"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, July 1, 2010

Fortnightly Roundup of SSRN Articles on Arbitration (June 16-30)

Marina Lombardo & Carlo Garbarino, Arbitration of Unresolved Issues in Mutual Agreement Cases: The New Paragraph 5, Art. 25 OECD Model Convention, a Multi-Tiered Dispute Resolution Clause

The paper deals with arbitration of unresolved issues in mutual agreement cases as regulated by the new paragraph 5, Article 25 of the OECD Model Convention to avoid double taxation in respect to income taxes. After general introductory remarks on the arbitration method in international tax matters, the paper describes the evolution of international tax arbitration. The central part of the paper is devoted to the analysis of the procedure of the tax arbitration established by new Article 25(5) of the OECD Model Convention, which has the features of a a multi-tiered dispute resolution clause. The paper concludes with a discussion on the effectiveness of the tax treaty arbitration of Article 25(5) OECD Model Convention.

Patrick Dumberry, Compensation for Moral Damages in Investor-State Arbitration Disputes

This article examines the issue of monetary compensation awarded by arbitral tribunals for moral damages suffered by foreign investors in the context of investor-State arbitration. It examines the nature and the function of moral damages in international investment law as well as several controversial issues, including the proper form of reparation to remediate moral damages suffered by a State, whether proof of malicious intent is a necessary condition for a tribunal to award compensation and whether compensation should be limited to cases involving “egregious” or grave treaty violations. The article argues that particularly condemnable governmental actions toward foreign investors will have a bearing on the actual quantification of the amount of compensation to be awarded for moral damages. The goal is not only to remediate the actual damage suffered but also to send a “clear message” to the host State.

Amy Schmitz, Legislating in the Light: Considering Empirical Data in Crafting Arbitration Reforms

Consumer advocates and policymakers call for abolition of predispute arbitration clauses in consumer contracts, while proponents of arbitration claim such abolition would increase companies’ dispute resolution costs, leading to higher prices and interest rates. Policymakers on both sides of the debate, however, rarely consider the empirical research necessary for crafting informed arbitration disclosure rules. This article therefore focuses on how varied research, including my own empirical studies, may inform policies regarding arbitration disclosure regulations. The article also offers suggestions for regulations tailored to have the most impact for the cost in light of this research.

Amy Schmitz, ‘Drive-Thru’ Arbitration in the Digital Age: Empowering Consumers Through Regulated ODR

Online Dispute Resolution (ODR) has been promoted for quickly and conveniently resolving claims using online “drive-thru” processes instead of more costly and time-consuming face-to-face meetings and hearings. Most commentators have nonetheless focused mainly on non-binding or automated bidding processes, perhaps due in part to fairness concerns associated with off-line arbitration. This Article, however, explores the potential for online binding arbitration (OArb), and sheds new light on arbitration as means for empowering consumers to obtain remedies on their e-merchant claims. By moving arbitration online, OArb helps address concerns regarding companies’ use of arbitration clauses to curb consumers’ access to remedies on their typically small claims. This Article offers suggestions for regulations that aim to capitalize on OArb’s potential for providing consumers with convenient and cost-effective access to remedies while augmenting companies’ cost-savings from avoiding court and class actions, which they may pass on to consumers through lower prices and better quality products.
This is a short piece written for the AAA's Dispute Resolution Journal on two competing provisions in Section 4 of the FAA. One provision tells district courts to compel arbitration in accordance with the parties' agreement, including any forum selection clause. The other says that the court can compel arbitration only within its own territory. This, of course, creates a problem when the forum selection clause calls for arbitration in another jurisdiction. This short article addresses the conflict, showing how courts tend to rule on the issue (as of 2006).

This is a short piece written for the Georgia Bar Journal on the General Assembly's adoption of manifest disregard as a statutory ground for vacating arbitration awards.

Thomas V. Burch, Necessity Never Made a Good Bargain: When Consumer Arbitration Agreements Prohibit Class Relief

Courts rely on the "national policy favoring arbitration" to restrict the review of arbitration agreements under state laws of unconscionability. Consequently, banks, phone companies, and other consumer businesses implement mandatory arbitration clauses that provide complete immunization from both class actions and classwide arbitrations. As potential defedants, these companies hope that courts will force individual resolution of all consumer claims against them by upholding their agreements to arbitrate. Such an exercise raises an important question, which is the subject of this Article: To what extent should courts use the "national policy favoring arbitration" to protect consumer arbitration agreements that prohibit all class relief?

John W. Hinchey and Thomas V. Burch, An Arbitrator's Authority to Award Attorney Fees for Bad-Faith Arbitration

This is a short piece written for the AAA's DIspute Resolution Journal discussing when an arbitrator may award fees against a party for arbitrating in bad faith.

Abhijit P.G. Pandya and Sandy Moody, Legitimate Expectations in Investment Treaty Arbitration: An Unclear Future?

The dangers of the excesses of legitimate expectations as a public law doctrine are exposed when it is applied to investment treaty arbitration. Current jurisprudence makes a strong case for restraint by arbitrators. However, recent decisions, have only paid lip-service to deference to sovereignty of states, as the EDF v. Romania decision shows.

