to start and where to stop international arbitration ......consideration by the arbitrator of the...

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Agreeing to disagree: defaultAgreeing to disagree: defaultarbitral appointmentsarbitral appointments

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Witness preparation ininternational arbitration: Where

to start and where to stop

ISSUE 12 / FEB 2017

Warmest regards, John GreenEditor

FROM THE EDITOR

Welcome to the 12th issue of ReSolution® in which we draw onthe experience and knowledge of leading experts in the field tobring you commentary, articles and reviews on topical mattersrelating to domestic and international dispute resolution.In this issue we feature the financial sector with articles on the ICCReport on Financial Institutions and Arbitration, and expertdetermination in the context of the recent High Court decision inthe Peregrine Wines shareholder dispute.We also look at the study of neuroscience and its relevance tomediation, the little understood default appointment procedurefor arbitrators in domestic arbitration, litigation funding ininternational arbitration, witness preparation in internationalarbitration, and more.In Case in Brief, Sarah Redding discusses the recent highlypublicised decision of the Hong Kong Court of Appeal in the Astrocase in which the court dismissed an out of time appeal againstenforcement and confirmed the ‘choice of remedies’ principlewhereby an unsuccessful party to an international arbitration canchoose to ‘passively oppose enforcement’ of an award.I wish to take this opportunity to thank all our contributors. We aremost grateful for the support we receive from dispute resolutionprofessionals, law firms, and publishers, locally and overseas, thatallows us to share with you papers and articles of a world-classstandard, and to bring you a broad perspective on the law andevolving trends in the delivery and practice of domestic andinternational dispute resolution.Contributions of articles, papers and commentary for future issuesof ReSolution® are always welcome. I do hope you find this issueinteresting and useful. Please feel free to distribute ReSolution® to your friends and colleagues – they are most welcome to contactus if they wish to receive our publications directly.

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EXPERT DETERMINATION

Model Clause:In the event of any dispute or difference arising out of or inconnection with this contract, or the subject matter of this

contract, including any question about its existence,validity or termination, the parties must refer that disputein the first instance to Expert Determination in accordance

with the Expert Determination Rules of the New ZealandDispute Resolution Centre.

ReSolution Issue No. 12Contents

ReSolution | Feb 2016 2

01 FROM THE EDITOR 03 RESOLUTION® IN BRIEF 05 Expert determination: High Courttakes a wine tour 11 What I learned from studyingneuroscience about the future of mediation 15 ICC Report on Financial Institutionsand Arbitration will be of interest to banksand financial institutions throughout Asia-Pacific

23 Case in Brief: Astro v Lippo 27 Litigation funding in internationalarbitration: recovering the costs of litigationfinance 31 Witness preparation in internationalarbitration: where to start and where to stop 36 Courses and Workshops 38 Letters to the Editor

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To secure the appointment of an expert determiner contact NZDRC [email protected]

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New Zealand reclaims its ranking asthe least corrupt in the world Transparency International’s CorruptionPerceptions Index for 2016 placed NewZealand first-equal with Denmark. With 19 outof the 30 Asia Pacific countries included in theindex scoring less than 40 out of 100, NewZealand stands out as a clear leader in theregion and globally. Following on from an 8thplace ranking (1st in the Asia Pacific region) inthe World Justice Project Rule of Law Index,New Zealand is well placed as a highlyrespected, independent, and lawfuljurisdiction for international commercialarbitrations and mediations.Enquiries regarding international disputeresolution in New Zealand may be directed toNZIAC website. NZIAC offers fullyadministered dispute resolution processes,including arbitration, mediation, and arb-med,and is due to launch its revised rules shortly.Watch this space.Financial Conduct Authority CEOcalls for dispute resolutionmechanism for SMEsAndrew Bailey, the CEO of the UK FCA, islooking to develop an independent disputeresolution service for small and medium sizedenterprises which have a complaint against afinancial institution, and his statementpresented to the UK Treasury Committee lastyear has recently been debated in the Houseof Commons.The Financial Ombudsman Service is availableto resolve complaints from individuals andmicro enterprises (employing less than tenpeople and with a turnover of 2 million Euro orless. There is no word yet as to whether thisservice will simply be expanded or a separatescheme introduced.See the House of Commons Hansard debates for more.

New Year's HonoursTwo of the luminaries of dispute resolution inNew Zealand were recognised in the NewYears Honours with David A R Williams QCbeing made a knight companion, and DerekFirth, one of NZDRC’s highly respectedpanellists, being named a Member of the NewZealand Order of Merit.Our warmest congratulations to both.Time to say sorryThe Hong Kong Government introduced theApology Bill into the Legislative Council on 8February 2017. This piece of legislation setsout the legal consequences of making anapology in certain proceedings and legalmatters. The primary objective is to promoteand encourage apologies to facilitate theamicable resolution of dispute, providingdisputing parties with certainty as to the legalimplications of making an apology. Under theBill as drafted, an apology does not constitutean admission of fault or liability. Further, itcannot be taken into account or be admissibleas evidence for the purpose of determiningfault or liability to the detriment of the partymaking the apology. An apology will also notvoid or affect any relevant insurance cover.The Hong Kong Department of Justice’s FinalReport and Recommendations is available onthe website of the Department of Justice.

ReSolution: In Brief



Baring Head bridge dispute headingto court-ordered mediation A longstanding dispute between the GreaterWellington Regional Council and Alan Loan asto who must pay for a new bridge over theWainuiomata River is on its way to mediation.Mr Loan is refusing to pay $224,000 towardsthe total $750,000 costs of the new bridge.Without the bridge, Mr Loan cannot access hisBaring Head property but that same bridge isintended to be used by thousands of cyclists,when it becomes part of the Rimutaka CycleTrail. On the topic of court-orderedmediation…A 64-year old man in Gary, Indiana, wascharged last month in Lake Criminal Court withstrangulation (a level 6 felony) after policealleged he strangled another man during arecent court-ordered mediation. Themediation became so heated, an affidavit says,that the man tore up the victim’s papersbefore allegedly throttling him with bothhands.Sony Pictures: Arbitrator todetermine gateway issue ofarbitrabilityThe United States District Court, MiddleDistrict of Florida, Orlando Division, hasgranted Sony’s motion to arbitrate a disputebrought by Possibility Picture, arising from thecyber-attack on Sony enabling the film ToWrite on Her Arms to be downloaded for freealmost 20,000 times. Judge Daniel Irick, in hisReport and Recommendations, recommendedthat the parties be compelled to arbitration forconsideration by the arbitrator of the gatewayissue of arbitrability of the claim and that thecase be stayed pending arbitration. In other Hollywood newsIn other Hollywood news, the Kardashians –best known for their reality tv series – havehad their motion to compel arbitration ofKroma Makeup, EU’s claims against them forcosmetics trademark infringement declined.

The Court of Appeals for the Eleventh Circuitfound that, whilst policy was generally infavour of arbitration, ultimately the questionwas a matter of contract. In this case, theKardashians were seeking to enforce anarbitration clause in an agreement to whichthey were not parties. The Kardashians argued that, whilst they werenot signatories to the agreement, they ought tobe entitled to compel arbitration of the claimagainst them by using Florida’s doctrine ofequitable estoppel. Under that doctrine, anynon-signatory defendant to an agreementcontaining an arbitration clause, is able toforce arbitration of a signatory’s claims whenthe signatory…must rely on the terms of thewritten agreement in asserting its claimsagainst the nonsignatory… (AllscriptsHealthcare Sols Inc v Pain Clinic of Nw. Fla, Inc158 So. 3d 644,646 (Fla. 3d DCA 2014)). Thedoctrine cannot however, be invoked tocompel arbitration of claims that are outside ofthe scope of the arbitration clause.The Court held that the doctrine permits a non-signatory to an agreement to avail herself ofan arbitration clause only when the claimsasserted against her fall within the scope ofthe clause that the signatories had agreedupon. In this case the claim fell outside thescope of the clause, and accordingly, thedistrict court’s judgment was affirmed.

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EXPERT DETERMINATION: HIGHCOURT TAKES A WINE TOUR By Timothy Lindsay & Jay Shaw A recent High Court decision1 involving well-known Central Otago winery PeregrineWines (PWL), which concerned a shareholder dispute arising from the applicationof a standard form share transfer mechanism in PWL’s constitution (theConstitution), highlights some of the key features of the expert determinationprocess (particularly as a method of determining fair value for the purposes ofshareholder buy-outs). The judgment provides important guidance for both thelawyers drafting expert determination clauses in shareholder agreements, and

experts themselves in discharging their valuation mandates.

BackgroundPWL is a boutique producer of premium (andenjoyable) Central Otago wines, specialising inPinot Noir. The plaintiffs (the trustees of theGreg Hay Family Trust) (the Trustees and theTrust) and the defendant Peregrine EstateLimited (PEL) are the shareholders in PWL, withthe Trustees holding 25.14% and PEL 74.86%.The Trustees determined to sell the Trust’s25.14% shareholding in PWL. Accordingly, inMarch 2013 the Trustees approached PELinviting them to make an offer. PEL respondedwith an offer of $1.568 million. The trustees,however, believed the Trust’s shares to beworth considerably more, $3.25 million. PELwas not prepared to pay the Trust’s price, butconfirmed that it would buy the shares at “fairvalue” fixed in accordance with the valuationprocedure in Clause 11.4 of the Constitution.PWL’s Constitution was a standard form ‘AvonPublishing’ document, with the relevantprovision (Clause 11.4) printed withoutalteration.PWL appointed a valuer in accordance withClause 11.4 (the Valuer), who produced avaluation report (the Valuation Report)determining the “fair value” of the Trust’sshares to be $2.62 million. PEL declined tocomplete a purchase at this figure and insteadengaged its own advisor who provided analternative fair value assessment of $1.275million. High Court proceedings ensued. TheTrustees sought specific performance (by wayof summary judgement) of PEL’s obligation to

buy the shares at the Valuer’s fair value of$2.62 million.High Court decisionThe High Court upheld the Trustee’sapplication for summary judgment and orderedPEL to perform its obligation to buy the Trust’sshares at the Valuer’s valuation of $2.62million. In doing so, Matthews J made threekey findings, each of which provides importantguidance for drafters of expert determinationclauses and valuers alike:

• The Valuer had fixed “fair value” forthe purposes of Clause 11.4 of theConstitution;• The valuation was final and bindingon the Trustees and PEL; and• The valuation also fixed “fair value”for the purposes of s149 of the CompaniesAct.

