferring matter

from national Courts to arbitral Tribunals.

4.2. Claimant’s Position

Claimant objected that no written notice was served to

them as a prerequisite under Art 14 of the Bilateral Investment

Treaty (BIT) and Art 65(1) of the Vienna Convention of the Law

of the Treaties (VCLT) on termination of the BIT. Secondly, biT

remains in force until 15 years from its termination pursuant to

Art 14 of BIT and Tribunal has jurisdiction to hear claim only

for the breaches under Art 65(4) of the VCLT. Thirdly, Treaty on

the functioning of the European Union (hereinafter as TFEU)

does not regulate the same subject matter. It is not at par with

Art 8(1) dispute resolution under BIT. Lastly, Art 344 covers

disputes between the European Union (EU) member states and

not individuals under Art 8(1) of the BIT.

5. Tribunal’s Analysis

Tribunal passed an award dated 10 March 2017 at Stockholm

observing that the treaty interpretation by Respondent as BIT and

TFEU does not constitute same subject matter and overlapped

each other whereas the latter does not address on promotion and

protection of investments and Tribunal only had the jurisdiction to

hear matter on BIT. Art 344 of TFEU concerns EU member states

and Art 267 constitutes explicit jurisdiction of the EU Court of

Justice. Following the accession, neither party terminated the BIT.

Tribunal marked that Claimant failed to persuade the Tribunal

under relevant arbitration clause. Therefore, while rejecting claims

by Respondent, Tribunal held that BIT was terminated upon their

accession to the European Union in May 2004.

6. Establishment of Investment Tribunal under Intra-EU BIT6

6.1 Czech Republic’s Accession

in Anglia, jurisdictional issue arises out of termination of

BIT after Czech Republic’s accession to the EU in May 2004.

However, it becomes contradictory to the fact that neither party

ever intended7 nor took any step to terminate the BIT while

promulgating the argument of termination. A treaty shall be

considered as terminated only if the UK-CR BIT relates to same

subject matter as in TFEU according to the principle of lex posterior

under Art 59 of VCLT stating that, “A treaty shall be considered as

terminated if all the parties to it conclude a later treaty relating to the same

subject-matter and: (a) it appears from the later treaty or is otherwise

established that the parties intended that the matter should be governed by

that treaty8; or (b) the provisions of the later treaty are so far incompatible

with those of the earlier one that the two treaties are not capable of being

applied at the same time”. Parties never intended to be governed by

the later treaty, that is, TFEU which was acceded by CR in 2004,

prima facie. The question of incompatibility can only be raised

if the first pre-requisite is met out. Moreover, Tribunal explicitly

upheld BIT’s survival clause as set out in Art 14 providing for BIT

to be in continuing force for the next fifteen years even if the it is

terminated. It is similar to a sunset clause9 under the BIT where

the investor enjoys certain protection by the virtue of the BIT.

6.2 TFEU and BIT does not relate to the same subject matter

Respondent made an averment that TFEU and the BIT

relates to same subject matter in protecting the investments of

national state into the territory of another member state as under:

TFEU BITArt 49: Right of establishment and prohibit restrictions on the rights of nationals of a member state in the territory of another member state

Art 2(1): Favorable conditions for the investors to invest in the territory of the other contracting state

Art 18: Discrimination between nationals between member states based on their nationality

Art 2(2): Fair and equitable treatment and full protection and security Art 3: Most-favored nation provision

Art 63: Freedom of movement of capital between member states

Art 6: Guarantees unrestricted transfer of investments and returns

APRIL | 2019 • YAR • 8


The analogy provided by the Respondent sets a foot in

propounding that same subject matter must be read in literal

sense and should be treated as identical. Here, an observation

can be made for the preliminary purpose of establishing an

arbitral Tribunal derived out of the dispute resolution provision

under the Art 8(1) of the BIT, where only certain disputes can be

submitted to the Tribunal. The scope of BIT is wider and more

specific as it deals with disputes arising out of the investment

made by investors in Czech Republic. Here, the Tribunal rightly

held that TFEU and BIT are incompatible relating to the

provision of treaty interpretation. It would have led to serious

implications if the two treaties had been compatible. Moreover,

the purpose of both the treaties are different. BIT protects and

promotes the investments made by the investors whereas TFEU

concerns functioning in the European Union.

6.3 Exclusive Jurisdiction of the Court of the Justice of the European

Union

As against the corollary, the Court of Justice of the

European Union (hereinafter as CJEU) seated in Frankfurt

had to determine whether arbitral Tribunal established for the

purpose of resolving dispute is a Court or Tribunal 10of a member

state11 in Slowakische Republic v. Achmea B.V12. For the said

purpose, interpretation of Art 267 of TFEU became imperative

which states that,

“The Court of Justice of the European Union shall have jurisdiction

to give preliminary rulings concerning:

(a) the interpretation of the Treaties;

(b) the validity and interpretation of acts of the institutions, bodies,

offices or agencies of the Union;

Where such a question is raised before any Court or Tribunal of a

Member State, that Court or Tribunal may, if it considers that a decision

on the question is necessary to enable it to give judgment, request the Court

to give a ruling thereon.

Where any such question is raised in a case pending before a Court

of Tribunal of a Member State against whose decisions there is no judicial

remedy under national law, that Court or Tribunal shall bring the matter

before the Court. […]”

Art 267 suggests that CJEU will have an exclusive

jurisdiction over the disputes submitted by the EU members

to arbitration. The Federal Court of Justice while deciding to stay the

proceedings referred the question on preliminary ruling that whether

preclusion of Art 344 and Art 267 of TFEU under the Netherlands-

Slovakia BIT may bring proceedings against the latter state where

the investment protection agreement was concluded before one of the

contracting states acceded to the EU but arbitral proceedings not

brought until after that date. One of the considerations provided to this

question in the main proceeding was that the arbitral tribunal is neither

a part of the judicial system of Netherlands nor Slovakia. Tribunal

confirmed that the matter cannot be referred to CJEU for a

preliminary ruling13. It was also declared to be inadmissible on

the basis of case-by-case examination.

6.4 Interpretation of Art 344

It provides for “Member States undertake not to submit a dispute

India|Steve AllenUK

APRIL | 2019 • YAR • 9


concerning the interpretation or application of the Treaties to any method of

settlement other than those provided for therein.” There are two types of

method of settlement for disputes. One between the two-member

states and the other one between an individual and a state. The

findings provided by the Tribunal in Achmea case relates to the

Anglia case. Related approach is observed under the BIT, where the

parties can refer a matter to arbitral Tribunal only if it falls under

the ambit of Art 8(1) of the UK-CR BIT. The Tribunal clearly

states that there is no incompatibility – simply, the BIT and TFEU

regulates different issues. The only difference between Achmea and

Anglia is that in latter, arbitral Tribunal had jurisdiction to hear

only those matters which falls under the purview of Art 8(1) of

the UK-CR BIT as compared to interpretation of EU provisions

with EU law in former.

While complying with the compulsory jurisdiction,

contractual obligations needs to be kept in mind. The dispute

solely arises out of the treaty obligation and not a contract

between the parties although the contracting parties are under no

obligation to submit their dispute to arbitration14.

6.5 Case Review

Other Tribunals had distinguished15 opinion as to

interpretation of the treaty in the light of ECT cases as EU is a

contracting party to the ECT. In the case of European American

Investment Bank AG (EURAM) v Slovak Republic16, amicus curiae17

submitted that firstly, private parties cannot rely on such a treaty

to reap the fruits of dispute settlement mechanism that are in

conflict with the EU Law. Secondly, it maintains the subject matter

that fall squarely within the scope of Energy Charter Treaty

[ECT] emphasizing on the rules relating to foreign investment

activity including post-establishment treatment and operation.

Thirdly, EU Laws are incompatible with the principle of non-

discrimination on the grounds of nationality. Fourthly, one state

cannot unilaterally impose any rule on other without the latter’s

consent as provided under customary international law of Art 65

of the VCLT. Lastly, amicus curiae also placed reliance on the BIT

of Republic of Austria, which does not deal with the same subject

matter as against the ECT (for the same reasoning provided in

Eastern Sugar and Eureko) however still in force and rendered the

Czech Republic’s accession under Art 59 and Art 30(3) of the

VCLT as obsolete.

Tribunal observed that EU Law is a part of the International

Law and legal order for the EU state, simultaneously performing

dual functions as set out in AES Summit Generation Limited18 case

whereas, ECT is governed by International Law. Although arbitral

Tribunal may interpret EU Law however, the BIT and EU Law

work parallelly19.

in Charanne BV and Construction Investments S.A.R.L.

v. The Kingdom of Spain20, Tribunal rejected Spain’s argument

of interpreting Art 344 of TFEU for the purpose of dispute

settlement mechanism under ECT incompatible with EU Law. It

advocated the fact that only EU institutions have the jurisdiction

over the matters of interpretation EU law relying on Electrabel

SA v. Hungary21, where the final say rests with the CJEU for a

uniform interpretation22. Equivalent approach was taken by the

Tribunal in RREEF Infrastructure (G.P.) Limited and RREEF Pan-

European Infrastructure Two Lux S.à.r.l. v. Kingdom of Spain23. The

only difference carved out in the latter case was on the basis of

inconsistency between the two, that is ECT and EU law, however,

ECT shall prevail24 in such a case.

Tribunal while propounding this preposition relied on

Eiser and Energia Solar v. Spain25. It constrained on the fact that

interpretation to the statute must be provided in a bonafide

(goodfaith) manner. The award emphasis on the intention

of the treaty makers to provide clear interpretation to the text

removing latent meanings and unwanted implied exclusions.

While contending Art 344 of TFEU, Tribunal advocated that

only European Courts especially CJEU is a competent institution

to deal with the matters of interpretation. The jurisdiction of

the Tribunal is derived from the provisions under ECT that is a

binding treaty under the customary international law and does

not form part of the European legal order.

However, the jurisdiction of the tribunal for the claims

under ECT was debated and it approached in a different manner

as set out in Vattenfall AB v. Federal Republic of Germany26 following

the Achmea decision. The Tribunal rejected Germany’s Achmea

based jurisdictional claim as intra-EU ECT claims are barred in

Achmea Case27. Therefore, it held that “principles of international law

which may be used to derive meaning from Article 26 ECT, since EU Law

is not general law applicable as such to the interpretation and application

of the arbitration clause in another treaty such as the ECT” (this view is

been presently considered by Svea Court of appeal in Novenergia

Case28). Also, observed that there existed no conflict between Art

26 of ECT and Art 267 and Art 344 of the TFEU. While Tribunal

in Masdar Solar v. Spain29 held that, “Achmea Judgment is simply silent

on the subject of the ECT”.

6.6 Conclusion

It is somehow clear from the observations in Anglia Case

that investment treaty Tribunals do not have the jurisdiction to

entertain disputes under intra-EU in International Investment

Agreements (IIAs) or BITs as the treaties are incompatible with

the EU law as marked by Tribunal in various cases30. European

Commission on the other hand, observes that the treaty clashes with

the EU law because of international law is subordinate to the EU law

and undermines the CJEU’s interpretative monopoly on the EU law in

consonance with Art 267 and 344 of the TFEU31.

However, when compared with ECT, the position stands on

a different footing as it a multilateral treaty signed with the EU and

pose no disconnection clause between EU law and the members

to the ECT signatories being parties to a regional organization.

Moreover, cases review shows adjudication by the tribunals pre-

Achmea Case. UK so far has shown no signs of terminating the

BIT. On the other hand, Czech Republic along with Italy and

Ireland have sought provisions to terminate their BIT. European

Union specifically seeking to terminate their BIT with certain

countries through a process of formal infringement proceedings

against five states and informal against 21 states32 via declaration

signed on 19 January 2019 stating that, “…international agreements

concluded by the [EU], including the Energy Charter Treaty, are an

APRIL | 2019 • YAR • 10


integral part of the EU legal order and must therefore be compatible with

the [EU constitutional] Treaties. Arbitral tribunals have interpreted the

[ECT] as also containing an investor-State arbitration clause applicable

between Member States. Interpreted in such a manner, that clause would

be incompatible with the Treaties and thus would have to be disapplied”,

proving the case in Anglia.

In Anglia, treaty was neither frustrated nor Czech Republic

acceded the treaty. The legitimacy of the compatibility is still

pending before CJEU. Some member states of the EU are in

consideration of terminating their BIT voluntarily post Achmea

decision in recent news. However, this may consider to have a

wide implication on the investment treaty cases in the future and

post-Brexit era. As Anglia case was decided much more before

Achmea case, the tribunal had no opportunity but to reject the

claim by the Respondent observing that BIT was not terminated

as Respondent could not show any evidence to their accession

from the EU. Moreover, latter was decided by the CJEU. Achmea

is the first judgment, where CJEU had exclusive jurisdiction to

decide the incompatibility. Netherlands-Slovak BIT remains

applicable after Slovak’s accession to the EU. The whole matter

has developed a lot of confusions and controversial objections.

In my opinion, following reasons constitute on to the rightful

rejection of claims by Respondent in the Anglia Case.

1 Adam Junek, ‘State may have a winning arbitration come a long way off’ (Ceska Pozice, 18 March 2015) < http://ceskapozice.lidovky.cz/statu-muze-vyhrana-arbitraz-jeste-prijit-draho-frv-/tema.aspx?c=A150317_102509_pozice-tema_houd> accessed 24 February 2019

2 Anglia Auto Accessories Ltd. v. The Czech Republic, SCC Case No. V 2014/181, Final Award of 10 March 20173 Angeline Welsh, ‘Grappling with jurisdictional issues under the UK-Czech Republic BIT’ (The Law of Nations, 8 May 2017) <https://lawofnationsblog.

com/2017/05/08/grappling-jurisdictional-issues-uk-czech-republic-bit/> accessed on 26 January 20194 Unknown author, ‘England Auto Accessories Limited Czech Republic’ (Ministry of Finance of the Czech Republic, 13 March 2017) < https://www.mfcr.cz/cs/

zahranicni-sektor/ochrana-financnich-zajmu/arbitraze/prehled-rozhodcich-nalezu/2017/anglia-auto-accessories-limited-vs-ceska-28008> accessed 24 February 2019

5 Inaê Siqueira De Oliveira, ‘SCC Tribunal dismisses claims brought by British Company and its shareholders against the Czech Republic’ (International Institute for Sustainable Development, 12 June 2017) < https://www.iisd.org/itn/2017/06/12/scc-tribunal-dismisses-claims-brought-by-british-company-and-its-shareholders-against-the-czech-republic/> accessed on 26 January 2019

6 Matthieu Gregoire, ‘Note on Slowakische Republic v. Achmea BV’ (4 New Square, 6 March 2018)7 Eastern Sugar B.V. (Netherlands) v. The Czech Republic SCC Case No. 088/2004; Partial Award 27th March 2007 para 102, 143 and 147: ‘Tribunal held that the

text of the article does not postulate the intention to terminate BIT’ 8 Rupert Joseph Binder v. Czech Republic (UNCITRAL) (Award on Jurisdiction, 6 June 2007) (CL-202); European American Investment Bank AG v. Slovak Republic

(UNCITRAL) (PCA Case No. 2010-17)- “a distinction was made by the Tribunal on the basis of the test. Clause (a) forming the subjective test whereas clause (b) relating to the objective test”

9 Gavazzi v. Romania (ICSID Case No.ARB/12/25)10 Ascendi Beiras Litoral e Alta, Auto Estrades das Beiras Litoral e Alta SA v. Autoridade Tributaria e Aduaneria [2014] 6 WLUK 328, [2014] B.T.C. 30: “Tribunal

as a whole was part of the system of judicial resolution of tax disputes provided for by the Portuguese constitution itself. Where an arbitral Tribunal was not part of the judicial system of either of the contracting parties to a BIT, it could not be classified as a Court or Tribunal “of a Member State” within the meaning of Art 267 of TFEU

11 Clement Fouchard, Marc Krestin, ‘The Judgment of the CJEU in Slovak Republic v. Achmea – A Loud Clap of Thunder on the Intra-EU BIT Sky’ (Kluwer Arbitration Blog, 7th March 2018) http://arbitrationblog.kluwerarbitration.com/2018/03/07/the-judgment-of-the-cjeu-in-slovak-republic-v-achmea/ accessed on 3 January 2019

12 Achmea B.V. formerly called Eureko B.V. v. Slovak Republic [2018] 4 W.L.R. 87, [2018] 2 C.M.L.R. 40 (UNCITRAL) (Case C-284/16; PCA Case No. 2008-13); Final Award dated 7 December 2012

13 Ibid 214 Denuit and Cordenier v. Transorient – Mosaique Voyages and Culture SA [2005] 1 C.M.L.R. 4815 WNC factoring Ltd v. Czech Republic (UNCITRAL) (PCA Case No. 2014-34) Award on 22 February 201716 European American Investment Bank AG (EURAM) v Slovak Republic (UNCITRAL) (PCA Case No 2010-17) Award on Jurisdiction of 22 October 2012;17 Latin for ‘Friend of the Court’ 18 AES Summit Generation Limited & AES-Tisza Eromu Kft v. Hungary (ICSID Case No. ARB/07/22)19 Eco Swiss China Time Limited v. Benetton International NV [1999] ECR I-3055 (RL-77) (Case No. 126/97)20 Tammi Pilgrim and Ignacio Torterola, ‘Charanne B.V. and Construction Investments S.A.R.L. v the Kingdom of Spain (SCC Case No. 062/2012) AWARD - Case

Report’ < https://www.transnational-dispute-management.com/downloads/15994-case_report_charanne-v-spain-award.pdf > accessed on 5 January 201921 Electrabel SA v. Hungary (ICSID Case No. ARB/07/19)22 Unknown, ‘3 Takeaways from the First Spanish Solar Arbitration Award’ (Global Arbitration Review, 4 February 2016) < http://www.globalinvestmentprotection.

com/2016/02/04/3-takeaways-from-the-first-spanish-solar-arbitration-award/> accessed on 5 January 201923 RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à.r.l. v. Kingdom of Spain (ICSID Case No ARB/13/30)24 Ibid (n 11)25 Eiser and Energia Solar v. Spain (ICSID Case no. ARB/13/36)26 Vattenfall AB v. Federal Republic of Germany (ICSID Case No ARB/12/12)

27 Kirstin Schwedt and Hannes Ingwersen, ‘Intra-EU ECT Claims Post-Achmea: Vattenfall decision paves the way’ (Kluwer Arbitration Blog, 13 December 2018) < http://arbitrationblog.kluwerarbitration.com/2018/12/13/intra-eu-ect-claims-post-achmea-vattenfall-decision-paves-the-way/ > accessed on 4 march 2019

28 Novenergia II- Energy Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. The kingdom of Spain, SCC Case No. 2015/063 29 Masdar Solar v. Spain (ICSID Case No ARB /14/1)30 WNC factoring Ltd v. The Czech Republic (PCA Case No.2014-34) and IP Busta and JP Busta v. The Czech Republic (SCC V 2015/014)31 Boxun Yin and Lord (Peter) Goldsmith, ‘Chapter-14: Intra-EU BITs: Competence and Consequences’ (Ed. Kaplan and Moser, Jurisdiction, Admissibility and Choice

of Law in International Arbitration: Liber Amicorum Michael Pryles, January 2018)32 Ibid (n 3)

Himanshi Gupta

APRIL | 2019 • YAR • 11


By Johannes Tropper

The infamous Achmea judgment by the Court of Justice of the

European Union (CJEU) dealt a blow to investment arbitration

in the European Union. Last March the CJEU concluded that a

Dutch-Slovakian bilateral investment treaty (BIT) was contrary

to EU law.1 Following this judgment, several investment

arbitral tribunals had to (re-)address the question whether EU

law precludes them from exercising jurisdiction in investment

disputes between an investor from an EU member state and

another EU member state. Whereas investment tribunals have

never upheld a challenge based on an intra-EU objection, the

European Commission has long been opposed to intra-EU

investment treaties and member states have recently sided with

the European Commission in that regard (see below).

However, the true reach of Achmea is rather unclear. In

particular, there exists serious disagreement whether the Energy

Charter Treaty (ECT)2 violates EU law as well. The ECT, which

is a multilateral treaty with 53 parties, including both EU

member states3 and non-member states as well as the EU itself,

has proven extremely important for investment protection in

the energy sector.

This article addresses the question whether the reasoning

in Achmea can be transposed to the ECT, resulting in an

incompatibility with the EU legal order. Furthermore, the article

assesses what an incompatibility with EU law would imply for

investment arbitration based on the ECT– both for questions of

jurisdiction of an arbitral tribunal and the enforceability of awards.

The bone of contention: Achmea

On 6 March 2018 the CJEU ruled that a Dutch-Slovakian

BIT, concluded prior to the Slovakian accession to the EU, was not

in conformity with EU law because arbitral tribunals applying the

BIT might be required to interpret or apply EU law without being

able to refer questions of EU law to the CJEU. The choice of law

clause of the BIT in question refers inter alia to ‘the law in force of

the Contracting Party concerned’ and ‘other relevant agreements

between the Contracting Parties’.4 According to the CJEU, EU law

‘must be regarded both as forming part of the law in force in every

Member State and as deriving from an international agreement

between the Member States’, which might entail the interpretation

of EU law by arbitral tribunals. However, the CJEU does not regard

invesTmenT ARbiTRATion undeR The eneRgY chARTeR

TReATY AFTeR AchmeA

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arbitral tribunals as courts or tribunals of member states and thus

they are not entitled to refer questions of EU law to the CJEU

for a preliminary ruling. By implication, arbitral tribunals might

adopt an interpretation of EU law different from the CJEU, which

threatens the uniform and coherent interpretation of EU law.

