Monthly Roundup of SSRN Articles on Arbitration (August 2011)

Counterclaims in Investor-State Arbitration
LSE Legal Studies Working Paper No. 8/2011
Yaraslau Kryvoi

London School of Economics - Law Department

Date Posted: August 5, 2011
Working Paper Series
85 downloads

Abstract:
This paper provides a comprehensive analysis of the legal regime governing counterclaims in investor-State disputes. It challenges the frequent presumption that the right to assert counterclaims is hindered by the fact that investment treaties impose no obligations on foreign investors and only protect their rights. The paper demonstrates that the right to assert counterclaims is a procedural right, and subject matter jurisdiction over counterclaims depends on whether the investor has breached obligations found in applicable law. The paper shows that foreign investors’ substantive obligations can be found in sources of international law other than investment treaties. The paper also highlights the difficulties of asserting counterclaims in non-commercial areas such as human rights and environmental protection. Finally, it also shows that tribunals may pierce the corporate veil of foreign investors in the context of counterclaims.

Managing Disputes Through Contract: Evidence from M&A
John C. Coates, IV
Harvard Law School
Date Posted: August 23, 2011
Working Paper Series
76 downloads


Abstract:
An important set of contract terms manages potential disputes. In a detailed, hand-coded sample of mergers and acquisition (M&A) contracts from 2007 and 2008, dispute management provisions in correlate strongly with target ownership, state of incorporation, and industry, and with the experience of the parties’ law firms. For Delaware, there is good and bad news. Delaware dominates choice for forum, whereas outside of Delaware, publicly held targets’ states of incorporation are no more likely to be designated for forum than any other court. However, Delaware’s dominance is limited to deals for publicly held targets incorporated in Delaware, Delaware courts are chosen only 20% of the time in deals for private targets incorporated in Delaware, and they are never chosen for private targets incorporated elsewhere, or in asset purchases. A forum goes unspecified in deals involving less experienced law firms. Whole contract arbitration is limited to private targets, is absent only in the largest deals, and is more common in cross-border deals. More focused arbitration – covering price-adjustment clauses – is common even in the largest private target bids. Specific performance clauses – prominently featured in recent high-profile M&A litigation – are less common when inexperienced M&A lawyers involved. These findings suggest (a) Delaware courts’ strengths are unique in, but limited to, corporate law, even in the “corporate” context of M&A contracts; (b) the use of arbitration turns as much on the value of appeals, trust in courts, and value-at-risk as litigation costs; and (c) the quality of lawyering varies significantly, even on the most “legal” aspects of an M&A contract.

The Next 10 Year ECT Investment Arbitration: A Vision for the Future – From a European Law Perspective
LSE Legal Studies Working Paper No. 7/2011
Jan Kleinheisterkamp
London School of Economics - Law Department
Date Posted: August 5, 2011
Working Paper Series
54 downloads

Abstract:
The interaction of investment treaty law with European law is a growing concern not only for policy makers but also for investors and arbitral tribunals, especially in the energy sector. This paper sketches the existing and potential legal problems between the regimes with the aim of drawing conclusions on the impact of those tensions on the future of the Energy Charter Treaty (ECT). In a first part, the paper discusses the problem of the compatibility of investment treaty law with European law in general that may require European member states to renegotiate their existing agreements. A second part is dedicated to the more controversial issues of the continuing applicability of intra-EU investment treaties, discussing their far-reaching overlap with the protection afforded by European law and the resulting complications. Most of the previously discussed problems also arise under the Energy Charter Treaty, in addition to the specific complications that are analysed in a third part. The paper also outlines the consequences of the entry into force of the Lisbon Treaty and finishes with a summary and outlook of the general importance of these European developments for the future of the Energy Charter Treaty.

Arbitration of Investors' Claims Against Issuers: An Idea Whose Time Has Come?
Law and Contemporary Problems, Forthcoming
Barbara Black
University of Cincinnati - College of Law
Date Posted: August 1, 2011
Accepted Paper Series
36 downloads

Abstract:
Ever since the U.S. Supreme Court held that arbitration provisions contained in brokerage customers’ agreements were enforceable with respect to federal securities claims, proposals have been floated to include in an issuer’s governance documents a provision that would require arbitration of investors’ claims against the issuer. To date, however, publicly traded domestic issuers and their counsel have not seriously pursued these proposals, probably because of several legal obstacles to implementation. In addition to these legal obstacles, publicly traded issuers may not have perceived significant advantages to arbitration. Recent legal developments, however, make inclusion of an arbitration provision in a publicly traded issuer’s governance documents a proposal worthy of serious consideration. In particular, because of the Supreme Court’s recent opinion in AT&T Mobility LLC v. Concepcion, issuers may be able to achieve an advantage through adoption of an arbitration provision in their governance documents that they were not able to achieve through PSLRA and the Securities Litigation Uniform Standards Act. They could finally achieve the demise of securities class claims.

Fully Federalizing the Federal Arbitration Act
Roger Williams Univ. Legal Studies Paper No. 108
Michael J. Yelnosky
Roger Williams University School of Law
Date Posted: August 10, 2011
Accepted Paper Series
24 downloads


Abstract:
There is a widely-shared belief that the Supreme Court’s interpretation of the Federal Arbitration Act has resulted in a doctrine that is far too solicitous of arbitration and not sufficiently solicitous of state lawmaking power. That may be so, but there is one provision of the FAA, the savings clause, that the Court has interpreted to permit the application of state law to invalidate agreements that would otherwise be enforceable under the FAA. This Article examines the savings clause.

The Court’s interpretation of the savings clause is dicta, and a better reading is that the savings clause authorizes federal courts to create federal common law to govern the enforcement of covered arbitration agreements. That alternative interpretation is consistent with the Court’s treatment of the rest of the statute, it is consistent with an analogous regulatory scheme, – federal common law regulation of the enforcement of collective bargaining agreements – and it reflects a division of lawmaking authority that would have been familiar to the Congress that passed the FAA in 1925. Moreover, while there are no doubt legitimate state interests in regulating arbitration agreements and guaranteeing parties a judicial forum for the assertion of certain rights, that alone is not a sufficient justification for requiring the application of state law to FAA-covered arbitration agreements. Like it or not, Congress has the authority to regulate the enforcement of arbitration agreements in interstate commerce, and a necessary consequence is the displacement of some overlapping state law.

A federalized savings clause would result in the creation of a uniform body of arbitration law, and that body of law could prove to be at least as effective, and perhaps even more effective, in addressing the major arbitration issue of our time – the imposition on relatively weak parties, like consumers and employees, of agreements that effectively deprive those parties of the right to assert their federal or state law rights. This existing but undeveloped body of federal law helps shed light on the Supreme Court’s recent decision in AT& T v. Concepcion and helps chart a post-Concepcion approach to the issue of “lopsided” arbitration agreements.

Private Regulation of Consumer Arbitration
Christopher R. Drahozal and Samantha Zyontz
University of Kansas School of Law and Searle Civil Justice Institute
Date Posted: August 4, 2011
Working Paper Series
18 downloads


Abstract:
Arbitration providers, such as the American Arbitration Association (“AAA”) and JAMS, have promulgated due process protocols to regulate the fairness of consumer and employment arbitration agreements. A common criticism of these due process protocols, however, has been that they lack an enforcement mechanism. While arbitration providers state that they enforce the protocols by refusing to administer cases in which the arbitration agreement materially fails to comply with the relevant protocol, the private nature of arbitral dispute resolution makes it difficult to verify whether providers in fact refuse to administer such cases.

This article reports the results of the first empirical study of the AAA’s enforcement of its Consumer Due Process Protocol. We find that the AAA’s review of arbitration clauses for protocol compliance appears to be effective at identifying and responding to those clauses with protocol violations. During the time period studied, the AAA refused to administer a substantial number of cases (almost 10% of its total consumer caseload) that involved a protocol violation. Moreover, in response to AAA protocol compliance review, over 150 businesses have either waived problematic provisions or revised arbitration clauses to remove provisions that violated the Consumer Due Process Protocol.

Our findings support the proposition that private regulation by the AAA complements existing public regulation of the fairness of consumer arbitration clauses. Any consideration of the need for future legislative action should take into account the effectiveness of this private regulation. That said, we do not assert that private regulation alone - with no public regulatory backstop, such as through court oversight - suffices to ensure the fairness of consumer arbitration proceedings. Rather, we suggest ways that courts and policy makers could reinforce the AAA’s enforcement of the Consumer Due Process Protocol as well as ways the AAA could improve its own review process.