Did the expert fix “fair value” for the purposesof Clause 11.4 of the Constitution?Yes. The High Court highlighted two key piecesof evidence which, in the Court’s view, made itunarguable that the “figure arrived at is otherthan the fair value required under clause 11”: • Engagement letter: the Valuer’sengagement letter (signed by PWL’s twodirectors, one of which was also the soledirector of the defendant PEL) instructed theValuer to determine the “fair value” of theTrust’s shares in PWL. Relevantly, theengagement letter expressly drew thedistinction between “fair value” and “fair


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• Engagement letter: the Valuer’sengagement letter (signed by PWL’s twodirectors, one of which was also the soledirector of the defendant PEL) instructedthe Valuer to determine the “fair value” ofthe Trust’s shares in PWL. Relevantly, theengagement letter expressly drew thedistinction between “fair value” and “fairmarket value”.• Valuation Report: the ValuationReport made clear (for example, inrecording the Valuer’s mandate, andsetting out the Valuer’s basis of valuation)that the Valuer was valuing the “fairvalue” of the Trust’s shares.

These findings highlight the importance of anappointed expert, in accordance with theparties’ contractual terms, documenting anddischarging his or her mandate accurately.Was the valuation final and binding on theTrustees and PEL?Yes. Although PEL sought to argue that thevaluation was not final and binding becausethe Valuation Report did not so state, the HighCourt rightly noted that Clause 11 “specificallyprovides that the determination of the expertappointed under that clause will be final.”2

Importantly, in rejecting PEL’s challenges tothe substantive merits (i.e. correctness) of theValuation Report, the High Court went on toconfirm the general principle that expertdeterminations are final and binding, with verylimited scope for review by the courts. A courtcannot intervene to review the substantivemerits of an expert’s determination—even ifthe expert is patently wrong; the only avenueof review is where the expert has exceeded hisor her mandate. Citing recent consideration ofthese issues by the Court of Appeal, the HighCourt confirmed that:

“[32] As noted in the passage cited fromWaterfront Properties, the Court mayintervene only where an expert hasdeparted from his or her mandate in amaterial respect and failed to do what theexpert was appointed to do. It isinsufficient to show that the expert hasmade a mistake, was negligent or is evenpatently wrong. The thrust of theevidence presented for PEL, by way of areport from Mr J C Hagen, charteredaccountant, is that Ms Millar made amistake, and that she was wrong in herassessment of fair value. Even if correct,that would be insufficient to avoid theotherwise binding effect, for the purposesof the constitution, of her assessment.”3

In turn, and again providing practical guidanceto lawyer-drafters and valuers alike, MatthewsJ rejected PEL’s arguments that the Valuer hadexceeded her mandate.

• No deficiency of reasons: PEL’s argumentthat the Valuer did not provide adequatereasons to support the valuation in herValuation Report failed. Neither Clause 11nor the terms of the Valuer’s appointmentplaced any obligation on the Valuer toprovide reasons. Citing authority from theHigh Court of Australia, the High Courtnoted of the expert determination process:

In practical terms (and perhaps less understoodin commercial practice), a valuer’s mandate (asreflected in both a contractual expertdetermination clause and engagement letter)should expressly state whether the


“The evident advantage of an expertdetermination of a contractual dispute isthat it is expeditious and economical. Thesecond attribute is a consequence of thefirst: expert determinations are, at least intheory, expeditious because they areinformal and because the expert applies hisown store of knowledge, his expertise, tohis observations of facts, which are of akind with which he is familiar”4

In practical terms (and perhaps less understoodin commercial practice), a valuer’s mandate (asreflected in both a contractual expertdetermination clause and engagement letter)should expressly state whether theengagement is either speaking (with reasons)or non-speaking. Both modes of delivery havetheir pros and cons. Non-speakingengagements tend to ‘end the dispute’ and,with more abbreviated reporting requirements,be more cost effective. A decision withreasons enables the parties to understand theexperts reasoning, but leaves the door slightlyajar to challenge. In NZ, speaking engagementstend to be the norm, possibly due to a lack ofawareness about the alternative option.

• Minority shareholding discount: PEL’s “mosttrenchant” criticism of the Valuation Reportwas that the Valuer did not apply a minorityshareholding discount to the value of theTrust’s (minority) shareholding. Thiscriticism, however, amounted to no morethan a challenge to the merits of theexpert’s conclusion, which was not areviewable error. As Mathews J concluded:

“[45] In my view these aspects of MrShiels’ argument only raise theprospect that Ms Millar was mistaken inher view, or possibly that she made anerror in not enquiring further on thispoint. This does not amount, however,to departing from her mandate toassess fair value.” 5

• Delegation of authority: PEL also

complained that the Valuer had delegatedher authority impermissibly, because shehad sought the advice of a law firm inrelation to the application of a minoritydiscount. This complaint was rejected on thefacts. On the evidence before the HighCourt the Valuer had, albeit with the benefitof having received advice, arrivedindependently at the conclusion that aminority discount should not be applied. Inpractice, a valuer is therefore able to seekadvice from a third party for an issue thatfalls within their mandate but would beunwise to rely on that advice withoutundertaking their own evaluations.

The Valuer had properly discharged hermandate in Peregrine, and therefore there wasno basis to review her assessment of fair value.Did the expert’s valuation also fix “fair value”for the purposes of s149 of the Companies Act?Yes. In an important finding, Matthews J heldthat the Valuer’s “fair value” determinationalso fixed “fair value” for the purposes of s 149of the Companies Act. Section 149 of theCompanies Act provides that, in givencircumstances, directors may only acquireshares at or above “fair value”, and dispose ofthem at or below “fair value”.PEL submitted that setting the “fair value” forthe purposes of s 149 of the Companies Actwas the sole province of the High Court. Itargued that, even if parties agree on a fairvalue, that may still not bind them if, on anobjective assessment, it is found (by a court)that they have agreed on a figure that is not infact “fair value”. On PEL’s case, because theValuer’s fair value was substantively wrong onan objective assessment, it could not bebinding for the purposes of s 149.In the circumstances, the High Court rejectedPEL’s argument. Because (as discussed above)the Valuer had not exceeded her mandate therewas no basis to conclude that the Valuer hadnot determined the “fair value” of the Trust’sshares. In turn, there was no basis not toenforce her valuation for the purposes of s 149.As Matthews J noted: “… The short and, quite frankly, simple point isthat the Act requires the shares to transfer atfair value. It is not open to the parties to agree


EXPERT DETERMINATION: HIGH COURT TAKES A WINE TOURC O N T . . .

...the parties to ...the parties to an expert determination an expert determination

cannot use s149 as acannot use s149 as abackdoor route backdoor route

to re-litigating a fairto re-litigating a fairvalue determination.value determination.


In the circumstances, the High Court rejectedPEL’s argument. Because (as discussed above)the Valuer had not exceeded her mandatethere was no basis to conclude that the Valuerhad not determined the “fair value” of theTrust’s shares. In turn, there was no basis notto enforce her valuation for the purposes of s149. As Matthews J noted:

“… The short and, quite frankly, simplepoint is that the Act requires the shares totransfer at fair value. It is not open to theparties to agree that they transfer at avalue assessed on any other basis, or thatthey transfer at a price which later turnsout not to be fair value …[82] In the present case the parties havenot agreed to assess the value on anybasis other than fair value, and have notagreed on a figure at all, whether it be byreference to fair value or not. They haveagreed in the constitution, and reiteratedby the subsequent shareholders’agreement, that shares will be transferredat fair value, and no other figure. I do notdiscern any basis on which fair valueshould be said to bear one meaning forthe purposes of the constitution, yetanother for the purposes of s 149. Fairvalue is a well-recognised concept ofvaluation and the same phrase appears inboth the constitution and s 149.” 6

In turn, the High Court distinguished a positionwhere specific performance would beunavailable if that would involve a breach of s149. In Peregrine, however, the High Court was

“not being asked to do something which isunlawful. It is being asked to enforce anindependent assessment of fair value, asrequired by s 149, undertaken inaccordance with a process provided for inthe company’s constitution. Asher J wasreferring to the agreement in Fong vWong, which was to assess fair marketvalue, not fair value. That did not complywith s 149. The material differencebetween that position, and the presentcase, is evident.”7

This finding has important practicalconsequences. As demonstrated on the factsof Peregrine, it means that parties to an expertdetermination cannot use s149 as a backdoor

route to re-litigating a fair value determination.The High Court has confirmed the final andbinding nature of expert determinations withrespect to share valuations, and thereforeshould find support from the commercialcommunity.


End Notes

[1] Hay & Hollows v Peregrine Estate Ltd [2016] NZHC2097[2] Ibid at [31].[3] Ibid at [32], referring to Waterfront Properties(2009) Ltd v Lighter Quay Residents’ Society Inc [2015] NZCA 62, [2015] NZAR 492 at [29] (emphasisadded).[4] Ibid at [35], citing Shoalhaven City Council vFiredam Civil Engineering Pty Ltd [2011] HCA 38,(2011) 244 CLR 305 at [25].[5] Ibid at [45].[6] Ibid at [81]-[82].[7] Ibid at [85].


