the australian adr reporter

The stunning success of this year’s Diploma Course

The Petronas Towers at dusk (Photograph: John Morhall)

Arbitration in China: Progress and challenges

The Australian

ADR ReporterQuarterly Bulletin of The Chartered Institute of Arbitrators Australia

Issue No 20 - June 2013

The Australian www.ciarb.net.au

ADR Reporter2

November 2013 Diploma Course in International Commercial Arbitration

Kuala Lumpur, Malaysia 9 to 17 November 2013

AustralianBranch

CIArb

Places are strictly limitedCost: A$7,900 includes tuition, course notes, morning and afternoon tea, lunch, midweek dinner, course banquet and accommodation at Royale Chulan HotelThe above cost is for students who are not residents of Kuala Lumpur only and includes the cost of the Practice and

Procedure exam but NOT the Award Writing exam which is subject to an additional fee.

This intensive residential course in International Commercial Arbitration is offered over nine days. Participants will be taught the practice of international commercial arbitration, including all major forms of international arbitration and related dispute settling mechanisms such as WIPO, WTO and Investment Treaty Arbitration. Participants will gain

the ability to appear in or act as an arbitrator in such arbitrations in different contexts.

In the first half, a series of lectures cover the fundamentals of international commercial arbitration. They follow and analyse legal concepts and issues arising during the course of an arbitration. In the second half, the lectures will examine Trade Law disputes and arbitration under Bilateral Investment Treaties and Free Trade Agreements and other specialist areas such as construction arbitration.

Meanwhile in the afternoon sessions, participants take part in practical group workshops, under the guidance of experienced arbitrators. Students will be given practical training in the conduct of an international arbitration and will discuss a range of problems which may arise in the course of conducting an international arbitration.

On successful completion of the Diploma course and Module 4 Award Writing Examination, candidates will be awarded a CIArb Diploma in International Commercial Arbitration.

Successful completion of the course assessment will enable students to gain advanced standing in postgraduate programs offered by the Faculty of Law UNSW. Please contact student services to discuss admission to a post-graduate program before undertaking the course. Current UNSW students should contact student services to obtain information about units of credit available to your degree. A maximum of 12 units of credit advanced standing is available.

For further information about the course, please contact:

Ms. Rashda Rana, Course DirectorChartered Institute of Arbitrators (Australia) Limited

Level 16, 1 Castlereagh Street

Sydney, NSW, 2000, AustraliaTel: + 61 2 9230 3205; Mob: +61 (0)413 130 601

Email: [email protected]

To register, pay fees or hotel bookings, please contact:

Michael Sanig, Course Logistics DirectorChartered Institute of Arbitrators (Australia) Limited

Level 16, 1 Castlereagh Street

Sydney, NSW, 2000, AustraliaTel: + 61 2 9415 1600; Mob: +61 (0)457 000 747

Email: [email protected]

ADRReporterTable of ContentsJune 2013

24 September - Board Meeting

29 October - Clayton Utz/University of Sydney International Arbitration lecture - Justice James Allsop - Federal Court,

184 Phillip Street, Sydney

9 - 17 November- Diploma Course in International Commercial Arbitration in

Kuala Lumpur, Malaysia

26 November - Board Meeting

5 December - One day conference in Sydney - “Key issues in International Arbitration in the Asia Pacific Region”to

be held at the Intercontinental Hotel

Updated information and other events can be found on our website

www.ciarb.net.au

TheDiary

3

June 2013




The Australian




LegalViewpoint46 Adjudications: Queensland

Mixed messages from Qld Supreme Court

47 Expert witnesses: VictoriaExpert conclaves - avoiding collision of

ships in the night

48 All are right!A Hasidic lesson for American mediators - or any mediators

TheDirectory4 Who is who in CIArb Australia

The Australian ADR Reporter

Editorial5 Where next?

Why Australia is not an automatic choice for any Diploma Course;

The ADR Reporter

NewsReview7 Magnificent KL, sensational Melaka

12-13 The Class of 201314 The Course DinnerPassport dramas in KL

15 An unforgettable experience - Louise Dargan’s personal account

17 Rashda Rana elected president;AGM results

John Wakefield elected to Board of ACDC;

Peter Megens moving to Singapore18 East Timor takes Australia to

arbitration19 Cuba takes Australia to WTO over

cigarette packing21 Diploma Course returns to Malaysia

22 University of Canberra wins Vis Moot East

23 Plain cigarette packaging - six months on

Cover story7-9, 11-16 The 2013 Diploma Course in International Commercial Arbitration41-44 Aribtration in China: Progress and

challenges

Columnists6 From the President

20 John Wakefield’s valedictory column

InternationalReport

25 MalaysiaKLRCA looks to increase arbitration

cases by 150pc26 Singapore

Singapore expands arbitration influence in Asia

27 UNCTADInternational investment disputes hit

record in 201231 Kenya

Is arbitration of disputes better than litigation ?32 UAE

Has recent ruling of Dubai Court of First Instance on enforcement of foreign arbitral awards sent UAE back to square one?

34 UKCompanies bolster lawyers as clashes

riseEcuador: Ecuador Says Unasur Dispute-

Settlement Centre could operate this year35 Ecuador

The cost of failing to comply with an interim award

36 USTreaty disputes fuel big paydays

36 MuscatArbitration fees need to be curbed

38 ChinaBreakaway Shanghai body announces

new official name39 China

Arbitrating in the PRC: What are the risks to arbitration now?

44 RussiaArbitration implications of recent

Supreme Arbitrazh Court practice review

In our next issue:

Report on the CIArb/Young Lawyers International Arbitration Moot

Competition

The Annual Law Society/CIArb Diploma Course Dinner

ADR ReporterEditor: Michael Sanig

Editorial correspondence, articles etc for publication should be sent to:-

PO Box 57,OURIMBAH, NSW, 2258Tel: (02) 9415 1600 (office)Mobile: 0404 023 006e-mail: [email protected]

Articles can be submitted in Word or RTF format. Please submit photographs or images as JPEG files 300dpi or greater.

Please do not use double spacing within paragraphs and please use endnotes not footnotes.

All opinions expressed in The Australian ADR Reporter are those of the contributor and publication of same does not imply endorsement by The Chartered Instituite of Arbitrators (Australia) Limited or any of its officers.

Published four times per year.

Copy Dates:Sep 2013 - 15 AugDec 2013 - 15 NovMar 2014 - 15 FebJun 2014 - 15 May

All articles © 2013 The Chartered Institute of Arbitrators (Australia) Limited - Permission to reproduce any item should be obtained by writing to the Editor at the address stated above.

The Chartered Institute of Arbitrators (Australia) Limited

Australian Business Number: 27 118 131 016

Level 16, 1 Castlereagh Street, Sydney, NSW, 2000, Australia

www.ciarb.net.au

President

Rashda Rana( (02) 9390 8000

E: [email protected]

Vice-president & Hon TreasurerMichael Sanig

Company SecretaryJulie Soars

Board of Directors:Beth CubittSimon DavisJo Delaney

James HealeyCaroline Kenny

Albert MonichinoIan NosworthyGeorgia QuickColin RobertsPaul Roberts

Ron SalterDamian Sturzaker

Executive Officer:Michelle Sindler( (02) 9230 0677

Fax: (02) 9223 7053E: [email protected]

TheDirectory

The Australian




The Australian




4ADR Reporter

Michael Sanig

WHERE TO NEXT ?Why Australia is not an automatic choice to host any future Diploma Course

The Majestic Hotel in Melaka where the Diploma Course has been held on the last weekend of the Course for the last two years.

5June 2013

Editorial

This years Dip loma Course in International Commercial Arbitration, held in Kuala Lumpur and Melaka,

was, by any measure, an outstanding success.There were 32 students on the course

including 11 from outside of KL. This was the largest number of students, by far, that CIArb Australia has had on any course and has lead to the situation that a second course will be held in KL in November.

There has been considerable debate within the Board of Directors about holding another course in Australia - there hasn’t been one for three years.

There is a suggestion that a course should be held in Melbourne during Asia-Pacific Regional Arbitration Group (APRAG) Conference next March. Whether this can take place so soon after the proposed course in November is problematical but, it should be said, there is not a universal view that any course should automatically be held in this country in the future.

Other locations under consideration include Singapore and Hong Kong.

There are several arguments for hosting courses offshore. The first and most compelling argument is cost. Believe it or not, it is cheaper to fly from Sydney to KL with Air Asia than it is to fly from Sydney to Melbourne. At the time of writing this editorial, even the current return airfare to KL with Malaysian Airlines is not much more than a fully flexible airfare between Sydney and Melbourne.

Add to this the fact that, in Kuala Lumpur, the course is based in a five star hotel with additional benefits such as free laundry, club rooms and access to the club lounge - all for A$150 per night including breakfast, and one can see it is cheaper to fly people to Malaysia and accommodate them than it is to fly around internally and use Australian hotels of an equivalent level.

This years’s course was held in the same hotel where the faculty and non-KL students stayed. Other than the transfer between Kuala Lumpur and Melaka, there was no requirement for anyone to move from place to place for daily lectures, go to the offices of different law firms each day or move between the city

and the university at weekends. The fact that everyone resided in the

same place undoubtedly contributed to the collegiality and unity that all the students felt.

On the occasions that the course has been held in Australia, accommodation has never been arranged for anyone, and at the end of every day, everyone has been left to their own devices.

The view has been that local students do not need the accommodation and most would prefer to stay in cheaper places than five star hotels in Sydney or Melbourne - don’t even think about hotel costs in Perth !!

Another argument is that we are much more likely to get a larger contingent of international students if we hold the Course in South-East Asia simply because the cost and time of getting there is less than it takes to get to Australia and the accommodation costs are less.

I do not know how many non-Australian students have done the courses that we have held in Australia because I don’t have those records. There were 14 students in total at the

2011 course held in Sydney. The number of Australian students who have done the course in Malaysia in the last three years it has been held there was 4 out of 18 in 2010 in Penang, 3 out of 23 in 2012 in KL and Melaka and 5 out of 32 in 2013, also held in KL and Melaka.

The big question is whether there is sufficient demand from Australian students to hold the Course in Australia and whether it would be viable for us to hold it considering the substantial additional logistical costs we would incur in flying a large number of presenters in from overseas and accommodating them.

These are questions with which the Board is wrestling. In the meantime, Australia is not an automatic choice to host a Diploma Course in the immediate future. If there are those members of CIArb who would attend a course only if it was held in Australia, they should make their wishes clear as it might help to shape the decision that those who run the Course have to make some time in the future.

The ADR Reporter

This issue of The ADR Reporter is very much later than intended. This is due mainly to fact that I have been

overwhelmed with work and have spent a considerable amount of time interstate during the last 3 months which has made completing, what was a journal scheduled for June, extremely difficult.

I am hopeful that I can get out a further two issues this year and bring publication back to a regular schedule.

There are some very exciting potential developments in the pipeline which will see some very significant changes in The ADR Reporter in the not-too-distant future. I hope to be able to announce more in the next issue which will appear shortly.

In the meantime I appeal for more contributions from members. This is the Branch’s journal and I welcome a plurality of views. There is a huge amount happening in the arbitration world - please let me know if there is anything specific which you like us to cover.

From the President

6ADR Reporter

It is with great pleasure that I write my first report as President. I am very honoured to have been elected and am looking forward

to the challenge of taking the Chartered Institute of Arbitrators in Australia to the next level and continuing and extending all the good work of my predecessor, John Wakefield.

Thanks to John WakefieldIn the first newsletter after the end of John’s three year term as President, I wish to acknowledge and thank John for his immense contribution to the CIArb. John salvaged the Institute from fairly turbulent events and times when he took over the reins in 2010.

He has been a stabilising influence and nurtured councillors and members alike to reinvigorate the work of the Institute in Australia.

I, therefore, am particularly grateful to John for handing over to me a vibrant and active organisation. I know you will all join me in thanking John for his hard work for and dedication to the work of the Institute.

We start this new Council year with new directors. Firstly, I would like to thank the retiring directors who did not renominate; Peter Megens and Robert Holt. Peter Megens resigned because he has now moved to fresh pastures in Singapore. We wish him well in his new role as partner at King & Spalding.

New DirectorsI would also like to welcome the new directors.

Caroline Kenny SC (Victoria), who has a particular interest in advancing the role of the Institute and its members in international arbitration in Asia. I am certain with all that the Institute has planned for Asia this year, she will be able to realise some of her goals in this regard.

Jo Delaney of Baker & McKenzie (Sydney) has a tremendous amount of experience in international arbitration, having spent the last 14 years working with Audley Sheppard’s group at Clifford Chance. She has very kindly agreed to serve as Chair of the Education Committee (Australia) and I, as immediate past Chair, am very pleased to be handing over the baton to a very capable and enthusiastic councillor who I am sure will carry on the good work in the educational sphere that is such an important part of the work of the Institute.

James Healy (WA) is a barrister practising in Perth. He is keen to participate in the work carried out by the Young Members group which is chaired by Georgia Quick and Deborah Tomkinson.

Each of Michael Sanig, Beth Cubitt, Simon Davis and Ron Salter resigned, was renominated, and voted back onto the Council. They are all active members and I am very pleased and grateful to have them as a part of the Council I lead.

I am looking forward to the Institute’s busy schedule this year and to greater participation by all members.

CIArb Young Lawyers MootThe CIArb/Young Lawyers’ International Arbitration Moot is being held again in August this year.

Over 22 contestants have signed up. It attracts such great interest, in part, because the winning prize for best oralist is a place on the CIArb Diploma in International Commercial Arbitration. The 2012 winner, Erika Hansen of Baker & McKenzie, is now heading up the organisation of the Moot with the assistance of Natalie Puchalka of MK Lawyers and Jo Delaney as Chair of the Education Committee.

Erika will be doing the next Course in Kuala Lumpur in November this year (more on that below).

The Moot Final is being hosted by Baker & McKenzie on Tuesday 3 September at 6pm. It will also be one of our networking events. I encourage everyone to come along to support the mooters and to see first-hand the marvellous pool of talent we have in Australia and also to meet other members at every level from Associate to Fellow.

The 2011 best oralist winner, Louise Dargan of Clayton Utz attended the Course in Kuala Lumpur and Melaka in April this year. She has contributed her thoughts on her experience in this editoopn of the Reporter.

Other eventsThe Practice & Procedure examination following the Diploma Course was held on Saturday 6th July.

There were 30 candidates sitting the

examination in 6 different locations around Asia Pacific: Sydney, Kuala Lumpur, Philippines, Indonesia, Kota Kinablu and Hong Kong, which is reflective of the variety of candidates drawn from all parts of Asia.

I will be conducting the Award Writing Workshop for Australian candidates who have either passed the Practice & Procedure exam or the Accelerated Route to Fellowship Assessment, on Saturday 27 July 2013 as a precursor to the exam to be held on 17 August 2013.

Albert Monichino and Damian Sturzaker will once again be holding their successful Accelerated Route to Fellowship (Fast Track) Assessment weekend over 24 – 25 August 2013.

There will be a second Diploma Course in International Commercial Arbitration to be held from 9 – 17 November 2013 in Kuala Lumpur in collaboration with the KLRCA. The interest in the April Diploma Course far exceeded our expectations. There were 33 enrolled candidates and just before the Course started one candidate dropped out, leaving 32, still the highest number of candidates on any Diploma Course conducted by either Australia or Keble College Oxford.

In discussion with KLRCA, we determined that there was sufficient interest to justify holding a second course in the same year.

Young members committeeThe Young Members committee of the CIArb has been particularly active this past year.

Georgia Quick and Deborah Tomkinson (of AIDC) have been holding regular ‘brown bag’ lunches dealing with diverse topics of interest. These events have been very popular.

I am keen to continue supporting these events as I see them as helping to strengthen the base of the Institute and, therefore, allow it to grow. I encourage all members to participate in these symposium style lunches, particularly senior and more experienced members.

Knowledge gained from experience imparted at these events can be more valuable to the participants than exploration of issues by them alone.

I encourage all members, no matter at what level, to participate in everything the CIArb has to offer.

The Australian branch remains one of the most active of the Institute’s branches and I would like to see it continue at that high level. This is due to the hard work put in (voluntarily) by councillors and members alike.

I am particularly interested in hearing how we can improve the services we provide and in improving the contact and networking opportunities for all. Members may contact me with ideas at any time and I encourage you to do so.

(Continued on page 8)

32 students attend the best Diploma Course held to date

“Magnificent KL, sensational Melaka”

The Royale Chulan Hotel in Kuala Lumpur, where the Diploma Course was held for the first seven days - photograph taken from the top of the Petronas Towers by Michael Sanig.

On the morning of Saturday 30 March, thirty-two students from Malaysia, Australia, Indonesia, Hong Kong,

India and the Philippines assembled on level one of the Royale Chulan Hotel in Kuala Lumpur, to commence the eighth, and most successful to date, Diploma Course in International Commercial Arbitration run jointly by CIArb Australia and the Kuala Lumpur Regional Centre for Arbitration (KLRCA)..

So large was this year’s contingent of students, that the course had to be moved from

the KLRCA at 12 Jalan Conlay in downtown KL, where is was originally intended to hold it, to larger accommodation at the Royale Chulan across the road at 5 Jalan Conlay.

On the evening of Friday 5 April, the course decamped to the Majestic Hotel in Melaka, a two hour coach drive from KL, where every available hotel room, which hadn’t already been pre-booked by other guests, was taken by course participants.

The thirty-two students were complemented by a faculty of 25 lecturers, tutors and presenters who came from eight countries

Michael Sanig, the Course Logistics Director for this year’s Diploma Course in International Commercial Arbitration, also lectured and tutored in KL. This is his report.

- Australia, Malaysia, China, Hong Kong, Vietnam, Singapore, Dubai and Mauritius.

This was the eighth time that the Branch had held the Diploma Course and the fourth time it had taken place in Malaysia. In 2008, the Course was held only in Kuala Lumpur. In 2010 it moved to Penang and last year as well as this, it was held in both KL and Melaka.

The view of those who have attended previous courses was that this year’s course was the best that had ever taken place and both students and faculty members have

7June 2013

NewsReview

Malaysian High Court judge, Y.A Dato’ Umi Kalthum Binti Abdul Majid joined other students on a special trip to the top of the Petronas Towers, the first time she had ever visited them. The judge was “captured” trying out the barcode on her ticket which superimposes a hologram of the Petronas Towers on the webcam image. At the right is Heidi Chui, a student from Hong Kong. (Photo MS)

commented on how well organised and enjoyable the course was.

Stephanie Chin, from the Sarawak Energy Board, described it as the best course of any kind that she had ever attended.

Ulyses Aguila from the Ministry of Justice in Manila, our first ever student from the Philippines, wrote:

“Thank you for your warm and prompt attention during the course and all other things in KL and Melaka. I will always treasure this experience.”

Apart from the Course Banquet, traditionally held on the last Saturday, the traditional “meet and greet” between students and faculty took place on the evening of the first Saturday in the club lounge of the Royale Chulan.

For the first time during any course, additional social events were held to encourage more mingling between students.

On the Tuesday night, eleven people went to the top of the Petronas Towers to see KL from the highest vantage point in the city. The group, mainly comprising students from outside of KL, included Malaysian High Court judge, Y.A Dato’ Umi Kalthum Binti Abdul Majid, who was visiting the Petronas Towers for the first time. The judge was so impressed that she said she would have to take her sister to experience the spectacular view from the top.

This was the first time that optional sightseeing had been included in the course. The view from the top of the Towers is quite spectacular and there is also a small exhibition on the history of the Towers. Visitors get approximately 30mins to enjoy the panoramic view and ask questions of the ever-helpful staff.

After descending in the high-speed lifts, most of the group adjourned to the nearest bar whilst others went for dinner.

