New dispute resolution rules for foreign investors in South Africa

South Africa’s draft regulations for investor-state mediation require refinement to work effectively with international arbitration.

Interested parties have until 28 February 2017 to comment on draft Regulations on Mediation Rules (Regulations) published by South Africa’s Department of Trade and Industry (DTI) on 30 December 2016, under the Protection of Investment Act, 2015 (Act).

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Filed under ADR, Africa, Arbitrators

English Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause

The English Commercial Court has held that an asymmetric jurisdiction clause is an exclusive jurisdiction clause for the purposes of the recast Brussels Regulation. The English court was therefore entitled to continue with its proceedings where it was the chosen court but proceedings had been commenced earlier in Greece: Commerzbank Aktiengesellshcaft v Liquimar Tankers Management and another [2017] EWHC 161 (Comm).

The recast Brussels Regulation, which applies to proceedings commenced since 10 January 2015, contains a number of improvements over the previous version. These include provisions aimed at defusing so-called "torpedo" actions by which a party could seek to delay proceedings in the court the parties had chosen in their jurisdiction clause by commencing proceedings in breach of the clause elsewhere in the EU.

There has been doubt however as to whether these new "anti-torpedo" provisions would be effective where the parties had agreed an asymmetric jurisdiction clause rather than an exclusive jurisdiction clause binding on all parties. An asymmetric clause (also known as a unilateral or one-way clause) provides that one party, typically a borrower, can only sue in one jurisdiction whereas the other party, typically a finance party, can sue in any available jurisdiction.

The English Commercial Court in Perella Weinberg Partners UK LLP v Coder SA [2016] EWHC 1182 (Comm) considered the "anti-torpedo" provisions should apply equally to an asymmetric clause (see blog post here) but the comments were obiter. The present decision is significant in reaching the same conclusion after a detailed analysis of the arguments. In the court's view, however, whether a jurisdiction clause is exclusive for the purposes of these provisions is a question of autonomous interpretation of the Regulation, rather than English law, so until there is CJEU authority on the point there remains a risk of a torpedo action being effective.

The case is also of interest in once again rejecting the approach of the French courts which have held that asymmetric clauses are invalid, at least in some circumstances (see our blog posts on the decisions in Mme X v Societe Banque Prive Edmond de Rothschild 13, First Civil Chamber, 26 September 2012, Case no 11-26022 here, Societe eBizcuss.com v Apple, First Civil Chamber, 7 October 2015, Case No.  14-16898) here and Mauritius Commercial Bank Limited v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm) here).

For more detail, please see our Litigation Notes blog post here.

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Filed under Europe

DIS adopts model clause to be used with ISDA Master Agreement

Effective January 2017, the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit, "DIS") has adopted a new model clause to be used with the 2002 ISDA Master Agreement ("DIS ISDA Model Clause"). The DIS ISDA Model Clause provides for use of the institutional rules of the DIS and Frankfurt, Germany as the seat of the arbitration. While the underlying substantive agreement is subject to English or New York law, the arbitration clause is governed by German law. The DIS ISDA Model Clause can be found here:

http://www.disarb.org/en/17/clause/isda-model-clause-for-dis-rules-frankfurt-main-seat-id35

Background

In 2013, the International Swaps and Derivatives Association (ISDA) published the 2013 ISDA Arbitration Guide (the "Guide"). The Guide's purpose was to provide guidance on the use of arbitration clauses with either the ISDA 2002 Master Agreeement or the ISDA 1992 Master Agreement. The Guide included a range of model clauses for a number of combinations of national and international arbitration institutions and arbitration seats for users to choose from.  However, the DIS was not among the institutions featured, nor was any German city. It had subsequently been suggested to include a model clause for Frankfurt, not least because of the economic size of Germany but also because Frankfurt is the largest financial centre in continental Europe and the seat of the ECB (see "Finanzbranche entdeckt Schiedsgerichte", Börsen-Zeitung, No. 201, October 2013).

In cooperation with ISDA, the DIS has now closed this gap. 

Outlook  

With the newly-adopted DIS ISDA Model Clause, financial parties – especially when doing business in Germany – can now choose arbitration in Germany under the auspices of the DIS. For banks with German customers, this is a big step forward: they can offer arbitration on 'home-turf' to customers who might otherwise be reluctant to agree to arbitration. For the DIS, this is another success in its continued bid to establish itself among the top arbitration institutions.

Dr Peter Werner, Senior Counsel at ISDA, commented: "We welcome the interest in ISDA model clauses expressed by German market participants and the dispute resolution community. ISDA is looking forward to including the new model clause as one of the additional appendices in the next edition of the ISDA Arbitration Guide."

Dr Mathias Wittinghofer
Dr Mathias Wittinghofer
Partner
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+49 69 2222 82400
Tilmann Hertel
Tilmann Hertel
Senior Associate
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Filed under Arbitration clauses, Arbitration rules, EU, Institutions

Inside Arbitration: Issue #3 of the publication from Herbert Smith Freehills’ Global Arbitration Practice

We are delighted to share with you the latest issue of the publication from Herbert Smith Freehills' Global Arbitration Practice, Inside Arbitration.

