The discontinuation of LIBOR and arbitration: issues of substance and procedure for parties and arbitrators

The global financial markets are currently preparing for the phasing out of the London Inter-bank Offered Rate (or LIBOR) and other Inter-bank Offered Rates (or IBORs). LIBOR is the most widely used benchmark interest rate globally, employed in an estimated US$350 trillion worth of financial contracts worldwide. LIBOR may also be used in commercial contracts – for example, in price adjustment mechanisms in share purchase agreements, price escalation clauses or as a reference rate for contractual interest on late payments. LIBOR may also be specified in arbitration clauses as a benchmark rate for interest on the award.

Many financial instruments affected by the discontinuation of LIBOR will include arbitration clauses. As discussed below, whilst the substantive disputes arising from the end of LIBOR will be the same whether they are resolved in a court or by an arbitral tribunal, there are some additional considerations particular to the arbitration process which are relevant in the context of LIBOR discontinuation disputes. Further, even when determining a dispute which does not arise from the end of LIBOR, arbitral tribunals may have to grapple with how to award interest where an arbitration clause uses LIBOR as a reference point. Read more in the E-bulletin here.

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Facing cybersecurity head on: the arbitration community develops guidance on how to tackle this difficult issue

There is an emerging consensus among the arbitration community that parties, arbitral institutions and tribunals in individual arbitration matters must give greater attention to cybersecurity in order to minimise the risks of a successful attack.

International arbitrations can involve parties that are prominent targets or potential targets of cyberattacks.  As part of the arbitral process, those parties may share material which is not in the public domain and access to which may have the potential to influence individuals, employees, share prices, corporate strategies and government policy.  Similarly, the outcome of an arbitration can have significant repercussions in the financial markets, meaning that obtaining draft forms of arbitral awards could be very lucrative for cybercriminals. As such, the arbitral process is a prime target for cyberattacks, particularly if hackers can identify a weak link in the chain of custody.

Over the last year several tools have become available to assist stakeholders in the arbitral process address issues of cybersecurity, including the draft Cybersecurity Protocol produced by a working group from International Council for Commercial Arbitration (ICCA), the New York City Bar Association (NYC Bar) and the International Institute for Conflict Prevention and Resolution (CPR) (see here), and the International Bar Association’s (IBA) Cybersecurity Guidelines (see here).

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English Court refuses to grant an injunction against the enforcement of a s1782 US Evidence Order

In a decision dated 24 August 2018, the English Commercial Court (the “Court“) dismissed Dreymoor Fertilisers Overseas PTE Ltd’s (“Dreymoor“) application to continue an injunction preventing the enforcement of an order of a U.S. court granting discovery under section 1782 of the United States Code (the “Order“). The Order required one of Dreymoor’s employees to be deposed and produce evidence for use in various international proceedings by Eurochem Trading GMBH (“ECTG“) against Dreymoor. Dreymoor argued that enforcing the Order would constitute unconscionable conduct as it would interfere with its preparation for arbitration proceedings against ECTG.

The Court accepted that the enforcement of orders such as the Order could potentially be unfair, as they would effectively provide an opportunity to cross-examine the same witness twice. However, whether to injunct the enforcement of such an order required a careful case-by-case analysis. Based on various case-specific factors, the Court decided that it would not be unconscionable to allow ECTG to enforce the Order and dismissed Dreymoor’s application to continue the injunction.

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India’s lower house of Parliament approves further amendments to the Indian Arbitration Act

As previously reported here, a draft Bill to amend the Arbitration and Conciliation Act 1996 (the “Act“) was approved by the Indian Cabinet on 7 March 2018 (the “Bill“). The Bill was listed as a part of the agenda for the monsoon session of the Indian Parliament and was passed by the Lower House on 10 August 2018, without any amendments. The text of the Bill can be found here.

The Law Minister has described the Bill as “a momentous and important legislation” aimed at making India “a hub of domestic and international arbitration”. The key features of the Bill are:

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India announces further amendments to the Arbitration Act to strengthen institutions and clarify previous reforms

According to this press release, on 7 March 2018, the Indian Cabinet approved a draft Bill to amend the Arbitration and Conciliation Act, 1996 (“Arbitration Act“). The press release indicates that the Bill will focus on building institutional support for arbitration by establishing a new body, the “Arbitration Council of India” (“Council“), to grade arbitral institutions, develop guidelines for the accreditation of arbitrators and promote the use of arbitration and ADR. It also suggests that the Bill will impose a duty of confidentiality on all aspects of an arbitration, except that the Council will maintain an electronic repository of all awards (with perhaps the implication that awards will also be published in some form). Finally, the press release notes that aspects of the 2015 Amendments will be clarified, including the controversial twelve month time-limit for tribunals to render awards and the somewhat ambiguous application of the 2015 Amendments to existing proceedings.