Concluding observationsPeregrine highlights the main feature ofexpert determination, which is its finaland binding nature. This means greatercommercial certainty for the parties tothe process; a faster process by reducingavenues of challenge to excess ofmandate; lower costs; and flexibility andcertainty over timing. However, it isprecisely because of its binding naturethat parties should be aware that once ashare valuation process is underway,there is little way back—even if there isfundamental disagreement with thevaluer’s conclusions. Current mediareporting indicates that the High Court’sdecision may be appealed, and so anyfuture developments in this case will bewatched with interest.



ABOUT THE AUTHORS

Timothy LindsayTimothy Lindsay is a partner at Lowndes Jordan specialising inarbitration and litigation, and is recognised as one of thecountry’s leading arbitration experts. Tim has appeared ascounsel is some of the most significant arbitrations in the pastdecade, many of which concerned shareholder and corporatedisputes, and has led policy development in the fieldinternationally. He is an experienced trial lawyer, withparticular expertise in corporate/shareholder, complexcontract, banking and financial services (creditor and debtor),foreign investment, energy/resources, telco/IP/technologyand regulatory disputes. Tim also takes appointment asArbitrator.Tim’s full biography is available in Lowndes Jordan's website.He is contactable on [email protected] or 09 309 2500.

Jay ShawJay Shaw is a partner at the accounting firm Grant Thorntonand leads their valuation and forensic accounting service linenationally. Much of Jay’s work relates to providing expertwitness and expert determination services, includingbusiness valuations, loss of profits, financial investigationsand relationship property. He has over twenty yearsaccounting experience both in NZ and in the UK across arange of industries, from entrepreneurial private businessesto large listed multinationals.Jay currently serves as the Australasian representative on theBusiness Valuation Board of the International ValuationStandards Council (IVSC), the established global standardssetter for the business valuation profession. He is aChartered Accountant, and has a Bachelor of ManagementStudies in Accounting (1st class honours) from WaikatoUniversity. He is widely published and presents regularly onvaluation issues.Jay is contactable on [email protected] or 09 922 1204.

Jay Shaw

Timothy Lindsay

Jay Shaw



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WHAT I LEARNEDFROM STUDYING

NEUROSCIENCE ABOUT THE FUTURE

After studying neuroscience for the past tenyears, I have begun to think differently aboutmediation, and how we help others in general.Neuroscience is the study of the humannervous system, including the brain. The brainis in charge of all of our bodily functions. It alsoallows us to interact with others as individuals.Studying the brain provides an in-depth look athuman nature and why we behave as we do.

It explains why each of the different stylesof mediation works -- some of the time:

Facilitative mediation is driven by needsand interests. The brain is driven by needsand humans are motivated by both socialand self-interest. Needs lie at the heart ofevolution’s reciprocal altruism and of socialrelationships generally. The fact that manyof our most important needs areunconscious makes this style’s emphasis oninterests over positions a winner for thebrain;Transformative mediation focuses on therelationship between the parties. Itappreciates that stress negatively affectsthe brain and the body, and is disturbingand distracting in our relationships. Thisstyle’s desire to resolve conflict andpotentially transform the relationship intosomething more productive and workable,or at least less onerous, is a naturalmotivator;Narrative mediation knows the brain speaksand learns through stories; that it maintainsan ongoing and coherent story of “me.”Building on the constructive nature of thebrain, this style uses new narratives to helppeople reshape old understandings intonew beginnings and endings;

Insight mediation accepts that the brainneeds a moderate challenge to learn. It usesthe brain’s associative powers to elicitinsights that help us better understandourselves and reinterpret a conflict situationin non-obvious ways; and finally,Evaluative mediation speaks to the brain’sneed for certainty, for fixed points andpermanence. It builds on an accumulatedknowledge base and provides definitivenessin an otherwise ambiguous situation.

Neuroscience even has an answer for why manypeople initially prefer court to mediation: courtappeals to our inner sense of fairness and needfor revenge; it provides us with a feeling ofcertainty and rightness, and allows us to tell ourstory and place blame; it addresses our need todefer to dominance and rank, and lets us toequate survival with winning.Early in my study of neuroscience, BernieMayer, an author of many wonderful books onmediation, cautioned me not to take areductionist approach, not to come up with a“neuroscience-based approach to mediation.”Staying true to that goal, in thinking aboutneuroscience and what it means for mediation, Ihave come up with the following thoughts:


Camaron Thomas

"...many people initially"...many people initiallyprefer court to mediation:prefer court to mediation:court appeals to our innercourt appeals to our innersense of fairness and needsense of fairness and need

for revenge..." for revenge..."


1. Mediation is a process among equals.Our brains are more alike than they aredifferent: the cognitive and behaviorfunctions supported by human brainnetworks “are, for the most part, sharedamong all individuals” (Sporns, Olaf. TheNetworks of the Brain, p.67. MIT Press,2011). This is called functional homeostasis,and it’s been suggested that it occursbecause network regulation happens at aglobal level rather than locally, whichallows the brain as a whole to remain stablein the face of constant change (Ibid., p. 68citing Prinz et al. (2004) and Marder &Goaillard (2006)). Even the sensory systemswithin a single brain handle diverse inputs-- from sound waves to touch -- in generallythe same way. As people, we are driven bysimilar needs, experience the sameemotions, and share many of the samedesires. Every mediation session is amongequals – no one is in charge or sits at thehead of the table.2. Survival comes first. As a mediator, Iam no longer surprised that survival isalmost always the first reaction in amediation session. While it’s generally to apsychological more than a physical threat,the brain interprets both as a threat toexistence and re-acts accordingly; onecould feel like an angry, frustrated animalbacked into a corner, all the way to a cold-calculating hunter about to pounce on itsprey.3. Everyone’s reality is different; it has tobe. While our brains are exceedingly similar,each brain works with different rawmaterial: nearly 70% of the structure of ahuman infant’s brain is added post-birth(Cozolino, Louis. The Neuroscience ofHuman Relationships, p. 40 citing Schore(1994). W.W. Norton & Company, 2006).That means that the bulk of the brain’sconnections are experience-dependent --they are added post-birth and depend onwhat happens to us. The brain then createsour perception by combining inputs fromthe outside world with past experience. Theentire process is constructive and buildsfrom the bottom-up: our memories, rules,and expectations get incorporated into theproperties of the stimuli and shape what weultimately see (Kandel, Eric R. et al.

Principles of Neural Science, 5th edition, pp.556-557. McGraw Hill Medical, 2013). Thebrain thus shapes both our reality and ourexperience of it. The net result is that wereally cannot know the experience ofanother person, which reinforces themediator’s mantra: in a mediation session, amediator never makes recommendations.How could we possibly know what will workfor someone else?4. More than interests, the quality of ourrelationships, threats to cares, etc., conflictinvolves a threat to self. We are not bornwith a sense of self, we design and honeone. It is given to us through ourrelationships and societal constructs, and itbecomes the principle around which weorganize our life. The self is not real; it’s aseries of neural connections, a set of fixedideas. Yet the brain works hard to maintain aconsistent sense of self, it’s one of thebrain/mind’s primary jobs. Conflict eruptswhen our sense of self feels threatened;when how we see or want to see our selfand the world that self is part of, feels underattack.5. Individual differences matter. We havedifferent genetic make-ups, levels ofconnectivity in the brain, sensitivity tointernal and external inputs, uniquethresholds for stress and other emotions, toname just a few. To be of value, mediationhas to draw on these differences to elicithow the parties make sense. Making sensemeans how something fits with the person’spast, with what someone “knows about howthe world works” (Sousa, David A. How theBrain Learns, 4th edition, p. 52. Corwin,2011). Making sense of the world is anotherone of the brain’s primary jobs, and doing soreveals individual mind patterns. Mindpatterns are repetitive thoughts andbehaviors that become unconscious overtime. And in the brain, practice does notmake perfect, it makes permanent. Mindpatterns govern how we make sense of asituation, our role in it, and the other partiesinvolved.

But if we want people to take away somethingmore from mediation than a written agreement,the process of mediation must also elicit howthe parties find meaning. Meaning-making is



But if we want people to take awaysomething more from mediation than awritten agreement, the process ofmediation must also elicit how the partiesfind meaning. Meaning-making is yetanother primary job of the brain andpertains to how something is relevant to theindividual. Meaning-making, too, isgoverned by mind patterns – habitual waysof thinking and acting first created and thenreinforced by past experience. Between thetwo, meaning is more important thanmaking sense (Ibid., p. 54) because meaningaffects how we learn. It’s not enough to justunderstand the conflict-at-hand; mediationhas to cultivate an understanding of howand why it’s important to each personinvolved.6. The goal of mediation is to generatemore information. The prefrontal corticalarea of the brain is not the rational brain; itdoesn’t have veto power over our behaviornor can it ensure we do “the right thing.”We can fully engage the prefrontal cortex,weigh the various options, meditate on ourchoices, and still make a lousy decision. Theprefrontal cortex is more intentional than itis rational; it is built on a foundation of sub-cortical structures and owes its prowess tothose layers. Rather than an executivecontroller, the value of the PFC lies in itsgenerative powers: in its capacity to take in

more and more information, re-sort it,reorganize it, and realign is so it makessense and has meaning in a new way. Thegoal of mediation is to walk in with oneexplanation and walk out with another,deeper and wider understanding. Such anunderstanding should help individuate theother person or people involved and beginto take into account the effect we have onothers.7. This brings us back to the beginning:Mediation is a process among equals. Forhumans, change is a slow and hard process,habits unfold automatically, and we seem tonaturally revert back to the path of leasteffort. Everyone in a mediation session hassomething to learn. Beneath our everydaymind patterns lies a set of expectations weeach carry around with us about the world:rules about how things should happen, whatwe’re entitled to, what fairness means, etc.To the extent that mediation provides evena glimpse of one of these mind patterns toanyone involved – in addition to evoking anew understanding of the situation and theother party – it should be considered a hugesuccess.