The following evening, 40 people attended a mid-week dinner at the Malaysia Petroleum Club on Level 43 of the Petronas Towers. The dinner included a visit to the upper level of the Petronas Towers skybridge and was a most enjoyable event, topped off with the presentation of a birthday cake to David Levin, one of the course students, and the traditional singing of “Happy Birthday” by the assembled group. David, for once in his life, was taken totally by surprise and rendered speechless !!

Both of these events added to the tremendous collegiality and friendships which developed during the course and there was certainly more mingling of local and non-KL students than ever before.

On day one, after registration and a range of housekeeping issues had been dealt with, course teaching commenced with

Top down:Presenters on day one - Doug Jones, Meg Utterback and Malcolm Holmes

Bjorn Gehle opened the presentations on day two talking about international commercial arbitration from a civil law perspective. (Photos: Alia Mohd Anif KLRCA)(Continued on page 9)

8ADR Reporter

presentations from Malcolm Holmes, Doug Jones and Meg Utterback, a partner with King&Wood Mallesons in Shanghai. They dealt with the topics of what is international commercial arbitration?; An introduction to UNCITRAL, the Model Law and international arbitration legislation in the Asia-Pacific.

On the evening of the first day, students and faculty members took part in a “Meet and Greet” reception which was held in the Club Lounge of the Royale Chulan. People mingled until quite late before departing for a number of destinations for dinner.

On day two Bjorn Gehle, who is a partner with Pinsent Masons in Dubai, opened the proceedings talking about international arbitration from a civil law perspective. After the morning break he dealt with the Arbitration Agreement - its formation and validity; and Shanti Morgan, from Shearborn Delamore in KL, spoke about the commencement of the arbitral process, the activation and scope of the agreement.

After the lunch break, John Wakefield, the then president of CIArb Australia and Raja Bose, from K&L Gates in Singapore, dealt with the appointment of the arbitrator and the arbitrator’s independence, impartiality and any challenges.

From Monday to Friday, the format of the course changed. In the mornings there were presentations, whilst in the afternoons, there were tutorial sessions which dealt with a problem question that spanned the whole week and covered the topics that had been dealt with in the previous sessions.

On the Monday morning, Hop Dang, a partner in Allens’ Hanoi office addressed the subject of Choice of Law in International Commercial Arbitration. After the morning break, he was followed by Beth Cubitt, a partner in the Perth office of King&Wood Mallesons, and Datuk Sundra Rajoo, the ever energetic Director-General of KLRCA. They spoke about the preliminary conference and the issues that have to be dealt with including its timing, location, its preparation and other procedural issues.

In the afternoon, the first tutorial sessions commenced.

This year, Michael Sanig, Albert Monichino, Peter Caldwell and TS Chong were the principal tutors and were assisted by others during the week including those who were also lecturing.

The students were broken up into groups of six or seven and were led by different tutors each day. The tutorials are very enjoyable. They allow the students to ask questions on an almost one to one basis and there is free and frank discussion about the issues in question. The students learn that sometimes there is

more than one answer to a question and that international commercial arbitration has its own unique issues which differ substantially from issues which may affect domestic arbitration.

Rashda Rana, the Course Director, was the sole lecturer for the whole of Tuesday morning and commenced with the important topic of the seat or place of an arbitration. This is probably the most significant but singularly most misunderstood subject in international commercial arbitration!

After morning tea, Rashda addressed the students on the wide-ranging subject of interim measures that can be sought by parties. Amongst the issues Rashda dealt with were: what form they can take, ex parte hearings and security for costs.

Day five commenced with a lecture by local well-known Malaysian arbitrator TS Chong on confidentiality in the arbitration process. TS recounted the differences between confidentiality and privacy and covered the reasons why confidentiality might be excluded from an arbitration agreement and what measures could be taken to enforce it.

He was followed by Paul Sandosham and Peter Caldwell who dealt with the hearing. It was fascinating to hear Paul recount some of the problems that arbitrators face when carrying out arbitrations in countries where there are strict rules about who can or cannot practice, and some of the pitfalls that arbitrators need to overcome if they are not going to land themselves in jail !!

After enjoying the midweek dinner the previous evening, students returned on the morning of Day 6 to hear Damian Sturzaker speak about all matters concerning the Award. This was a very extensive presentation covering such matters as what remedies can be included in an award, pre and post award interest, applicable taxes, and offers of compromise and settlement.

He was followed in the second half of the morning by Robert Pé from the Hong Kong office of Orrick, who addressed the issue of the enforcement of awards in Asia.

Friday morning of Day 7 turned to two of the more specialised arbitration subjects - maritime and construction. 60pc of the cases dealt with by the Kuala Lumpur Regional Centre for Arbitration are construction matters.

Sitpah Selvaratnam, one of Malaysia’s leading maritime lawyers, gave an excellent and detailed presentation on maritime arbitration and covered arbitration practice in Australia, United Kingdom, USA, China, Singapore and Malaysia. She has an easy-going and uncomplicated way of making


9June 2013

Day two presenters (from top): Shanti Morgan from KL, John Wakefield from Sydney and Raja Bose from Singapore

Datuk Sundra Rajoo, Director-General of KLRCA, presented on day three

10ADR Reporter

Best Practice Mediation Training for CIArb Members

CIArb Australia has joined forces with the Australian Commercial Disputes Centre (ACDC), a leading Australian ADR training provider, to offer best practice mediation training and professional development opportunities to CIArb members.

The partnership supports CIArb’s ADR leadership role in the region and CIArb members are already reaping the benefits

CIArbAustralia

Benefits for CIArb Members

• CIArb members gain unique access to ACDC’s highly-regarded, high-quality mediation training and accreditation at discounted, membership prices.

• Upon successfully completing the course and assessment, listing as a nationally accredited mediator subject to meeting ongoing accreditation requirements.

• Eligibility for listing on CIArb’s list of approved mediators.

The ACDC Advantage means:

• Learning the skills and techniques of mediation from a Recognised Industry Leader• Small classes, high facilitator to participant ratio, interactive learning environment, skilled and experienced

professional trainers and coaches, individualised feedback and coaching, diverse participants, purpose-built professional environment

• Supportive learning environment and assessment process• Discounted course fees (10%)• Gaining a formal mediation training qualification • Compliance with the National Mediator Accreditation Standards• Option to gain ACDC Mediation Accreditation• A recognised pathway to National Mediator Accreditation through CIArb Australia• Access to continuing professional development opportunities at discounted prices• Eligibility to enter CIArb’s Mediation Stream via ACDC’s exempted provider status • Invitation to join ACDC’s ADR Resource Group as part of ACDC’s case management service

Find out more about the CIArb and ACDC training partnership: www.ciarb.net.auDiscover your ACDC training options: www.disputescentre.com.auFor information on the next available course, call Lynne Richards at ACDC on (02) 9327 0700

simple, what is to most non-maritime people, a quite complicated subject with its own language and nuances.

Peter Caldwell, a well known arbitrator and engineer based in Hong Kong, and Michael Sanig, a chartered quantity surveyor and construction lawyer from Australia, led the session on construction arbitration.

Peter mainly spoke about the “front end”of construction dealing with the different forms of contract and the different types of ADR that are available.

Michael dealt with variations, disputes and extensions of time provisions and spoke about his experiences and roles both as an arbitrator and as an expert witness.

Following the conclusion of the tutorials on Friday evening, the students and faculty members decamped from the Royale Chulan and went by coach for the two hour road trip to Melaka, the historic city 140km south of Kuala Lumpur.

The amazing Majestic Hotel was the base of operations for the next two days.

On Friday night most of the students and presenters made their way to various restaurants - went to the Portuguese section of the city where there is a multitude of restaurants all vying for business and all of which cook fish prepared in then local style. After a delicious meal, we all headed for the famous Jonkers Street Friday night markets in the heart of downtown Melaka. It seemed that everyone else on the course had the same intention because wherever one turned, I seemed to bump into someone that I knew.

This was a thriving bustling area and it was crowded with shoppers and sightseers enjoying the sights and sounds of what is described as a national institution. It certainly felt that the whole of Melaka had congregated in the one place that night.

The next morning, it was back to more presentations for most. Saturday and Sunday concluded with lectures on other specialised areas of international arbitration.

First up on Saturday was Neil Brown, a former Liberal party government minister, who dealt with domain name arbitration under the Uniform Domain Name Dispute Resolution Policy (UDRP). He is known for his highly engaging and entertaining presentations - he didn’t disappoint.

Jo Delaney, an associate with Baker & McKenzie in Sydney, and Fedelma Claire Smith, Legal Counsel at the Permanent Court of Arbitration and head of its office in Mauritius, presented for the rest of the day on Investor State Arbitration.

They gave an introduction about the Internat ional Centre for Set t lement of Investment Disputes (ICSID) and its arbitration processes.

In the afternoon they dealt with the major issues arising from investment treaty

arbitration including the enforcement of awards. A presentation on the practice and procedure of investment treaty arbitration in the Asia Pacific region ended the day before everyone went off to prepare for the evening’s course banquet which is reported elsewhere.

On the final morning of the Course, Rashda Rana and Jo Delaney addressed the students on how to draft an effective international arbitration clause.

After morning tea, Jun Wang, from Capital Alliance Advisory Services in Hong Kong, presented a case study on international arbitration in China and Lu Fei, from CIETAC’s Consultation and Registration Division in Beijing, spoke about the work of CIETAC and didn’t shy away from questions that were raised about the problems between CIETAC in Beijing and the breakaway group in Shanghai.

At 1pm, the course concluded and, after lunch, students and presenters began to make their way home to prepare for the practice and procedure exam which would be held some months later.

This was a Course which was exceedingly enjoyable. As a group it was unquestionably the most successful we have organised and everyone seemed to get on with each other and there was a heightened degree of friendliness which I hadn’t experienced previously.

Greater effort was made this time to ensure that there was more mingling between local and non-KL students including additional after-hours activities which hadn’t been organised before.

That said, the Course was not without incident. As reported elsewhere, two students were robbed whilst out late one evening. Fortunately they did not try to resist the thief and suffered no physical injuries for which we were all grateful. Obtaining replacement passports was another story in itself.

Another person mislaid her credit cards which led to a flurry of phone calls to ensure they were cancelled immediately. The good news is that she had left her other cards in the hotel safe so still had funds she could access.

I was able to avail myself of some sightseeing during the time that I had off. I like Kuala Lumpur very much. It is a vibrant and growing city with a tremendous amount of construction taking place. Whilst we were there, the Malaysian general election was announced which was the subject of much discussion around the lunch tables each day. The result, though probably not unexpected, would no doubt have been a source of disappointment to most of the young people with whom I spoke.

The highlight of my free time was a personal guided tour of Melaka that TS Chong arranged for a very small group of us on the last Saturday of our stay. I hadn’t seen much

(Continued on page 14)(Top down) Hop Dang, Beth Cubitt, TS Chong, Paul Sandosham

11June 2013

The Class of 2013

The class of 2013 together with faculty members on the steps of the main entrance of the Royale Chulan Hotel in Kualal Lumpur. Faculty members in the photo include Peter Caldwell and Albert Monichino on the back row; second row TS Chong, Datuk Sundra Rajoo, John Walkefield and Bjorn Gehle, third row: Michael Sanig; front row - Rashda Rana, Doug Jones

12ADR Reporter

The class of 2013 together with faculty members on the steps of the main entrance of the Royale Chulan Hotel in Kualal Lumpur. Faculty members in the photo include Peter Caldwell and Albert Monichino on the back row; second row TS Chong, Datuk Sundra Rajoo, John Walkefield and Bjorn Gehle, third row: Michael Sanig; front row - Rashda Rana, Doug Jones

13June 2013

The organisers of the 2013 Diploma Course (l-r) Azimeer Manaf and Alia Mohd Manif from the KLRCA, Michael Sanig and Rashda Rana from CIArb Australia

The Course Dinner

of Melaka on the previous trip, but this time we got to see the real areas that make this city a UNESCO world heritage listed attraction and, into the bargain, we found an art gallery with superb paintings by a unique local artist. I bought two to take back to Australia.

No article would be complete without thanking those who organised this year’s course and without whom it would not have been the success that it was.

In Australia, the effort is shared jointly by Rashda Rana and myself. Rashda deals with all matters academic and I deal with the rest. We complement each other as a team, share the problems, resolve the issues and get on with it with little or no fuss. A huge amount of work and co-ordination goes on behind the scenes which is unheralded and for which no reward is sought.

At the KLRCA, the workload was handled by Azimeer Manaf and Alia Mohd Manif. It is they who ensured that everything on the ground in KL and Melaka went off seamlessly. Azimeer has since left KLRCA, but Alia remains to assist with the next course.

She is a gem without whom we could not have managed. When we had to liaise with the local tourist police and immigration department concerning stolen passports, it was Alia to whom I turned to act as interpreter and transport organiser. No task is too big for her and she does everything we ask with a cheerful disposition and unfailing reliability.

The Diploma Course is CIArb Australia’s jewel in its crown, The April 2013 Course broke all records.

A big thank you to the organisers, students, presenters and tutors who helped to make that happen.

Magnificent KL

(Continued from page 11)

14ADR Reporter

Frances Isaac(l) and Milica Djurdjevic with Michael Sanig,whom they nicknamed “The San”, outside the Australian High Commission in KL

Passport dramas in KL

When Milica Djurdjevic had her bag snatched by a motor cyclist on the streets of Kuala Lumpur

on Saturday night she lost not only her own passport, credit cards, money and ticket to the Petronas Towers, but also the passport of her friend and fellow student, Frances Isaac.

It was the next morning that Michael Sanig, the Course Logistics Director, together with Alia Mohd Manif from KLRCA, sprung into action.

Telephone calls to the Australian High Commission and the DFAT emergency hotline in Canberra revealed that the High Commission was closed until the following Tuesday because of the Easter holidays. The High Commission would be alerted by email to expect the arrival of Milica and Frances when it re-opened for business in two days’ time.

In the meantime Michael and Alia, the latter acting as interpreter, took the two to the tourist police office to file reports of the theft.

Two sympathetic female police officers took down all the details which required both students to sign statements which would be required for the purposes of both obtaining new passports as well as filing insurance claims.

Departing the police station an hour later, Alia took Milica and Frances to get new passport photos whilst Michael went to the Petronas Towers booking office to see if he could get Milica’s ticket replaced for the trip to the top of the Towers the following Tuesday evening.

“No problem” said the ticket office manager “except that you purchased ten tickets and each ticket has a special barcode. You need to be able to tell us

(Continued on page16)

The Course Banquet, which is held on the last Saturday night, is always one of the highlights of the Course.

This year, almost fifty guests, faculty, students and their partners attended the event at the Equatorial Hotel in Melaka.

The guest of honour and after dinner speaker was Vinayak Pradhan, the Malaysian president of the CIArb worldwide. Rashda Rana also thanked those who had taken part in the course before she asked Vinayak to present each student with their participation certificate.

It was left Melbourne barrister, David Levin (pictured below), to give the vote of thanks on behalf of the students.

In a rousing and highly entertaining speech, he thanked those who had been responsible for putting on an excellent course. He said that not only was the course content and its speakers first class but no one could have had any complaints about the accommodation. He said. “Those of us staying at the Royale Chulan thought is was magnificent and couldn’t get any better. But when we walked into our bedroom at the Majestic, one was left speechless and the only expression one could say was Wow!”

15June 2013

Louise Dargan receiving her course participation certificate from CIArb President, Vinayak Pradhan at the Diploma Course dinner

An unforgettable experience:Louise Dargan, one of this year’s course students, writes about her experiences on this year’s Diploma Course

I completed the course component of the CIArb Diploma in International Commercial Arbitration at the end of March/

beginning of April this year.The course was held in Malaysia

over the Easter break and our time was divided between the Royale Chulan Hotel in Kuala Lumpur and the Majestic Hotel in Melaka - a beautiful colonial hotel.

It was a busy nine days but the convenors still managed to pack in some sightseeing activities of which going to the Petronas Towers (once to admire the view from the top and once for a formal dinner) was a highlight.

There were 32 students who participated on the course.

The course was basically divided into two parts: morning lectures by the world’s leading international arbitrators and practitioners and small tutoprial groups in the afternoons for tutorials. These were led by different lecturers each day.

We certainly covered a lot of ground - about 21 topics - and it was interesting to see the differences in approach to topis, such as expert evidence, from counsel and arbitrators.

It was a unique learning environment - to be thrown into a course with a mix of junior practitioners, case managers of arbitral institutions, partners, barristers and judges of various Malaysian courts both civil and criminal.

Not only was it an excellent opportunity to meet a whole lot of people but I was fortunate to be part of a particularly lovely and social group.

We found the time around classes to sample some great Malaysian food, enjoy the vista from the Sky bar and buy some silks at the Malaysian craft centre next to the hotel.

All in all it was a great experience and one I would recommend unreservedly.

16ADR Reporter

The Faculty

which ticket it is that has been stolen. It was then back to the course to ask every person who had bought a ticket to identify which numbered ticket they had and then back to the Petronas Towers to get the right ticket replaced.

On Tuesday morning, Frances and Milica, accompanied by Michael, went to the Australian High Commission where new temporary passports were arranged, but which could not be collected until Thursday afternoon.

It was then that the next problem was discovered. Officials at the High Commission said that there was no guarantee that Milica and Frances would be allowed to leave the country because there was no record of entry into the country in their temporary passports.

Enter Rozina Ayob - one of the students on the course who is also a Malaysian High Court judge. She asked a favour of one of her contacts - a senior lawyer in the Malaysian Immigration Department, and helped smooth the way for the two students to get the necessary stamps in their passports.

Arrangements were made for Alia to take Frances and Milica to Putrajaya, where the ministry is located. It was Alia who did most of the talking and answering the questions on the girls behalf. Had it not been for Alia asking Rozina to assist, the two might still have been in KL !!

The main lesson learnt from this story is there is no need to carry a passport at all times in Malaysia - the authorities will accept a photocopy of the relevant page as proof of a foreigner’s identity. That and other learnings will appear in the next Students’ Guide.

Passport dramas in KL

Malaysian High Court judge, Rozina Ayob, receiving her certificate from Vinayak Pradhan, the CIArb world president. Rozina was instrumental in smoothing the path with the Immigration Ministry for Milica and Frances to get the necessary passport stamps they needed to enable them to leave Malaysia without a hitch.

Top left down: Peter Caldwell, Damian Sturzaker; Right: Robert Pé, Lu Fei;Middle (l-r): Jo Delaney, Neil Brown and Fedelma SmithBottom(l-r): Albert Monichino and Sitpah Selvaratnam:

NewsReview

John Wakefield joins board of ACDC

Peter Megens moving to Singapore

Peter Megens, immediate past vice-president of CIArb Australia and one of Australia’s leading international

arbitration and construction lawyers, is to join King and Spalding as a partner in its Singapore office.

He will join the firm from King & Wood Mallesons in Melbourne, Australia, where he is co-head of KWM arbitration practice and a senior member of its construction team. Megens is expected to arrive at King & Spalding in July.

“Our firm has made a strategic decision to invest further in our marquee international arbitration practice, and especially in our international construction disputes capability,” said Reggie Smith, leader of global disputes at King & Spalding. “Peter’s stature as an outstanding construction disputes lawyer fits this bill, and nicely complements our world-class commercial and investment treaty arbitration practice serving the Asia-Pacific region from Singapore.”

Megens has over 30 years’ experience representing clients in disputes arising out of construction, energy, mining and infrastructure projects. His cases have included arbitrations relating to projects throughout Southeast Asia, as well as arbitration and litigation of construction claims across Australia and New Zealand.

Peter is a director and vice president of the Australian Centre for International Commercial Arbitration (ACICA), the national chair of the construction and infrastructure law committee of the Law Council of Australia and a fellow of the Institute of Arbitrators and Mediators, ACICA and the Singapore Institute of Arbitrators.

