After a successful event in 2022, Durham University Law School will be hosting a summer course on international arbitration between 10-15 July 2023.
Tag: International arbitration
HERBERT SMITH FREEHILLS PARTNER MIKE MCCLURE APPOINTED KING’S COUNSEL
We are very proud to announce that Seoul-based partner Mike McClure has been appointed King’s Counsel (KC) in England and Wales.
Mike will be the fourth KC currently practising at Herbert Smith Freehills, joining Paula Hodges KC, Simon Chapman KC and Chris Parker KC.
Home-grown talent, Mike McClure joined Herbert Smith’s international arbitration group in London on qualification. He has also spent time in Herbert Smith Freehills’ offices in Dubai, Hong Kong and Moscow before his current role as head of dispute resolution in Korea and also head of the Seoul office.
“This is a tremendous achievement and testament to Mike’s outstanding skills as an advocate. It reflects his legal excellence and the high esteem in which he is held by his peers, colleagues and clients. We are very proud of him” says Simon Chapman KC.
The prestigious appointment of KC is made on the advice of the UK Lord Chancellor, following consideration by an independent King’s Counsel Selection Panel. The appointment is given to distinguished practitioners based on merit, and in recognition of their professional ability, reputation and integrity. Mike is the only solicitor-advocate named on the 2022 list of King’s Counsel in England and Wales.
To view the announcement, click here.
Mike McClure
Partner
+82 10 5230 5701
SURINAME BECOMES PARTY TO THE NEW YORK CONVENTION
Suriname has become the 171st State party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). On 10 November 2022, Suriname deposited its instrument of accession to the Convention with the UN Secretary General. The Convention will enter into force for Suriname on 8 February 2023.
Not necessary to keep the lights on: court rejects application for urgent relief and gives green light to arbitration
In Power and Water Corporation v ENI Australia B.V [2022] WASC 376 the Supreme Court of Western Australia has provided clarification on the use of ‘urgent relief’ clauses, which permit parties to an arbitration agreement to obtain urgent relief from a court.
HSF experts contribute to ICCA Standards of Practice in International Arbitration
The International Council for Commercial Arbitration (ICCA) has recently released Guidelines on Standards of Practice in International Arbitration (Guidelines), which set out minimum standards of civility within the international arbitration community. The Guidelines were prepared by the ICCA Task Force on Standards of Practice in International Arbitration (Task Force), which was co-chaired by Abby Cohen Smutny and Professor. D. Guido Santiago Tawil, and was made up of experts and practitioners in international arbitration, including Christian Leathley and David Arias of Herbert Smith Freehills. This blog post provides a short background to the Guidelines, an overview and key takeaways, and a brief commentary.
CIETAC tribunal applies UNIDROIT Principles where parties fail to present case under governing law
While commercial parties are generally free to select the law that governs their contracts, they must also ensure that they understand the law they selected, and can actually apply that law to the contract. In a CIETAC arbitral award published by CIETAC in its publication “Selection of Arbitration Cases Involving the Belt and Road Countries”, a sole arbitrator came up with a creative solution in a situation where the parties failed to present their cases under the governing law of the contract. The arbitrator applied the UNIDROIT Principles of International Commercial Contracts to determine the legal issues in dispute. Despite this arbitrator’s willingness to “think outside of the box”, the case is a reminder that parties must consider the legal and practical implications of their contractual choices.
Background
On 24 September 2012, the Indonesian Respondent EPC contractor entered into an EPC Sub-Contract (Agreement) with the Mainland Chinese First Claimant and Indonesian Second Claimant to build a coal-fired power plant located in Indonesia. The governing law of the Agreement was Singapore law and disputes were referred to arbitration at the China International Economic and Trade Arbitration Commission (CIETAC).
The Project was stayed at the preliminary design stage. The Claimants contended that the Respondent had failed to provide permanent use of the road to access the Project’s site and failed to provide location details of the main entrance of the Project, which resulted in the Claimants’ delay in providing the preliminary design drawings to the Respondent. The Respondent in return blamed the Claimants for their delay in submitting the preliminary design drawing within the time limits as provided under the Agreement; and called the advance payment bonds and performance bond just before the Claimants completed and submitted the preliminary design drawings. After calling the bonds, the Respondent refused to pass the preliminary design drawing to the Employer for review and approval. As a result, performance under the Agreement was suspended.