* This article was firs published in mediate.com This article was

www.fdrc.co.nz

About the author Camaron J. Thomas, Ph.D. is returning to mediation after severalyears’ hiatus writing her latest book, The Wisdom of the Brain –Neuroscience for Helping Professionals. Camaron has a PhD in Transpersonal Psychology from WestbrookUniversity, a MPA from Maxwell School of Syracuse Universityand BS in Criminal Justice from State University College at Buffalo. To learn more about Camaron, visit her website.

"The goal of mediation is to generate more information.""The goal of mediation is to generate more information."

http://www.fdrc.co.nz/

www.fdrc.co.nz [email protected]

www.resolution.institutePhone 0800 453 237

http://www.fdrc.co.nz/

http://www.resolution.institute

http://www.resolution.institute


BackgroundInternationally, commercial arbitration is thepredominant means by which commercialparties resolve their disputes. Banks andfinancial institutions have appeared to resistthis trend, however, historically reverting tonational courts to resolve disputes with theirclients and each other. Whether there isaversion to change, “stickiness” of boilerplatedispute resolution clauses in financingdocuments, or misconceptions around thearbitration process, in recent years there hasbeen increasing use of arbitration by financialinstitutions. Against this background, the ICCrecognised the need to study financialinstitutions’ perceptions and experience ofarbitration and how arbitration procedures canbe used and adapted to meet their needs.The ReportThe Report’s findings and recommendationsare based on input from approximately 50financial institutions globally, banking counsel,data from 13 arbitral institutions, arbitralawards, relevant literature, and lawyersexperienced in banking and finance disputes.The Task Force examined a wide range ofbanking and financial activities, whether bylicensed banks or by funds, including lending

activities, derivatives, sovereign lending,regulatory matters, international financing,trade finance, Islamic finance, advisory matters,asset management and interbank disputes.Based on this research, the Report addressesusage of arbitration by financial institutions,the potential benefits of commercial arbitrationfor banks and financial institutions (e.g.,efficiency, expert decision-makers, globalenforceability of arbitral awards,confidentiality, and finality) and some commonmisconceptions about the process.

The Task Force's recommendations

• Enforcement: if a client and its assetsmay be located outside New Zealand, thenparties may wish to opt for arbitration tobenefit from easier enforcement of thearbitral award under the New York

ICC Report on FinancialInstitutions and Arbitration willbe of interest to banks andfinancial institutions throughoutAsia-Pacific

Late last year the ICC Commission on Arbitration released its multidisciplinaryreport Financial Institutions and Arbitration (the Report). The Report addresses

how banks, financial institutions and their clients, who have historically resorted totraditional litigation to resolve disputes arising out of their dealings, can use

arbitration for efficient and effective resolution of what can be complex disputes.Lowndes Jordan litigation partner Timothy Lindsay was one of the leaders of the

Task Force, and comments on why the Report will be of interest to banks andfinancial institutions in New Zealand and throughout the Asia-Pacific region.

- TIM LINDSAY

...the Report addressesusage of arbitration by

financial institutions, thepotential benefits of

commercial arbitrationfor banks and financialinstitutions, and some

common misconceptionsabout the process.



The Task Force's recommendationsImportant from a practical perspective, theReport also includes a series ofrecommendations banks and financialinstitutions should consider in tailoring thearbitration procedure to their needs (includingthe drafting of arbitration clauses in bankingand finance documents). These include:

• Enforcement: if a client and its assetsmay be located outside New Zealand, thenparties may wish to opt for arbitration tobenefit from easier enforcement of thearbitral award under the New YorkConvention.• Interim measures: Under mostinstitutional arbitral rules and domesticarbitration legislation (including theArbitration Act 1996) parties can, prior tothe constitution of an arbitral tribunal, seekinterim relief from national courts. Oncethe tribunal is in place, it has the samepowers as a court to order interim relief.• Summary judgment and dispositiverulings: While in this writer's view arbitraltribunals have the inherent power to awardsummary judgment and make dispositiverulings provided they have given all partiesthe opportunity to be heard, parties canavoid any ambiguity by specificallyproviding for such procedures in theirarbitration agreement. Some arbitralinstitutions (such as SIAC) have included thisexpress power in their rules.• Emergency arbitrators: Under manyinstitutional arbitration rules in urgent casesparties can, prior to the constitution of thearbitral tribunal, seek emergency orders forinterim relief from an emergency arbitrator.This avoids the need to resort to separateproceedings before the very courts thatparties, through their agreement to

This avoids the need to resort to separateproceedings before the very courts thatparties, through their agreement toarbitrate, are trying to avoid. New Zealand,for example, recently amended theArbitration Act 1996 to confirm thatinterim measures granted by emergencyarbitrators are enforceable uponapplication to a court of competentjurisdiction. Singapore and Hong Konghave done likewise.• Expertise of arbitrators: Oneadvantage of arbitration is the ability forparties to appoint the tribunal, orotherwise specify the qualifications andexpertise of the arbitrator(s). Familiaritywith financial instruments is regularly ofconcern to banks and financial institutions,particularly in jurisdictions withoutspecialised commercial and/or financialcourts.• Confidentiality: Arbitration is private,but not necessarily confidential. Ifconfidentiality of the existence andconduct of the arbitral proceedings andthe arbitral award is of concern, partiesshould make specific provision in theirarbitration agreement. This is often arelevant consideration for banks andfinancial institutions, principally forreputation and precedent reasons.• Consolidation and joinder: Manyinstitutional arbitration rules permitconsolidation of two or more arbitrationsin certain circumstances. Consolidationwill also be possible where two or morearbitration agreements themselves (say inrelated financing documents, such as aloan, a swap and a guarantee) provideexpressly for consolidation of disputesarising under two or more of thoseinstruments. Careful drafting is requiredto ensure that consolidation is in factpossible, practicable and the resultingaward is valid. Likewise for the possiblejoinder of third parties.• Availability of appeal: Internationalarbitration rules typically exclude theavailability of appeals on questions of factand law, providing finality to disputes.Given the predominance of internationalarbitration as the means for resolvingcross-border disputes, commercial parties


ICC REPORT ON FINANCIAL INSTITUTIONS AND ARBITRATION WILL BE OF INTERESTTO BANKS AND FINANCIAL INSTITUTIONS THROUGHOUT ASIA-PACIFIC - C O N T . . .


Given the predominance of internationalarbitration as the means for resolvingcross-border disputes, commercial partiesglobally have clearly voted with their feetin favouring this approach. In “domestic”arbitrations in some jurisdictions (includingNew Zealand), however, parties need toopt-out of appeal procedures. Opting-out isto be recommended. Parties consideringretaining appeal rights should carefullyassess whether such procedures areproportionate and provide the so-called"right answer" sought.• Precedent: Whilst arbitral awardscannot usually be published publicly, somearbitral rules permit anonymisedpublication. Parties themselves canlikewise provide for the same in theirarbitration agreement.

As the Report makes clear, these points (andvarious other important practical matters)need to be considered in the circumstances ineach case.

Arbitration of financial disputes ison the riseAs the Report also notes, the work of the TaskForce should not be seen in isolation. Rather,the use of arbitration by financial institutionsand counter-parties has been increasingsteadily over recent years. Otherdevelopments that banks, financial institutionsand their clients should be aware of include:

• International Swaps and DerivativesAssociation (ISDA): The increased interest inarbitration in cross-border finance isreflected in ISDA’s publication in 2013(after several years of consultations with itsmembers) of a range of optional arbitrationclauses, which are intended to form part ofthe Schedule to a Master Agreement. TheModel Arbitration Clauses can be found inthe 2013 ISDA Arbitration Guide whichsupplements and amends the correspondingguidance in the ISDA User’s Guides. TheModel Arbitration Clauses provide for use ofthe leading institutional arbitration rules,offering numerous combinations of arbitralrules, governing law, and seat.

• P.R.I.M.E. Finance: The increasing useof, and anticipated future demand for,arbitration of international financialdisputes also led to the establishment inearly 2012 of a new financial disputeresolution institution, the Panel ofRecognised International Market Experts inFinance (P.R.I.M.E Finance). P.R.I.M.EFinance’s aim is to provide a bespoke forumfor the resolution of complex internationalfinancial disputes. Its offering includes apanel of specialist senior arbitrators who areexperts in complex international financialdisputes, customized arbitration rules,mediation and expert services. In the 2013ISDA Arbitration Guide, ISDA has included inits model arbitration clauses an arbitrationclause that provides for arbitration underthe P.R.I.M.E Finance Arbitration Rules. P.R.I.M.E Finance's website, including copies of itsRules can be found at the PRIME Financewebsite.• London Arbitration Club: In 2015 theFinancial Sector Branch of the LondonArbitration Club published its FinancialServices Expedited Arbitration Procedure foradoption by financial institutions. This takesthe form of standard form arbitrationclauses that can be included in financedocuments which mandate that pre-agreedefficient arbitral procedures be used in theevent a dispute arises. A copy of theFinancial Services Expedited ArbitrationProcedure can be found at the LondonArbitration Club website.

Lowndes Jordan litigation partner Tim Lindsayhas been at the forefront of these policydevelopments, as a member of the ISDAArbitration Committee that developed ISDA'soptional arbitration clauses and published theISDA Arbitration Guide, a member of theLondon Arbitration Club Financial Branch and

PlanniPlanning for disputes ng for disputes at the time of contractingat the time of contractingis essential to managingis essential to managingthe risks associated withthe risks associated with

any contrany contract...act...


http://primefinancedisputes.org

http://primefinancedisputes.org

Lowndes Jordan litigation partner Tim Lindsayhas been at the forefront of these policydevelopments, as a member of the ISDAArbitration Committee that developed ISDA'soptional arbitration clauses and published theISDA Arbitration Guide, a member of theLondon Arbitration Club Financial Branch andcontributor to the work of P.R.I.M.E. Finance. .