The proposed amendments derive from recommendations made by the Srikrishna Committee that was set up to review the Arbitration Act. We reviewed the report here.

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Anticipated arbitration reforms in Australia

The Australian International Arbitration Act 1974 (Cth) (Act) applies to all international arbitration proceedings in Australia. The Civil Law and Justice Legislation Amendment Bill 2017 (Bill) is an omnibus bill which proposes to make certain amendments to the Act (as well as other various Australian legislation).

The International Arbitration Act incorporates the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration (Model Law) and, much like other Model Law jurisdictions, contains additional provisions supplementing the Model Law. The proposed amendments to the Act are another effort by Australia to improve and clarify the provisions of the Model Law by addressing issues which have arisen in jurisprudence.

The key proposed change will make it easier for foreign awards to be enforced in Australia. A number of other less significant amendments are also proposed.

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New Zealand considers further amendments to its Arbitration Act

On 9 March 2017, the Arbitration Amendment Bill (Bill) was introduced to the New Zealand Parliament. The Bill proposes to amend the Arbitration Act 1996 (Act), and follows recommendations by the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ).

The proposed changes include:

  1. permitting the inclusion of arbitration clauses in trust deeds;
  2. greater confidentiality of arbitration-related court proceedings; and
  3. narrowed grounds for the set-aside of an arbitral award.

Other amendments to the Act came into effect on 1 March 2017, which we earlier reported on here.

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English Court considers unilateral communications between arbitrator and party and anonymisation of judgments related to an arbitration

In a recent challenge to an award made under s68 of the English Arbitration Act 1996, in Symbion Power LLC v Venco Imtiaz Construction Company the English Court considered the issue of unilateral communications between a party-appointed arbitrator and its appointing party. Further, and of particular interest to parties who choose arbitration to keep the resolution of their disputes confidential, the Court also addressed the circumstances in which a judgment resulting from an application to challenge an award may be published without anonymization of the parties' names. On this point, a party seeking to maintain confidentiality will need to be able to provide evidence of the positive detriment which it will suffer if the judgment is not anonymized. 

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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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English High Court orders disclosure of arbitration documents by agent to principal

In its recent judgment AMEC Foster Wheeler Group Limited v Morgan Sindall Professional Services Limited & Ors [2015] EWHC 2012 (TCC) (available here), the English High Court (the Court) ordered that arbitration documents be disclosed by a party conducting arbitration to a party with a financial interest and practical involvement in the dispute.

The arbitration arose in relation to construction works at a naval base. The Secretary of State for Defence (SSD) had engaged a contractor (TES) to carry out works. Part of those works was subcontracted by TES to the claimant (AMEC). AMEC then sold its business to the defendants, who were assigned AMEC’s rights and agreed to carry out AMEC’s obligations under the relevant subcontract.

Disputes under the main contract and the subcontract arose, and arbitral proceedings between SSD and TES commenced. Under a name borrowing agreement between TES and AMEC (i.e. an agreement under which a party agrees to pursue or defend a legal claim in the name of another), AMEC, agreed to conduct the arbitration between TES and SSD on behalf of TES. AMEC and the defendants then agreed that the defendants would conduct the arbitration as AMEC’s agents.

The defendants conducted the arbitration without any involvement from AMEC. When AMEC sought copies of the arbitration documents, the defendants refused to provide them. The claimant brought proceedings before the Court for orders that the documents be disclosed.

The Court ordered that the documents be disclosed on the basis that they were held by the defendants as agent for AMEC. In reaching this decision, the Court rejected the defendants’ argument that disclosure should be refused on the basis that the arbitration documents were confidential.

The Court’s decision focussed largely on the relationship between the parties and little attention was given to the issue of confidentiality in arbitration proceedings. This in itself makes the decision noteworthy: the Court made clear that the legal obligation to provide the documents to AMEC (by virtue of the relationship between principal and agent) effectively ‘trumped’ any question of a duty of confidentiality owed to a third party (in this case, the SSD), in arbitration proceedings. Whilst the circumstances of this case were unusual, the decision may have broader application where there is an arbitration between an agent (whether disclosed or undisclosed) and a third party.

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