cepani/viac - case study - vienna,17 january · pdf filecepani/viac - case study - vienna,17...

CEPANI/VIAC - CASE STUDY - Vienna,17 January 2014

Kristof Cox, Deloitte Fiduciaire, Belgium

Emmanuel Kaufman, Wolf Theiss, Vienna Herman Verbist, Everest, Ghent and Brussels

Are the new CEPANI and VIAC Rules suitable for new cases?

A tale of chocolate…

The parties

• Belle Choc S.A. (“BC”) A Belgian chocolate producer;

• ZauberTorte (“ZT”) An Austrian cake producer;

• Netkoo A Belgian chocolate product distributor active in the Benelux; and

• GCD A major chocolate product distributor active in the whole of Western Europe.

2 CEPANI/VIAC - Case study - Vienna, 17 January 2014 Kristof Cox/ Emmanuel Kaufman / Herman Verbist

Case circumstances - 2008

• Cooperation Agreement between BC and ZT – BC will supply ZT with chocolate;

– BC will distribute ZT products in Benelux;

– CEPANI/VIAC arbitration clause; and

– Clause providing that ZT will avoid any actions that affect the distribution of its products in Benelux.


Case circumstances - 2009 • Because of the crisis BC decided to focus on its core-business

(i.e. production of chocolate);

• BC enters into a sub-distribution agreement (including a CEPANI/VIAC arbitration clause) with Netkoo Distribution of ZT in Benelux

• ZT agreed to BC’s decision about the sub-distribution of its products in the Benelux through Netkoo; and

• The sub-distribution agreement 1) expressly refers to the cooperation agreement between ZT and BC and 2) states that no actions are going to be taken affecting the distribution of ZT in Benelux.


Case circumstances 2013 (1)

• In an interview with a newspaper one of

Belgian’s top chefs lists ZauberTorte as his favourite “little sin”; and

• ZauberTorte-hype in Belgium Sales of ZT increase.


Case circumstances 2013 (2) • A major distributor of chocolate in Europe (GCD)

offers ZT to enter into a distribution agreement for Western Europe;

• ZT and BC agree that this would be beneficial for them both; and

• BC and ZT think there is no problem with Netkoo because of the lack of exclusivity clause towards GCD.



• Netkoo learns about the new distribution agreement for Western Europe with GCD; and

• Netkoo’s CEO and General Legal Counsel want to consider their options to start a legal action against BC and ZT.



• The in-house counsel of Netkoo studies the new CEPANI/VIAC Rules of 2013; and

• The new articles seem to be efficient tools, which may prove helpful for Netkoo’s claim.


Issue 1: How to ensure the applicability of the new CEPANI/Vienna Rules? (1)

• Art. 7(1) CEPANI: “The Rules which are in effect on the

date of the commencement of the arbitral proceedings*, unless they have agreed to submit to the Rules in effect on the date of their arbitration agreement.”

– * Art. 3(3) CEPANI : “The date on which the secretariat receives the

Request for Arbitration and the annexes thereto and the payment of the registration costs”


Issue 1: How to ensure the applicability of the new CEPANI/Vienna Rules? (2)

• Art. 1(2) Vienna Rules: “[…] the version of the Vienna Rules in effect at the time of commencement of the arbitration shall apply.”

• Art. 47 Vienna Rules: “This version of the Vienna Rules shall apply to all proceedings in which the Statement of Claim was filed after 30 June 2013.”



• Now that BC uses the biggest network to distribute the products of ZT’s competitor in the Benelux, the sales of Netkoo drop dramatically; and

• Netkoo’s CEO demands from his legal counsel that the arbitration should lead to results ASAP.


