"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.

Saturday, July 17, 2010

Fortnightly Roundup of SSRN Articles on Arbitration (July 1-15)

Mavluda Sattorova, Judicial Expropriation or Denial of Justice? A Note on Saipem v. Bangladesh


In its award on the merits, an ICSID tribunal in Saipem v Bangladesh found the host state responsible for expropriation resulting from the judicial intervention in arbitral proceedings instituted by an investor in pursuit of its contractual right. Having dismissed the respondent’s objection invoking the exhaustion of local remedies as a substantive condition for challenging judicial acts in investment arbitration, the tribunal held that the local remedies rule would apply in the case of denial of justice, but not in the case involving judicial expropriation. This note offers a critique of the Saipem award. It argues that by distinguishing between denial of justice and judicial expropriation, the Saipem tribunal effectively undermined the main rationale behind a theory that postulates the exceptional treatment of denial of justice cases. It questions whether the assertion of expropriation by the host state’s judiciary should enable the foreign investor to disguise its denial of justice claim and thus avoid the application of the local remedies rule. The note also discusses the tribunal’s adoption of the legality test in addition to (or substitution of) the ‘sole effect’ doctrine which hitherto prevailed as a method of establishing expropriation in investment treaty arbitration.

Julie A. Maupin, MFN-Based Jurisdiction in Investor-State Arbitration: Is There Any Hope for a Consistent Approach?


MFN clauses are a hotly contested basis for jurisdiction in investment arbitration. This paper surveys the divergent approaches taken by arbitral tribunals to-date, revealing the major types of MFN clauses interpreted, the key types of MFN questions confronted, and the major reasons cited for either upholding or denying MFN-based jurisdiction. It analyzes trends emerging from the awards and key differences between the interpretive approaches taken by various investor-state tribunals. The presentation posits an explanation for the current disparate state of the law concerning MFN-based jurisdiction and explores the feasibility of finding a more consistent and predictable approach, one which respects both the dictates of the Vienna Convention and the pragmatic concerns of investors and host states.

Alan Scott Rau, Understanding (and Misunderstanding) 'Primary Jurisdiction'


In our “Westphalian” regime of international arbitration, conflict and competition between national jurisdictions, with overlapping and yet plausible claims to supervise the process, become inevitable. The conventional starting point for any discussion - the fulcrum around which the entire arbitral enterprise pivots - has been the supposed dichotomy between the state of the “seat” - where the arbitration finds its juridical “home,” and whose jurisdiction over the process is therefore “primary” - and all other states whose jurisdiction must therefore be deemed only “secondary.” Both legislation and Convention envisage an exclusive role for the former in setting the process in motion - for example, by appointing the arbitrators - and above all in monitoring compliance with the agreement - for example, by annulling or vacating the resulting award.

That the “seat” is the privileged starting point with respect to any allocation of judicial authority has traditionally been a simple reflection of the power of any sovereign over acts taking place within its “territory”; an alternative and perhaps more robust explanation would be somewhat more “contractualist,” giving priority to the parties’ exercise of autonomy in the very act of selecting the place of arbitration - and to the intuition that, by extension, they have presumptively chosen to subject themselves both to a certain body of “arbitration law,” and to the supervisory jurisdiction of the courts charged with applying that law.

I begin by canvassing the various fact patterns in which the traditional allocation of international competence on the basis of “primary” and “secondary” jurisdiction might possibly be thought useful: It has become, for example, the heuristic of choice to test the extraterritorial effect of an award, in circumstances where the agreement of the parties has subjected the arbitral process to a particular legal system whose own courts have found it lacking in legitimacy. All this is much controverted, but generally well understood.

The inevitable problem, though, is that none of this is a universal solvent - the world can after all be understood and patterned and divided up in all sorts of ways. What may have begun as a rough attempt to allocate responsibility over the unfolding of the process, has often been unthinkingly applied to all sorts of new and unexpected and inappropriate contexts.