The Claimants commenced arbitration and sought a declaration that the Agreement was terminated due to the Respondent’s breach. The Claimants also sought an order for the Respondent to return the called amounts of the performance bond; to return the difference between the amount of the advance payment bonds and advance payment to the Claimants; damages, and interest.
The governing law issue
The parties had expressly selected Singaporean law to govern the Agreement. However, neither party engaged Singaporean counsel or legal experts when arguing their cases in the arbitration. The Claimants submitted their pleadings based on Chinese law. Whilst the Respondent objected to the application of Chinese law, it merely submitted a Singaporean legal expert report with a few Singapore court cases in support, which was very limited in substance and did not touch upon the major issues in dispute.
Despite the sole arbitrator’s instructions, the parties failed to provide sufficient Singaporean legal authorities. The sole arbitrator referred to Article 49 of the CIETAC Arbitration Rules, which provides: “[t]he arbitral tribunal shall independently and impartially render a fair and reasonable arbitral award based on the facts of the case and the terms of the contract, in accordance with the law, and with reference to international practices”, and proposed that the parties submit their cases under the UNIDROIT Principles. If any party considered there was a conflict between Singaporean law and the UNIDROIT Principles, it could make submissions accordingly. The parties accepted this solution and submitted pleadings based on the UNIDROIT Principles.
The sole arbitrator found that the Claimants had breached the Agreement by delaying the initial design drawings. However, the sole arbitrator held that the Respondent’s response to the Claimants’ breach, by calling the bonds in full and refusing to submit the initial drawing to the Employer, had been disproportionate to the breach. In the arbitrator’s view, the Respondent’s call on the bonds made it impossible for the Claimants to continue performing the Agreement.
In the arbitrator’s view, the Respondent’s call on the bonds therefore constituted a fundamental breach of the Agreement. The arbitrator relied on the UNIDROIT Principles to uphold the Claimants’ claim that they were entitled to terminate the Agreement, and to determine the consequences of that termination. The arbitrator reasoned that the UNIDROIT Principles reflect good practice and general principles in international commercial contracts. Unless either party could demonstrate otherwise, the sole arbitrator held that he had no reason to believe there was any inconsistency between Singapore law and the UNIDROIT Principles.
Comment
In practice, many arbitrators would not proactively apply a non-binding codification of transnational legal principles to resolve a dispute where parties have explicitly chosen the governing law of the contract. The published award does not elaborate on why the tribunal proposed applying the UNIDROIT Principles. However, it does indicate that Chinese arbitrators may be increasingly open to applying international legal principles when dealing with foreign-related commercial disputes.
Nevertheless, this case appears to be a one-off, and it would be unwise for parties to rely on an arbitrator’s willingness to adopt creative solutions of this kind. Parties who take advantage of the contractual freedom to select a neutral governing law must be prepared to argue their cases under that law, i.e. to instruct counsel or experts who are qualified to practice that law. If parties do not apply the selected governing law in the arbitration, they must be prepared for the additional time and expense involved in determining which laws apply before the substantive claims can be heard, not to mention the risk of an unexpected outcome if the law applied produces an unfavourable decision.
[1] This award was published by CIETAC in the Selection of Arbitration Cases Involving the Belt and Road Countries, at pages 58 to 105.
Helen Tang
Partner
+86 21 2322 2160
Jean Zhu
Counsel, Kewei
+86 10 6535 5041
Yingtong Chen
Legal Assistant, Kewei
+86 10 6535 5133
THE UNITED REPUBLIC OF TANZANIA PROPOSES ARBITRATION REFORMS TO PLACATE FOREIGN INVESTORS. WILL IT WORK?
Authors: Emma Schaafsma and Kemi Wood
Introduction
In 2017, the Tanzanian government introduced a raft of legislative reforms to the natural resources sector. Through the reforms the new government looked to ensure that investor disputes were resolved locally and that the Tanzanian government would not be subjected to international arbitrations. The new government showed a particular hostility towards international arbitration (especially in the mining and oil and gas sectors) arguing that it was inherently biased against developing countries, with no neutral ground in international arbitration.1 There followed a swathe of international arbitrations commenced against the Tanzanian government over parts of the legal reforms that cancelled the retention licences of foreign investors and transferred rights to the Tanzanian government. In response, by early 2020 the Tanzanian National Assembly passed a bill to enact a new Arbitration Act.2 The bill now awaits Presidential assent before being passed into law. This note looks at the background to the new bill and its key features, and what the potential impact could be on foreign direct investment into Tanzania.