Careful drafting of arbitrationagreements is criticalPlanning for disputes at the time ofcontracting is essential to managing the risksassociated with any contract or transaction, aswell as ensuring any disputes that arise aredealt with efficiently.The Report, the ISDA Arbitration Guide and thework of P.R.I.M.E. Finance and the LondonArbitration Club provide an excellent toolboxfor in-house counsel at banks and financialinstitutions in assessing whether arbitration isthe appropriate form of dispute resolution for any given transaction. However, in each case

careful drafting of arbitration agreements iscritical. Particular care is required aroundcomplexities common to domestic andinternational banking and finance, such asexpertise and appointment of the arbitraltribunal, multi-party and multi-contractscenarios, joinder of third parties,consolidation of disputes arising under relatedfinancing documents (e.g., loans, swaps,guarantees), emergency arbitrator powers andinterim relief, dispositive motions andsummary judgment, confidentiality, costs,appellate procedures, etc.Whilst receiving advice on these matters canbe critical to the enforcement of rights, it oftenonly takes a quick phone call or email toensure an arbitration agreement is draftedcorrectly.

ICC REPORT ON FINANCIAL INSTITUTIONS AND ARBITRATION WILL BE OF INTERESTTO BANKS AND FINANCIAL INSTITUTIONS THROUGHOUT ASIA-PACIFIC - C O N T . . .


ABOUT THE AUTHOR

Lowndes Jordan litigation partner Timothy Lindsay is amember of the ICC Task Force on Financial Institutionsand Arbitration and led the Sovereign Finance workstream. He is a member of the ISDA ArbitrationCommittee and the Financial Sector branch of theLondon Arbitration Club. To learn more abour Tim, visit Lowndes Jordan'swebsite.

Timothy LindsayPartner


http://www.lojo.co.nz/home

http://www.lojo.co.nz/team-detail/timothy-lindsay

http://www.lojo.co.nz/

For more information contact NZDRCat [email protected] or

NZIAC at [email protected]

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AGREEING TO DISAGREE:DEFAULT APPOINTMENTOF ARBITRATORS INDOMESTIC ARBITRATIONS

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We frequently receive enquiries from parties todisputes (or their advisors) who are havingdifficulty navigating the appointment processwhere the contracting parties have anarbitration clause, but simply cannot reachagreement as to who should be appointed toarbitrate any given dispute, or one party isrefusing to participate in the process byfollowing the procedure for appointmentprovided for in the parties’ contract.

Many parties and advisors we speak withvia the NZDRC Registry believe that, incircumstances where the parties are unableto agree on a procedure for appointing thearbitral tribunal, they then need to apply tothe High Court for an appointment to bemade in accordance with article 11,Schedule 1 of the Arbitration Act 1996 (theAct). In the clear majority of cases this issimply incorrect, as it does not account forthe procedure set out in Schedule 2 to theAct.

Schedule 2 of the Act applies to every domesticarbitration unless the parties agree otherwise(section 6).Clause 1 of Schedule 2 provides defaultprocedures for appointing the arbitral tribunal.Where clause 1 of Schedule 2 applies, thatclause modifies article 11 of Schedule 1 andexcludes the jurisdiction of the High Court foran order appointing an arbitrator. The HighCourt may only intervene and appoint anarbitrator where clause 1 of Schedule 2 doesnot apply. In Hitex Plastering Ltd v Santa Barbara HomesLtd [2002] 3 NZLR 695 (HC), the Court reviewedthe appointment procedures and the inter-relationship between article 11 of Schedule 1

and clause 1 of Schedule 2 and concluded theywere intended to provide separate andmutually exclusive procedures for theappointment of arbitrators in the event ofdefault or disagreement. At [28] RodneyHansen J held:

[art 11 of Schedule 1] and [cl 1 of Schedule 2]were intended to provide separate andmutually exclusive procedures forappointment of arbitrators in the event of‘default’ or disagreement. Resort to the Courtunder [art 11] is not available where, by virtueof [cl1(1) of Schedule 2] the procedures insubcls (4) and (5) apply.

The Schedule 2 default appointment proceduresimply requires a genuine attempt to reachagreement. At [29] his Honour noted that:

Anyone who peremptorily issues a notice ofdefault without making a reasonable attemptto resolve differences will risk a successfulchallenge to any appointment which ensues.

In the event that parties disagree as to thecomposition of the arbitral tribunal, Party Asimply needs to issue a notice of default toParty B. That notice of default needs to specifythe details of Party B’s default (being the failureto agree) and propose that, if that default is notremedied within a specific period of time (to benot less than seven days after service of thenotice of default), the individual named in thecommunication shall be appointed as arbitratorwith respect to the dispute between Party Aand Party B. Nothing more is required.Where clause 1 of Schedule 2 applies, itprovides a quick and effective means ofsecuring the appointment of an arbitral tribunalin the face of delay or obfuscation by anotherparty to the arbitration agreement, avoiding theneed, time, and cost of having to apply to theHigh Court under article 11 of Schedule 1.Note that article 11 of Schedule 1 applies to aninternational arbitration unless the parties have

Catherine Green



Where clause 1 of Schedule 2 applies, itprovides a quick and effective means ofsecuring the appointment of an arbitraltribunal in the face of delay or obfuscation byanother party to the arbitration agreement,avoiding the need, time, and cost of having toapply to the High Court under article 11 ofSchedule 1.Note that article 11 of Schedule 1 applies to aninternational arbitration unless the partieshave expressly opted into clause 1 of Schedule2 of the Act. Under section 6(2) of the Act,Schedule 2 of the Act applies to aninternational arbitration only if the parties soagree.

Upcoming amendments to the ActThe Arbitration Amendment Act 2016 comes into force on 1 March 2017. The Act states that [t]he Minister of Justice must, by notice in theGazette, appoint a suitably qualified body toresolve the matters specified in article 11(3) to(6) of Schedule 1 of the Act.This means that the Minister of Justice willappoint a nominating body to take the place ofthe High Court in making default appointmentsunder Schedule 1 of the Act. The impact of thisamendment is relatively minor as, for thereasons set out above, the article 11 Schedule1 procedure for appointments will onlyinfrequently be applicable.

How can you avoid the problemaltogether?The answer to this one is really quite simple.All you need to do is ensure that your contractshave effective arbitration clauses included inthem – not the outdated, complicated, multi-tiered, and often unenforceable disputeresolution clauses we frequently see in use.Too often we hear of parties and their advisersspending valuable time and money makingnumerous enquiries as to whether variousarbitrators are willing and available to acceptappointment, without necessarily having anytrue insight as to those arbitrators’ experienceand ability. Instead of adopting this approach,they could simply agree to arbitrate underNZDRC’s or NZIAC’s arbitration rules whichprovide, among other things, for anappointment to be made by NZDRC (or NZIAC)

in the event the parties are unable to agreewithin ten working days from service of theNotice of Arbitration under the generalarbitration rules and five working days underthe expedited arbitration rules.The NZDRC and NZIAC Registries work closelywith the arbitrators on their panels, includingby providing a peer review service with respectto any Award before it is made. This gives usthe first-hand knowledge to independentlyassess who is the best arbitrator to beappointed in any given case, based on thesubject-matter, value, and complexity of thedispute. Our panellists are not members, nor dothey pay any fee to be on our panels; they arethere strictly by invitation only, having beenrecognised as possessing extensive knowledge,skill, and experience in arbitration.NZDRC and NZIAC have developedcomprehensive suites of Rules for CommercialArbitration that are robust and certain, yetinnovative in their commercial commonsenseapproach to challenging issues such asappointment, urgent interim relief, expeditedprocedures, joinder, consolidation, multiplecontracts, confidentiality, representation,mediation, expert evidence, appeals, and costs.The Rules provide both a framework anddetailed provisions to ensure the efficient andcost effective resolution of commercialdisputes. They are set out in a manner designedto facilitate ease of use, and may be adopted byagreement in writing at any time before or aftera dispute has arisen.The Rules are intended to give parties thewidest choice and capacity to adopt fullyadministered procedures that are fair, prompt,and cost effective, and which provide aproportionate response to the amounts indispute and the complexity of the issuesinvolved.For domestic contracting parties who wish tohave future disputes resolved by arbitrationunder the aegis of NZDRC, the following modelclause is recommended for inclusion incontracts:Any dispute or difference arising out of or inconnection with this contract, or the subjectmatter of this contract, including any questionabout its existence, validity, or termination,

DEFAULT APPOINTMENT OF ARBITRATORS INDOMESTIC ARBITRATIONS


DEFAULT APPOINTMENT OF ARBITRATORS INDOMESTIC ARBITRATIONS

Catherine GreenExecutive Director


For domestic contracting parties who wish toFor domestic contracting parties who wish tohave future disputes resolved by arbitrationhave future disputes resolved by arbitrationunder the aegis of NZDRC, the following modelunder the aegis of NZDRC, the following modelclause is recommended for inclusion inclause is recommended for inclusion incontracts:contracts:

Any dispute or differenceAny dispute or differencearising out of or in connectionarising out of or in connectionwith this contract, or thewith this contract, or thesubject matter of this contract,subject matter of this contract,including any question aboutincluding any question aboutits existence, validity, orits existence, validity, ortermination, shall be referredtermination, shall be referredto and finally resolved byto and finally resolved byarbitration in accordance witharbitration in accordance withthe Arbitration Rules of thethe Arbitration Rules of theNew Zealand DisputeNew Zealand DisputeResolution Centre (NZDRC) forResolution Centre (NZDRC) forthe time being in force.the time being in force.

