"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.

Friday, April 29, 2011

AT & T v Concepcion

The United States Supreme Court has decided in favour of AT & T in the much awaited decision of AT & T v Concepcion. The decision can be downloaded from here. A post in this blog on the background of the case can be accessed from here. We'll have a detailed post on the judgement in the near future.

Saturday, April 23, 2011

It is Raining Mediation!

Mediation is so much in the news in the recent past that we have here an exclusive post on the latest news pertaining to mediation.

We all know that the Indian Premier League (IPL) is a cash cow. When the stakes are high, the cash cow walks into the lawyers’ den. The Board of Cricket Control in India (BCCI) has been on a legal war with World Sports Group (WSG) over the telecast rights of the IPL matches. The dispute concerns termination of media rights granted via an agreement dated 25.03.2009 to WSG in respect of broadcasts outside India of the IPL matches. BCCI and the WSG fought an intense battle in the Bombay High Court for interim measures under Section 9 of the Arbitration and Conciliation Act, 1996. The Division Bench of the Bombay High Court had granted an interim stay of sorts restraining BCCI from awarding the contract for those rights to anyone else till the issue of interim measures is heard and decided by the arbitral tribunal.

An SLP was filed by the BCCI challenging the said order. The Supreme Court has passed orders for an interim arrangement. Media reports state that the Supreme Court Bench hearing matter had purportedly stated during the hearing that the matter would go for mediation. Access the news reports from here and here. Access the court’s interim order from here.

[BY THE WAY, it is well known that BCCI has its main office in Mumbai. But it is not common knowledge that the BCCI is a society registered under the Tamil Nadu Societies Registration Act.]

The longest strike in twenty years in Gujarat has General Motors’ plant in Halol. The strike has been going on since March 16, 2011. The strike is against poor working conditions. The labour officers of the government tried mediating the dispute but have failed. News reports from here and here.

One of the top mediators in India, senior advocate Mr. Sriram Panchu, has been appointed to mediate disputes between the members of the Parsi community over performance of certain religious rites. The issue was relating to a decision by the Parsi Panchayat restraining two Parsi priests from performing religious ceremonies in the Tower of Silence and two fire temples, which are the properties of the Panchayat. The Division Bench of the Bombay High Court had earlier held that the Panchayat had no such power. The Panchayat filed an appeal before the Supreme Court challenging the decision of the Bombay High Court.

The Supreme Court suggested the parties to amicably settle the dispute through mediation. The Supreme Court appointed Mr. Panchu and allowed him to appoint a co-mediator to assist him. Check out the order of the Supreme Court from here.

Thursday, April 21, 2011

100 Translation Errors in Institutional Arbitration Rules

In our latest roundup of Social Science Research Network articles on arbitration, we had stated that the abstract of the article by Isabelle Liger titled "100 Translation Errors in Institutional Arbitration Rules" looked promising. This post is a short review of the article.

The 57-page article is an analysis of errors and inconsistencies in translations of the different institutional arbitration rules. Arbitration rules (Rules) in Chinese, Korean, Japanese, English and French  have been compared and  following errors/ inconsistencies have been noted:
  • Lack of declaration of official version of the Rules
  • Omissions in one or a few versions of the Rules
  • Mistranslations that modify the content of the Rules
  • Differences in interpretations of translation of the Rules
  • Errors in translations that turn an obligation into option and an option into obligation
  • Mistranslations that turn cumulative conditions into alternative conditions
  • Usage of general terms in one version and specific terms in the other
  • Grammatical errors
  • Typos
As a consequence of the discrepancies in the various versions of the Rules, the author apprehends:
"Lawyers in an arbitration case may try to use this situation to the advantage of their clients, by relying on the official version of the rules that would benefit them most. Such leaks in the arbitration system may be favorable to the participants in some arbitration cases, but they could also damage the reputation of arbitration as a valuable dispute resolution mean, by making its proceedings unreliable and confusing."
Articles on this issue of translation errors in arbitration rules are rare. So take note of this.

Tuesday, April 19, 2011

SSRN Articles on Arbitration: A Monthly Roundup (March 2011)

Many interesting articles in March on arbitration. The abstracts of articles by Thomas V. Burch, Isabelle Liger and Leonila Guglya seem promising. good reading!

Jasminka Kalajdzic, Consumer (In)Justice: Reflections on Canadian Consumer Class Actions
This paper was written on the occasion of the 40th anniversary of the Annual Workshop on Commercial and Consumer Law and as a contribution to a collection of retrospective essays in the 50th volume of the Canadian Business Law Journal. In the paper, I reflect briefly on the impact of collective action on consumer access to courts, and the promised guarantee of effective justice. In the first part of the paper, I summarize the results of an empirical study which asked class action lawyers to identify the categories of cases being litigated, including those that come within the rubric of "consumer protection actions." I then examine two of the more significant advances in consumer rights litigation, namely, the development of the waiver of tort doctrine and the widespread rejection of mandatory arbitration clauses in consumer contracts. In the final part of the paper, I discuss two challenges to achieving substantive justice for consumers that have recently become more pronounced: increasing reliance on cy près distribution of settlements, and the effect of adverse costs awards on representative plaintiffs.

Lawrence A. Cunningham, Rhetoric versus Reality in Arbitration Jurisprudence: How the Supreme Court Flaunts and Flunks Contracts (and Why Contracts Teachers Need Not Teach the Cases)
Supreme Court rhetoric about the role of contracts and contract law in arbitration jurisprudence differs sharply from the reality of its applications. In the name of contracts, the Court administers a self-declared national policy favoring arbitration, a policy directly benefiting the judicial branch of government. This often puts the Court’s preferences ahead of those of contracting parties while declaring its mission as solely to enforce contracts in accordance with contract law. The Court thus cloaks in the rhetoric of volition a policy in tension with constitutionally-pedigreed access to justice and venerable principles of federalism.