Peter Megens

17June 2013

AGM: 3 new directors elected

Rashda Rana elected president for 2013/4

(l-r): James Healey, Jo Delaney and Caroline Kenny have been elected Directors to the Board of CIArb Australia

At the board meeting following the Annual General Meeting, Rashda Rana was elected as President of

CIArb Australia for 2013/2014. Rashda is the first female to be elected as

President of the Australian Branch and has

been the chairperson of the Branch Education Committee for the past three years. Rashda practises as a barrister and arbitrator with chambers in both Sydney and London.

Michael Sanig, who was one of five directors re-elected to the Board, was elected both as Vice-President and Treasurer. Julie Soars continues as Company Secretary.

Other directors re-elected for another three years were Ron Salter from Victoria, Simon Davis from WA and Beth Cubitt from WA.

Three new directors were elected to the Board - Jo Delaney, an Associate with Baker &Mackenzie in Sydney; Caroline Kenny, a barrister in Melbourne, and James Healey, a

John Wakefield, the immediate past President of the Australian branch of CIArb, has been appointed to the Board

of the Australian Commercial Disputes Centre (ACDC) in Sydney.

He has a particular interest in looking at ways in which ACDC can increase its income following a decision by the Australian government to cease funding the Centre from the beginning of this financial year - a decision which has left a considerable hole in the Centre’s finances.

barrister in Perth.Three candidates for election were

unsuccessful - Francis Douglas (NSW); Paul Menzies (NSW) and John Arthur (Vic).

John Wakefield, the outgoing President, had to dial in to the meeting as he had taken ill in the UK and been prevented from travelling home to Australia.

The meeting adopted the Treasurer’s report and was advised that the Branch’s accounts were in good health primarily due to the ongoing success of the Diploma Course. The annual grant received from CIArb in London only just covered the operating expenses of the Branch and without the course income, it would be impossible to publish the journal or carry out other activities.

Rashda Rana has been elected the first female President of CIArb Australia

18ADR Reporter

East Timor is seeking to tear up a treaty on the sharing of oil and gas revenues with Australia because it says Australia

spied on it during the negotiations.East Timor has launched a process of

arbitration to challenge a 2006 treaty which governs how proceeds are shared from oil and gas fields that straddle the joint development area between the two countries and the Australian continental shelf.

The developing country argues the treaty is invalid because Australia did not conduct 2004 negotiations in good faith. Specifically, East Timor alleges Australia conducted espionage.

In his 2007 book Shakedown: Australia’s Grab for Timor Oil, Paul Cleary, a former Fairfax Media journalist who was part of East Timor’s negotiating team, wrote that the country’s then Prime Minister Mari Alkatiri was convinced the Australian Government was spying on them during negotiations in Canberra in September 2004. The East Timor delegation stopped holding meetings in their hotel, fearing rooms were bugged, and dumped their mobile phones because they suspected eavesdropping.

In a joint statement, Foreign Affairs Minister Bob Carr and Attorney General Mark Dreyfus said the spying allegations were not new, and it had been the position of successive Australian Governments to neither confirm nor deny them.

But the statement said Australia had “always conducted itself in a professional manner in diplomatic negotiations” and had acted “in good faith.”

Australia said it considered that the treaty – called the Treaty on Certain Maritime Arrangements in the Timor Sea – was valid and remained in force.

The treaty provides for revenue from the Greater Sunrise fields, which are situated 450km north-west of Darwin and 150km south-east of East Timor, to be shared equally between the two countries, and prohibits both countries from discussing maritime boundaries for 50 years.

Don Rothwell, a professor of international law at the Australian National University, said the revenue split had long been a source of tension between the two countries, with East Timor believing the arrangement was too favourable to Australia, and seeking a permanent maritime boundary, which would probably place the entire Greater Sunrise field within East Timor’s maritime boundary.

East Timor has initiated arbitration under the 2002 Timor Sea Treaty. Professor Rothwell said there was a legal question about whether a dispute over the 2006 treaty could be resolved under the arbitration process set out in the 2002 treaty. If arbitration proceeded the matter would be decided by a three-member tribunal comprising a nominee of each of Australia and

East Timor to take Australia to arbitration over 2006 treatyAustralia accused by Dili of spying during negotiations for resource deal

East Timor and a national of a third country, who would chair the tribunal.

But he said Australia could refuse to participate in arbitration.

The Australian Government’s statement said it was still considering its response. It said the treaties provided certainty for investors and delivered benefits to both countries.

East Timor’s ambassador to Australia, Abel Guterres, said: “Timor Leste and Australia are good neighbours and the good relationship and co-operation will go on, despite whatever differences we have.”

A spokesman for Woodside, the operator of the Greater Sunrise project, said the company was reviewing the announcement.

“Woodside will continue to engage with both governments to further understand any consequences of the proposed arbitration,” the spokesman said.

The treaty provides for

revenue from the Greater Sunrise fields, which are situated 450km north-west of Darwin and

150km south-east of East Timor, to

be shared equally between the two

countries

NewsReview

19June 2013

Tobacco leaves being sorted at a cigar factory in Havana. Cuba has joined Ukraine, Honduras and the Dominican Republic in complaining to the W.T.O. about Australia’s labeling laws.

Cuba takes Australia to WTO over cigarette labeling

Cuba, the world’s dominant producer of fine cigars, has filed a ‘‘request for consultations’’ with Australia, Keith

Rockwell, a spokesman for the WTO, said from Geneva, where the organisation is based.

The two nations now have 60 days to reach an agreement, he said; if they fail to resolve their differences in that time, the next step would be for Cuba to begin a formal challenge with the establishment of a dispute resolution panel.

The request was filed on 3 May but made public on 6 May, Mr. Rockwell said.

Cuba is joining Ukraine, Honduras and the Dominican Republic in challenging Australia’s tobacco-labeling laws at the WTO. All four nations argue that provisions of a 2011 Australian law, the Tobacco Plain Packaging Act, have created ‘‘technical barriers’’ to trade and violate intellectual property rights.

If Australia is ultimately found to have broken WTO rules, it must either bring its laws into conformity or face retaliation in the form of increased duties on Australian goods.

As part of a national anti-smoking drive, Australia has passed some of the world’s toughest laws on the labeling of cigars, cigarettes and other tobacco products, prohibiting ‘‘the use of logos, brand imagery,

and promotional text’’ and strictly regulating the use of brand names. Tobacco products in Australia are sold in standard dark green boxes with gruesome images of people with diseases caused by smoking.

Australian and Cuban officials could not immediately be reached for comment.

Cuba, seeking to reinvigorate a stagnant economy, has in recent years allowed more free-market activity. It joined the World Trade

Organisation in 1995, soon after the group’s founding, but has never before brought a formal challenge. It has been involved in cases

brought by others, including a dispute between the spirits makers Pernod Ricard and Bacardi over US rights to the Havana Club rum brand.

Cuba exported $215 million in cigars in 2011, the latest year for which figures are available, according to the National Statistics Agency. Cigar sales are handled by Habanos, a 50-50 joint venture between the Cuban state tobacco company and Altidis, a unit of Imperial Tobacco.

Habanos said exports of Cuban cigars rose in 2012 despite the economic slump in Spain and France, its top two markets, as sales to China, its No. 3 market, rose 6 percent. A United States embargo imposed in 1962 prohibits the import of Cuban cigars into the USA..

Emily Morris, an expert on the Cuban economy at University College London, said that overseas cigar sales make up only about 1.3 percent of Cuba’s total exports and that Australia was just a small part of that. ‘‘They’re keen on trademark protection for their premium cigars,’’ Ms. Morris said. ‘‘A lot of the buying of cigars is based on the wonderful packaging.’’

Cuba’s willingness to bring a WTO case shows that ‘‘it has got a lot at stake in intellectual property now,’’ she said, including in the pharmaceutical sector, where it earns more than $500 million a year.

The case puts Cuba in curious company in seeking to overturn a democratic country’s health laws in the interest of its tobacco exports. The global tobacco industry spent millions of dollars in an unsuccessful campaign against the Australian law, and continues to resist efforts by others, including the European Union, to adopt similar laws.

Nevertheless, New Zealand officials have said they are planning to follow Australia’s packaging example by sometime next year.

Tobacco “Wars” update

20ADR Reporter

At the branch elections in May 2013 my term in office as branch chair expired after 3 years.

The period has been one of intense activity in the branch. One focus has been on building the membership and I am pleased to say that our numbers continue to increase.

Accredited mediators can now also join CIArb as members as can those completing the mediation accreditation course conducted by the Australian Commercial Disputes Centre (ACDC) and this has been a source of further membership.

Successful Diploma CoursesThe branch has remained committed to education as one of it’s core activities and, as part of which, it conducts the annual Diploma in International Commercial Arbitration and Fast Track to Fellowship courses.

The most recent diploma course held in co-operation with our colleagues at the Kuala Lumpur Centre for Regional Arbitration (KLRCA) and the CIArb Malaysian branch attracted 32 students from around the region.

Earlier courses have included students from afar afield as Japan, Mongolia, Qatar and Switzerland as well as People’s Republic of China, Hong Kong, Singapore, Malaysia and Australia.

Such is the popularity of the course that the branch will be holding a second course

in Malaysia this year. The branch is also considering co-operation with the Australian International Disputes Centre (AIDC) to hold mediation accreditation courses in the region.

The holding of these courses and other initiatives has enabled the branch to grow strong ties with CIArb branches in Asia. There is now great co-operation with our colleagues in the East Asian branch, the Singapore branch and the Malaysian branch and we look forward to the strengthening of these ties for our mutual benefit into the future.

Co-operation agreementThe branch entered into a co-operation agreement with the Australian Centre for International Commercial Arbitration (ACICA) and AIDC for mutual support and the furtherance of their respective objects in ADR in the region.

This has enabled an organised and comprehensive focus to be given to the continuing development of an arbitration culture amongst practitioners in Australia, the appointment of ACICA as institutional body and the promotion of Australian locations as seats for the conduct of international arbitration in the region.

Young members’groupThe branch has also established a young members group and forum which meets on a regular basis both to interest young lawyers and others in alternate dispute resolution and to bring them through the courses and into a graded qualification.

On the initiative of Ms Rashda Rana, the branch has run international arbitration moots in co-operation with New South Wales young lawyers over the past 3 years. This year’s moot has attracted more than ten teams from around the country and is oversubscribed.

ADR initiativesThe branch remains a respected contributor to the formulation and development of ADR policy in Australia.

Upon invitat ion, the branch made submissions to both the federal and state attorneys-general concerning the form of the draft bills for the amendment of the federal and state arbitration regimes in Australia.

In co-operation with ACICA and the Institute of Arbitrators Mediators Australia (IAMA) the branch also sought and was granted leave to appear as amicus curiae in the appeals in the High Court of Australia in Gordian Runoff Ltd v Westport Insurance

Corporation [2010] HCA 57 and TCL Airconditioner v The Judges of the Federal Court of Australia [2013] HCA 5.

The first decision confirmed that the grounds for challenging an award are very limited and identified important underlying differences between arbitration and litigation determining that the decision of the Victorian Supreme Court in Oil Basins v BHP Billiton Limited [2007] VSCA 255 requiring arbitrators to be held that the standard of reasons of Judges should not be followed.

The second decision confirms the legality of the international arbitration regime in Australia and reflected the court’s supportive approach on receiving international instruments and commentaries in interpretation of the International Arbitration Act to promote uniformity in international practice.

Branch councilThe operations of the branch in the last 3 years have, of course, been governed by a branch council.

I have been fortunate to chair a board of councillors from all mainland states who have been committed to the objects of the branch and who have been prepared to carry out those objects selflessly and with determination. It is to be remembered that branch councillors are volunteers.

Members of the council have devoted themselves to the education committee, the co-ordination and running of courses, the conduct of moots, the establishment and furtherance of a young lawyer’s group and young lawyer’s forum, accreditation of arbitrators and mediators and other matters.

It had been my pleasure to be involved with branch and I have greatly appreciated the strong support of so many who are committed to it’s cause.

Going forwardAt the election of officers in May 2013,

Rashda Rana, a former Vice President of the branch and chair of the Branch Education Committee, was elected as President unopposed.

Michael Sanig was elected as Vice President unopposed and will continue as branch Treasurer. With their leadership and the support of an experienced and committed council the branch is very well placed to further it’s initiatives in the region going forward.

John Wakefield’s valedictory column

John Wakefield - the immediate past president of CIArb Australia

NewsReview

21June 2013

Diploma Course returns to Malaysia

International Commercial Arbitration Course to return to KL in November for second time in 2013

A second Diploma Course in I n t e r n a t i o n a l C o m m e r c i a l Arbitration will, once again, be held in Malaysia from 9 November

to 17 November. At the time of going to press, a record number 30 students had enrolled for the course.

As in April earlier this year, the Australian Branch of the Chartered Institute will co-present the course with the Kuala Lumpur Centre for Regional Arbitration (KLRCA). The Course will take place in Kuala Lumpur at the Royale Chulan Hotel in KL for the entire nine days and will not transfer to Melaka, south of KL , as occurred in April.

The Course Director is Rashda Rana, Education Director of CIArb Australia. Rashda is responsible for all academic aspects of the course. Michael Sanig will be responsible for all the course registrations, logistics, travel and hotel management.

More than twenty presenters and tutors – experts in their own fields - have been lined up for the course. Apart from local speakers, lecturers and tutors will be travelling to Malaysia from Singapore, Vietnam, China, Hong Kong, Australia, and Dubai, There will also be presenters from Malaysia.

This intensive residential course in International Commercial Arbitration is offered over nine days. Participants will be taught the practice of international commercial

arbitration, including all major forms of international arbitration and related dispute settling mechanisms such as WIPO, WTO and Investment Treaty Arbitration. Participants will gain the ability to appear in or act as an arbitrator in such arbitrations in different contexts.

In the first half, a series of lectures cover the fundamentals of international commercial

arbitration. They follow and analyse legal concepts and issues arising during the course of an arbitration. In the second half, the lectures will examine Trade Law disputes and arbitration under Bilateral Investment Treaties and Free Trade Agreements and other specialist areas such as construction maritime

and domain name arbitration. Meanwhile in the afternoon sessions from

Monday to Friday, participants take part in practical group workshops, under the guidance of experienced arbitrators. Students will be given practical training in the conduct of an international arbitration and will discuss a range of problems which may arise in the course of conducting an international arbitration.

On successful completion of the Diploma course and Module 4 Award Writing Workshop and Examination, candidates will be awarded a CIArb Diploma in International Commercial Arbitration.

Successful completion of the course assessment will enable students to gain advanced standing in postgraduate programs offered by the Faculty of Law UNSW. Students should contact student services to discuss admission to a post-graduate program before undertaking the course. Current UNSW students should contact student services to

obtain information about units of credit available to your degree. A maximum of 12 units of credit advanced standing is available.

The cost of the course is A$7 ,900 wh ich inc ludes tuition fees, course materials, accommodation and all meals (except evening dinner) in the five star Royale Chulan hotel in Kuala Lumpur. The cost also includes the course banquet, which will be held on the last night of the course, and a midweek dinner which, earlier this year, was held at the Malaysia Petroleum Club on Level 43 of the Petronas Towers.

The hotel is a short walk from the Pavilion Shopping Centre which is linked to the KLCC Shopping Mall and the Petronas Towers by an air-conditioned

walkway approximately 15min walk away. Places are limited and further information and registration details can be obtained from:Rashda Rana,Tel: + 61 2 9230 3205; Mob: +61 413 130 601Email: [email protected]

NewsReview

22ADR Reporter

University of Canberra law students have beaten almost 100 teams of the world’s best up-and-coming legal

eagles to win the Vis Moot East international mooting competition in Hong Kong.

The team of Simon Hall, Brent Thompson and James Stavridis impressed judges at the Willem C. Vis East International Commercial Arbitration Moot Court Competition with their legal arguments through four general rounds and four rounds of finals, knocking out teams from 27 countries along the way, before beating Germany’s Westfalische Wilhelms-Universitat Munster in the final.

An imposing panel high-profile international arbitrators kept the team on their toes with Mr Hall, who earned an honourable mention for the ‘best oralist’ award, comparing the experience to facing a tiger.

“One of the most hairy moments for me was during the knock-out rounds,” he said.

“In presenting your argument, you normally outline the three issues you will be discussing before going into each one in depth. But I had just got the words “my first point will be” out of my mouth when the arbitrator launched into a series of incredibly difficult questions on a totally unrelated topic. It was like fending off

a tiger from the minute we started.”The mooters argued a range of issues from

whether a witness statement can be admitted in evidence without the ability to question witnesses in international arbitration to questions of international contract law.

The students were joined in Hong Kong by mentor and law lecturer Dalma Demeter, who was very proud of the team’s performance.

“They showed excellent knowledge and skills, but also proved great collegiality and were active players of the competition’s social events,” Dr Demeter said.

“Through their performance, but also their personality, they made UC well-known among academics, professionals and students from all over the world.”

Mr Thompson described the team’s winning combination: “A unified team, the mooting super coach of Dalma Demeter, a lot of hard work and little bit of luck is unbeatable,” he said.

While Mr Stavridis felt the experience had boosted his confidence and given him a valuable network of fellow young lawyers around the world.

University of Canberra wins Vis Moot East(l-r) Simon Hall, Brent Thompson and James Stavridis with team coach Dalma Demeter after winning the Vis Moot East in Hong Kong.

“A unified team, the mooting super coach of Dalma Demeter, a lot of hard work and little bit of luck is unbeatable”- Brent Thomson on UC’s winning formula

23June 2013

23

And though experts say it is too soon to tell with certainty what impact the law has had on tobacco use, one thing is for sure: The

restrictions have left a bad taste in the mouth of many smokers. Specifically, complaints started to roll in about the flavor of beloved cigarette brands almost immediately after the law came into effect on Dec. 1. That, it turns out, could mean a whole lot.

‘‘The proof will be in years to come with decreased smoking rates and the decreased morbidity and mortality that comes with that,’’ the Australian health minister, Tanya

Plibersek, said in an interview. ‘‘But the best short-term indication I have that it’s working is the flood of calls we had in the days after the introduction of plain packaging accusing the government of changing the taste of cigarettes. Of course, there was no reformulation of the product, it was just that people being confronted with the ugly packaging made the psychological leap to disgusting taste.’’

All parties in the battle over tobacco consumption in Australia have their own take on the law’s efficacy. The most reliable sales figures, however, are proprietary and guarded by the tobacco companies, while

the government’s latest figures will not be released until September.

While Australia is out in front in requiring graphic imagery on tobacco labels, policy makers in Europe and the United States have been trying to head in similar directions. Several countries in Europe already require similar photographs, but European Union ministers last month agreed in principle on more: Newrules would require a health warning that would combine pictures and text and cover 65 percent of the front and back of all cigarette packs, up from 40 percent.

Tobacco “Wars” update

Products at the Sol Levy Tobacconist shop in Sydney. The new law requires health warnings to cover 75 percent of the front of packages.

Plain cigarette packaging - six months on

It has been about six months since Australia instituted one of the world’s toughest cigarette labeling laws, swapping icons like the Marlboro Man and Joe Camel for graphic images of mouth ulcers, cancerous lungs and gangrenous limbs. Andrew Quilty reports on the impact so far.


NewsReview

24ADR Reporter

The rules require approval by the European Parliament.

In the United States, a 2009 law empowered the Food and Drug Administration to require large graphic and text warnings on the top half of the front and back of cigarette packs. But as federal courts have wrestled with the details of that law in challenges by the tobacco industry, the F.D.A. has not yet imposed a final set of labeling requirements.

Tobacco is taxed heavily in Australia, where smokers spend about 16 Australian dollars, or $14.70, for a pack of cigarettes. Partly as a result, smoking rates in Australia have declined. As of 2011-12, according to figures from the Australian Bureau of Statistics, 20.4 percent of adult men were smokers and 16.3 percent of adult women smoked. In the United States, by comparison, the most recent data from the Centers for Disease Control and Prevention show that the smoking rate is 21.5 percent among adult men and 17.3 percent for adult women.