Moreover, the limited review of awards by domestic courts at the

seat of arbitration cannot compensate for the missing competence

of arbitral tribunals to initiate a preliminary reference procedure.

Therefore, the CJEU concluded that investment arbitration of

such a BIT has an ‘adverse effect on the autonomy of EU law’.5 As

a result, the German Federal Court of Justice (Bundesgerichtshof),

which had referred the matter to the CJEU, set aside the award

because it held the arbitration agreement to be invalid.6

Following the Achmea judgment by the CJEU, the European

Commission released a communication concerning intra-EU

investment protection in which it emphasized that Achmea also

applies to the ECT, therefore rendering the ECT inapplicable for

intra-EU investment disputes. 7 The fact that the EU itself is

party to the ECT is irrelevant, as this has only created rights and

obligations between the EU and third countries, according to the

Commission. Hence, the Commission inferred from Achmea that

not only all intra-EU BITs, but also the ECT is inapplicable for

intra-EU investment disputes due to the primacy of EU law.

Given the fact that the choice of law clause of the Dutch-

Slovakian BIT was rather broad and provided for various legal

sources to be taken into account, a formalistic argument could

be made that the reasoning in Achmea might not affect several

other intra-EU BITs with differently worded clauses on applicable

law. Nevertheless, EU member states eventually fully endorsed the

view of the European Commission concerning the incompatibility

and inapplicability of intra-EU BITs in January 2019. In three

separate declarations8 EU member states unequivocally stated

that no intra-EU BIT was in conformity with EU law and

therefore arbitral tribunals would not have jurisdiction to hear

any investment cases.9 They also promised to terminate the

BITs. In light of the contention that EU law prevails over

all intra-EU BITs, the need to terminate the treaties appears

rather contradictory. As far as the ECT is concerned, the three

declarations did not express a uniform view. According to the

majority of member states, the ECT is inapplicable for intra-EU

disputes, i.e. Achmea applies largely in the same manner to this

multilateral treaty. Six member states emphasized that Achmea

did not address the ECT and absent a judgment by the CJEU

it would be improper to make a statement on its compatibility

with EU law. One member state, Hungary, gave a separate

declaration also stressing that Achmea was silent on the ECT

and thus, the reasoning in Achmea could not apply to pending

or future intra-EU investment cases on the basis of the ECT.

(In)compatibility of the ECT with EU law

Against this backdrop, the question remains whether the

ECT is compatible with EU law and if not, what the consequences

for investment arbitration under the ECT will be.

Taking the Achmea reasoning at face value, the major

question will be if choice of law clause of the ECT involves the

interpretation or application of EU law. According to the CJEU, any

reference to ‘the law in force of the Contracting Party concerned’

or ‘other relevant agreements between the Contracting Parties’

leads to the interpretation of EU law. The provision of the BIT in

question also mentioned ‘the general principles of international

law’, which the CJEU did not regard as pertinent.

Article 26 ECT provides the legal basis for investor-state

arbitration. According to paragraph 6 ‘[a] tribunal established

under paragraph (4) shall decide the issues in dispute in

accordance with this Treaty and applicable rules and principles of

international law.’ Does this reference to ‘rules and principles of

international law’ also incorporate EU law?

From the CJEU’s perspective, EU law is a special legal order,

distinct from international law.10 In the context of Achmea, the

CJEU seems to preserve the special legal status by stating that

the EU treaties merely ‘[derive] from an international agreement

between Member States’, which still allows it to treat EU law

as part of ‘other relevant agreements between the Contracting

Parties’ as stipulated in the BIT. In other words, the CJEU alludes

to a fiction that EU treaties at the time of conclusion turned into

this special legal order, but their origin remains international law.

As far as investment arbitral tribunals are concerned, there

has been hardly any doubt that EU law forms part of international

law.11 While arbitral tribunals have indeed recognised the unique

nature of EU law as having a dual character12 –elements similar

to national law and elements which resemble international law–

it is evident that through the lens of public international, EU

law does not enjoy a special status, i.e. a third category of law

next to national and international law. Therefore, any potential

conflicts between the ECT and EU treaties have to be solved by

relying on the conflict-of-laws provisions of public international

law, primarily found in the Vienna Convention on the Law of

Treaties (VCLT)13.14 For a variety of reasons, arbitral tribunals

have neither been able to determine that a treaty conflict

exists nor –assuming that a conflict indeed exists– been able

to identify a rule of international law that would grant EU law

precedence over the ECT.15

At any rate, from the perspective of international

investment law EU law has to be treated as ‘rules of international

law’ (though certainly not principles of international law16).

Whereas the CJEU neglected to address the findings by arbitral

tribunals in Achmea, the approach of arbitral tribunals arguably

lends credence to the argument of the CJEU that choice of law

clauses referring to ‘international law’ lead to the interpretation of

EU law. Presumably for this very reason one post-Achmea arbitral

tribunal refused to subsume EU law under Article 26(6) ECT

stating that ‘[i]n the context of the arbitral jurisdiction created by

the ECT, reference to “international law” cannot be stretched to

include EU law […]’.17

From the standpoint adopted by the CJEU in Achmea,

the choice of law clause of the ECT might indeed imply an

incompatibility with EU law. However, arbitral tribunals have

highlighted that the EU itself is party to the ECT and therefore,

both member states and the EU have given their consent to

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investment arbitration under the ECT.18 The first publicly

available award addressing Achmea explicitly stated that ‘the

Achmea Judgment does not take into consideration, and thus it

cannot be applied to, multilateral treaties, such as the ECT, to

which the EU itself is a party.’19 Achmea seems to give some leeway

to this argument because the CJEU held that ‘an international

agreement providing for the establishment of a court responsible

for the interpretation of its provisions and whose decisions are

binding on the institutions, including the Court of Justice, is not

in principle incompatible with EU law [….] provided that the

autonomy of the EU and its legal order is respected’.20 however,

the BIT in question ‘was concluded not by the EU but by Member

States’.21 Thus, one can reasonably distinguish between bilateral

treaties concluded between member states and multilateral treaties

to which member states (and the EU) have acceded.

Technically speaking, an intra-EU BIT and the multilateral

ECT are not the same, but for the CJEU these details might only

play a minor role. The crux of the question is not whether the

investment agreement is bilateral or multilateral and whether it

EU is party to the treaty.22 What counts is whether EU law is

interpreted without oversight by the CJEU, which according to the

CJEU constitutes a threat to the autonomy of EU law. The system

of investment arbitration provided for by the Dutch-Slovakian

BIT is essentially identical to ECT arbitration. ECT arbitral

tribunals are equally ad-hoc tribunals and not courts or tribunals

of member states; the award is final and binding and depending

on the specific arbitration rules (ICSID, ICSID Additional Facility

Rules, UNCITRAl, SCC)23 review of awards by national courts is

either impossible or limited. Hence, should the CJEU receive a

request to rule on whether the ECT is compatible with EU law, the

CJEU will most likely conclude that the ECT in its current form

contravenes EU law.24

Future of ECT investment arbitration

What does this imply for EU investors and their investments

in the energy sector? Generally, a potential conflict with EU law

could primarily affect two phases in investment arbitration:

jurisdiction and enforcement.

Jurisdiction

As far as the jurisdictional phase is concerned, no ECT

tribunal has ever declined to hear a case because of a jurisdictional

challenge based on EU law. Post-Achmea arbitral tribunals– both

under intra-EU BITs and the ECT– have not significantly departed

from this settled case law.

in Vattenfall v. Germany, the tribunal provided the most

comprehensive analysis on the Achmea issue. Amongst other reasons,

it held that Article 26(6) ECT does not relate to jurisdiction, but

only to the applicable law in the merits phase. Therefore, EU law

and the Achmea judgment do not affect jurisdiction in that regard.25

To establish whether the tribunal has jurisdiction it needs to apply

the ECT in accordance with international law, which might involve

EU law under Article 31(3)(c) VCLT (‘There shall be taken into

account [for purposes of treaty interpretation], together with the

context [a]ny relevant rules of international law applicable in the

relations between the parties’).26 In applying EU law under Article

31(3)(c) VCLT, however, the interpretation needs to ensure that

a multilateral treaty imposes the same obligations upon all state

parties– regardless of whether some of these are also members of

the EU.27 Furthermore, no treaty conflict exists, as the ECT and

EU law do not have the same subject matter. However, even in

case of a treaty conflict Article 16 ECT ‘poses an insurmountable

obstacle to […] the argument that EU law prevails over the ECT’.28

Article 16 ECT stipulates that

‘[w]here two or more Contracting Parties have entered

into a prior international agreement, or enter into a subsequent

international agreement, whose terms in either case concern the

subject matter of Part III [Investment Promotion and Protection]

or V [Dispute Settlement] of this Treaty, (1) nothing in Part

iii or v shall be construed to derogate from any provision of

such terms of the other agreement or from any right to dispute resolution with respect thereto under that agreement; and (2)

nothing in such terms of the other agreement shall be construed

to derogate from any provision of Part III or V of this Treaty or

from any right to dispute resolution with respect thereto under

this Treaty, where any such provision is more favourable to the

Investor or Investment.’[emphasis added]

Accordingly, in the absence of any indication in the ECT

that EU law should prevail in case of a treaty conflict, there is no

legal ground for such a conclusion.

in Novenergia v. Spain the tribunal inter alia held in an

award rendered shortly before Achmea (citing Eiser v. Spain29) that

‘this Tribunal’s jurisdiction is based exclusively on the explicit

terms of the ECT. As is evident, the Tribunal is not constituted

on the basis of the European legal order and it is not subject to

any requirements of such legal order.’30 Similarly, in another pre-

Achmea award the tribunal stated that ‘in case of any contradiction

between the ECT and EU law, the Tribunal would have to insure

the full application of its “constitutional” instrument, upon which

its jurisdiction is founded’ and defiantly concluded that ‘EU law

does not and cannot “trump” public international law’.31

Arbitral tribunals do not deal with the question of treaty

conflict in the abstract. Relying on the rules of interpretation of

international law, the specific circumstances of the case and the

specific pronouncement of the CJEU in Achmea, arbitral tribunals

have not had great difficulties in rejecting jurisdictional challenges

based on this new intra-EU objection. Existing case law suggests

that arbitral tribunals will continue to dismiss jurisdictional

challenges based on an intra-EU objection regardless of whether

the CJEU declares the ECT incompatible with EU law.

Enforcement

While investors might be successful in the jurisdictional

phase and ultimately receive an award in their favour, enforcing

such an award might (have) become more difficult. Post-Achmea

arbitral tribunals have regarded the question of enforceability

as irrelevant for their findings on jurisdiction.32 However, for

investors contemplating the initiation of investment proceedings

it is of utmost importance to receive an enforceable award. In

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that regard, it is crucial to distinguish between ICSID awards

and non-ICSID awards.

As it stands, non-ICSID awards can typically be reviewed

by domestic courts on a limited number of grounds, but

nonetheless a review and setting aside of awards is possible

(as it happened with the UNCITRAL award in Achmea).

Therefore, every investor pursuing claims under the ECT based

on arbitration rules of the ICSID Additional Facility, SCC or

UNCITRAL Arbitration Rules faces the risk that the domestic

courts of the seat of arbitration refers the matter to the CJEU–

provided they are courts of an EU member states– and/ or sets

aside the award because of an incompatibility with EU law.33 in

this context, a domestic court will most likely find either that the

arbitration agreement was invalid or that it is in conflict with the

public policy of the state. Currently, the Svea Court of Appeals

has suspended the enforcement of the SCC award Novenergia v.

Spain (based on the ECT) until further notice, i.e. until a decision

by in the setting-aside proceedings is reached.34

Under the New York Convention, which investors will

typically use to enforce non-ICSID awards abroad, also the

enforcing state may refuse enforcement, for instance, if the

arbitration agreement was invalid or if the award was set

aside or suspended by a competent authority of the country

in which, or under the law of which, that award was made.35

Hence, even enforcing an award outside the EU might run into

trouble, for example, if the CJEU finds that the ECT violates

EU law and the enforcing court in the third state accepts the

CJEU’s position.

Thus, in non-ICSID cases investors can only significantly

reduce risks in the enforcement proceedings if the seat of

arbitration is in a third state and enforcement takes place outside

the EU too (provided that suitable assets are available abroad).

In ICSID cases domestic courts cannot set aside an award

since the ICSID proceeding are completely ‘anational’36 only

providing for an annulment procedure by ad-hoc Committees

constituted on the basis of Article 52 ICSID Convention.37 Such an

ad-hoc Committee could theoretically annul an award, for instance,

if the tribunal has manifestly exceeded its powers, which includes

situations where a tribunal wrongly assumed jurisdiction.38 The

grounds for annulment are limited and it is unlikely that an ad-hoc

Committee relying on the rules of international law will find that

EU law has indeed deprived a tribunal of its jurisdiction.39

The ICSID Convention provides for a rather effective

enforcement mechanism. Article 53 states that ‘[t]he award shall

be binding on the parties and shall not be subject to any appeal or

any other remedy except those provided for in this Convention.

[…].’ Article 54 provides that ‘[e]ach Contracting State shall

recognize an award rendered pursuant to this Convention as

binding and enforce the pecuniary obligations imposed by that

award within its territories as if it were a final judgment of

a court in that State. […].’ Very importantly, the award can

be enforced in all contracting parties of the ICSID Convention

(again assets of the respondent state have to be available in the

state where enforcement is sought). Nevertheless, according to

Article 54(3) the ‘[e]xecution of the award shall be governed by

the laws concerning the execution of judgments in force in the

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State in whose territories such execution is sought’. In the Micula

v. Romania40 dispute the European Commission found that the

payment of the award by Romania would constitute illegal state

aid41 and currently the case is pending before the General Court

of the EU42. In light of that, the English High Court43 stayed the

enforcement of the ICSID award in the Micula dispute, finding

inter alia that the ICSID Convention only requires treating ICSID

awards in the same way as judgments by the High Court, which

are also subject to EU state aid law. Therefore, the court stayed

enforcement until the General Court of the EU renders a judgment.

The English Court of Appeal essentially confirmed this.44

Hence, while ICSID awards might be relatively safe in

annulment proceedings, enforcement within the EU could also

be problematic for ICSID awards once a case concerning the

compatibility of the ECT with EU law is pending before the

CJEU– or even more so if the CJEU confirms that the ECT is

incompatible with EU law.

In other words, in the long run the enforcement phase might

turn out to be a major obstacle for investors and render investment

arbitration under the ECT unattractive. However, investors using

ICSID arbitration and enforcing ICSID awards outside the EU

can certainly minimize the risk of being unsuccessful in their

enforcement proceedings to the greatest extent possible.

Conclusion

While Achmea technically speaking only applies to specific

BITs, the reasoning in Achmea could also be transposed to the

ECT leading to a conflict with EU law. From an international

law perspective this conclusion is problematic and has hitherto

been rejected by arbitral tribunals. In pending and future cases

arbitral tribunals are almost certain to disregard any jurisdictional

challenges based on an intra-EU objection, even if the CJEU

finds that the ECT is incompatible with EU law. Nonetheless,

this might prove to be a Pyrrhic victory for investors because the

enforcement of awards based on a treaty contrary to EU law will

ultimately only be successful if the awards are ICSID awards and

enforced outside the EU– a scenario, which makes ECT arbitration

unreliable for investors.

Johannes Tropper

1 Case C-284/16 Achmea ECLI: EU:C:2018: 158 [2018] [hereinafter: Achmea].2 Energy Charter Treaty (signed 18 December 1991, entered into force 16 April 1998) 2080 UNTS 95. 3 All EU member are parties to the ECT apart from Italy, which withdrew in 2014 (withdrawal took effect on 1 January 2016). 4 Article 8(6) Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak

Federal Republic (signed 29 April 1991, entered into force 1 October 1992) 2242 UNTS 205.5 Achmea paras. 31-60.6 German Federal Court of Justice, Decision, Case I ZB 2/15, 31 October 2018, paras. 26-28. 7 Commission, ‘Protection of intra-EU investment’ (Communication) COM (2018) 547 final <http://eur-lex.europa.eu/legal-content/EN/

TXT/?uri=COM:2018:0547:FIN>. 8 Declaration of the Member States of 15 January 2019 on the legal consequences of the Achmea judgment and on investment protection <http://

ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/190117-bilateral-investment-treaties_en.pdf>; Declaration of the Member States of 16 January 2019 on the enforcement of the Achmea judgment and on investment protection <http://www.regeringen.

se/48ee19/contentassets/d759689c0c804a9ea7af6b2de7320128/achmea-declaration.pdf>;Declaration of the Representative of Hungary of 16 January 2019 on the legal consequences of the Achmea judgment and on investment protection <http://

www.kormany.hu/download/5/1b/81000/Hungarys%20Declaration%20on%20Achmea.pdf>. 9 Prior to those declarations two ICSID tribunal established on the basis of a French-Hungarian BIT and a Cypriot-Greek BIT distinguished the Achmea-

BIT from their respective BITs and the ICSID Convention finding that they had jurisdiction to hear the cases (Marfin Investment Group v. The Republic of Cyprus, ICSID Case No. ARB/13/27, Award, 26 July 2018, paras. 577-597 [hereinafter: Marfin v. Cyprus]; UP and C.D Holding Internationale v. Hungary, ICSID Case No. ARB/13/35, Award, 9 October 2018, paras. 252-267). It is highly unlikely that –in the absence of the actual termination of the intra-EU BITs by member states– arbitral tribunals will uphold a jurisdictional challenge. For a detailed analysis of the declarations of the member states and the legal consequences, see Johannes Tropper, “Alea iacta est? Post-Achmea investment arbitration in light of recent declarations by EU-member states”, Völkerrechtsblog, 24 January 2019 <http://voelkerrechtsblog.org/alea-iacta-est/?fbclid=IwAR2dhEzK3xIF2yHaxp6ZtmAxIvZArYEjTnws9eg5gXWJ1IXCnLScwUxlyZw>

10 Case 26/62 Van Gend en Loos [1963] ECR 1; Case 6/64 Costa v E.N.E.L. [1964] ECR 1141. 11 see e.g. Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012,

paras. 4.117-4.126 [hereinafter: Electrabel v. Hungary]; European American Investment Bank AG v. The Slovak Republic, PCA CASE No. 2010-17, Award on Jurisdiction, 22 October 2012, paras. 69-72 [hereinafter: EURAM v. Slovakia]; RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, 6 June 2016, para. 73 [hereinafter: RREEF v. Spain].

12 see e.g. AES Summit Generation Limited and AES-Tisza Erömü Kft v. Republic of Hungary, ICSID Case No. ARB/07/22, Award, 23 September 2010, para. 7.6.6.

13 Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331. 14 Arbitral tribunals may also have to consider EU law as a ‘fact’. See for example Electrabel v. Hungary 4.127-4.129.15 For a particularly detailed conflict-of-laws analysis –albeit on an intra-EU BIT– see EURAM v. Slovakia paras. 155-238, 246-278.16 Vattenfall AB and others v. Federal Repbulic of Germany, ICSID Case No. ARB/12/12, Decision on the Achmea Issue, 31 August 2018, para. 133 [hereinafter:

Vattenfall v. Germany]. 17 Greentech Energy Systems A/S and others v. The Italian Republic, SCC Case No. V2015/095, Award, 23 December 2018, para. 397 [hereinafter: Greentech v.

Italy].18 See e.g. Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain, ICSID Case No. ARB/13/31, Award, 15 June

2018, para. 224. 19 Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain, ICSID Case No. ARB/14/1, Award, 16 May 2018, para. 679; see also Vattenfall v. Germany paras.

162 et seq.; Greentech v. Italy para. 398. 20 Achmea para. 57.

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21 Ibid. para. 58.22 See the outcome in Opinion 2/13 Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental

Freedoms ECLI:EU:C:2014:2454 [2014].23 Article 26(4) ECT. 24 From an international law perspective a convincing argument can be made that no conflict exists between EU treaties and the ECT for a variety of reasons

(see Gloria M. Alvarez, ‘Redefining the Relationship Between the Energy Charter Treaty and the Treaty of Functioning of the European Union: From a Normative Conflict to Policy Tension’ (2018) 33 ICSID Review 560, 570-579), but it is unlikely that the CJEU will adopt a deferential position vis-à-vis such an interpretation due to the ascribed special legal nature of the EU treaties.