Where, for example, a party has asked a court to enjoin an arbitration against him that has been threatened or initiated - perhaps on the fundamental ground that he has never even given his assent - American courts will increasingly hold that, whatever power they might have to enjoin a “local” arbitration, it would be “inconsistent with the purpose of the New York Convention” to enjoin arbitral proceedings in a state of “secondary jurisdiction” - and thus they “lack jurisdiction” to do so. Where a party has claimed that a foreign award has been obtained by bribery and corruption, and wishes to institute a “collateral attack” in this country through a RICO action, it may equally be held that the court lacks “subject matter jurisdiction” to reassess an award rendered in a state of “primary jurisdiction”; “under the framework of the New York Convention, the proper method of obtaining this relief is by moving to set aside or modify the award in a court of primary jurisdiction.”

American courts thus seem curiously mesmerized, when asked to deploy familiar procedural devices in aid of their nationals, by a rhetoric invented for quite different purposes. What purports in cases like these to be a commendable solicitude for the needs of international arbitration, takes the form of an abdication of any decision making power whatever, in favor of the courts of the seat. To invoke a putative lack of “power” based upon absolute prohibitions that supposedly emanate from the Convention seems a crude and clumsy and overbroad and irresponsible way of responding; even a legal system quite committed, for example, to the proposition that attempts to evade the arbitral process are likely to be quite without merit - or for that matter to the proposition that international neutrals cannot possibly be corrupt - need not shrink, on the prophylactic grounds of lack of jurisdiction, from testing any challenges.

Genevieve Saumier, Consumer Arbitration in the Evolving Canadian Landscape

The enforceability of pre-dispute consumer arbitration clauses is not uniform across Canada despite the Supreme Court of Canada's recent approval of the practice in the Dell Computers case. Legislation in Quebec and Ontario prohibits these clauses and B.C. courts have struggled with the impact of the Dell decision on their contrary earlier decisions. This article examines this dynamic and changing landscape for consumer arbitration, contrasting it with approaches prevalent in the U.S. and in Europe.

William T. Fryer III, Handling Internet Domain Name Arbitration

This article reviews the administrative and legal actions that can be used to cancel or transfer a registered domain name that is in conflict with an earlier used trademark. For purposes of this article these alternative remedies will be referred to as a group by reference to the transfer step, the most common remedy used. The same analysis also can help guide a business in selecting a non-conflicting domain name. After analyzing the dispute resolution options, this article will suggest strategies that should be considered in selecting which domain name conflict resolution path to follow.

Robin F. Hansen, Parallel Proceedings in Investor-State Treaty Arbitration: Responses for Treaty-Drafters, Arbitrators and Parties

Parallel investment treaty arbitrations present a demonstrated risk of inconsistent awards. This article examines several ameliorative responses to parallel investment treaty proceedings, executable by treaty-drafters, arbitrators and parties themselves. The unique jurisdiction mechanics and applicable law in investment treaty disputes frames the responses available. Despite the unique context within which parallel investment arbitrations occur, the challenges they pose to party interests, to principles including legal fairness and to the effective pursuit of dispute resolution closely resemble those posed by parallel proceedings in other domestic and international legal fora

Richard Bilder, Adjudication: International Arbitral Tribunals and Courts


This essay, a chapter in a U.S. Institute of Peace sponsored study of various methods and techniques for seeking to manage or resolve international disputes and conflicts, focuses on the role of international adjudication as a method of international dispute settlement. The chapter discusses inter alia: (1) some broad caveats regarding the usefulness of international adjudication, as compared with other the techniques of international dispute settlement, the somewhat different role of adjudication in national legal orders, the preference for non-adversarial methods in some – particularly non-western - societies, and the historic ambivalence of the U.S. government towards international adjudication; (2) the nature of international adjudication, including a description of how international arbitration and international judicial settlement typically operate and the factors that may influence states in choosing between them; (3) a detailed description of the International Court of Justice (ICJ), its jurisdiction, its work, and U.S. attitudes towards the Court; (4) the question whether there are now too many international tribunals; (5) the advantages and disadvantages of adjudication as a dispute management technique; (6) the reasons why the author believes international adjudication deserves the international community’s encouragement and support, and (7) a list of measures that might be taken to facilitate and encourage the use of international adjudication.