This Article documents the rhetoric-reality gap and explores why it exists and why it matters. The rhetoric-reality gap is attributable in part to a dilemma the Court created for itself: its national policy favoring arbitration is constitutionally-suspect unless people assent, yet letting people make what contracts they wish would prevent implementing the national policy. The jurisprudence diminishes the Court’s legitimacy, tempts defiance, creates doctrinal incoherence, and poses other costs. This Article calls for reconciling these conflicting positions rather than sustaining the status quo: the Court should either give up its national policy favoring arbitration and truly respect freedom of contract or come clean about its national policy’s real implications and acknowledge its narrow conception of contract and contract law.

J. J. Spigelman, International Commercial Litigation: An Asian Perspective
This paper focuses on the legal transaction costs which operate as a significant non-tariff barrier to mutually beneficial exchange in trade and investment between nations. It sets out the role, functions and advantages of the international regime for commercial arbitration, based on the UNCITRAL Model Law and the New York Convention for Enforcement of Arbitral Awards. The paper discusses a range of mechanisms to harmonise civil procedure and to enhance co-operation between courts on cross-border issues, including: the Model Principles of Transnational Civil Procedure of the American Law Institute and UNIDROIT; the incidence of venue disputation; the Hague Choice of Court Convention; the UNCITRAL Model Law on Cross-Border Insolvency; the Hague Evidence Convention and Hague Service Convention and the mechanisms for enforcement of foreign judgments. The emergence of a new conception of judicial comity and of an international sense of collegiality in the context of globalisation is discussed.

Catherine A. Rogers, International Arbitration's Public Realm
Domestic arbitration is under attack as permitting repeat players to evade mandatory statutory law, as retarding legal developments, as undermining democratic lawmaking, and ultimately as imposing substantively biased outcomes on less sophisticated parties through contracts of adhesion. Collectively, these critiques of domestic arbitration could be interpreted as suggesting that domestic arbitration seeks to obviate or even subvert public interests and the public realm. The thesis of this chapter is that, in contrast to criticisms of domestic arbitration, international arbitration has a vibrant public realm. International arbitration produces public goods and has the potential to go beyond simply resolving disputes. It can promote international cooperation, improve transnational governance and contribute to the development of an international rule of law.

[Note: paper originally submitted in January but revised and submitted in March]

Robert D. Sloane, On the Use and Abuse of Necessity in the Law of State Responsibility
In an era of crises (economic, environmental, humanitarian, and even existential), the defensive plea of necessity has become a growth industry in the law of state responsibility, spurred in part by the publication of Article 25 of the International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts. Recorded incidents suggest that necessity has been raised more times in the past three decades than in the preceding three centuries - in diverse fields ranging widely across the landscape of contemporary international law. Yet recent scholarship focuses almost exclusively on necessity’s role in the distinctive (lex specialis) context of investor-state arbitration. This is understandable because of its significance to recent disputes in the field. But it is also regrettable, for it has to some extent eclipsed more fundamental questions that should be asked about the very concept of necessity in international law, which characteristically lacks the effective institutions and comparatively high degree of normative consensus that enable states to regulate necessity, consistent with the rule of law, in national law.

This Article, first, analyzes the historical evidence for Article 25, which purports to codify the customary definition of necessity; second, argues on the basis of this evidence that at least in terms of the ILC’s formal mandate, Article 25 reflects far more "progressive development" than it does "codification"; third, clarifies several of the most troubling conceptual and institutional problems that necessity raises in general international law - that is, outside of the confines of a treaty regime or other lex specialis; and finally, inquires into the continuing viability, value, and appropriate analysis of necessity in the contemporary international legal order.

I argue, in part, that the modern plea of necessity should rest on foundations that differ fundamentally from those of the existential conception inherited from the law of nations, which privileged the "very existence" of the state qua state. Article 25 modifies, but also builds upon, this partly anachronistic pedigree by borrowing concepts from national criminal law. The often incongruous transposition of these concepts obscures what almost invariably proves to be the real question raised by necessity in the law of state responsibility: who - which state, states, or other international actors - should bear the loss? A categorical answer would be neither plausible nor desirable. International law should instead contextualize the inquiry and candidly consider the competing policies and values at stake in the diverse scenarios in which necessity has been, or foreseeably might be, pled. The lodestar of this inquiry should no longer be the formerly paramount "natural" right of states to preserve themselves; it should be a transparent recognition of the difficult tradeoffs required by the - sometimes mutually exclusive - global policies, social interests, and human rights recognized by contemporary international law.

Michael H. LeRoy, Are Arbitrators Above the Law? The 'Manifest Disregard of the Law' Standard
Arbitration is supposed to be final and binding. But federal and state laws, and judicial doctrines, allow courts to vacate arbitrator awards. This study contemplates the role of courts when they review awards that “manifestly disregard the law” - a term that means the arbitrator knew the law but chose to ignore it. Given the norm of arbitral finality, should courts vacate these rulings?

Hall Street Associates v. Mattel, Inc., 552 U.S. 576 (2008), failed to answer this question. The parties asked a court to review their award for errors of law. This standard is not in the Federal Arbitration Act (FAA). Hall Street ruled that courts cannot review awards beyond the FAA’s express terms. The parties’ standard prompted Hall Street to ask whether courts may apply “manifest disregard of the law,” even though it is not in the FAA. Inscrutably, Hall Street answered: “Maybe the term ‘manifest disregard’ was meant to name a new ground for review, but maybe it merely referred to the [FAA’s] § 10 grounds collectively, rather than adding to them.”

I analyze “manifest disregard” by using historical and empirical methods. Common law courts vacated awards for “fraud,” “corruption,” “partiality,” or if arbitrators “exceeded powers.” The FAA enumerates these as grounds to vacate awards. In the same sequence with these terms, nineteenth century courts vacated awards for “manifest mistake” or “palpable mistake” of the law. I contend that Congress inadvertently omitted “manifest disregard” from the FAA. To answer Hall Street’s equivocation: “Manifest disregard of the law” is part of the FAA.

