Commencing court proceedings in breach of an arbitration agreement: The risk of indemnity costs

In the recent decision of Pipelines Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 (S), his Honour Chief Justice Martin of the Supreme Court of Western Australia ordered Pipeline Services WA Pty Ltd (Pipeline) to pay, on an indemnity basis, the costs incurred by ATCO Gas Australia Pty Ltd (ATCO) in applying for a stay of proceedings under section 8 of the Commercial Arbitration Act 2012 (WA) (2012 Act).

In making this order, his Honour confirmed the application in Western Australia of the principle in the English case of A v B [2007] EWHC 54 that indemnity costs will generally be awarded where a party commences legal proceedings in breach of a contractual obligation to refer a dispute to arbitration.

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New ruling of the French Cour de cassation in the Tecnimont judicial saga on challenge of an arbitrator

In Avax v Tecnimont (Civ. 1ère, 25 June 2014, pourvoi n° 11-26.529) the French Supreme Court reviewed the Paris Court of Appeal’s decision regarding the effect of the time limits in institutional rules on the judge reviewing the award. 

On 25 June 2014, the French Supreme Court (the Cour de cassation) held that a party that had failed to exercise its right to challenge an arbitrator within the time limit specified by the applicable arbitration rules is deemed to have waived its right to have the award set aside on that ground. In other words, the French Supreme Court held that the arbitration rules that have been chosen by the parties to govern the arbitration have a legal effect on the judge reviewing the award and cannot be disregarded once the arbitral award has been rendered. The decision reversed a controversial decision rendered by the Reims Court of Appeal in 2011.

This is the latest decision in the now long-running judicial saga of the 2007 ICC award in Avax v Tecnimont. The Paris Court of Appeal initially annulled the award in 2009, on the ground that the chairman of the tribunal had failed to disclose his law firm’s representation of companies affiliated to one of the parties during the arbitration proceedings. That decision was then reversed on a procedural ground by the French Supreme Court in November 2010. The case was then referred to the Reims Court of Appeal, which set aside the award again, this time for a failure to disclose conflicts of interests and to take into account the impact of the ICC rules on challenging arbitrators.

In the latest decision, the French Supreme Court ruled on the same case for the second time, but on a different legal issue, reversing the Reims Court of Appeal decision only on the question of the legal authority of the ICC Rules. It did not rule on the second question addressed to it, which concerned the scope of the arbitrator’s duty of disclosure. The French Supreme Court has sent the case back to the Paris Court of Appeal, which will issue another decision on the case (although it will be dealt with by a different chamber of the Paris Court of Appeal).

The decision is a reminder to parties to consider promptly their rights under any agreed institutional arbitration rules and, more importantly, to heed the time limits imposed by those rules.

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Going South …. Singapore High Court diverges from English Court’s position on governing law of the arbitration agreement

The recent decision of the Singapore High Court in FirstLink Investments Corp Ltd v. GT Payment Pte Ltd and others [2014] SGHCR 12 highlighted the importance of making an express choice as to the law governing an arbitration agreement, in addition to stating the governing law of the remainder of a contract. The decision raised some interesting questions as to the determination of the parties’ implied choice of proper law, in the absence of an express choice, and diverged from the English decision of SulAmerica Cia Nacional De Seguros S.A. and others v Enesa Engenharia S.A..

The Singapore High Court found that, in the absence of indications to the contrary, parties will have impliedly chosen the law of the seat as the proper law to govern the arbitration agreement, in a direct competition between the chosen substantive law and the law of the chosen seat of arbitration.

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Filed under Arbitration clauses, Arbitration laws, South East Asia

Sanctions Update: EU and US introduce further sanctions in response to the situation in Ukraine; EU amends sanctions against Libya, Central African Republic and Syria

Herbert Smith Freehills has published its latest Sanctions Update e-bulletin, on the latest developments in sanctions regimes in Ukraine, Libya, Central African Republic and Syria.

Both the EU and US have introduced limited additional sanctions in light of the current situation in Ukraine, and Australia has announced its list of Ukraine-related designated persons.  The EU has also announced amendments to its sanctions against Libya, the Central African Republic and Syria.  Of these developments, the most significant is a ban on the import into the EU of goods from Crimea and Sevastopol, and any associated financing or re/insurance by EU persons.

For further information, please contact Susannah Cogman, Partner, Elizabeth Head, Associate, or your usual Herbert Smith Freehills contact.

Susannah Cogman
Susannah Cogman
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+44 20 7466 2580
Elizabeth Head
Elizabeth Head
+44 20 7466 7555

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Filed under Africa, Australia, EU Law, Europe, Middle East, Sanctions, The Americas

“Dispute Resolution and Governing Law Clauses in China-related Commercial Contracts” – 6th edition now available

Herbert Smith Freehills has published the 6th edition of our popular guide “Dispute Resolution and Governing Law Clauses in China-related Commercial Contracts” (also known as the “Dragon Book”)

The guide is aimed principally at multinational companies negotiating China-related commercial contracts. It explains the restrictions on choice of law and dispute resolution provisions under PRC law, and highlights common traps that drafters should avoid to ensure dispute resolution and governing clauses are effective. The guide also includes a number of recommended clauses.