Aubrey Laine Thomas, Nonsignatories in Arbitration: A Good-Faith Analysis

As businesses conduct more and more transactions in the world market, the ability to settle disputes between international parties in a neutral forum has become a paramount concern. For this reason, the arbitration clause is an integral part of the international commercial contract. Still, due to the complex nature of most international commercial transactions, a nonsignatory, often times a subsidiary or parent corporation of one of the signatories, becomes materially involved in the performance of the contract. All of the benefits of the arbitration clause relied on by the contracting parties - such as a neutral forum, dispute finality, party autonomy, and reliance on enforceability - can be lost if the nonsignatory is not required to arbitrate disputes arising out of the contract.

Acknowledging this problem, U.S. courts have applied a variety of legal theories to require arbitration with a nonsignatory. Still, application of these different theories is inconsistent from jurisdiction to jurisdiction and is incongruent with the delocalization movement inherent in international transactions. This Comment proposes that U.S. courts should apply the principle of good faith to determine whether arbitration including a nonsignatory is appropriate. Essentially, courts should utilize the equitable principle of good faith to analyze both the contractual language as well as the conduct of the parties during negotiation and performance of the contract to determine whether the nonsignatory may compel or be compelled to arbitrate. This Comment focuses on past cases dealing with the nonsignatory issue to exemplify how the principle of good faith would create a uniform test and to demonstrate how this principle is consistent with the public policy underpinnings of arbitration. Last, this Comment concludes with arbitration clause drafting tips. Parties must engage in “conscious drafting” so that when the principle of good faith is used to interpret the parties’ contract, it will be clear when a nonsignatory should or should not arbitrate.

[The timing of this article cannot be more right. Extension of arbitration agreement to non-signatories has been an issue post the decision of the Indian Supreme Court in Indowind Energy Ltd. v. Wescare (I) Ltd. & Anr]

Maureen Weston, The Other Avenues of Hall Street and Prospects For Judicial Review of Arbitral Awards

In Hall Street Associates, L.L.C. v. Mattel, Inc., the U.S. Supreme Court held that the Federal Arbitration Act (FAA) provided the exclusive grounds for judicial vacatur and modification of arbitral awards covered under the Act. In so ruling, the Court rejected the contention that the FAA’s requirement to enforce arbitration contracts as written includes private contracts that seek to expand the scope of judicial review beyond the grounds enumerated in the FAA. Despite holding that parties cannot expand a court’s power to review an arbitration award under the FAA, the Court alluded to the possibility of “other possible avenues” for judicial review of arbitration awards. This decision arguably raised more questions than it answered. For example, did Hall Street limit a court’s power to review an arbitral award for a judicially recognized standard of manifest disregard of the law or violation of public policy? Can parties achieve essentially the same result through creative drafting, such as provisions that limit the scope of an arbitrator’s powers to render only factually or legally correct decisions? Are state courts bound by the FAA’s narrow modification and review standards, and Hall Street’s interpretation thereof? This Article analyzes these questions and considers Hall Street’s impact on arbitration practice and judicial willingness and ability to review arbitral awards.

Katia Fach Gómez, CSID Claim by Spanish Companies Against Mexico Over the Center for the Integral Management of Industrial Resources

On December 11, 2009, The ICSID Secretary General registered a request for the institution of arbitration proceedings. Abengoa, S.A. and COFIDES, S.A. are the companies who requested the arbitration against the United Mexican States. There is no further information about this claim on the ICSID’s website, but the Spanish press has reported that these companies require the Mexican federal government to pay USD $ 96 million plus interest for failure to implement the waste plant in Zimapán -USD $40 million for the cost of the plant and USD $56 million for lost profits.

The request for arbitration stresses that the inability to operate the project is a consequence of various acts carried out by Zimapán’s municipal authorities, such as the revocation of the municipal license to operate, the digging of trenches and roadblocks to keep out truck en route to the landfill, and the diversion of public funds to prevent the operation. The Spanish companies also accuse the federal government and the state of Hidalgo’s authorities of various acts and omissions that may encompasses a violation of the Bilateral Investment Treaty between Mexico and Spain.

[Abstract in Spanish omitted]

Caroline Osborne, Pathfinder on International Investment Law and Alternative Dispute Resolution Web Based Resources

This pathfinder is intended to assist government officials, investors, practitioners, arbitrators, scholars, and other stakeholders in locating literature on the dialogue of international investment law and dispute resolution. This document covers online resources useful in promoting collaborative relationships among experts in international investment law and dispute resolution.

Primary international investment law materials include multinational and bilateral investment and trade agreements, as well as domestic laws and regulations of foreign investments made in other countries. Traditional topics of interest under international investment law include tax, antitrust, securities, corporate, environmental, and labor laws.

Arbitration is a dispute resolution process typically conducted in a non-judicial setting. As a general concept alternative dispute resolution is broadly construed to include negotiation, mediation, conciliation, and arbitration. These techniques are not considered to be mutually exclusive and one or more techniques may be used in sequence or as part of a combination. The process is simple and traditionally governed by the rules of a neutral arbitration organization selected by the parties or an agreement administered by a panel of arbitrators agreed upon by the parties. Confidentially requirements are often included. The presence of confidentiality requirements can limit access to information.

The large number of dispute resolution institutions adds a complexity to locating certain information on awards. This paper presents selected resources in the areas of international investment law and dispute resolution, including the following categories: locating literature and resources; organizations, associations, societies, and institutions; arbitration; rules; news services, discussion lists and blogs; resources regarding conventions, treaties, cases, and awards; other web resources; specialized journals; resource guides, pathfinders and annotated bibliographies; and UNCTAD. Resources available solely in print and resources the scope of which is limited solely to an individual nation are excluded as beyond the scope of this document.

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