The Malaysian High Court has reconfirmed that if the same interim relief can be granted by an arbitral tribunal and the courts, a party should first apply to the tribunal. The decision in Malaysia Resources Corporation Bhd v Desaru Peace Holdings Club Sdn Bhd [2022] MLJU 3355 is significant for arbitrations with a Malaysian nexus as parties should prioritise tribunal-ordered interim relief in their case strategy where possible. This case demonstrates that should a party fail to approach its tribunal in the first instance, the Malaysian courts would generally be reluctant to grant the interim relief sought, resulting in wasted costs.
Tag: Costs
English High Court holds English Court judgments can be enforced in the United Arab Emirates
In Invest Bank PSC v Ahmad Mohammed El-Husseini and ors [2022] EWHC 3008 (Comm), the English High Court held that there was no real risk of substantial obstacles to enforcement or an additional burden in terms of costs or delay in enforcing English Court judgments in the United Arab Emirates (the “UAE”).
GIVE MANDATORY MEDIATION A CHANCE: INSIGHTS FROM THE LCAM-HSF SURVEY ON COMPULSORY MEDIATION
Study shows support by members of the dispute resolution community for some degree of mandatory mediation in both litigation and arbitration proceedings.
Please use this link to access the recording of a live webinar in which Craig Tevendale, Chris Parker KC, Gill Mansfield and Jonathan Wood discuss the survey’s outcomes.
Herbert Smith Freehills partnered with the London Chamber of Arbitration and Mediation (LCAM) to conduct a survey of perspectives on compulsory mediation in arbitration and mediation (the Survey). The results are in and we are pleased to share the insights they provide. Continue reading
HKIAC publishes average costs and duration
The Hong Kong International Arbitration Centre has released an updated report on the average costs and duration of HKIAC arbitral proceedings, following previous reports in 2018 and 2016. The report demonstrates that HKIAC offers parties administered arbitration, as well as expedited and emergency proceedings, that are both efficient and reasonably priced.
The updated report reflects data from all cases in which a final award or decision was issued between 1 November 2013 and 31 May 2021, totalling 186 arbitrations, including 44 expedited arbitrations and 13 emergency arbitrations. Arbitrations which were withdrawn, settled or terminated prior to the final award or decision were not covered.
Cost and duration are presented by both median and mean values, but the HKIAC comments that “the median value is the more meaningful and robust value, as it minimises the skewing effect of outliers“.
Key takeaways are summarised below:
- Overall duration and costs.The median duration was 13 months (representing a decrease from 16.2 months in the 2018 report) and the mean duration was 16.9 months. The median total costs of arbitration were US$64,606 and the mean US$137,332.
- Payment to the arbitral tribunal. Under the HKIAC Administered Arbitration Rules, parties have the option of paying an hourly rate (capped at HK$6,500 or approximately US$840) or on ad valorem Of the 186 arbitrations reported, the vast majority opted for the former. Arbitral tribunals were paid by an hourly rate in 175 proceedings, and by reference to an ad valorem fee scale in the remaining 11 proceedings.
- Expedited arbitration.The median duration of expedited proceedings was 8.9 months and the mean 9.3 months, a slight increase as compared to the 2018 report. Likewise, the median and mean costs for expedited arbitration increased slightly to US$24,212 and US$51,239, respectively.
- Emergency arbitration.The duration of emergency arbitrations was measured from the date of HKIAC’s acceptance of the application to the date of the emergency arbitrator’s decision, inclusive of any stays. The median duration was 15 days (a slight increase from 14 days in the 2018 report) and 22.6 hours from application to the HKIAC to the appointment of the emergency arbitrator.
For more information, please feel free to get in touch with any of the contacts below, or your usual Herbert Smith Freehills contact.
Simon Chapman QC
Partner, Regional Head of Practice - Dispute Resolution, Asia
+852 21014217
Kathryn Sanger
Partner, Hong Kong
+852 21014029
Briana Young
Foreign Legal Consultant (England & Wales)/Professional Support Consultant, Hong Kong
+852 21014214
Sophia Li
Associate, Hong Kong
+852 21014178
PERU APPROVES ARBITRATION REFORM ON DISPUTES INVOLVING STATE ENTITIES
On January 24, 2020, the Executive Branch of Peru approved the Emergency Decree No. 020-2020 (“Emergency Decree”), introducing amendments to the rules on international and domestic arbitration contained in Legislative Decree No. 1071 (“Peruvian Arbitration Law”).