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Filed under Arbitration clauses, Asia, Hong Kong & China

Christian Leathley speaks at BritishAmerican Business event with keynote speech by EU Trade Commissioner Karel de Gucht: “TTIP and the Investment Dimension: What is the State of Play?”

International arbitration partner Christian Leathley spoke on a panel at an event organized by transatlantic business organization BritishAmerican Business yesterday discussing how important investor-state dispute settlement is to the success of the TTIP and whether it is feasible or desirable for the TTIP to be concluded in the absence of ISDS provisions. The TTIP is discussed in our blog post here. The keynote speech at the event was delivered by European Commissioner for Trade Karel de Gucht, who is negotiating the TTIP on behalf of the EU.

Mr de Gucht described the need for the EU Commission to get the right balance between protecting the rights of investors and preserving the right of states to regulate in the public interest. He also explained how the investment protection provisions in the TTIP were of fundamental importance in setting the standards which would be relevant in the negotiation of future investment agreements and FTAs between the EU and other states. Other speakers also referred to the global signal which would be sent by the inclusion of ISDS and the content of the substantive protections in the TTIP.

Christian noted that there was a need to identify what was the fundamental problem with ISDS; namely, that it was not the arbitral institutions (in particular ICSID) which were the issue and, whilst access to arbitration is fundamentally important, the core of the criticism of ISDS addressed the substantive rights granted to investors. He commended the EU Commission for launching the public consultation on the investment protection provisions in the TTIP as an attempt to bring together the perspectives of states and investors on substantive protection in a meaningful way. In terms of the EU Commission’s approach to the negotiation of the investment protection chapter with the US, Christian highlighted some points for further consideration, including: (i) questioning the need to amend or add to the UNCITRAL Transparency Rules, which themselves were the product of very detailed consideration; (ii) noting that the “closed list” of grounds for breach of the Fair and Equitable Treatment Standard was in places inconsistent and incomplete, particularly with regard to the treatment of an investor’s legitimate expectations; and (iii) criticising an approach which was premised on an assumption that use of shell companies was per se abusive.

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Filed under EU Law, Europe, Investment Arbitration

Second video post in “Observations on Arbitration” series: “Introduction to Investment Arbitration”

In the second of our video posts in the “Observations on Arbitration” series, Matthew Weiniger QC provides an Introduction to Investment Arbitration. Continue reading

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Filed under Advice on State Contracts and Disputes, Investment Arbitration, Public International Law

English High Court considers the requirement to “exhaust” any available arbitral process of appeal before challenging an arbitral award under the Arbitration Act 1996

In an anonymised judgment dated 11 June 2014, Mr Justice Andrew Smith considered whether the terms of section 70(2) and/or section 73(2) of the Arbitration Act 1996 (the Act) precluded the Claimants (referred to as A) from bringing a challenge to an arbitral award (the Award) under sections 67 and 68 of the Act.

The judgment provides a helpful clarification in respect of what a party seeking to challenge an award under the Act must have done to satisfy the requirement in section 70(2)(a) to have first exhausted any available arbitral process of appeal or review in a two-tier arbitration.

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Filed under Arbitration rules, Awards, Challenges to awards, Europe

English High Court says that a head of state who dies in office enjoys immunity only in respect of official acts


In the recent decision of Harb v HRH Prince Abdul Aziz Bin Fahd Bin Abdul Aziz [2014] EWHC 1807 (Ch), the High Court found that the principles of state immunity apply to a head of state who dies in office in the same way as they apply to a head of state who stands down from office during their lifetime. The Court found that both enjoy immunity only in respect of their official acts whilst in office. There was no justification for treating the estate of a head of state who dies in office in a more favourable way than (i) a living former head of state or (ii) the estate of a former head of state who dies some time after leaving office.

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Filed under Europe, Public International Law, Sovereign Immunity

No jurisdiction over BIT claims if investor fails to state a prima facie case

In Achmea BV v The Slovak Republic (PCA Case No. 2013-12), the tribunal considered the respondent’s objection that it lacked jurisdiction on the ground that the claimant had failed to establish a prima facie cause of action under the Netherlands – Slovak Republic bilateral investment treaty (BIT).

A tribunal constituted under the BIT has dismissed claims brought by Achmea BV relating to possible future changes in the Slovak private health insurance market including the threatened expropriation of Achmea’s Slovak subsidiary. The tribunal determined that it had no jurisdiction to hear the case because Achmea had failed to make out a prima facie case that the Slovak Republic had breached the expropriation and fair and equitable treatment provisions of the BIT by indicating an intention to expropriate Achmea’s subsidiary.

The case is of interest for its discussion of the prima facie case requirement and also the tribunal’s ruling that it was impossible and impermissible, in circumstances where no expropriation had yet taken place, for the tribunal to attempt to assess the legality of the Slovak Republic’s hypothetical future conduct. (Achmea BV v The Slovak Republic (PCA Case No. 2013-12).

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Filed under Costs, Europe, Investment Arbitration