This sets the stage for my empirical question: Has Hall Street led courts to confirm more awards, thus promoting finality? The answer is yes. In 46.4% of federal cases and 21.8% of state cases, parties in my database argued that an award manifestly disregarded the law. Still, state appellate courts confirmed more employment awards after Hall Street was decided on March 3, 2008 - 88.9% (16/18), compared to 70.9% (73/103) from 1975 until Hall Street. Federal district courts confirmed 93.7% of awards (164/175) before Hall Street, and 90.9% (30/33) after. Federal appeals courts confirmed awards at a high rate before and after Hall Street (87.8% and 85.7%).

Unfortunately, Hall Street’s muddled analysis has split federal circuits. The Fifth and Eleventh Circuits ruled that Hall Street ended “manifest disregard,” but the Second, Sixth, and Ninth Circuits still treat it as part of the FAA. The First, Third, Fourth, and Tenth Circuits avoided ruling on the standard. In addition, state courts have differed in their reactions to Hall Street.

This fractured approach implies that the Supreme Court may reconsider its vague treatment of “manifest disregard.” The Court should affirm this standard. My findings show that review for “manifest disregard” does not erode finality. The standard translates to nanoscale review of awards. As one court put it: “There is...a way to understand ‘manifest disregard of the law’ that preserves the established relation between court and arbitrator...It is this: an arbitrator may not direct the parties to violate the law.” Judges have applied this concept for two centuries to ensure that private tribunals conform to the laws. This rationale is particularly relevant because so much arbitration has changed from a voluntary to mandatory process. Judicial review must be allowed to correct an arbitrator’s intentional flouting of the law. If “manifest disregard” is eliminated, arbitral finality will rise above the crowning principle of the American constitutional system: “No man in this country is so high that he is above the law.” (U.S. v. Lee, 106 U.S. 196, 220 (1882)).

[Note: paper originally submitted in February but revised and submitted in March]

Zev J. Eigen and David Sherwyn, A Moral Contractual Approach to Labor Law Reform: A Template for Using Ethical Principles to Regulate Behavior Where Law Failed to Do So Effectively
If laws cease to work as they should or as intended, legislators and scholars propose new laws to replace or amend them. This paper posits an alternative – offering regulated parties the opportunity to contractually bind themselves to behave ethically. The perfect test-case for this proposal is labor law, because (1) labor law has not been amended for decades, (2) proposals to amend it have failed for political reasons, and are focused on union election win rates, and less on the election process itself, (3) it is an area of law already statutorily regulating parties’ reciprocal contractual obligations, and (4) moral means of self-regulation derived from contract are more likely to be effective when parties have ongoing relationships like those between management and labor organizations. The paper explains how the current law and proposed amendments fail because they focus on fairness as a function of union win rates, and then outlines a plan to leverage strong moral contractual obligations and related norms of behavior to create as fair a process as possible for employees to vote unions up or down.

S.I. Strong, Does Class Arbitration 'Change the Nature' of Arbitration? Stolt-Nielsen and First Principles
In Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the United States Supreme Court stated that class arbitration “changes the nature of arbitration.” Certainly class proceedings do not resemble the traditional view of arbitration as a swift, simple and pragmatic bilateral procedure with few witnesses, documents or formalities, but do these types of large-scale disputes violate the fundamental nature of the arbitral procedure? This article answers that question by considering the jurisprudential nature of arbitration and determining whether and to what extent class arbitration fails to meet the standards necessary for a process to qualify as “arbitration.” During the course of the discussion, the article analyzes the ways in which class arbitration differs from other forms of multiparty arbitration and investigates whether a form of “quasi-arbitration” is in the process of developing as a means of responding to the demands of class proceedings.

Zev J. Eigen , Nicholas Menillo and David Sherwyn, Shifting the Paradigm of the Debate: A Proposal to Eliminate At-Will Employment and Implement a 'Mandatory Arbitration Act'
This article recasts the debate over mandatory arbitration of employment disputes as a discussion of the need to overhaul some critical elements of the way in which workplace rights disputes are adjudicated. Efforts to overhaul the system such as the Arbitration Fairness Act perpetuate the status quo of unjust cost-driven exploitation by law-breaking employers and employees alike. The authors provide an alternative two-part solution. First, we propose a "Mandatory Arbitration Act" that attempts to remedy legitimate problems like forum privacy that increase bad employers' abilities to hide from the law, while retaining significant benefits of pre-dispute arbitration like flexibility, speed, and reduced costs which augment access to justice for low wage earners. Second, we propose that employees engaged in interstate commerce can be terminated only if there is cause for the termination or severance pay given in lieu thereof. The article outlines a new employment standard that will provide employees with protection, allow employers to operate with greater certainty, and restore creditability and accountability to discrimination law.

[Note: paper originally submitted in February but revised and submitted in March]

Amar Gupta Sr. , Deth Sao and David A. Gantz, Disputes Related to Healthcare Across National Boundaries: The Potential for Arbitration
Trade in international health services has the potential to play a leading role in the global economy, but its rapid growth is impeded by legal barriers. Advances in technology and cross-border movement of people and health services create legal ambiguities and uncertainties for businesses and consumers involved in transnational medical malpractice disputes. Existing legal protections and remedies afforded by traditional judicial frameworks are unable to resolve the following challenges: (1) assertion of personal jurisdiction; (2) choice of forum and law considerations; (3) appropriate theories of liability for injuries and damages arising from innovations in medical care and delivery of health services; and (4) enforcement of foreign judgments. Such legal uncertainties and ambiguities call for a uniform means of redress that is more flexible and predictable than litigation in a court room. Given such needs, arbitration offers a potential solution, as it is a private streamlined adjudication process that has been successfully utilized on an international level to resolve several of the above mentioned legal quandaries. The voluntary, flexible, and legally binding nature of arbitration agreements across jurisdictions makes this form of dispute resolution more efficient and adaptive to changes in the health services industry than litigation. With careful construction of an approach that accounts for arbitration costs, reasonable recovery amounts, and complementary mechanisms such as no-fault compensation, international arbitration of medical malpractice disputes will reallocate the legal risks borne by businesses and consumers more fairly and efficiently.
Thomas V. Burch, Regulating Mandatory Arbitration

Over the last twenty-five years, the Supreme Court has relied on party autonomy and the national policy favoring arbitration to expand the Federal Arbitration Act’s scope beyond Congress’s original intent. Choosing these loaded premises has allowed the Court to reach the outcomes it desires while denying that it is making any political or moral judgments in its decisions – a type of bureaucratic formalism. One controversial outcome of the Court’s formalism, overall, has been the increased prevalence of mandatory arbitration. Although it reduces judicial caseloads and lowers companies’ dispute-resolution costs, it also restricts or eliminates individual rights and reduces public regulation of the companies that require it. The Court has supported the spread of mandatory arbitration despite these negative effects.