Resolving Disputes in the Context of Australian and Canadian Civil Justice Reform
Australian Journal of Dispute Resolution, Vol. 22, No. 1, 2011
Shahla F. Ali and Felicia Lee
University of Hong Kong - Faculty of Law and University of Hong Kong
Date Posted: August 2, 2011
Accepted Paper Series
13 downloads


Abstract:
In recent years, many countries have increased their use of alternative mechanisms of dispute resolution to resolve a growing number of financial and commercial disputes. This trend has been supported by civil justice reforms taking place throughout the world, including those within Australia, and Canada. Such reforms have aimed at encouraging cost-effective, expeditious and amicable case handling within the civil justice system. This article will analyze the increasing use of mediation to resolve financial and commercial disputes in countries undergoing civil justice reform, review the scope and nature of these reforms and examine lessons learned.

The Right of Investor to Arbitrate: Can Domestic Laws provide for its Extinguishing in case of Annulment of its relative Award? A Commentary on the ATA v. Jordan ICSID Award of May 18, 2010 (Case Arb/08/2) (in Arabic)
World Journal of Arbitration, No. 8, pp. 543-557, October 2010
Nader M. Ibrahim
Arab Academy for Science, Technology & Maritime Transport - College of International Transport and Logistics
Date Posted: July 31, 2011
Last Revised: August 8, 2011
Accepted Paper Series
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Abstract:
This is a commentary on an ICISD award, issued in favor of a Turkish Company against Jordan on May 18, 2010. The award relates to a FIDIC contract between a Turkish Company (ATA) and a Jordanian Company (APC) to build a dike. At time of contracting in 1998, APC was owned and controlled by Jordan. Due to reasons beyond ATA’s obligations, a section of the dike collapsed, APC consequently activated the FIDIC arbitration, however in 2003, the APC’s claim was dismissed and the ATA’s counter-claim was instead accepted, leading to an award in favor of ATA.

In 2006, the Jordanian Court of Appeal vacated the 2003 FIDIC award, a decision that was confirmed by Jordan’s Court of Cassation in 2007. And, the FIDIC arbitration clause was judicially declared extinguished in application of Article 51, of the Jordanian Arbitration Act No. 31 of 2001, leading to new Jordanian court proceedings, a result that ATA claimed being in violation of international law (namely, the Turkey-Jordan Bilateral Investment Treaty, i.e., the ‘BIT’, and the 1958 New York Convention).

In 2008, ATA claimed being an investor entitled to resort to ICSID against Jordan, based on the BIT. Jordan objected to the jurisdiction of the ICSID Tribunal, for the claim does not fall in the ‘temporal scope’ of the BIT, and which came to effect in 2006, after formation of the FIDIC contract and its disputes, in addition to non-breach of the BIT.

The ICSID tribunal held in 2008 that some of the aspects of the ATA claim falls in the temporal scope of the Turkey-Jordan BIT, namely the investor’s ‘right to arbitrate’, and ruled against Jordan, for its courts applying a provision of law (extinguishing arbitration clause in case of vacated awards) in violation of international law. The commentator analyzes both aspects, and highlights the risk that some Arab countries run when they adopt domestic arbitration laws that deviate from international standards of arbitration.

Note: This commentary does not cover the subsequent ICSID decision on Interpretation and on the Request for Provisional Measures, related to the same case, issued on March 7, 2011.

'The Iceberg Beneath the Water': The Hidden Discrimination Against the Lex Mercatoria in Chinese Arbitration
Journal of Private International Law, Vol. 7, No. 2, pp. 341-359, 2011
Manjiao Chi
Law School, Xiamen University / Xiamen Academy of International Law
Date Posted: August 17, 2011
Accepted Paper Series
11 downloads

Abstract:
That the lex mercatoria can be applied absent parties’ agreement in international arbitration has been established over time. Yet the extent to which it can be applied vary depending on the arbitrators’ choice-of-law power granted by the applicable arbitration laws and rules. At the international level, four major patterns of the arbitrators’ choice-of-law powers are adopted. But the 'Chinese pattern' is different because the arbitrators under Chinese law are subject to heavier restrictions in making choice-of-law decisions in favor of the lex mercatoria. Though Chinese law contains no de jure discrimination against the lex mercatoria, these restrictions amount to a de facto impediment for the application of the lex mercatoria in Chinese arbitration, which could seriously hurt the competitiveness of Chinese arbitration in the long run. However, given the current sociopolitical situation in China, it remains a tough task to remove such discrimination.

Party Autonomy and Interim Measures in International Commercial Arbitration
Albert Jan van den Berg, INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION: IMPORTANT CONTEMPORARY QUESTIONS, pp. 179-189, Kluwer Law International, 2003
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 5, 2011
Accepted Paper Series
10 downloads

Abstract:
Legal regimes differ on the authority of courts and arbitrators to grant interim measures in support of arbitration proceedings. Some arbitration laws authorize both courts and arbitrators to award interim relief (based on the parties’ agreement or otherwise); some laws deny arbitrators such authority, limiting it to the courts; some laws deny the courts such authority once the arbitrators have been selected; while others are unclear whether and under what circumstances courts may make such orders. The fundamental question is an institutional one: Which is the appropriate party to grant interim measures—the court, the arbitration panel, or both?

This paper argues that the principle of party autonomy should determine who has the authority to award interim relief. The argument is twofold. First, empirical examination of contracting practices—what parties actually agree to in their arbitration agreements concerning interim measures—may provide important insights into how authority over interim measures should be allocated. Second, in translating those insights into statutory provisions, drafters and legislators should preserve party autonomy by permitting parties to contract around the statutory provisions, in other words, by making those provisions default rules rather than mandatory rules.

International Commercial Arbitration and the Application of Mandatory Rules of Law
Asian International Law Journal, Vol. 5, No. 1, 2009, Faculty of Law, Monash University Research Paper No 2010/49
Jeffrey Maurice Waincymer
Monash University - Faculty of Law
Date Posted: August 19, 2011
Working Paper Series
8 downloads

Abstract:
The purpose of this article is to try and synthesize the views that have been put forward to date and analyze them in a comprehensive framework. The article begins with an analysis of:

(1) the concept of mandatory rules;
(2) the position of the debate within international commercial arbitration;
(3) the sometimes overlooked distinction between issues of jurisdiction and the application of mandatory rules;
(4) legal and policy arguments for the application of mandatory rules; and
(5) the relevance of party autonomy and possible types of evidence of consent for or against the application of mandatory rules.

This leads on to a critical analysis of the suggestions postulated by leading authors, organisations and treaties, and finally, an evaluation of the various individual factors that may come into play if an arbitrator is found to have a discretion as to whether to apply mandatory rules in the absence of express consent from the parties.

International Arbitration Law in the United States
INTERNATIONAL COMMERCIAL ARBITRATION: A COMPARATIVE SURVEY, No. 63, N. Eski et al, ed., 2007
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 5, 2011
Accepted Paper Series
7 downloads

Abstract:
The importance of American international arbitration law has grown in recent decades. Arbitration is widely used as a means of resolving transnational disputes involving American parties, albeit more widely for some types of contracts than others. The United States is frequently chosen as a situs for international arbitration proceedings, and American lawyers regularly appear as counsel and serve as arbitrators. This paper provides an overview of the law governing international arbitration in the United States. It first describes the treaties and statutes that govern international arbitration in the U.S. It then provides an overview of U.S. law as it applies to enforcing the arbitration agreement, to the conduct of the arbitration proceeding, and to enforcing the arbitration award.

Arbitration by the Numbers: The State of Empirical Research on International Commercial Arbitration
Arbitration International, Vol. 22, No. 2, p. 291, 2006
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 6, 2011
Accepted Paper Series
4 downloads


Abstract:
This article provides an overview of the state of empirical research on international commercial arbitration, focusing on quantitative rather than qualitative studies. It begins by discussing sources of data on international commercial arbitration and providing a brief description of empirical research methods as applied to international arbitration, evaluating the strengths and weaknesses of the different methods. The article then summarizes the existing empirical literature on international commercial arbitration. The topics studied are diverse, ranging from the factors parties view as important in arbitration, to whether arbitrators charge cancellation fees, to whether arbitrators make compromise awards. But while the body of empirical research on international commercial arbitration is growing, much remains to be done. The article concludes by suggesting some possible topics for future research.

Arbitrator Selection and Regulatory Competition in International Arbitration Law
TOWARDS A SCIENCE OF INTERNATIONAL ARBITRATION: COLLECTED EMPIRICAL RESEARCH, Christopher R. Drahozal & Richard W. Naimark, eds., Kluwer Law International, January 2005
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 6, 2011
Accepted Paper Series
4 downloads

Abstract:
This paper examines empirically the effect of enacting a new or revised arbitration statute on the selection of international arbitrators. It considers three principal ways in which arbitrators may benefit from a new arbitration law. Parties may prefer to select arbitrators from the country in which the arbitration proceeding is held because of their expertise in the country‟s arbitration law (which governs the conduct of the arbitration proceeding). Thus, any increase in arbitration proceedings in a country following enactment itself likely benefits local arbitrators. In addition, enactment of a new arbitration statute might make it more likely that local arbitrators will be selected in proceedings held in the enacting country, because the changed legal regime makes local arbitrators‟ expertise more valuable than it was before enactment. Finally, successfully lobbying for a new arbitration statute may signal that arbitrators in the country have the sort of managerial or consensus-building skills that would make them effective arbitrators. If so, enactment might make it more likely that arbitrators in the enacting country will be selected for arbitration proceedings elsewhere.

