UK Supreme Court rules that no security may be ordered when challenging enforcement of arbitration awards

The UK Supreme Court has overturned a Court of Appeal decision requiring Nigerian National Petroleum Corporation ("NNPC") to provide US$ 100m in security while the case was remitted to the Commercial Court to decide on IPCO (Nigeria) Limited's ("IPCO") challenges to enforcement of an award. The Supreme Court held that while the English courts had the express power to make such orders for security under section 103(5) of the Arbitration Act 1996 (the "Act") in the context of an adjournment pending a challenge to the award in the jurisdiction where it was made, the present proceedings rather concerned a challenge to the enforcement of the award under section 103(3) of the Act. As such, no power to order security was available under the Act or the scheme of the New York Convention 1958 (the "Convention").: IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2017] UKSC 16.

The Supreme Court also provided guidance on the relationship between the Act and the New York Convention (the "Convention"), on which the relevant sections of the Act are based.

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Filed under Africa, Arbitration Act 1996, Awards, Challenges to awards, Enforcement, New York Convention

‘Bare’ arbitration clauses and the extent to which the Singapore court may assist

In K.V.C Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another Suit [2017] SGHC 32 ("KVC Action") the Singapore High Court discussed the extent to which the Singapore courts and the Singapore International Arbitration Centre, in its capacity as default appointing authority under the Singapore International Arbitration Act ("IAA"), are able to support and facilitate an arbitration commenced pursuant to a bare arbitration clause which specifies neither the place of arbitration nor the manner in which arbitrators are to be appointed.

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Filed under Arbitration clauses, Asia, South East Asia

The DIFC’s conduit jurisdiction under attack? The Dubai Court attempts to reverse Banyan Tree

Following on from our reporting on the controversial first decision of the Judicial Tribunal in Daman Real Capital Partners Company LLC v. Oger Dubai LLC, Cassation No. 1 of 2016 (JT) (click here), there has been significant commentary on the possible implications for the DIFC's status as a conduit jurisdiction, particularly in connection with the enforceability in the DIFC of Dubai-seated arbitral awards, commonly referred to as the 'Banyan Tree' jurisdiction. 

At best, the Judicial Tribunal's decision seemed to provide yet another forum for onshore award debtors to use guerrilla tactics to frustrate and delay satisfaction of awards and, at worst, appeared to rule out enforcement of onshore seated DIAC arbitral awards in the DIFC, effectively overturning Banyan Tree.

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Filed under Awards, Court intervention, DIFC, Enforcement, Middle East

ADR in Asia Pacific: Spotlight on Indonesia

 The third edition of our ADR in Asia Pacific Guide spotlights alternative dispute resolution (ADR) in Indonesia. 

We summarise the state of play in relation to ADR in Indonesia and its interplay with adversarial processes like litigation and arbitration. We delve into the detail of the Supreme Court's new mediation regulation and decree and analyse how these hope to improve rates of settlement. We then look at some practical aspects of mediation and dispute resolution from a lawyer's perspective, highlighting the often novel way in which mediation is deployed in Indonesia. Finally, we summarise the ground-breaking Global Pound Conference (GPC) series which looks at all dispute resolution processes and how these can be improved for commercial parties. Herbert Smith Freehills is proud to be global founding sponsor of GPC.

To download your copy, please click here.

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Revised ICC Rules now in force

The revised ICC Rules came into force yesterday, 1 March 2017. The ICC has not introduced substantive changes to the main body of the Rules, but has focused on the introduction of an expedited procedure for small claims, as well as general amendments designed to streamline non-expedited cases. The revisions have also sought to provide greater transparency to the arbitration process.

The changes are considered in our earlier blog post here.

For more information, please contact Andrew Cannon, Partner, Rosalind Axbey, Associate or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
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Rosalind Axbey
Rosalind Axbey
Associate
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++33 1 53 57 69 51

 

 

 

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Brexit—the future of state-to-state, investor-state and domestic dispute resolution

The Brexit White Paper

The much-anticipated Brexit White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’, was published on 2 February 2017. This post focuses on a subject that has to date received relatively little attention—what it has to say about the future of dispute resolution. In its Chapter 2 (‘Taking control of our own laws’), and Annex A, the White Paper contains perhaps a surprising amount on dispute resolution, in comparison to the text devoted to the other eleven of the UK government’s 12 stated principles.