Smoking i s a l so banned in nearly all public spaces in Australia, including restaurants, bars, sporting facilities and places of business.

The new labeling law, which bans brand logos and requires health warnings to cover 75 percent of the front of cigarette packages and 90 percent of the back, aims to remove the allure of wellknown brands. Last year, a challenge to the law brought by British American Tobacco, Imperial Tobacco, Japan Tobacco and Philip Morris Australia was dismissed by the Australian High Court.

Now Philip Morris Asia, whose headquarters is in Hong Kong, is challenging the legislation under a broad 1993 bilateral trade agreement aimed at promoting and protecting trade between Australia and Hong Kong. The pact was designed to ‘‘encourage and create favorable conditions’’ for investors in both countries and mandates that any traderelated disputes be settled through arbitration. Philip Morris argues that by stripping its products of their brand identity, the law is hurting its intellectual property in violation of that agreement.

The exact mechanism by which the law would further push down smoking rates is hotly debated, so even seemingly innocuous signs like taste are closely scrutinized for meaning by all sides.

The issue comes into sharp focus at Sol Levy Tobacconist. Opened in 1890 on a prime

strip of real estate in what is now Sydney’s booming Chinatown, it is one of only a handful of dedicated tobacconists remaining in the city.

Evelyn Platus, whose grandfather was the founding Mr. Levy, has managed the shop for more than 20 years. On a recent afternoon, it was nearly empty. Her business, she said, has been hurt by high taxes and restrictive rules governing tobacco. But when it comes to plain packaging, the ire she normally reserves for the ‘‘nanny state’’ is pointed at Big Tobacco.

‘‘The cigarette companies will deny it, but all of our customers are telling us the cigarettes taste different. The government’s spruiked it as a mind-over-matter thing, but I don’t believe so,’’ Ms. Platus said, using Australian slang for making a pitch. She added: ‘‘With all of the changes they were forced to make, there was no way to recoup their money, so the cigarette companies appear to have taken advantage of it and sourced their product from somewhere else.’’

It is a common refrain among Australian

smokers and is repeated on Internet forums dedicated to the issue. In some versions of the conspiracy theory, the government is responsible for changing the taste; in others, the state is accused of having colluded with the tobacco companies.

Scott McIntyre, a spokesman for British American Tobacco, dismissed concerns about flavor. ‘‘It’s the same tobacco, being made in the sameway, in the same Australian factories by the same people as it always has been made for a very long time,’’ he said in an interview at the company’s headquarters here.

He said the new restrictions had had no effect on tobacco sales, but he declined to

provide any numbers, citing confidentiality.Some experts had quietly predicted such

an outcome before the law was enacted, said Simon Chapman, a professor of public health at the University of Sydney. That smokers are citing an unpleasant reaction to their longtime brands is a positive early sign for antismoking advocates, he said.

‘‘It’s totally consistent with packaging literature, which is that you can influence the perception of taste by the packaging that something comes in. The most obvious example of that is wine,’’ he said. In any given liquor store, ‘‘you don’t know most of the wines, and you kind of go, ‘That one looks like it’ll be good.’ Packaging really does cue taste.’’

Overseas challengesThat would be bad news for tobacco companies and exporters. And it helps explain the raft of challenges undertaken in overseas jurisdictions in the wake of the High Court decision, which seem aimed as much at the handful of other

countries considering similar restrictions - Canada, New Zealand and Thailand - as at Australia itself.

In May, Cuba, the world’s dominant producer of fine cigars, filed a ‘‘request for consultations’’ with Australia through the World Trade Organization, the first time the country has used the forum to confront another nation directly over its commercial laws.

The Dominican Republic, Honduras and Ukraine have already challenged Australia over the issue at the W.T.O., citing ‘‘technical barriers’’ to trade and violations of intellectual property rights.

In another closely followed move, Japan Tobacco, Asia’s biggest listed cigarette maker, said at the end of June that it had filed suit against the Thai government over its plan, announced in April,

to increase the size of graphic health warnings to 85 percent of the cigarette pack cover, from 55 percent.

But not everyone believes plain or offputting packaging will affect the habits of dedicated smokers. Robert Moore, 80, said he smoked about 60 cigarettes a day for most of his life and was a spokesman for Dunhill during his days as a radio announcer. He is now living in a hospice, after doctors diagnosed lung cancer.

‘‘I look back at my time and think, Would I have been influenced by that? And I don’t think I would have been,’’ he said. ‘‘I don’t think it would have had any impact on me at all if it didn’t come in a pretty packet.’’

Plain cigarette packaging - six months on

25June 2013

Th e K u a l a L u m p u r R e g i o n a l

Centre for Arbitration (KLRCA), a forum f o r s e t t l e m e n t by a rb i t r a t i on o f disputes concerning t r a d e , c o m m e r c e and investment in Asia-Pacific, aims to arbitrate 250 cases per year by 2016, from 100 cases last year, said its director Datuk Sundra Rajoo.

Founded in 1978, he said KLRCA has taken time to establish itself as a regional hub for arbitration and today it is recognised as an alternative to established arbitration centres such as Singapore and Hong Kong.

“Kuala Lumpur is 20% more cost effective (in arbitration proceedings) compared with other arbitration institutions in the region,” he told SunBiz recently.

“There’s no res t r ic t ion for lega l representation (be it local or foreign lawyers or arbitrators) where arbitration is concerned in Malaysia,” he said, adding that KLRCA has a panel of 700 arbitrators, of whom 500 are international arbitrators.

Arbitration is a form of alternative dispute resolution and is a less formal way for parties to resolve legal disputes outside of the traditional court system. It aims to provide fair and unbiased resolution to disputes without causing needless delay or expenses.

I n M a l a y s i a , a r b i t r a t i o n i s g o v e r n e d b y t h e Arbitration Act 2005 and the Arbitration (Amendment) Act 2011 , bo th based s u b s t a n t i a l l y o n the United Nations C o m m i s s i o n o n International Trade Law (Uncitral) model law.

Sundra said half of the arbitration cases in KLRCA are from the construction sector and the rest are commercial, intellectual property, i n s u r a n c e a n d technology-related.

E x a m p l e s o f commercial cases i n c l u d e d i s p u t e s

in supply contracts, sales and purchase agreements, joint ventures and dealerships agreements.

About 20% of the hearings being conducted in KLRCA are international cases.

“While we’re trying to expand KLRCA’s role, we’re also trying to expand the role of arbitration institutions in Asia. We want to expand the pie We want all arbitration going to Europe or the US to come back to Asia,” said Sundra, who is also the president of the Asia-Pacific Regional Arbitration Group that represents 40 arbitration institutions in the region.

He said Malaysia’s strength is in Islamic arbitration, with the i-Arbitration Rules being the first set of Islamic arbitration rules in the

KLRCA looks to increase arbitration cases by 150pc

Datuk Sundra Rajoo, Director-General of KLRCA, who has been re-appointed for a further 3 years

InternationalReport

world for the resolution of disputes arising from commercial contracts containing syariah issues. It adopts Uncitral Arbitration Rules that ensures international enforceability.

In its efforts to make Malaysia the preferred alternative dispute resolution hub in the region, KLRCA is continuously building on its portfolio of rules as well as improving its services.

“We have to innovate our products (in arbitration rules) and market KLRCA aggressively. We have to sell Malaysia as a package to promote the legal services here,” said Sundra.

Malaysia is a signatory to the 1958 New York Convention on the Recognition and Enforcement of foreign Arbitral Awards which enables KLRCA’s arbitral awards to be enforceable in 148 signatory countries.

The KLRCA director has the statutory authority and independence to appoint arbitrators without court interference as provided in the Malaysian Arbitration Act, 2005.

“Half of the arbitration cases dealt with by KLRCA are from the construction sector”

- Sundra Rajoo, Director-General of KLRCA

INTERNATIONAL REPORT: SE ASIA

26ADR Reporter

AFTER a 25 per cent surge in demand. the Singapore International Arbitration Centre is opening offices

in India and South Korea to streamline the flow of work to the island state.

The centre also has adopted a new structure that will concentrate its arbitral expertise in a new Court of Arbitration under the presidency of Australia’s Michael Pryles.

The new structure is modelled on the system used by the London Court of International Arbitration and the International Chamber of Commerce.

While the arbitral functions of the SIAC have moved to its new Court of Arbitration. the corporate compliance. finance and mareketing functions remain with the centre’s board chaired by Lucien Wong. chairman and senior partner of Allen & Gledhill.

Dr Pryles said two of the world’s most eminent arbitrators had agreed to join the centre’s new court: Jan Paulsson of Paris and Gary Born of London,

It has I6 leading arbitration practitioners from countries that include Bahrain. Belgium, China, France, India, Japan, Singapore. Britain and the US.

SIAC will open an office this month in

Mumbai, under the directorship of India’s Pallavi Shroff, a senior partner at Amarchand & Mangaldas & Surest A Shroff & Co.

The Court of Arbitration also features one of India’s top barristers. Hanish Salve. a former solicitor-general of India who practices primarily before the Supreme Court of India.

An office in Seoul will be opened later this year and a third off-shore office, in the Persian Gulf, is being considered.

Dr Pryles said some arbitration work would be done in India. but the Mumbai office would focus primarily on highlighting SIAC’s service in Singapore.

“Our three key markets are India, China and Indonesia,” Dr Pryles said.

We send people over to India all the time to put on conferences and seminars. We have two Indians on our court and another Indian on our board of directors.

“India is enormously important: they have basically moved their (commercial arbitration) work from London to Singapore.”

These moves come soon after SIAC handled 235 new international commercial disputes last year, a 25 per cent increase on the year before.

Parties from China generated the highest number of non-Singaporean matters (44), followed by India (42), Indonesia (27), the US (25) and Hong Kong (18). Parties from

Singapore expands arbitration influence in Asia

Australia filed nine matters.Singapore government figures show that the

value of legal services exports has grown from $S363 million in 2008 to $S551m in 2011.

Dr Michael Pryles

By Chris Merritt, The Australian, 12 April 2013

“In 2012, SIAC handled 235 new international commercial disputes, a 25 per cent increase on the year before.Parties from China generated the highest number of non-Singaporean matters (44), followed by India (42), Indonesia (27), the US (25) and Hong Kong (18). Parties from Australia filed nine matters.”

INTERNATIONAL REPORT: UNCTAD

27June 2013

Foreign investors are increasingly resorting to investor-State arbitration to settle investment disputes, with a record

number of cases filed last year, according to a new report released by the United Nations Conference on Trade and Development (UNCTAD).

The 36-page detailed report, ‘Recent Developments in Investor-State Dispute Settlement (ISDS)’, showed that 62 new cases were filed in 2012, of which 68 per cent of respondents were from developing or transition economies. The report can be downloaded at www.unctad.org.

“Recent developments have amplified a number of cross-cutting challenges that are facing the ISDS mechanism, which gives credence to calls for reform of the investment arbitration system,” said James Zhan, Director of UNCTAD’s Division on Investment and Enterprise, which published the report.

Foreign investors challenged a broad range of government measures, UNCTAD reported, including revocations of licences, breaches of investment contracts, irregularities in public tenders, changes to domestic regulatory frameworks, withdrawal of previously granted subsidies, direct expropriations of investments and imposition of taxes. Nine decisions in 2012 awarded damages, including the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), which ordered Ecuador to pay $1.77 billion to Occidental Petroleum Corp as compensation for taking over its

assets in 2006. The monetary award was the highest in the history of Investor-State Dispute Settlement (ISDS).

In addition, for the first time in treaty-based ISDS proceedings, an arbitral tribunal affirmed its jurisdiction over a counterclaim lodged by a respondent State against the investor.

By the end of 2012, the total number of known cases reached 518, and the total number of countries that have responded to one or more ISDS claims increased to 95, according to UNCTAD.

The overall number of concluded cases reached 244, out of which approximately 42 per cent were decided in favour of the State and 31 per cent in favour of the investor. Approximately 27 per cent of the cases were settled.

“The ISDS mechanism is already a source of considered reflection in numerous bilateral and regional IIA negotiations. However, a multilateral dialogue on ISDS could prove more effective in bringing about a harmonized approach to reform,” Zhan said.

UNCTAD: International investment disputes hit record in 2012

Highlights

• In 2012, 62 new cases were initiated, which constitutes the highest number of known treaty-based disputes ever filed in one year and confirms that foreign investors are increasingly resorting to investor-State arbitration.

• In 68% of the new cases, respondents are developing or transition economies. While the number of cases initiated by developing country investors has increased, the majority of new cases (63%) still originate from developed countries.

• Claimants have challenged a broad range of government measures, including those related to revocations of licences, breaches of investment contracts, irregularities, in public tenders, changes to domestic regulatory frameworks, withdrawal of previously granted subsidies, direct expropriations of investments, tax measures and others.

• At least 42 arbitral decisions were issued in 2012, including decisions on objections to tribunal’s jurisdiction, merits of the dispute, compensation and applications for annulment of an arbitral award. 31 of these decisions are in the public domain.

• In 70% of the public decisions addressing the merits of the dispute, investors’ claims were accepted, at least in part. Nine public decisions rendered in 2012 awarded damages to the claimant, including the highest award in the history of ISDS (US$ 1.77 billion) in Occidental v Ecuador, a case arising out of a unilateral termination by the State of an oil contract.

• For the first time in treaty-based ISDS proceedings, an arbitral tribunal affirmed its jurisdiction over a counterclaim lodged by a respondent State against the investor.


By the end of 2012, the total number of known cases reached 518, and the total number of countries that have responded to one or more ISDS claims increased to 95



28ADR Reporter

• The total number of known treaty-based cases reached 518 in 2012, and the total number of countries that have responded to one or more such case increased to 95.

• The overall number of concluded cases reached 244. Of these, approximately 42%. were decided in favour of the State and approximately 31% in favour of the investor.Approximately 27% of the cases were settled.

• The public discourse about the usefulness and legitimacy of the ISDS mechanism is gaining momentum, especially given that the ISDS mechanism is on the agenda in numerous bilateral and regional international investment agreements (IIA) negotiations.

• While ISDS reform options abound, their systematic assessment including with respect to their feasibility, expected effectiveness and implementation methods remains wanting. A multilateral policy dialogue could help to develop a consensus about the preferred course for reform and ways to put it into action.

Compensation

On damages, at least nine decisions rendered in 2012 awarded them to

the investor.The highest amount - which also

represents the highest known award of damages in the history of investment treaty arbitration - featured in Occidental v Ecuador II where the investor was awarded US$ 1.77 billion plus pre- and post-award compound interest by the majority of the tribunal. In EDF v Argentina the claimant was awarded US$ 136.13 million plus compound interest, while in Deutsche Bank v Sri Lanka, the claimant was awarded US$ 60.36 million plus interest. In SGS v Paraguay, the claimant was awarded US$ 39.02 million plus interest and in RDC v Guatemala, the claimant was awarded US$ 11.2 million plus compound interest.

Smaller awards were granted in Marion

Highlights

In 2012, the number of known treaty-based investor-State dispute settlement (ISDS) cases filed under international investment agreements (IIAs) grew by at least 62.1 This constitutes

the highest number of known treaty-based disputes ever filed in one year.Of the 62 new disputes, 39 were filed with the International Centre for Settlement of

Investment Disputes (ICSID) (of which seven cases are under the ICSID Additional Facility rules), five under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL) and another five under the Stockholm Chamber of Commerce (SCC). The International Chamber of Commerce (ICC) and the Cairo Regional Centre for International Commercial Arbitration (CRCICA) received one new case each. One case was an ad hoc arbitration.

For ten cases, the applicable arbitration rules/venues are unknown.2

In 42 of the 62 new cases, respondents are developing or transition economies and in 15 cases they are developed countries. For five cases the respondent country is unknown. In 2012, Venezuela, for the second consecutive year, responded to the largest number of cases (9); followed by India (7); Pakistan (4); Algeria, Egypt and Hungary (3 each). In 2012, Belgium, Equatorial Guinea, Republic of Korea and Laos faced their first ISDS claims.

Of the 62 new cases, 39 were filed by investors from developed countries. Out of these 39 cases, 29 were filed against developing countries or economies in transition; the remaining ten cases were filed by investors from developed countries against host developed countries. 2012 witnessed a surge in the number of cases filed by investors from developing countries (17, compared to nine in 2011). For six cases the investor’s home country remains unknown.

2012 saw at least eight new intra-EU investment disputes, i.e. claims by EU investors against EU Member States, which brought the overall number of such claims to 59. Of the eight new claims, two were brought pursuant to the Energy Charter Treaty (to which all Member States are party) and the other six pursuant to provisions of intra-EU bilateral investment treaties (BITs).3 Hungary was the most popular respondent, having to cope with three new intra-EU claims.

Investors have challenged a broad range of government measures, including those related to revocations of licences (e.g., in mining, telecommunications, tourism), alleged breaches of investment contracts, alleged irregularities in public tenders, changes to domestic regulatory frameworks (gas, nuclear energy, marketing of gold, currency regulations), withdrawal of previously granted subsidies (solar energy), direct expropriations of investments, tax measures and others,

1 This Note does not cover cases that are exclusively based on investment contracts (State contracts) or national investment laws and cases where a party has so far only signalled its intention to submit a claim to ISDS, but has not yet commenced the arbitration.2 Information about 2012 claims has been compiled on the basis of public sources. Additional information received from the ICSID Secretariat, the Permanent Court of Arbitration, the Arbitration Institute of the Stockholm Chamber of Commerce, the Cairo Regional Centre for International Commercial Arbitration and the London Court of International Arbitration.3 These are BITs between Hungary and the Netherlands, Hungary and the UK, Hungary and Portugal, Bulgaria and the Netherlands, Italy and Romania, Latvia and Lithuania.

New claims

Figure 1 - Known ISDS cases

Figure 1 - Known ISDS cases

Total claims by end 2012

The total number of known treaty-based cases rose to 518 by the end of 2012 (figure 2)1. Since most arbitration forums do not maintain a public registry of claims,the total number

of cases is likely to be higher.

The majority of cases have been brought under the ICSID Convention and the ICSID Additional Facility Rules (314 cases) and the UNCITRAL Rules (135).2 Other venues have been used only rarely, with 27 cases at the Stockholm Chamber of Commerce and eight with the International Chamber of Commerce (see Figure 3).

In total, over the past years at least 95 governments have responded to one or more investment treaty arbitration: 61 developing countries, 18 developed countries and 16 countries with economies in transition (see annex 2). Argentina continues to be the most frequent respondent (52 cases) followed by Venezuela (34), Ecuador (23) and Mexico (21).

1 Due to new information becoming available for 2011 and earlier years, the number of total known IIA-based ISDS cases at end 2011 was revised upwards to 456 from 450, as reported in UNCTAD’s 2012 IIA Issue Note No. 1, available at http://unctad.org/en/PublicationsLibrary/webdiaeia2012d10_en.pdf.2 A number of cases under the UNCITRAL rules are administered by the Permanent Court of Arbitration (PCA). By the end of 2012,the total number of PCA-administered ISDS cases amounted to 85, of which 47 were pending. Only 18 of all PCA-administered ISDS cases are public. Source: the Permanent Court of Arbitration International Bureau.

Figure 3 Distribution of known cases among arbitral institutions/rules(total as of end 2012)

29June 2013

and Reinhard Unglaube v. Costa Rica (US$3.1 million plus interest), Renta 4 v. Russia (US$ 2 million plus compound interest), Antoine Goetz v Burundi (US$ 2 million plus interest), and Swisslion v Macedonia (€350,000 plus compound interest).