Issue 2: Speed-up the arbitration proceedings? (1)

• Art. 3 CEPANI Arbitration Rules for Disputes of Limited Financial Importance (Section II): – Claim + counterclaim < Euro 25.000 – What if amount is exceeded in the course of

the arbitration? • Art. 3.2 of Section II: Section II still

applicable, unless otherwise agreed by the parties in which case Section I (Arbitration Rules) shall apply


Issue 2: Speed-up the arbitration proceedings? (2)

• Art. 45 VIAC: – Application of supplementary rules -> if the parties agree to their

application in the arbitration agreement or subsequently (Art. 45 paragraph 1)

– Specific rules applicable? -> The provisions of the Vienna Rules unless Art. 45 foresees something differently (Art. 45 paragraph 2)

– Number of arbitrators? -> One arbitrator unless otherwise agreed – Deadlines:

• Answer to request for arbitration: 30 days (= to “normal” proceedings) • Payment of advance on costs: 15 days • Nomination of arbitrator (sole arbitrator, co-arbitrator and chairman): 15 days • Deadline to render the award: 6 months (can be extended)


Issue 3: Preliminary relief (1)

• Art. 26 CEPANI: Interim and Conservatory Measures prior to the Constitution of the Arbitral Tribunal

- except if parties have agreed otherwise - arbitrator deciding on interim and conservatory measures - within 15 days from receipt of the file by him - decision does not bind any arbitrator who will decide on merits

• Art 27 CEPANI : Interim and Conservatory Measures after the

Constitution of the Arbitral Tribunal


Issue 3: Preliminary relief (2)

• Art. 33 VIAC Rules: – Unless otherwise agreed between the Parties, the Arbitral

Tribunal can grant interim and conservatory measures against another party

– Right to be heard – Appropriate security “may” be required – Compliance by the parties “irrespective of whether they are

enforceable before State courts” – In writing – The provisions in the VIAC Rules do not prevent the parties from

applying to any competent State authority for interim or conservatory measures.

15 CEPANI/VIAC - Case study - Vienna, 17 January 2014

Kristof Cox/ Emmanuel Kaufman / Herman Verbist


How much will the arbitration eventually cost? • Netkoo’s CEO hears from a fellow entrepreneur that

arbitration is much more expensive than court proceedings; and

• He is not pleased that his legal counsel has not mentioned so during the contract negotiations. Moreover, he is worried about the lawyer’s fees.


Issue 4: Fees and costs of arbitrators, administrative fees, lawyer‘s fees (1)

• Article 34 CEPANI: administrative expenses of CEPANI, fees and

expenses of arbitrator(s), expenses of parties, and of any experts and witnesses

• CEPANI Schedule I: Scale of costs for arbitration • CEPANI Schedule II: Parties‘ costs - Recommendations


Issue 4: Fees and costs of arbitrators, administrative fees, lawyer‘s fees (2) • Registration fee (Art. 10 Vienna Rules):

– EURO 1500 (increase by 10% for each additional party up to a maximum of 50%) – Not refundable

• Advance on costs (Art. 42 Vienna Rules): – Relevant -> amount in dispute, number of arbitrators and parties – The Secretary General shall determine the VIAC‘s prospective administrative fees, the

arbitrators’ fees and the expenses (Annex 3 Vienna Rules)

• Advance on costs for additional costs of the proceedings (Art. 43 Vienna Rules)

• Composition and calculation of procedural costs (Art. 44 Vienna Rules) – Three groups: 1) Costs of the arbitration (administrative fees, arbitrator’s fees and

expenses) 2) the Parties’ costs; 3) additional costs – Who calculates and determines the procedural costs?



How to avoid the delays in the arbitration? • Netkoo’s legal counsel expects that BC and ZT will

“sabotage” the start of the arbitration proceedings. • How to deal with:

– Challenge of jurisdiction; – Lack of payment of advance on costs; – Failure to appoint an arbitrator; and – Signing of Terms of Reference (CEPANI).


Issue 5: Challenge of jurisdiction (1)

• Prima facie control of existence of arbitration agreement by CEPANI

• Art. 6 and 7 (2) CEPANI: If Respondent does not answer within one month or refuses arbitration, CEPANI decides whether arbitration can proceed

• Art. 7 (3) CEPANI: In case of plea concerning existence, validity or scope of arbitration agreement, CEPANI shall transmit the matter to Arbitral Tribunal for decision on merits


Issue 5: Challenge of jurisdiction (2)

• Does the VIAC have any role?

• Art. 24 Vienna Rules –> the jurisdiction of the Arbitral Tribunal is determined by the Arbitral Tribunal.