Because of the Court’s support, the parties being subjected to mandatory arbitration began asking lower courts for relief through the unconscionability doctrine in the early 1990s. And because the unconscionability doctrine could not provide the wide-scale relief they wanted, they also turned to Congress, convincing its members to introduce 139 anti-arbitration bills since 1995 – the majority of which proposed eliminating mandatory arbitration. A review of these efforts, including an original survey of these bills, reveals that these parties have been disregarding mandatory arbitration’s public benefits in favor of a rights-oriented, liberal approach that rejects regulation as a possible way to improve mandatory arbitration’s overall fairness.

This Article shows that both the Supreme Court’s and the reform advocates’ approaches to mandatory arbitration are flawed. It makes more sense, at least for now, to continue mandatory arbitration’s use while improving its overall fairness through legislative or agency regulation. Regulating mandatory arbitration with the goal of improving its fairness is consistent with pragmatic principles and is superior to the Supreme Court’s formalism and the reform advocates’ liberalism in the current mandatory-arbitration context. Taking this approach will allow us to study mandatory arbitration over time before deciding whether to eliminate it – a fair way to proceed given the importance of the rights at stake and the positive effects that mandatory arbitration can (possibly) have on the public good.

[Note: The abstract seems promising. Note the fact that for the past 15 years there have been about 139 bills initiated in the US against mandatory arbitration]

Chetan Phull, U.S. Anti-Suit Injunctions in Support of International Arbitration: Five Questions American Courts Ask

International arbitration is an increasingly popular dispute resolution mechanism, however, the threat of foreign court intervention unremittingly remains. It is therefore important for a party seeking to enforce an arbitration agreement to know which jurisdictions are most amenable to protecting arbitration agreements, and what courts in these jurisdictions consider material in deciding whether to issue an anti-suit injunction (ASI) against the party seeking to sidestep arbitration through a foreign court order. In the United States, courts in certain jurisdictions in particular have shown a willingness to protect arbitration agreements through ASIs, in the presence of certain factors. The author has uncovered five fact-specific questions from the case law produced by these courts that are material to the courts’ issuance of ASIs. In the abstract, the questions consider: actual refusal to arbitrate and parallel foreign litigation; recognition and enforcement of an arbitration award enjoined by a “competent authority” under the New York Convention; the res judicata effect of U.S. judgments; the strong public policy in favor of arbitration; and bad faith by the party seeking to hinder arbitration. The additional element of whether an ASI to enforce an arbitration agreement is requested from an offensive versus defensive position is also considered in the discussion of the five questions.

Andrew Newcombe , Markus Gehring and Marie-Claire Cordonier Segger, Introduction to ‘Sustainable Development in World Investment Law’

This volume builds upon previous research on sustainable development in international trade law and policy, published in Sustainable Development in World Trade Law. The volume’s goal is to analyse the state of international investment law through the lens of sustainable development and to clarify how international investment law can contribute to sustainable development. The various chapters in the volume identify, characterize, and analyse existing rules, innovations, and best practices in international investment agreements, including the investment measures used by other sustainable development treaties and instruments.

The volume proceeds in four parts. Part I establishes the foundations. Part II of the volume addresses the procedural and substantive dimension of sustainable development in international investment law. Part III is divided into two sections. The first section examines emerging issues and proposals. The second section examines how investment can be promoted through sustainable development treaties in general, followed by chapters on climate change, and biodiversity treaties, as well as treaties concerning water use and shared river regimes. Part IV provides the conclusions, which draw out the themes from this volume and provide a research agenda for the future in this emerging and important area.

Kristen Blankley, Keeping a Secret from Yourself? Confidentiality When the Same Neutral Serves Both as Mediator and as Arbitrator in the Same Case

As the alternative dispute resolution field has grown, parties have designed their own processes from established processes in an attempt to best serve their process needs. One such hybrid process is mediation-arbitration, called “med-arb” for short. Med-arb involves a single neutral who first serves as a mediator, and, if the parties reach impasse in mediation, the neutral then serves as an arbitrator to resolve the dispute. Although the literature has given some attention to the benefits and drawbacks of med-arb, this Article examines the process in light of broad mediation confidentiality and privilege statutes. Because these laws have no exceptions for med-arb, parties who seek to utilize this process must execute careful waivers to avoid the possibility that any resulting arbitration award later be vacated by the courts.

Dinah L. Shelton, Form, Function, and the Powers of International Courts

At the end of the nineteenth century, the international community began creating its first tribunals with the establishment of the Permanent Court of Arbitration. Since then, numerous courts and tribunals have been created on the international stage. This Article examines the interplay of form, function, and the powers exercised by international courts. It first considers the functions or attributes of any institution that carries the name "court" or "tribunal" and reflects upon whether there are powers that must be deemed inherent in such an institution to allow it to fulfill the judicial function, irrespective of limitations placed on the court's jurisdiction or the type of proceedings it conducts. The Article then identifies four specific functions that states have expressly delegated to international courts. The conclusion suggests that courts, litigants, and scholars still may usefully examine any exercise of international judicial powers by considering the function of the court and asking whether the power is one inherent to all courts, expressly conferred on the particular court, or reasonably implied from an express or inherent power.