On the condition for the award of damages, the tribunal in RDC v. Guatelmala determined that, while reparation was due to the claimant to compensate it fully for the injury suffered, the payment of the amount awarded should be subject to the claimant’s relinquishing its rights under all the contracts. Since the claimant’s local subsidiary, FVG, was the party to the usufruct contracts, the tribunal conditioned payment of the award upon the transfer of the claimant’s shares in FVG to the respondent.124

On valuation methods, the tribunal in Occidental v. Ecuador found that “the discounted cash flow method is the most widely used and generally accepted method in the oil and gas industry for valuing sales or acquisitions”125 and that “it can derive no assistance from an analysis of the seven transactions which the respondent has submitted as comparable sales [since each oil and gas property presents a unique set of value parameters].”126

On the award of future lost profits, in Mobil and Murphy v Canada, the tribunal - having found that Canada admitted a continuing breach of NAFTA Article 1106 inflicting the ongoing damage to the claimants’ interests in the investment – held that it would award compensation for past damage (including past lost profits) but rejected the claim for future lost profits (projected by the claimant up to the year 2036) because it said it would not be able to estimate those damages with “reasonable certainty”. The tribunal suggested, instead, that the claimants should bring new arbitral proceedings in the future to collect damages “for losses which [will] have accrued” by the relevant point in time as by that time the damages will become “fully ascertainable” and “actual”.127

W i t h r e g a r d t o a d d i t i o n a l circumstances relevant for quantifying the losses, three findings by the majority of the tribunal in Occidental v. Ecuador128 are worth emphasising (in particular as one of the arbitrators was in “complete disagreement”129 with the findings of the majority). First, the majority decided to disregard certain “value-depressing measures” taken by the respondent (before the measure under review was adopted)


Compensation

(contunued from page 28)


30ADR Reporter

Investor-State arbitrations have been initiated most frequently by claimants from the United States (123 cases, or 24% or all known disputes), the Netherlands (50 cases), the United Kingdom (30) and Germany (27).

The three investment instruments most frequently used as a basis for ISDS claims have been NAFTA (49 cases), the Energy Charter Treaty (29) and the Argentina-United States BIT (17).

Outcomes

In 2012, ISDS tribunals rendered at least 42 decisions in investor-State disputes, 31 of which are in the public domain (at the time of writing).1 Of the 31 public decisions, twelve addressed jurisdictional issues, with seven decisions

upholding the tribunal’s jurisdiction (at least in part) and five decisions rejecting jurisdiction. 17 decisions on the merits were rendered in 2012, with twelve accepting - at least in part - the claims of the investors, and five dismissing all of the claims. Compared to previous years, this represents a higher percentage of rulings against the State.

Of the twelve decisions finding State’s liability, six found a violation of the FET provision, five of the expropriation provision, two of the umbrella clause and one of the prohibition of certain performance requirements. At least nine decisions rendered in 2012 awarded compensation to the investor, among them the highest award in the history of ISDS2 (some decisions on liability have postponed the question of damages to the next phase of the arbitration).

Two decisions on the application for annulment were issued in 2012 by ICSID ad hoc committees, with one partially annulling the arbitral award and the other dismissing all claims for annulment.

In 2012, individual arbitrators issued seven dissenting opinions, up from six in 2011 and three in 2010. The 2012 dissenting opinions touch upon a broad number of issues, including the most favored nation (MFN) clause, the umbrella clause, the definition of investment, expropriation, fair and equitable treatment, nonconforming measures and the assessment of damages.

In addition to investor-State cases, one arbitral award was issued in State-State proceedings between Ecuador and the United States brought under the Ecuador-United States BIT.3This award is not public.

2012 arbitral developments brought the overall number of concluded cases to 244.4 Out of these, approximately 42% were decided in favour of the State and approximately 31% in favour of the investor. Approximately 27% of the cases were settled. In settled cases, specific terms of settlement typically remain confidential.5

1 There may have been other decisions issued in 2012 whose existence is not known due to the confidentiality of the dispute concerned.2 See section III.C “Compensation” below.3 Republic of Ecuador v. United States of America, PCA Case No. 2012-5, Award, 29 September 2012. 4 A number of arbitral proceedings have been discontinued for reasons other than settlement (e.g., due to the failure to pay the required cost advances to the relevant arbitral institution). Status of some other proceedings is unknown. Such cases have not been counted as “concluded”. 5 Some settlements have been made public, which allowed for their discussion and analysis (for example,

(ICSID Case No. ARB/09/6).

Figure 5. Results of concluded cases

because those measures (for example, Law 42 providing for a windfall profit tax of 99%) were taken in breach of the applicable BIT.

Second, the tribunal concluded that the respondent must compensate the claimants for 100% of their interest in the investment despite the fact that the claimant may be liable vis-à-vis third-parties.

Third, the tribunal discounted 25% of the total loss suffered by the investor because of the investor’s “material and significant wrongful act” (linked to the investor’s failure to fully disclose the nature of the assignment agreement with a third party). Citing the legal principles of contributory negligence, the tribunal found that the claimants had contributed to the extent of 25% to the prejudice which they suffered following the host State’s termination of the concession agreement and that “the resulting apportionment of responsibility as between the claimants and the respondent, to wit 25% and 75%, is fair and reasonable in the circumstances of the present case.”

On the investor’s duty to mitigate damages, the tribunal in EDF v. Argentina stated that it would be patently unfair to allow the claimants to recover damages for loss that could have been avoided by taking reasonable steps as the duty to mitigate damages is a well-established principle in investment arbitration. It further added that whether the aggrieved party had taken reasonable steps to reduce the loss was a question of fact, not law and what was reasonable depended largely upon the facts of the individual case.

On the calculation of interest, the tribunal in Occidental v Ecuador noted that while the traditional norm was to award simple interest, this practice has changed and the majority of recent awards provided for compound interest.

The tribunal in SGS v Paraguay noted that the virtually universal principle of nternational law and international arbitration practice in the case of a delayed payment of monetary obligations due is to apply interest as of the date payment ecame due. The tribunal noted that the claimant adopted the conservative approach of requesting interest only as from the date of contract termination, rather than from the date when each invoice became due.

Due to space limitations, the footnote references which accompany the Compensation section in this Report have been omitted. They can be found on pages 18-20 of the UNCTAD Report at www.unctad.org.

Compensation(contunued from page 29)

31June 2013

The efficiency of Kenya’s legal system and its ability to deliver swift and cost effective justice has remained on the

radar despite ongoing reforms in the Judiciary.In any forum of commercial justice, the

crucial question is always how much it costs businesses and individuals engaged in a dispute of a commercial nature. The time and money spent in the pursuit of a resolution is critical.

A build-up in the backlog of cases and the influx of foreign investment in Kenya since 2003 has forced many parties seek alternative dispute-resolution methods such as arbitration and mediation. Many see these methods as cheaper, quicker and less messy alternatives to litigation.

Arbitration, in particular, has been singled out for its potential to ease the case load of an overburdened Judiciary. It has been nearly 10 years of Kenya’s experience with arbitration, making it valid to ask whether this method of dispute resolution remains the golden child of Commercial Justice.

One of the biggest benefits of arbitration is that it makes use of adjudicators with specialised knowledge in particular fields to settle commercial disputes.

The Chartered Institute of Arbitrators in Kenya accepts and encourages members from all professions and this has been found to be particularly important where the conflict in question is highly technical.

But therein lies the paradox. Many legal experts have argued that the suitability of arbitration to highly technical and industry-specific conflict negates its perceived cost effectiveness.

It is generally acknowledged that arbitration has been a particularly effective dispute resolution tool in international commercial transactions but is seldom cheap.

Th i s i s because a rb i t e r s cha rge competitively for their time - the more specialised the knowledge required the more the parties pay to access them. It has also been said that choosing arbitration

over litigation helps save the time spent to access justice.

This is mainly because the Kenyan Judiciary has in the past not been very efficient and cases filed in the Commercial Division of the High Court took years to resolve.

The advantage of arbitration is that while a judge is burdened with a case load of hundreds of file all equally demanding and deserving of his attention, an arbitrator is often facing fewer demands, leaving him enough room to set a time line for the delivery of awards in consultation with the parties to the dispute.

Yet arbitration faces the challenge of dealing with the outcome of its processes. Most parties to the disputes have patiently sat through the processes only to move to the High Court seeking to set aside arbitral awards.

It is for this reason that arbitration, once seen as a time and money saving alternative to litigation, has in many cases, become a mere first step on the long and expensive road to litigation.

There are many reasons that parties to arbitration move on to the courts.

First is the fact that in the face of a failing Judiciary, the idea of a new “private” justice seemed revolutionary. The nature of arbitration is such that parties determine the parameters for the decision maker and may even pick an arbitrator or board with specialised knowledge on the dispute.

In Kenya, arbitration gained impetus once embraced by lawyers - who realised that since arbitration was essentially an adversarial process their skills would be called upon to represent parties.

Most arbitration clauses or agreements also have evidential requirements and a set standard of proof making advocacy skills crucial in the presentation of a case.

Consequently, the bid for arbitration and other forms of alternative dispute resolution has meant that arbitration clauses become standard in commercial contracts.

The challenge has, however, been that most of these clauses have been infused into

contracts without any thought to the suitability of arbitration to resolve the conflicts that are likely to arise from the contract.

More recently, the promulgation of a new Constitution has set in motion a chain of events including the appointment of a progressive Chief Justice and the vetting of judicial officers.

While it may be fair to say that these reforms have yet to deliver any tangible or sustained improvements in the delivery of justice, they have gone an incredibly long way in restoring public faith in the Judiciary.

When it comes to commercial justice, forum is everything. Arbitration is suitable for complex claims or highly technical claims where an arbiter with specialised knowledge is needed to grapple with the nuances of the claim.

Many judges have taken to directing parties to a dispute to seek arbitration, mediation or conciliation where they see an opportunity resolve the matter through alternative channels. The arbitral award is ultimately adopted as a court order.

Arbitration has not been the ‘one size fit all’ solution to the overburdening of the Judiciary. As a form of dispute resolution it is not simply an alternative to litigation but an adversarial process uniquely suited to the resolution of certain disputes.

When applied to the correct dispute arbitration has proved to be an incredibly successful mode of dispute of resolution. Yet the success of the unusual marriage between ‘private’ and ‘public’ justice that was envisioned by courts in initiating ADR processes remains to be seen.

It could be a match made in heaven; the certainty of outcome of litigation (as results would be adopted as court orders) and the flexibility and specialisation of ADR processes.

If properly adopted this ‘“multi-door” approach to commercial Justice could provide parties to the disputes access to an appropriate (in term of costs, expertise and time) forum for their resolution and may prove to be the stabilising element that restores faith in Kenyan dispute resolution.

Ms Onsando is a Nairobi-based commercial lawyer

Is arbitration of disputes better than litigation?Aisha Onsando writes that although suitable for highly technical commercial cases, arbitrations are not a ‘one size fit all’ solution in Kenya.

INTERNATIONAL REPORT: DUBAI

32ADR Reporter

A recent ruling of the Dubai Court of First Instance (see Case No. 489/2012, ruling of the Dubai Court of First

Instance of 18 December 2012) questions de novo the UAE courts’ compliance with their obligations under international enforcement instruments in the enforcement of foreign arbitral awards.

Following the recent trend of consolidation of the UAE courts’ practice to abide by the terms of international enforcement instruments – foremost amongst them the New York Convention (see Convention on the recognition and enforcement of foreign arbitral awards, done in New York on 10 June 1958, as ratified and hence implemented in UAE law by UAE Federal Decree No. 43 of 2006), this ruling marks a sudden and unwelcome setback in what commentators had believed had become a turning-point in the UAE enforcement practice of foreign arbitral awards.

In essence, the present application before the Dubai Court of First Instance relates to the enforcement of a trilogy of awards rendered under the Arbitration Rules of the International Chamber of Commerce (ICC) International Court of Arbitration in Paris (see ICC Case No. 5277/RP/BGD), one preliminary award in relation to a discrete finding of fact, a final award on the merits and an award on costs.

In the final award, the ICC tribunal awarded the Claimant, la Compagnie Françaised’ Entreprises S.A (CFE), several million US$ for outstanding payments for works performed in the construction of the Canal de Jonglei in South Sudan. The award debtor, the Government of the Republic of Sudan, ultimately refused to perform the awards voluntarily, hence the present application for enforcement to the Dubai Courts.

Eschewing any reference to relevant provisions of potential ly applicable international enforcement instruments binding on the UAE in the present context, the Dubai Court of First Instance simply pronounced in pertinent part as follows:

“Pursuant to articles 21 [...] of the Civil Transactions Law, articles 19.1, 20, 21 and 42 of the Civil Procedures Law as well as practice of the Court of Cassation, it has been upheld that the international jurisdiction of Courts is a matter of the public policy. Further, the UAE Courts lack jurisdiction over the cases brought against any foreigner having no domicile or place of residence within the UAE, unless such case does relate to an obligation that has been concluded, carried out or has to be carried out in the United Arab Emirates or if a foreign company, located aboard, has a branch in the United Arab Emirates and the dispute relates to such branch ...

In its rulings based on article 235 of the Civil Procedures Law, the Court of Cassation has established that for having a judgment rendered by a foreign Court enforced in the United Arab Emirates, the national Courts should not enjoy the jurisdiction over hearing the dispute decreed under such foreign judgment in pursuance of the principles of jurisdiction as set forth in the Civil Procedures Law...

Whereas the papers prove that the Ministry of Irrigation in the Republic of Sudan (the Defendant) does not have any domicile or place of residence within the United Arab Emirates and that the subject obligation has been concluded and carried out abroad, therefore the conditions stipulated in article 235 of the Civil Procedures Law have not been satisfied and hence the Court decrees lack of jurisdiction.”

With all due respect to the Dubai Court’s holding, its reasoning is entirely flawed. Even though the Court is right in pointing out that (i) Articles 19 to 24 of the UAE Civil Procedures Code set out the relevant principles for determining proper jurisdiction of the UAE Courts in international matters and over foreign persons, that (ii) Article 21 of the UAE Civil Transactions Code confers upon the UAE Courts the right to rely upon its own procedural laws in determining its own proper standing in international matters and that (iii)

Article 235 of the UAE Civil Procedures Code applies to foreign enforcement actions brought in the UAE, the Dubai Court is wrong to rely on these provisions for present purposes. This is because the Dubai Court has completely ignored the text of Article 238 of the UAE Civil Procedures Code and Article 22 of the UAE Civil Procedures Code: The former exempts the application of the provisions governing the execution of foreign judgments and foreign arbitration awards under Articles 235 and 236 of the UAE Civil Procedures Code from the enforcement of foreign judgments and arbitration awards

United Arab Emirates: Has recent ruling of Dubai Court of First Instance on enforcement of foreign arbitral awards sent UAE back to square one?Gordon Blanke asks the question


33June 2013

that fall within the scope of application of international conventions. In similar vein, the latter exempts the application of Article 21 of the UAE Civil Transactions Code from cases governed by international conventions binding on the UAE.

Under the New York Convention, enforcement of a foreign award is conditional upon presentation by the award creditor of (i) an original or officially certified copy of the foreign arbitration award (rendered in another Convention country) and (ii) an original or officially certified copy of the underlying arbitration agreement. Equally, under the Convention on Judicial Cooperation and the

Recognition and Enforcement of Judgments in Civil and Commercial Matters between the United Arab Emirates and the French Republic, as ratified by UAE Federal Decree No. 31 of 1992, enforcement in either of the two countries of an award rendered in the respectively other is conditional upon (i) the existence of a valid arbitration agreement, (ii) confirmation that the subject-matter of the underlying award is arbitrable in the State of enforcement and (iii) presentation of a certified copy of the arbitrator’s mandate, a full certified copy of the award attested in the State of issuance and proof demonstrating that the award is final and hence not subject to appeal in the State of issuance.

Under either of the two Conventions, enforcement does not depend – contrary to the terms implied by the Dubai Court of First Instance in its ruling – upon the award debtor having a geographical nexus (in the form of domicile or otherwise) with the country of enforcement..

The jurisdiction of enforcement of a supervisory court in a Convention country is entirely independent from any jurisdictional criteria apart from the authentication requirements listed in shorthand above. In other words, there is no requirement for subject-matter jurisdiction for a court to have jurisdiction of enforcement under either of the Conventions, provided the court in question is an emanation of a Convention country.

By way of illustration, in Case No. 764/Judicial Year No. 24 (ruling of the Federal Supreme Court of 7 June 2005), the UAE Federal Supreme Court confirmed that enforcement of an award rendered in France, including the instant ICC award issued in Paris, France, proceeds under the terms of the France-UAE Bilateral Convention, provided the formal authentication requirements set out in the Convention have been met. The Court emphasized that pursuant to Article 238 of the UAE Civil Procedures Code, the terms of international conventions concluded by the UAE with foreign countries prevail over the

provisions of Article 235 read together with Article 236 of the UAE Civil Procedures Code in the enforcement of foreign awards. In the words of the Court:

“The provisions of Article 235, 236 and 238 of the Law of Civil Procedures are to the effect that the provisions of conventions between the United Arab Emirates and other foreign countries, and international agreements ratified by the UAE, will be applicable with regards to the enforcement of the judgments of foreign courts and the arbitral awards as being domestic law, irrespective of the conditions set out in Article 235 of the Law of Civil Procedures ...

The courts of the UAE must ascertain that the conditions set out in such international conventions and agreements have been met before ordering that such orders be ratified or enforced in the UAE.”

This ruling hence confirms the UAE Court’s deference to the terms of bi-lateral enforcement treaty between the UAE and France.

At present, this commentator is not aware of whether the Dubai Court of First Instance’s ruling has been appealed to the higher courts or not. If so, it is to be hoped that the Dubai Court of Appeal and the Court of Cassation in a final instance will overturn the ruling of the Dubai Court of First Instance, declare that the Dubai Courts have proper jurisdiction and proceed to the enforcement of the disputed ICC awards under the relevant applicable international enforcement instruments.

In the event that the Dubai Court of First Instance’s ruling is not appealed, it is to be hoped that it will remain an isolated instance that will not be followed by future courts and be considered no more than an unfortunate accident in the recent more modern practice of the UAE courts in the enforcement of foreign awards, rather than going all the way back to square one...

First published on KLI International Arbitration Blog, 12 March 2013

Multinational companies, under pressure to cut budgets, are resorting to bringing specialist lawyers

in-house in a bid to cut costs in an environment where legal disputes are increasing.

Companies, particularly those in financial services, energy and construction, are hiring dispute-resolution lawyers to reduce the work that is traditionally given to external law firms, new data show. These in-house lawyers are undertaking more of the case preparation work and document production that is necessary to prepare for big litigation and arbitration cases, according to a survey by PwC and Queen Mary Law School.

“One of the key findings of the research is this trend in specialist counsel being brought in-house. In part, this is down to a cost-control measure but it will also serve as a real vote of confidence in [international arbitration] as these firms recognise the value in having arbitration specialists embedded more within their multinational businesses,” said Gerry

Companies bolster lawyers as clashes rise

Lagerberg, PwC’s head of international arbitration.

Arbitration can be costly, but is also the preferred method of resolving cross-border disputes for major companies, the research shows. Construction companies particularly warm to it, with 84 per cent of respondents from the sector reporting to PwC that international arbitration was suited to the kinds of disputes they faced.

International arbitration is an increasingly popular method of resolving cross-border disputes for big business and governments. Unlike traditional courts, proceedings are private and settlements confidential, making them particularly attractive for sensitive disagreements. Arbitration tends to be quicker than traditional litigation because decisions tend to be binding and not open to appeal.

The fact that companies can stipulate a choice of panel member who will decide the claim makes arbitration particularly attractive for sectors that can have highly technical

By Caroline Binham, Legal Correspondent

disputes, PwC found.One of the world’s most established

arbitration venues, the International Chamber of Commerce’s centre in Paris, has reported an increase in the number of awards it makes – from 325 in 2006 to 508 in 2011 – and the value of cases it hears. In 2008, 31 claims with a value of more than $100m were filed and four with a value of more than $1bn.