2017 – Looking inwards: Tanzania turns away from international arbitration
As recently as 2014, following the signing of a number of Bilateral Investment Treaties, the United Nations Conference on Trade and Development identified Tanzania as a top destination for foreign direct investment in East Africa.3 However, following the election of President John Magufuli in 2015, a number of legislative reforms were introduced into Tanzania’s natural resources sector which made it a significantly less attractive prospect for foreign direct investment. The legislative reforms included limiting the use of international arbitration to resolve disputes in respect of Tanzania’s natural resources. Article 11 of the Natural Wealth and Resources (Permanent Sovereignty) Act 20174 prohibited investors from resorting to international dispute resolution mechanisms, such as international arbitration, where the subject matter of the dispute concerned natural resources:
“(1) Pursuant to Article 27(1) of the Constitution, permanent sovereignty over natural wealth and resources shall not be a subject of proceedings in any foreign court or tribunal.
(2) For the purpose of subsection (1), disputes arising from extraction, exploitation or acquisition and use of natural wealth and resources shall be adjudicated by judicial bodies or other organs established in the United Republic and accordance with laws of Tanzania.
(3) For the purpose of implementation of subsection (2), judicial bodies or other bodies established in the United Republic and application of laws of Tanzania shall be acknowledged and incorporated in any arrangement or agreement.”
The Tanzanian government also passed legislation in September 2018 prohibiting international arbitration as a method for resolving investor-state disputes. Under Section 22 of the Public-Private Partnership Act (Amendment) Act 20185 , any disputes arising under a PPP contract “shall in case of mediation or arbitration be adjudicated by judicial bodies or other organs established in Tanzania and in accordance with its laws.”
These reforms inevitably increased the risks and costs associated with investing in the Tanzanian natural resources sector (including oil, gas and mineral extraction). Somewhat ironically, the restrictions on investors themselves prompted a wave of new arbitration claims, including by several multinational mining companies over revoked retention licences.
2020 – Looking outwards: Tanzania seeks to make local arbitration more attractive
Just a few years since the introduction of restrictions in 2017, the Tanzanian government has taken (an albeit limited) U-turn on its hostility towards international arbitration. On 28 January 2020 the government tabled the Arbitration Bill 2020 (the “Bill”)6 before the Tanzanian National Assembly. According to the public notice issued with the Bill, it is aimed at creating a friendly regime that will encourage alternative dispute resolution in Tanzania, and establish a more conducive framework for enforcement of arbitral awards.
However, restrictions on the use of international arbitration for disputes relating to the natural resources sector remains. Under the Bill, arbitration can be used in the context of natural resource related disputes only where the law and seat of the arbitration is that of the United Republic of Tanzania. The introduction of the Bill to replace its antiquated predecessor therefore appears to be an effort to make local arbitration a more attractive proposition to foreign investors.
Notable features of the Bill
The Bill is divided into thirteen parts and appears to have been broadly modelled on the English Arbitration Act 1996.
The Bill, if passed, will:
- Repeal and replace the Tanzanian Arbitration Act 1931 (Section 91(1));
- Provide a definition of both ‘domestic commercial arbitration’ and ‘international commercial arbitration’ (Section 3);
- Apply where the seat of arbitration is Mainland Tanzania (Section 5);
- Introduce provisions on the enforcement of foreign arbitral awards (Section 78);
- Establish the Tanzania Arbitration Centre (“TAC”) for the conduct and management of arbitration (Section 77). The TAC would also maintain a list of accredited arbitrators and provide education for arbitrators.
The Bill, as currently drafted, requires any arbitration arrangements concluded in the past but which have not yet materialised to be renegotiated to comply with the requirements of the proposed law (Sections 91(3) and 91(4)). The same requirement is also imposed on any pending arbitral proceedings. This could pose a significant practical challenge for entities with multiple arbitration agreements, who would prefer consistency across their contract suite.
Potential Impact of the Bill
While the proposed law has largely been welcomed by local and international commentators, there are those who have expressed concern that the Bill does not more closely align with the UNCITRAL Model Law and makes no mention of the New York Convention, as well as affording a multiplicity of opportunities for court intervention in the arbitration process.7 It remains to be seen whether it will in fact make local arbitration more attractive to foreign investors. While Tanzania is now offering the ‘carrot’ of an updated arbitration regime, the ‘stick’ of prohibitions on international arbitration introduced in 2017 will likely still sit heavily on investors’ minds.