Nancy Welsh, Integrating ‘Alternative’ Dispute Resolution into Bankruptcy: As Simple (and Pure) as Motherhood and Apple Pie?

Today, there can be little doubt that “alternative” dispute resolution is anything but alternative. Nonetheless, many judges, lawyers (and law students) do not truly understand the dispute resolution processes that are available and how they should be used. In the shadow of the current economic crisis, this lack of knowledge is likely to have negative consequences, particularly in those areas of practice such as bankruptcy and foreclosure in which clients, lawyers, regulators, and courts work under pressure, often with inadequate time and financial resources to permit careful analysis of procedural options. Potential negative effects can include: (1) impairment of a lawyer’s ability to provide her clients with competent advice regarding the appropriate application of these procedures; (2) impairment of a lawyer’s ability to suggest new dispute resolution hybrids that are both creative and implementable; (3) inappropriate use of dispute resolution procedures, adversely affecting clients, third party beneficiaries/victims, sponsoring institutions, and the integrity of dispute resolution as a field; (4) inadequate regulation, monitoring, and use of dispute resolution procedures; (5) the temptation of some lawyers, clients, and institutions to make intentionally inappropriate and even unethical use of dispute resolution procedures; and (6) new, and sometimes entirely unnecessary, satellite litigation arising out of the use of dispute resolution procedures. Meanwhile, the current ethics rules for lawyers, which are based largely on the American Bar Association’s Model Rules of Professional Conduct and are supposed to provide some sort of an ethical and professional brake upon “sharp practices” by lawyers, are either so ambiguous or so insufficient in their treatment of “non-adjudicative” dispute resolution procedures that they may invite bad behavior by clever clients or their lawyers. This Article tells two tales – one hypothetical, the other the real story that inspired the hypothetical – that illustrate many of the negative effects described supra.

While now is the time to advocate for the increased use of dispute resolution procedures in bankruptcy and foreclosure matters, now is also the time to demand more stringent education and regulation of lawyers to assist them in making sufficiently knowledgeable, skillful and ethical use of “alternative” dispute resolution procedures, especially in the court-connected context. Law schools, meanwhile, play an essential role in educating students regarding existing dispute resolution procedures and their application, but law schools are much more likely to incorporate such material into their curricula if bar exams test for future lawyers’ knowledge and thoughtful application of these procedures. Last, the Model Rules of Professional Conduct and states’ ethics rules for lawyers should be updated to respond to the many ethical ambiguities that currently haunt non-adjudicative court-connected dispute resolution.

Leonila Guglya, International Review of Decisions Concerning Recognition and Enforcement of Foreign Arbitral Award: A Threat to the Sovereignty of the States or an Overestimated Hazard (so far)? (With Emphasis on the Developments within the International Investment Arbitration Setting)  
The article explores the possibilities of review of the decisions of national courts pertaining to the recognition and enforcement of foreign arbitral awards by the international investment arbitration tribunals – a relatively new development, arguably limiting the sovereignty of the judiciaries of the host states further by creating a new “appellate” mechanism, verifying the “appropriateness” of their respective verdicts. The scrutiny, based on the case law analysis, demonstrates that, while overall the international dispute settlement mechanism concerned does feel certain reluctance in dealing with the reviews of the kind, in principle, taken that jurisdictional preconditions are met, it should be considered as a possible venue for the reexamination of the respective national judgments and could potentially be addressed by the parties raising expropriation, denial of justice and similar claims, arising out of the relevant context. The controversies, however, promise to present quite a challenge to the investors as far as the merits phase is concerned in light of [potential] existence of the alternative enforcement fora (arguably eliminating the expropriation claim) or the need to exhaust all available national judicial remedies (for the cases of denial of justice).

Additionally, the enforcement prospects for the international investment arbitration awards resolving the post-award phase controversies, rendered outside of the ICSID context, are so far unclear. They might risk following the fate of the awards with the successful or failing recognition and enforcement of which they are concerned.

[Note: An interesting topic]

Isabelle Liger, 100 Translation Errors in Institutional Arbitration Rules
This article is an extensive comparison of the main arbitral institutions’ rules in different languages, focusing on the English, French, Spanish and Russian versions of the rules, when available. Our comparative analysis of the rules took us to the conclusion that there are discrepancies between versions of the rules in different languages. In some cases, such differences between versions can have important consequences on arbitration proceedings. This article is a wake-up call for international arbitral institutions, which should provide participants to arbitration cases with better quality translations of the rules, and a warning for participants to arbitration and litigators, who should be careful in using translations of arbitration rules.

Most international arbitral institutions make their rules available on their websites in two or more languages. Because international arbitration involves parties from different countries who often do not speak the same language, these parties will use translations of the rules to make their way into arbitration proceedings. However, a comprehensive comparison of major arbitral institutions’ rules in different languages has revealed that there are differences between versions of the rules. Some of these differences are minor, and do not change the content itself of the rules or the obligation of the parties, but some differences are more important and can have notable consequences on the conduct of arbitration proceedings. Such variations can create confusion in the minds of the parties to arbitration, and prevent arbitration proceedings from being carried on diligently and without delay. First, the parties might not know that different versions of the rules are not equivalent, and rely only on one translation, which could lead in some cases to a different result. Second, the arbitral institution may indicate that one version of the rules is the official one, but the parties may not necessarily be able to understand the content of the rules if it is not written in their native language. Third, arbitration rules may have more than one official version, and the parties may legitimately rely only on one of them, though there may be some differences between two official versions of the rules. Finally, the arbitral institution may not say which of the versions of the rules is the official one, and in this case the parties are not in a position to know on which version they should rely in the event of a conflict between different versions of the rules.

The translation errors that result in differences between versions of arbitration rules vary considerably in terms of number and types of errors. Some versions of the rules are very similar, but others are very divergent. This article only reports on the institutions whose versions of the rules are not equivalent; we also limited our research to the comparisons of English, French, Spanish and Russian versions (and Italian in some very few cases). This means that the number of translation errors, considering all existing arbitration institutions, and translations of the rules in all languages available, is probably much higher. The purpose of this article is to list the kind of translation errors that can be found in arbitration rules, and to raise the awareness of the importance of wording in these rules. Hopefully, arbitral institutions will consider the need to improve their translations, in order to facilitate arbitration proceedings and to allow participants to rely on them.