In this blog post we review the White Paper with the aim of discerning so far as possible the potential future of dispute resolution for the UK. In particular, we consider how the UK government envisages, at this relatively early stage, that disputes will be resolved under new post-Brexit UK-EU agreements, and if and how UK businesses will be able to enforce their provisions. We also consider certain implications of the end to the Court of Justice of the European Union (CJEU)’s jurisdiction in the UK and the adoption of the acquis under the Great Repeal Bill.

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Filed under Brexit, Brussels Regulation, EU, EU Law, Europe, Public International Law, Trade Agreements, TTIP

New TAI Rules 2017 – welcome changes for the Thai arbitration institute

On 30 December 2016, the Thai Arbitration Institute (the "TAI") published updated arbitration rules (the "TAI Rules 2017"). The rules came into force on 31 January 2017 and, unless otherwise agreed by the parties, will apply to all TAI arbitrations commenced after that date. The TAI's arbitration rules are not updated frequently and this is the first update since 2003 (the "TAI Rules 2003"). 
The changes implemented in the TAI Rules 2017 are designed to promote efficiency, speed, transparency and fairness in proceedings. In particular, they seek to address some of the practical problems that arose under the TAI Rules 2003.

What is new under the TAI Rules 2017?

The TAI Rules 2017 introduce many new concepts and processes that were not included in the TAI Rules 2003. The main changes of significance are as follows. 

Removal of right to challenge appointment of arbitrator in court (Article 23)

Under the TAI Rules 2003, any challenge to the appointment of an arbitrator was referred to the arbitral tribunal for a decision. However, if the party making the challenge was unsuccessful, rule 18(2) allowed that party to submit the challenge to the Thai courts. This process was used by some parties as a delaying tactic – they would often challenge the appointment of arbitrators in court in order to delay the arbitration.

Under the TAI Rules 2017, the arbitral tribunal will decide on any challenge to the appointment of an arbitrator unless the TAI decides that it is appropriate to appoint an independent umpire (or three umpires) to decide on the challenge. The umpire (or umpires) must make a decision within 15 days of their appointment. The TAI Rules 2017 state that the decision of the umpires is final. If the party bringing the challenge is unsuccessful, the rules do not include a right to challenge the umpires' decision in court. The intention of the TAI appears to be to avoid delay. However, this conflicts with section 20 of the Thai Arbitration Act 2002 (the "Arbitration Act"), which states that unsuccessful arbitrator challenges may be submitted to the courts.

It remains to be seen whether an agreement by the parties to adopt the TAI Rules 2017 (or a generic reference to "the rules of the Thai Arbitration Institute") would be interpreted as an agreement not to challenge the appointment at court. Ultimately, this is a question that will need to be determined by the Thai courts.

In addition, it would be interesting to see how this new rule concerning umpires would work in practice, including how the umpires will be appointed, the procedure for the appointment of umpires and whether there will be a panel of regular umpires.

Sole arbitrator as default position (Articles 14 and 15)

In the event that the parties do not fix or otherwise agree the number of arbitrators, the TAI Rules 2017 stipulate that the default position will be to have a sole arbitrator. If the parties cannot agree on the identity of the sole arbitrator, the rules set a specific period of time in which the parties must nominate candidates for the role.  If any party does not nominate its candidate within that period, or the nominated candidate does not accept the appointment, then the TAI has the power to make the nominations or the appointment (as the case may be). 

This is a welcome change that should reduce the ability of a party to delay the appointment of the tribunal.
Power to grant interim measures (Article 39)

Under the TAI Rules 2003, the arbitral tribunal did not have the power to grant interim measures. Therefore, parties' only option was to make an application to court pursuant to section 16 of the Arbitration Act.  This was complicated because the courts could only grant the same interim measures that would have been available had the proceedings been conducted in court.

Under the TAI Rules 2017, the arbitral tribunal is now also given the power to grant interim measures. The advantage to the parties is that there is no similar requirement for the tribunal to consider whether the measure is available in domestic litigation.

In practice, interim measures made by TAI arbitral tribunals will not be enforceable in Thailand without a separate court order.  However, this is similar to the position in other jurisdictions, where experience indicates that parties often comply with tribunal ordered interim measures voluntarily (so as to avoid annoying the tribunal).  Therefore, this rule change may be helpful in some circumstances. 

Service and filing by email (Article 4(4))

The TAI Rules 2003 did not allow the parties to serve or file arbitration documents by email. All documents to be filed had to be provided to the TAI in hard copy. Documents to be served on the parties also had to be provided to the TAI in hard copy for onward transmission to the other party. This process caused inevitable delays in the serving of documents on the parties and occasionally led to parties making non-sequential submissions.