Unsurprisingly, it was respondents in the financial services sector who said that there had been a noticeable jump in disputes since 2008 and the onset of the financial crisis. Litigation, rather than arbitration, is still the preferred method for financial companies to resolve disputes, however.

“Many disputes arising out of defaults under loan agreements are ‘simple debt collection’ cases that are well suited to the courts rather than a flexible and potentially costly dispute-resolution mechanism such as arbitration,” the survey found.

Financial Times, 16 April 2013

QUITO, Ecuador-The Union of South American Nations, or Unasur, expects to formalise in the coming months

the creation of a dispute settlement centre to deal with differences among its members and multinational corporations.

Andres Arauz, Ecuador’s undersecretary of public investment from the national planning secretariat, said during a meeting with journalists that the protocol for the Unasur’s dispute settlement centre will be made public in May. He said the centre could be operating this year.

“Ecuador has had a key regional leadership

in the structure of the centre,” Mr. Arauz said. “In May, there will be a meeting in Quito to present the protocol for Unasur’s dispute settlement centre.”

With the Unasur centre, leftist governments in Ecuador, Bolivia and Venezuela, among others members of the group, aim to replace the role of the World Bank’s International Centre for Settlement of Investment Disputes, or ICSID, to resolve contractual or commercial matters between the state and individuals or corporations.

Ecuador’s current constitution, rewritten by President Rafael Correa’s allies and approved

in a referendum in 2008, prohibits the signing of international agreements in which Ecuador would have to cede jurisdiction to international arbitration courts. It allows for disputes to be resolved between Latin American states and their nationals in regional arbitration courts.

Mr. Arauz also said that next week members of the socialist nations grouped in the Bolivarian Alternative for the Peoples of Our America, or ALBA, will hold a meeting in Quito to discuss strategies on how to contest lawsuits by multinational corporations.

DowJones News Service

Ecuador Says Unasur Dispute-Settlement Centre could operate this year

34ADR Reporter

INTERNATIONAL REPORT: SOUTH AMERICA

35June 2013


Introduction

In the protected dispute between Chevron Corporation and Ecuador on one side, and the US multinational and a group

of Ecuadorean citizens on the other, an international arbitral tribunal established under the Permanent Court of Arbitration has found Ecuador liable for breaching two interim awards on provisional measures.

As a result, the tribunal has opened the door for ordering Ecuador to pay considerable damages to Chevron.

BackgroundChevron, Texaco Petroleum Company, Ecuador and a group of Ecuadorean citizens have been engaged in a complex dispute since the mid-1990s.

One of several chapters in this seemingly endless saga involved a civil lawsuit filed against Chevron in 2003 by a number of indigenous groups settled in and around Lago Agrio, a town in the northern province of Sucumbios. Texaco and state-owned oil company Petroecuador carried out operations in the area for several years in the form of a consortium. The plaintiffs alleged that

Chevron and Texaco caused environmental damage, which severely affected the health of families living in the area. The defendants denied this.

On September 29 2009, while the Sucumbios court was hearing the action filed by the plaintiffs, Chevron and Texaco filed a United Nations Commission on International Trade Law (UNCITRAL) international arbitration with the Hague Permanent Court of Arbitration under the US-Ecuador bilateral investment treaty.(1)

Both companies alleged that Ecuador had breached the rights and guarantees provided in the treaty because the respondent had refused to honour the 1995, 1996 and 1998 settlement and release agreements under which Texaco was discharged of any liability for its past oil operations.

The companies also claimed that the trial in the Sucumbios court was marred with corruption, political interference and lack of independence, denying them due process.

As the investment arbitration process was underway the Ecuadorean court ruled for the plaintiffs. In February 2011 Chevron and

Texaco were ordered to pay approximately $19 billion in damages, one of the world’s largest awards (the Lago Agrio judgment). The decision was confirmed by the Superior Court of Sucumbios on January 4 2012. A few weeks later, the Permanent Court of Arbitration tribunal ruled that it had jurisdiction to hear the claims filed by Chevron and Texaco under the treaty.

On January 25 2012 the tribunal, at the request of Chevron and Texaco, issued its first interim award on provisional measures. The tribunal ordered Ecuador “to take all measures at its disposal to suspend or cause to suspend the enforcement or recognition within or without Ecuador of any judgement” against the claimants. The tribunal noted that the award was made without prejudice to the merits of the parties’ substantive rights.

Despite this order the Sucumbios court went ahead with the local process. As Chevron relied on Ecuador’s compliance with the first interim award, the company did not place the required bond to suspend the enforcement of the Sucumbios ruling, while its cassation appeal was decided by the National Court. Thus, the Lago Agrio judgment became enforceable.

Because the plaintiffs had announced their intention to enforce the Lago Agrio judgment in third countries, on February 16 2012 the court tribunal, at the request of Chevron and Texaco, issued a second interim. It expanded its first interim award by ordering Ecuador to abstain from issuing any certification that may help the plaintiffs to enforce the Sucumbios sentence against Chevron in third countries.

Ecuador did not comply with the second interim award. The Ecuadorean Ministry of Foreign Affairs issued the certification needed to enforce the Sucumbios ruling in third countries.

The Ecuadorean plaintiffs then filed petitions to enforce the Lago Agrio judgment with the courts of Canada, Brazil and Argentina - countries where Chevron had important assets. In Argentina, the plaintiffs were able to make some inroads. A Buenos Aires court issued a temporary order freezing the assets of a Chevron subsidiary doing business in Argentina.

Chevron v Ecuador

The cost of failing to comply with an interim award

36ADR Reporter


Edward G. Kehoe said his law firm had long seen the billing potential in international feuds.

The legal profession is facing corporate cutbacks in spending and pushback over billable hours, but at least a dozen law firms based in the United States are in line for huge paydays stemming from myriad international issues.

About a dozen legal heavyweights like White & Case, Shearman & Sterling and King & Spalding are benefiting from the growing number of lucrative, complex international disputes. About 120 such actions worth more than $1 billion each are pending at international arbitration tribunals worldwide, according to a recent tally by the magazine The American Lawyer.

Often, these awards result from suits brought by companies or commercial interests against foreign governments or entities they control, invoking investment protections in international or bilateral treaties. Big awards also stem from contract disputes between two or more private entities that have invested

internationally.Among the eye-popping claims that have

already reached resolution is a $2.2 billion decision against Petrochemical Industries of Kuwait in favor of Dow Chemical over a joint plastics venture that the Kuwaitis canceled. Dow Chemical was represented by King & Spalding, based in Atlanta, and Shearman & Sterling, based in New York.

King & Spalding also represented Universal Compression, a Houstonbased natural-gas compression services provider, when it landed a $442 million arbitration award last year from Venezuela to make good on the nationalization of its operations.

King & Spalding, which began as a regional firm 128 years ago, has handled nearly two dozen international arbitration cases in the past two years, of which 20 are disputes between corporate entities or other groups and the countries where they invested. The firm has 64 partners and associates working on global arbitrations that are valued at $60 billion, according to The American Lawyer’s scorecard, issued in July.

Edward G. Kehoe, co-head of King & Spalding’s international arbitration practice, said the firm spotted the potential of such commercial disagreements a decade ago and began to ‘‘slowly build the business, because we saw increasing need for investor protection against appropriation.’’

‘‘We wanted to catch a rising wave of business,’’ said Mr. Kehoe, whose firm also handled the arbitration in the fractious legal feud between Chevron and Ecuador.

Ecuador, along with Argentina, Venezuela and the Czech Republic, is among the defendants that appear most often in claims brought by dissatisfied parties, according to the U.N. Conference on Trade and Development, which tracks worldwide investment. Canada, Egypt, the United States and Poland are next on the list.

Worldwide, at least 518 treaty claims cases were pending last year against 95 countries, according to the U.N. body, and more than 100 known arbitrations between feuding private investors. The World Bank’s International Center for the Settlement of Investment Disputes, in Washington, logged 50 new cases last year, up from 1 in 1982.

Lawfirms charge either by the hour (the going rate at top firms hovers around $1,000 an hour) or take a percentage of the final arbitration award. As more countries include arbitration clauses in bilateral trade pacts and more investors plow money into infrastructure and other big overseas projects, the prospects for rising revenue are not lost on law firms.

‘‘The volume and complexity of deals are ramping up, illustrated by the 163 percent growth in the number of U.S. law firm offices opened overseas last year,’’ said William D. Henderson, a professor and director of the Center on the Global Legal Profession at Indiana University’s Maurer School of Law.

Law firms are vying to recruit law partners with international experience, and law schools like that at Columbia University are adding graduate courses in the field, said George A. Bermann, who taught arbitration at

Treaty disputes fuel big paydays

Edward G. Kehoe said his law firm had long seen the billing potential in international feuds.

Debt troubles, broken contracts and soured business deals may cost global investors billions in losses and create seemingly never-ending headaches for policy makers. But there is a set of specialists profiting from such geopolitical problems: arbitration lawyers, says Damon Winter

37June 2013

Worldwide, at least 518

treaty claims cases were pending last

year against 95 countries.

Columbia and was director of its new Center for International Commercial and Investment Arbitration.

‘‘Not only are courses multiplying,’’ he said by e-mail, but ‘‘enrollment — in all — is growing.’’

The U.N. Conference on Trade and Development makes public basic information on cases. But most such commercial conflicts can be hidden from public view because there is no incentive for aggrieved plaintiffs or the recalcitrant countries being sued to air issues in public. Some cases are settled through private arbitration and others come before tribunals, including the International Chamber of Commerce’s International Court of Arbitration in Paris.

Corporations triumph in most of the disputes that are made public, with two-thirds of tribunal decisions favoring their claims, according to the U.N. scorecard. Nine public decisions last year awarded damages to the party claiming injury, with a record award of $1.77 billion against Ecuador for terminating an oil contract in 2006 with Occidental Petroleum.

Some countries, however, are beginning to dig in against arbitration claims, not only because of the staggering dollar amounts, but also because the cases can disrupt national decisionmaking. Uruguay and Philip Morris International, for example, are wrangling over restrictions on tobacco use, which the tobacco giant says violate a bilateral investment treaty.

Those who favor international forums for settling disputes — where arbitrations are presided over by one arbitrator or a panel of three — say that such tribunals avoid local courts, which can tilt in favor of parochial interests.

‘‘It’s a big improvement from historical gunboat diplomacy,’’ said Edna Sussman, an arbitrator and mediator with experience in more than 100 international and other arbitrations. She helped spearhead the opening of the NewYork International Arbitration Center to encourage holding such proceedings in the city.

Such ‘‘arbitration will definitely grow as international commerce grows,’’ she said, adding that some people question whether secretive arbitration bodies should be deciding billion-dollar cases that can impinge on a government’s regulatory powers.

Two decades ago, such international arbitration was not a big revenue generator, said Carolyn B. Lamm, a White & Case partner who specialized in the field. Most treaties, intended to give foreign investors like corporations an avenue outside of local courts in case their investments were nationalized, ‘‘did not take effect until the 1980s, and we had two or three cases a year,’’ she said.

‘‘If an investor is confronted with a dispute, arbitration as means of enforcement is much better,’’ she said. ‘‘You can go anywhere you can find an asset. But if you use the courts, you really have to rely on deference to the local court, and that might not turn out as well.’’

Arbitration fees need to be curbed

Muscat: “The government should initiate steps to rationalise the arbitration fee in the Sultanate,”

Khalifa Al Hinai (pictured below), a former judge and a senior advocate, said.

“Arbitration is fast emerging a preferred

choice for dispute settlement the world over and Oman is no exception. However, in Oman, at times arbitrators charge exorbitant fees from the parties to settle the disputes.

This is very unfair and regulation or rationalisation is required so that everyone would feel that justice is done to the litigants,” the former judge told the Times of Oman.

“Arbitration is often faster than litigation in courts and more flexible for businesses. But, the speedy settlement of disputes is no justification for overcharging by arbitrators,” the former judge added.

Today there are no set norms and guidelines on deciding the cost of arbitration and the ground is open for all players, according to their own whims and fancies. This leads to unpalatable situations wherein the parties feel that they have been taken for a ride by the arbitrators. This must be stopped. The Arbitration Law of Oman, promulgated by Royal Decree 47/97, is no doubt a comprehensive legislation, but is silent on this most important point.

According to the former judge, a majority of cases he came across during his career as a lawyer and judge were contractual disputes and to resolve these, new norms should be set by the government. Many of the international consulting and contracting firms also prefer arbitration to conventional court proceedings.

“This is mainly because of the parties’ failure to study and review the contracts properly before signing them. In my opinion, the government should set some new norms. For example, if a contract amount is beyond a certain limit, then it should have been attested by an advocate to avoid disputes that may arise in the future,” the former judge said.

While responding to the delinking of the courts from the Ministry of Justice and bringing them under the Supreme Judicial Council, Al Hinai welcomed the change as it removes administrative control of the ministry over the appointment and removal of judges and judicial officers.

“At the same time, we have to wait patiently to know the effectiveness of the new mechanism,” he added.

CHINA FOCUS

Breakaway Shanghai arbitral body announces new official name

38ADR Reporter

The former Shanghai-based arm of China’s main international arbitration body will now be known as Shanghai

International Arbitration Centre (SHIAC).SHIAC will also be known as the Shanghai

International Economic and Trade Arbitration Commission, the body said on its website.

It added that the new names had been approved by the Shanghai Municipal Government, and agreed by the Shanghai Commission for Public Sector Reform.

SHIAC formerly operated as the Shanghai office, or sub-commission, of the China International Economic and Trade Arbitration Commission (CIETAC).

It declared itself independent from CIETAC in May last year in a disagreement over new arbitral rules. CIETAC banned the breakaway office from using its name and logo at the end of last year, and has declared that it is no longer entitled to hear cases related to contracts that specify CIETAC Shanghai as the place of arbitration.

Established in 1956, CIETAC is the best known centre in China for arbitrations with an international element. It administered over 1,000 cases last year and has offices in Beijing, Chonqing and Tianjin.

Under changes to CIETAC’s arbitration rules, which came into force on 1 May 2012, sub-commissions became ‘branches’ of the body with the power to accept and administer arbitrations “with CIETAC’s authorisation”.

In the previous version of the rules, which took effect in 2005, sub-commissions were described as an integral part of CIETAC with the power to administer cases under the direction of their respective secretariats. Both Shanghai and Shenzen, South China sub-commissions have since set up as separate arbitral bodies, with the latter now known as the Shenzen Court of International Arbitration or South China International Economic and Trade Arbitration Commission.

On its website, SHIAC said that it would continue to accept cases where the parties had agreed to arbitrate through CIETAC Shanghai, as well as those where the parties

had explicitly agreed to arbitrate through SHIAC. Its new arbitration rules and panel of arbitrators will be effective from 1 May 2013, it said.

CIETAC is yet to comment on SHIAC’s change of name. However, in a statement in December, it said that parties who had specified CIETAC Shanghai or South China as the relevant arbitral body in their contracts should submit requests for arbitration directly to CIETAC. Both SHIAC and the Shenzen Court of International Arbitration have disputed this announcement, stating at the beginning of the year that it had no binding effect on the new institutions.

Chevron v EcuadorNew interim award

On February 3 2013 the international arbitration tribunal issued a new

interim award. The tribunal found that Ecuador was in breach of the first and second interim award under the UNCITRAL rules and international law:

“in regard to the finalisation and enforcement subject to execution of the Lago Agrio Judgment within and outside Ecuador, including (but not limited to) Canada, Brazil and Argentina.”

Moreover, the tribunal decided that Ecuador should show cause in accordance with a procedural timetable, to be fixed later, as to why it should not compensate Chevron for any harm caused by its violation of the first and second interim awards.

The tribunal rejected Ecuador’s position that it was unable to comply with the awards because the Ecuadorean judiciary was an independent branch of government. The tribunal said that its interim awards were directed not only to Ecuador’s executive branch, but to all its branches. It added that neither:

“disagreement with the Tribunal’s orders and awards on interim measures nor constraints under Ecuadorian law can excuse the failure of the Respondent, through any of its branches or organs, to fulfill its obligations under international law imposed by the Treaty, the UNCITRAL Rules and the Tribunal’s orders and awards thereunder, particularly the First and Second Interim Awards on Interim Measures.”

CommentWhile the tribunal may take several months to issue its ruling on the merits of the controversy, the failure of Ecuador to comply with the interim awards on provisional measures may cost it as much as what is stake in the arbitration itself.

According to Chevron, the actions taken by the plaintiffs to enforce the Lago Agrio judgment in Argentina and elsewhere have already caused substantial damages and the loss of important business opportunities.

In the coming weeks Chevron will spell out the amount of money it is seeking from Ecuador as compensation. It will not come as a surprise if it is measured in billions of dollars.

Endnotes(1) Case 2009-23For further information on this topic please contact Hernán Pérez Loose at Coronel & Pérez by telephone (+593 4 2519 900), or email ([email protected]).

Established in 1956, CIETAC is the best known

centre in China for arbitrations with an international

element. It administered over 1,000 cases last

year and has offices in Beijing, Chonqing

and Tianjin.

39June 2013

CHINA FOCUS


On 11 April 2013, the arbitral institution former ly known as CIETAC Shanghai held a press conference to

publicise its establishment as the Shanghai International Economic and Trade Arbitration Commission and its promulgation of a new set of institutional rules which would apply as of 1 May 2013.

It will use the name the Shanghai International Arbitration Centre and the official short form of its name is SHIAC.

Users of arbitration will be aware that this has arisen out of the well-publicised split in May 2012 between CIETAC Beijing and CIETAC Shanghai, South China and Shenzhen following a disagreement over the 2012 CIETAC rules.

SHIAC has stated that its establishment has been approved by the Shanghai M u n i c i p a l G o v e r n m e n t and agreed by Shanghai Commission for Public Sector Reform.

C I E TA C , w h i c h h a s set up new Secretariats in Shanghai and Shenzhen, has not yet responded but announced that the establishment of Shenzhen Court of International Arbitration (“SCIA”) or South China International Economic and Trade Arbitration Commission (“SCIETAC”) was null and void.

A host of dangers arise from the CIETAC split, and the recent news only consolidates the potential for confusion, argument and, ultimately, risk to arbitral awards.

Parties seeking to arbitrate in Shanghai or Shenzhen under the new or old institutions or rules or under CIETAC should take great care and seek legal advice, both in commencing arbitrations under existing arbitration clauses, and drafting new arbitration agreements.

Ensuring that the correct institution is specified in the arbitration clauseParties naturally wish to choose an arbitration institution which is most suitable to their particular needs.

The main difference between CIETAC, SHIAC and SCIETAC will be the applicable procedural rules. SCIETAC continues to use the 2005 CIETAC Rules1, whilst CIETAC

Beijing will apply the 2012 CIETAC Rules, and now SHIAC will apply its own set of rules from May 2013.

The most far-reaching difference in the 2012 CIETAC Rules is that arbitrations concerning “foreign-related” disputes can be seated outside the People’s Republic of China (the “PRC”).

Hong Kong is the first jurisdiction to benefit from this amendment, with CIETAC announcing the opening of the CIETAC Arbitration Centre in Hong Kong last year.

Parties entering into arbitration agreements to be held in the PRC and/or which may lead to an arbitral award to be enforced in the PRC ought to state clearly both the seat of

the arbitration and the institution under whose rules the arbitration is to be held.

It is particularly important to specify an arbitration institution because Article 16 of the PRC Arbitration Law provides that if “an arbitration agreement contains no or unclear provisions concerning the matters for arbitration or the arbitration institution” the arbitration agreement “shall be null and void.”

This would provide a basis for the dispute to be referred to the courts, in the PRC or elsewhere.