[note: A very promising abstract]

Leonila Guglya, Conflicts of Interest in Arbitration: The News from the Russian Federation
Impartiality and independence of arbitrators, standing right at the forefront of the arbitration and, essentially, ensuring its legitimacy, have always attracted attentions of scholars and practitioners. A major breakthrough in terms of development of internationally recognized standards in the area took place in 2004, when the Guidelines on Conflicts of Interest in International Arbitration were published by the IBA. Nevertheless, despite the optimistic expectations of the drafters, the IBA Guidelines had not facilitated the conflicts of interest resolution practice of the courts and tribunals in the Russian Federation. In order to fill the lacuna, in late August 2010 the “Russian version” of the Guidelines – Rules on Impartiality and Independence of the Arbitrators – were adopted by the Chamber of Commerce and Industry of the Russian Federation. The present article is aimed at analyzing the reasons underlining the adoption of the Rules, their structural peculiarities, and, most importantly, at scrutinizing the content of the instrument in making an attempt to find explanations for the inclusion of certain provisions thereto, be that by virtue of reference of pre-existing precedents, regional cultural heritage or legal realities. The study proceeds on the comparative edge, contrasting the approach adopted by the Rules with that finding its reflection in the text of the IBA Guidelines.

Zdenek Novy, The Enforcement of Consumer Right via Arbitration (2nd Version)
I will seek to demonstrate in the first part of my thesis that while arbitration may be a suitable mechanism for resolving of business disputes, it is less certain that this holds true also for consumer disputes.

The key question is whether arbitration may ensure the effective protection of consumer rights. This question is gaining particular importance, as the EU prompts there be “adequate and effective out-of-court dispute resolution procedures” for consumer disputes in Member States.

Therefore, the starting point is the analysis of arbitration as a dispute resolution mechanism. Indeed, my initial hypothesis then is that some idiosyncratic features of arbitration are ill-suited for consumer disputes.

The reasons why arbitration seems to be inappropriate for resolution of consumer disputes are of the twofold nature: normative and empirical. Normative reasons stem from the peculiarities of arbitration as a legal system, whereas empirical reasons arise from certain patterns of the functioning of arbitration in practice, e.g. businesses being “repeat players” as opposed to consumer as “single-shot players” or the business-oriented nature of (international) arbitration.

Nicholas Pengelley, Confidentially Speaking: Commercial Arbitration in Canada’s Open Courts
Confidentiality is a vexed topic in international commercial arbitration. Regarded as arising inherently from the private nature of arbitration, with few exceptions, by UK courts; other jurisdictions have hedged it with qualifications. Canada, with its strong adherence to the principles of open courts, and freedom of speech, is at the extreme edge of the spectrum. Although its courts have found no inherent right to confidentiality, "sealing orders" will be granted in certain circumstances to preserve confidentiality of materials gathered in the course of preparing for an arbitration.

Katia Fach Gómez, Latin American Approaches to International Dispute Resolution
The presentation studies some actions taken by Latin American States against ICSID and also offers information about the latest developments in Latin America regarding the creation of a regional Dispute Regional Center.

Saturday, April 16, 2011

Monthly Roundup of Indian Arbitration Cases for March 2011

Significant Aspects: Setting aside arbitral awards, Interest

Significant Aspects: Making a third person a party to arbitration

Significant Aspects: Setting aside arbitral awards, Inability to present the case, Arbitrator went beyond the scope of reference; meaning of the terms 'arising out of' or "in respect of" or "in connection with' or "in relation to" or "in consequence of" or "concerning" or "relating to" used in the arbitration agreement.

Significant Aspects: Reference of a dispute to arbitration, Determination of the validity of the arbitration agreement

Significant Aspects: Dismissal of Writ Petition in view of Arbitration Clause.

Significant Aspects: Appointment of Arbitrator, Appointment barred by limitation

Significant Aspects: Interim measures, conditional bank guarantee, invocation of bank guarantee

Significant Aspects: Interim measures, invocation of bank guarantee, appropriate "court" under the Arbitration & Conciliation Act, 1996

Significant Aspects: GAFTA Arbitration, Enforcement of Foreign Awards, Grounds for refusing enforcement of awards, Absence of arbitration agreement, inability to present its case for want to notice by the tribunal, award contrary to public policy, dismissal with costs.

Key Issues: interim measures, assignment of participating interests under production sharing contract, termination of production sharing contract, material change in status, change of control.
[We've had about two posts on the Canoro Resources case and the same may be accessed from here and here]

Key Issues: Appointment of arbitrator

Sunday, April 10, 2011

Sports Arbitration and Other News, Links and Posts

A proposal was made by the Ministry of Youth Affairs and Sports in February this year on a comprehensive sports legislation in India to be known as the National Sports Development Act. The proposal was accompanied by a Preliminary Exposure Draft which contained the proposed statute. Some features of the proposed statute as it relates to arbitration are below:
  • Every national federation is to be responsible for agreeing to the institution of an autonomous and impartial mechanism of arbitration and mediation through Sports Ombudsman to handle athletes’ grievances as well as other sports-related disputes between the National Sports Federation and other stakeholders
  • The National Olympic Committee of India (known as the Indian Olympic Association) is to agree to facilitate through arbitration, conciliation and mediation mechanism, the resolution of conflicts or disputes within its own management or within the management of any National Sports Federation, which comes under its purview within fifteen days from the date of making such representation;
  • A National Sports Ombudsman is to be appointed for resolving disputes relating to sports. The body shall be responsible to resolve all kinds of disputes pertaining to sports (The scheme of appointment of the said body is contained in the IX Schedule of  the Preliminary Exposure Draft).
  • Appeals from the Ombudsman would be to an appellate authority.
  • The awards of the Ombudsman and the Appellate Authority would be final and binding as per the Arbitration and Conciliation Act, 1996.
  • Each sports federation is to have exhaustive provisions pertaining to arbitration in their written constitutions.
  • One or more retired High Court judges with knowledge of sports law and international/ domestic arbitration would be appointed as the Ombudsman
Other Links:
The latest volume of Virginia Law Review has a post on the need for clarity in subject matter Jurisdiction. Access it from here.