Interestingly, the modifications provided by the Emergency Decree only concern arbitration proceedings in which the State is involved as a party, apparently as a response to the corruption scandals in the region. The Emergency Decree suggests that the new amendments are aimed to strengthen arbitration in the country and avoid “bad habits” when the State is involved.
The decree was approved without the involvement of the Peruvian Congress, which was dissolved last year in September – and congressional elections were still to be held at the time of its enactment. While the stated intention behind the amendments is to be welcomed, some of the new provisions have already raised concerns among the arbitration community in the region. These concerns are discussed further below.
Background
In Peru, domestic and international arbitrations are governed by the Peruvian Arbitration Law which is based on the 2006 UNCITRAL Model Law (with certain modifications). Adopted in 2008, following extensive deliberations by the Legislative Branch and consultations with experts in the field, the Peruvian Arbitration Law is viewed as a modern arbitration law in the region.
While introducing a number of important improvements to the arbitration regime in Peru, the Peruvian Arbitration Law did not contain specific provisions regarding arbitration proceedings with the State. This was emphasized in the Preamble of the Emergency Decree, which states that, while the Peruvian Arbitration law is suitable for arbitrations between individuals, said law did not consider the particularities of the proceedings where the State was a party. As such, it was “[…] not adequate to ensure transparency and to avoid acts of corruption or situations that affect the interests of the State that can cause serious economic consequences.”
Amendments introduced by the Emergency Decree
The main amendments introduced by the Emergency Decree are as follows:
- Ad-hoc and institutional arbitration: when the State is involved, the Emergency Decree establishes that it is possible to have institutional or ad-hoc arbitration – however, the latter is only possible when the amount in dispute does not exceed a certain very low amount (approximately US$ 13,000).
- Provisional measures: a party seeking a provisional measure against the State must provide security of an amount not lower that the performance bond under the contract. Such bond shall not be subject to any condition and shall continue for the duration of the arbitration proceedings. The provision is not clear on whether this is a requirement applicable when the provisional measure is requested to the arbitral tribunal or a Peruvian court.
- Conflicts of interest: addressing concerns about conflicts of interest in the appointment of arbitrators, the Emergency Decree prohibits a person who has been previously involved in the same dispute as lawyer of any of the parties or as an expert, or has personal, labor, economic, or financial interests that could be in conflict with the exercise of his or her arbitration function (either as lawyers and/or experts) from being appointed as arbitrator.
- Challenges and removal of arbitrators: where a party challenges an arbitrator and the other party does not agree with the challenge and the arbitrator rejects the challenge, remains silent, or does not resign, the challenge shall be decided by the arbitral institution administering the arbitration. In domestic arbitrations, if there is no arbitral institution administering the proceedings, the decision will be referred to the corresponding Chamber of Commerce located in the arbitration seat or in the place where the arbitration agreement was concluded. In case of an international arbitration proceedings, the Chamber of Commerce located in the arbitral seat or the Lima Chamber of Commerce (if no arbitration seat was agreed by the parties) will decide on the challenge. Any agreement providing that other members of the arbitral tribunal will decide on the challenge is void.
- Transparency: the arbitration proceedings as well as the award are to be made public once the proceedings are concluded – although there are exceptions to this rule. Where the parties have agreed to institutional arbitration, such institution’s rules will apply regarding publication. If the arbitration is ad-hoc, such obligation is assumed by the State entity participating in the arbitration proceedings.
- Abandonment of the case: if no action is taken to pursue and advance the arbitration proceedings involving the Peruvian state in four months, either party may declare that the case is abandoned. The “abandonment” of a case ‒a figure borrowed from the Peruvian Civil Procedural Code− has the effect of concluding the process notwithstanding the parties’ rights.
- Damages and costs: in the arbitrations in which the Peruvian State is involved as a party, arbitrators are not allowed to order administrative fines or concepts other than the costs of arbitration. The provision does not clarify which other concepts would be excluded.
- Setting Aside: the Peruvian Arbitration Law already provides that if the award is set aside because a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case, the arbitral tribunal shall re-initiate the arbitration proceedings at the procedural stage in which the party’s defense right violation occurred. In those cases, the Emergency Decree adds that either party may request the replacement of the arbitrator that it had appointed, or request the disqualification of the arbitrators who issued the award.