Article 4 of the Interpretation of the SPC’s Interpretation on Several Issues Concerning the Application of the Arbitration L a w o f t h e P R C ( t h e “Interpretation”) suggested that it would be sufficient for the PRC courts to uphold an arbitration clause so long as it specified the applicable rules. Unfortunately, the PRC courts have not followed suit. For example, in 2009, the Supreme People’s Court in the Xiaxin Electronics case refused to recognise an Award which provided for arbitration under

the ICC rules. While the arbitration clause stated that the arbitration should be conducted under the ICC Rules of Arbitration, it did not clearly specify the arbitration institution and was null and void2.

The requirement to state an institution can also make it difficult to enforce an ICC award seated in the PRC under a clause which specifies the ICC rules and the location of the arbitration, but not the arbitral institution. For example, in the Zublin case of 2004 the Supreme People’s Court held that an arbitration clause was invalid which provided for “arbitration: ICC Rules, Shanghai shall apply”.3

Arbitrating in the PRC:

What are the risks to arbitrations as CIETAC Shanghai follows CIETAC Shenzhen and South China and formalises its split from CIETAC Beijing?

They are not just rivals on the arbitration field. Shanghai Shenwa and Beijing Guan are also rivals in the Chinese Super League.

CHINA FOCUS

40ADR Reporter

This was upon the basis that the clause failed to designate an arbitration institution in accordance with Article 16.

The Hong Kong Court of First Instance reached a similar conclusion in the case of Klöckner Pentaplast GmbH v. Advance Technology (HK) Company Limited.4 The Court had to consider whether an arbitration agreement seated in Shanghai under the ICC Rules and governed by Chinese law was null and void because it failed to specify an arbitration institution. Considering the Interpretation, the failure of the arbitration clause to specify a particular institution was held to be fatal under PRC law, unless the CIETAC arbitration institution could be identified through the agreed-upon arbitration rules.

Where does the Claimant issue the Request for Arbitration: Beijing, Shenzhen or Shanghai?Therefore, where an arbitration clause is ambiguous as to the arbitral institution (CIETAC or otherwise) to resolve the dispute and/or administer the arbitration a Claimant can decide which institution to submit the request for arbitration.

However, in such a case the Respondent can claim that the arbitration agreement is null and void for failing to contain a clear provision as to the arbitration institution, and/or claim a different institution has jurisdiction. As a result, it is important for parties to arbitration

clauses providing for CIETAC, SCIETAC or SHIAC arbitrations to specify the relevant arbitral institution to prevent a challenge to the

interpretation of the clause and/or jurisdiction of the institution.

For example, consider a typical CIETAC arbitration clause used prior to the schism at CIETAC:

“Any dispute arising from or in connection with this Contract shall be submitted to CIETAC for arbitration which shall be conducted in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties. The seat of the arbitration and the venue for hearing will be Shanghai.”

Previously, it would have been clear that the CIETAC Rules then in force would apply to an arbitration to be held at the CIETAC Shanghai Sub-commission. However, the divide between the centres now creates an ambiguity. This is because a party to such a clause could claim that either:

• CIETAC Beijing has jurisdiction because at the time of the agreement, the parties foresaw that CIETAC Beijing would resolve the dispute, albeit the arbitration would be seated in CIETAC Shanghai, now the CIETAC Beijing’s Secretariat in Shanghai; or

• SHIAC has jurisdiction because it is the successor of the CIETAC sub-commission in Shanghai.

There is yet more complexity as, in addition to SHIAC and CIETAC Beijing’s Secretariat in Shanghai, there is another independent arbitration commission in the region called the Shanghai Arbitration Commission. Similarly in Shenzhen, as well as the SCIA and CIETAC Beijing’s Secretariat, there is a further institution called the Shenzhen Arbitration Commission.

SolutionsIf parties are subject to a CIETAC arbitration agreement which is unclear, they should consider entering into a supplementary agreement which clarifies the relevant institution, venue and arbitral rules.

Article 16 of the Interpretation provides for this eventuality, stating that “the parties may reach a supplementary agreement” to resolve an unclear arbitration clause.

For example, a possible clause for an arbitration at CIETAC Beijing, but seated in Shanghai, could read as follows:

“Any dispute arising from or in connection with this Contract shall be submitted to CIETAC Beijing’s Shanghai Secretariat (Arbitration Center) for arbitration which shall be conducted in accordance with the CIETAC Beijing arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties. The seat of the arbitration and the venue for hearing will be in Shanghai”

In terms of clearly and sufficiently specifying the required details, the CIETAC, SCIA and SHIAC model clauses may not provide suitably watertight arbitration clauses for parties wishing to resolve disputes at their preferred centre. CIETAC model clause 2 is an example5. As such, parties should be wary of relying upon those model clauses without seeking further legal advice.

Footnotes:1. Announcement August 2012 at part II 2. Xiaxin Electronics Co Ltd v Societe de Production Belge AG [2009] Min Min Di Zi No. 7 (SPC 2009) 3. Zublin International GmbH v Wuxi Woco-Tongyong Rubber Engineering Co Ltd. [2003] Min Si Ta Zi No 23 (SPC 8 July 2004) 4. HCA 1526/20105. Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission (CIETAC)___________Sub-Commission (Arbitration Center) for arbitration which shall be conducted in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.

Risks to Chinese arbitrations

41June 2013

CHINA FOCUS


Arbitration in China is a fast-growing industry. There are over 200 arbitration institutions established in

China (known as arbitration commissions). In 2010 alone, for example, the arbitration

commissions collectively registered almost 80,000 cases,1 most of which were domestic cases involving purely Chinese parties and Chinese law-governed contracts. Only a small fraction (less than 2 percent) of these cases involved foreign elements, such as a non-Chinese party or a place of performance that is outside of China.

Many foreign parties are concerned that the Chinese courts may be more interventionist in arbitral proceedings, or that there may be greater difficulties in defending a successful award against a challenge in a Chinese court by a dissatisfied losing Chinese party.

Foreign parties are still wary of agreeing to arbitration in China. These fears are largely centred on the fact that the Chinese courts, as the courts of the seat of the arbitration, will have supervisory jurisdiction over the arbitration and will hear any challenges to an arbitration award issued in such arbitration.

Many foreign parties are concerned that the Chinese courts may be more interventionist in arbitral proceedings, or that there may be greater difficulties in defending a successful award against a challenge in a Chinese court by a dissatisfied losing Chinese party.

Foreign parties are generally able to persuade their Chinese counterparties to agree that their contractual relationships should be governed by a law other than the laws of their respective jurisdictions and that their disputes should be settled by arbitration in a mutually acceptable neutral jurisdiction (Hong Kong, London and Singapore are popular compromises).

However, there may be commercial or other circumstances where a foreign party may have to agree to arbitration in China.

This article will discuss the various practical issues that a party should consider when

agreeing to arbitration in China, so as to ensure that the arbitration agreement would be valid under Chinese law and to adapt the arbitration process to meet its concerns.

The China International Economic and Trade Arbitration Commission (CIETAC), established in 1956, is the largest and most prominent of the many Chinese arbitration institutions, and handles the lion’s share of the arbitrations with foreign elements. This article will therefore focus on the CIETAC arbitration rules.

Validity of Arbitration Agreements Under Chinese LawAn arbitration agreement that provides for arbitration in China is also likely to be governed by Chinese law. It should, therefore be, valid in accordance with the requirements

of the PRC Arbitration Law.2 The most important requirements in this

respect are3 (a) a clear expression of the parties› intention to submit disputes to arbitration, (b) a description of the matters to be arbitrated, and (c) identification of the arbitration institution selected by the parties to administer arbitrations.

This third element of having to identify a specific arbitration institution in the arbitration agreement is a fairly unique requirement. It means that an arbitration seated in China cannot be an ad-hoc arbitration.

Furthermore, it is understood that only Chinese arbitration institutions should be designated for arbitrations seated in China. The PRC Arbitration Law does not expressly limit the choice to only Chinese arbitration institutions.

However, Chapter II of the PRC Arbitration Law, which deals with arbitration institutions, only refers to Chinese arbitration institutions, and has been widely interpreted to mean that

only a Chinese arbitration institution can be designated if an arbitration agreement is to be valid under Article 16 of the PRC Arbitration Law.

There have been a few instances where parties to arbitrations in China have designated foreign arbitration institutions. However, in the absence of clear Chinese legislative or judicial direction permitting this, designating a foreign arbitration institution to administer an arbitration seated in China runs the risk of having the arbitration agreement declared invalid or having any arbitral award declared unenforceable in China.

Therefore, the safest approach, if parties agree to arbitration in China, is to clearly designate in their arbitration agreement a Chinese arbitration institution to administer their arbitration.

On balance, the new CIETAC Rules should be viewed as a welcome development for parties who have to arbitrate in China.

The question then becomes which Chinese

arbitration institution, out of the 200 or more options, to designate in an arbitration agreement. As noted above, CIETAC is the most frequently chosen arbitration institution for agreements involving a foreign element, whether or not a party, or the shareholder of a party, is a non-Chinese entity.

CIETAC has been hard at work at developing and promoting itself as a credible arbitration institution. It adopted new arbitration rules on February 3, 2012 which came into effect on May 1, 2012 (the CIETAC Rules). These new rules seek to align the CIETAC arbitration process with contemporary international arbitration standards and practices. Nevertheless, they still contain some elements which can be described as Chinese arbitration characteristics, such as opportunities for greater court involvement and conciliation.

On balance, the new CIETAC Rules should be viewed as a welcome development

Arbitration In China — Progress and ChallengesBy Nicholas Song

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42ADR Reporter


for parties who have to arbitrate in China. However, parties should be aware that they can specify changes to the processes contained in the CIETAC Rules by express drafting in their arbitration agreement.

Practical Issues Regarding CIETAC Arbitration ProcedureArticle 4(3) of the CIETAC Rules permits parties to modify the CIETAC Rules, except where such modifications conflict with a mandatory provision of the law applicable to

the arbitration. Therefore, if a foreign party has to agree

to arbitration in China, it should designate CIETAC as the arbitration institution and then request deviations from the CIETAC Rules in order to tailor the process to address any specific concerns with such process.

Number and Appointment of ArbitratorsA fundamental concern for parties to any arbitration is the composition of the arbitration tribunal. Parties to an arbitration governed by the CIETAC Rules should be aware of the default position in such rules regarding the number of arbitrators and who can be appointed as arbitrators.

The parties to an arbitration agreement would usually specify the number of arbitrators on the tribunal (either one or three

arbitrators). Under Article 23 of the CIETAC Rules, if the parties fail to specify the number of arbitrators, the default position is that the tribunal will comprise three arbitrators.

The default position under the CIETAC Rules is unusual for two reasons. First, many rules of international arbitration institutions, such as those of the ICC, LCIA and SIAC, provide for a one-arbitrator tribunal in the absence of an agreement by the parties. Second, these other rules also provide the arbitration institution with discretion to

appoint a different number of arbitrators if it deems it appropriate. In contrast, the CIETAC Rules provide for a fixed default position of three arbitrators and do not give CIETAC any discretion to vary this default number.

As such, if a party to a CIETAC arbitration strongly believes that having only one arbitrator is appropriate, then the arbitration agreement must specify that the arbitration tribunal is to be made up of only one arbitrator.

The other aspect of the composition of the tribunal is who can be nominated or appointed as arbitrators. Article 24 of the CIETAC Rules requires the parties to nominate arbitrators from its Panel of Arbitrators, unless the parties have expressly agreed that they can nominate arbitrators from outside the CIETAC panel.

The current CIETAC Panel of Arbitrators was appointed on May 1, 2011 and comprises 998 individuals. There are 716 arbitrators

from mainland China, 64 from Hong Kong, Macau and Taiwan, and the remaining 218 arbitrators are domiciled in other countries around the world.

The language in which an arbitration is conducted is also of concern to the parties to the arbitration. In particular, a foreign party involved in a CIETAC arbitration in China usually wants to ensure that the proceedings are conducted in a language it can follow.

A foreign party to an arbitration agreement calling for CIETAC arbitration in China

should always specify in the agreement that a party can nominate arbitrators from outside CIETAC’s Panel of Arbitrators, and that the chairman of the tribunal can also be nominated or appointed from outside the panel. This is to preserve flexibility for the foreign party so that it is not constrained by the CIETAC panel. However, it should be noted that the CIETAC Rules do state that an arbitrator nominated from outside the CIETAC panel is subject to confirmation by the Chairman of CIETAC in accordance with law. In this regard, it is reassuring that Article 67 of the PRC Arbitration Law allows a Chinese arbitration institution such as CIETAC to appoint foreigners with professional knowledge in fields such as law, economics and trade, or science and technology, as arbitrators.

A final aspect regarding the composition of

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CHINA FOCUS

the tribunal is with respect to the nationality of the chairman of a three-arbitrator tribunal. A Foreign Invested Enterprise (FIE) entering into an arbitration agreement with a Chinese counterparty may wish to specify in the arbitration agreement that the chairman should not be a Chinese national or a national of the jurisdiction of the foreign investor in the FIE. Without such a provision, there is a possibility that where the parties do not agree on the nomination of the chairman, CIETAC will simply appoint a Chinese national as the chairman of the tribunal.

LanguageThe language in which an arbitration is

conducted may also be of concern to the parties to the arbitration. In particular, a foreign party involved in a CIETAC arb i t ra t ion in China usually wants to ensure that the proceedings are conducted in a language it can follow. In this regard, the change to the CIETAC Rules regarding language is welcome.

Previously, the old CIETAC arbitration rules provided that in the absence of any agreement among the parties, the arbitration will be conducted in the Chinese language. Now, Article 71 of the CIETAC Rules is more flexible as it permits CIETAC to designate Chinese or any language having regard to the circumstances of the case. It is therefore possible, at least in theory, for CIETAC to designate a language other than Chinese to be the language of the arbitration.

A unique feature of the CIETAC Rules not found in any of the rules of the major arbitration institutions is the ability of a tribunal to conciliate the dispute.

Nonetheless, if a party to an arbitration agreement calling for CIETAC arbitration wants the proceedings to be conducted in a specific language, it should expressly provide for this in the arbitration agreement. Importantly, Article 71 of the CIETAC Rules states that the parties’ agreement on the language of the arbitration shall prevail.

It is common to see arbitration agreements calling for CIETAC arbitration to require, as a compromise, arbitration proceedings to be conducted in dual languages (typically English and Chinese). This is permissible under the CIETAC Rules. However, it should be noted that Article 72(4) of the CIETAC Rules specifically provide that where the

parties agree to use two or more languages for the arbitration, CIETAC is entitled to charge extra in respect of the costs of the arbitration.

Consolidation of ProceedingsThe CIETAC Rules now permit the consolidation of two or more arbitrations where either a party or CIETAC proposes such consolidation and all the parties agree (see Article 17 of the CIETAC Rules).

This is a welcome revision from the old CIETAC arbitration rules which were silent on this issue. However, it should be noted that with respect to the ability to consolidate arbitration proceedings, the CIETAC Rules are still more conservative than the new ICC

arbitration rules that came into effect five months before the CIETAC Rules. Under the CIETAC Rules consolidation of multiple proceedings is permitted only where all the parties agree, whereas under Article 10 of the ICC arbitration rules, consolidation is still possible even if not all the parties agree, provided certain conditions are satisfied.

As a related matter, the rules of major arbitration institutions allow for the joinder of third parties to arbitration proceedings; see, for example, Article 7 of the ICC Rules, Article 22.1(h) of the LCIA Rules, and Article 24(b) of the SIAC Rules. However, the CIETAC Rules are silent on the issuer of joinder of third parties. As such, unless the parties expressly confer on the tribunal the power to join third parties to an existing proceeding, a party to a CIETAC arbitration will not have the possibility to join a third party to the arbitration.

Conservatory or Interim MeasuresPreviously, tribunals operating under the

old CIETAC arbitration rules did not have any ability to grant conservatory or interim measures.

Now, under Article 21(2) of the CIETAC Rules, tribunals do have the power to order any interim measures it deems necessary or proper upon the application of a party to the arbitration. However, a tribunal under the CIETAC Rules still does not have the power to order conservatory measures. Article 21(1) of the CIETAC Rules provides that any application for conservatory measures has to be forwarded to the competent court for decision.

Conciliation (Article 45)A unique feature of the CIETAC Rules not found in any of the rules of the major arbitration institutions is the ability of a tribunal to conciliate the dispute.

Art ic le 45 of the CIETAC Rules expressly allows a tribunal to conciliate the dispute where the parties agree to attempt conciliation. F u r t h e r m o r e , t h e CIETAC Rules provide that if conciliation fails, the same tribunal shall resume the arbitration proceedings and issue an arbitration award.

The ability of the s a m e p a n e l t o a c t as both conci l ia tor

and as arbitrator is controversial. This is because conciliation and arbitration have different approaches and objectives, and the panel qua conciliator may learn information and the intentions of a party that it may not otherwise be able or entitled to discover in an arbitration proceeding, and may be unduly influenced by such knowledge when deciding the arbitration.

Under the CIETAC Rules, conciliation is not possible if a party does not agree. However, as a practical matter, a party may fear that if it rejects a tribunal’s recommendation to attempt conciliation, it may appear unreasonable or as having a weak case. The CIETAC Rules further provide that if the parties are willing to conciliate their dispute but do not wish the existing tribunal to conciliate the dispute, then, if the parties agree, CIETAC may assist the parties to conciliate the dispute. As such, a party to a CIETAC arbitration agreement may wish to specify upfront that if the parties agree to conciliation, any conciliation cannot


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44ADR Reporter

be conducted by the tribunal hearing the arbitration.

Effect of CIETAC disputeCIETAC has four sub-commissions in China. These are in Chongqing, Shanghai, Shenzhen and Tianjin. These sub-commissions together with the headquarters in Beijing constitute a single arbitration institution. Parties can agree to submit their dispute to CIETAC or a sub-commission of CIETAC. These sub-commissions can accept and administer arbitration cases with CIETAC’s authorization.

This arrangement with respect to the Shanghai and Shenzhen sub-commissions has now been thrown into disarray. These two sub-commissions refused to adopt the CIETAC Rules which came into effect on May 1, 2012. It is believed that the sub-commissions viewed the new CIETAC Rules as an attempt to consolidate power at the CIETAC headquarters in Beijing and to diminish the role of the sub-commissions in administering arbitrations. For example, Article 47(4) of the CIETAC

Rules now provides that the CIETAC seal has to be affixed to an arbitral award before it can be issued. This means that the seals of the Shanghai or Shenzhen sub-commissions are no longer sufficient for the issuance of any arbitral award.

On August 1, 2012, CIETAC announced that it is suspending with immediate effect the authorization of the Shanghai and Shenzhen sub-commissions to accept and administer arbitrations. These two sub-commissions then retorted that they are independent arbitration institutions established with the approval of their respective local governments.

Finally, on December 31, 2012, CIETAC announced that the authorization of the Shanghai and Shenzhen sub-commissions to accept and administer arbitrations is terminated, and that their declaration of independence is null and void by law. For good measure,

CIETAC further stated that these two sub-commissions are forbidden to conduct any further arbitration activities in the name of

either the CIETAC Shanghai sub-commission or the CIETAC South China sub-commission (the formal name of the Shenzhen sub-commission).

The upshot is that parties should now avoid specifying in their arbitration agreements either the CIETAC Shanghai sub-commission or the CIETAC South China sub-commission as the applicable arbitration institution.

Parties to an arbitration agreement can always specify either Shanghai or Shenzhen as the place of arbitration, but they should specify CIETAC as the applicable arbitration institution.

Endnotes1. 2010 Annual Report of the Legislative Affairs Office of the State Council on the Caseload of Chinese Arbitration Commissions.2. The Arbitration Law of the People’s Republic of China, which entered into force on September 1, 1995 (PRC Arbitration Law).3. See Article 16 of the PRC Arbitration Law.