Lewis and Clark Law Review has an article on the resilience of the ground of manifest disregard for setting aside arbitral awards.

The Arbitrajul in litigiile comerciale. Blog has a post informing about call for papers by the the University of Missouri School of Law on the topic “Border Skirmishes: The Intersection Between Litigation and International Commercial Arbitration”. The last date of submission is in August 2011. See here for details.

The Lex Arbitri Blog has a call for papers on for an edited book on arbitration. details are here.
UNCTAD has published its annual review on investor-state dispute settlement cases. Access it from here.
Indian Legal Space Blog has a post on the Penn Racquet case where the scope of public policy in the enforcement of foreign awards is discussed. We had earlier posted a descriptive comment on the case.
Check out the post in the Kluwer Arbitration Blog on appeals from arbital awards in Switzerland.

Saturday, April 9, 2011

Link to the Paris Court of Appeal Decision in Dallah Real Estate v Pakistan

In the last post, we had dealt with the Paris Court of Appeal decision in the case of Dallah Real Estate v. Government of Pakistan. The Court of Appeal decision can be accessed from this link. Thanks to one of the members in the Linkedin International Arbitration group who was gracious enough to send me the judgement.

Tuesday, April 5, 2011

The Paris Court of Appeal Decision in Dallah Real Estate v Pakistan

Thanks to one of the members in the Linkedin International Arbitration group, this blawgger was able to get hold of the decision of the Court of Appeal of Paris in Dallah Real Estate and Tourism Holding Co. v. Government of Pakistan. We have had about three posts (more would come, hopefully in the near future!) on the case. Basically, we had discussed a few principles involved in the case and had two posts (here and here) on the English Commercial Court's decision. We now analyse the French Court of Appeal (CoA) decision and compare the same to what the Commercial Court decided.

The only issue that the CoA was really concerned with was whether Pakistan was a party to the arbitration agreement. While discussing the facts, the court noted that the Awami Hajj Trust established by an Ordinance of the Government of Pakistan ceased to exist only after the agreement was executed (for facts, see this post). The CoA held that Pakistan was a party to the arbitration agreement for the following reasons:
  • As per the MoU (Memorandum of Understanding) signed between Dallah and Pakistan, Dallah was to submit the terms and conditions of the agreement, the financial plans etc to Pakistan and the financier was to be an entity designated by Pakistan. Further, the Pakistan had the right as per the MoU to 
  • The only interlocutor with Dallah was the Government of Pakistan. the negotiations took place exclusively between Pakistan and Dallah
  • The officials of the Ministry of Finance, Pakistan were members of the board of the Trust.
  • The financial plans etc were given by Dallah to the Government during the pre-contractual stage
  • Although Dallah has written a letter which states that the Trust was the sole contracting partner , as per the understanding between Dallah and the Government, the government designated in the letter head of the government the financier for the project.
  •  It was clearly indicated to the Chairman of Dallah by one of the members of the Board of the Trust that it was for the Government to approve the contractual relationship between Dallah and the Trust.
  • During the performance of the contract, officials of the Pakistani Government exchanged correspondence in respect of the agreement.
It may be noted that the English Commercial Court decided that the Government of Pakistan was not a party to the agreement. The Commercial Court (CC) accepted that the Trust was created by the Ordinance and that the Government had control over the Trust (through the board). Further, the CC also admitted that the participation of the Government in the agreement was substantial: the agreement was signed by a Government  official although he signed it as a member of the board; the Trust had a unilateral right to assign the contract to the Government; the government provided the contract bank guarantee on behalf of the Trust. Nevertheless the CC concluded that the Government was not party. The reasons were:
  • The Managing Trustee of the Trust signed the contract
  • The guarantee provided to the affiliate of Dallah was an independent contract. merely furnishing the bank guarantee does not indicate that the third party intended to be bound by the contract. The obligations of the trust were independent to that of the Government in furnishing guarantee
  • Pakistan was not a party to the agreement
  • The assignment clause itself was indicative of the fact that the Government did not have any rights in the agreement.  
  • The most important aspect in favour of Pakistan was that the MoU contemplated that the Government would be a party while in the agreement the Government was not a party.
  • Although the letters nominating the financier were sent to Dallah under the letter head of the Government, the nomination was already done by the Trustees.
  • Although the arbitrators concluded that it was the Government which actually funded the Trust, the conclusion was not correct because the funds were to come from the piligrims and philanthropists
  • Although the termination letter was under the letter head of the Ministry of Religious Affairs, he could not have acted as a member of the Board of the Trustee as by then the Trust had ceased to exist.
  • It was not that by not re-promulgating the Ordinance, the Government decided to step in the shoes of the Trust.
  • Before the Judge in Pakistan, the government had sought a declaration that the agreement was repudiated due to the default of Dallah. This implied that the Government did not consider itself to be a party to the agreement.
I leave it to the readers to decide which one is of these judgements is more convincing. We'll look at this extremely interesting divergence between the French and the English courts in a future post.

Saturday, April 2, 2011

Global Process Systems v. Syarikat Takaful Malaysia Berhad ( UK SC, 2011)- II

In the last post, we had discussed about rigs and their transportation on barges. In this post, we’ll discuss certain other technical aspects and also the judgement. The judgement, it may be noted, has a bearing on marine cargo insurance. We'll look into the judgement in this post.