- https://www.theeastafrican.co.ke/business/Tanzania-cites-bias-as-it-changes-laws-governing-arbitration/2560-4763234-timkl6z/index.html
- Available at: https://www.bunge.go.tz/polis/uploads/bills/1580219386-The%20Arbitration%20Bill.%202020.pdf
- United Nations Conference on Trade and Development (2014), World Investment Report 2014, New York and Geneva, United Nations Publication, p.37.Available at: https://unctad.org/en/PublicationsLibrary/wir2014_en.pdf
- Available at: https://tanzlii.org/tz/legislation/act/2017/5-0
- Available at: http://parliament.go.tz/polis/uploads/bills/acts/1553699390-Amendment%20of%20PUBLIC%20PRIVATE%20PARTNERSHIP%2012%20SEPTEMBA,%202018%20CHAPA.pdf
- Available at: https://www.bunge.go.tz/polis/uploads/bills/1580219386-The%20Arbitration%20Bill.%202020.pdf
- iResolve (2020), Comments on the Arbitration Bill 2020. Available at: https://www.iresolve.co.tz/webmak2/wp-content/uploads/2020/02/iResolve-Comments-on-Arbitration-Bill-2020.pdf
For more information, please contact Emma Schaafsma and Kemi Wood or your usual Herbert Smith Freehills contact:
Emma Schaafsma
Partner, London
Kemi Wood
Associate, London
+44 20 7466 2161
23RD ANNUAL IBA ARBITRATION DAY: “INNOVATION 360: NEW AND NOVEL IDEAS FOR THE PRACTICE OF ARBITRATION—CRITICALLY TESTED”
12-13 March 2020
Ciragan Palace Kempinski, Istanbul, Turkey
A conference presented by the IBA Arbitration Committee
Under the theme of “Innovation 360: new and novel ideas for the practice of arbitration – critically tested”, the 2020 Arbitration Day will present a series of panels, with each panel presenting one new idea that challenges a key aspect of the way in which international arbitration is presently practiced. Each panel discussion will start with the proponents of the new idea making their case. Both the other panelists and the audience will then subject the new idea to critical testing and rigorous assessment.
Topics include:
- Procedural Timetable No. 1—topped and tailed: improved case management
- Quantum academy: training and certification on assessing damages
- Creating an independent technology and document management hub
- Prosecuting and adjudicating fraud claims in international arbitration
To book tickets, or for more information, please visit: https://www.ibanet.org/Conferences/conf1004.aspx
Paula Hodges QC, Head of Herbert Smith Freehills’ Global Arbitration Practice, is a member of the organising committee of the conference.
For more information, please contact Paula Hodges QC, Head of Global Arbitration Practice, Craig Tevendale, Partner, or your usual Herbert Smith Freehills contact.
Paula Hodges QC
Head of Global Arbitration Practice
+44 20 7466 2027
Craig Tevendale
Partner
+44 20 7466 2445
SECTION 1782 UPDATE: U.S. DISCOVERY IN AID OF INTERNATIONAL COMMERCIAL ARBITRATIONS
As we have explained in a previous post, Section 1782 of the United States Code (28 USC § 1782, titled “Assistance to foreign and international tribunals and to litigants before such tribunals”) is a means by which “an interested person” in non-US proceedings can request an order compelling discovery from a US-based entity “for use in a proceeding in a foreign or international tribunal.” It remains an open question, however, whether such proceedings include international commercial arbitrations.
In 2004, the Supreme Court of the United States in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) held that Section 1782 gave United States District Court judges broad discretion to permit foreign litigants to obtain discovery in the United States, subject to certain guidelines. But in interpreting this case – and the statute itself – US federal courts remain split as to whether parties to international commercial arbitrations may seek discovery under Section 1782, or whether the provision is meant only to extend to foreign court proceedings or perhaps arbitrations conducted under the auspices of state-sanctioned authorities.
HERBERT SMITH FREEHILLS OPENS APPLICATIONS FOR INTERNATIONAL ARBITRATION INTERNSHIPS IN ITS MARKET-LEADING LONDON OFFICE
Herbert Smith Freehills is now accepting applications for two internship opportunities in our international arbitration team in London. The programme offers aspiring arbitration lawyers a chance to work within one of the world’s leading specialist arbitration groups.
The two paid internships are for three months each, starting in September 2019 and December 2019.
Interns will have a varied workload, including: assisting with current arbitrations and other client work; arbitration-related research; assisting with blog posts and articles; producing arbitration-related know-how, and similar projects.
For more details of the role, please click here.
To apply, please visit our careers page.
Applications must be received on or before Sunday 6 July.