The paper uses cross-sectional data to estimate models of the selection of presiding and party-appointed arbitrators in arbitration proceedings administered by the International Chamber of Commerce (“ICC”) in 2000. The principal empirical findings are threefold. First, there is a strong relationship between the number of arbitration proceedings held in a country and the number of arbitrators selected from the country. Thus, as expected, an increase in arbitration proceedings held in a country following enactment of a new arbitration law almost certainly benefits prospective arbitrators in that country. Second, the rate at which local arbitrators are selected for arbitration proceedings held in a country increases after enactment of a new arbitration law. Enactment thus benefits local arbitrators not only by increasing the number of proceedings in the country, but also by increasing the rate at which local arbitrators are selected in those proceedings. Third, the rate at which local arbitrators are selected for arbitration proceedings held in other countries does not appear to increase after enactment of a new arbitration law, with the possible exception of presiding arbitrators in countries that have enacted the UNCITRAL Model Law on International Commercial Arbitration. The evidence thus does not support the theory that enactment of a new arbitration statute serves as a signal of arbitrator quality.

New Experiences of International Arbitration in the United States
American Journal of Comparative Law, Vol. 54, p. 233, 2006
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 6, 2011
Accepted Paper Series
4 downloads


Abstract:
This article is the National Report of the United States for the XVIIth International Congress of Comparative Law held in Utrecht, The Netherlands. Part I provides an overview of international arbitration law in the United States, highlighting some currently unsettled issues. Part II describes the growing American involvement in international arbitration. Part III then examines “new experiences” with international arbitration in the U.S.: (1) investor-state arbitration, particularly under the North American Free Trade Agreement (NAFTA); (2) the interrelationship of new information technologies and international arbitration, focusing on the formation of arbitration agreements in electronic commerce transactions; and (3) the use of arbitration to resolve consumer and employment disputes in the United States, which to date has largely been a domestic undertaking but increasingly shows signs of becoming internationalized.

After Lehman: International Response to Financial Disputes – A Focus on Hong Kong
Richmond Journal of Global Law and Business, Vol. 10, No. 2, 2011
Shahla F. Ali and John Koon Wang Kwok
University of Hong Kong - Faculty of Law and University of Hong Kong
Date Posted: August 2, 2011
Accepted Paper Series
3 downloads
Abstract:
Recent global financial dislocation has provided an impetus for examining effective avenues for the resolution of financial disputes. Hong Kong, like many financial centers throughout the world, has been directly affected by the collapse of Lehman Brothers. Its response to the collapse has included a creative mix of regulatory strengthening and government sponsored mediation and arbitration. Each of these alternative mechanisms of resolution provides a useful case study of the prospects of the use of ADR in response to financial crises. The efficacy of such interventions will be reviewed and options for the future development of a multi-tier dispute resolution system in Hong Kong will be explored.

Casenotes – Standard of Reasons Given by an Arbitrator and Arbitration Media Watch
Alternative Dispute Resolution Journal, Vol. 21, p. 139, 2011
David L. Spencer
La Trobe University
Date Posted: August 20, 2011
Last Revised: August 23, 2011
Accepted Paper Series
3 downloads

Abstract:
In this case note, the Victorian Supreme Court was asked the question about what standard of reasoning must be given in an award by an arbitrator in order to avoid an allegation that the arbitrator made an error of law pursuant to the Commercial Arbitration Act 1984 (Vic) (the Act). In this case the court came to the view that each issue should be resolved sequentially and appropriately in the sense that there was no reasonable doubt as to what the Arbitrator decided in respect of each issue and the reason for his decision on each issue.

Enforcing Vacated International Arbitration Awards: An Economic Approach
American Review of International Arbitration, Vol. 11, p. 451, 2000
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 6, 2011
Accepted Paper Series
3 downloads

Abstract:
This article argues for an economic approach to a widely-debated issue in the international commercial arbitration literature: whether arbitration awards vacated in the arbitral situs should nonetheless be enforceable in other jurisdictions. Under this economic approach, parties should be permitted to resolve the issue by contract, with the default rule being that vacated awards are not enforceable (with the possible exception of judgments of the vacating court procured in bad faith). Conceptually, this approach is most like the approach reflected in In re Chromalloy Aeroservices, which is the only current approach that plainly focuses on the agreement of the parties in determining the enforceability of vacated awards. Ironically, although the Chromalloy court adopted the proper conceptual approach, it misapplied that approach on the facts of the case, too readily finding the parties had contracted around the default.

On Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of Emplooyment Arbitration Awards
McGeorge Law Review, Vol. 29, p.223, 1998, Indiana University-Bloomington: School of Public & Environmental Affairs Research Paper Series No. 2011-05-04
Lisa Blomgren Bingham
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)
Date Posted: August 16, 2011
Accepted Paper Series
3 downloads

Abstract:
This Article empirically examines the repeat player employer and the use of personnel manuals, one form of contract of adhesion, in employment arbitration. First, it briefly reviews some of the salient cases that allow for the imposition of arbitration through an adhesive employment contract. Second, it summarizes prior empirical research on employment arbitration. Third, it reports the results of an empirical study on the repeat player effect as it relates to the presence of a personnel manual or handbook as the basis for arbitration. That study finds that repeat player employers do better in arbitration than one-shotters, and that employers arbitrating pursuant to a personnel manual do better than those arbitrating under an individual contract. Thus, adhesive contracts do put employees at a disadvantage. Fourth, the article examines some of the accounts for the repeat player effect in light of Marc Galanter's catalogue of advantages. Lastly, it discusses ways empirical analysis of arbitration awards should, and should not, be used in the judicial review of employment arbitration awards in light of the repeat player effect. It argues that statistics on an arbitrator's past record should not be used in judicial review for actual active bias of the arbitrator. However, undisclosed prior cases with the same employer are relevant evidence on the question of the reasonable appearance of arbitrator bias. Finally, statistical analysis on the set of cases decided under certain arbitration rules or protocols may be helpful in examining structural bias.

The Federal Arbitration Act and Testamentary Instruments
North Carolina Law Review, Vol. 90, 2012
David Horton
University of California, Berkeley - School of Law Loyola Law School Los Angeles
Date Posted: August 29, 2011
Accepted Paper Series
3 downloads


Abstract:
The U.S. Supreme Court’s expansion of the Federal Arbitration Act (FAA) has made arbitration clauses ubiquitous in consumer and employment contracts, and provoked heated debate. Recently, though, arbitration clauses have become common in a different context: wills and trusts. Courts have reached wildly different conclusions about whether these provisions are enforceable under state arbitration law. However, no judge, scholar, or litigant has considered the more important question of whether the FAA governs these terms. In this Article, I fill that gap. I first examine the statute’s text and legislative history, and conclude that Congress intended the FAA only to govern “contracts.” Nevertheless, I show that the Court has stretched the definition of “contract” for the purposes of the FAA. Indeed, the Court has predicated arbitration on the mere fact that the parties have entered into a consensual relationship, even if it does not meet the test for contractual validity. I then argue that estate plans, which arise from mutual assent and feature elements of exchange, are “contracts” under the FAA. Finally, I analyze how some of the most challenging features of the Court’s interpretation of the FAA — including the non-arbitrability doctrine, the separability rule, and the statute’s preemptive ambit — would play out in the field of wills and trusts. By doing so, I seek not only to provide guidance for courts and policymakers, but to illustrate that testamentary arbitration may not suffer from some of the flaws that make contractual arbitration so polarizing.

Commitment Problems, Bargaining Power, and the Choice of International Arbitration and Adjudication
APSA 2011 Annual Meeting Paper
Stephen E. Gent and Megan Shannon
University of North Carolina at Chapel Hill and Florida State University
Date Posted: August 1, 2011
Last Revised: August 28, 2011
Working Paper Series
2 downloads


Abstract:
We model the choice to pursue international arbitration and adjudication as part of a political bargaining process. We find that disputants are more likely to pursue legally binding mechanisms when commitment problems plague bilateral bargaining and when the costs of failed negotiations are high. However, states weigh their concerns about commitment problems against the costs of giving up decision control to a third party. Thus, they are more motivated to seek arbitration and adjudication when the ruling is likely to result in a policy similar to what they states would agree to in bilateral negotiations. In short, states value legally binding mechanisms for the commitment advantage they give to settlements over issue disputes, but states will only pursue this avenue if they can expect to receive a politically acceptable outcome. We conclude the paper with a proposed experimental design to investigate how commitment problems a ect the choice of arbitration, as well as case illustrations to show how an expected ruling influences the chosen mechanism of conflict management.