25 Vattenfall v. Germany paras 113-121; see also Greentech and others v. Kingdom of Spain, SCC Case No. V2015/150, Award, 14 November 2018, para. 218. 26 Vattenfall v. Germany paras. 124-125, 134. 27 Ibid. para. 156. 28 Ibid. para. 229. 29 Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Award, 4 May 2017, para. 199.30 Novenergia II - Energy & Environment (SCA) (Grand Duchy of Luxembourg), SICAR v. The Kingdom of Spain, SCC Case No. 2015/063, Award, 15 February

2018, para. 461.31 RREEF v. Spain para. 75.32 Vattenfall v. Germany para. 230; Marfin v. Cyprus para. 596. 33 Cf. Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (OUP 2012) 300 et seq [hereinafter: Dolzer and Schreuer].34 Svea Hovrätt, Konungariket Spanien v. Novenergia II - Energy & Environment (SCA), SICAR, T4658 -18, 16 May 2018.35 Article V United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (opened for signature on 10 June 1958, entered

into force 10 June 1958) 330 UNTS 3.36 Andrea K. Bjorklund, ‘The Emerging Civilization of Investment Arbitration’ (2009) 113 Penn State Law Review 1269, 1272.37 Article 52 Convention on the settlement of investment disputes between States and nationals of other States (opened for signature 18 March 1965,

entered into force 14 October 1966) 575 UNTS 159.38 Dolzer and Schreuer 304. 39 see Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Decision on Annulment, 26 February 2016, para. 195.40 See Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013.41 Arbitral award Micula v Romania of 11 December 2013 (C(2015) 2112) Commission Decision 2015/1470 [2015] OJ L 232/43.42 Case T-704/15, Action brought on 28 November 2015- Micula e.a. v Commission [2015] OJ L 232/43.43 Micula & Ors v Romania & Anor [2017] EWHC 31 (Comm).44 Micula & Ors v Romania [2018] EWCA Civ 1801.

APRIL | 2019 • YAR • 17


cAiRn v. indiA - The conTinuing SAGA OF INDIA’S RENDEZVOUS

wiTh invesTmenT ARbiTRATion oF TAX disPuTes

By Vishakha Choudhary

Abstract

Post the Industrial Policy Statement of 1991, the Republic of

India sought to transform its closed economy into one relatively

accepting of foreign investments. For this purpose, India

commenced its tryst with Bilateral Investment Treaties in the

1990s. The first of these Treaties was the agreement between the

United Kingdom and India for the promotion and protection of

investments, signed in 1994.

Paradoxically, it is under this Treaty that India’s faces the

most significant investment arbitration claim filed against it in

recent times – the arbitration initiated by Cairn Energy Plc and

Cairn UK Holdings Limited as a consequence of the retrospective

taxation introduced by India vide its amendment of Section 9(1)

(i), Income Tax Act, 1961.

As indicated by the Press Release on the Notice of Dispute,

Cairn seeks commencement of arbitration under the UK – India

BIT, largely for breaches of ‘Fair and Equitable Treatment’ and

‘Expropriation’ protections guaranteed to UK investors under

the aforesaid BIT. The present essay will attempt to address

this arbitration in three parts: first, the potential preliminary

objections and jurisdictional issues of relevance in this investment

arbitration. Second, the essay contemplates investment arbitration

jurisprudence that either party may resort to, in order to justify

their claims on merits. Finally, the essay analyses whether the

Model BIT proposed in 2015 will allow India to subvert similar

arbitration claims in the future.

I. INTRodUCTIoN

The Cairn Energy Plc and Cairn UK Holdings Limited v.

Government of India1 (“Cairn v. India”) arbitration is an outcome

of the amendment to Section 9(1)(i) of the Income Tax Act,

1961 (“IT Act, 1961”) and the consequent Income Tax Appellate

Tribunal (“ITAT”) Order in Cairn U.K. Holdings v. DCIT, Delhi2

vis-à-vis its scope.

1. Legal Background of the Case

Jantar Mantar in Delhi, India | meinzahn

APRIL | 2019 • YAR • 18


Section 9(1)(i) of the Act regards income arising, directly or

indirectly, through the transfer of a capital asset situated in India

as ‘income deemed to accrue or arise in India’, exigible to taxation

under the Act.3

In the landmark judgement delivered by the Hon’ble

Supreme Court in Vodafone International Holdings BV v. Union

of India4, Section 9(1)(i) was interpreted to be inapplicable to

transfer of shares of a foreign company between non-residents,

notwithstanding whether the object of this transfer was to

acquire Indian assets of a foreign company. The rationale was

justified by looking at the nature of such transactions – which

did not involve transfer of any capital assets situated in India.5

To recuperate from this decision, the Government amended

Section 9(1)(i) vide the Finance Act, 2012 allowing for taxation

of indirect transfers that derived ‘substantial value’ from assets

located in India.6 The greatest oddity concerning this extensively

criticized amendment was its retrospective application from 1

April 1962.7

2. Factual Background of the Case

Cairn India Holdings Limited (“CIHL”), a wholly owned

subsidiary of Cairn UK Holdings Limited (“CUHL”) was

incorporated in Jersey. The purpose of this incorporation was

to transfer complete shareholding of nine Indian Cairn group

subsidiaries from CUHL to CIHL. Subsequently, by means of

subscription and share purchase agreements, CIHL’s shareholding

was transferred to Cairn India Limited (“CIL”), a wholly owned

subsidiary of CUHL, incorporated in 2006 in India.

In 2015, an assessment confirmed that the sale of CIHL

shares by CUHL to CIL had resulted in short term capital gains

to CUHL. The Assessing Officer deemed this transaction to be

exigible to taxation in India under the amended Section 9(1)

(i). The due tax amount was computed as INR 10,247 Crore,

excluding interest for AY 2007-08.

A Dispute Resolution Panel constituted under the IT Act,

1961, and the ITAT upheld this assessment vide orders dated

25 January 2016 and 9 March 20178 respectively, in light of

the modified scope of Section 9(1)(i). Subsequently, to extract

this payment, the Government provisionally froze the residual

9.8% shareholding of CUHL in CIL.9 Additionally, CUHL’s

dividend from CIL was seized and tax refunds for FY 2011-12

were to be adjusted against its tax liability for AY 2007-08.10

3. Retrospective Taxation: The Basis for Investment Treaty Arbitration in Cairn v. India

Pursuant to Article 9 of the Agreement between the

Government of Kingdom of Great Britain and Northern

Ireland and the Government of the Republic of India for the

Promotion and Protection of Investments, 199411 (“UK – India

BIT”), Cairn Energy Plc and CUHL (“the Claimants”) initiated

investment treaty arbitration against the Indian Government.

The Claimants assert the following investment rights under the

UK – India BIT:

a. Interests in subsidiary, Cairn UK Holdings Limited.

b. The provisionally frozen 9.8% shareholding in Cairn

India Limited.

c. Seizure of dividends of CUHL and set off of tax refunds

due to it for FY 2011-2012.

The Claimants specify the cause of action as the

retrospective taxation legislation passed by the Government of

India to amend Section 9(1)(i) of the IT Act, 1961.12 The tax

demand made pursuant to assessment of CUHL under Section

9(1)(i) is alleged to have encumbered the Claimants’ investments

by breaches of the Fair and Equitable Treatment Standard (“FET”)

and Expropriation clause.

Vedanta Resources Plc, CIL’s parent company that

admittedly has 59.9% interest in CIL13, also initiated distinct

proceedings against the Government of India.14 While the Cairn

arbitration concerns CUHL’s failure to furnish capital gains tax as

the seller of CIHL’s shares, the Vedanta arbitration concerns the

tax demand issued to CIL for its failure to withhold capital gains

tax as the buyer of those shares.

The present essay seeks to analyse the potential legal

issues that may form the crux of the Cairn investment arbitration

confronting India, while simultaneously assessing legal jurisprudence

in support of the Government of India. It also aims to evaluate the

sustainability of the Model Indian BIT vis-à-vis its ability to prevent

similar claims from arising under future Indian BITs.

II. MAPPINg THE CAIRn dIsPUTE: PoTENTIAL PRELIMINARy IssUEs ANd JURIsdICTIoNAL CHALLENgEs

Barring Procedural Orders No. 3 and 4 denying stay and

bifurcation of the proceedings between the Claimants and India,

no other material concerning the Cairn arbitration is available for

public perusal. The following analysis is based on the perusal of

the factual matrix of the dispute between the Claimants and the

Government of India, and its relation to the UK – India BIT.

1. Preliminary objections

On 6 October 2016, India (“the Respondent State”) filed

an application for bifurcation of proceedings, culling out some

preliminary objects.15 It sought determination of these objections

in a separate preliminary phase. Few of these have also been

analysed in this section:

a. Consent to Arbitration

This was not discussed in India’s bifurcation application.

However, on this front, there are no objections that the

Respondent State could potentially raise. Article 9 of the UK –

India BIT provides for a multi-tiered dispute resolution clause.16

A clause of this nature is deemed a unilateral act of consent of a

State, granting an investor the option to initiate dispute resolution

under any of the prescribed fori.17 The investor’s initiation of a

APRIL | 2019 • YAR • 19


claim under Article 9(3)(c) is sufficient to presume both parties’

consent to arbitration.18

b. Prematurity of the Arbitration Proceedings

India’s argument pursuant to its bifurcation application did

not hinge on exhaustion of local remedies – rather, the Respondent

State asserted that the Claimant was attempting to reap benefits

of both domestic remedies and investment arbitration by filing

a claim for a cause of action it had not sufficiently agitated

before Indian judiciary.19 The Claimant’s failure to challenge the

assessment in appropriate domestic judicial fori, alleged the State,

is indicative of this intention. It was asserted that the validity of

the assessment had not been finally determined in India – hence,

the claim before the Tribunal was premature.

Article 9(3)(c) of the UK – India BIT entitles the

Claimants in the present dispute to initiate investment treaty

arbitration pursuant to the UNCITRAL Rules, 1976, to be

submitted to an ad hoc Tribunal;20 but the Article does not

confer any mandate upon the Claimants to avail local judicial

remedies prior to instituting these claims.

Perhaps the most prominent case supporting the State’s

contention is the decision in SGS v. Philippines, where the Tribunal

refrained from ruling on a contractual claim under an Umbrella

Clause – stating that the claim had not been assessed by appropriate

judicial bodies as stipulated under the Contract and hence, was

premature.21 Notably, the Switzerland – Philippines BIT did

not prescribe any requirement to exhaust local remedies.22 The

Tribunal’s decision is this regard was based on the subject matter

of the dispute and the appropriate forum for its adjudication.

However, Tribunals have refrained from importing disguised

restrictions into dispute resolution clauses of BITs, unless they can

be specifically gleaned from the wording thereof. These include

importing requirements similar to exhaustion of local remedies23

or exclusive jurisdiction of domestic courts.24 The decision in the

SGS case, similarly, was also based on an exclusive jurisdiction

clause in the contract which was ‘umbrella’d in’ the BIT.25

It is thus improbable that Respondent State’s objection on

the prematurity of this investment claim shall succeed since:

• No restriction on jurisdiction of the Tribunal can be

read into Article 9 of the UK – India BIT.

• There is no legislation or agreement supporting

exclusive jurisdiction of Indian courts in taxation

disputes with respect to assessment under Section 9(1)

(i), IT Act, 1961.

Reliance on Article 27 of the Double Taxation Avoidance

Agreement between India and UK26 (“UK – India DTA”) in this

regard would be misplaced. The mutual resolution by courts

envisaged therein is optional, as indicated by use of the word

‘may’, contingent upon resort made to it by the Assessee (the

Claimant herein). It does not confer exclusive jurisdiction upon

domestic courts.

Notably, this preliminary objection of prematurity was

raised prior to the ITAT’s Order dated 9 March 2017. Following

the same, the Claimants have sufficient basis to argue that the

requirement of agitation of the dispute in local courts, if any,

has been met.

c. Non-applicability of the BIT to taxation disputes

In its bifurcation application dated 6 October 2016, India

asserted that taxation disputes were outside the purview of

UK – India BIT.27 While acknowledging that the treaty did not

expressly exclude such disputes, the Respondent State claimed

this exclusion on the basis of general non-arbitrability of taxation

legislations and the ‘exclusive jurisdiction’ under Article 27 of

the UK – India DTA.

There is no a priori rule excluding taxation legislations

from the purview of investment treaty arbitration.28 BITs may

provide for complete exclusion of municipal taxation matters

from the domain of investment arbitration. States are free to

negotiate such exclusions.

This was observed in an investment dispute concerning

taxation measures, EnCana v. Ecuador, where Article XII of the

Canada – Ecuador BIT encompassed a complete exclusion

of taxation measures from the purview of the Agreement.29

Consequently, a review of substantive assurances with respect

to taxation measures was deemed beyond the scope of the

Tribunal’s jurisdiction.30

On the contrary, the UK – India BIT is significantly

different. It does not contain such carve – out clauses; in

the absence thereof, the Tribunal is not precluded from

contemplating disputes concerning taxation measures related

to the Claimants’ investment.

Pertinently, a carve-out clause is provided in Article

4(3)(b) of the UK – India BIT vis-à-vis “any international

agreement or arrangement relating wholly or mainly to

taxation or any domestic legislation relating wholly or mainly

to taxation.”31 However, this merely precludes evaluation of

taxation measures under the protection of Article 4 relating

to Most-favoured-nation treatment and National Treatment.

This does not exclude taxation measures in toto from the scope

of the BIT.

2. The Jurisdictional Triumvirate of Investment Treaty Arbitration

Investment Arbitration largely deals with two aspects

in its determination of a claim: jurisdictional issues and

substantive issues. The threefold aspects of an investment

tribunal’s jurisdiction pertain to subject matter jurisdiction

(ratione materiae), personal jurisdiction (ratione personae) and

territorial jurisdiction (ratione loci). This is also embodied in

Article 9 of the UK – India BIT, which restricts the availability

of dispute resolution to “any dispute between an investor of one

Contracting Party and the other Contracting Party in relation to an

investment of the former under this Agreement.”

APRIL | 2019 • YAR • 20


a. Ratione Personae Jurisdiction

Under Article 1(c) of the UK – India BIT, ‘investors’ refer

to any national or company of a Contracting Party. Companies,

with respect to UK investors, are defined as “corporations, firms

and associations incorporated or constituted under the law in

force in any part of the United Kingdom or in any territory

to which this Agreement is extended in accordance with the

provisions of Article 13.”32

Both the Claimants are companies incorporated in the

UK and carry substantial business activities in the United

Kingdom’s territory. Consequently, they would be entitled

to protection as ‘investors’ under Article 1(c) of the BIT

read with Article 1(a)(i). Any jurisdictional objections to

the ratione personae jurisdiction of the Tribunal seem largely

unsustainable.

b. Ratione Materiae Jurisdiction

Ratione materiae jurisdiction of the Tribunal hinges on

characterization of an investor’s right as ‘investments’. Thus, to

avail the protection of the UK – India BIT, the Claimants’ rights

must constitute an ‘investment’ as defined under Article 1(b) of

the BIT. Under this Article, Investment includes:

(ii) Shares in and stock and debentures of a company and any other

similar forms of interest in a company;33

The present case involved two claimants.

• Of these, the first is Cairn Energy Plc, the parent

company of CUHL. Cairn Energy Plc claims its

‘interests’ in CUHL and CIL as its investments.

• Similarly, the second investor CUHL claims ‘interests’

in CIL as investments under the BIT.

On the face of it, it seems evident from Article 1(b)(ii)

that the Claimants are entitled to claim interests in CUHL, the

9.8% frozen shareholding in CIL and CUHL’s dividends as their

‘investments’, since these constitute ‘interests in a company’.

Preceding decisions, such as CMS v. Argentina, support their

claims.34

However, the rights of Cairn Energy Plc in CIL, unlike

CUHL’s rights, are held indirectly through intermediaries. Unlike

several other Indian BITs35, the UK – India BIT does not contain

an express provision allowing indirect rights to be protected as

investments under the BIT. In this regard, India may object to the

ratione materiae jurisdiction of the Tribunal, asserting that the

UK – India BIT would necessitate that the investment is ‘made

by’ and not simply held by Cairn Energy, as per Article 1(b).36

Guidance may be sought for this assertion from the Standard

Chartered Bank v. Republic of Tanzania37 dispute, where similar

reasoning prevented the Tribunal from exercising ratione materiae

jurisdiction under the UK – Tanzania BIT over an investment

simply held by a UK national with subsidiaries all around the

world. In the absence of evidence of direct investment activity

by the investor, Cairn Energy Plc can be denied ratione materiae

Nerul river in Goa, India | Andriy Shevchenko

APRIL | 2019 • YAR • 21


protection of its indirectly held rights. 38

Additionally, the Respondent may object to the ratione

materiae jurisdiction, asserting that the tax refund of the Claimants

for FY 2011-12 is capital gain or return, and not an ‘investment’

under Article 1. Since Article 9 extends only to disputes with

respect to ‘investments’, the Claimants must be able to qualify the

tax refund within the meaning of the term. This seems difficult,

since the definition under this Article does not extend to include

rights in the form of returns facilitated under domestic law.

c. Ratione Loci Jurisdiction

It is pertinent to note that under the chapeau to Article 1(b)

of the UK – India BIT, the relevant investment by the investor

must be made within the territory of India.39 This is essential

to establish the territorial jurisdiction of the Tribunal over such

investment.40

CUHL’s rights in CIL, a company incorporated in India,

will qualify as investments within the ‘territory’ of India as defined

under Article 1(f)(ii).41 However, Cairn Energy Plc does not hold

any rights in CIL. Its rights are limited to its interests in CUHL,

which is a company incorporated in the United Kingdom. Thus,

Cairn Energy Plc’s rights in CUHL cannot qualify as investments

within the territory of India – consequently, they cannot be

entitled to protection under the UK – India BIT.

India’s assertion in this regard can be supported by the

jurisprudence developed through the Quiborax v. Bolivia42, Romak

S.A. v. Uzbekistan43, Saba Fakes v. Turkey44 decisions, among others,

upholding the ratione loci principle.

On the flipside, the investor may potentially establish this

ratione loci jurisdiction by arguing that:

• Cairn Energy’s interest in CUHL has territorial nexus

to the territory of India, insofar as its interest also

extends to the underlying assets of CIL, a company

incorporated in India. Tribunals have previously

accepted dilution of the ratione loci requirement to a

lower threshold of ‘territorial nexus’, as observed in

Giovanni Alemanni v. Argentina.45

• The ultimate benefit of Cairn Energy’s interests in

CUHL, which includes CIL, accrues to the host state

of the investment, i.e. India. This is evinced by CIL’s

large presence in oil and gas exploration activities in

India. Such benefit to the host state is sufficient to

prove a territorial link of the investment to the host

state. The Claimant may place reliance in this regard

on the decisions in British Caribbean Bank v. Belize46

and Fedax v. Venezuela.47

3. Interim Conclusion

The Respondent State’s preliminary objections, as reflected

in Procedural Order No. 4 of the Tribunal, seem unlikely to

succeed. However, the Respondent state may succeed in raising

objections based on the threshold jurisdictional requirements with

respect to Cairn Energy Plc, namely:

• Ratione Materiae jurisdiction: Cairn Energy Plc’s

indirectly held rights, with respect to which it has no

direct investment activity, do not constitute investments

‘made’ in the territory of India. The ‘tax refund’ cannot

be qualified as an investment either.

• Ratione Loci jurisdiction: Cairn Energy Plc’s rights

in CUHL do not constitute investments within the

‘territory’ of India.

III. AssEssINg THE REsPoNdENT sTATE’s CAsE oN MERITs oF THE dIsPUTE

Following the crippling defeat in White Industries Australia

Limited v. The Republic of India, the Government’s keenness

to avoid another loss cannot be understated. Not only do

investment arbitration cases involve large sums as costs, damages,

et al, repeated losses in investment disputes tarnish the state’s

reputation as a stable host for foreign investment.

The Government of India may find some support in

jurisprudence of investment tribunals to object to the Cairn

Tribunal’s jurisdiction. However, this jurisprudence lends negligible

support to India’s position in the Cairn dispute on merits. This is

discussed in the forthcoming section.

1. Expropriation [Article 5]

Expropriation essentially refers to a governmental taking of

property, in lieu of adequate compensation.48 The possibility of

an expropriation claim in the present dispute arises largely with

respect to seizure of CUHL’s dividends, purported set off of its

tax refunds and attachment of CUHL’s 9.8% shareholding in CIL.

Taxes, even those that deprive investors of the value of their

investments [in this case, the Claimants’ interests in CIL], benefit

from a presumption of legality in International Law.49 To evince

that a taxation measure leads to direct or indirect expropriation of

an investment, the investor must establish that this is against the

usual tax practices of the state and causes severe depletion of the

value of the investors’ investment.

Claimants’ Position

The Claimant may place reliance on similar asset freezes

and denial of tax returns, which were deemed to constitute

expropriation in the case of Yukos v. Russia50 and RosInvestCo v.

Russia.51 Additionally, the substantial impairment caused to the

Claimants’ interests due to principle tax of INR 102 Billion along

with revised interest of INR 14.4 Billion may evince the severe

depletion of the value of the investment of the Claimants.

Respondent state’s Position

The Tribunals’ decisions in the Yukos and RosInvestCo

cases were motivated by relentless and deliberate attacks by the

APRIL | 2019 • YAR • 22


Russian Government on owners of the investment ‘to destroy

Yukos and gain control over its assets.’52 Such malpractice

cannot be potentially imputed to the Respondent State in the

present case.

In holding a tax legislation to be expropriatory, Tribunals

require dual proof of:

• State conduct contrary to usual practice of the State.53

India has often followed the practice of retrospective

taxation with respect to amendments to the IT Act, 1961, such as

insertion of Explanation to Section 9(2). These have been upheld

in decisions such as Ashapura Minichem Ltd. v. ADIT.54 Thus, it

may be asserted that retrospective amendments to IT Act, 1961,

are not beyond the norm of the Respondent State.

