Working Group II UNCITRAL Discussions of September 2020

The United Nations Commission on International Trade Law’s (“UNCITRAL“) Working Group II (Arbitration and Conciliation/Dispute Settlement) (“WGII“)​ has published the advance copy of its report (the “Report“) on the discussions held between 21 and 25 September 2020 during its 72nd session. The Report provides details about the discussions around various issues, including: (i) the form of the expedited arbitration provisions (the “EAPs“) to be incorporated into the UNCITRAL Arbitration Rules; (ii) general provisions on expedited arbitration and the non-application of the EAPs; (iii) the application of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration to expedited arbitration (the “Transparency Rules“); (iv) time frames and the discretion of the arbitral tribunal; and (v) hearings. In this blog post we will cover a number of the key elements in the Report.

Background

WGII began considering issues related to expedited arbitration at its 69th session in 2019, with the aim of reducing the cost and duration of arbitral proceedings.

The current draft EAPs discussed at the 72nd session are therefore already at an advanced drafting stage, and aim to provide a comprehensive framework for expedited arbitration. The draft EAPs are available here and a commentary on them is available here.

Incorporation of the EAPs into the UNCITRAL Arbitration Rules

An important point of discussion has been around the form of the EAPs and how they would be incorporated into the UNCITRAL Arbitration Rules.  It has been proposed that the EAPs will be published as an appendix to the UNCITRAL Arbitration Rules (the “Appendix“). In addition, it was discussed that an additional guidance document, to accompany the EAPs, may be useful. Whilst it is intended that the EAPs are clear and easily understandable, the additional guidance document could assist the users of EAPs, particularly those unfamiliar with the relevant procedure.

Various options were discussed for incorporating the Appendix into the UNCITRAL Arbitration Rules, including the possibility of achieving this through including a reference to the Appendix in Article 1 of the UNCITRAL Arbitration Rules. This option received ”general support”, but WGII agreed to defer agreement on this matter to a later stage.

The role of designating and appointing authorities

Draft provision (“DP“) 2 of the EAPs provides that arbitrators shall conduct the proceedings in an expeditious and effective manner. It was discussed whether this provision should be expanded to cover designating and appointing authorities as well. A number of delegates took the view that there was no need for this, as Article 8(2) of the UNCITRAL Arbitration Rules addresses this adequately. It was ultimately agreed that the provision would not be expanded to cover designating and appointing authorities, but it was suggested that the need for an expeditious approach from designating and appointing authorities in arbitrations conducted under the EAPs could be covered in a guidance document.

Non-application of the EAPs

DP 3(2) provides that, at the request of a party, the arbitral tribunal may, in exceptional circumstances, determine that the EAPs shall no longer apply. A view was expressed that the application of this provision would run contrary to party autonomy – in particular, this would be contrary to the parties’ agreement to resolve their dispute under the EAPs. In response, it was highlighted that this provision would apply only in “exceptional circumstances“, and that a party’s withdrawal from the emergency arbitration procedure would be possible only where convincing and justified reasons were presented in that party’s request under DP 3(2).

However, after discussion, it was widely felt that DPs 3(2) and 3(3) (which set out the elements which arbitral tribunals should take into consideration when determining that the EAPs shall no longer apply to the arbitration) should be revised. The revisions will aim to set a high threshold, to limit arbitration parties from withdrawing from EAPs easily, and to provide guidance to the arbitral tribunal when making the determination under DP 3(2).

Application of the Transparency Rules

WGII considered whether the Transparency Rules would apply in the context of expedited arbitration. It was recalled that WGII was yet to assess the relevance of its work on expedited arbitration to investment arbitration. WGII agreed to inform Working Group III (Investor-State Dispute Settlement Reform) of the progress made so far after its upcoming 73rd session (for more information about the work of Working Group III, please see our PIL Notes posts of April 2018January 2019February 2019, November 2019 and February 2020).

Timeframes and discretion of the arbitral tribunal

DP 10 provides that the arbitral tribunal may at any time, after inviting the parties to express their views, extend or abridge any period of time prescribed under the EAPs. Following discussions, WGII agreed to replace the previous DP 10 with a simplified text, and to add wording to state that the tribunal may extend or abridge any period of time agreed by the parties, to reinforce the discretion of the arbitral tribunal in respect of time frames.

Hearings

DP 10 addresses hearings and the conduct of hearings in expedited arbitrations, and provides for the arbitral tribunal’s power to decide that hearings shall not be held and that the proceedings shall be conducted on paper only.