Issue 6: Advance on costs (1)

• Art. 35(1) CEPANI: advance on costs to be paid before transmission file • Art. 35(3) : - payable in equal shares by Claimant(s) and Respondent(s) - in case a party fails to pay its share, the other party shall be free to pay the whole advance on arbitration costs • Art. 35(4) : separate advances on costs may be fixed by CEPANI, - at request of a party - in case counterclaim or request for intervention is filed


Issue 6: Advance on costs (2)

• Art. 11 Vienna Rules: – Transmission of file to Arbitral Tribunal -> only after payment of advance on costs

• Art. 42 Vienna Rules:

– The parties undertake to bear the advance on costs in equal parts by agreeing on the Vienna Rules

– If one party does not pay its share in full within the time limit, the Secretary General will inform the other party and request the payment from this payment;

– The Arbitral Tribunal may order the non-paying party to reimburse the paying party (through an award or other form).


Issue 7: Appointment of arbitrators (1)

• Art. 15(2) CEPANI : if parties agreed to settle dispute through sole arbitrator,

- parties may select sole arbitrator within one month (extendable) - failing which, sole arbitrator shall be appointed by CEPANI • Art. 15(3) : if parties agreed to settle dispute through three arbitrators - each party shall nominate its co-arbitrator - if party fails to do so, the co-arbitrator shall be appointed by CEPANI • Art. 15(5): in case of multiparty arbitration - in absence of joint nomination and if parties do not agree on appointment method, CEPANI shall appoint all arbitrators • Art. 15(4): if parties did not agree on number of arbitrators, a sole

arbitrator shall be appointed, unless requested or decided otherwise


Issue 7: Appointment of arbitrators (2) • Art. 17 Vienna Rules:

– The parties may agree on 1 or 3 arbitrators and the mechanism of appointment – Appointment under the Vienna Rules:

• No agreement on number of arbitrators -> Board determines the number • If one arbitrator -> the Parties jointly nominate within 30 days -> Failure ->

appointed by Board • If three arbitrators -> Each Party nominate one arbitrator within 30 days ->

failure -> appointed by the Board • If three arbitrators -> the co-arbitrators nominate the chairman within 30 days

-> failure -> appointed by the Board.

• Art. 18 Vienna Rules: Rules in the case of multy-party arbitration

• Art. 19 Vienna Rules: Confirmation of the nomination – Secretary General (Board if required) shall confirm the nominated arbitrator/s – After the confirmation -> the arbitrator will be considered appointed


Issue 8: Terms of Reference (CEPANI)

• Art. 22(1) CEPANI : to be established prior to examination of file • Art. 22(2) CEPANI : • - to be signed by the parties and the arbitrator(s) within 2 months of

transmission of file • - if party refuses to take part in drawing up ToR or to sign, • - parties shall continue after expiration of time limit granted by

CEPANI to the arbitrator(s) for obtaining the missing signature • - thereupon, deemed to conform to rules of due process


Issue 9: Challenge of arbitrator(s) (1)

• Art. 16(1) CEPANI : alleged lack of independence or other reason • Art. 16(2) CEPANI : must be filed by party within one month - of receipt of notification of arbitrator‘s appointment ; or - of date on which it was informed of facts and circumstances • Art. 16(3) : CEPANI invites arbitrator concerned, other parties and

other arbitrators (if any) to file written observations - written observations are communicated to parties and arbitrators - parties and arbitrators may respond to these observations • Art. 16(4) : CEPANI Challenge Committee decides - without any recourse - reasons for decision shall not be communicated • Art. 26(7) CEPANI : Challenge of emergency arbitrator


Issue 9: Challenge of arbitrator(s) (2)

• Art. 20 VIAC Rules: – “[…] [I]f circumstances exist that give rise to justifiable doubts as to his

impartiality or independence, or if he does not fulfill the qualifications agreed by the parties […]”

– Deadline for filing the challenge of the arbitrator before the Secretariat: 15 days

– Specification of the ground and inclusion of corroborating materials – Board of the VIAC makes the decision on the challenge – Comments from the Parties and from the challenged arbitrator required – Arbitration proceedings may continue -> However, no award until

decision on the challenge


Issue 10: Examination of the case – Evidence (1)

• Art. 23(2) CEPANI: Arbitral Tribunal shall examine the case - within as short a time as possible - by all appropriate means • Unless agreed otherwise by parties, Arbitral Tribunal shall be free to

decide on rules as to taking of evidence - may i.a. obtain evidence from witnesses and appoint expert(s)


Issue 10: Examination of the case – Evidence (2)

• Art. 29 Vienna Rules: – Arbitral Tribunal:

• Not limited in the determination of the disputes to the evidence submitted by the Parties

• The Arbitral Tribunal may collect 1) evidence, 2) question parties and witnesses; 3) request the parties to submit evidence and call experts.