Comment
Although the reforms introduced by the Emergency Decree are portrayed by the Executive Branch as a way to increase transparency and the integrity of arbitration when State entities are involved, they are not exempt from criticism – especially when it appears that the Emergency Decree was adopted without debate by Congress, and no consultation was offered with commercial parties who may contract with the State.
One of the main criticisms is the decision to incorporate these changes within the arbitration law rather than to produce a consolidated legal framework for disputes involving the State. It has also been suggested that the provision enabling the parties to request the disqualification or replacement of an arbitrator when the award has been set aside due to the lack of proper notice or inability to present the case could be deemed a disguised appeal given that it allows the parties to have a new tribunal deciding on the same dispute. In addition, some of the provisions have not been clearly drafted, which can create room for disputes regarding their interpretation.
The provisions of the Emergency Decree will be tested once they are concretely applied to arbitration proceedings with State entities. Only at this stage will it be possible to confirm whether the concerns raised by the arbitral community are justified.
For more information, please contact Florencia Villaggi, Of Counsel, Lucila Marchini, Associate or your usual Herbert Smith Freehills contact.
Florencia Villaggi
Of Counsel
+1 917 542 7804
Lucila Marchini
Associate
+1 917 542 7850
ENGLISH HIGH COURT REFUSES TO AWARD COSTS TO CLAIMANT DESPITE SUCCESSFUL ENFORCEMENT OF ICC ARBITRATION AWARD
The English High Court (the “Court“) has refused to order costs to a claimant who successfully enforced an arbitration award, because the claimant did not satisfy its duty of full and frank disclosure when making a without notice enforcement application to the Court. In Leidos Inc v The Hellenic Republic [2019] EWHC 2738 (Comm), the claimant failed to explain to the Court that the defendant’s challenge of the award in Greece (the seat of the arbitration) might constitute a defence to enforcement in England. Even though the claimant was ultimately successful in enforcing the award, the Court held that this “serious” and “material” omission meant it would be unjust for the defendant to pay the claimant’s costs.
Observations on Arbitration: video for in-house counsel on the Myths and Realities of Arbitration
In this short video in our Observations on Arbitration series, Professional Support Consultants Vanessa Naish and Hannah Ambrose talk about the myths and realities surrounding the arbitration process. The discussion draws out key points and common misconceptions about arbitration, touching on costs and duration, confidentiality, party autonomy, availability of interim relief, summary judgment and enforcement of arbitral awards.
For more information, please contact Vanessa Naish, Professional Support Consultant, Hannah Ambrose, Professional Support Consultant or your usual Herbert Smith Freehills contact.
Hannah Ambrose
Professional Support Consultant
+44 207 466 7585
Vanessa Naish
Professional Support Consultant
+44 207 466 2112
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.
ICC Court announces new policies to foster transparency and ensure greater efficiency
On 5 January 2016, the ICC Court announced two new policies aimed at enhancing the efficiency and transparency of ICC arbitration proceedings. The first aims to promote transparency for users and stakeholders in ICC arbitration by publishing the names and certain details of arbitrators sitting in ICC cases. The second aims to encourage the prompt submission of awards by arbitrators to the ICC Court for scrutiny, by tying the arbitrators' remuneration to the time taken to submit the award.
ICC examines allocation of costs in international commercial arbitration
On 1 December, the Commission on Arbitration and ADR of the International Chamber of Commerce (ICC) issued a report intended to inform users of arbitration of the factors that tribunals consider when allocating costs between parties to arbitration.
A 60-strong Task Force drew on a study of over 300 ICC awards and contributions from eight other institutions (LCIA, PCA, SCC, HKIAC, CIETAC and SIAC). The report summarises some of the trends apparent from those awards, the institutional contributions and the Task Force's experiences under different national legal systems and from arbitration practices across the world. It therefore provides a very useful insight into the approach to costs adopted by many different tribunals in many different contexts.
The report does not endorse a particular approach on the allocation of costs in arbitration. Nor does it seek to provide rigid guidelines for tribunals to follow. However, it re-enforces that tribunals should use the allocation of costs as a case management tool, to ensure parties conduct proceedings in an expeditious and cost-effective manner.
This blog post summarises the key points in the ICC's report and the key conclusions that parties might take into account when engaged in arbitration.