"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.

Tuesday, November 16, 2010

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



Abstract:     
Interim relief is critical in any form of dispute resolution. Parties must have the option to seek interim measures, like preliminary injunctions and attachments, where their adversaries threaten to take action which cannot be undone by after-the-fact damages. Parties in international arbitrations are no exception. But while international arbitration has many advantages that make it a consensus favorite over litigation in national courts, interim relief has been rightfully called its “Achilles’ heel.” Acknowledging this crippling shortcoming, arbitration institutions have sought to address the problem by revising their international arbitration rules to provide a variety of options for parties to seek interim relief. Drawing on prior research, case studies, and statistics, we provide an updated comparative analysis of interim measures under twelve sets of commonly used international arbitration rules and guidelines. Unlike prior studies, however, we test these procedures in action by comparing them in four hypothetical scenarios, consider expedited proceedings as an alternative to interim relief, and compare a much broader group of rules. We conclude that, while no single set of rules provides the full range of possible options that a party might want, those institutions that have sought to address the problem have come up with several viable procedures (particularly pre-tribunal referee procedures) that other arbitral institutions should consider adopting.


Abstract:     
While courts often think of religion in terms of faith, prayer, and conscience, many religious groups are increasingly looking to religion as a source of law, commerce, and contract. As a result, courts are being called upon to apply the church autonomy doctrine – which bars courts from reviewing matters of faith, doctrine, and church governance – where commercial conduct is religiously motivated. In this Article, I consider an example of the challenges faced by courts when trying to interpret and regulated religious commerical conduct: the constitutionality of imposing sanctions for violating the Bankruptcy Code’s automatic stay by submitting a dispute for religious arbitration. In considering this example, I suggest that courts, instead of trying to take religion out of the equation, need to develop an increasingly sophisticated understanding of the religious dynamics of a case to know when they can – and cannot – review and regulate the conduct in question.


Abstract:     
Commercial parties worldwide rely on arbitration clauses to mitigate the high risks inherent in international business transactions. A split in federal circuit courts has emerged and left the validity of arbitration agreements in global insurance contracts under the United Nations Convention on the Recognition and the Enforcement of Arbitral Agreements (the "New York Convention" or "Convention") in a state of uncertainty in the United States. The Convention mandates that federal courts must recognize and enforce arbitration agreements among international parties. Article II specifically requires signatories to "recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship... concerning a subject matter capable of settlement by arbitration." In the context of insurance, however, many states have enacted anti-arbitration statutes and invalidated international insurers’ arbitration agreements under the McCarran-Ferguson Act, which allows state law regulating the "business of insurance" to reverse-preempt federal law. Under this statute, which Congress originally enacted in 1945 to preserve states’ rights to regulate the industry and prevent federal prosecutors from targeting insurers’ industry practices under the federal antitrust laws, states have refused to enforce arbitration clauses in insurance contracts, despite the New York Convention.

On November 9, 2009, Safety Nat’l Casualty Corp. v. Certain Underwriters at Lloyd’s, London created a split in federal circuit courts over whether the McCarran-Ferguson Act reverse preempts the New York Convention and allows states to circumvent the United States’ national policy favoring arbitration and invalidate global insurers’ arbitration agreements. The Fifth Circuit and several district courts have held that the McCarran-Ferguson Act does not reverse-preempt any treaty and the New York Convention therefore protects arbitration agreements in international insurance contracts. In contrast, the Second Circuit has held that the McCarran-Ferguson Act reverse-preempts the New York Convention because it is a non-self-executing treaty and the Act preempts the Convention’s implementing legislation. As the international insurance has globalized and expanded, this circuit split is timely and greatly impacts global business relations.

This Note examines the split in federal circuit courts created by Safety Nat’l Casualty Corp. Part I examines the legal framework governing arbitration in the United States, including New York Convention and Federal Arbitration Act. It also explores the current state of insurance arbitration and the McCarran-Ferguson Act. Furthermore, Part I briefly reviews the doctrine of preemption and foreign relations law concerning the status of treaties in United States law. Part II discusses the split in federal authority, particularly both sides’ interpretations of foreign relations law and the McCarran-Ferguson Act. Part III proposes two possible resolutions to the conflict in authority, both legislative and judicial. Part III.A suggests that Congress should amend the McCarran-Ferguson Act to exempt the New York Convention in light of the national policy favoring arbitration and the importance of arbitration in promoting international business in which parties rely on arbitration to diminish risks and efficiently resolve their conflicts. Part III.B offers a judicial solution. It contends that the Supreme Court should accept certification in Safety National and hold that the McCarran-Ferguson Act does not enable state law to reverse-preempt the New York Convention or enable states to thwart arbitration of disputes concerning insurance contracts. It argues that the Fifth Circuit appropriately found that the plain meaning of “Act of Congress” when Congress enacted the MFA did not include treaties but instead only contemplated legislation. It further maintains that the MFA’s legislative history reflects that "Act of Congress" does not contemplate treaties. The current status of the Convention as executing and non-self-executing remains unknown, but it is irrelevant for this analysis. Furthermore, it posits that the Supreme Court should recognize that the MFA does not cover the Convention as an "Act of Congress" because the MFA only applies to interstate commerce and does not apply to international arbitration agreements under the Convention. Finally, it contends that Congress did not intend the MFA preemption exemption to apply to arbitration or dispute resolution because in enacting the MFA. This Note concludes that Congress and the Supreme Court should ensure that states do not have unlimited power to preclude international business parties from enforcing mutually agreed-upon arbitration clauses in insurance contracts.