• Substantial erosion of the investments’ value by

taxation measures of the State.55

It is incontrovertible that profits of the Claimants have

been impacted as a result of the Respondent State’s measures.

This is not sufficient to constitute expropriation.56 There is no

impact on CIL’s continued business activity in India, which

operates profitably till date. Such continued availability of rights

in an investment for profitable business activity indicates lack of

expropriation.57

However, the greatest flaw in India’s position vis-à-vis

the claim of expropriation is the attachment of CUHL’s 9.8%

shareholding in CIL. This would severely inhibit its ability to

derive profits from its investment without encumbrances, which

may amount to indirect expropriation. 58 If such is sufficiently

elaborated by facts, compensation and damages for indirect

expropriation may accrue to the Claimants.

2. Fair and Equitable Treatment [Article 3]

The Fair and Equitable Treatment (“FET”) standard finds

mention in Article 3(2) of the UK – India BIT, and is often deemed

to include an obligation to respect legitimate expectations.59 It also

includes the obligation incumbent upon host states of investments

to act in a just, fair and non-arbitrary manner to secure such

legitimate expectations of investors.

Claimants’ Position

The Claimant may assert that certainty and stability of

business environment would constitute an essential element of

the FET standard. This is vitiated by enactment of retrospective

taxation legislations. The legitimate expectations of investors,

who undertake investment activity based on the direct or

indirect assurances of the host state, are violated by such

retrospective amendments that completely alter the business

environment of the State.60 Support for this legal principle may

be found in decisions, such as Occidental v. Ecuador61, CME v.

Czech Republic62 and Metaclad v. United Mexican States.63

Thus, it may be argued by the Claimants that the

retrospective amendment of Section 9(1)(i) is in contravention

to their legitimate expectation as guaranteed by the FET standard

under Article 3(2) of the BIT. This is premised on the fact that the

amendment alters business environment in India by amending the

meaning of taxable ‘income deemed to accrue or arise in India.”

Respondent’s Position

Investment arbitration decisions lean towards the principle

that investors ‘must know beforehand, all rules and regulations that

will govern their investments’.64 Thus, prima facie, the retrospective

application of the amendment to Section 9(1)(i) seems in breach

of the Claimants’ legitimate expectations, irrespective of whether it

was in good faith or not.65

However, India may defend its position and enactment

on two grounds. First, it is possible to assert that incremental

taxation regimes are part of normal business risk that an

investor undertakes while making an investment.66 No specific

representation vis-à-vis complete stagnation in regulatory

regimes can be guaranteed to investors. This is specifically true

in cases on changes to taxation law:

“In the absence of a specific commitment from the host

State, the foreign investor has neither the right nor any

legitimate expectation that the tax regime will not change,

perhaps to its disadvantage, during the period of the

investment.”67

In this regard, the Occidental decision may also be

distinguished. The Tribunal’s conclusions hinged upon whether the

tax law was changed without providing any clarity about its meaning

and extent, and practised inconsistently with such changes.68

However, the present amendment by means of Explanation 4 and

5 to Section 9(1)(i) expressly clarifies the scope and meaning of the

amendment, and is applied accordingly.

Second, India may resort to its right to regulatory freedom.

It is not reasonable to expect that the circumstances prevailing

during an investment shall remain eternally unchanged. States

are entitled to make regulatory changes in light of fiscal69 or

public interest.70

Thus, the Respondent State may justify its measures on

grounds of pressing economic interest. This could include its

need for preventing large – scale tax evasion in transactions

deriving their value from India. India may refer the Tribunal to

losses it has incurred from similar transactions in the past, such

as the Vodafone restructuring, which necessitate such a change in

fiscal policy.

3. Repatriation of Investments and Returns [Article 7]

Under the UK – India BIT, India has assumed an ‘unrestricted’

obligation to transfer all returns arising from an investment made

by any investor.71 This would include returns arising in the form

of tax refunds. Since this obligation is unqualified, it seems

highly likely that India would be held in breach of this Article

for failing to secure return of the Claimants’ tax refunds.

APRIL | 2019 • YAR • 23


4. Most Favoured Nations Treatment (“MFN”) and National treatment (“NT”) [Article 4]

The Claimants may attempt to import more favourable

protections granted to investors under other Indian BITs to

substantiate their rights. Additionally, they may resort to more

favourable treatment granted to Indian companies under the

municipal tax legislations of the Respondent State.

However, these attempts are easily refutable by reference to

Article 4(3)(b) of the UK – India BIT, which excludes application

of the MFN and NT provisions to domestic legislations ‘wholly or

mainly’ relating to taxation.72 Such carve –out clauses are found

in model BITs of several countries, including Austria,73 China,74

Germany,75 Netherlands,76 among others and similarly interpreted.

Thus, Section 9(1)(i) of the IT Act, 1961 and the

consequence of its retrospective application are excluded from the

protection of Article 4 of the BIT.

IV. CoNCLUsIoN: REsPITE IN THE ModEL INdIAN BIT

The discussion in the foregoing sections brings us to the

conclusion that should the Claimants be able to overcome the

burden of proving ratione materiae and ratione loci jurisdiction of

the Cairn Tribunal, their case may succeed on merits. This would

entail substantial liability for the Respondent state for breach of:

• Obligation to refrain from indirect expropriation or

alternatively, compensate such expropriation.

• Obligation to ensure repatriation of returns of the

Claimants’ investments.

• Obligation to ensure legitimate expectations of

investors.

An overhaul of the Indian BIT regime, as it exists now, is

necessary to prevent the State from being trapped into similar

disputes in the future. The Model Indian BIT sufficiently

addresses these concerns by, at the outset, providing for a

general carve-out exception. This is found is Article 2.4 of the

Model, which stipulates that the Treaty shall not apply to “any

law or measure regarding taxation, including measures taken to enforce

taxation obligations.”

In addition, the Treaty clarifies that if the host state of the

investment determines that an alleged breach of its BIT obligations

relates to the subject matter of taxation, such decision shall not be

amenable to review by an arbitration tribunal.

The BIT goes an extra mile by ensuring a corresponding

burden on investors with respect to tax payments. Its stipulation

in Article 11(iii) confers the investor with a duty to comply

with provisions of law concerning taxation and ensuring timely

payment of tax.

Is it difficult to negotiate a BIT with a blanket exclusion of

taxation measures from its purview? Not necessarily – taxation

care out clauses have appeared in BITs since the late 1960s,

post the extensive development of Double Taxation Avoidance

Agreements.77 Such was the case with the US – Ecuador BIT,

where the accompanying explanatory note to the BIT provided:

“[T]ax matters are generally excluded from the coverage

of the prototype BIT, based on the assumption that tax

matters are properly covered in bilateral tax treaties.”

Perhaps due to lessons learnt from the Cairn and Vodafone

arbitration, the Model BIT has envisaged these exceptions and

obligations to protect. It is imperative that Indian investment

agreements be reformed to preclude any implied undertakings

of vast and unqualified obligations as a host state. Equitable

obligations such as meeting legitimate expectations with respect

to taxation must be either culled out in precise terms in BITs or

excluded altogether.

Keeping this in mind, the Model Indian BIT in its present

form is a welcome change from existing BITs and a step in the

correct direction.

Vishakha Choudhary

1 Cairn Energy Plc and Cairn UK Holdings Limited v. The Republic of India, PCA Case No. 2016-7.2 Cairn U.K. Holdings v. DCIT, (International Tax) Delhi ITA no. 1669/Del/2016; available at: http://119.226.207.85:8080/itat/upload/-200506499233809084113$5

% 5E1REFNOCairn_U_K_holdings_Limited_ITA_No_1669_del_2016_AY_2007-08_Final.pdf. (Last accessed on 13 October 2017).3 The Income Tax Act, 1961, s. 9(1)(i).4 Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613.5 Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 at para 81.6 Finance Act, 2012, s. 4(a).7 Finance Act, 2012, s. 4(a).8 Cairn U.K. Holdings v. DCIT, (International Tax) Delhi ITA no. 1669/Del/2016; available at: http://119.226.207.85:8080/itat/upload/-200506499233809084113$5

% 5E1REFNOCairn_U_K_holdings_Limited_ITA_No_1669_del_2016_AY_2007-08_Final.pdf. (Last accessed on 13 October 2017).9 Cairn Energy, Update on India Tax Dispute, 20 September 2017 available at https://www.cairnenergy.com/news-media/news/2017/update-on-india-tax-

dispute/#Tabundefined=1 (Last accessed on 13 October 2017).10 Cairn Energy, Update on India Tax Dispute, 20 September 2017 available at https://www.cairnenergy.com/news-media/news/2017/update-on-india-tax-

dispute/#Tabundefined=1 (Last accessed on 13 October 2017).11 Agreement between the Government of Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Promotion and

Protection of Investments (signed 14 March 1994, entered into force 6 January 1995) (“UK – India BIT”).12 Cairn Energy, India Tax Dispute - Clarification, 19 June 2017 available at https://www.cairnenergy.com/news-media/news/2017/india-tax-dispute-

clarification/#Tabundefined=1 (Last accessed on 13 October 2017).13 Cairn U.K. Holdings v. DCIT, (International Tax) Delhi ITA no. 1669/Del/2016; available at: http://119.226.207.85:8080/itat/upload/-200506499233809084113$5

% 5E1REFNOCairn_U_K_holdings_Limited_ITA_No_1669_del_2016_AY_2007-08_Final.pdf. (Last accessed on 13 October 2017) at para 33.14 Vedanta Resources PLC v. Government of India, UNCITRAL Rules (1976).

APRIL | 2019 • YAR • 24


15 Cairn Energy Plc and Cairn UK Holdings Limited v. The Republic of India, Procedural Order No. 4, PCA Case No. 2016-7 (19 April 2017).16 UK – India BIT, art. 9.17 Yulia Andreeva, Interpreting Consent to Arbitration as a Unilateral Act of State: A Case Against Conventions, ArbitrAtion internAtionAl 27(2) 129 – 148 (1 June 2011).18 Mobil Corp. Venezuela Holdings BV and others v. Venezuela, Decision on Jurisdiction, ICSID Case No. ARB/07/27 (10 June 2010) at paras. 71-85; Cemex Caracas

Investments BV and others v. Venezuela, Decision on Jurisdiction, ICSID Case No. ARB/08/15, (30 December 2010) at paras. 71-79.19 Cairn Energy Plc and Cairn UK Holdings Limited v. The Republic of India, Procedural Order No. 4, PCA Case No. 2016-7 (19 April 2017) at para 39(a).20 UK – India BIT, art. 9(3)(c): “[dispute may be referred to arbitration as follows]... to an ad hoc arbitral tribunal by either party to the dispute in accordance

with the Arbitration Rules of the United Nations Commission on International Trade Law, 1976.”21 SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, ICSID Case No. ARB/02/6 (29

January 2004) at para 155.22 Agreement between the Republic of the Philippines and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments (signed 31

March 1997, entered into force 23 April 1999), art. 8.23 Tulip Real Estate and Development B.V., Netherlands v. Republic of Turkey, Award, ICSID Case No. ARB/11/28 (10 March 2014) at para 364; Interocean Oil

Development Company, Interocean Oil Exploration Company v. Federal Republic of Nigeria, Decision on Preliminary Objections, ICSID Case No. ARB/13/20 (29 October 2014) at para 144.

24 Occidental Petroleum Corporation, Occidental Exploration and Production Company v. Republic of Ecuador, Decision on Jurisdiction, ICSID Case No. ARB/06/11 (9 September 2008) at para 81.

25 SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision of the Tribunal on Objections to Jurisdiction, ICSID Case No. ARB/02/6 (29 January 2004) at para 143.

26 Convention between the Government of the Republic of India and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income and capital gains (entered into force 25 October 1993), art. 27.

27 Cairn Energy Plc and Cairn UK Holdings Limited v. The Republic of India, Procedural Order No. 4, PCA Case No. 2016-7 (19 April 2017) at para 39(b).28 Amco Asia Corporation v. Republic of Indonesia, Resubmission: Decision on Jurisdiction, ICSID Case No. ARB/81/1 (10 May 1988).29 Agreement between the Government of Canada and the Government of the Republic of Ecuador for the Promotion and Reciprocal Protection of Investments

(signed 29 April 1996, entered into force 6 June 1997), art.XII.30 EnCana Corporation v. Republic of Ecuador, Award, UNCITRAL Rules (1976) (3 February 2006) at para 149.31 UK – India BIT, art. 4(3)(b).32 UK – India BIT, art. 1(a)(i).33 UK – India BIT, art. 1(b)(ii).34 CMS Gas Transmission Company v. The Republic of Argentina, Decision on Jurisdiction, ICSID Case No. ARB/01/8 (17 July 2003). 35 For instance, Agreement between the Republic of India and the Kingdom of the Netherlands for the Promotion and Protection of Investments (signed 6

November 1995, entered into force 1 December 1996), art. 2.36 UK – India BIT, art. 1(b): “investment” means every kind of asset established or acquired, including changes in the form of such investment, in accordance

with the national laws of the Contracting Party in whose territory the investment is made....”37 Standard Chartered Bank v. The United Republic of Tanzania, Award, ICSID Case No. ARB/10/12 (2 November 2012), at paras 270-5.38 Tokios Tokelés v. Ukraine, Decision on Jurisdiction, ICSID Case No. ARB/02/18 (29 April 2004).39 UK – India BIT, art. 1(b): “investment” means every kind of asset established or acquired, including changes in the form of such investment, in accordance

with the national laws of the Contracting Party in whose territory the investment is made...”40 Zachary Douglas, the internAtionAl lAw of investment ClAims 171 (Cambridge University Press, 2009, New York USA).41 UK – India BIT, art. 1(f)(ii): “in respect of India: the territory of the Republic of India including its territorial waters and the airspace above it and other

maritime zones including the Exclusive Economic Zone and continental shelf over which’ the Republic of India has sovereignty, sovereign rights or jurisdiction in accordance with its laws in force, and Public’ International Law including the 1982 United Nations Convention on the Law of the Sea.”

42 Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, Decision on Jurisdiction, ICSID Case No. ARB/06/2, (27 September 2012) at para 215.

43 Romak S.A. v. The Republic of Uzbekistan, Award, PCA Case No. AA280 (26 November 2009) at para 237.44 Saba Fakes v. Republic of Turkey, Award, ICSID Case No. ARB/07/20 (14 July 2010).45 Giovanni Alemanni and Others v. The Argentine Republic, Award, ICSID Case No. ARB/07/8 (17 November 2014).46 British Caribbean Bank Ltd. v. Government of Belize, Award, PCA Case No. 2010-18/BCB-BZ (19 December 2014).47 Fedax N.V. v. The Republic of Venezuela, Decision on Jurisdiction, ICSID Case No. ARB/96/3. (11 July 1997).48 Todd Weiler, internAtionAl investment lAw An ArbitrAtion: leAding CAses from the iCsid, nAftA, bilAterAl treAties And CustomAry internAtionAl lAw

650 (London: Cameron May, 2005).49 The American Law Institute, Restatement of the Law (Third): The Foreign Relations Law of the United States vol 2 (1987) 200–01.50 Yukos Universal Ltd (Isle of Man) v. The Russian Federation, Final Award, PCA Case No AA 227 (18 July 2014).51 RosInvestCo UK Ltd v. The Russian Federation, Final Award, SCC Case No V079/2005 (12 September 2010).52 Yukos Universal Ltd (Isle of Man) v. The Russian Federation, Final Award, PCA Case No. AA 227 (18 July 2014) at para 1404.53 A Reinisch, Expropriation in P Muchlinski and others (eds), the oxford hAndbook of internAtionAl investment lAw 422 – 25 (OUP, 2008).54 (2010) 5 Taxman 57 (Bom).55 CMS Gas Transmission Company v. The Argentine Republic, Award, ICSID Case No ARB/01/8 (12 May 2005) at paras. 262–63.56 Marvin Roy Feldman Karpa v. United Mexican States, Award, ICSID Case No ARB(AF)/99/1 (16 December 2002); Archer Daniels Midland Company and another

v. United Mexican States, Award, ICSID Case No ARB(AF)/04/5 (21 November 2007).57 Pope & Talbot Inc. v. Government of Canada, Interim Award, 7 ICSID Rep 69, 89 (26 June 2000).58 EnCana Corporation v. Republic of Ecuador, Award, UNCITRAL Rules (1976) (3 February 2006) at para 174.59 Rumeli Telekom AS and Another v. Republic of Kazakhstan, Award, ICSID Case No ARB/05/16 (29 July 2008) at para 609; Saluka Investments BV (The Netherlands)

v. Czech Republic, Partial Award, UNCITRAL Rules (1976) (17 March 2006) at para 302.60 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, Award, ICSID Case No. ARB(AF)/00/2 (29 May 2003) at para 154.61 Occidental Petroleum Corporation, Occidental Exploration and Production Company v. Republic of Ecuador, Award, LCIA Case No. UN3467 (1 July 2004) at para183.62 CME Czech Republic B.V. v. The Czech Republic, Partial Award, Case No.10435/AER/ACS (13 September 2001) at para 157.63 Metalclad Corporation v. United Mexican States, Award, ICSID Case No. CASE No. ARB(AF)/97/1 (30 August 2000).64 MTD Equity Sdn Bhd & MTD Chile S.A v. Republic of Chile, Award, (2005) 44 ILM 91, 105-6 (25 May 2004).65 Occidental Petroleum Corporation, Occidental Exploration and Production Company v. Republic of Ecuador, Award, LCIA Case No. UN3467 (1 July 2004) at para186.66 Marcin Kałduński, Element of Risk in International Investment Arbitration, internAtionAl Community lAw review 13(1) 111-24 (2011).67 EnCana Corporation v. Republic of Ecuador, Award, UNCITRAL Rules (1976) (3 February 2006) at para 173.68 Occidental Petroleum Corporation, Occidental Exploration and Production Company v. Republic of Ecuador, Award, LCIA Case No. UN3467 (1 July 2004) at para184.69 Genin, Eastern Credit Ltd Inc and AS Baltoil v. Republic of Estonia, Award, ICSID Case No. ARB/99/2, 6 ICSID Rep 236 (2001) 370.70 Saluka Investments BV (The Netherlands) v. Czech Republic, Partial Award, UNCITRAL Rules (1976) (17 March 2006) at para 305.71 UK – India BIT, art. 7: “Each Contracting Party shall in respect of investments grant to investors of the other Contracting Party the unrestricted transfer of

their investments and returns.”72 UK – India BIT, art. 4(3)(b).73 A Reinisch, Austria in Brown in C Brown (ed), CommentAries on seleCted model investment treAties (Oxford University Press 2013).74 W Shan and N Gallagher, China in C Brown (ed), CommentAries on seleCted model investment treAties (Oxford University Press 2013).75 R Dolzer and Y Kim, Germany in C Brown (ed), CommentAries on seleCted model investment treAties (Oxford University Press 2013).76 N Schrjver and V Prislan, The Netherlands in C Brown (ed), CommentAries on seleCted model investment treAties (Oxford University Press 2013).77 Matthew Daviem, Taxation-Based Investment Treaty Claims, JournAl of internAtionAl dispute settlement 8 202-227 (2015).

APRIL | 2019 • YAR • 25


enFoRceAbiliTY oF inTeRim meAsuRes bY FoReign-seATed ARbiTRAl TRibunAls in indiA

By Harshad1 and Anirudh Gandhi2

1. INTRodUCTIoN

Lord Mustill once famously compared the relationship between

an arbitral tribunal and national courts to a relay race. He wrote

that in the “initial stages, before the arbitrators are seized of the

dispute, the baton is in the grasp of a court; for at that stage,

there is no other organization which could take steps to prevent

the arbitration agreement from becoming ineffectual. When the

arbitrators take charge, they take over the baton and retain it until

they have made an award.”3

In 2015, the Indian Parliament, armed with the

recommendations of the Law Commission of India4, echoed Lord

Mustill’s understanding. It introduced a series of amendments

to facilitate the grant of interim measures by an arbitral tribunal

under Part I of the Indian Arbitration and Conciliation Act 1996

(‘Indian Arbitration Act’).5 The object, amongst other things,

was to make the arbitration process in India more cost effective

and resulting in the expeditious disposal of cases.6 however, in

this entire process, the emphasis remained on improving the legal

regime governing the interim measures issued by arbitral tribunals

seated in India, or otherwise governed by Part I of the Indian

Arbitration Act. The fate of interim measures issued by tribunals

seated outside India (or foreign-seated interim measures), but

relating to subject matter situated within the territory of India,

remains as ambiguous as it was prior to 2015.

It is difficult to comprehend if the Indian Parliament’s

silence on the enforceability of interim measures by a foreign-

seated arbitral tribunal was deliberate or a consequence of some

oversight. Nonetheless, the uncertainty surrounding this issue

poses yet another obstacle for litigants and practitioners while

arbitrating a dispute involving subject-matter in India. That

this uncertainty must therefore be addressed is clear, and this is

precisely what the authors endeavour to do herein.

Part II details the legal regime governing the grant of

interim measures by an arbitral tribunal and the enforceability

of such orders under the Indian Arbitration Act. Thereafter, Part

III explores varied avenues available in Indian law for indirect

enforcement of foreign-seated interim measures. Part IV concludes.