Ecuador’s Attainment of the Sumak Kawsay and the Role Assigned to International Arbitration
Katia Fach Gómez
University of Zaragoza
Date Posted: August 4, 2011
Working Paper Series
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Abstract:
The current Constitution of Ecuador was approved by referendum on September 28, 2008 and replaces the 1998 Constitution. The text was published on October 20, 2008 in the Official Registry of Ecuador. As Part I of this chapter will explain, the 2008 Ecuadorian Constitution includes Article 422 preventing the Ecuadorian State from ceding its sovereign jurisdiction to international arbitration entities through entering into Treaties or international instruments. This provision is a clear manifestation of the rejection generated in Ecuador by an ex ante and general submission to international tribunals. Additionally, Part I discusses in detail the wording of Article 422, highlighting the doubts and difficulties of interpretation posed by this constitutional provision. Part I finishes by reflecting on two events derived from the approval of Article 422: the denunciation of the ICSID Convention and the denunciation of a number of Bilateral Treaties on the Promotion and Guarantee of Investments (BITs) signed by Ecuador. Part II of this chapter studies some recent judgments of the Ecuadorian Constitutional Court, which have declared many BITs as unconstitutional. A detailed review of these decisions will lead us to make a critical assessment. Part III analyzes the most recent manifestations of the Ecuadorian government regarding international investments. These latest contractual and legislative developments force us to reconsider the real impact that Article 422 of the Constitution is having on Ecuadorian economic life.

Judicial Incentives and the Appeals Process
SMU Law Review, Vol. 51, p. 469, 1998
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 5, 2011
Accepted Paper Series
2 downloads

Abstract:
All, or virtually all, court systems have some sort of appeals process whereby litigants that are dissatisfied with an initial decision can challenge that decision “on appeal.” The widespread availability of an appeals process in court adjudication contrasts sharply with the lack of an appeals process in commercial arbitration, where a party has a very limited ability to appeal an adverse award. The literature identifies two principal functions served by an appeals process. The first function of an appeals process is to correct errors by the initial decision-maker. Trial courts make mistakes, and appellate courts, because of their greater expertise, lesser time pressures, collegial decision-making, or some other reason, correct those mistakes. The second function attributed to the appeals process is lawmaking. At least in common law countries, appellate judges decide cases that provide precedents to guide decisions in future cases.

This Article extends the existing literature by addressing the functions of an appeals process from the perspective of the incentives of judges rather than from the perspective of the incentives of litigants. Because the institutional characteristics of courts at different tiers of the court system vary, the incentives of judges at the different tiers vary as well. As a result, on the margin a judge may decide a case differently depending on whether the judge sits on a trial court, an intermediate appellate court, or a supreme court. An appeals process permits parties to have their case reviewed by a court with different incentives than the trial judge, and ensures that the trial judge considers that possibility in deciding the case. As a result, the appeals process prevents some such “errors”; others will be corrected by the appellate court. An appeals process does more than correct cognitive mistakes by trial court judges; it changes the trial judge's incentives.

Arbitrators, by comparison, have very different incentives than trial judges. Unlike judges, the compensation of arbitrators varies with the amount of time they spend on a case, and arbitrators compete with each other for future cases. Market forces constrain the self-interest of arbitrators
in ways that they do not for judges, making an appeals process of less value to the disputing parties in an arbitration proceeding. The differing incentives of judges and arbitrators thus provide an additional, incentives-based explanation for the lack of an appeals process in commercial arbitration.

Strategic Selection: Political and Legal Mechanisms of Territorial Dispute Resolution
APSA 2011 Annual Meeting Paper
Emilia Justyna Powell and Krista E. Wiegand
Georgia Southern University and University of Alabama , Georgia Southern University
Date Posted: August 1, 2011
Last Revised: August 27, 2011
Working Paper Series
2 downloads


Abstract:
What types of states are more likely to resort to legal methods of peaceful resolution in attempting to resolve their territorial disputes? We posit that two separate mechanisms affect states’ decisions to choose legal methods of peaceful resolution: the legal mechanism – domestic rule of law and the political mechanism – win/loss record. The interplay of both of these mechanisms explains strategic choices made by states with regards to arbitration and adjudication. Empirical analysis of all attempts at peaceful resolution of territorial disputes from 1985-2006 shows that states are more likely to return to international legal venues if they have a positive experience with these methods. However, a positive win/loss record matters more for rule-of-law challenger states. These states will still consider resorting to legal venues even after having lost in these venues. Low rule-of-law states, on the other hand, exhibit moderate enthusiasm toward legal methods of peaceful resolution even with a positive win/loss record. These states are also very unlikely to resort to arbitration and adjudication after having suffered a territorial loss in international legal venues.

The Future of Manifest Disregard
Stockholm International Arbitration Review, 2009: 1
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 8, 2011
Working Paper Series
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Abstract:
Manifest disregard of the law is a "non-statutory" or "judicially-created" ground for vacating arbitration awards. It does not appear in the Federal Arbitration Act, but instead has been developed by courts—which typically derive the doctrine from dictum in the overruled Supreme Court case of Wilko v. Swan. The usual test for manifest disregard—that the arbitrator knows the applicable law but intentionally refuses to apply it—is based on a literal reading of the Wilko dictum and is directly contrary to the common law authorities cited by the Wilko Court. Indeed, in seeking to ensure that arbitrators correctly apply mandatory rules of law in their awards, lower courts have distorted the doctrine further, in ways that undercut the arbitration process itself. In short, manifest disregard of the law, as currently applied, leaves much to be desired.

Nonetheless, in “Rethinking the Federal Arbitration Act,” manifest disregard of the law should be codified as a ground for vacatur. The justification for codifying manifest disregard is not to ensure that arbitrators follow mandatory rules of law in their awards. Instead, the justification is to protect the integrity of the judicial process—by enabling courts to avoid putting their power and authority behind arbitral awards that openly flaunt the law. As codified, challenges to arbitration awards for manifest disregard of the law will rarely, if ever, succeed. But the need to protect the integrity of the court system justifies codifying manifest disregard, even if the doctrine only rarely is applied.

A Better Solution to Moral Hazard in Employment Arbitration: It is Time to Ban Predispute Binding Arbitration Clauses
Minnesota Law Review Headnotes, Vol. 93, No. 1, pp. 1-14, 2009
Lisa Blomgren Bingham and David H. Good
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) and Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)
Date Posted: August 16, 2011
Accepted Paper Series
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Abstract:
Published in new online journal: Minnesota Law Review Headnotes. Mandatory arbitration is a neologism that describes the capacity of an economically stronger repeat player to impose an adhesive binding arbitration clause on the weaker, usually one-shot, player. Such agreements appear frequently as a condition of some economic relationship, most problematically employment, consumer purchases, or health care. Employers and businesses adopt adhesive arbitration clauses as a means to manage the risk of litigation and perceived “runaway” jury awards. Professor Michael LeRoy, together with his colleague Professor Peter Feuille, has made a series of important empirical and substantive contributions to the dialogue and controversy. In his recent article appearing in the Minnesota Law Review, Professor LeRoy outlines the debate over mandatory arbitration and proposes another way to view the developing and divided case law: that courts create conditions of moral hazard by vacating arbitration awards that employees win. We argue that the data do not support Professor LeRoy’s first recommendation, and that enforcing the narrow FAA review standards will not address the many abuses presented by mandatory arbitration. We conclude that the FAA, as the Supreme Court has interpreted it lately, is the problem and not the solution. The solution is legislation to ban predispute arbitration agreements for employment, health care, and consumer disputes.

Control Over Dispute-System Design and Mandatory Commercial Arbitration
Law and Contemporary Problems, Vol. 67, p. 221, 2004, Indiana University-Bloomington: School of Public & Environmental Affairs Research Paper Series No. 2011-05-08
Lisa Blomgren Bingham
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)
Date Posted: August 16, 2011
Accepted Paper Series
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Abstract:
The phrase "mandatory arbitration" has come to refer to binding arbitration imposed by the stronger party on the weaker in an economic relationship through an adhesive contract clause. Critics have identified a series of concerns regarding the fairness of mandatory arbitration systems, including lack of consent, lack of due process, privatization of public law, shifting costs, and others. This Article argues that mandatory arbitration is not itself the problem. The problem is instead that in some instances, one party to the dispute has exclusive control of the design of the dispute-resolution system. Consequently, research on mandatory arbitration should concentrate on who is structuring it, how they structure it, why this is so, and how these choices affect dispute outcomes.