Ana Stanic, Challenging Arbitrators and the Importance of Disclosure: Recent Cases and Reflections

The last few years have seen a rise in challenges to arbitrators. It is argued that challenges are a tactic resorted to by parties and their counsel to cause delay and increase the costs of arbitration and, thus, undermine the parties’ choice and the finality of awards. However, the right to challenge an arbitrator and the arbitrators’ duty of disclosure are key to ensuring the integrity of the arbitral process. This article examines how the balance is struck between these two objectives by looking at the nature and the scope of the right to challenge arbitrators and the duty to disclose under national laws and rules of arbitral institutions. After reviewing recent national court cases and arbitral decisions concerning challenge, the article calls for (i) the threshold for challenging arbitrators in investment arbitrations to be, at the very least, the same as in international commercial arbitrations; (ii) a neutral and independent body to be given the authority to review challenges under the ICSID system; and (ii) disclosure obligations to be imposed on counsel and the parties.

Pradhuman Gautam, The Umbrella Clause: A Search for Greater Legal Certainty

The aim of this research is to search for a greater legal certainty in the interpretation of the Observance of Undertakings or umbrella clause in a Bilateral Investment Treaty. In doing so, it will look into the history and origin of the clause, the theories given by academicians, the language of the clause in the different BITs, and the interpretations of the clause as given by the different Tribunals of the International Centre for Settlement of Investment Disputes. The conclusion of the research involves answering two basic questions related to the umbrella clause, which are as follows: 1. What is the exact scope of an umbrella clause? 2. Does the umbrella clause elevate contractual claims to a treaty level?

This paper argues that historically, the clause was introduced as a measure of safeguard to prevent the foreign investor from suffering due to unilateral acts of atrocity by the host State, by taking investment and investment related contracts to an international forum. To arrive at the exact ambit of the clause, I have analysed the language of the clause, through its various nuances, in order to know which specific contracts can be brought within the purview of the clause. Next I have looked at the different Tribunal decisions that have interpreted the clause from different perspectives. Some of them have taken a restrictive approach, which says that the clause gives jurisdiction to an international forum only when coupled with some other substantive treaty claim. Some other Tribunals have, on the other hand, decided that the clause internationalises contract claims by elevating them to a treaty level. There are even others who have advocated keeping the contract and treaty claims as parallel remedies.

My conclusion is that there are problems in both the restrictive as well as the parallel claims approach. The restrictive approach nullifies the entire objective of the clause. Giving parallel remedies to the foreign investor will create problems of jurisdictional overlap and the possibility of double recovery. The correct interpretation of the clause is that it gives the foreign investor a choice – either to pursue his claim in the contractual forum, whereby the proper law of the contract will become applicable; or to treat it as a breach of Treaty and go to the international forum provided by it, whereby the claim shall be determined according to the rules of international law. Taking either course will disbar him from pursuing the other course of action, and thereby will help create certainty in this legal area of conflict.

Richard Bilder, International Third Party Dispute Settlement

This essay, a chapter in a U.S. Institute of Peace sponsored volume exploring various approaches to international conflict management, discusses the potential role of third-party intervention in dispute settlement.

After noting several broad questions underlying the study of dispute settlement problems and processes more generally, the essay discusses: (1) what is meant by “Third-Party Dispute Settlement”?; (2) whether nation-states have an obligation to submit their disputes to third parties for assistance or binding settlement?; (3) why disputing parties may turn to third parties; (4) why third parties may be willing to intervene; (5) what kinds of third-party techniques are available; (6) how third parties can help; (7) which techniques work best; (8) the potential role of adjudication, including its advantages and disadvantages; (9) some limitations of third-party intervention or settlement; (10) how important is third-party dispute settlement and does it really work?; (11) a summary suggesting the proper role of third parties in managing international disputes; and (12) a list of recommendations for measures which might improve the usefulness of such third-party interventions.

These recommended measures include: (1) expanding the availability and use of nonbinding conciliation processes and of the advisory jurisdiction of international tribunals; (2) developing a wider, more easily available and more credible array of international fact-finding, monitoring and verification facilities; (3) exploring ways of making international adjudication and, in particular, resort to the International Court of Justice, more acceptable, accessible and flexible; (4) strengthening the ability of third parties to intervene on a temporary basis in disputes and conflicts to help keep matters from getting worse; (5) developing ways to better use national legal systems to implement international dispute management objectives; and (7) supporting innovative research – particularly empirical and interdisciplinary studies – about international dispute processes and dispute-management techniques, with a listing of research questions that might particularly merit attention.

Julien David Payne, Family Conflict Management And Family Dispute Resolution on Marriage Breakdown and Divorce: Diverse Options

Avoidance of litigation; various options for dealing with marriage and family breakdown.

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