2. INTERIM MEAsUREs UNdER THE INdIAN ARBITRATIoN ACT

Agra, India | Vladimir Zhuravlev

APRIL | 2019 • YAR • 26


The Indian Arbitration Act provides a party to an arbitration

agreement7 two avenues for seeking any interim measures of

protection. On the one hand, Section 9 entitles a party to seek

interim measures from a competent court8 “before or during

arbitral proceedings or at any time after the making of the arbitral

award but before it is enforced in accordance with Section 36”9 of

the Indian Arbitration Act. On the other hand, Section 17 entitles

a party to seek interim measures from the arbitral tribunal itself

either “during the arbitral proceedings or at any time after the

making of the arbitral award but before it is enforced in accordance

with Section 36.”10

In 2015, the legal regime for the grant of interim measures

was amended in four significant respects.

Firstly, the Arbitration and Conciliation (Amendment)

Act 2015 equated an arbitral tribunal’s power to grant interim

measures with that of a civil court.11 The amended Section 17 now

clarifies that “the arbitral tribunal shall have the same power for

making orders, as the court has for the purpose of, and in relation

to, any proceedings before it.”12

Secondly, the amendments provided for the direct

enforcement of any interim measures granted by an arbitral

tribunal in accordance with Section 17 of the Indian Arbitration

Act.13 The newly introduced Section 17(2) now states that “[s]

ubject to any orders passed in an appeal under Section 37, any

order issued by the arbitral tribunal under this section shall be

deemed to be an order of the Court for all purposes and shall

be enforceable under the Code of Civil Procedure, 1908 (5 of

1908) (‘Indian CPC’), in the same manner as if it were an order

of the Court.”14

This amendment was a result of some scathing observations

made by the Law Commission of India, acknowledging that the

“efficacy of Section 17 is […] seriously compromised given the

lack of any suitable statutory mechanism for the enforcement of

such interim orders of the arbitral tribunal.”15

It also drew inspiration from Article 17H of the UNICTRAL

Model Law on International Commercial Arbitration16 (‘Model

Law’), on which the Indian Arbitration Act is premised. Article

17H(1) of the Model Law states that an “interim measure issued

by an arbitral tribunal shall be recognized as binding and, unless

otherwise provided by the arbitral tribunal, enforced upon

application to the competent court, irrespective of the country in which

it was issued, subject to the provisions of article 17 I.”17 Article 17

I then lists the grounds for refusing recognition or enforcement

of an interim measure, which includes grounds set forth in article

36(1)(a)(i), (ii), (iii) or (iv) ) and 36(1)(b)(i) or (ii) relating to the

recognition and enforcement of an arbitral award.18

Although having similar objectives, a textual comparison of

Article 17 H of the Model Law and Section 17(2) of the Indian

Arbitration Act reveals that these provisions are not pari materia.19

Article 17H of the Model Law relates to the enforcement of an

interim measure issued by an arbitral tribunal, “irrespective of the

country in which it was issued”.20 This includes all interim measures

issued by arbitral tribunals in any form, “whether the place of

arbitration is the State where recognition or enforcement is sought,

outside that State, or even not yet determined”.21 however,

Section 17(2) of the Indian Arbitration Act merely confines itself

to the interim measures “issued by the arbitral tribunal under

this section”, i.e. Section 17 itself.22 This excludes any interim

measures issued by an arbitral tribunal not governed by Part I

of the Indian Arbitration Act,23 particularly those seated outside

India. This is why the amendments that the Law Commission

of India had recommended as being consistent with the 2006

amendments to Article 17 of the Model Law “do not go as far.”24

Thirdly, the amendments restricted the jurisdiction of civil

courts to grant interim measures during the arbitral proceedings.25

The newly introduced Section 9(3) now clarifies that “[o]nce the

arbitral tribunal has been constituted, the Court shall not entertain

an application under sub-section (1), unless the Court finds that

circumstances exist which may not render the remedy provided under

section 17 efficacious.”26

Fourthly, the amendments provided for extra-territorial

application of some provisions contained in Part I of the Indian

Arbitration Act, specifically Sections 9, 27 and 37(1)(a) and

37(3).27 The Proviso to Section 2(2) provides that “subject to an

agreement to the contrary, the provisions of sections 9, 27 and

clause (a) of sub-section (1) and sub-section (3) of section 37

shall also apply to international commercial arbitration, even if the

place of arbitration is outside India, and an arbitral award made or

to be made in such place is enforceable and recognized under the

provisions of Part II of this Act.”28 In this regard, while Section

9 of the Indian Arbitration Act relates to a civil court’s power to

grant interim measures, Section 27 includes the power of a court

to render assistance in taking of evidence and in case of contempt

to the arbitral tribunal.

This amendment not only resonates with the view that “the

jurisdiction of the courts of the seat to assist with international

arbitrations is not exclusive”,29 but is also consistent with a

growing tendency to render assistance in international arbitration

proceedings notwithstanding any territorial limitations.30 Its

rationale was further explained by the Law Commission of India.

The Commission observed that “[w]here the assets of a party

are located in India, and there is a likelihood that that party will

dissipate its assets in the near future, the other party will lack an

efficacious remedy if the seat of the arbitration is abroad.”31 Thus,

the above amendment, which ensures “that an Indian Court can

exercise jurisdiction with respect to these provisions even where

the seat of the arbitration is outside India”,32 was made “to prevent

dissipation and diversion of assets.”33

In view of the above, it is evident that the legal regime in

India governing the interim measures issued by an arbitral tribunal

has taken significant strides. However, few limitations still remain.

Specifically, the Indian Arbitration Act does not provide any

mechanism for direct enforcement of interim orders issued by an

arbitral tribunal seated outside India, which may attract criticism

from those who identify international arbitration as a “borderless”

paradigm.34. But this raises a more preliminary question – are

there any avenues for indirect enforcement of foreign-seated

interim measures?

APRIL | 2019 • YAR • 27


3. AVENUEs FoR INdIRECT ENFoRCEMENT oF FoREIgN-sEATEd INTERIM MEAsUREs

Indian law appears to provide three distinct avenues for

indirect enforcement of foreign-seated interim measures. These

include (i) a possibility to seek identically worded fresh interim

measures under Section 9 of the Indian Arbitration Act; (ii)

invoke the contempt jurisdiction of the courts in India under

Section 27(5) of the Indian Arbitration Act; and finally, (iii) seek

enforcement of a judgment issued by the courts situated at the

arbitral seat in accordance with the Indian CPC. While each

avenue comes with its own uncertainties, it nonetheless provides

an opportunity to an aggrieved party to ensure compliance with

interim measures issued by a foreign-seated arbitral tribunal.

3.1 Fresh Interim Measures under section 9 of the Indian Arbitration Act

Subject to an agreement to the contrary, a party to a

foreign-seated arbitration may approach Indian courts under

Section 9 of the Indian Arbitration Act to independently seek

interim measures for indirectly enforcing foreign-seated interim

measures;35 a possibility affirmed by the High Court of Bombay

and Delhi respectively on two separate occasions.

In the case of HSBC Pl Holdings (Mauritius) Ltd. v Avitel

Post Studioz Limited and Ors.,36 the petitioner had already obtained

interim relief from an emergency arbitrator in a Singapore

seated SIAC administered arbitration for inter alia freezing the

respondents’ accounts and disclosing their assets.37 Subsequently,

the petitioner then filed an application under Section 9 of the

Indian Arbitration Act seeking similar interim reliefs.38 The High

Court of Bombay, after undertaking an independent review of the

circumstances, granted interim measures akin to those granted

by the emergency arbitrator.39 While passing such directions,

the High Court relied on the fact that the petition filed under

Section 9 was not for the enforcement of foreign-seated interim

measures but instead, was seeking interim reliefs independent of

the emergency award.40 The above findings rendered by the Single

Judge were then affirmed in appeal by the Division Bench.41

in Raffles Design International India Private Ltd. and Ors. v

Educomp Professional Education Ltd. and Ors.42, the High Court of

Delhi, while considering the maintainability of a petition filed

under Section 9 of the Indian Arbitration Act, arrived at a similar

conclusion. It noted that although recourse to Section 9 is not

available for the purposes of enforcing foreign-seated interim

measures, yet a court, while exercising the powers available under

this provision, may conduct an analysis independent of the orders

passed by an arbitral tribunal, and grant interim relief in cases

where it is warranted.43 It held that the emergency award cannot

be enforced under the Indian Arbitration Act and the only method

for enforcing it will be by filing of a civil suit.44

In this light, Indian courts have shown openness to freshly

examine the need to issue interim measures under Section 9 of the

Indian Arbitration Act, even though identical measures had already

been granted by an arbitral tribunal. Yet, this option is riddled

with certain uncertainties. It may lead to grant of conflicting or

incompatible interim measures by an arbitral tribunal and a court,

which may create impediments for a party seeking enforcement

of such decisions. The aggrieved party must also be mindful of

Section 9(3) of the Indian Arbitration Act,45 which mandates

a court to not entertain an application for the grant of interim

measures, unless it finds any circumstances which may render the

grant of interim measures by an arbitral tribunal inefficacious.46

Indeed, the obstacle of Section 9(3) was considered to be

insurmountable by the High Court of Calcutta in Rishima SA

Investments LLC v. Shristi Infastructure Development Corporation Ltd.

Amritsar, India | Elena Odareeva

APRIL | 2019 • YAR • 28


and Ors.47, wherein the petitioner had filed a petition under Section

9 of the Indian Arbitration Act for seeking interim measures in

relation to the respondents’ conduct alleged to be in violation

of certain foreign-seated interim measures already granted by a

Singapore-seated arbitral tribunal.48 The High Court, however,

observed that since the arbitral tribunal had not yet become

functus officio, there did not exist any circumstances that rendered

grant of interim measure by the arbitral tribunal inefficacious.49

Although an arbitral tribunal does not have the power to enforce

its interim measures, the understanding endorsed by the High

Court of Calcutta poses a significant hurdle that needs to be taken

into consideration while approaching a court under Section 9.

3.2 Contempt Jurisdiction under section 27(5) of the Indian Arbitration Act

Section 27 of the Indian Arbitration Act, titled “Court

assistance in taking evidence”, provides the legal framework for

seeking judicial assistance in support of the arbitration proceedings.

Specifically, Section 27 (1) entitles an arbitral tribunal, or a party

with the approval of the arbitral tribunal, to apply to a competent

court for assistance in taking evidence.50 Though Section 27

is often invoked to seek assistance in relation to evidentiary

measures,51 it also empowers court to punish a party for contempt

to the arbitral tribunal.

Section 27(5) of the Indian Arbitration Act states that

persons “making any other default […] or guilty of any contempt to

the arbitral tribunal during the conduct of arbitral proceedings, shall be

subject to the like disadvantages, penalties and punishments by

order of the Court on the representation of the arbitral tribunal

as they would incur for the like offences in suits tried before the

court.”52 Notably, the expressions “making any other default”

as well as “any contempt to the arbitral tribunal” will include a

situation of non-compliance with the interim measures issued by

any arbitral tribunal.

The above assertion was first confirmed by the High

Court of Delhi in 2009 in Sri Krishan v Anand53, wherein the

petitioner had approached the High Court under Section 9 of

the Indian Arbitration Act seeking interim measures identical

to those already granted by an arbitral tribunal in India. The

petitioner contended that it was essentially “remediless in the

event of violation by the respondent of the interim order passed

by the arbitrator.”54 The High Court however, disagreed. It first

opined that Section 17 of the Indian Arbitration Act intended

“to make the arbitral tribunal a complete fora not only for

finally adjudicating the disputes between the parties but to also

order interim measures. If it were to be held that to give teeth

to orders under Section 17, petitions under Section 9 are to be

filed, no purpose would be served in the parties approaching the

arbitral tribunal first under Section 17 of the Act inasmuch as

in such situation they might well approach the court directly

under Section 9.”55 It then alluded to the remedy available under

Section 27(5) to dispel any notions that an aggrieved party will

be left remediless. The Court observed that:

“Any person failing to comply with the order of the arbitral

tribunal would be deemed to be ‘making any other default’

or ‘guilty of any contempt to the arbitral tribunal during

the conduct of the proceedings’. Thus, the remedy of the

other party is to apply to the arbitral tribunal for making a

representation to the court to meet out such punishment,

penalty to the guilty party, as would have been incurred

for default in or contempt of the court […] Once such a

representation is received by this court from the arbitral

tribunal, this court would be competent to deal with such

party in default or in contempt as if in contempt of order of

this court i.e., either under the provisions of the Contempt

of Courts Act or under the provisions of Order 39 Rule 2A

[of the Code of Civil Procedure 1908].”56

The aforementioned position was reiterated by the High

Court of Delhi in Indiabulls Financial Services Ltd. v Jubilee Plots and

Housing Private Ltd. and Ors.57

Interestingly, the Law Commission of India did not

consider the High Court of Delhi’s judgment in Sri Krishan v

Anand to provide a complete solution;58 thereby, necessitating the

introduction of Section 17(2) of the Indian Arbitration Act in

2015. Nonetheless, the Supreme Court of India in 2017 again

affirmed the importance of the contempt jurisdiction in Section

27(5) in case of non-compliance of the interim measures issued by

an arbitral tribunal. In Alka Chandewar v Shamshul Ishrar Khan,59

the Supreme Court held that “the entire object of providing that

a party may approach the Arbitral Tribunal, instead of the Court,

for interim reliefs would be stultified if interim orders passed

by such Tribunal are toothless. It is to give teeth to such orders

that an express provision is made in Section 27(5) of the [Indian

Arbitration] Act.”60

Admittedly, the aforementioned decisions dealt with a

situation of contempt to an arbitral tribunal that was seated in

India, and hence, governed by Part I of the Indian Arbitration Act.

Indeed, in Raffles Design, the High Court of Delhi differentiated

the judgments rendered in Sri Krishan and Indiabulls on the ground

that they related to interim measures issued by an arbitral tribunal

under Section 17 of the Indian Arbitration Act, whereas “a person

guilty of not following the interim orders of the arbitral tribunal

in Singapore cannot be proceeded for the contempt under Section

27 of the Act.”61 However, such a constrained understanding of

Section 27 is betrayed by the text of the legislation itself.

Firstly, unlike Section 17(3) of the Indian Arbitration Act,

which explicitly limits itself to “any order issued by the arbitral

tribunal under this section”,62 there are no similar limitations in

Section 27(5). To the contrary, Section 27(5) can be invoked either

in case of “any other default” or “any contempt to the arbitral

tribunal during the conduct of arbitral proceedings”. An ordinary

construction of the provision suggests that it has sufficient breadth

to include instances of disobedience of any interim measures

issued by an arbitral tribunal seated outside India as well.

Secondly, as explained above, subject to any agreement to

the contrary, the Proviso to Section 2(2) of the Indian Arbitration

Act, introduced in the year 2015, extends the provision of Section

27 to international commercial arbitrations “even if the place

of arbitration is outside India” as long as the resultant award is

APRIL | 2019 • YAR • 29


enforceable and recognized in Part II of the Indian Arbitration

Act.63 Thus, the Indian Arbitration Act now entitles any party

to an international commercial arbitration seated outside India

to have access to Section 27 of the Act, including the contempt

jurisdiction in Section 27(5), in case of disobedience of any

interim measures issued by such tribunal. This would mean that in

case of any non-compliance with foreign-seated-interim-measures,

the aggrieved party may apply to the arbitral tribunal to make a

suitable representation to the competent court in terms of Section

27(5) of the Indian Arbitration Act.

3.3 Enforcement of a Judgment issued by a Foreign Court

Finally, where an arbitral tribunal is seated in any country

or territory outside India, which the Central Government has by

means of a notification in the Official Gazette declared to be a

“reciprocating territory” for the purposes of Section 44A of the

Indian CPC,64 the aggrieved party may attempt to indirectly

enforce the foreign-seated interim measure under the Indian

CPC. An interim measure issued by the arbitral tribunal may not

be directly enforceable under the Indian CPC as a “judgment”

or “decree” rendered by a foreign national court. However, in

the event of any disobedience, the aggrieved party may obtain

identical interim measure from the courts situated at the arbitral

seat, or initiate contempt proceedings in such foreign court, and

thereafter enforce the judgment eventually rendered by the foreign

court under Sections 13 and 44A of the Indian CPC.

However, such a remedy will in most cases remain

theoretical. As explicitly acknowledged by the Law Commission

of India, such remedy will be neither efficacious nor practical for

a party seeking to enforce a foreign-seated interim relief.65 In such

case, it will remain “a distinct possibility that a foreign party would

obtain an arbitral award in its favour, only to realize that the entity

against which it has to enforce the award has been stripped of its

assets and has been converted into a shell company.”66

4. CoNCLUsIoN

Unlike the Model law, the Indian Arbitration Act does not

provide a mechanism for direct enforcement of interim measures

granted by arbitral tribunals seated outside India. While it is

difficult to comprehend if this legislative stance is intentional

or a result of oversight, the need to introduce provisions akin to

Articles 17 H and 17 I of the Model Law could not be more clearer

in the current globalised paradigm.

That being said, it will be incorrect to suggest that the

Indian law does not provide any remedy at all to enforce foreign-

seated interim measures, even if by indirect means. Subject to an

agreement to the contrary, an aggrieved party may independently

seek identical interim relief from a competent court in India in

terms of Section 9 of the Indian Arbitration Act. Alternatively, it

may apply to the arbitral tribunal to make a representation to such

court, in terms of Section 27(5) of the Indian Arbitration Act,

for invoking contempt jurisdiction. Both these avenues, although

imperfect, provide a reliable opportunity to ensure compliance

with a foreign-seated interim measure.

by Harshad and Anirudh Gandhi

India | ostill

APRIL | 2019 • YAR • 30


1 [email protected]; Senior Associate, P&A Law Offices, New Delhi. 2 [email protected]; Senior Associate, L&L Partners Law Offices, New Delhi. The contents of this article reflect the personal views of the authors alone, and not of any organization they may be affiliated with. The authors reserve their

right to depart from these views in the future. 3 Lord Mustill, ‘Comments and Conclusions’ in Conservatory and Provisional Measures in International Arbitration (9th Joint Colloquium ICC Publication 1993)

118.4 Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996 (Law Com No. 246, 2014) (LCI - A&C Amendment).5 The Arbitration and Conciliation (Amendment) Act 2015 (India) (A&C Amendment Act 2015).6 The Arbitration and Conciliation (Amendment) Bill 2015 (India), Statement of Object and Reasons para 7.7 The Arbitration and Conciliation Act 1996 (India) (A&C Act 1996), s 2(1)(h).8 A&C Act 1996, s 2(1)(e).9 A&C Act 1996, s 9(1). See also Sundaram Finance Ltd. v. NEPC India Ltd. (1999) 2 SCC 479.10 A&C Act 1996, s 17(1).11 A&C Amendment Act 2015, s 10. 12 A&C Act 1996, s 17(1).13 A&C Amendment Act 2015, s 10. 14 A&C Act 1996, s 17(2) (emphasis added). 15 LCI - A&C Amendment, para 46.16 Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (1985) (‘Model Law’).17 Model Law, art 17 H(1) (emphasis added).18 Model Law, art 17 I.19 Raffles Design International India Private Limited and Ors. v Educomp Professional Education Limited and Ors. 2016 (6) ARBLR 426 (Delhi) [98].20 Model Law, art 17 H(1).21 Howard M. Holtzmann and others, A Guide to the 2006 Amendments to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History

and Commentary (Kluwer Law International 2015) 183.22 A&C Act 1996, s 17(2).23 Raffles (n 17) [98]. See generally Azal Khan and Vinayak Panikkar, ‘Enforcement of Interim Orders Granted by Foreign Seated Arbitral Tribunals in India:

A Classic Case of Close, but not Quite’ [2018] 15(2) TDM.24 LCI - A&C Amendment, para 49. 25 A&C Amendment Act 2015, s 5.26 A&C Act 1996, s 9(3) (emphasis added).27 A&C Amendment Act 2015, s 2(II).28 A&C Act 1996, s 2(2), Proviso (emphasis added).29 Dolores Bentolila, Arbitrators as Lawmakers (2017) International Arbitration Law Library Series Vol. 43 (Kluwer Law International 2017) 33.30 See German Zivilprozessordnung (ZPO) (Germany), art 1025(3); Arbitration Act 1996 (UK), s 2(3); and New Code of Civil Procedure (France), art

1505. 31 LCI - A&C Amendment, para 41(i). See also Trammo DMCC v Nagarjuna Fertilizers and Chemicals Ltd. 2018 (6) ALLMR 293 [22] (‘A party in enforcing a

foreign award and seeking recourse to Section 9 of the Indian Arbitration Act cannot be left without an effective remedy...’).32 LCI - A&C Amendment, p 39.33 Heligo Charters Pvt. Ltd. v Aircon Beibars FZE 2018 (5) ABR 317 [16].34 Bentolila (n 27) 35.35 See A&C Act 1996, s 2(2), Proviso.36 Arbitration Petition No. 1062 of 2012 (High Court of Bombay, 22 January 2014). 37 ibid [1(s)].38 ibid [1].39 ibid [98], [100].40 ibid [88].41 Avitel Post Studioz Ltd. vs. HSBC PI Holdings (Mauritius) Ltd. Appeal No. 196 of 2014 in Arbitration Petition No. 1062 of 2012 (High Court of Bombay,

31 July 2014) [28], [57].42 Raffles (n 17).43 ibid [100].44 ibid [99].45 A&C Amendment Act 2015, s 5.46 A&C Act 1996, s 9(3).47 Arbitration Petition No. 682 of 2018 (High Court of Calcutta, 11 October 2018).48 ibid [99].49 ibid.50 A&C Act 1996, s 27(1). 51 See A&C Act 1996, s 27(4), (6).52 A&C Act 1996, s 27(5) (emphasis added).53 2009 (112) DRJ 657.54 ibid [2].55 ibid [9].56 ibid [11].57 OMP. Nos. 452 and 453/2009 (High Court of Delhi, 18 August 2009).58 LCI - A&C Amendment, para 49.59 Civil Appeal No. 8720 of 2017 (Supreme Court of India, 6 July 2017).60 ibid [7].61 Raffles (n 17) [102].62 A&C Act 1996, s 17(3) (emphasis added).63 A&C Act 1996, s 2(2), Proviso.64 The Code of Civil Procedure 1908, s 44A.65 LCI - A&C Amendment, para 41(i).66 LCI - A&C Amendment, para 41.