In addition to sharing knowledge and insights about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

In this issue:

  • Paula Hodges QC, Peter Leon, Craig Tevendale and Chris Parker share their insights into the development of commercial arbitration on the African continent and consider dispute resolution choices for parties negotiating Africa-related contracts.
  • We consider the development of arbitration in Rwanda and the Kigali International Arbitration Centre "in conversation" with KIAC's secretary general, Dr Fidèle Masengo.
  • Peter Godwin, Regional Head of Disputes Asia, reflects on his 16 years in Asia and the changes in attitudes towards dispute resolution amongst Japanese parties.
  • Dr Patricia Nacimiento, Thomas Weimann and Dr Mathias Wittinghofer give their view on whether Germany is on its way to becoming a true arbitration powerhouse.
  • Chris Parker, Elaine Wong, Gitta Satryani and Elizabeth Kantor provide a global perspective on the availability of security for costs and claim in international arbitration.
  • Dr Larry Shore discusses his path into public international law and the development of his interest in treaty disputes, as well as the differences in arbitration practice in the US and the UK and trends in US arbitration.
  • We highlight a number of key considerations for parties negotiating contracts with state and state-owned entities across the globe and provide comparative into state immunity in five key jurisdictions.

We are pleased to present our clients with an infographic providing a snapshot of our global arbitration practice in the two years 2014-2016.

The infographic details the successes of our growing practice and our huge geographical reach. The infographic is available at this link and at page 25 of Inside Arbitration.

The full digital edition can be downloaded in PDF by clicking on this link.

We hope that you enjoy reading Issue #3 of Inside Arbitration. We would welcome your feedback.

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Filed under Publications and Guides

Australian Full Federal Court decision highlights the importance of explicitly binding all parties to an arbitration agreement

On 25 January 2017, the Full Federal Court of Australia dismissed Trina Solar US, Inc.’s (Trina) appeal from an earlier decision of a single Federal Court Judge not to exercise residual discretion to refuse Jasmin Solar Pty Ltd (Jasmin) leave to serve an originating application on Trina in the US, while arbitration proceedings were ongoing in New York. As discussed below, the decision highlights the importance of ensuring that all parties to a transaction are bound by the relevant arbitration agreement from the outset of the transaction.

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Filed under Arbitration clauses, Australia, Court intervention, Enforcement, The Americas, Third-Party Rights

ACICA announces panel of tribunal secretaries, publishes guideline on the use of tribunal secretaries

On 1 January 2017, the Australian Centre for International Commercial Arbitration (ACICA) announced the launch of a panel of tribunal secretaries which will serve as a resource for tribunals and parties undertaking arbitration in Australia and the region. ACICA also published the ACICA Guideline on the use of tribunal secretaries to provide guidance.

This is a welcome initiative as the use of tribunal secretaries in ACICA arbitrations has been somewhat of a grey area. The Guideline should provide parties with clarity as to the procedure for appointment and removal of tribunal secretaries, their duties and their remuneration.

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Filed under Arbitration proceedings, Australia, Confidentiality, Independence, Procedures in arbitration, Publications and Guides, Uncategorized

Appointment of arbitrators: English Court grapples conflicting case law and clarifies relevant principles when asked to assist with appointments

In its decision in Silver Dry Bulk Company Limited v Homer Hulbert Maritime Company Limited [2017] EWHC 44 (Comm) the English Court has considered and clarified the principles which apply to an application under section 18 of the English Arbitration Act 1996 (the "Act").  Section 18 enables a party to apply to the court to exercise its powers to give directions as to the making of tribunal appointments or make the appointments itself.  The decision confirms, amid conflicting case law, that the applying party must establish a "good arguable case" that a tribunal would have jurisdiction to hear the case, and emphasises that any jurisdictional arguments remain matters for the tribunal to decide in accordance with the principle of kompetenz-kompetenz. The case is also a good reminder of the purpose of section 18, which only applies where there has been a complete failure of the appointment procedure agreed between the parties, and cannot be used to declare or confirm the validity of a tribunal's constitution.

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Filed under Arbitrability, Arbitration Act 1996, Arbitration clauses, Arbitration proceedings, Arbitrators, Court intervention, EU, Europe, Jurisdiction

Recent Supreme Court Nominee Quiet Defender of Arbitration in the United States

On 31 January 2017, U.S. President Donald Trump formally nominated Judge Neil Gorsuch – who currently sits on the U.S. Court of Appeals for the Tenth Circuit – to fill the U.S. Supreme Court seat left vacant after the death of Justice Antonin Scalia.  Speaking shortly after his nomination was announced, Judge Gorsuch promised to fulfill his potential role with "impartiality and independence, collegiality and courage."

While his limited record on arbitration makes it difficult to gauge his potential impact on the Supreme Court, Judge Gorsuch's tenure on the Tenth Circuit offers some hints on how he would contribute to the Supreme Court's evolving arbitration case law. 

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Filed under The Americas

Australian Federal Court stays winding up application to allow arbitration of underlying dispute

The Federal Court of Australia has recently held that a winding up application made in respect of a joint venture company should be stayed and the substantive underlying matters of dispute between the joint venture parties be referred to arbitration pursuant to the joint venture agreement.

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Filed under Arbitrability, Arbitration clauses, Arbitration laws, Australia, Jurisdiction, Stays, UNCITRAL Model Law

Hong Kong Court Dismisses set-aside application for lack of jurisdiction

On 22 December 2016 Justice Mimmie Chan delivered her reasons in A v D, where the Plaintiffs had applied to set aside an arbitrator's decision on the ground of serious irregularity under section 4 of Schedule 2 of the Hong Kong Arbitration Ordinance (Cap. 609) (Ordinance). Justice Chan dismissed the Plaintiffs' application.

The judgment demonstrates the high threshold required for setting aside a decision by an arbitrator in Hong Kong. While Justice Chan did not provide detailed reasons for her costs order, it is noteworthy that costs were awarded against the Plaintiffs on an indemnity basis.

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Filed under Challenges to awards, Enforcement, Hong Kong & China, Uncategorized