It was stated that the use of technology to streamline the arbitration process and to save cost and time should be further explored, particularly in the light of the current COVID-19 pandemic. As such, it was suggested that a provision could be included on the use of technological means in expedited arbitration, and that remote means of communication should be the preferred option. In addition, such a provision would highlight the discretion of the arbitral tribunal to direct the  use of a wide range of technological means of communication.

It was further suggested that a separate guidance document to the EAPs should clarify that the inclusion of such a provision in the EAPs did not imply that the use of technological means was available only in expedited arbitration.

Upcoming WG II sessions

At the close of the 72nd session of WGII, delegations were invited to provide written comments on certain DPs. In addition, the Secretariat was asked to prepare: (i) a revised version of the EAPs in the form of an Appendix, which would be without prejudice to the decision by WGII on the final presentation of the EAPs; (ii) draft texts that could be included in a guidance document to accompany the EAPs; and (iii) a model arbitration clause for expedited arbitration.

Comment

The 72nd session of WGII covered significant ground and, in addition to the points above, also addressed many other matters. Other issues covered included:  requirements for notices of arbitration, responses, statements of claim and defence; the number and appointment of arbitrators; counterclaims; evidence; and the making of awards. WGII is due to meet in New York between 8 and 12 February 2021, and between 27 September and 1 October 2021 in Vienna, for its 73rd and 74th sessions respectively. We will continue to follow, and update on, the upcoming discussions of WGII in our blogs.

For more information, please contact Andrew Cannon, Partner, Helin Laufer, Associate or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852
Helin Laufer
Helin Laufer
Associate

Federal Court of Australia preserves the efficiency and integrity of the arbitration process

A recent decision by the Federal Court of Australia has highlighted the diligence of Courts to ensure non-interference with the arbitral process. The Court in Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [2015] FCA 1028 refused to make any of the orders requested by the applicant, namely that the Court should decide on an arbitrator challenge where the appointing authority had not made its final decision and the requests to issue subpoenas for the production of documents where the course of action was not endorsed by the Tribunal.

The approach in this case is a welcome sign that the Australian Federal Court is supportive of international commercial arbitration, and that this support extends to exercising its powers only in a careful and appropriate way.  This decision provides further confirmation that, for parties in the Asia-Pac region, Australian seats remain a viable option for their arbitration agreements.

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Although the arbitrations were brought separately by each Claimant and not consolidated, the Parties appointed the same arbitrators to each Tribunal (collectively, the “Tribunals”) and the Tribunals proceeded to hear and decide the claims together in three substantially similar awards (the “Awards”).  The Tribunals found that the Russian Federation had unlawfully expropriated the assets of Yukos, in contravention of its obligations under international law, through a series of targeted measures taken between 2003 and 2007.  Put together, in monetary terms the arbitration Awards are by far the largest ever made public, as the Tribunals awarded total damages to the Claimants of more than US$ 50 billion. The Tribunals also ordered Russia to reimburse the Claimants for arbitration costs of € 4.2 million and costs of representation of more than US$ 60 million.

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The decision could prompt other Claimants (including some of the over 50,000 other minority shareholders in Yukos) to move forward with claims against the Russian Federation. For claimants from ECT signatory states, the Tribunals’ decision to uphold the continued application of the substantive protections of the ECT, at least for qualifying investments made before Russia withdrew from the ECT in August 2009, is likely to make the ECT an attractive option under which to bring such claims.

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If adopted by the UN and embraced by states, the Convention has the potential to bring about a significant change to the resolution of investor-state disputes, impacting states and investors alike.

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UNCITRAL unveils new Transparency Rules for investor-state arbitrations

On 11 July 2013, the United Nations Commission on International Trade Law (“UNCITRAL“) adopted new rules on transparency in investor-state disputes conducted under the UNCITRAL Arbitration Rules, to come into effect from April 2014. 

The UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (the “Transparency Rules“) are due to come into force from 1 April 2014, and will give (subject to certain exceptions) public access to documents generated during treaty-based investor-state arbitrations brought under the UNCITRAL Arbitration Rules, as well as public access to hearings of such disputes and the ability for third parties make submissions.  A new paragraph has also been added to the 2010 UNCITRAL Arbitration Rules, providing for the Transparency Rules to form part of the UNCITRAL Arbitration Rules, also with effect from 1 April 2014.

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Given the role afforded to the Tribunal under these Rules on transparency, it will be interesting to see what weight Tribunals give these potentially competing interests, and whether the potential publicity has any impact on a party’s decision whether to pursue an investment claim under a treaty (where the Transparency Rules apply) or under contract, where there will be no such disclosure requirements.

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