Arbitration In China — Progress and Challenges

On July 9 2013 the presidium of the Supreme Arbitrazh Court issued Informational Letter 158 – the Practice

Review on Certain Questions Relating to the Resolution of Disputes Involving Foreign Parties by the Arbitrazh Courts.1

Although the practice review is largely dedicated to cross-border litigation questions, it is of interest to arbitration practitioners in two respects.

First, it sets out the principles of granting interim measures in support of foreign arbitral proceedings; second, it leaves open the question of whether unilateral option dispute resolution clauses are valid in Russia.

Interim measures in support of foreign arbitrationIn 2010 the presidium of the Supreme

Arbitrazh Court ruled in Edimax Ltd v SP Chigirinsky2 that arbitrazh courts have general powers to grant interim measures in support of foreign arbitral proceedings.

In 2009 Edimax commenced arbitration against Mr Chigirinsky at the London Court of International Arbitration (LCIA) for payment of over $30 million of the unpaid purchase price of its shares. The claim arose out of the letters of guarantee given by Chigirinsky as security for various legal entities under the share purchase agreements. Edimax sought attachment of certain property in Russia in aid of the LCIA proceedings. The first instance court rejected the Edimax application, stating that Edimax had not established the necessary conditions for granting interim measures.

The appellate court reversed the lower court decision and granted the interim measures.

The cassation court annulled the appellate court ruling on the basis that the arbitrazh court did not have jurisdiction to grant interim measures. Edimax appealed to the Supreme Arbitrazh Court.

The presidium of the Supreme Arbitrazh Court found in favour of Edimax and ruled that arbitrazh courts may grant interim measures in support of international arbitration proceedings if the matter in dispute is commercial in nature. However, the presidium failed to identify any further conditions for granting interim measures in such a case.

Section 29 of the practice review is essentially based on the Chigirinsky decision and confirms the general powers of Russian arbitrazh courts to grant interim measures at:

• the place of arbitration;

Arbitration implications of recent Supreme Arbitrazh Court practice review

Russia


INTERNATIONAL REPORT: RUSSIA

R U S S I A

45June 2013

• the place of incorporation or residence of the debtor; or

• the place in which the debtor’s property is located.

Section 29 also sets out further conditions to be established in the course of considering the application.

The presidium suggested that arbitrazh courts should check the validity of the arbitration agreement as well as the arbitrability of the dispute in question.

The presidium further recommended that the court should take into account whether an arbitral tribunal had ordered interim measures and whether the respondent had complied voluntarily with such interim measures.

The practice review’s endorsement of arbitrazh courts’ powers to grant interim measures in aid of arbitral proceedings should be welcomed. Although practice reviews are considered guidelines, rather than binding rules, in practice the lower courts follow the interpretation of legislative provisions provided in such reviews.

Presumably, interim measures may be ordered before the relevant arbitral proceedings are initiated, but in such case the applicant would have to provide confirmation within the time ordered by the court that it has commenced the arbitral proceedings.

It is likely that in this case the court would also pay greater attention to the question of the validity of the arbitration clause. However, if the arbitration is ongoing, the court may not go into such detail regarding the validity of the arbitration agreement.

Nevertheless, the presidium failed to indentify the scope of review of the validity of an arbitration clause, and Russian courts may be unwilling to limit themselves to prima facie review.

Greater problems are likely to arise due to the requirement to consider the arbitrability of the dispute. The question of which disputes can be resolved by arbitration is still unsettled. For example, corporate disputes (which may include disputes for payment of share prices) have been considered non-arbitrable by some courts.

Therefore, the arbitrability of the dispute from the perspective of Russian law may in fact become the greatest limitation to interim

measures in support of foreign arbitral proceedings in Russia.

Unilateral option dispute resolution clausesIn June 2012 the presidium of the Supreme Arbitrazh Court issued its resolution in the infamous Russian Telephone Company v Sony Ericsson Communications Rus case, whereby the unilateral option choice of court clause was invalidated.(3) More than one year later, it its still unclear whether the Sony Ericsson principle is commonly applicable or fact-specific.

Sony Ericsson involved a master agreement between the parties for sale and purchase of mobile phones and accessories, which contained a unilateral option dispute resolution clause for the benefit of the seller (Sony Ericsson).

Pursuant to the agreement, the dispute should have been referred to arbitration under the International Chamber of Commerce rules in London, but the seller was entitled to commence proceedings for recovery of the unpaid purchase price in Russian arbitrazh courts.

The buyer in breach of the dispute resolution clause (RTC) commenced proceedings in the Moscow Arbitrazh Court seeking delivery of substitute mobile phones. Sony Ericsson objected with reference to the arbitration agreement and the objection was sustained by the lower courts.

RTC appealed to the Supreme Arbitrazh Court. The presidium found that the unilateral option dispute resolution clause gave one party unfair advantage over the other, and was thus contrary to the equality of arms principle (both in its substantive and procedural incarnations).

The case attracted much attention from arbitration specialists and the decision was widely criticised. Some judges privately admitted that the case was decided on facts and the decision was taken by a split presidium. One Supreme Arbitrazh Court justice hinted that the case lacked a foreign element, as both parties were incorporated in Russia.

Nevertheless, the draft practice review contained a section dealing with unilateral option dispute resolution clauses. The relevant part of this section read:

“[O]n the basis of general principles of protection of civil rights, a dispute resolution agreement cannot grant to one party only a right to refer disputes to a competent state court, while depriving the other party of such right.”

Therefore, the draft practice review concluded that each of the parties was entitled to commence arbitration or litigation in a designated state court pursuant to the dispute resolution clause. This section was intended to confirm the validity of the arbitration clause within the unilateral option dispute resolution agreement, but the wording was criticised for being overly broad and general. In the end, this section was not included in the final text of the practice review.

The fact that the Sony Ericsson principle was not included in the final version of the practice review may suggest that the question of validity of unilateral option dispute resolution clauses in Russia remains unsettled. Therefore, there is still room for argument to distinguish the facts of Sony Ericsson from other situations in which a unilateral option dispute resolution clause may be said to be valid. Nevertheless, it is uncertain whether the same principle will be applied in other cases. Presumably, the Sony Ericsson principle may be inapplicable in enforcement cases where the Russian courts are called on only to enforce a foreign award or a decision of an arbitral tribunal or foreign court whose jurisdiction was based on the unilateral option dispute resolution clause.

Nevertheless, caution should be exercised in cases that have greater connections with Russia – for example, where the parties agree that one of them would have the option to commence proceedings before Russian courts.

For further information on this topic please contact Andrey Panov at Norton Rose Fulbright (Central Europe) LLP by telephone (+7 499 924 5101), fax (+7 499 924 5102) or email ([email protected]).

Endnotes

(1) Available in Russian at www.arbitr.ru/as/pract/vas_info_letter/89295.html.(2) A partial translation of the ruling of the panel of Supreme Arbitrazh Court judges that granted leave for revision of the lower courts’ decisions by the presidium of the Supreme Arbtirazh Court is available at www.arbitrations.ru/userfiles/file/Case%20Law/En forcemen t /Ed imax%20v%20Chigrinsky%20translation%20Zykov.pdf. Essentially, the resolution of the presidium of the Supreme Arbitrazh Court used the same reasoning.(3) The English translation of the resolution is available at www.arbitrations.ru/userfiles/file/Case%20Law/Enforcement/Sony_Ericsson_Russian_Telephone_Company_Supreme_Court%20eng.pdf.

LEGALVIEWPOINT

46ADR Reporter

The decision, South East Civil & Drainage Contractors Pty Ltd v AMGW Pty Ltd & Ors1, confirms

that, to be valid under the Building and Construction Industry Payments Act 2004 (Qld) (the Act), a payment claim must be made within 12 months after the relevant supply. The courts will show no flexibility in this regard.

The decision confirms that a failure to raise a point in a payment schedule may not mean that the point is necessarily lost. The adjudicator has the ultimate responsibility to consider all relevant requirements of the Act and a failure to do so may render the adjudication decision void.

The decision confirms that industry participants will need to pay closer attention to the invoices they receive (and other similar documentation). Identifying a payment claim with imprecise wording may be sufficient to satisfy the requirements of the Act.

The Statutory FrameworkThe Act establishes a process for the provision of progress payments if a person has undertaken to carry out construction work, or supply related goods and services, under a ‘construction contract’.

Relevantly, section 17 of the Act requires that a payment claim:

• must state that it is made under the Act; and

• may be served only within the later of• the period worked out under the

construction contract; or • the period of 12 months after the

construction work to which the claim relates was last carried out.

BackgroundSouth East Civil and Drainage Contractors Pty Ltd and AMGW Pty Ltd entered into a contract under which AMGW was to supply construction materials to South East. This was a ‘construction contract’ for the purposes of the Act.

On 23 November 2012, AMGW sent an

email to South East, attaching a tax invoice for the amount of $27,032. This invoice related to the supply of goods that AMGW made to South East on 22 October 2011. The invoice contained the following statement:

This is a claim under the Building and Construction Industry Security of (sic) Payment Act 2004 Queensland

South East refused to pay the claimed amount and served a payment schedule to

this effect. AMGW asserted that the payment schedule was outside the prescribed time period and filed an adjudication application under the Act for the $27,032.

The adjudicator determined that AMGW made a valid payment claim under the Act (and South East was liable to pay the claimed amount). In particular, the adjudicator held that, given South East failed to lodge its payment schedule in time, it lost its ability to assert that AMGW’s payment claim was invalid on the basis that it was served outside the 12-month timeframe.

South East applied to the Supreme Court to set the decision aside, on the basis that:

• AMGW’s tax invoice was not a valid payment claim under the Act, as it did not clearly state that it was made under the Act; and

• AMGW’s payment claim was not valid, as it was served more than 12 months after the last supply of goods under the

Adjudication: Queensland

Mixed messages from Qld Supreme CourtThe Queensland Supreme Court has further clarified the requirements for payment claims under the Building and Construction Industry Payments Act, sending mixed messages to the wider construction industry.

construction contract between the parties.

The DecisionThe Supreme Court of Queensland held that the adjudication decision should be set aside.

In relation to the first issue, the court found that the wording used in the tax invoice was sufficient for the purposes of the Act (as the wording did not leave South East in any doubt that it was a payment claim under the Act). In particular, the court remarked that, although the invoice was in a small font, it was legible and this was sufficient for the purposes of the Act.

As for the second issue, the court found that the payment claim was invalid, on the basis that it was served more than 12 months after the relevant supply of goods. The court, contrary to the adjudicator’s finding, determined that it was not fatal to South East’s case that it had not raised this point in its payment schedule.

The court noted that, even if South East had not made the point in its payment schedule, the adjudicator was still required to consider the issue in its adjudication of the matter. The adjudicator did not do so, which amounted to a jurisdictional error and rendered the adjudication void.

CommentaryThe decision provides useful guidance as to the operation of s17 of the Act. It supports the view that a payment claim must be served in time in order to be valid and that a ‘substance over form’ approach will be taken for the identification of payment claims.

Importantly, the decision also confirms that a failure to raise a point in a payment schedule may not necessarily be fatal in an adjudication. An adjudicator has the ultimate responsibility to consider all relevant requirements of the Act and a failure to do so may render their decision void.

Footnotes1.[2013] QSC 45.

LEGALVIEWPOINT

47June 2013

The use of expert conclaves or joint meetings of experts1 by Australian courts is becoming more prevalent, but

there has been limited judicial guidance as to the manner in which these conclaves should be conducted.

A recent case in the Supreme Court of Victoria, Matthews v SPI Electricity Pty Ltd2, which provides some judicial guidance on the procedures.

Background to the caseMatthews v SPI Electricity Pty Ltd involves a class action by a group of plaintiffs who had sustained personal injury, property damage, and/or economic loss as a result of the “Black Saturday” bushfire in Victoria in February 2009.

In this decision of the Supreme Court of Victoria, Forrest J was asked to consider the composition and conduct of the expert conclaves and, specifically, whether the experts should participate in discrete sub-issue conclaves or whether the conclaves should consist of a larger group of experts. The two methods of running the conclaves proposed by the parties were described as:

• “The Maurice Blackburn model” which proposed that the conclaves should take place within six broadly agreed topics that were to be the subject of expert evidence; and • “The Freehills model” which proposed a

more detailed approach involving specific issue-by-issue conclaves. Under this model, the number of joint expert meetings would increase to fourteen.

The preferred model: A detailed approach to expert conclavesForrest J acknowledged that the approach proposed by Freehills would result in “double the number of conclaves and be challenging administratively”.

However, His Honour went on to find that the Freehills model was preferable given the degree of flexibility of implementation. Further, Forrest J highlighted the following

advantages of the Freehills model:• His Honour reasoned that by having

a conclave devoted to specific issues there would be less scope for the parties to contest the expertise of particular witnesses.

• The Freehills model reduced the likelihood that the use of experts would become a “battle of numbers”. As an example, Forrest J noted that, under the Maurice Blackburn model, one of the

proposed conclaves would provide for five witnesses engaged by the Plaintiff with only one expert engaged by the Defendant. Citing this example, his Honour held that “[t]his is exactly the type of confrontation I hoped to avoid”.

• The provision of joint reports dealing with specific and discrete issues would better assist to refine the issues requiring expert evidence, leading to a greater prospect of providing the Court with a clearer distillation of the issues in dispute and those that were not.

• The Court retains the scope to expand the conclaves if the experts believed this would be of assistance.

Forrest J’s guidance on running expert conclavesHaving held that the more detailed approach suggested by Freehills was preferable, His

Honour considered the following procedural aspects of the proposed expert conclaves.

The issues addressed by his Honour included:

• Management of the process • The use of a moderator • The use of a scribe • The extent to which the parties could

instruct the experts • Balancing the number of experts engaged

by the parties.

Who is responsible for managing the process?Forrest J addressed the risk, often arising in complex proceedings requiring experts across multiple disciplines, that lawyers for both parties will fervently contest issues put to the experts. In a paragraph titled “How to stop the bickering”, His Honour observed that:

As night follows day, it is inevitable that the lawyers for [the Plaintiff] and [the Defendant] will continue to argue about questions relating to the conclaves. I fear that there is a real prospect that the arrangements could go off the rails if this is permitted to go on.

In response to this issue, Forrest J held that a court-appointed party be responsible for the management and supervision of the expert conclaves. In this instance, an Associate Justice was employed for this role.

Should there be a moderator?Not surprisingly, this question was also contested by the parties. In response, His Honour noted that the resolution of this issue lay with the experts themselves and was not a matter for the lawyers representing the litigants.

Forrest J held that, if the experts felt that they required the assistance of a moderator, then the Court appointee could also act in this capacity.

Should there be a scribe?His Honour again noted that the resolution of this question lay with the experts, but

Expert witnesses: Victoria

Expert conclaves - avoiding collisions of ships in the nightAnh Nguyen commemnts on a recent Victorian Supreme Court case


LEGALVIEWPOINT

48ADR Reporter

All are right! A Hasidic lesson for American mediators - or any mediators

His Honour held that if appointed, a scribe’s duty should be confined to the recording of discussions with a view to assisting the experts to prepare the joint expert reports.

Should there be an agenda or list of questions provided to the experts?

His Honour stated that it was not necessary to provide the experts with a list of questions to be considered, but held that an agenda, agreed by the parties, should be provided to the experts. If the contents of the agenda were further disputed, Forrest J held that the matter could be resolved by the Associate Justice appointed to manage the process.

On the risk that the expert conclaves would become “death by numbers”

His Honour indicated a preference for the parties to appoint one expert for each of the topics in dispute, but noted that in some cases this may not have been practical for bona fide reasons. In stating that “[T]he expert

evidence will be determined on quality not quantity”, His Honour provided the parties with an opportunity to tender further expert evidence to redress any genuine detriment from an imbalance in the number of experts participating in each conclave.

Significance of this caseThis case lends support to the growing

use of expert conclaves by Australian courts. It also highlights the need for litigation practitioners to consider the implications of adapting to this trend, and the strategic and practical issues highlighted by this decision.

It is interesting to note that, under the guidance given by Forrest J, the experts were given a wide scope to determine the manner in which a conclave was run. On balance, a structured approach which incorporates the views of the participants in the expert conclaves is a positive development in this nascent area of litigation in Australia. This approach reduces the risk, even after a joint expert process, of the experts being “ships in the night” who address differing questions based on differing assumptions, with views

that are difficult or impossible to reconcile. It comes in an environment where we are seeing some courts more prepared to become involved in the management of experts3, including the joint setting of agreed questions and assumptions.

Endnotes1. Also known as Joint Conferences of Experts2. Matthews v SPI Electricity Pty Ltd; SPI Electricity Pty Ltd v United Services Corporation Limited (Ruling No 10) [2012] VSC 379 (4 September 2012)3. It is interesting to contrast this with the NSW Supreme Court practice direction (SC Gen 11) which requires that:

• The parties should agree on the questions to be answered

• Questions should be framed to answer an issue, preferably capable of a yes/no answer

• That this be done at least 14 days before the conference occurs

Expert witnesses

A couple who could not reconcile on any issue and were considering a final separation agreed only on a single point: to bring their tortured complaints to an influential rabbi and accept his ruling.

On the appointed day, the woman elaborated on her side of the ordeal. The rabbi listened carefully and following a brief contemplation, said, “You are right.”

Then the husband presented his perspective of the truth. Again, the rabbi listened attentively and closed his eyes to concentrate on the presentation.

The frustrated husband’s version was the opposite of that of his wife, her black was his white; cause and effect were interchangeable.

The only common denominator was blame. The husband blamed his wife and she blamed him. After a short but careful consideration of the case, the rabbi opened his eyes and, with a tortured expression, declared: “You are right.”

The scholars present were stunned. They could not contain their gasps and looked at one another with astonishment. They whispered among themselves for a while until the most courageous student, who was considered to be the closest to the rabbi and some even said his slated successor, opened his mouth and in a trembling voice asked: “Rabbi, with all due respect, the husband’s and wife’s versions are

the complete opposites of each other. How can you say that both are correct?”

Another observant pupil added from the back of the room: “It does not make any sense.” The rabbi smiled and said: “You too are correct.”

The couple left unhappy but remained together.

Several months later, the couple were still together and unhappy, but the pupils’ puzzlement had not subsided.

In the midst of a Talmudic back- and- forth discussion on a particularly tough issue about two people who claim the ownership of one tallit ( prayer shawl), each of them claims, “It is all mine.” No apparent solution surfaced.

One of the students, who was brilliant and possessed a good memory, said: “Rabbi, it is obvious that the other side is wrong. Justice and truth are on our side! This time, don’t teach us your theoretical philosophy, give us a real solution, a decision.”

The rabbi scanned the entire room with a wise expression and shared his thought process.

“Truth is not absolute. It is multifaceted. We cannot just insist on our truth and expect the other side to succumb to it and accept us as winners.

“The tallit cannot be divided. If it does

not have all four corners with all tzitziot untouched, it is damaged and no longer is a tallit. Now let’s talk and pray together and forget the tallit.”

“But rabbi, we need the tallit to pray properly. Do you have any practical solution?”

The rabbi looked at his students and mumbled to himself, “We have to adopt the merit in the opponent’s approach and recognize it as our own.

“Once we illuminate the merits of both sides, controversy will hopefully be reduced to a shadow and we will all prevail. All of us will prevail, God willing.”

“But master,” said the feuding camps in unison,” you are our rabbi, tell us what to do!”

“You see,” the rabbi responded, “the main problem now is not the tallit any more. I united you all in seeing me as the problem. I accept it. All of you are right, praise the Lord.”

The lesson to American mediators in the Israeli Palestinian conflict – if they care to listen – is this: Mediation carries its own perils, especially when undivided property is in dispute and the mediator brings to the table his own perspective, based on his own preconceptions, procedures and stature.

If and when the mediator claims, “I know best what is good for you, you better do it or else...” beware!

the australian adr reporter

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