For parties who have their places of business inFor parties who have their places of business indifferent States who wish to have futuredifferent States who wish to have futuredisputes resolved by arbitration under thedisputes resolved by arbitration under theaegis of NZIAC, the following model clause isaegis of NZIAC, the following model clause isrecommended for inclusion in contracts:recommended for inclusion in contracts:

Any dispute or differenceAny dispute or differencearising out of or in connectionarising out of or in connection

with this contract, or thewith this contract, or thesubject matter of this contract,subject matter of this contract,including any question aboutincluding any question aboutits existence, validity, orits existence, validity, ortermination, shall be referredtermination, shall be referredto and finally resolved byto and finally resolved byarbitration in accordance witharbitration in accordance withthe Arbitration Rules of thethe Arbitration Rules of theNew Zealand InternationalNew Zealand InternationalArbitration Centre (NZIAC) forArbitration Centre (NZIAC) forthe time being in force.the time being in force.

The primary objective of modern commercialThe primary objective of modern commercialarbitration must be the fair, prompt, and cost-arbitration must be the fair, prompt, and cost-effective determination of any proceeding in aeffective determination of any proceeding in amanner that is proportionate to the amounts inmanner that is proportionate to the amounts indispute and the complexity of the issuesdispute and the complexity of the issuesinvolved. Sensible contracting, by including aninvolved. Sensible contracting, by including aneffective arbitration clause, is the first step toeffective arbitration clause, is the first step toachieving those objectives.achieving those objectives.

Catherine is the Executive Director of the New ZealandDispute Resolution Centre and also maintains her ownpractice as an arbitrator, adjudicator, and mediator. Prior to starting her dispute resolution practice back in NewZealand, Catherine gained a wide range of experience infinancial services, regulatory, and general commerciallitigation matters both onshore and offshore, in NewZealand, London, and the Cayman Islands. To learn more about Catherine or request her appointment,please visit NZDRC's website.

https://secure.zeald.com/commercialdisputes/About_us/PANELS/CATHERINE%20GREEN?mv_pc=901

Background In 2005, Astro and Lippo entered into a joint venture for the provision of multimedia services inIndonesia. The parties signed a conditional subscription and shareholders’ agreement (SSA)which set out their obligations and intentions under the joint venture. In the interim periodwhile the SSA remained conditional, three Astro subsidiaries provided funding for the jointventure. However, when the conditions fell through and the SSA failed to go unconditional, adispute arose over the continued funding of the joint venture while the parties considered exitstrategies.In October 2008, Astro commenced arbitration proceedings against Lippo in the SingaporeInternational Arbitration Centre. Astro’s notice of arbitration sought to join the subsidiaries(Joinder Parties) to the arbitration, stating they had consented to being joined because theywere not parties to the SSA. Lippo contested the joinder application; however the Tribunal heldthat it had the power to join additional parties as long as they consented. Thereafter between2009 and 2010, the Tribunal rendered five awards in favour of Astro against Lippo, totalling inexcess of US$130 million, approximately US$700,000 of which was awarded to the JoinderParties as non-contractual, restitutionary relief.Lippo did not take any steps to challenge the awards or apply to have them set aside before theSingapore Court as the court of the Arbitration. Astro subsequently applied for and was grantedleave to enforce the awards in Singapore by the High Court.It was not until Astro sought enforcement of the awards in various jurisdictions that First Media,a Lippo entity, opposed enforcement on jurisdictional grounds arguing that there was noagreement to arbitrate between First Media and the Joinder Parties as they were not parties tothe SSA. While Astro sought enforcement in various jurisdictions, Lippo only resistedproceedings for recognition and enforcement of the award in Hong Kong, as it was the onlyrelevant jurisdiction in which Lippo had assets that could be levied.

Singapore Court of AppealIn a 2013 judgment, the Singapore Court of Appeal refused enforcement of the awards by theJoinder Parties against First Media on the grounds that there was no valid arbitration agreementbetween the Joinder Parties and First Media, and the Tribunal had no jurisdiction to make theawards it had in favour of the Joinder Parties against First Media. In allowing First Media to resist enforcement, the Singapore Court of Appeal confirmed theprinciple of “choice of remedies”, under which passive remedies will still be available to anaward debtor who did not utilise its active remedies, is fundamental to the UNCITRAL Model Lawwhich Singapore adopted in 1994. Astro argued that Lippo had breached the principle of goodfaith by participating in the arbitration and only raising objections at the enforcement stage of

CASE IN BRIEF Astro Nusantara International BV v PT Ayunda

Prima Mitra CACV272/2015, 5 December 2016 )

Recently the Hong Kong Court of Appeal dismissed an out of timeappeal against enforcement, and confirmed the “choice of remedies”principle: an unsuccessful party to an international arbitration can

choose to passively oppose enforcement of an award, despiteabstaining from any active challenge against the award.



In allowing First Media to resist enforcement, the Singapore Court of Appeal confirmed theprinciple of “choice of remedies”, under which passive remedies will still be available to anaward debtor who did not utilise its active remedies, is fundamental to the UNCITRAL Model Lawwhich Singapore adopted in 1994. Astro argued that Lippo had breached the principle of goodfaith by participating in the arbitration and only raising objections at the enforcement stage ofthe awards granted. The Singapore Court of Appeal disagreed, finding that the ‘choice ofremedies’ principle meant that First Media’s failure to pursue active remedies to challenge thepreliminary ruling or set aside the award did not prevent it from resisting enforcement bypassive means, and was not a breach of good faith based on the following principles:

• ‘Active remedies’ means taking positive steps to invalidate an arbitral award suchas by an application to challenge a preliminary ruling on jurisdiction, or to set aside anaward; and• ‘Passive remedies’ means resisting the recognition or enforcement of an award inthe jurisdiction where and when the award is sought to be enforced.

Hong Kong Court of First InstanceIn 2010 the Hong Kong Court (Court of first instance) granted Astro leave to enforce the awardsin two orders (Hong Kong Orders). Initially, Lippo did not apply to have the orders set asidewithin the required 14-day timeframe, and judgment was entered in favour of Astro. It latercame to light that Lippo’s inaction was due to a mistaken belief that it did not have any assets inHong Kong which could be levied against in any enforced award. In July 2011, Lippo realised itserror when Astro obtained a garnishee order to attach a US$44 million debt due to First Media,from a Hong Kong listed company.In January 2012, First Media commenced proceedings for an extension of time to set aside theHong Kong Orders, as well as substantive orders to set aside the Hong Kong Orders andgarnishee order. First Media’s applications were dismissed at first instance. The Court found thatFirst Media’s delay in taking any action against the awards amounted to bad faith, and declinedto aid First Media to get out of its self-inflicted predicament. The Court also held that it could notrely on its discretion (under section 44(2) of the Ordinance) to allow enforcement as it wasprecluded by the good faith principle. The Court considered that to grant an extension of time inthe circumstances would undermine the principle of finality, against the background of whichquestions of fairness fall to be judged. First Media appealed the decision.Hong Kong Court of AppealThe Court of Appeal declined to interfere with the Court of first instance decision against notextending the time limit for First Media’s application. However, the Court of Appeal found thatthe lower court’s decision on the principle of good faith was incorrect. The CA considered thelower court had misdirected itself on the exercise of discretion in relation to the good faithprinciple, and had not given sufficient weight to the findings of the Singapore Court of Appeal. Inconsidering the purpose of the good faith principle, the CA considered the law of the seat ofarbitration and the ruling of the supervisory court of the seat of arbitration, being Singapore, asparticularly relevant.The CA held that First Media was not in breach of good faith by reserving its right to resistenforcement despite not actively challenging the awards. This aligned with the ‘choice ofremedies’ principle endorsed earlier by the Singapore Court of Appeal. The CA considered thatthe two principles: good faith and choice of remedies were not mutually exclusive butcomplementary, meaning that a party’s’ actions in line with one were not necessarily indetriment to the other.

Case in Brief (Cont..)


The CA also found the lower Court’s decision that First Media’s conduct was such that it shouldnot be permitted to rely on section 44(2) of the Ordinance to resist enforcement of the awardsbecause it had acted in breach of the good faith principle was incorrect. Section 44 provides thatenforcement of a convention award is mandatory unless a ground is made out under therelevant subsections, in which case the court has discretion whether to permit or refuseenforcement.The CA held that the lower Court had erred in ruling that the breach of the good faith principleprecluded it from resisting enforcement pursuant to its discretion under s44(2). The CA held thatthe discretion was found in the word “may” which enables the enforcing court to enforce anaward, notwithstanding that a s 44 ground might otherwise be established”. The CA held thatonce the fundamental defect of the awards sought to be enforced was taken into account, (thatthe awards were made without jurisdiction in favour of parties wrongly joined to thearbitration), the only conclusion was to exercise discretion and refuse enforcement. For thesereasons, the CA concluded that the Court at first instance decision that First Media is precludedby the principle of good faith from relying on s 44(2) to resist enforcement could not besupported.Despite the CA’s disagreement with the lower Court’s approach, the CA considered theconclusion was not plainly wrong, and the appeal was ultimately dismissed due to thesignificant time delay in First Media’s application for an extension of time. First Media’sapplication some 14 months after the Hong Kong Court’s enforcement orders was well outsidethe statutory 14-day time limit. However, the CA reflected its disagreement with the Court offirst instance conclusion on good faith by awarding 60% costs against Astro.