APRIL | 2019 • YAR • 31


The emeRgencY ARbiTRAToR in mAlAYsiA, singAPoRe, HONG KONG AND BRUNEI

By Philip Teo

RoLE ANd FUNCTIoN

Arbitration serves as an immensely beneficial recourse in

reaching a settlement of disputes between two parties of different

nationalities. Parties in dispute turn to arbitrators possessing

particular set of skills and specialty to resolve issues at hand

which usually require in-depth knowledge of technicalities of

a particular subject matter which the disputes may arise from.

However, more often than not, the appointment of an

arbitrator or constitution of an arbitral tribunal takes time. In

some cases urgent action will need to be taken to ensure that

the purpose of an alternative dispute resolution is not defeated.

These may include actions to preserve evidence, goods which

may be perishable, or need to prevent publishing of confidential

information. There may be difficulties in resorting to local or

national courts for interim urgent remedies not least of which

having to use local counsel.

These difficulties can be addressed if parties can resort

to an interim arbitrator called emergency arbitrator before the

arbitral tribunal is constituted. An emergency arbitrator can be

appointed expeditiously without wasting any time. However,

the emergency arbitrator is not a part of the intended pending

arbitral tribunal. His involvement is prior to the constitution of

arbitration tribunal. Once the tribunal is set up, the role and

function of the emergency arbitrator ceases.

Emergency arbitrators are not appointed by parties as the

power to appoint is provided in institutional arbitration rules. This

overcomes the problem of seeking the agreement of a recalcitrant

party who refuses to cooperate. An emergency arbitrator is often

accorded wide powers to grant necessary conservancy powers.

However, an emergency arbitrator is empowered temporarily

until intended arbitral tribunal is constituted. Once constituted,

the arbitral tribunal is not bound by the emergency arbitrator’s

orders and has the option to confirm, vary, adopt or set aside

orders made by such emergency arbitrator.

This article seeks to examine the recourse and role of the

Little India, Singapore | Luciano Mortula

APRIL | 2019 • YAR • 32


Emergency Arbitrator under the Rules of Arbitral Tribunals of

4 Countries: Malaysia – Asian International Arbitration Centre

(AIAC), Singapore – Singapore International Arbitration Centre

(SIAC), Singapore Chamber of Maritime Arbitration (SCMA),

Hong Kong International Arbitration Centre (HKIAC) and

Brunei – Brunei Darussalam Arbitration Centre (BDAC).

LAW ANd PRACTICE: IN CoMPARIsoN WITH sINgAPoRE INTERNATIoNAL ARBITRATIoN CENTRE (sIAC) RULEs 2016, BRUNEI dARUssALAM ARBITRATIoN CENTRE (BdAC) ARBITRATIoN RULEs ANd HoNg KoNg INTERNATIoNAL ARBITRATIoN CENTRE (HKIAC) AdMINIsTEREd ARBITRATIoN RULEs 2018.

AIAC Arbitration Rules 2018, Malaysia.

Application of Emergency Arbitrator

Schedule 3 sets out emergency interim measures which

parties can invoke / apply under the emergency arbitrator

procedure prior to constitution of the Arbitral Tribunal..

Article 3 lists out items to be included in the application

for emergency interim measures. The application is to include

names and contact details of applicant, copy of relevant

agreements including arbitration clause, brief description of

legal and factual basis, a statement certifying that all other

parties have been notified or an explanation of the steps taken

in good faith to notify the other parties and proof payment of

AIAC administrative fee. In contrast, Schedule 1 of SIAC Rules

2016 provides that application for emergency interim relief

shall include the nature of the relief sought, the reasons why

the party is entitled to such relief, and a statement certifying

that all other parties have been provided with a copy of the

application or, if not, an explanation of the steps taken in good

faith to provide a copy or notification to all other parties.

Meanwhile under BDAC Rules, the appointment of

emergency arbitrator is set out in Schedule 2 of the Rules.

Article 1 provides that a party in need of emergency interim

relief may, concurrent with or following the filing of a Notice

of Arbitration but prior to the constitution of the arbitral

tribunal, make an application for emergency interim relief. The

application for emergency relief shall be made in writing and

shall be sent simultaneously to the appointed Chairman of

BDAC and all other parties to the arbitration. The application

for emergency interim relief shall include applicant’s name,

description, address and contact details of other parties; name,

description and address of people representing the applicant;

description of circumstances giving rise to the application;

reasons why the applicant requires the emergency relief; a

statement certifying that all other parties have been notified

or an explanation of the steps taken in good faith to notify

the other parties; the relevant arbitration clause or arbitration

agreement; and an application fee pursuant to Appendix C.

Schedule 4 of the HKIAC Administered Arbitration Rules

2018 has provided the procedures for emergency arbitrators in

Schedule 4. The Rules have come into effect on 1 November

2018. Article 1 states that a party requiring Emergency

Relief may submit an application for the appointment of an

emergency arbitrator to HKIAC either before or concurrent

with, or following the filing of a Notice of Arbitration, but prior

to the constitution of the arbitral tribunal. This is similar to the

rules set out in Malaysia, Singapore and Brunei. Article 2 sets

out that the application shall be submitted in accordance with

any of the means specified in Articles 3.1 and 3.2 of the Rules.

Article 3.1 of HKIAC Administered Rules 2018 provides

that any written communication pursuant to these Rules shall

be deemed to be received by a party, arbitrator, emergency

arbitrator or HKIAC if:

(a) communicated to the address, facsimile number

and/or email address communicated by the addressee or its

representative in the arbitration; or

(b) in the absence of (a), communicated to the address,

facsimile number and/or email address specified in any

applicable agreement between the parties; or

(c) in the absence of (a) and (b), communicated to

any address, facsimile number and/or email address which

the addressee holds out to the world at the time of such

communication; or

(d) in the absence of (a), (b) and (c), communicated to

any last known address, facsimile number and/or email address

of the addressee; or

(e) uploaded to any secured online repository that the

parties have agreed to use.

Article 3.2 provides that if, after reasonable efforts,

communication cannot be effected in accordance with Article

3.1, a written communication is deemed to have been received

if it is sent to the addressee’s last-known address, facsimile

number and/or email address by means that provides a record

of attempted communication.

The Application shall include the names and (in so far as

known) the addresses, facsimile numbers and/or email addresses

of the parties to the Application and of their representatives; a

description of the circumstances giving rise to the Application

and of the underlying dispute referred to arbitration; a statement

of the Emergency Relief sought; the reasons why the applicant

needs the Emergency Relief on an urgent basis that cannot

await the constitution of an arbitral tribunal; the reasons why

the applicant is entitled to such Emergency Relief; any relevant

agreement and, in particular, the arbitration agreement;

comments on the language, the seat of the Emergency Relief

proceedings, and the applicable law; confirmation of payment

of the amount referred to in paragraph 5 of this Schedule (the

“Application Deposit”); the existence of any funding agreement

and the identity of any third party funder pursuant to Article

44 and 64; and confirmation that copies of the Application

and any supporting materials included with it have been or are

APRIL | 2019 • YAR • 33


being communicated simultaneously to all other parties to the

arbitration by one or more means of service to be identified in

such confirmation.

The laws set out in the aspect of application of emergency

arbitrator are pretty much similar across Malaysia, Singapore,

Brunei and Hong Kong except for some procedural differences.

Appointment of Emergency Arbitrator

With regards to the appointment of emergency arbitrator

set out in Paragraph 4 of Schedule 4 of AIAC Arbitration Rules

2018, if the Director grants the application, the Director shall

appoint an emergency arbitrator within 2 days upon AIAC

receiving completed sets of documents of application. Prior

to accepting appointment, a prospective emergency arbitrator

shall disclose to the Director any circumstance that may give

rise to justifiable doubts as to his impartiality or independence.

Once the emergency arbitrator has been appointed,

the AIAC shall so notify the Parties. Thereafter, all written

communications from the parties shall be submitted directly

to the emergency arbitrator with a copy to the other party and

the AIAC.

Nonetheless, an emergency arbitration cannot be

involved in future arbitration such as intended arbitral tribunal

without parties’ involved consent. This provision is similar with

Article 6 and 7 of SIAC Rules 2016.

The next SIAC Rules 2016’s procedure is that if the

President determines that SIAC should accept the application for

emergency interim relief, the President shall seek to appoint an

emergency arbitrator within one day of receipt by the Registrar

of such application and payment of the administration fee and

deposits, as stated under Sub 3 of Schedule of the SIAC 2016. If

the parties have agreed on the seat of the arbitration, such seat shall

be the seat of the proceedings for emergency interim relief. Failing

such an agreement, the seat of the proceedings for emergency

interim relief shall be Singapore, without prejudice to the Tribunal’s

determination of the seat of the arbitration under Rule 21.1.

Prior to accepting appointment, a prospective emergency

arbitrator shall disclose to the Registrar any circumstances

that may give rise to justifiable doubts as to his impartiality

or independence. Any challenge to the appointment of the

Emergency Arbitrator must be made within two days of the

communication by the Registrar to the parties of the appointment

of the Emergency Arbitrator and the circumstances disclosed.

Provided in Article 5 of BDAC Rules, once the emergency

arbitrator has been appointed, BDAC shall so notify the parties.

Thereafter, all written communications from the parties shall

be submitted directly to the emergency arbitrator with a copy

to the other party and BDAC. Furthermore, similar to the

provisions in Malaysia and Singapore, Article 4 of BDAC Rules

also prohibits the involvement of emergency arbitrator in any

future arbitration relating to the dispute unless it is agreed by

the parties in dispute.

Meanwhile, HKIAC utilizes a slightly different approach

in appointment of emergency arbitrator. Schedule 4, Sub 4 of

the 2018 Hong Kong Arbitration Rules provides that if HKIAC

determines that it should accept the application, HKIAC shall

seek to appoint an emergency arbitrator within 24 hours after

receipt of both the application and the Application Deposit.

The Application Deposit is the amount set by HKIAC, as stated

on HKIAC’s website on the date the Application is submitted.

The Application Deposit consists of HKIAC’s emergency

administrative fees and the emergency arbitrator’s fees and

expenses. The emergency arbitrator’s fees shall be determined by

reference to his or her hourly rate subject to the terms of Schedule

2 and shall not exceed the amount set by HKIAC, as stated on

HKIAC’s website on the date the Application is submitted unless

the parties agree or HKIAC determines otherwise in exceptional

circumstances. Sub 5 & 6 of Schedule 4 of the Hong Kong

Arbitration Rules 2018 further provides that HKIAC may, at any

time during the emergency relief proceedings, request additional

deposits to cover any increase in the emergency arbitrator’s fees

or HKIAC’s emergency administrative fees, taking into account,

inter alia, the nature of the case and the nature and amount of

work performed by the emergency arbitrator and HKIAC. If the

party which submitted the application fails to pay the additional

deposits within the time limit fixed by HKIAC, the application

shall be dismissed. Once the emergency arbitrator has been

appointed, HKIAC shall communicate the appointment to

the parties to the Application and shall communicate the case

file to the emergency arbitrator. Thereafter, the parties shall

communicate with the emergency arbitrator directly, with a copy

to all other parties to the Application and HKIAC. Any written

communications from the emergency arbitrator to the parties

shall also be copied to HKIAC.

Challenge on the Appointment of Emergency Arbitrator

Whilst Parties cannot choose the judge hearing their

cases, the whole concept of Arbitration means that arbitrators

are chosen and appointed by Parties or the Arbitral Institution.

That Parties choice in the appointment of Arbitrator also

applies to emergency arbitrators i.e. the emergency arbitrator’s

appointment can be challenged by the Parties.

AIAC Rules 2018 provides that, in paragraph 8, in

the event there is any challenge to the appointment of the

emergency arbitrator, such challenge application must be made

within one day of the notification by the AIAC to the Parties

of the appointment of the emergency arbitrator or the date on

which the relevant circumstances were disclosed. Rule 5 shall

apply to the emergency arbitrator, except that the time limits

set out in Rules 5(3) and 5(7) are reduced to one day.

SIAC Rules 2016 provides that, in paragraph 5, prior to

accepting appointment, a prospective Emergency Arbitrator

shall disclose to the Registrar any circumstances that may give

rise to justifiable doubts as to his impartiality or independence.

Any challenge to the appointment of the Emergency Arbitrator

must be made within two days of the communication by the

Registrar to the parties of the appointment of the Emergency

Arbitrator and the circumstances disclosed.

APRIL | 2019 • YAR • 34


BDAC Rules provides that, in paragraph 6, in the event there

is any challenge to the appointment of the emergency arbitrator, it

must be made within one business day of the communication by the

appointed Chairman of BDAC to the parties of the appointment

of the emergency arbitrator or the circumstances disclosed. Rule 5

shall apply to the emergency arbitrator, except that the time limits

set out in the Rules 5(3) and 5(6) are reduced to one business day.

Upon withdrawal or sustainment of the challenge, the substitute

emergency arbitrator shall be appointed in accordance with the

procedure provided in Rule 4.

Lastly, HKIAC Administered Arbitration Rules 2018,

in paragraph 8, where an emergency arbitrator dies, has been

successfully challenged, has been otherwise removed, or has

resigned, HKIAC shall seek to appoint a substitute emergency

arbitrator within 24 hours. If an emergency arbitrator

withdraws or a party agrees to terminate an emergency

arbitrator’s appointment under paragraph 8 of this Schedule,

no acceptance of the validity of any ground referred to in Article

11.6 of the Rules shall be implied. If the emergency arbitrator is

replaced, the emergency relief proceedings shall resume at the

stage where the emergency arbitrator was replaced or ceased to

perform his or her functions, unless the substitute emergency

arbitrator decides otherwise.

Seat of Arbitration

Paragraph 9 of Schedule 3 of AIAC Rules 2018 states that

if the parties have agreed on the seat of arbitration, such seat

shall be the seat of the emergency interim relief proceedings.

Where the Parties have not agreed on the seat of arbitration, and

without prejudice to the arbitral tribunal’s determination of the

seat of arbitration pursuant to Rule 7, the seat of the emergency

interim relief proceedings shall be Kuala Lumpur, Malaysia.

Paragraph 4 of Schedule 1 of SIAC Rules 2016 states that

if the parties have agreed on the seat of the arbitration, such

seat shall be the seat of the proceedings for emergency interim

relief. Failing such an agreement, the seat of the proceedings for

emergency interim relief shall be Singapore, without prejudice

to the Tribunal’s determination of the seat of the arbitration

under Rule 21.1.

Paragraph 8 of Schedule 2 of BDAC Rules states that if the

parties have agreed on the seat of arbitration, such seat shall be

the seat of the emergency interim relief proceedings. Where the

parties have not agreed on the seat of arbitration, and without

prejudice to the arbitral tribunal’s determination of the seat of

arbitration pursuant Rule 6, the seat of the emergency interim

relief proceedings shall be Brunei Darussalam.

Lastly, paragraph 9 of Schedule 4 of HKIAC Rules 2018

states that if the parties have agreed on the seat of arbitration,

such seat shall be the seat of the Emergency Relief proceedings.

Where the parties have not agreed on the seat of arbitration, and

without prejudice to the arbitral tribunal’s determination of the

Singapore | Yee Khai Teo

APRIL | 2019 • YAR • 35


seat of arbitration pursuant to Article 14.1 of the Rules, the seat

of the Emergency Relief proceedings shall be Hong Kong.

Award by Emergency Arbitrator

Malaysia’s AIAC Rules 2018 propounds in paragraph 11

and 12 Schedule 3 that the emergency arbitrator shall have

the power to order or award any interim measures that the

emergency arbitrator deems necessary. The emergency arbitrator

shall give reasons for the emergency arbitrator’s decision in

writing. Any order or award of the emergency arbitrator shall

be made within 15 days from the date of notification of the

appointment to the Parties and this period of time may be

extended by agreement of the parties or by the Director if the

Director deems it appropriate. Paragraph 17 of Schedule 3 adds

that any interim award or order of emergency interim measures

may be conditional upon the provision of appropriate security

by the party seeking such relief

Meanwhile, SIAC Rules 2016 propounds in paragraph 8 to

11 Schedule 1 that the emergency arbitrator shall have the power

to order or award any interim relief that he deems necessary,

including preliminary orders that may be made pending any

hearing, telephone or video conference or written submissions

by the parties. The emergency arbitrator shall give summary

reasons for his decision in writing. The Emergency Arbitrator

may modify or vacate the preliminary order, the interim order

or Award for good cause. The Emergency Arbitrator shall make

his interim order or Award within 14 days from the date of his

appointment unless, in exceptional circumstances, the Registrar

extends the time. No interim order or Award shall be made by

the Emergency Arbitrator until it has been approved by the

Registrar as to its form. The Emergency Arbitrator shall have no

power to act after the Tribunal is constituted. The Tribunal may

reconsider, modify or vacate any interim order or Award issued

by the Emergency Arbitrator, including a ruling on his own

jurisdiction. The Tribunal is not bound by the reasons given by

the Emergency Arbitrator. Any interim order or Award issued by

the Emergency Arbitrator shall, in any event, cease to be binding

if the Tribunal is not constituted within 90 days of such order or

Award or when the Tribunal makes a final Award or if the claim

is withdrawn. Any interim order or Award by the emergency

arbitrator may be conditioned on provision by the party seeking

such relief of appropriate security.

BDAC Rules propounds in paragraph 10 and 11 of

Schedule 2 that the emergency arbitrator shall have the power

to order or award any interim relief that he deems necessary.

The emergency arbitrator shall give reasons for his decision in

writing. Any order or award of the emergency arbitrator shall be

made within 15 days from the date of appointment notification

to parties and this period of time may be extended by agreement

of the parties or, in appropriate circumstances, by the appointed

Chairman of BDAC. Paragraph 16 adds that any interim award

or order of emergency interim relief may be conditional on

provision of appropriate security by the party seeking such relief.

Lastly, HKIAC Rules 2018 propounds in 10, 11

and 12 of Schedule 4 that taking into account the urgency

inherent in the Emergency Relief proceedings and ensuring

that each party has a reasonable opportunity to be heard on

the Application, the emergency arbitrator may conduct such

proceedings in such a manner as the emergency arbitrator

considers appropriate. The emergency arbitrator shall have

the power to rule on objections that the emergency arbitrator

has no jurisdiction, including any objections with respect to

the existence, validity or scope of the arbitration clause or

of the separate arbitration agreement, and shall resolve any

disputes over the applicability of this Schedule. Articles 23.2

to 23.8 shall apply, mutatis mutandis, to any emergency relief

granted by the emergency arbitrator. Any decision, order or

award of the emergency arbitrator on the application shall

be made within 14 days from the date on which HKIAC

transmitted the case file to the emergency arbitrator. This

time limit may be extended by agreement of the parties or, in

appropriate circumstances, by HKIAC. Paragraph 13 adds that

the Emergency Decision may be made even if in the meantime

the case file has been transmitted to the arbitral tribunal.

Arbitration (Amendment)(nO.2) Act 2018, Malaysia.

An ‘interim measure’ is defined under section 19(2) of

Malaysia’s Arbitration (Amendment) (NO.2) Act 201 as any

temporary measure, whether in the form of an award or other

form prior to issuance of the award by which the dispute is

decided, the arbitral tribunal orders a party to:

(a) maintain or restore the status quo pending

determination of the dispute;

(b) take action that would prevent, or refrain from taking

action that is likely to cause current or imminent harm or

prejudice to the arbitral process itself;

(c) provide a means of preserving assets out of which a

subsequent award may be satisfied;

d) preserve evidence that may be relevant and material

to the resolution;

(e) provide security for the costs of the dispute.

Section 19A(1) of the Act furnishes a party requesting

interim measure must satisfy two materials. Firstly, there is

a harm not adequately reparable by an award of damages is

likely to result if the measure is not ordered, and such harm

substantially outweighs the harm is likely to result to the party

against whom the measure is directed if the measure is granted.

Secondly, there is a reasonable possibility that the requesting

party will succeed on the merits of the claim. Subsection (2)

added that determination of the reasonable possibility shall

not affect the discretion of the arbitral tribunal in making any

subsequent determination in relating to the dispute. Thus

emergency arbitrator has a broad discretion to decide on what is

considered as urgent, harm and merits. He may decide whether

relief sought is necessary or urgent and whether damages are

an adequate remedy if relief is not granted. Any determination

by an emergency arbitrator is not binding on arbitral tribunal.