International Arbitration and the Republic of Colombia: Commercial, Comparative and Constitutional Concerns from a U.S. Perspective
Duke Journal of Comparative & International Law, Forthcoming, University of Missouri School of Law Legal Studies Research Paper No. 2011-18
S.I. Strong
University of Missouri School of Law
Date Posted: August 29, 2011
Accepted Paper Series
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Abstract:
Although the Republic of Colombia is one of Latin America‟s economic powerhouses, with a free trade agreement with the United States on the brink of ratification by Congress, U.S. corporate actors know extremely little about Colombia‟s approach to international commercial arbitration, even though arbitration is commonly agreed to be the preferred method of resolving cross-border business disputes. The scarcity of information on this issue puts U.S. companies at a distinct disadvantage when negotiating with Colombian parties and places the entire dispute resolution process – and thus the economic benefit of the transaction – at risk.

This Article undertakes the first comparative analysis of Colombian arbitration law in English, setting Colombian statutory and case law side by side with international and U.S. law to provide U.S. parties with the information they need to (1) evaluate the risks and benefits associated with entering into an arbitration agreement with a Colombian party and (2) establish the kinds of procedures needed to provide optimal protection of the arbitral process and any resulting award. Not only does this research discuss important comparative and commercial matters, it also considers how a unique type of constitutional challenge – the acción de tutela – affects arbitration law in Colombia.

Of Rabbits and Rhinoceri: A Survey of Empirical Research on International Commercial Arbitration
Journal of International Arbitration, Vol. 20, p. 23, 2003
Christopher R. Drahozal
University of Kansas School of Law
Date Posted: August 6, 2011
Accepted Paper Series
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Abstract:
Although empirical knowledge about the process of international arbitration and its effectiveness is incomplete, a growing number of empirical studies are being published. By expanding the degree of empirical knowledge about international commercial arbitration, these efforts should benefit all those involved in the arbitration process: parties, practitioners, and arbitrators, not to mention policy-makers and academics. This article outlines the current state of affairs by surveying the existing empirical literature on international commercial arbitration. Part II of the article discusses the sources of data on international arbitration; Part III summarizes many of the existing empirical studies on international arbitration; and Part IV suggests possible experimental research on arbitral decision-making.

The Choice for Multilateral Institutions as a Dispute Settlement Method: The Use of the International Court of Justice in Conflict Management
APSA 2011 Annual Meeting Paper
Molly M. Melin and Alexandru Grigorescu
affiliation not provided to SSRN and affiliation not provided to SSRN
Date Posted: August 1, 2011
Last Revised: August 24, 2011
Working Paper Series
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Abstract:
Mechanisms for addressing international disputes greatly vary. While many of these tools allow for active disputant involvement in deciding the potential outcome of a dispute, international arbitration and adjudication require states relinquish control over the outcome and adhere to the decision of the court. When are states more likely to solve their disputes through international institutions as the International Court of Justice (ICJ)? We begin by reviewing the literature that has addressed this question. We then offer several additional hypotheses that we derive from the 1) multilateral and 2) institutional character of the ICJ. We also consider the relevance of the stage the dispute has reached for the likelihood that states will refer it to the ICJ. We use several “networks” of territorial disputes to illustrate our main arguments. We test our hypotheses using Third Party Intermediary data (Dixon and Frazier, 2006).

When We Hold No Truths to be Self-Evident: Truth, Belief, Trust, and the Decline in Trials
Journal of Dispute Resolution, Vol. 2006, p. 131, 2006, Indiana University-Bloomington: School of Public & Environmental Affairs Research Paper Series No. 2011-05-10
Lisa Blomgren Bingham
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)
Date Posted: August 16, 2011
Accepted Paper Series
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Abstract:
This article explores the relationship between the "vanishing trial" and the changing ways in which we think about truth. First, it briefly overviews how we think about knowing what is true: epistemology and the history of philosophy. Second, it looks to the philosophy of science and history of social science for new theories and methods about how we ascertain and construct meaning and what we believe to be real and true. Third, it examines our changing relation to information in the face of the "information explosion": information is the evidence upon which we reach a conclusion about what is true. Fourth, it relates these changes to the philosophy of law and theories of the jury and adversary system. Fifth, it examines what social science has taught us about truth, belief, trust, justice, and control over information. Finally, it addresses how these changes may explain why litigants are using mediation, arbitration, and other forms of appropriate dispute resolution in lieu of the adversarial civil trial. People are choosing to exercise control over what information is used in disputing and over who is using it for what purposes. This takes them away from the civil trial, a formalistic process with strict rules about who can be a witness, what they can say on the stand, what information is admitted as relevant and material to a decision, and what standards the decision-maker must use to evaluate that information. If complexity in the modern world has taught us anything, it is that we no longer hold much to be self-evident.

Worker Participation and Social Dialogue at the Work Place Level in the United States
Charles B. Craver
George Washington University - Law School
Date Posted: August 26, 2011
Working Paper Series
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Abstract:
This paper discusses the right of private sector employees to influence management decisions that may affect their working conditions. It explores the ability of workers represented by labor organizations to deal with their employers through the collective bargaining process, and through contractual grievance-arbitration procedures with respect to issues arising under current agreements. It notes the decline of unions over the past fifty years, with union membership declining from 35% in the late 1950s to under 7% today. In the absence of formal union representation, employees have no formal right to affect management decisions, even though over 85% of surveyed employees have indicated that they would like to have a collective voice at work. Although many firms have established employee participation committees, these are primarily designed to enhance worker productivity and service quality. Most of these institutions are controlled by the employers in a way that makes them technically illegal under Section 8(a)(2) of the NLRA. Few have been established to provide employees with any significant control over their employment terms.

Considerations on the Regulation of Arbitration in the New Civil Procedure Code – With a Special Focus on the Institutionalized Arbitration
Revista Dreptul
Union of Jurists of Romania
Date Posted: August 25, 2011
Working Paper Series

Abstract:
In the following study, the author makes a relatively exhaustive analysis of the provisions of book IV in the new Romanian Civil Procedure Code (Law no. 134/2010), a Code already published (on 15 July 2010) in the Official Journal of Romania, but not yet in force. In this context, the author examines the provisions of “About arbitration” (art. 533-612) in the new Romanian Civil Procedure Code, (with a special focus on the institutionalized commercial arbitration) in relation both to the corresponding provisions in the current Romanian Civil Procedure Code, and to the provisions contained in the Rules of Arbitration of the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania.

Forms of Arbitration in International Trade
Law Annals, Titu Maiorescu University, Forthcoming
Carmen Palacean
Titu Maiorescu University
Date Posted: August 1, 2011
Accepted Paper Series

Abstract:
Commercial arbitration is an alternative way of solving the patrimonial disputes (which can be estimated in money) stemming from acts and deeds of trade. The disputes are assigned to be solved, according to the agreement between the parties, to arbitrators chosen by the parties, whose task is to judge the dispute and give a ruling, which the parties undertake to execute. Inserting the arbitration provision in a commercial contract entitles the interested party, in case of dispute, to request its solving by means of arbitration, therefore excluding the competence of law courts.

In the Name of Equality? The Missing Intersection in Canadian Feminists' Legal Mobilization Against Multiculturalism
American Behavioral Scientist, No. 53, pp. 1763-1787, 2009-2010
Eléonore Lépinard
Universite de Montreal - Political Science
Date Posted: August 17, 2011
Accepted Paper Series

Abstract:
In Canada, women's rights organizations have successfully mobilized the law to foster gender equality. In doing so, they have been constrained by legal understandings of equality and discrimination which have shaped their strategies to seek justice. In return, their mobilization, mainly through litigation, has contributed to craft or to alter legal categories (such as "substantive equality", "women", "sexual harassment" etc.) which in turn sustain their identities and their interests. However, claims made in the name of gender equality raise two issues: they tend to overlook the intersection of gender with other grounds of discrimination such as religion or race/ethnicity, and they tend to conflict with multiculturalism, a value enshrined in Canadian Law. The recent decision taken by the Province of Ontario to ban religious arbitration for family matters offers an illuminating case study of this tension between gender equality and religious rights in the Canadian context. This paper analyzes women's rights activists' legal understandings of gender equality and religious/ethnic discrimination, to explain how these representations have influenced women's mobilization against religious arbitration in Ontario. Bringing together the insights developed by critical legal studies about intersectionality and the study of legal mobilization, this paper explores through a concrete example the tension between feminism and multiculturalism.

Resolution of International Water Disputes: Challenges for the 21st Century
INTERNATIONAL BUREAU OF THE PERMANENT COURT OF ARBITRATION: RESOLUTION OF INTERNATIONAL WATER DISPUTES, Vol. 6, pp. 33-47, The Hague, 2003
Surya P. Subedi
University of Leeds - Faculty of Education, Social Sciences and Law
Date Posted: August 1, 2011
Accepted Paper Series


Abstract:
This fifth volume in the Permanent Court of Arbitration/Peace Palace Papers series reproduces the work of the 6th International Law Seminar held at the Peace Palace on November 8, 2002. The Seminar's distinguished panelists and participants focused on the settlement of international disputes over that most essential of natural resources water.

