When life gives you lemons, make lemonade: anti-suit injunctions and arbitration in London post-Brexit

London has long been a city associated with international arbitration. In 2015, even with the UK referendum on EU membership looming, according to analysis by theCity UK, London was the seat or centre of 4,738 international commercial arbitrations, mediations and adjudications in 2015. These were conducted under the auspices of numerous institutions, with the long-established LCIA governing only a relatively small percentage. In the year preceding the referendum, according to the Queen Mary University of London International Arbitration survey, 47% of participants included London amongst their top three choices of seat (Paris was the next most popular with 38%, followed by Hong Kong with 30%). Many different factors attract international parties to London as a seat of arbitration, including the legislative framework, the supportive powers of the English courts and the pro-arbitration attitude with which they are exercised, the common use of English contract law in commercial transactions (from which the choice of a London seat often follows), the infrastructure of London and the availability of legal, expert and other services to support arbitration.  

The referendum outcome has inevitably led to reflection on the commercial, legal and practical effects in so many areas, arbitration included. Whilst the relationship between the UK and the EU is yet to be re-defined, it is timely to consider the ways in which Brexit may have an impact on arbitration in London, whether negative, or indeed positive.

In general terms, Brexit should not have a substantive impact. Arbitration is excluded from EU legislation regarding jurisdiction and enforcement, and a tribunal seated in London is not obliged to follow EU rules regarding choice of governing law. The UK and all other EU Member States are party to the New York Convention, and their obligations under the Convention are entirely independent of EU membership. As such, following Brexit, an agreement to arbitrate in London and a resulting award will continue to be enforceable across the EU. Likewise, an agreement to arbitrate anywhere in the EU (and indeed, in any state which is a contracting party to the New York Convention) and a resulting award will still be enforceable in the UK. And the stability, certainty and predictability of common-law made English contract law will remain unaffected, and as an excellent choice to govern contractual relationships.

But there are of course many issues to consider at a more micro level. This post focuses on an issue which has been the subject of much discussion in the last few years: the significance of the availability of anti-suit relief to halt proceedings in breach of an arbitration agreement in an EU Member State court.  It also considers, among other things, whether Brexit could affect the pool of specialist arbitration practitioners which represents one of the many strengths of London as a seat of arbitration. 

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Filed under EU, EU Law, Interim relief, Jurisdiction

“We will pay for delays” – ICC clampdown on its award scrutiny process

On 13 July 2016, the International Chamber of Commerce ("ICC") issued its revised Practice Note allowing for a reduction in ICC administrative fees of up to 20% for unjustified delays in the ICC's award scrutiny process. The revised Practice Note also sets out the exact steps the scrutiny process entails. Reflecting on the amendments, ICC Court President Alexis Mourre noted that "as a world leader in commercial dispute resolution, it is imperative for ICC to lead by example and take steps to improve transparency and accountability wherever appropriate".

An overview of both the scrutiny process and the changes are provided below.

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Filed under Awards, Costs, Institutions

Hong Kong Court stays enforcement of award pending challenge at seat, on condition of security

In L v. B (HCCT 41/2015), the Hong Kong Court of First Instance (CFI) adjourned enforcement proceedings, on condition that security in the sum of the unpaid award, plus costs, be furnished by the losing party. Click here for a copy of the judgment.

Background

The Applicant commenced arbitration proceedings against the Respondent in the Bahamas in October 2012, claiming breach of a Non-Recourse Loan Agreement (the Agreement). Under the Agreement, the Respondent agreed to advance a loan to the Applicant against the transfer of Applicant's shares in a Hong Kong listed company, as collateral and security for the loan to be advanced. The Applicant transferred 800 million shares to the Respondent, but the Respondent only advanced loans in relation to 200 million shares transferred. The Tribunal found the Respondent liable and awarded to the Applicant damages in the total sum of approximately US$41.8 million (the Award).