Abstract:     
This paper analyses the human rights interventions of various civil society organisations in international investment arbitration through the submission of amicus curiae briefs. It asks what value these interventions have had in promoting social justice issues in the arbitration process.

The paper argues that the language and legal obligations of human rights appear to have an important impact in terms of ensuring that amicus submissions of civil society groups are accepted by tribunals. But there are fundamental problems inherent in this mechanism which make it unlikely that the human rights arguments raised will have any significant role in the decision-making process of the tribunal panels. The paper concludes with some thoughts about the wider implications of these findings for international investment law, international human rights law and international law more generally.


Abstract:     
We can expect that many eminent commentators will pass judgment on the first 10 years of operation under the Arbitration Act 1996. Their scrutiny will be intense and erudite. Herein lies a danger. For the very sophistication of the analysis may obscure simple truths. First among these is the fact that the 1996 Act has turned out to be an unquestionable improvement on the prior law.

Indeed, London’s reputation today as a centre for international commercial arbitration is enviable. In the Queen Mary/PWC Survey conducted under the direction of Dr. Mistelis, England was ranked by respondents as the preferred international arbitration venue. The Second Annual Litigation Trends Survey by Fulbright & Jaworski, based on 354 registered interviews, records London as the favoured arbitration venue in the world, preferred by 31 per cent of respondents overall (including US and UK respondents), followed by New York (with 25 per cent) and Paris (with 5 per cent). Amongst UK respondents, London was preferred by 60 per cent. In contrast, New York was only preferred by 33 per cent of US respondents. This agreeable situation stands in satisfying contrast to what I observed when I started practice in the 1970s, when the ravages and abuses of the special case procedure had led to the result that an international lawyer proposing a London venue might be accused of professional negligence. The point was a serious one; how could one justify the selection of a place of arbitration for an ICC arbitration which considered a cornerstone of the ICC rules – namely the waiver of appeal – to be a nullity? And it is a matter of historical fact that in those Dark Ages the ICC Court of Arbitration, the world’s leading body in the field, clearly and demonstrably shunned London.


Abstract:     
A national policy of encouraging the use of voluntary arbitration to settle disputes arising from the terms of collective bargaining agreements was established by the Labor Management Relations Act of 1947 (LMRA). Section 301(a) of the Act authorized federal courts to hear disputes arising from collective bargaining agreements. The ramifications of section 301, however, carry far beyond a mere procedural grant of jurisdiction to federal courts. For example, the Supreme Court, in Textile Workers Union v. Lincoln Mills, made section 301 the basis for the judicial review of labor arbitration awards. By authorizing federal courts to fashion standards for the enforcement of collective bargaining agreements, the Court required the judiciary to apply federal substantive law to those subject to the provisions of the LMRA. In amplifying Lincoln Mills, the Court held in Dowd Box v. Courtney that section 301(a) did not divest state courts of jurisdiction in a suit for violation of a provision of a collective bargaining agreement. Thus, impliedly at least, a state court could exercise concurrent jurisdiction in such cases. The Court later held, however, that federal jurisdiction and state jurisdiction over agreement violations were not mutually independent under section 301(a). Incompatible doctrines of local law were held subordinate to federal labor law principles. As a result, the scope of judicial review over an arbitration decision became primarily a question of federal law.

Part II of this Article discusses the Steelworkers Trilogy, a series of three cases, handed down on June 20, 1960, where the Supreme Court outlined the scope of judicial treatment of arbitration provisions in collective bargaining agreements that fall under the ambit of section 301 of the LMRA. These cases are popularly referred to as The Steelworkers Trilogy, include: United Steelworkers v. American Manufacturing Co., United Steelworkers v. Warrior & Gulf Navigation Co., and United Steelworkers v. Enterprise Wheel & Car Corp. In Part III, this Article examines a representative survey of the various approaches taken by the circuit courts in applying the Enterprise standard of judicial review to the validity of an arbitrator’s award. Part V focuses on specific problems such as the remedial powers of the reviewing court; ambiguous awards; procedural questions; and public policy issues, whether a court will enforce an arbitrator’s award that contravenes public policy, and finally it focuses on the significance of the applicability of the Federal Arbitration Act to collective bargaining agreements. This Article concludes that the arbitration award is not a mere step in a chain of appeals, but is, in most cases, the terminal point of the dispute. If a more liberal scope of review is vested in the judiciary, it will encourage the losing party to appeal to the courts, resulting in a prolongation of the dispute, additional expense to the parties, and loss of confidence in the arbitration process.