– The discretion of the Arbitral Tribunal is limited by the provision of the applicable arbitration law

• Article 28 Vienna Rules: fair treatment of the Parties and the right to be heard

– Continuity of the arbitration proceedings regardless of the failure of any party to participate


Issue 11: Challenge of expert(s) (1)

• Art. 23(2) CEPANI : Arbitral Tribunal may obtain evidence from witnesses and appoint one or more experts

• Arbitral Tribunal should check independence and impartiality of expert(s) prior to appointment

• Arbitral Tribunal shall decide about challenge of appointed expert(s)


Issue 11: Challenge of expert(s) (2)

• Article 23 Vienna Rules: – The rules relating to the challenge of an arbitrator apply by

analogy (Art 20 paragraph 1 and 2) • 15 days to submit the challenge to the Secretariat • Circumstances exist that give rise to justifiable doubts as to

impartiality or independence or expert does not fulfill the qualification agreed by the Parties

– The Arbitral Tribunal decides on the challenge




• Hearing? • BC finds it important that the Tribunal

personally hears the CEOs of all parties involved about: – Agreements reached orally – Clause not affecting distribution in BENELUX

• ZT and Netkoo want to avoid a hearing on the basis that it is unnecessary and overly costly.


Issue 12: Hearing (1)

• Art. 23(3) CEPANI: Arbitral Tribunal may decide the case solely on basis of documents submitted by the parties, unless the parties or one of them requests a hearing

• Art. 23(4): At request of parties or of one party or on its own motion, Arbitral Tribunal may summon the parties to a hearing

• Art. 23(5): If a party fails to appear, although duly summoned, and if there is no valid excuse for its absence, Arbitral Tribunal may proceed

• Art. 23(6): Persons not involved in proceedings shall not be admitted • Art. 23(7): Parties shall appear in person or through duly authorized

representatives


Issue 12: Hearing (2)

• Art. 30 Vienna Rules: – Oral or written proceedings? -> Unless otherwise agreed by the Parties,

the Arbitral Tribunal decides – If no exclusion of an oral hearing -> A hearing will be held upon request

of a party – Date of hearing -> fixed by chairman or sole arbitrator – Hearings shall be private – The sole arbitrator or the chairman shall prepare and sign minutes of the

hearing (minimum content –> summary of the hearing and its results)



Award

• All three arbitrators have conflicting opinions on the merits of the claims. They fail to reach agreement. Quid?


Issue 13: The Award (1)

• Art. 29(1) CEPANI: Where there is more than one arbitrator, - the award shall be made by a majority decision - if no majority can be reached, the chair of the Arbitral Tribunal shall have the deciding vote

• Art. 29(2) CEPANI : Award shall state reasons upon which it is based



Issue 13: The Award (2)

• Art. 35 Vienna Rules:

– An award or any decisions of the Arbitral Tribunal -> requires a majority ruling

– If no majority can be achieved -> the chairman decides

– Questions of procedure -> The chairman may decide by himself/herself if authorized by the other arbitrators



Summary guide Issue CEPANI Rules VIENNA RULES

1. Applicability of New Rules Art. 7(1) Arts. 1(2) and 47

2. Fast-track arbitration Section II(Lim. Fin. Imp.) Art. 45

3. Preliminary relief Arts. 26-27 Art. 33

4. Costs Art. 34; Sched. I and II Arts. 10, 42-44

5. Challenge of Jurisdiction Art. 7(2)-(3) Art. 24

6. Advance on costs Art. 35 Arts. 11, 42-43

7. Appointment of arbitrators Art. 15 Arts. 17-19

8. Terms of Reference Art. 22 ---

9. Challenge of arbitrator(s) Art. 16 ; Art. 26(7) Art. 20

10.Examination case:Evidence Art. 23(2) Art. 29

11. Challenge of expert(s) Art. 23(2) Art. 23

12. Hearing Art. 23(3)-(7) Art. 30

13. Award Art. 29 Art. 35


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