In order to address this issue, Article 4(4) of the TAI Rules 2017 allows service of pleadings, notices, documents and other information by electronic means. The result of this rule change should be increased efficiency of proceedings and decreased costs for parties.

Timetable for the arbitration (Article 28)

Under the TAI Rules 2003, there was no requirement for the arbitral tribunal to establish, at the outset, a timetable for the proceedings. This meant that proceedings could often take a long time and were not dealt with as efficiently as possible.

Under the TAI Rules 2017, within 30 days of the arbitral tribunal being constituted, the arbitral tribunal must consult the parties and establish a preliminary timetable for the proceedings which must not be longer than 180 days. The timetable must then be submitted to the TAI for approval. Any modifications to the timetable can only be made by the tribunal and considered by the TAI. The TAI will only allow an extension "in case of necessity or reasonable causes".

If strictly enforced, this new rule would mark a significant change in the speed of TAI arbitrations. The length of arbitrations under the TAI Rules 2003 was often measured in years rather than months.  Previously, extensions of time would be routinely granted to any deadline set by the TAI.

One issue that has not been addressed in the TAI Rules 2017 is that an arbitral tribunal is not allowed to make an award on account of costs in an arbitration.  If this were to be introduced, it may help incentivise the parties to adhere to the imposed timetable.

Power to consolidate proceedings (Article 13)

The TAI Rules 2017 grant the TAI the power to consolidate proceedings "regardless of whether the relevant arbitration agreements are identical" and if "such consolidation will render the proceeding to be carried out more convenient [sic]".

Here, the TAI Rules 2017 grant a broad discretion to the TAI, and much broader than the powers of other arbitral institutions with respect to consolidation. It remains to be seen how the discretion will be exercised by the TAI.  In addition, there is a risk that a decision to consolidate where the arbitration agreements are not identical – and any subsequent award – could be successfully challenged in court (whether in Thailand or upon enforcement elsewhere).

Other notable changes

Other notable changes made in the TAI Rules 2017 include the following.

  • Confidentiality of proceedings is now made explicit (Article 36). Previously, whilst not explicit, it tended to be agreed by the parties or otherwise ordered by the arbitral tribunal.
  • The form of the award now needs to be approved by the TAI (Article 47). It remains to be seen to what extent the TAI will actively review the form of the award or comment on it.
  • If the arbitration agreement does not provide for the language of the arbitral proceedings then, unless otherwise agreed, the pleadings must be in the language of the contract (Article 10). However, the arbitral tribunal still retains the power to determine the language of the proceedings. Where the arbitration agreement provides for more than one language to be used in the arbitral proceedings, the TAI may order the party to submit a translation of their pleadings in another language specified in the arbitration agreement.
  • The TAI has the right to dispose of a case if there is no prima facie evidence of an arbitration agreement between the parties (Article 11). However, this right does not affect the power of the arbitral tribunal to rule on the existence or validity of the arbitration agreement and the scope of its own jurisdiction.

Parties must disclose all communications with an arbitrator or prospective nominee for arbitrator except for certain narrow exceptions (Article 27). Communications discussing prospective candidates for appointment as chairman of the tribunal are not an exception and must be disclosed.

Conclusion

The TAI Rules 2017 are a welcome attempt to bring the rules of the TAI into line with international best practice. It is evident from the changes made that the overall goal of the TAI is to improve the speed and efficiency of TAI arbitrations. It will be interesting to see how the changes will be implemented in practice by the TAI and tribunals.

If you have any questions about how the introduction of the TAI Rules 2017 will impact on the drafting of dispute resolution clauses in contracts or on any current or future TAI arbitrations you may have, then please contact Chinnawat Thongpakdee (Managing Partner), Gavin Margetson (Partner), Emi Rowse (Of Counsel), Niruch Winiyakul (Associate) or Pralakorn Siwawej (Associate) in the Herbert Smith Freehills Bangkok office or your usual Herbert Smith Freehills contact.

Chinnawat Thongpakdee
Chinnawat Thongpakdee
Managing Partner
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+66 2 657 3829
Gavin Margetson
Gavin Margetson
Partner
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+66 2 657 3817
Emi Rowse
Emi Rowse
Of Counsel
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+66 2 657 3816

 

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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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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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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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Tilmann Hertel
Tilmann Hertel
Senior Associate
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Filed under Arbitration clauses, Arbitration rules, EU, Institutions