APRIL | 2019 • YAR • 36


Furthermore, for preliminary orders, section 19B, subsection

(1) provides that unless otherwise agreed by the parties, a party

may, without notice to any other party, make a request for an

interim measure together with an application for a preliminary

order directing a party not to frustrate the purpose of the interim

measure requested. Meanwhile subsection (2) provides that

arbitral tribunal may grant preliminary order provided it considers

that prior disclosure of the request for the interim measure risks

frustrating the purpose of the interim measure.

Preliminary Orders procedure under Section 19C(1)

states that upon determination of application for preliminary

order, arbitral tribunal shall:

(a) give notice to all parties of request of interim measure,

application for preliminary order, the preliminary order, if any;

and

(b) give opportunity to any party against whom

preliminary order is directed to present its case at earliest

practicable opportunity

Subsection (3) states that the preliminary order will

expire after 21 days on which it has been issued, unless it has

been adopted within the interim measure.

ENFoRCEMENT ANd RECogNITIoN

Generally both parties who are desirous of proceeding

with the arbitration will comply with the orders of the emergency

arbitrator. If the defaulting party does not comply, the order will

need to be enforced in the jurisdiction of the defaulting party.

The issue that arose is whether that jurisdiction recognises such

orders? It is worth noting that emergency arbitrators’ orders are

not an arbitral award.

However, with the amendment to the Arbitration Act

2005 with Amendments of May 2018, section 2 expands the

definition of arbitral tribunal to include emergency arbitrator.

Section 2 now provides that arbitral tribunal means an

emergency arbitrator, a sole arbitrator or a panel of arbitrators.

Hence, emergency arbitrators’ orders are recognized in

Malaysia. In addition, multiple additions to section 19 provide

new provisions empowering arbitral tribunal which includes

emergency arbitrator to grant interim measures. Section 19H

states that an interim measure issued by an arbitral tribunal

shall be recognized as binding, unless otherwise provided

by the arbitral tribunal and enforceable upon application to

competent courts irrespective of where it was issued.

Philip Teo

Singapore | Sira Jantararungsan

APRIL | 2019 • YAR • 37


The APPlicAbiliTY oF ARbiTRATion clAuses

in AnTiTRusT dAmAges AcTions

By Sílvia Bessa Venda

Does the application of an arbitration clause (in the context

of an action for damages resulting from an anti-competitive

conduct) require an express reference to that type of dispute?

Is the answer to the previous question different according to

whether the case involves an illicit agreement under Article

101 of the Treaty on the Functioning of the European Union

(TFEU) or an abuse of a dominant position in breach of Article

102 of the TFEU? This article aims to address these issues,

based on the recent case-law of the Court of Justice of the

European Union (CJEU).

On 24 October 2018, the CJEU ruled that Article 25 of

Brussels I Regulation1 “must be interpreted as meaning that the

application, in the context of an action for damages brought by a

distributor against its supplier on the basis of Article 102 of the

TFEU, of a jurisdiction clause within the contract binding the

parties is not excluded on the sole ground that that clause does

not expressly refer to disputes relating to liability incurred as a

result of an infringement of competition law”.

This judgment came to inflame the tension on this issue,

since the same court stated, on 21 May 2015, regarding an

action for damages caused by an infringement of Article 101 of

the TFEU, that jurisdiction clauses contained in contracts for

the supply of goods must apply “provided that those clauses

refer to disputes concerning liability incurred as a result of an

infringement of competition law”.

We are referring, respectively, to the cases Apple Sales

International2 and CDC Hydrogen Peroxide3. Although the

CJEU does not refer directly to arbitration clauses, there is a

serious risk that Member State courts apply these understandings

analogically, as defended by the CDC’s Advocate General,

Jäaskinen, based on the Eco Swiss case4.

Above we intend to briefly describe these judgments and

analyse them, with focus on the different treatment given and

in the light of the principle of effectiveness of EU competition

law and the EU Damages Directive. We will close with some

final remarks.

I. The CdC case

Lisbon, Portugal | Sean Pavone

APRIL | 2019 • YAR • 38


CDC brought a class action for damages based on

European Commission (EC) Decision 2006/903/EC of 3 May

2006 relating to a proceeding under article 101 [previous 81]

of the TFUE. According to the EC, Akzo Nobel and seventeen

other companies exchanged sensitive information, restricted

production, allocated markets and clients and fixed prices during

at least six years, through regular meetings and other type of

(directed) contacts.

Allegedly, some of the contracts of sale concerned included

agreements on arbitration and jurisdiction and the defendants

invoked that the referring court had no jurisdiction for the case.

According to the CJEU, that type of clauses, which

abstractly refers to all disputes arising from contractual

relationships, only apply in the context of disputes arisen in

connection with the relationship underlying the agreement in

which the clause was inserted. Since the dispute in question

was relating to one party liability as a result of its participation

in an anti-competitive cartel, the Court considered that such

litigation could not have been reasonably foreseen at the time

of the agreed. Therefore, such litigation could not be regarded as

stemming from the contractual relationship. This understanding

aims to protect the parties´ legal certainty that a jurisdiction

clause agreed in other business relationship will not apply.

II. The Apple case

This recent case concerns to a stand-alone action for

damages (there were no previous decision from a competition

authority, declaring the infringement) brought by the MJA

(liquidator of eBizcuss.com) against Apple Sales International,

Apple Inc. and Apple retail France EURL, on the possible

existence of a dominant position within the meaning of Article

102 of the TFEU.

The CJEU confirmed that a jurisdiction clause can only

concern disputes related with the legal relationship in connection

with which the agreement was entered into. However, according

to the Court, there is a much higher probability of Article 102

infringements (in contrast to those of Article 101) being directly

linked to a contractual relationship, with the party in a dominant

position. For that reason, the application of the referred clause is

not surprising to one of the parties.

III. Two different situations or contradictory decisions?

The individuals’ right (including consumers, undertakings

and public authorities) to seek compensation for the harm caused

to them by an infringement of articles 101 and 102 of the TFEU

was recognized for the first time by the CJEU in the Courage

case5, two years after the Eco Swiss case. This last case indirectly

declared the arbitrator’s obligation to apply antitrust rules: “Article

81 EC (…) [current 101] may be regarded as a matter of public

policy”6. In addition, it stated that where national courts should

annul an arbitration award which fail to observe national rules

of public policy, it must also grant such application where there

is a frailer to comply with competition rules. To that extent, the

CDC’s Advocate General considered that when the application

of an arbitration clause, would hamper the effectiveness of EU

competition law, it should not apply.

We understand that the cartel infringement entails

additional difficulties in this context, since it involves individual

contracts, concluded between different participants in the cartel

and several aggrieved parties. However, as Jäaskinen also admits,

it is debatable to conclude that the application of arbitration

clauses jeopardises the effectiveness of Article 101 of the TFUE7.

In fact, the EU Damages Directive adopted on 26 November

20148 devotes an entire chapter to consensual dispute resolution

mechanisms (arbitration, out-of-court settlements – including

those where a judge can declare a settlement binding – mediation

and conciliation), reinforcing the recognition of its contribution

in the achievement of the main objectives of the Directive: ensure

effective protection for anyone who has suffered damages caused

by infringements of competition law and to strike a balance

between public and private enforcement. According to its recital

48, “a ‘once-and-for-all’ settlement for defendants is desirable

in order to reduce uncertainty for infringers and injured parties.

Therefore, infringers and injured parties should be encouraged to

agree on compensating for the harm caused by a competition law

infringement through consensual dispute resolution mechanisms”.

Pursuing this, the Directive establishes the following – let us say –

pro-arbitration rules:

(i) Suspension (1) of the limitation period for

bringing an action for damages during the consensual

dispute resolution process or (2) of the action for damages

proceedings for up to two years, by the national courts,

where the parties thereto are involved in a consensual

dispute resolution concerning the claim covered by that

action for damages (Article 18 (1) and (2));

(ii) Possibility of the competition authority to

consider the compensation paid as a result of a consensual

settlement to be a mitigating factor, provided that is prior

to its decision imposing a fine (Article 18 (3));

(iii) Effects of consensual settlements on subsequent

actions for damages (Article 19): deduction of co-infringer’s

share in the claim for compensation of the injured party,

to the extent that both parties have participated in the

consensual settlement; (2) impossibility of exercise

any remaining claim or right of recourse against the

co-infringers that have participated in the consensual

settlement, unless non-settling co-infringers cannot pay

the remaining damages – although, this exception may

be expressly excluded; (3) consideration by the national

courts of the damages paid pursuant to a prior consensual

settlement, when determining the co-infringer’s relative

responsibility.

We have to remember that the CDC’s decision and (even

more so) Jäaskinen’s Opinion were issued before the adoption

of the EU Damages Directive. On the other hand, difficulties

in arbitrating cartel cases do not, in themselves, justify the

APRIL | 2019 • YAR • 39


restrictive interpretation adopted by the CJEU.

Indeed, in both cases, the court puts its main emphasis on

the type of infringement. Although it is true that in the context

of an illicit cartel there is a greater probability that the dispute

is not related to the contractual relationship within which the

arbitration clause was agreed, there may be exceptions, for

example in the context of selective distribution agreements. Not

only the Article 101 of the TFUE is not confined to secret cartels

but also the anti-competitive agreements affect the terms of the

relationships established between infringers and the aggrieved

parties. The same applies to cases of dominant position abuse,

which may or may not have its origin in the contract containing

the arbitration clause9.

To that extent, we agree with the Apple’s Advocate General

position, when he states that he not “support the notion that

cartels prohibited by Article 101 TFEU always produce their

harmful effects outside any contractual relationship, while

conduct constituting an abuse of a dominant position prohibited

by Article 102 TFEU would necessarily have its source in the

contract entered into by the victim of the alleged conduct and

the person committing such an abuse”10. Regardless the antitrust

infringement type that underlies the non-contractual liability,

an arbitration clause should apply if there is a link between the

infringement and the contractual relationship in connection

with which the clause was entered. Therefore, the Apple case

has changed, to some extent, the restrictive interpretation given

by the CDC case and contributed to increase legal certainty on

this regard11.

By way of conclusion, we consider that general

arbitration clauses should be interpreted on a case-by-case

basis, namely in order to determine if an antitrust damages

action fall within its scope, i.e., if the parties wanted to include

that type of dispute or, at least, cannot be ‘taken by surprise’

by the application of the arbitration clause, since the dispute is

related to the agreement within which the clause was agreed. Of

course, the safest solution is to avoid the risk of Member State

courts applying this case-law in future cases, by including in the

arbitration clauses an express reference to actions for damages

resulting from anti-competitive conducts.

Lisbon, Portugal | Ivan Soto

Sílvia Bessa Venda

1 No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, previously Article 23 of Council Regulation (EC) No 44/2001 of 22 December 2000.

2 C-595/17.3 C-352/13.4 C-126/97.5 C-453/99. See Sofia Oliveira Pais and Anna Piszcz, Package on Actions for Damages Based on Breaches of EU Competition Rules: Can One Size Fit All?, Yearbook

of Antitrust and Regulatory Studies, Vol. 2014, 7(10), p. 211.6 See para 39.7 As stated by Rupert Bellinghausen and Julia Grothaus, “there is no reason to believe that arbitral tribunals do not effectively enforce EU cartel law when

dealing with cartel damage claims”, in The CJEU’s decision in CDC v Akzo Nobel et al: A Blessing or a Curse for Arbitrating Cartel Damage Claims?, Kluwer Arbitration Blog, July 31, 2015, available on www.arbitrationblog.kluwerarbitration.com.

8 No 2014/104/EU of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.

9 Speaking, in this context, of the creation of “presumptions”, see Pedro Caro de Sousa, Should Jurisdictional Clauses be Interpreted Differently in Competition Law Cases? A Comment on Case C 595/17 Apple ECLI:EU:C:2018:854, CPI EU News Column edited by Thibault Schrepel, Sam Sadden & Jan Roth, November 26, 2018, available on www.competitionpolicyinternational.com.

10 See para 70.11 On the “understanding that Apple hasn’t changed the case-law” but instead reinforced CDC case, see Miguel Sousa Ferro, Apple (C-595/17): ECJ on

jurisdiction clauses and private enforcement: “Multinationals, go ahead and abuse your distributors”?, CPI EU News Column edited by Thibault Schrepel, Sam Sadden & Jan Roth, October 31, 2018, available on www.competitionpolicyinternational.com.

APRIL | 2019 • YAR • 40


PARTY APPOINTED ARBITRATORS: TIME TO RETHINK?

By Alok Vajpeyi

Introduction

With the introduction of Investment Court System in

Comprehensive Economic and Trade Agreement (CETA) and

the release of the model BIT of the Netherlands, a clear shift

can be seen in the practice of party appointed arbitrators in

investment treaty arbitrations. However, in international

commercial arbitrations, the practice of party appointed

arbitrators is still continuing.

The debate regarding the practice of party appointments

started in the year 2010 when Jan Paulson described the

practice of party appointments as a ‘moral hazard’. Contrary

to the views of Paulson, Charles Brower considered practice of

party appointments as an essential factor for the development

of international arbitration. This practice though debated

has been continuing in commercial arbitrations. However,

the growing popularity of arbitration requires it to be a more

transparent dispute resolution mechanism, free from any form

of criticism. The author in this article argues that the practice

of unilateral party appointments should be reconsidered. In

doing so, the author will outline the arguments both in favour

and against the practice of party appointments. Further, the

author will discuss the other alternatives which can replace the

system of party appointments.

Why Party aPPointment arbitrators are Preferred?

There are various arguments made by the scholars

supporting the practice of party appointed arbitrators. The major

arguments put forth in support of this practice are as follows:

a. Tradition right

The practice of party appointed arbitrators has been

continuing since the evolution of arbitration as a mode of

dispute resolution mechanism. In the Classical period, the party-

appointed arbitrators were often referred to as ‘friends’.1 The goal

of an arbitrator then was to mediate a settlement/compromise.

In the Renaissance period, the prevalent practice was to appoint

India| Sira Anamwong

APRIL | 2019 • YAR • 41


an equal numbers of arbitrators, with a final member appointed

by both only in the event of a tie.

Further, the nineteenth-century was marked by the Alabama

Claims between the US and the Great Britain. The possibility of

arbitration was introduced to determine the compensation Great

Britain should pay to the United States for the destruction the

Alabama had wrought. The tribunal formed consisted of two

arbitrators, each appointed by the parties and three others- a

Brazilian, a Swiss and an Italian. Eventually, the Treaty of Washington

was concluded that became the ‘basic model for international

arbitration today’2. The legacy of party appointed arbitrators is

further reflected in the First Hague Convention3, International

Court of Justice4, International Chamber of Commerce, ICSID,

UNCITRAL Model law5 to name a few.

Though the role of party appointed arbitrators kept on

changing but the history shows that this right has remain constant.

The proponents of this practice view party appointments as

a traditional right and thereby prefer status quo rather than

bringing change or looking for alternatives.

b. Party Autonomy

Party autonomy as a private international law principle

has its roots in the principle of freedom of contract.6 Without

any doubt, it is the most cherished principle of arbitration and

gives the parties the right to determine the procedure applicable

to resolve their dispute. The freedom to stipulate the procedure

can be near absolute “short of authorizing trial by battle or ordeal

or, more doubtfully, by a panel of three monkeys”.7

The principle of party autonomy is fully recognized

by Article II and Article V(1)(d) of the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards 1958

(the New York Convention). Moreover, Article 19(1) of the

UNCITRAL Model law on International Commercial Arbitration

1985 (Model law) gives the parties the freedom to agree on the

procedure to be followed by the tribunal in the conduct of the

proceedings.

The party appointed arbitrators derive the authority from

the principle of party autonomy. Article 11 (2) of the Model

law recognizes the right of the parties to agree on a procedure

for the appointment of the arbitrator and making unilateral

appointments in a three member tribunal has been a preferred

practice. Therefore, party autonomy stands as the core argument

which is put forward in favour of practice of party appointed

arbitrators.

c. Lack of faith on Arbitral Institutions

Since the grounds for challenging an arbitral award are

limited, generally with no possibility of a review on the merits,

this makes the process of selection of the arbitrator all the more

essential. Parties may lack trust on arbitral institutions, in which

appointments result mostly made from pre-existing lists or from

any mechanism such institutions apply. Therefore, lack of faith

is one other factor which discourages parties to choose any other

procedure for the constitution of the arbitral tribunal.

d. Confidence in the procedure

Appointment of the arbitrator directly by the parties

gives them confidence in the arbitration procedure. In view of

Professor Andreas Lowenfeld, this confidence is well founded on

the fact that at least one amongst the arbitral tribunal will listen

carefully to the presentation as well as study the documents with

care,8 and will appreciate the legal and commercial culture, as

well as the procedural expectations of the appointing party. It is

said that because of these factors, parties will be more invested

in the proceedings and will therefore be more likely to accept the

arbitral award and comply with it.

Further, all parties are likely to consider at the time of

making an appointment as to what extent the arbitrator may be a

good choice for its case. At this instance, each party is selfish and

should not be blamed for it. It is natural that each party chooses

someone who they believe is closer or less hostile towards the

appointer’s case. Therefore, the unilateral nominated arbitrator

provides confidence to the appointing party in the arbitration

procedure and hence party appointed arbitrators are preferred.

CritiCism of the PraCtiCe of Party aPPointed arbitrator

Party appointments are criticised for various reasons,

though such practice is preferred in numerous jurisdictions and

is part of rules of various arbitral institutions. The arguments

against the practice of Party Appointed Arbitrator are as follows:

a. Potential bias

In a considerable amount of cases there has been an

incentive for an arbitrator in showing his loyalty by ruling in favour

of his nominating party, in order to secure future nominations.

Practice often shows that party-appointed arbitrators are not

neutral, impartial and independent decision-makers, but rather

will be biased in favour of the party who appointed them. The

fact that users identify fairness and quality as particular concerns

in choosing arbitrators does not mean that the inspiration behind

the preference for party-appointed arbitrators is entirely pure.

Jan Paulson, in his 2010 speech, “Moral Hazard in International

Dispute Resolution”, argues that the motivation in appointing

one’s own arbitrator necessarily involves the overriding interest

in winning the case and permitting such appointments corrupts

the institution of international arbitration.

In 2009, Professor Albert Jan van den Berg analysed the

thirty-four International Centre for Settlement of Investment

Disputes (ICSID) awards in which a dissent had been issued,

and found that in almost all those awards the dissents had

been issued by the arbitrator appointed by the losing party,

causing him to doubt the neutrality of such party appointed

arbitrator. He was of the view that the ‘root of the problem is

the appointment method’, arguing that a system of unilateral

appointments ‘may create arbitrators who may be dependent in

some way on the parties that appointed them’. Therefore, there

is a higher probability of conflict of interest and potential bias in

APRIL | 2019 • YAR • 42


the party appointed arbitrator. Such conflicts can lead to costly

satellite disputes, including challenging the arbitral award itself.

b. Multi Party Arbitrations

The practice of party appointed arbitrators in the

constitution of the arbitral tribunal has been diluted in multi-

party arbitrations. This principle gained international acceptance

after the decision of the French Cour de cassation in the Dutco

case.9 Three companies, BKMI, Siemens and Dutco, had signed

a contract which included an arbitration agreement providing

for three arbitrators appointed in accordance with the ICC Rules

(1975). Dutco started arbitration against BKMI and Siemens

and unilaterally nominated one arbitrator. The ICC Court invited

BKMI and Siemens to jointly appoint an arbitrator from their

side, in accordance with the arbitration rules. BKMI and Siemens

objected to the joint appointment on the grounds that they

had different interests. However, they appointed an arbitrator

under protest. The ICC appointed the presiding arbitrator. The

arbitral tribunal rejected the objection by BKMI and Siemens

regarding the improper constitution of the tribunal, and so did

the Paris Court of Appeal when BKMI and Siemens challenged

the arbitral award on the grounds that they had not been able to

participate in the constitution of the arbitral tribunal on equal

terms with Dutco. The French Supreme Court upheld BKMI

and Siemens’ claim and annulled the decision of the Paris Court

of Appeal. In a short reasoning, the Cour de Cassation argued that

the principle of equal treatment of the parties in the appointment

of the arbitrators is part of public policy of France and thus this

principle can only be waived after the dispute has arisen.

After the decision of the French Cour de Cassation in the

Dutco case, most institution rules and laws across the globe

have provided for compulsory exclusion of unilateral party

appointment in arbitrations where there are more than two

parties.10 Today, the general rule is that if there is a group of

claimants or respondents and the members of that group do not

agree on the appointment of an arbitrator, all the members of the

arbitral tribunal shall be appointed by the concerned institution

or the relevant state court.

Therefore, in multi-party arbitrations, the practice of party

appointed arbitrators may affect the right of equal representation

of the parties in the constitution of the arbitral tribunal and may

lead to challenge on the procedure for the constitutional of the

arbitral tribunal.

the author’s vieWs on the PraCtiCe of Party aPPointed arbitrators

The foregoing shows us that the present system of party

appointments is one which carries some considerable risks. As

highlighted above, the proponents of this practice majorly rely

on the argument of traditional right, party autonomy, confidence

in the process and lack of trust on arbitral institutions. Let’s

analyse each of the argument separately.