They explored a range of questions: Which settlement mechanisms are most promising in the field of transboundary freshwater disputes? Is adjudication a suitable method of apportioning water rights which are vital not only to human life, but to the agriculture and industry of every nation on the planet? Given the need for "win-win" solutions to most water disputes, are negotiation and regional cooperation the only realistic and viable methods for settling them? What is the potential role of conciliation, mediation, good offices and other ad hoc mechanisms?

This volume also contains the 1997 United Nations Convention on the Law of the Non-Navigational Uses of International Watercourses, a multilateral framework treaty dealing with transboundary freshwater, which provides a variety of tools (such as the submission of disputes to fact-finding commissions) for the peaceful resolution of water disputes.


WTO Dispute Settlement Mechanism as a New Technique for Settling Disputes in International Law
INTERNATIONAL LAW AND DISPUTE SETTLEMENT: NEW PROBLEMS AND TECHNIQUES, pp.173-190, Duncan French, Matthew Saul, Nigel D. White, eds., Hart Publishing, Oxford, 2010
Surya P. Subedi
University of Leeds - Faculty of Education, Social Sciences and Law
Date Posted: August 1, 2011
Accepted Paper Series

Abstract:
The dispute settlement mechanism (DSM) of the World Trade Organisation (WTO) is a novelty in international law in so many respects. Although it is an improvement on the old GATT dispute settlement mechanism, it is quite different in nature from other international mechanisms available for resolving international disputes between States. Unlike other mechanisms, its rules and procedures, especially the provisions relating to the appellate body, follow the principles of common law rather than civil law. This mechanism is a blend of diplomacy, negotiation, mediation, arbitration and adjudication. It is neither fully judicial nor completely a non-judicial mechanism. However, this is not a perfect mechanism by any means. It is not free of constraints, deficiencies and some inherent weaknesses. Critics argue that the Dispute Settlement Body (DSB) is not as effective as it appears to be on the surface especially when it comes to enforcing the rulings of the DSB against major powers. They also argue that it does not provide effective remedy for those non-State business actors which suffer from injustices and distortions in international trade. It is in this context that this research project aims to examine the framework of the dispute settlement system within the WTO and explore its weaknesses and ways to overcome them.

The Twenty-First Century Law Merchant
American Business Law Journal, Vol. 48, No. 4, 2011, UNSW Law Research Paper No. 32
Leon Trakman
University of New South Wales (UNSW) - Faculty of Law
Date Posted: August 31, 2011
Accepted Paper Series
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Abstract:
This article examines the multifarious conceptions of the Law Merchant, focusing on its attributes as a spontaneously ordered and plurally autonomous framework of law. Part I considers the economic rationale that the Law Merchant has evolved spontaneously. Part II investigates the autonomy values that are associated with a Law Merchant system, the degree to which those values are commensurable with one another, and the prospects of mediating among them. Part III considers whether the Law Merchant is truly an independent merchant system, whether it is uniform in nature, and whether it has resisted fragmentation through its localization within domestic legal systems. Parts IV and V, evaluate the extent to which a liberalized Law Merchant has evolved into the twenty-first century, the influence of micro-economic interests such as the autonomy rights of merchants upon it, and the practices of nation-states in “nationalizing” or “trans-nationalizing” it structurally, substantively, and procedurally. Part VI examines the extent to which these features can be applied to the example of transnational arbitration. The article concludes that abstract notions of a cohesive Law Merchant, entailing romantic conceptions of its origins and current subsistence, are to be discouraged. Instead, greater attention should be given to particular facets of the Law Merchant as it exists in the transnational commercial world today, especially the ways in which a universalized Law Merchant interacts with regulation at domestic and multistate levels.

Proferas Nihil Ultra Quam Quod Necessarium Est: SBI v Emmsons International

Case: State Bank of India & Anr. V. M/s Emmsons International Ltd. & Anr.

Civil Appeal 1709/ 2007

Date: 18 August 2011

Court: Supreme Court of India

Bench: Aftab Alam & RM Lodha,

Facts:

Unialkem Fertilizers Ltd. (Unialkem) placed a purchase order on Emmsons Intl. Ltd. (Emmsons) for supply of 2000 MT of Syrian Rock Phosphate (SRP) for a consideration of Rs. 43,86,411/-. According to the Purchase Order, payment was to be made “against 180 days issuance of letter of credit”. Consequently, a letter of credit (LoC) for Rs. 43,86,411 was established by Unialkem’s bank, State Bank of India (SBI or Issuing Bank) for the benefit of Emmsons. The letter of credit was subject to the Uniform Customs and Practices for Documentary Credits (UCP) (1993 Revision).

The LoC provided for the following documents to be submitted for honouring the LoC:

1. Certificate of Syrian origin issued by the Chamber of Commerce
2. Copy of Certificate Of Quality And Quantity issued by Chamber of Commerce

Emmsons supplied the material and Unialkem accepted the documents pertaining to the sale such as the sale invoice, bills of lading and so on. The sale was a high seas sale. When Emmsons submitted the documents through its bank, Oriental Bank of Commerce (Negotiating Bank), SBI pointed out that there were the following discrepancies in the documents submitted:

1. Certificate from the negotiating bank mentioning all the terms of credit have not been furnished.
2. The certificate of Syrian origin is not issued by the Chamber of Commerce.

Consequently, SBI advised the Negotiating Bank to rectify the discrepancies within Seven days from the date of submission of documents. The defects, according to the Negotiating Bank, were rectified and resubmitted. SBI disagreed that they were rectified. Correspondence ensued between both the banks for more than nine months.

Ultimately, Emmsons filed a summary suit for a decree of Rs. 43,86,411 and interest. In its written statement, SBI pointed out defects in the documents and contended that it had acted in due compliance with the Uniform Customs and Practices for Documentary Credits. The trial court framed five issues and, after considering the evidence, decided in favour of SBI. Ultimately, the Division Bench of the High Court held in favour of Emmsons.

SBI appealed to the Supreme Court. The Supreme Court, after considering the judgement of the Division Bench, held that since the Division Bench did not consider the trial court’s finding on the fifth issue, the impugned judgement suffered from grave error. After supporting its point with decided cases [Santosh Hazari v Purushottam Tiwari, Madhukar v Sangram, H.K.N. Swami v. Irshad Basith (2005) 10 SCC 243, Basith Jagannath v. Arulappa (2005) 12 SCC 303] the court set aside the impugned judgement and restored the first appeal for re-hearing.

There is nothing special about this to necessitate a separate post. But what is notable is that in the decision, the Supreme Court went on to analyse the legal position on rejection of documents. The court cited several decisions, quoted several provisions of the Uniform Customs and Practices for Documentary Credits- UCP 500 and analysed the “fairly well-settled” legal position. If the court was ordering re-hearing of the appeal on a totally different ground, why analyse the legal position on the right of the Issuing bank to insist on strict compliance of the terms of the LoC? Courts have the bad habit of dealing with aspects unnecessary for the disposal of the case. The court could have just stuck to the ground of lack of consideration by the Division Bench of the High Court of the fifth issue and could have dismissed the appeal on the said ground. This is not an one-off instance. In one of our previous posts, we had mentioned a case where the Delhi High Court unnecessarily dealt with facts on performance of the contract when the court had to decide merely on the maintainability of the suit in view of the arbitration clause contained in the contract.

We’ll look at the law on the right of the Issuing Bank (here, SBI) to insist on strict compliance by the Negotiating Bank or the Seller of the terms of LoC in another post. Meanwhile check out the following interesting article on the subject: Ronald J Mann, The Role of Letters of Credit in Payment Transactions, 99 Michigan Law Review 2494 (2000).

Indus Water Treaty Dispute Update: Pakistan Applies for Interim Stay

News papers have reported that Pakistan has sought interim stay on the construction activities of the Kishenganga Hydro Electric project on the Sutlej river till the final disposal of the case. The uninitiated may check out the blog posts from label titled "Arbitration: Indus Water Treaty Dispute". The Kishanganga Project is scheduled to be commissioned by January 2016.

News reports suggest that the application for interim stay would be heard by the seven member arbitral tribunal during the August 25-27 August this year. 

Pakistani newspapers report infighting among the members of its legal team. Allegations such as favoritism in the appointment of lawyers have been made. Also, the papers report difference of opinion in obtaining interim stay of the Kishanganga project even during the first hearing. In fact, people watching the arbitration closely were slightly surprised when Pakistan did not seek an interim stay of the project during the first hearing of the arbitration.

We'll keep readers updated on the hearings.