Abstract:     
The chapter discusses a multi-sourced equivalent norm (MSEN) situation arising out of the parallel breach of an investment treaty and the WTO agreement. On the basis of a number of case studies, it considers how MSENs are affected by secondary rules of state responsibility that prima facie reflect precisely the systemic and harmonising perspective of the international legal order. It focuses, in particular, on the WTO-authorised suspension of TRIPS concessions that may breach investment obligations regarding IP rights, and on the converse scenario of countermeasures applied against investment protection obligations that might also breach WTO rules (using the US-Mexico soft drinks disputes in NAFTA and the WTO as a case study). It is suggested that the focus of trade and investment dispute settlement regimes on systemic strengthening may come at the cost of complicating the relationship and the resolution of conflicts with extra-systemic primary and secondary rules.


Abstract:     
We study attorney fee clauses in a data set of 2,350 contracts contained as exhibits in Form 8-K filings by reporting corporations. Because 8-K filings are required only for material events, these contracts likely are negotiated by sophisticated parties and, therefore, provide evidence of efficient ex ante solutions to contracting problems. The American Rule for compensating attorneys requires each party to pay its own attorney, win or lose; the English Rule (applicable rule in most of the world) requires the losing party to pay the winner’s reasonable fees. Adoption of the English Rule or other loser-pays arrangements has frequently been proposed as a solution to perceived U.S. litigation problems. But the vast theoretical modeling literature on fees has reached no consensus. Empirical reality should help assess the models and provide new insights. Because contracting parties can opt out of the American Rule and into a loser-pays rule at low cost, we expect such opt-outs to occur frequently if the English Rule more efficiently compensates counsel. Our data show, however, that the American Rule is preferred about as often as the English Rule (or similar loser-pays rules). Choosing the American Rule is associated with the following contractual features: specific kinds of contracts, the presence of a non-U.S. party, the absence of arbitration clauses and jury trial waivers, selection of New York law in contracts other than underwriting contracts, and a likely long-term relation between the parties. It is inversely associated with an increasing degree of contract standardization. Sophisticated parties thus often perceive the American Rule to be value-enhancing compared to loser-pays systems but contracting parties that opt out of U.S. courts through arbitration clauses, or eliminate jury trials through jury waiver clauses tend to reject the American Rule. The findings suggest that theoretical models should resist the assumption that a single attorney fee rule is most efficient in all contexts and that models should strive to account for real-world factors associated with fee clauses.


Abstract:     
To distinguish between these two concepts is a matter of considerable concrete importance. Decisions of tribunals which do not respect jurisdictional limits may be invalidated by a controlling authority. But if parties have consented to the jurisdiction of a given tribunal, its determinations as to the admissibility of claims should be final. Mistakenly classifying issues of admissibility as jurisdictional may therefore result in an unjustified extensiion of the scope for challenging awards, and frustrate the parties expectation that their dispute be decided by the chosen neutral tribunal. Of course, national laws may explicitly provide that arbitral disposition of issues of admissibility are not final. But then again, national laws may explicitly provide that all decisions by arbitrators are subject to full appeals, including findings of fact or conclusions of law. Indeed, national laws may forbid arbitration altogether. Yet that is emphatically not the modern trend. This essay proposes an approach consistent with an international consensus that decisions of arbitrators having jurisdication are final.


Abstract:     
Friends of Karl-Heinz Böckstiegel remark that it is almost impossible to imagine him in an embarrassing situation. He seems always to find himself in the right place at the right time, and, perhaps more importantly, never in the wrong place at the wrong time. The key to this phenomenon is to be found in two words: anticipation and planning. These concepts are not difficult to understand. They are simply hard to implement.

Over the years, practitioners in the field of international arbitration have become conscious of a method of controlling time which is so closely identified with its creator that most of us will understand a suggestion – without further explanation – to follow ‘the Böckstiegel Method,’ or ‘a Böckstiegel style procedure.’ Given the confidentiality of most arbitral proceedings, the details of this method are not a matter of general knowledge; the procedural orders that reflect the Böckstiegel Method tend to become part of the intellectual property of fellow arbitrators, parties, counsel who have participated in cases over which he has presided.

It is therefore a source of satisfaction to have available the full text of an award which sets out a procedural framework characteristic of the Böckstiegel Method. This award, rendered in the Tradex Hellas v. Albania case under the aegis of the International Centre for the Settlement of Investment Disputes and under the chairmanship of Professor Böckstiegel, has been published by consent in extenso.

Time is a particularly precious commodity in international arbitral proceedings. No one seeks with greater insistence to avoid its waste than Professor Böckstiegel. The Tradex case provides an interesting illustration of his approach, and invites the reflections that follow.

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