CommentThe Hong Kong Court of Appeal’s decision brings Hong Kong law in line with already establishedSingaporean law on the “choice of remedies” principle to allow parties to choose active orpassive remedies against awards. The decision brings some procedural certainty for partiesinvolved in international arbitration seated in two of Asia’s most prominent arbitrationdestinations (Singapore and Hong Kong). While both the Singaporean and Hong Kong Courtshave endorsed the choice of remedies principle and passive approach to challengingenforcement, this decision serves as a timely reminder to debtors who do not challengeenforcement orders for awards within specified timeframes. All debtors are encouraged to actquickly when challenging enforcement orders for awards against them, regardless of their assetliability in the relevant jurisdiction, or prepare to face the consequences as First Media did.


Brief by Sarah Redding, Kensington Swan Lawyers

Sarah Redding





http://www.legalwiseseminars.co.nz/cpd-options/seminars-and-conferences/building-and-construction-law-conference-march-2017/


This is the first decision of its kind andwill no doubt be regularly referred to

when a claimant seeks to recover suchcosts. The decision is particularly relevant

as litigation funding is becoming morecommon in international arbitration.

Brackground In Essar Oilfields Services Limited v NorscotRig Management Pvt Limited,1 an applicationwas made to the Court under section 68 ofthe Arbitration Act 1996 (UK) to set asidethe arbitrator's award on costs. Thearbitrator had found Essar liable to paydamages to Norscot for repudiatory breachof an operations management agreementand awarded costs in the order of US$4million. This included Norscot's costs ofobtaining litigation funding.The litigation funder had advanced to Norscotthe sum of about £647,000 for the purpose ofthe arbitration. The agreement between thetwo provided that, in the event of Norscot'ssuccess, the litigation funder would be entitledto recover the greater of 300% of the fundingor 35% of what Norscot recovered. Thearbitrator considered that section 59(1)(c) ofthe Arbitration Act 1996 (UK) and Article 31(1)of the ICC Rules were wide enough to permitrecovery of litigation funding.Section 61(1) of the Act provides that:

"The tribunal may make an Award allocatingthe costs of the arbitration as between theparties, subject to any agreement of theparties".

Section 63(3) provides that (inter alia):"The tribunal may determine by award the

recoverable costs of the arbitration on suchbasis as it thinks fit..."

Section 59 is a defining section. It states that:(emphasis added)

1. References in this Part to the costs of thearbitration are to –2.

a. the arbitrators' fees and expenses, andb. the fees and expenses of any arbitralinstitution concerned, andc. the legal or other costs of the parties.

3. Any such reference includes the costs ofor incidental to any proceedings todetermine the amount of the recoverablecosts of the arbitration."

Article 31(1) of the ICC Rules 1998 is similarlyworded to section 59(1)(c). It provides that "The costs of the arbitration shall include... thereasonable legal and other costs incurred bythe parties for the arbitration".The arbitrator considered that "other costs" insection 59(1)(c) could include the costs oflitigation funding. Further, in respect of the ICCRules, the ICC Commission Report of 2015headed "Decision on Costs in InternationalArbitration" supports the view that the costs oflitigation funding can be recovered underArticle 31(1)2. Essar applied under section 68(2)(b) of theArbitration Act to set aside the arbitrator'saward on the ground of a "serious irregularity",specifically "the tribunal exceeding its powers".Section 68(2)(b) has application only where anarbitrator has purported to exercise a powerwhich he or she does not have. It does notapply where a tribunal erroneously exercised,or fell into error in the application of, a power

The High Court in London recently upheld a decision of an arbitratorallowing recovery of £1.94 million in litigation funding costs.

AUSTRALIA: LITIGATION FUNDING ININTERNATIONAL ARBITRATION: RECOVERING THECOSTS OF LITIGATION FINANCE

- Andrew Stephenson and Lee Carroll



LITIGATION FUNDING IN INTERNATIONAL ARBITRATION: RECOVERINGTHE COSTS OF LITIGATION FINANCE. - CONT...

Essar applied under section 68(2)(b) of theArbitration Act to set aside the arbitrator'saward on the ground of a "serious irregularity",specifically "the tribunal exceeding itspowers". Section 68(2)(b) has application onlywhere an arbitrator has purported to exercise apower which he or she does not have. It doesnot apply where a tribunal erroneouslyexercised, or fell into error in the applicationof, a power that it did have. (Lesotho vImpregilo [2006] 1 AC 221.)Upholding DecisionThe Court said the arbitrator clearly had thepower to award costs.If the arbitrator fell into error, it was an error asto the scope of such costs, and therefore therewas no serious irregularity within the meaningof s68(2)(b). Notwithstanding, the Court wenton to consider the construction issue (i.e.whether the expression "other costs" includethe costs of obtaining litigation funding) andagreed with the arbitrator's finding.Sections 63(3) and 61(1) allow the arbitrator todetermine the recoverable costs of thearbitration as he sees fit. Section 59(1)(c) thendeliberately includes a head of costs, otherthan legal costs. The Court concluded that, "asa matter of language, context and logic", "othercosts" can include the costs of obtaininglitigation funding. The Court reasoned that thecosts relate to the arbitration and are for thepurpose of it as the costs have been incurred inorder to bring the claim.It is, of course, a matter of the arbitrator'sdiscretion whether to award it.In exercising his discretion to permit recoveryof litigation funding, the arbitrator's findings asto the respondent's conduct was critical. Thearbitrator said that Essar had set out to crippleNorscot financially by resolutely refusing tomake certain payments. The arbitrator found

that as a consequence of Essar's conduct"Norscot had no alternative, but was forced toenter into the litigation funding". The arbitratorfound that "Essar was undoubtedly aware thatNorscot's costs could not be financed from itsown resources...and it was forced into'litigation funding'..."The arbitrator concluded that Norscot'simpecuniosity was deliberately caused, orsubstantially contributed to, by Essar.In addition, the arbitrator considered thefunding costs (i.e. 300% of the sum advancedor 35% of the sum recovered) reflectedstandard market rates and terms for such afacility.An Australian PositionSection 33B(1) of the Australian modelCommercial Arbitration Act provides:"Unless otherwise agreed by the parties, thecosts of an arbitration (including the fees andexpenses of the arbitrator or arbitrators) are tobe in the discretion of the arbitral tribunal".The relevant phrase is "the costs of anarbitration". It is not defined (unlike the Englishequivalent) and it is not given any context byother provisions of the Act.In Minister for Home and Territories vTeesdale-Smith (1924) 35 CLR 120, the HighCourt stated "the costs of an arbitration[include] the costs of every step necessaryfrom the essential preliminaries to the finaldetermination" and include costs incidental tothe arbitration. Notwithstanding this case,Section 33B is unlikely to be read widely, toempower an arbitrator to award costs which arenot legal costs. Such legal costs will include thecosts associated with running the arbitration,including expert costs, witness costs and thelike. However, legal costs will not include costsincurred in respect of employees of a partygiving instructions or the financing of litigation.The jurisdiction of arbitrators to award costscan be derived from the legislation (e.g.Section 33B) or can be extended by agreement.The arbitration agreement may include thearbitral rules of an institution. If so, those rulesform part of the agreement and have thecapacity to extend the jurisdiction of anarbitrator.For example, Rule 44 of the ACICA Rules3



the costs associated with running thearbitration, including expert costs, witnesscosts and the like. However, legal costs will notinclude costs incurred in respect of employeesof a party giving instructions or the financing oflitigation.The jurisdiction of arbitrators to award costscan be derived from the legislation (e.g.Section 33B) or can be extended by agreement.The arbitration agreement may include thearbitral rules of an institution. If so, those rulesform part of the agreement and have thecapacity to extend the jurisdiction of anarbitrator.For example, Rule 44 of the ACICA Rules3 provides as follows:"The Arbitral Tribunal shall fix the costs ofarbitration in its award. The term "costs ofarbitration" includes only:

a. the fees of the Arbitral Tribunal, to bestated separately as to each arbitrator,and to be fixed in accordance with Article45;b. the travel (business class airfares) andother reasonable expenses incurred bythe arbitrators;c. the costs of expert advice and of otherassistance required by the ArbitralTribunal;d. the travel (business class airfares) andother reasonable expenses of witnessesto the extent such expenses are approvedby the Arbitral Tribunal;e. the legal and other costs, such as thecosts of in-house counsel, directlyincurred by the successful party inconducting the arbitration, if such costswere claimed during the arbitralproceedings, and only to the extent thatthe Arbitral Tribunal determines that theamount of such costs is reasonable;f. ACICA's administration fee; g. fees for facilities and assistanceprovided by ACICA in accordance withArticles 9 and 47.4;h. ACICA's registration fee; andi. the costs associated with any requestfor emergency interim measures ofprotection made pursuant to Article 33.1

(a)."Rule 44(e) uses the same expression 'othercosts' which the English High Court consideredin the context of Section 59 of the ArbitrationAct 1996 (UK). It is therefore arguable that theACICA Rules are wide enough to allow a partyto recover the costs of litigation funding.However, the language of Rule 44 of the ACICARules is different. Time will tell whether thegeneral words 'other costs' should beconstrained by the surrounding words, inparticular the words 'such as the costs of in-house counsel'. Those words provide anexample, which suggests a narrower ambit forthe expression 'other costs'.In any event, where the ACICA Rules apply,respondents arbitrating in Australia should notbe alarmed. Even if 'other costs' are given awide meaning, an arbitrator's discretion toinclude in "other costs" the costs of litigationfunding will not be exercised in the case of allsuccessful claimants who are funded bylitigation funders. In Essar Oilfields ServicesLimited v Norscot Rig Management Pvt Limited,the arbitrator exercised his discretion becauseof the respondent's egregious conduct (asdescribed above) which "forced" Norscot intolitigation funding and because the fundingarrangement in question reflected standardmarket rates. The authors submit that a similarfactual scenario would be required.Finally, we note that the potentialconsequences of this case is one reason whylitigation funding arrangements should bedisclosed by a claimant at the outset of anarbitration (other reasons being potentialconflicts of interest and applications forsecurity for costs).