Mandala tattoo | Anna Vynohradova

APRIL | 2019 • YAR • 43


It has been argued that unilateral appointment is a

‘traditional right’. It is contended that the ‘the right to name an

arbitrator has existed for decades, even centuries’ and should be

considered as one of the ‘fundamental elements’ of international

arbitration and that any abrogation of this right will constitute

an ‘assault on the very institution of international arbitration’.

However, the Author is not convinced by this argument. There is

no doubt that the current system of party appointments is one

which is historically entrenched. However, it does not follow as a

matter of logical stipulation that just because parties have been

appointing arbitrators from time immemorial; it ought therefore

always to be so. Indeed, it seems to the Author that party-

appointed arbitrators are at best a contingent, rather than being

a necessary, part of the institution of arbitration. If indeed the

operational landscape as we see it today is such that the perverse

incentives are too great to bear or to be tolerated, than a valid

question can be raised as to whether the practice of unilateral

appointments ought to be discarded.

The second and the core argument is party autonomy,

which states that party autonomy includes the right of unilateral

appointments. However, there is nothing in the nature of party

autonomy that leads necessarily to a conclusion that one must

choose their arbitrator. What one gets from party autonomy is

the freedom to shape the process and of course within that one

may get a central key involvement and role in the constitution

of the arbitral tribunal. There are many ways of achieving that

without simply making a direct appointment. A party can have

a choice of an arbitral institution or can have a choice of an

appointing authority. Within that, the parties can have a choice

of setting the parameters for the selection of the arbitrator;

the parties can guide the arbitral institution or the appointing

authority in such appointment. Further, the parties can steer

them towards the issue of nationality, legal background, culture,

expertise, restrictions etc. Moreover, parties can agree to a

process where the appointing authority will enter into active

consultations with the parties to collectively agree on the choice

of the arbitrators. All of this is still party autonomy, all of this

involves active participation in the constitution of the tribunal

and thereby the need of the parties can be addressed,

Now, let us get into practical side of party autonomy. The

appointment process is not about choosing the neutral and the

best expert arbitrators. Clients don’t want that, Clients want to

win; and lawyers are not there to achieve some high ideal, that

this is very neutral and independent tribunal. We are simply there

to win. Now, in order to win, you want to secure one vote in the

three member tribunal and appoint the arbitrator with the hope

that he will convince the president of the arbitral tribunal as well.

Therefore, in practice, too much time is spent on running a due

diligence of the candidate. Due diligence is done in the sense of

trying and exploring every possible feature of the candidate which

will help you to determine what decision such candidate would

make. Therefore, this whole process of party appointments is

not about neutrality but about securing that one vote in a three

member tribunal. One may argue that there is a degeneration of

the arbitrator’s appointment process and it might well depend

on how good is one’s investigation of the “best profile”. The

Author understands that this is unfair as there is no equality of

information around the world and not every party can spent the

same amount on performing such due diligence.

Moreover, if you are a party appointed arbitrator then

there are various factors which may influence your decision

making. These factors are as follows:

• Reciprocity (the arbitrator may understand he or she

has to be nice to a party who has been also nice in

appointing him or her);

• The arbitrator would want to return the favour;

• The arbitrator would want to justify the due diligence

done by the party;

• The arbitrator would want to secure your track record;

• The arbitrator would want to secure future

appointments, etc.

These may be some of the forces in the head of the

arbitrator if he or she has been directly appointed by the party.

So, the next question is how well one can resist these forces, the

answer being that some people can actually do it. However, if

you are appointed by the arbitral institution or the appointing

authority or there is some break between the party and the

arbitrator then these forces are gone. Therefore, it is justified to

look for alternatives.

One may find alternatives which involve active

participation of the parties and hence the concern of party

autonomy will be addressed. There are various examples through

which this can be achieved like jointly conducted interviews of

prospective arbitrators identified by the arbitral institution from

their pre-existing list after consultation with the parties as to

their preferences; providing a list to the arbitral institution of

four potential arbitrators developed unilaterally by the parties

and letting the other party choose its arbitrator from the list

provided by the other party. There are various other alternatives

too and the learned arbitration community has the capacity

develop creative and effective alternatives for exploration.

The argument that one may not trust the arbitral

institution holds some value. However, the trust can be built by

making the appointment process more transparent. The arbitral

institutions should explain the parties as to how they appoint

the arbitrator when they receive request from the parties. For

example, in 2015, Commercial Arbitration Centre of Lisbon

implemented a new “Criteria for the appointment of arbitrators

by the Centre. This involved more inputs from the parties in the

appointment process and the parties can specify their preference

for language and nationality of the arbitrator.

The last argument regarding confidence is the following:

the appointment procedure is well addressed if we look for an

alternative which involves active participation of the parties

in the constitution of the arbitral tribunal. Therefore, further

alternatives should be explored considering the risk involved in

APRIL | 2019 • YAR • 44


the party appointed arbitrators.

alternatives to the PraCtiCe of Party aPPointed arbitrators

Although there are high costs involved in changing the

default rules, it is always a possibility that the parties agree in

the method for the selection, hence, the possibility to exclude

such practice is always an option. This section provides different

alternatives available to the parties.

a. Appointment of a Sole Arbitrator

A proposal for a sole arbitrator can be made, either by

stipulating that the appointment has to be done in consensus

between the parties, or by agreeing in the name of a third party

(arbitral institution or the appointing authority) who will be

responsible to make it. The logic behind supporting a Sole

arbitrator is the following: since both of the parties have the right

to appoint one arbitrator with the expectation that its nominee

will be successful in persuading the third arbitrator, then the

effect of the co-arbitrators should annul the other one; hence,

the process becomes no different (except for the cost involved)

than having a Sole arbitrator.

Some of the obvious problems that this proposal could

bring are that it is possible that the parties are unable to agree

on the name of the arbitrator, or will not be entirely satisfied

by the appointment made by the Institution. Additionally, there

can be complex cases where having a sole arbitrator could not be

enough.

The author does not argue that every arbitration clause

should have a sole arbitrator however choice of sole arbitrator

jointly appointed by the parties should be preferred as it will not

involve the risk of bias which may come because of the unilateral

appointments.

b. Appointments made by the Third Party

A second alternative may be to conclude an agreement

where all the appointments, or at least the appointments related

to party appointed arbitrators, are to be decided by a third

neutral party, an option available either is an arbitral institution

or appointing authority. The biggest advantage of this proposal

is that it is likely that the quality of the arbitral proceedings and

the award will increase as a consequence of having a higher level

of cooperation. Another interesting point to highlight is that if

all arbitrators are being selected by a third neutral party, such

institution could decide to include individuals with expertise on

the subject area of the dispute.

Some criticism regarding this proposal can be raised as

there could be unsatisfied users by the selection made by the

arbitral institution or the appointing authority. Another problem

will be with the small pool of available professionals, which

could promote the repeated appointments, higher number of

challenges to the arbitrators.

c. Blind Appointments

Another option available is to keep confidential the name

of the appointing party, in order to promote the free exchange

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of ideas between arbitrators during the period that last the

proceedings, and especially during the deliberations, since it

guarantees that none of the parties will feel pressured in affirming

one side or the other. In this alternative, the parties will know

about their respective appointments however the arbitrators will

be unaware about the appointing party.

However, the main problem with this solution is that it

is not so reliable in implementation, as it would be extremely

easy to find out which party appointed the respective arbitrators.

Although, in theory, it is still an alternative and can be applied

with certain modifications.

b. Seat Courts making the appointment

The courts of the seat of arbitration have a supervisory

jurisdiction over arbitration. In most jurisdictions, the default

rule states that if the parties are unable to appoint the arbitrator

or one of the party is not following the agreed procedure then the

court appoints the arbitrator. The parties in their agreement can

state that the court will appoint the arbitrator.

The problem with this solution is that the parties choose

arbitration in order to avoid the involvement of courts. Therefore,

parties might hesitate in giving court the authority to appoint

the arbitrator.

ConClusion

In the ADR market, notwithstanding its different

struggles, arbitration is still the preferred one and considered, in

general, as the most effective and reliable method for the parties

to solve their divergences. It cannot be ignored that unilateral

appointments are one of the major attractions of arbitration and

there are less sign of changing this practice. Moreover, the high

costs involved in undertaking the task of changing this practice

of unilateral appointments cannot be ignored. Various statutes

and rules would need to be subject to a reform. This will be in

addition to the changes in international conventions with all the

complications that taking such task would require.

There is no certainty of the results but perhaps the

mere attempt to reform the system could bring along further

difficulties. If this would mean that parties stop relying in

arbitration because they would be denied the right of selecting

their arbitrators for their cases, it is a question of perspective and

justice, indeed.

Having in consideration that the problems and issues

of biased arbitrators ultimately impact on how users of ADR

methods perceives the Institution of Arbitration as a reliable

method of dispute resolution, it is important to see in which ways

better results can be achieved without going through a solution

as controversial and dramatic such as banning the practice of

party appointed arbitrators.

At first instance, parties have the possibility of agreeing

a different method of appointment, since it rests within their

autonomy the freedom of designing the procedures that they

consider satisfactory. In this context, it is encouraged that parties

conclude agreements to either have sole arbitrators, appointments

by arbitral institutions or appointing authority, or courts of the

seat, or where the arbitrator does not find out who was the party

who appointed him or her. If none of the alternatives work, then

the role of the party appointed arbitrators should be clearly

defined in order to address the hypocrisy one sees with party-

appointed arbitrators.

Having a system where there are no unilateral appointments

by the parties would surely reduce challenges to arbitrators and

the parties will feel that all arbitrators have equal loyalty towards

both the parties. The system can survive and prosper without

the practice of party appointed arbitrators.

Alok Vajpeyi11

1 Sundaresh Menon, ‘Adjudicator, Advocate, or Something in Between? Coming to Terms with the Role of the Party-appointed Arbitrator’, Journal of International Arbitration, 347-372.

2 V. V. Veeder, The Historical Keystone to International Arbitration: The Party-Appointed Arbitrator – From Miami to Geneva, 107 Proc. Am. Soc’y Int’l L, 392–393.3 1899 Hague Convention, Art. 24.4 Statute of the International Court of Justice, Art. 31.5 UNCITRAL Model Law (2006), Art. 11(3).6 Ramona Elisabeta Cirlig, Party Autonomy in Determining the Law Applicable in International Commercial Arbitration and its Limits Derived from the New York

Convention, Spain Arbitration Review, 47-61. 7 Darius J. Khambata, Tensions Between Party Autonomy and Diversity, Legitimacy: Myths, Realities, Challenges, ICCA Congress Series, Volume 18, 612-637. 8 Andreas F. Lowenfeld, The Party-Appointed Arbitrator in International Controversies: Some Reflections, 30 Texas Int’l L.J., 59- 65.9 Siemens AG and BKMI Industrienlagen GmbH v. Dutco Construction Co., Cass., ruling of 7 January 1992.10 see, e.g.: LCIA Arbitration Rules (2014), Art. 8; UNCITRAL Arbitration Rules (2010), Art. 10; ICC Arbitration Rules (2012), Art. 12.6 and 12.8.11 Associate, Singhania & Co., Mumbai, India.

APRIL | 2019 • YAR • 46


[biogRAPhies]

Pedro Sousa Uva is an international dispute resolution

lawyer focused in international arbitration and cross-border

disputes. He is Of-Counsel at the Lisbon based full service

law firm pbbr. Pedro headed the arbitration and litigation

department of the firm until October 2018.

As to date, Pedro has gathered over 15 years of work experience

in Dispute Resolution. Before joining pbbr, he handled at

Miranda law firm international disputes, often based in

former Portuguese colonies in Africa or Asia. Seconded to the

London office of Wilmer Hale in 2009/2010, Pedro worked

on international arbitration matters alongside a worldwide

team of lawyers. He started his career at Abreu Advogados,

where he represented foreign and national clients in court and

arbitral proceedings for nearly a decade.

Pedro holds a LL.M degree in Comparative and International

Dispute Resolution from the School of International

Arbitration (Queen Mary University of London). Before

graduating in Law at the Lisbon Law School of the Portuguese

Catholic University (2003), he studied as a scholarship

student International Arbitration at the Katolieke

Universiteit Leuven in Belgium in 2001/2002. Pedro is a

regular speaker on arbitration events and hosts conferences,

PedRo sousA uvA

including São Paulo, Vienna and Lisbon. He was one of

the invited lecturers for the 7th Post Graduation Course of

Arbitration at the University Nova, in Lisbon (2018).

Pedro co-chaired the Sub40 Committee of the Portuguese

Association of Arbitration (APA) from 2013 to 2018, being

an active member of the Co-Chairs Circle (CCC). He was

a member of APA’s Ethics Committee. Pedro co-founded

AFSIA Portugal (2010), the national branch of Alumni &

Friends of the School of International Arbitration (AFSIA).

During the last years, Pedro authored several articles on

international and national arbitration topics, notably

“International Arbitration Shifting East”, published in Iberian

Lawyer in December, 2017, “Getting the Deal Through -

Arbitration 2016” (co-author, Portugal; 11th Edition), “World

Arbitration Reporter -2nd Edition” (co-author, Jurisnet 2014),

“Interim Measures in International Arbitration - Chapter 30

(Portugal)” (co-author, Jurisnet 2014) and “Portugal finally

approves its new arbitration law” (co-author, Revue de Droit

Des Affaires Internationales / International Business Law,

no. 3, June 2012). His dissertation was published in the

American Review of International Arbitration under the

title “A Comparative Reflection on Challenge of Arbitral Awards

Through the Lens of the Arbitrator’s Duty of Impartiality and

Independence”.

Pedro has been recently considered a leading individual in

Portugal by Who’s Who Legal (WWL) – Arbitration 2019.

The idea for YAR was born in London and put into practice

by the co-founders Pedro Sousa Uva and Gonçalo Malheiro

in January, 2011. It is a pioneer project as it was the first

under40 international arbitration review ever made.

The Founders

APRIL | 2019 • YAR • 47


Gonçalo Malheiro is an associated partner of Abreu Advogados.

He focuses his work on Arbitration and Litigation.

With around 20 years of experience, Gonçalo has a broad

expertise in handling arbitration, civil, commercial and criminal

litigation. He has represented foreign and national clients before

Tribunals and Courts.

He has also handled numerous contract disputes including claims

arising out of sales of goods agreements, distribution arrangements,

unfair competition matters, banking and insurance, real estate,

franchising disputes and corporate matters.

Gonçalo completed his LLM at Queen Mary – University of

London (School of International Arbitration) and published his

dissertation about interim injunctions in Portuguese Arbitration

Law and a compared analysis with different jurisdictions.

gonÇAlo mAlheiRo

Before, he already had attended a Summer Course at

Cambridge University.

Between 2012 and 2015 he was Chairman of the Young Member

Group of the Chartered Institute of Arbitrators and is currently

member of the Chartered Institute of Arbitrators.

Gonçalo attended the 1st Intensive Program for Arbitrators

organized by the Portuguese Chamber of Commerce and

Industry in April 2015.

He has been a speaker in several national and international

conferences focused on arbitration.

Besides publishing in English and Portuguese regarding various

arbitration matters, Gonçalo is also Co-Founder of YAR - Young

Arbitration Review,.

Gonçalo also co-founded AFSIA Portugal (2010), the national

branch of Alumni & Friends of the School of International

Arbitration (AFSIA), of which he is a member.

Gonçalo published recently articles about arbitration in

Portuguese speaking countries and recently about rules of

evidence in arbitration for the book “La prueba en el

procedimiento arbitral”.

[biogRAPhies]

The Founders

APRIL | 2019 • YAR • 48


[biogRAPhies]

Sherina Petit is a partner at Norton Rose Fulbright in London and heads the international arbitration practice across Asia, Europe and Middle East. She also heads the firm’s India practice. Besides arbitration she has significant experience in investor state disputes resolution, alternative dispute resolutions (ADR), litigation and regulatory investigations. In addition to acting as counsel in arbitrations, she regularly sits as an arbitrator.

Sherina is the Chairperson of the European Federation of Investment Law and Arbitration (EFILA) and is on the LCIA Board of Directors. She is also part of the ICC Indian Arbitration Group, the SIAC Users Council, the SIAC Users Council’s Regional/National Committee for the United Kingdom and the Kuala Lumpur Court of Arbitration. Sherina is also on the Steering Committee of the Pledge for Equal Representation for Women in Arbitration.Sherina has received multiple awards:

Was recently included on The Legal 500’s inaugural International Arbitration Powerlist for the United Kingdom. Featured as an expert in Expert Guides’ 2018 edition of the Commercial Arbitration Guide. Named as a Leading Individual from England in the Who’s Who Legal: Arbitration 2019 being described as “a stand out name in the international arbitration space”. Included in India Business Law Journal’s A-list for 2019 of the Top 100 international lawyers for India related work.

Sherina qualified as an Advocate in India whilst working at a leading law firm in Mumbai (non-practicing) and completed her Masters of Laws at King’s College London. She obtained her England and Wales qualification whilst training at Linklaters in London and subsequently spent six years as an associate in the international arbitration team at Shearman & Sterling in the London office before joining Norton Rose Fulbright.

sheRinA PeTiT

Johannes Tropper works as a research assistant for the project ‘Rule of Law and Investment Law’ at the University of Vienna. He graduated in Law with a specialization in public international law from the University of Vienna and also holds an undergraduate degree in Political Science. During his studies he spent time at the Vrije Universiteit Brussel and the London School of Economics and Political Science. In 2017 he participated in the Jessup International Law Moot Court.

JohAnnes TRoPPeR

The author is currently pursuing her masters in law in Comparative and International Dispute Resolution from Queen Mary University of London (2018-19 batch). She is a qualified Indian Lawyer having an experience of 1 year in Litigation and Arbitration Matters at the Supreme Court of India. She aims at Working in the field of investment treaty arbitration.

himAnshi guPTA

Vishakha Choudhary is an LL.M. Candidate (2019) at the Europa-Institut, University of Saarland (Germany) and a Research Assistant at the Chair of Prof. Dr. Marc Bungenberg, Director of the Europa-Institut. She is pursuing specialisations in international trade, investment, and dispute resolution.

VISHAKHA choudhARY

APRIL | 2019 • YAR • 49


Harshad is an India-qualified lawyer specializing in investor-State and international commercial arbitration, and presently Senior Associate at P&A Law Offices in New Delhi, India. He is an alumnus of the Geneva LL.M. in International Dispute Settlement (MIDS) and the National Law University, Delhi.

hARshAdPATHAK

Anirudh Krishan Gandhi is an India-qualified lawyer, and presently Senior Associate at L&L Partners Law Offices (formerly Luthra & Luthra Law Offices) in New Delhi, India. An alumnus of the National Law University, Delhi, he regularly handles domestic and international commercial arbitration disputes across varied industry sectors.

AniRudh KRISHAN gAndhi

Philip Teoh has been in legal practice in Singapore and Malaysia for the past 29 years. He has written key Practitioners Texts eg Halsbury’s Laws of Malaysia on Equity, Conflict of Laws and the Shipping Titles as well as the Annotated Merchant Shipping Laws, Forms and Precedents on Shipping, Chapter on Carriage of Goods by Sea in Bullen Leake & Jacob on Precedents of Pleadings, Malaysia. He is active as Arbitrator on the Panels of LCIA, LMAA, SCMA, AIAC, AABD Brunei, Stockholm Chamber of Commerce. His Profiles have appeared in Chambers and Legal 500.

PhiliP Teoh

Sílvia Bessa Venda is a Senior Specialist Official at Entidade Reguladora da Saúde – ERS (Portuguese Healthcare Regulation Authority) and a PhD Candidate in EU Competition Law at Universidade Católica Portuguesa, where she also obtained her Law and Master Degrees, with one of the best access qualifications, which earned her a merit scholarship. She is also a Contributor at the Observatory on Competition Law Enforcement and a Researcher at the Research Centre for the Future of Law. She has been invited to publish several scientific articles and to participate, as a speaker, in specialized conferences, namely at an international level. Previously and for four years she was Associate Lawyer with Abreu Advogados, in the practice area of Competition, Regulatory and EU Law. At the law firm, her professional practice included the assistance on all areas of competition law, especially regarding the representation of Clients both before national and EU entities.

sílviA bessA vendA

Alok Vajpeyi is a qualified lawyer at the Indian Bar. He is currently working as Associate at Singhania & Co.-Law Firm, in Mumbai, India. He has also completed the Tribunal Secretary Training Program offered by Hong Kong International Arbitration Centre (HKIAC).

He is a graduate in B.A. LL.B (Hons.) from Institute of Law, Nirma University. He attained high first division scores in International Commercial Arbitration, Goods and Service Tax, Conflict of Laws, Alternate Dispute Resolution, Public International Law, Property Law and Corporate Law. He has worked under Senior Advocates, prominent law firms in Delhi and Bombay as part of his internship program. His area of specialization is International Commercial Arbitration and he is also an active member of Young Singapore International Arbitration Centre (YSIAC), Young International Arbitration Group (YIAG), HK 45 and Young Mumbai Centre of International Arbitration (MCIA). Apart from working on domestic arbitration law, he has also worked on Singapore Arbitration Laws during his internship. He is also involved in judging and coaching teams for arbitration moots across the globe.

ALOK VAJPEYI

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