On 22 June 2015, the Respondent applied in the Bahamian court to challenge the Award. The application was made under s.90 of the Bahamian Arbitration Act 2009 (the Act), to set aside the Award on the ground of serious irregularity, and under s.91 of the Act, to appeal on a question of law. On 22 September 2015, the CFI granted the Applicant leave to enforce the Award in Hong Kong. One month later, the Respondent applied to set aside the order and to stay the enforcement proceedings pending determination of the challenge to the Award. The Applicant requested dismissal of the application or, in the alternative, provision of security by the Respondent.

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Filed under Arbitration laws, Awards, Challenges to awards, Enforcement

Abu Dhabi Global Market Courts secure co-operation arrangements with UAE Ministry of Justice and Federal Courts

Following on from our previous post on the enactment of the Abu Dhabi Global Market Arbitration Regulations 2015 and the creation of a new seat of arbitration in the Middle East, the Courts of the Abu Dhabi Global Market (“ADGM”) have entered into a memorandum of understanding with the United Arab Emirates Ministry of Justice (the “MoU”).

The ADGM Courts are frequently compared to the Courts of the Dubai International Finance Centre (“DIFC”) as they both operate as autonomous common law jurisdictions, operating with an independent judiciary (largely made up of experienced common law justices), carved out from the civil law jurisdictions in which they are situated, the Emirates of Abu Dhabi and Dubai respectively. However, one key difference between the ADGM and DIFC Courts is that, rather than merely applying common law principles, the ADGM directly incorporates English common law rules and principles into its legal system.

The MoU marks an important step for the integration of the ADGM Courts into the UAE legal system. The Preamble to the MoU states that the ADGM Courts “form part of the judicial system of the UAE” and, importantly, should therefore be considered UAE Courts for the purposes of international treaties.

The MoU also provides for judicial cooperation between the Federal Courts of the UAE. Clause (2)5 of the MoU states that the Federal and the ADGM Courts are to “take all necessary measures that will ensure that enforcement of the ADGM Courts’ judgments and arbitration awards issued in the ADGM” can be sought before the Federal Courts of the UAE. Importantly, ADGM judgments and arbitral awards should be enforced by the Federal Courts “without examining the substance of the dispute”.

However, given that the three Emirates with arguably the most commercial activity – Dubai, Ras Al Khaimah and Abu Dhabi itself – have elected to opt out of the UAE’s Federal judicial system (and are therefore not Federal Courts), the practical benefits of the MoU may be limited. Similar memoranda will be required to institute the same relationship with the Courts of these Emirates.

Nonetheless, what the introduction of the MoU does clearly demonstrate is the political support the ADGM enjoys from the UAE authorities and the overriding intent that the ADGM be promoted as an accommodating and arbitration friendly forum. Judging by the development of the DIFC’s relationship with the Courts of Dubai and with other courts across the globe, the MoU is likely to be the first of many such memoranda.

For further information, please contact Caroline Kehoe, Partner, Stuart Paterson, Partner, Craig Shepherd, Partner, Joseph Bentley, Associate or your usual Herbert Smith Freehills contact.

Caroline Kehoe
Caroline Kehoe
Partner
Email | Profile
+971 4 428 6302
Stuart Paterson
Stuart Paterson
Partner
Email | Profile
+ 971 4 428 6308
Craig Shepherd
Craig Shepherd
Partner
Email | Profile
+971 4 428 6304
Joseph Bentley
Joseph Bentley
Associate
Email
+971 4 428 6350

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Filed under Middle East

Singapore International Arbitration Centre Arbitration Rules 2016: key changes and potential impact

As discussed in our earlier blog post, on 1 July 2016, the Singapore International Arbitration Centre ("SIAC") released the sixth edition of its Arbitration Rules (the "2016 Rules"). The 2016 Rules supersede the 2013 version of the SIAC's rules (the "2013 Rules") with effect from 1 August 2016.  The 2016 Rules were jointly produced by the SIAC Secretariat and various subcommittees of the Court of Arbitration of SIAC and were finalised following an extensive public consultation exercise.  