But, to recap, during the voyage of the barge which carried the rig (see this picture), all the three legs of the rig broke of and fell into the sea. The owner of the rig , the insured, made a claim with its insurers for the loss caused. The insurers rejected the claim. The insured sued. The insurers argued that the insurer was not liable for the loss because the loss was caused due to inherent vice. The insurers contended that since the loss not caused by any an unexpected accident or casualty, therefore the loss was proximately caused by inherent vice. This ground of inherent vice was relied upon by the insurers as it was an exception to insurer liability under the contract. Section 55(2)(c) of the English Marine Insurance Act, 1906 also provided:
Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.”
The Commercial Court determined that the loss was due to metal fatigue in the legs. As we discussed in the previous post, the legs in this rig were mat-type legs and therefore the legs were cylindrical structures.Fatigue occurs when there is repeated stress on the legs. According to the court, the stress in the legs were due to the pitching and rolling motion of the barge due to the height and direction of the waves.

An important aspect that had bearing on the case was that there was a risk of fatigue was well known to the insurers and the insured. Therefore, the insurers insisted that the rig be inspected again in Cape Town, South Africa and necessary remedial operations be conducted. On this condition, the insurers granted a certificate approving the voyage. Thus, both knew that the voyage was risky for the rig. Therefore, the insurers took the ground of inherent vice.

It was argued by the insurers that insurance was a contract aimed at protecting against risks and not certainties and since it was certain that the rigs would be affected by metal fatigue, they were not liable for the loss of the legs.

Inherent Vice: as the Proximate Cause
Loss due to Inherent vice means that the loss is caused due to the nature of the goods itself and not due to any external causes.

In Soya GmbH Mainz Kommanditgesellschaft v. White [1982] 1 Lloyd’s Rep 122, Soya beans were to be transported by ship. The goods were insured against the risk of heating, among other things. When the goods arrived to the port, it was in a heated condition. Relying on the ground of inherent vice, the insurers denied liability. Donaldson LJ held that a loss is proximately caused by inherent vice if the natural behavior of the goods is such that they suffer a loss in circumstances in which they are expected to be carried.

However, the House of Lords in the same case [1983] 1 Lloyd’s Rep 122, supplied a different definition. Lord Diplock held :
[Inherent vice] means the risk of deterioration of the goods shipped as a result of their natural behavior in ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.”
Now, there is a subtle difference between the above two definitions. To clarify, we would take the soya bean example. If the subject matter, that is, soya beans was wet when it was loaded in the ship, then the insurer is not liable because the subject matter inherently suffers from vice, that is, wetness. The proximate consequence of the heatedness would be the wetness of the subject matter. It was the fault of the insured to not keep the goods away from moisture. Therefore, it is right that the insurers should not be liable.

However, the definition of Donaldson LJ seems to suggest the incapability of the subject matter to stand the expected events of voyage as inherent vice. The UKSC in the present case favoured Lord Diplock’s definition. In T M Noten BV v. Harding –[1989] 2 Lloyd’s Rep 283, Bingham LJ held that the proximate cause of the loss was inherent vice of the subject matter, that is, the goods were shipped wet.

Noting the above decisions and another, the UKSC held:
[T]hese cases do not provide authority for the proposition that inherent vice or nature of subject matter insured is established by showing that the goods in question were not capable of withstanding the normal incidents of the voyage, including weather reasonably expected. What they do establish is that where the only fortuity operating on the goods comes from the goods themselves, the proximate cause of the loss can be properly be said to be the inherent vice or the nature of the subject matter insured and so (in the absence of provisions to the contrary) falls outside the cover.”
The Court also disagreed with the decision in Mayban General Insurance v. Alstom Power Plants Ltd [2004] 2 Lloyd’s Rep 609, where a transformer, the cargo, was damaged due to the movement of the vessel due to wind and sea action. The court stated that the goods transported must be capable of withstanding the “forces” that could be reasonably expected during the voyage. The court stated that since there was no unusual cause which caused the damage.

This, according to the UKSC, would have the consequence of reducing “much of the purpose of cargo insurance, for the would then only extend to loss or damage caused by perils of the seas that were exceptional, unforeseen or unforeseeable, and not otherwise. This…would go far to frustrate the very purpose of all risks cargo insurance, which is to provide indemnity in respect of loss or damage caused by, among other things, perils of the seas.”


Section 55(2)(c) also states that insurer is not liable for ordinary wear and tear. In Mayban General Insurance, the court implied that insurers would not be liable if the cargo was unseaworthy. Seaworthiness is defined in Section 39 of the Act to mean “reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.” Perils of the seas is defined in the Act to only mean fortuitous accidents or casualties of the seas and does not include action of the winds and waves. Therefore the court implied that seaworthiness did not include the ability of the cargo to withstand wind and wave action.

Seaworthiness of the vessel is an implied warranty in the marine insurance policy. If the vessel is not seaworthy, the insured is not entitled to be indemnified by the insurers irrespective of whether the loss was proximately caused by the unseaworthiness.

The court held, by an analogy to the seaworthiness standard in Section 39, the mere fact that the goods are not reasonably fit in all respects to encounter ordinary perils of the seas of the adventure insured does not by the reason alone deprive the assured of the right to be indemnified.

But then, when the seaworthiness standard in the Act refers to a higher standard, that is, the ability to withstand “fortuitous accidents or casualties of the seas”, does it not mean that seaworthiness would also include a lesser standard, I.e., the ability to withstand wave and wind action would also be covered?

In any case, Section 39 dealt with seaworthiness of a vessel (hull insurance) while the present case dealt with cargo insurance.

Two Proximate Causes:

The insurers also argued, without prejudice, that the loss was caused by two proximate causes- inherence vice and perils of the sea. They relied on a decision that dealt with hull insurance- Miss Jay Jay [1987] 1 Lloyd’s Rep 32 where it was held that where there were two proximate causes, and where the policy excluded one cause from the cover, the assured would not be entitled to be indemnified. While Lord Saville rejected the argument for the reason that it was not the case where there were two proximate causes, Lord Mance did not wish to go into the question without hearing arguments.

In any case, the court held that the rolling and pitching of wave the barge in the sea conditions encountered caused the damage and the insurers were liable for the loss.
Comments on the Case: