IRAQ RATIFIES MAURITIUS CONVENTION ON TRANSPARENCY IN INVESTOR STATE ARBITRATION

Iraq has become the latest state to ratify the Mauritius Convention on Transparency in Treaty-based Investor State Arbitration (the Mauritius Convention), having deposited its instruments of ratification at the UN Headquarters in New York and having previously signed the Mauritius Convention on 13 February 2017. The Mauritius Convention will come into force for Iraq on 20 February 2022.

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LAUNCH OF AIAC ARBITRATION RULES 2021

The Asian International Arbitration Centre has launched the latest revisions to its Arbitration Rules, following their last update in 2018. Upon coming into effect on 1 August 2021, the AIAC Arbitration Rules 2021 will apply to all AIAC arbitrations commenced after this date, unless parties agree otherwise. The 2021 revisions come following an extensive study by an international External Advisory Committee for the Revision of the AIAC Arbitration Rules (including Peter Godwin, Partner, HSF Kuala Lumpur) and a public consultation of the draft rules.

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NEW ICC RULES 2021 AND NEW ICC NOTE TO PARTIES AND ARBITRAL TRIBUNALS COME INTO FORCE

The revised International Chamber of Commerce (ICC) 2021 Arbitration Rules have now come into force, applying to all ICC arbitrations commenced on or after 1 January 2021. The new rules are accompanied by a revised Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (dated 1 January 2021) (the “Note to Parties”).

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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
Florencia Villaggi
Of Counsel
+1 917 542 7804
Lucila Marchini
Lucila Marchini
Associate
+1 917 542 7850

The DIS Rules of Arbitration of 2018

The new arbitration rules of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit – “DIS”) will enter into force on 1 March 2018 (“DIS Rules 2018”).

It is the first revision of the DIS Rules since the current version was adopted in 1998 (“DIS Rules 1998”). The revision process involved nearly 300 persons sitting in three different commissions, but took only 18 months. The DIS Rules 2018 were drafted concurrently in English and German. The result: The DIS maintained and enhanced those civil law elements which were already decisive for the success of the DIS Rules 1998. But it also adopted new rules to reflect the changes and developments of international arbitration practice of the last two decades.

One of the most prominent features – as under the DIS Rules 1998 – of the DIS Rules 2018 is the promotion of early settlements (I.). Further, a newly founded body, the “Arbitration Council” will enhance the transparency and the integrity of the arbitration process (II.). Next, several new rules have been adopted in order to increase the already high efficiency, quality and expeditious character of DIS arbitration proceedings (III.). Lastly, along with the amendments of several institutional rules, the DIS Rules 2018 contain several new rules for multi-party and multi-contract arbitrations (IV.).

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ICC ANNOUNCES A NEW EXPEDITED PROCEDURE TO COME INTO FORCE MARCH 2017

The International Chamber of Commerce (ICC) has announced changes to its Rules of Arbitration (ICC Rules) which will come into force on 1 March 2017. The changes include the introduction of an expedited procedure for small claims, as well as general amendments designed to streamline non-expedited cases, and provide greater transparency to the arbitration process.

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Live webcast of hearing on jurisdiction and the merits: United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia (ICSID Case No. ARB/14/24)

A hearing on jurisdiction and the merits in ICSID Case No. ARB/14/24, United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v Republic of Estonia, will be transmitted live via internet feed from Monday, November 7, 2016 to Tuesday, November 15, 2016 (from 9:00 a.m. to approximately 5:00 p.m. CET (Central European Time) on November 10, 2016 and from 10:00 a.m. to approximately 6:00 p.m. CET on all other days).

This webcast is being made available pursuant to the parties’ agreement. To access the webcast, please click here.

Herbert Smith Freehills is co-counsel for the Claimants.

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LCIA releases Registrar’s Report for 2015

Earlier this month the LCIA released its Registrar's Report for 2015. The report, which is produced annually, gives an overview of the LCIA's casework for the year, providing detailed statistics regarding various facets of the LCIA's caseload, including the nature and subject matter of the contracts out of which its cases arise, and key figures about arbitrator appointments and the frequency of use of different procedures under the LCIA's arbitration rules.  

Some of the highlights from this year's report are noted below.

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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.

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