LITIGATION FUNDING IN INTERNATIONAL ARBITRATION: RECOVERINGTHE COSTS OF LITIGATION FINANCE. -



End Notes

1 [2016] EWHC 2361 (Comm).2 http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2015/Decisions-on-Costs-in-International-Arbitration---ICC-Arbitration-and-ADR-Commission-Report/3 Similar to and based upon Article 40(2) of the UNCITRAL Rules.**The content of this article is intended to provide a general guide to the subject matter.Specialist advice should be sought about your specific circumstances.

LITIGATION FUNDING IN INTERNATIONAL ARBITRATION: RECOVERINGTHE COSTS OF LITIGATION FINANCE. -

Lee Carroll (Special Counsel) Known for her ability to provide concise and strategic legaladvice, Lee demonstrates a thorough understanding of the law asit relates to arbitration and complex dispute processes. She has experience in trial and appellate litigation andalternative dispute resolution processes including domestic andinternational arbitration, mediation, statutory adjudication, anddispute resolution boards. Lee has also gained internationalexpertise from her time practising at a leading global law firm inLondon.

ABOUT THE AUTHORS

Andrew Stephenson (Partner) Andrew Stephenson is one of Australia’s leading projects lawyerswith a particular focus on matters involving technology,engineering, construction, infrastructure and internationalarbitration. He advises clients in respect of contractual projectrisk allocation, dispute management and dispute resolution. He provides advice in respect of bi-lateral investment treatyprotection for inward investment. Likewise he advises Australianinvestors in respect of available bi-lateral investment treatyprotection when Australians are investing overseas."


http://www.corrs.com.au/people/lee-carroll/

http://www.corrs.com.au/people/andrew-stephenson/

http://www.corrs.com.au/


Ethics: the English positionWitness preparation is generally thought toinvolve different levels of witness contact;therefore, a distinction is made frequentlybetween witness familiarisation and witnesscoaching (or witness training). Witnessfamiliarisation is designed to demystify thepractice and procedure of giving evidence forthe witness. This may involve explaining thelayout of the hearing room and the likely orderof events, and, perhaps, a mock cross-examination based on a hypothetical set offacts. Witness coaching, on the other hand,involves a detailed review of the specific factsof the dispute in question and seeks torehearse with the witness their answers toanticipated questions on cross-examination.For advocates practising in English courts, thelaw is clear. As stated by the Court of Appeal inR v Momodou [2005] EWCA Crim 177: “There isno place for witness training in this country, wedo not do it. It is unlawful”. In particular, theCourt of Appeal confirmed that, whilst witnessfamiliarisation is permitted, training orcoaching is not permitted: a witness mustconvey his or her own evidence uninfluencedby others. Despite it being a criminal case, ithas been held that the rules laid down inMomodou in relation to witness preparationare equally applicable to civil litigation inEngland and Wales (Ultraframe (UK) Ltd vFielding and others [2005] EWHC 1638).In line with the case law, the English BarStandards Board’s code of conduct prohibits a

barrister from rehearsing, practising orcoaching a witness in relation to his or herevidence. Similarly, under the SolicitorsRegulation Authority’s Code of Conduct,English solicitors are required to refrain fromdeceiving or knowingly misleading the court (orbecoming complicit in others’ doing so). Giventhat neither of these rules contains expresscarve-outs in relation to arbitration, Englishlawyers clearly must comply with theirprofessional obligations, irrespective ofwhether they are acting in internationalarbitration or domestic litigation.The boundaries in internationalarbitrationNotably, unlike the clear stance under English law,the majority of the institutional arbitration rulesprovide little guidance in relation to witnesspreparation. The London Court of InternationalArbitration (LCIA) Rules are silent on the topic ofwitness preparation, save for Article 20.5, whichallows witness interviewing subject to themandatory provisions of any applicable law, and theSingapore International Arbitration Centre (SIAC)Rules contain similar wording. The InternationalCentre for Dispute Resolution (ICDR), StockholmChamber of Commerce (SCC) and InternationalChamber of Commerce (ICC) Rules are all silent asto witness interviewing or preparation.Article 4(3) of the International Bar Association(IBA) Rules on the Taking of Evidence (which arefrequently adopted in international arbitration)envisages some discussion with witnesses andpotential witnesses in respect of their “prospectivetestimony”. Guideline 24 of the IBA Guidelines onParty Representation in International Arbitration

WITNESS PREPARATION ININTERNATIONAL ARBITRATION:WHERE TO START AND WHERETO STOP - Jue Jun

There is now a broad consensus across the common and civil law divide that it ispermissible in international arbitration for counsel to prepare a fact witness for the

purpose of giving evidence to the arbitral tribunal. However, considerable differences stillexist as to what constitutes permissible “witness preparation”, under arbitration laws andwithin ethical rules of different jurisdictions. This post considers a number of legal, ethical

and practical considerations that might influence practitioners’ approaches to witnesspreparation in international arbitration.


frequently adopted in international arbitration)envisages some discussion with witnesses andpotential witnesses in respect of their“prospective testimony”. Guideline 24 of theIBA Guidelines on Party Representation inInternational Arbitration seems to go one stepfurther, allowing counsel to meet and interactwith witnesses in order to “discuss and preparetheir prospective testimony”.Despite these provisions, it is still far fromclear what witness preparation in internationalarbitration may involve. Given this lack of clearguidance, and in the absence of a supranationalcode of ethics for use in internationalarbitration, there is potential for lawyers fromdifferent jurisdictions to “play” by differentrules. For example, whilst someCommonwealth jurisdictions (such as Australiaand New Zealand) may have rules akin to theEnglish position, with a prohibition on witnesscoaching, in jurisdictions such as the USA,witness coaching comprising mock cross-examinations and rehearsals is not only lawfuland accepted, but common practice.The danger is that these widely differingapproaches to witness preparation could, insome cases, lead to an uneven playing fieldbetween the parties. Where this is the case, itis important for the parties to seek directionfrom the arbitral tribunal to clarify the positionon permissible contact with witnesses. Whilstthe tribunal is not able to direct counsel to goagainst their professional obligations, byaddressing the issue at an early stage of theprocess, the tribunal can at least try to even up

the process by giving clear directions that takeaccount of the background of the parties andtheir representatives. Adopting a pragmaticapproach to witness preparation will allow thetribunal to consider the impact of the law of theseat (and any applicable laws), thus ensuring tothe greatest extent possible the integrity of thearbitral process and the enforceability of thefinal award.

A fine balanceFrom a practical point of view, the process ofwitness preparation would ideally strike abalance between building the confidence of thewitness so that he or she gives evidence in acompelling, convincing manner and, at thesame time, preparing the witness for therigours of the process. To this end, and giventhe fallibility of human memory, it is importantto give the witness an opportunity to review(and if necessary, re-review) all the relevantmaterials before giving evidence. Dependingon the experience of the witness, a role playexercise giving the witness some idea of theformat of trial and the procedure of cross-examination may also be very helpfulpreparation for what might seem like aterrifying ordeal. That said, it is worth bearing in mind that theeffects of witness preparation can backfire, asillustrated in the recent case of EnergySolutions EU Ltd v Nuclear DecommissioningAuthority [2016] EWHC 1988 (TCC). In thatcase, the judge openly criticised a number ofEnergy Solutions’ witnesses for being too readyto follow a “pre-ordained script” of embarking


W I T N E S S P R E P A R A T I O N I N I N T E R N A T I O N A L A R B I T R A T I O N :W H E R E T O S T A R T A N D W H E R E T O S T O PC O N T . . .

"...it is important for theparties to seek direction

from the arbitral tribunal toclarify the position on

permissible contact withwitnesses."



That said, it is worth bearing in mind that theeffects of witness preparation can backfire, asillustrated in the recent case of EnergySolutions EU Ltd v Nuclear DecommissioningAuthority [2016] EWHC 1988 (TCC). In thatcase, the judge openly criticised a number ofEnergy Solutions’ witnesses for being tooready to follow a “pre-ordained script” ofembarking on a prepared exposition of theirside’s case, and for avoiding giving clearanswers to sensible questions on cross-examination.Although the judge stopped short of blamingwitness training for cultivating a particularstyle of giving evidence (which he deemedunhelpful and counter-productive), the

potential downsides of witness preparationshould not go unnoticed. As with all things,there are benefits to witness preparation,provided that parties have a clear idea of whereto start and, perhaps more importantly, whereto stop. This article first appeared on Practical LawArbitration Blog.

W I T N E S S P R E P A R A T I O N I N I N T E R N A T I O N A L A R B I T R A T I O N :W H E R E T O S T A R T A N D W H E R E T O S T O PC O N T . . .

ABOUT THE AUTHOR Jue Jun is a Solicitor Advocate and a senior associate atBLP’s Litigation and Dispute Resolution Group in London. Jue Jun specialises in complex, cross-border commercialdispute resolution, with a particular focus on internationalarbitration. She regularly acts in international commercialarbitrations administered under the rules of major arbitralinstitutions including the London Court of InternationalArbitration (LCIA), International Chamber of Commerce(ICC), Hong Kong International Arbitration Center (HKIAC),Singapore International Arbitration Centre (SIAC), and theLondon Maritime Arbitrators Association (LMAA), as well asin ad hoc arbitration proceedings under the rules of theUnited Nations Commission on International Trade Law(UNCITRAL). Jue Jun has advised clients from sectors asdiverse as energy, mining, telecommunications, trade,construction, private equity and financial services.

".... the judge openlycriticised a number of

Energy Solutions’witnesses for being tooready to follow a 'pre-

ordained script'."


http://www.blplaw.com/lawyer-directory/profile?lawyer=jue-jun-lu

http://www.blplaw.com/

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