On 18 July 2017, Australia became the first state in the Asia-Pacific region to sign the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, also known as the Mauritius Convention. Globally, Australia was the 21st signatory to the Mauritius Convention, joining a number of other major signatories such as the UK, the US, France, Germany and Canada. The Convention will come into force on 18 October 2017, six months after its ratification by the first three states.
On 13 July, Hong Kong’s Legislative Council passed a law (the Apology Law) intended to facilitate the resolution of civil disputes in the territory. The Apology Law, which is expected to be gazetted and come into force shortly, reforms the legal consequences of making any sort of apology (written, oral or by conduct). An apology will not constitute an admission of fault or liability (even if it includes such an admission), nor may it be admissible in evidence to the detriment of the apology maker. This is the case unless the maker of the apology wishes it to be admitted or it falls to be admitted in the usual way through discovery, oral evidence or an equivalent tribunal processes.
Hong Kong is the first jurisdiction in Asia to enact apology legislation and its Apology Law is the broadest enacted to date worldwide. The driver behind it is that apologies may in some circumstances ‘unlock’ disputes and lead to settlement without recourse to formal legal action. Since parties (and their lawyers and insurers) may be reluctant to do anything that may be construed as an admission of liability, apologies have to date been sparse. The Apology Law seeks to incentivise disputing parties to make apologies, whether in the direct aftermath of an accident or dispute, or further down the line, should the dispute escalate.
The law has far-reaching consequences for anyone involved in contentious civil disputes, whether before the courts or tribunals in Hong Kong. The Apology Law has the scope substantially to change the way insurance, evidence and settlement are approached in civil proceedings and regulatory and disciplinary matters. The scope for ‘tactical’ apologies by counterparties should be borne in mind as set out below.
In a ruling handed down on July 11, 2017, the United States Court of Appeals for the Second Circuit resolved a circuit split that had sown legal uncertainty on the correct procedure for the enforcement in the United States of awards rendered under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).
In Mobil Cerro Negro Ltd et al v. Bolivarian Republic of Venezuela (2d Cir. 2017), a unanimous three-judge panel held that an ExxonMobil Corporation subsidiary could only enforce its USD 188 million ICSID award against Venezuela through the procedures set forth in the Foreign Sovereign Immunities Act (FSIA), and not—as the court below had held—through summary ex parte proceedings. The decision will likely have an impact on the reputation of the Southern District of New York's (SDNY) as a convenient enforcement forum for ICSID award creditors.
The last two months have delivered three notable developments in China-related investment arbitrations. In addition to the third known claim to be lodged at ICSID against the People's Republic of China (PRC), two recent and potentially inconsistent decisions in claims by PRC investors have raised questions as to the scope of protection under PRC bilateral investment treaties (BITs).
Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin. In this issue we will consider Indian court decisions, including the arbitrability of allegations of fraud and non-arbitrability of trust disputes by the Supreme Court. We have also considered various decisions in which the Delhi High court shows restraint in relation to interfering with offshore arbitrations, while also making decisions that demonstrate the observance of formalities by the court which could be construed as not pro-arbitration, including refusing to enforce an arbitration clause in an unsigned agreement. In other news, we consider the rise of institutional arbitration in India and India-related bilateral investment treaty news. Further, we discuss the imminent launch of a new edition of our Guide on India-Related Contracts Dispute Resolution.
Inside Arbitration: Issue #4 of the publication from Herbert Smith Freehillsâ€™ 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 Micula & Ors v Romania & Anor  EWHC 31 (Comm) the English High Court stayed enforcement of a 2013 ICSID award in favour of Swedish investors Ioan and Viorel Micula against Romania (the "Award"), but refused to set aside registration. Subsequently, in Micula & Ors v Romania & Anor  EWHC 1430 (Comm) the English High Court gave permission to appeal the stay of enforcement but refused to make the stay conditional on the provision of security by Romania.
The English Court’s decisions in this case consider interesting aspects of the interplay between potentially conflicting obligations of national, international and EU law. In particular, the Court found that:
- as a matter of English law read with Article 54 of the ICSID Convention, an ICSID Convention award achieves finality, and becomes res judicata, at the time of the award; and
- the English Arbitration (International Investment Disputes) Act 1966 (the "1966 Act"), which implements the ICSID Convention into English law, only requires that ICSID awards be treated in the same way as judgments of the English High Court. Therefore, as a judgment of the High Court is subject to EU rules as to state aid, the Court is restrained from taking a decision which conflicts with the European Commission's decisions on state aid.
The Court's decision represents the latest development in the long-running dispute between the parties arising out of Romania’s abolition of certain tax incentives in 2005 in order to comply with EU rules on state aid. Please see here for our blog post on the ICSID award.
The Award has been subject to decisions of the European Commission. In its final decision of 30 March 2015 (the "Final Decision"), the Commission found that payment of the Award by Romania would constitute new state aid incompatible with EU law, and was therefore prohibited. Please see here for our blog post on the Final Decision. The claimants in the case invited the Court to assume that the Final Decision was valid.
Given the Court's decision, the parties will now await the outcome of (i) the claimants' application to the General Court of the European Union ("GCEU") to annul the Commission’s Final Decision, which is expected to be heard before the end of the year; and (ii) the claimants' appeal, if brought, against the English High Court's stay of enforcement of the Award.
HONG KONG HIGH COURT APPOINTS RECEIVERS AS INTERIM MEASURE IN SUPPORT OF ARBITRATION PROCEEDINGS IN MAINLAND CHINA
A recent judgment from the Hong Kong High Court (Chen Hongqing v Mi Jingtian) illustrates the manner in which parties may seek interim relief in Hong Kong to support arbitral proceedings being conducted elsewhere – in this case, the appointment of receivers in connection with a CIETAC arbitration in Mainland China. The decision illustrates the wide-ranging power of the Hong Kong courts to grant measures to preserve assets or evidence (or simply to preserve the status quo between parties) in support of foreign arbitral proceedings, which will be of particular interest to parties arbitrating in Mainland China given the relatively limited powers of the PRC Courts to grant equivalent interim relief.
ICSID tribunal rules that it is neither necessary nor urgent to grant security for costs from a claimant with the benefit of third-party funding
An ICSID tribunal has rejected a State's application for security for costs in circumstances in which the other party had third-party funding in the form of ATE insurance which specifically provided for cover of the State's costs.
Italy's request for security for costs
The application formed part of arbitral proceedings brought by Eskosol S.p.A. in liquidazione ("Eskosol") under the Energy Charter Treaty and the ICSID Convention against the Italian Republic ("Italy"). Italy sought security for costs in support of its ICSID Arbitration Rule 41(5) application for summary dismissal of Eskosol's claims on the basis that they are manifestly without legal merit.
Two recent judgments from the Delhi High Court affirm the court's pro-enforcement stance on foreign arbitral awards and offer welcome guidance on the exit rights of foreign investors in Indian companies, an important subject for many companies looking to invest in India. In the dispute between Tata Sons and Tata Teleservices ("Tata") and NTT Docomo Inc ("Docomo"), the court ruled that the Reserve Bank of India did not have standing to prevent enforcement of a foreign award between two private parties on grounds of Indian public policy. In a similar case (Cruz City 1 Mauritius Holdings v Unitech Limited), the court dismissed a challenge to enforcement by an award debtor arguing that a foreign award was contrary to Indian foreign exchange regulations.