UNCITRAL Arbitration Rules 2010 & 1976: A Comparison- Part VI

This  is the sixth and last installment in the series of posts on the analysis of the new features in the UNCITRAL Arbitration Rules, 2010. The UNCITRAL Arbitration Rules became effective from 15 August 2010. This series was intended to be complete on the First Anniversary of the Rules. It has been exactly a year since the New Rules have been adopted. The last post was intended to coincide with the first anniversary of the New Rules. Previous posts of this series can be accessed from here, here, here, here and here.

Power of the Arbitral Tribunal to Rule on its Jurisdiction:
The provisions in the 2010 Rules on the power of the arbitral tribunal to rule on its jurisdiction is based virtually on Article 16 of the Model Law, except for some changes, mostly minor in nature. The only change that could be considered as substantial is that the Model Law provided that in case the arbitral tribunal decided that it had jurisdiction on a preliminary issue as to jurisdiction, a party could appeal to the court on the preliminary issue. This provision is absent in the 2010 Rules. The purpose of the deletion might be because the Model Law was aimed at providing a model of arbitration law and would ideally contain provisions pertaining to the role of courts in the arbitral process. The purpose of the Arbitration Rules, on the other hand, is primarily to govern the procedure pertaining to the conduct of the arbitral proceedings.

The New Rules provides that in case a party challenges the jurisdiction of the tribunal in a court, the tribunal nevertheless had the power to continue with the arbitral proceedings and make an award.

The minor but notable changes made in the 2010 Rules vis-a-vis the Model Law are as follows:

1. The term “null and void” in Article 16(1) of the Model Law has been modified as “null”
2. The term “ipse jure” in the above provision has been changed to “automatically”.
3. Article 16(1) provides that a plea that the tribunal lacks jurisdiction shall be raised in the statement of defence and not thereafter. However, it does not deal with a plea of lack of jurisdiction as regards counterclaim or set off. The 2010 Rules provides that a plea of lack of jurisdiction in respect of counterclaim or set off should be made in the reply to the counterclaim or set off and not thereafter.

Time Limit for Communication of Pleadings:
Article 23 of the Old Rules and Article 25 of the New Rules provide that the time limit for communication of the pleadings should not exceed forty five days unless the tribunal, for justifiable reasons, extends the time limits. The time limit of forty five days in complicated arbitrations may not be always possible. While the purpose of this provision is to expedite the arbitral process, practically these provisions presents a huge difficulty to the parties. Therefore, the arbitral tribunal should have the discretion right at the outset to give parties more time for the submission of pleadings.

Interim Measures:
Unlike the Old Rules, the New Rules elaborately deals with interim measures. The Model Law was amended extensively in 2006 as regards provisions pertaining to interim measures that could be granted by the tribunal. These provisions were inserted in a new Chapter IVA of the Model Law. At the time of revising the Arbitration Rules, the Secretariat to the UNCITRAL suggested that the provisions in Chapter IVA could be adopted in the New Rules. Consequently, several provisions in Chapter IVA were incorporated with changes mutatis mutandis.

The Model Law gives the option to the parties to agree that the tribunal would not have the power to grant interim measures [Article 17(1)]. This option of the parties has not been replicated in the New Rules [Article 26(1)].

According to Article 26(2) of the New Rules, an interim measure is any temporary measure ordered by the tribunal prior to issuance of the final award which is in the nature of, but is not limited to, the following measures:
a) Maintenance or restoration of the status quo pending the final decision on the dispute
b) Taking an action, or refraining from taking an action, that would prevent

• Current or imminent harm
• Prejudice to the arbitral process

c) Providing a means of preserving assets out of which a subsequent award may be satisfied

d) Preserving evidence relevant to the resolution of the dispute.

In this regard, it may be noted that Article 17(2) of the Model Law was exhaustive in providing for the kinds of interim measure that an arbitral tribunal could order. The Working Group considered Article 17(2) and concluded that the relevant provision in the New Rules should not be exhaustive in enumerating the interim measures [Para 92-93 A/CN.9/669 - Report of Working Group II (Arbitration and Conciliation) on the work of its fiftieth session (New York, 9-13 February 2009)]. The analogous provision in the New Rules must be drafted so that even measures not contemplated therein may be ordered by the arbitral tribunal. To that effect, Article 26(2) makes it clear that the tribunal had the power to order measures that were not limited to those provided therein.

Further, the party asking for interim measures of the nature specified in (a) to (c) above has to satisfy the arbitral tribunal that:

1. The harm that the interim measures would prevent is not adequately reparable by an award of damages
2. The harm that would be caused to the applicant substantially outweighs the harm likely to result to the party against whom such measure is sought to be directed.
3. There is a reasonable possibility that the applicant will succeed on the merits of the claim.

As regards interim measure specified in (d) above, the above requirements would apply only to the extent the arbitral tribunal considers its appropriate.

The tribunal possesses the power to modify, suspend or terminate the interim measure it ordered either on the application of a party or in exceptional circumstances suo moto.

The tribunal has the power to order a party applying for interim measure to promptly disclose any material change in the circumstances on the basis of which interim measure was sought or was ordered by the tribunal.

The tribunal has also got the power to order the party that applied for interim measures to pay costs and damages in case the tribunal feels subsequent to granting interim measure that interim measures should not have been granted in the circumstances then prevailing. Such order could be made by the tribunal at any time during the arbitral proceedings.

Examination of Witnesses:
According to Article 28(4), witnesses could be examined even by means of telecommunication that does not require the physical presence of the witnesses. Thus, the 2010 Rules has recognised witness examination through video conferencing etc.

Experts Appointed by the Tribunal:
Under the Old Rules, the arbitral tribunal could appoint experts on specific issues without consulting the parties. However, under the New Rules, Article 29(1) makes it clear that the tribunal should consult the parties before appointing experts. Further, the New Rules makes it clear that the expert must be independent.

A delegation of the Working Group wanted to make a proposal pertaining to the challenge of arbitrators. The proposal was that experts appointed by the tribunal could be challenged by the parties for the same reasons and in the same way as an arbitrator could be challenged. Another proposal was made that the experts should, along the lines of the IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules), declare their qualifications and a statement of independence and impartiality before they accept their appointment. Relevant portion of Article 6(2) of the IBA Rules on the Taking of Evidence in International Arbitration provides:

"The Tribunal-Appointed Expert shall, before accepting appointment, submit to the Arbitral Tribunal and to the Parties a description of his or her qualifications and a statement of his or her independence from the Parties, their legal advisors and the Arbitral Tribunal. Within the time ordered by the Arbitral Tribunal, the Parties shall inform the Arbitral Tribunal whether they have any objections as to the Tribunal-Appointed Expert’s qualifications and independence. The Arbitral Tribunal shall decide promptly whether to accept any such objection.”

Further the proposal provided that the parties would have the right to challenge the independence of the expert (A/CN.9/WG.II/WP.159/Add.1 - Settlement of commercial disputes: Transparency in treaty-based investor-State arbitration - Compilation of comments by Governments). This was accepted. The New Rules also provide, based on the IBA Rules, that after the appointment of the expert, a party can challenge the independence of the expert but only for reasons that the party came to know after appointment of the expert.

Waiver of Right to Object:
The provisions pertaining to waiver of the right to object to any non-compliance has been substantially re-worded in the New Rules. The purpose of rewording the provision is to align the provision with the corresponding provision in the Model Law on the waiver of right to object (Para 66-67, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session). The first significant change is that under the Old Rules, the provision pertaining to waiver of right to object to any non-compliance with the arbitration agreement was absent. This has been incorporated in the New Rules.

Another significant divergence, even from the corresponding Model Law provision is that the tribunal would have the power to conclude that there was no waiver of the right to object if the party could show that its failure to object was justified. During the discussions in the Working Group, it was observed that the provision did not exclude legitimate grounds for a party to not object to the non-compliance of a provision (A/CN.9/684 - Report of Working Group II (Arbitration and Conciliation) on the work of its fifty-first session). Views were expressed that in such a case, the party having legitimate grounds for not objecting to the non-compliance should have a reverse burden of proving the same. Thus, in case a party did not object to a non-compliance, the arbitral tribunal would treat the same as a waiver, unless the said party can prove that there were legitimate grounds for not objecting to the non-compliance. After discussions, the Working Group decided to adopt the above proposal.