The 2016 Rules aim to further promote the cost-effective and efficient resolution of arbitrations.  Key highlights include new provisions on multi-party arbitrations, consolidation, joinder and a procedure for the early dismissal of claims and defences.  SIAC Registrar, Ms Delphine Ho, stated that the "unprecedented number of comments on the draft rules from users and stakeholders… enabled us to produce what we are confident will be the gold standard of international arbitration rules".

Readers may also be interested to know that the proposed SIAC Investment Arbitration Rules are still being finalised and are due to come into force on around 1 September 2016.

In this post, we summarise the key changes introduced by the 2016 Rules and consider their potential impact.

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Filed under Arbitration rules, South East Asia

Inside Arbitration: Issue #2 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.

Inside arbitration #2

 

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:

  • Sarah Grimmer, the new Secretary General for the Hong Kong International Arbitration Centre shares her insights on, and ambitions for, HKIAC.
  • Nick Peacock and Dr Mathias Wittinghofer consider whether arbitration is a suitable tool for resolution of derivative disputes, as well as the future of the ISDA arbitration guide.
  • Jessica Fei, Chinese national and NY lawyer, talks about the unique blend of cultures and legal qualifications that shape her perspective as a practitioner.
  • Mark Lloyd-Williams, Hamish Macpherson, Craig Shepherd, Emma Kratochvilova and Thomas Weimann give a global perspective on arbitrating construction and infrastructure disputes.
  • Dominic Roughton and Andrew Cannon consider the impact of territory and maritime boundary disputes on commercial investments and the role of private actors and states in their resolution.
  • Peter Leon and Ben Winks give their view from Johannesburg on the future of arbitration in South Africa.
  • Vanessa Naish and Hannah Ambrose take a practical look at the effect of Brexit on dispute resolution choices, both now and in the future.
  • Andrew Cannon talks about his experience working at the Foreign and Commonwealth Office and how it has shaped his public international law practice.


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

We hope that you enjoy reading Issue #2 of Inside Arbitration. We would welcome your feedback.

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Filed under Publications and Guides, Uncategorized

When does “may” mean “shall”? Hong Kong Court rejects argument that permissive language creates either a binding arbitration agreement or a right to compel arbitration

In The Incorporated Owners of Wing Fai Building, Shui Wo Street v Golden Rise (HK) Project Company Limited DCCJ 225/2016, a Hong Kong court considered the effect of a dispute resolution clause that provided that parties "may" refer disputes to arbitration (click here for the full judgment).

The Defendant applied for a stay of proceedings under s.20 Arbitration Ordinance, on the basis that the clause constituted a binding arbitration agreement; or, in the alternative, the clause was an option to arbitrate that became mandatory when one party elected for arbitration (relying on the Privy Council decision in Anzen Ltd v Hermes One Ltd ("Anzen")). The Court rejected both arguments. Whilst recognising that there are cases in which "may" actually means "shall" in respect of obligations to arbitrate, the Court held that this was not one of those cases and the evidence suggested the parties did not intend to be bound to arbitrate disputes.

The Court held that the arbitration clause in Anzen was "substantially different" from the clause in the present case. Accordingly, the Court held that the finding in Anzen, that the clause gave the parties a right to compel arbitration after litigation had commenced, should be limited in application to cases with similar facts. The judgment is a useful reminder that, if parties intend to arbitrate all disputes under an agreement, the  arbitration agreement must be clearly and unambiguously drafted, to avoid any dispute as to its effect.

The Court awarded costs on the indemnity basis.

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Filed under Arbitration clauses, Hong Kong & China, Stays

India seeks to re-negotiate Bilateral Investment Treaties with over 47 countries

As we previously reported in April 2015 and January 2016, the Government of India ("GOI") published a draft Model Text for the Indian Bilateral Investment Treaty ("Model BIT") to serve as a framework for the renegotiation of India's bilateral investment treaties ("BITs") worldwide.  This appeared to be a response to the BIT claims that India has been faced with over the last few years, including the decision against India in the White Industries award of 2012, in which a tribunal hearing a claim under the India-Australia BIT held against the GOI by importing provisions found in the India-Kuwait BIT (reported here).

The GOI is now reported to have taken a further step, by making contact with counterparts in 47 countries to re-open negotiations of their BITs with India on the basis of the Model BIT. 

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Filed under India, Investment Arbitration, Public International Law

Dispute Resolution choices for Finance Parties: A practical look at recent developments affecting dispute resolution options

Thursday 14th July 2016, 12.45 – 1.45pm BST

Finance parties are often inclined to revert to favoured dispute resolution choices in their transactions. This default position is largely based on their perception of what offers the greatest flexibility or the lowest risk or both. However, the legal landscape moves fast and there have been a number of recent developments that have challenged the assumptions supporting these default choices. Indeed, with careful drafting, finance parties are in a better position than ever with regard to their choice of forum for resolving disputes. 

In this highly practical webinar our panel will explore a number of recent developments which have a significant impact on dispute resolution choices in finance transactions and affect how those clauses can be structured. The topics our speakers will explore include:

  • the end of the threat of an "Italian torpedo" within the EU?
  • the implications of Brexit for dispute resolution and governing law clauses
  • the potential for a summary judgment style process in arbitration
  • recent changes to the position on unilateral option clauses in transactions related to France
  • alternatives to arbitration in Asia Pacific: the Singapore International Commercial Court

Our speakers will also discuss the issue of "Brexit-proofing" contracts in the context of dispute resolution.

Chair:

Vanessa Naish, Professional Support Consultant, Herbert Smith Freehills LLP

Speakers:

Nick Peacock, Partner, Herbert Smith Freehills LLP

Adam Johnson, Partner, Herbert Smith Freehills LLP

What is a webinar?

  • A webinar is an online seminar delivered to your desktop. On the day of the webinar you will be sent a link to login to the live event.
  • The webinar is recorded so you can listen again. If you are unable to listen to the live event, register anyway and you will be able to listen to the recorded version when convenient.
  • Participation in webinars enables you to record 1 hour on your continuing competence personal training record. Further guidance can be found on the attachments tab.
  • Audio is available via your PC. Click here to see if your system supports live audio streaming.
  • The webinar is interactive and we welcome questions from our audience. Email your comments to the speakers on the day using the appropriate tab on the player.
  • Check the attachments tab for a PDF copy of the slides and other relevant material.

… and the benefits to you

  • One off registration – Register once to access any event. This will create your own account on BrightTALK, our webinar service provider. After registering you will gain access to a full programme of relevant events.
  • Easier access to archived webinars – Each practice area channel holds full details of events held during the past year as well as forthcoming webinars.
  • Add events to your calendar – When choosing a webinar there is now an option to add an appointment to your Outlook calendar. You can also manage your email alerts.
  • Keep up-to-date with topics of emerging importance.
  • Hear our experienced speakers from across our global network without leaving your office.

For further information or to register, please contact arbitration.info@hsf.com.

Nicholas Peacock
Nicholas Peacock
Partner
Email | Profile
+44 20 7466 2803
Adam Johnson
Adam Johnson
Partner
Email | Profile
+44 20 7466 2064
Vanessa Naish
Vanessa Naish
Professional Support Consultant
Email | Profile
+44 20 7466 2112

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Filed under Arbitration proceedings, Banking and Finance, EU Law, Uncategorized

Arbitral tribunal’s refusal to strike out a claim could not be challenged under s68 or s69 of the Arbitration Act 1996

In a recent decision, the Mercantile Court dismissed two appeals under s68 (procedural irregularity) and s69 (error of law) of the Arbitration Act 1996 (the "Act") which sought to challenge an arbitral tribunal's refusal to strike out a claim. The appeals were dismissed on the basis that the tribunal's orders did not constitute "awards" for the purposes of the Act.  The fact that the parties had consented to the s69 appeals did not remove the need to establish that the court had jurisdiction under s69 of the Act: Enterprise Insurance Co Plc v (1) U-Drive Solutions (Gibraltar) Ltd (2) James Drake QC [2016] EWHC 1301 (QB). 

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Filed under Arbitration Act 1996, Challenges to awards, Europe, Procedures in arbitration, Uncategorized