Arbitral Award:
Publication of the Arbitral Award: The Old Rules simply provided that an arbitral award can be made public only with the consent of both parties. The Secretariat to the UNCITRAL proposed that the Working Group should consider a situation where a party is under the legal duty to disclose the award (A/CN.9/WGII/WP.143/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The Secretariat advised that two options be considered as regards the issue of making the award public. The first option is to retain the provision in the Old Rules that an award could be made public only with the consent of both parties. The second option is to provide that apart from making the award public with the consent of the parties, a party could make the award public for protecting or pursuing a legal right or in relation to legal proceedings before a court or other competent authority (Para 31, A/CN.9/WG.II/WP.145/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The Working Group considered the two options suggested by the Secretariat. However, during discussions three kinds of proposals were made on the issue. The first was to retain the provision in the Old Rules on the issue. The second proposal, which received wide support, was to opt for the second option which the Secretariat proposed. The third proposal, which received the least support, was to delete the provision altogether and add a provision in the next sub-clause stating that the arbitral tribunal shall not disclose the award to any third party and leave the issue of disclosure of the award to national laws (Paras 95-99, Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session). Ultimately, the second proposal was adopted (Para 27, A/CN.9/WG.II/WP.151/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules).

Filing or Registration of Arbitral Award: The Old Rules contained a provision to the effect that in case the arbitration law of the country in which the award is made requires the award to be filed or registered by the arbitral tribunal, the tribunal had the obligation to comply with the requirement as per the law, including any requirement of doing the same within a specified time. This provision was considered by the Working Group as unnecessary for the reason that it casts an onerous obligation on the arbitral tribunal when in many cases the tribunal might be unfamiliar with the national laws.In the end, the Working Group decided to delete the provision ((Para 101-105, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session).

Applicable Law:
The Old Rules provided that in case the parties did not designate the substantive law of the contract, the tribunal had the power to decide the substantive law of contract based on the conflict of laws rules which the tribunal considers apposite. The New Rules makes no reference to conflict of laws rules. The Working Group had two options in respect of the situation where the parties do not designate the substantive law of contract. One was to retain the corresponding provision in the Old Law. The second option was to allow the tribunal to directly designate the substantive law of contract. This was done for the reason that the tribunal must be given an opportunity to decide directly on the substantive law of contract, especially in view of the fact that there were several non-national instruments such as the United Nations Convention on Contracts for the International Sale of Goods, the UNIDROIT Principles of International Commercial Contracts, the INCOTERMS, the Uniform Customs and Practices for Documentary Credit, or lex mercatoria which could be decided directly by the tribunal without reference to any conflict of laws rules (Paras 106 -112, A/CN.9/641 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-seventh session).

The 1976 Rules laid down two conditions for the tribunal to decide a dispute ex aequo et bono or as an amiable compositeur. They are:

1. The parties have expressly granted such power to the arbitral tribunal, and
2. The procedural law of arbitration permits the tribunal to decide a dispute ex aequo et bono or as an amiable compositeur.

The Secretariat of the UNCITRAL proposed, citing the then existing provisions of the ICC Rules (“The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers.”), Article 22.4 of the LCIA Rules (“The Arbitral Tribunal shall only apply to the merits of the dispute principles deriving from “ex aequo et bono”, “amiable composition” or “honourable engagement” where the parties have so agreed expressly in writing.”) and Article 28.3 of the AAA Rules (“The tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties have expressly authorized it to do so"), to delete the second condition (A/CN.9/WG.II/WP.143/Add.1-Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). The 2010 Rules does not make any reference to the second condition.

Terminal of Arbitral Proceedings:
As regards termination of arbitral proceedings, the Old Rules provided that before making of the final award if the tribunal considered it unnecessary or impossible to proceed with the arbitration, the tribunal shall have the power to terminate the arbitration proceedings after informing the parties of its intention to do so unless the parties raise justifiable grounds against termination of the proceedings. In the new Rules the justifiable grounds exception has been deleted.

Correction of Arbitral Awards:
The Working Group considered whether a time limit should be fixed for the tribunal to correct minor errors in the award. Wide support was given for such a proposal but there was divergence regarding the time specified. Ultimately, it was decided that the tribunal should correct such minor errors within forty five days (Para 106-107, A/CN.9/684- A/CN.9/684 - Report of Working Group II (Arbitration and Conciliation) on the work of its fifty-first session). Thus, under the New Rules, the tribunal is under an obligation to decide any requests for correction of computational, clerical or typographical errors, or other errors or omissions of a similar nature within forty five days from the request if the tribunal considers such request justified. The term “omissions” was added in the New Rules to include situations such as omission by the arbitrator to put his signature or the date in the award (Para 127, A/CN.9/614 Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session).

Costs:
The provisions pertaining to costs are some of the most important provisions of the UNCITRAL Arbitration Rules. UNCITRAL Arbitration Rules has been considered by many as ensuring cost effective arbitration as compared to institutional arbitration or other rules. The Working Group considered that failure to provide for exhaustive provisions on costs might lead to reluctance in choosing the Rules by parties.

The Tribunal has been given the power to decide on the costs in the final award or even in a separate decision. In relation to interpretation, correction or completion of award, the tribunal may charge reasonable costs but shall not charge additional fees.

The Secretariat of the UNCITRAL recommended that the term “reasonable” ought to be inserted in the different kinds of costs enumerated in the definition of “costs” (Para 36 A/CN.9/WGII/WP.143/Add.1 - Settlement of commercial disputes: Revision of the UNCITRAL Arbitration Rules). Accordingly, the New Rules requires that costs should be reasonable. Further, the New Rules provides for an additional requirement as regards the travel and other costs of witnesses: it states that only reasonable travel and other costs will be allowed and such costs have to be approved by the arbitral tribunal. With regard to legal costs, the New Rules states that such costs must be in relation to arbitration and the tribunal must consider such costs reasonable. Thus, the New Rules ensures that there is a greater transparency towards costs incurred by the parties in respect of the arbitration proceedings.

The tribunal is not entitled to charge any fee for proceedings pertaining to interpretation, correction or completion of any award although it is entitled to charge costs for the same.

Article 41 of the New Rules retains the corresponding provision in the Old Rules that the fee charged by the arbitral tribunal shall be reasonable. The Old Rules provided that where an appointing authority states that it will apply a particular method of computation of fees the arbitral tribunal need not treat the same as sacrosanct. The tribunal has the power to take the same into account to the extent it considers it appropriate. The New Rules provides that promptly after the tribunal is constituted, it shall inform the parties of the manner in which it proposes to compute the fee. The parties have the right to approach the appointing authority within fifteen to request for review of the tribunal’s proposal. Within forty five days, the appointing authority has the power to see if the tribunal’s proposal is inconsistent with its method of computation of fee. If the tribunal’s proposal is inconsistent with the appointing authority’s method, the appointing authority can make necessary adjustments to the proposal. Such adjustments would be binding on the arbitral tribunal. In case no appointing authority has been designated or if the appointing authority fails to act within the said forty five days, a party shall have the right to approach the Secretary-General of the Permanent Court of Arbitration.

To safeguard the interest of the party seeking review of fee, the New Rules provides that such action shall not:

1. affect the determination in the award
2. delay the recognition and enforcement of the award.

Conclusion:

In our first post in the series, we had mentioned that the UNCITRAL Rules were popular not only in commercial arbitration circles but also in Investment arbitration. Recognising this, when UNCITRAL considered revision of the 1976 Rules, it was agreed that the generic approach of the Rules should be maintained in the New Rules. At the time of the Revision, there were several proposals to include provisions that relate to investor-state arbitration such as confidentiality, amicus curiae briefs etc. The UNCITRAL was, however, apprehensive in including specific provisions for investor state arbitration, considering generic nature of the Rules. Consequently, the New Rules do not contain specific provisions addressing issues pertaining to investment arbitration.The Milan Club of Arbitrators, a Non-govermental Organisation, proposed that the Rules should contain optional clauses dealing with Investment Arbitration. There were several proposals such as these to address specific Investment Arbitration concerns.However, in view of the urgent need to revise the Arbitration Rules and the complex issues involved in Investment Arbitration, the UNCITRAL felt that such issues should not be brought within the ambit of the Arbitration Rules. Therefore, the UNCITRAL concluded:

• Issues pertaining to Investment Arbitration were significantly different from those in commercial arbitration.
• Any work on Investment Arbitration should not delay completion of the revision of the Arbitration Rules.
• It is not desirable to have specific provisions on Investment Arbitration in the New Rules.
• After the completion of the revision of the Arbitration Rules, the Working Group would seek guidance from the UNCITRAL as to whether to consider specific issues pertaining to Investment Arbitration.

(Para 54-69, A/CN.9/646 - Report of the Working Group on Arbitration and Conciliation on the work of its forty-eighth session).

Subsequent to the revision, the UNCITRAL felt that transparency in Investment Arbitration was an important issue. There was a consensus in the Working Group that transparency in Investment Arbitration was an important issue that needed attention. Hence, the Working Group decided to work on a legal standard on transparency in Investor-State arbitration. The Working Group was of the opinion that the legal standards on increased transparency in Investor-State arbitration would add credibility to the process. Currently, the Working Group has already come up with a draft Standards. It remains to be seen how this legal standards would be adopted in Investment Treaty Agreements alongwith the New Rules.