We were delighted to announce recently that leading Canadian firm Ogilvy Renault and leading South African firm Deneys Reitz will join Norton Rose Group in June 2011: fantastic news for our arbitration practice, which is discussed in the noticeboard section.
In this issue, we provide an update to the Jivraj case which has caused so much concern in the London arbitration market. A unique perspective on the arbitration process is provided in our discussion of a survey by Queen Mary College – “Choices in Arbitration”. We also look at the new UNCITRAL rules which recently came into force, and at TheCityUK’s report on dispute resolution in London. On the back page we are delighted to feature a light hearted Q&A with consultant to our practice, Professor Robert Merkin.
Head of international arbitration and ADR
Norton Rose LLP
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English courts refuse to enforce French IC award
In Dallah Real Estate v The Government of Pakistan  UKSC 46 the UK Supreme Court refused to enforce a French IC arbitration award on the grounds that there was no valid arbitration agreement as a matter of French law. The decision is of significance beyond the UK because of its analysis of Article V of the New York Convention and, in particular, the need for the courts of the country where enforcement is sought to revisit the question of jurisdiction initially determined by the tribunal. Enforcement proceedings have also been commenced in France with hearings due to take place in early 2011. Although the English decision is not binding on the French courts, it could prove significant.
Lawyers from Norton Rose Group have co-authored an article on Dallah with lawyers from Ogilvy Renault, soon to be Norton Rose OR. To view this article please visit www.nortonrose.com/dallahupdate.
Changes to the “without prejudice” rule
In a landmark judgment, Oceanbulk Shipping & Trading SA v TMT Asia Limited and others  UKSC 44, the UK Supreme Court has limited the application of the “without prejudice” rule.
The purpose of the “without prejudice” rule is to assist the parties in a dispute to reach a settlement during the course of proceedings. Any communications (oral or written) between parties aimed at settling a dispute are “without prejudice” and cannot be put before the courts in evidence should such negotiations fail.
The Supreme Court’s judgment has created an exception to this rule. Relevant “without prejudice” communications are now admissible as evidence of the true meaning of any provision in the settlement agreement in the event that the parties disagree on that meaning. The judgment highlights the importance of care when negotiating and drafting settlement agreements.
See our guide to drafting settlement agreements for more information www.nortonrose.com/settlementguide.
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Choices in arbitration: users’ survey
London’s position as a leading international arbitration centre has been given a boost in the recently published “International Arbitration Survey: Choices in Arbitration”. The survey was prepared by the School of International Arbitration, Queen Mary College, University of London. The survey cites London as the most preferred seat of arbitration and suggests that this may be related to the popularity of English law. It also provides insight into corporate attitudes and practices regarding the appointment and performance of arbitrators and confidentiality.
The survey focuses on the key factors that influence corporate choices in international arbitration and builds upon themes identified in the previous two international Arbitration Surveys (published in 2006 and 2008). It also covers new ground, including corporate policies towards international arbitration and attitudes towards confidentiality. This year, the survey has captured the views of a more geographically diverse pool of respondents to reflect emerging economies.
Corporate dispute resolution policies
The survey reveals that 68 per cent of respondents have a corporate policy on the dispute resolution mechanisms to be incorporated into their contracts. Of those respondents, the majority have a “preferred” position on their choice of governing law, arbitral institution, language and seat.
“English law is preferred because of its ‘predictability’, ‘certainty’, ‘developed jurisprudence’ and respect for principles such as freedom of contract.”
Many respondents referred to arbitration clauses as the “2 a.m. clause” and described how they were often brought in late to negotiations and expected to conclude these clauses with minimal negotiation. In our experience, a carefully drafted arbitration clause can avoid unnecessary conflict on peripheral issues and significantly reduce the risk of protracted disputes about procedure. If and when a dispute does arise, these clauses can become the most important clauses of all. It is well worth giving them the attention they deserve from the outset.
Choice of governing law, seat and infrastructure
With regard to the choices made in relation to the governing law, seat, institution and rules, 51 per cent of respondents said that the law governing the substantive dispute is the first issue to be decided. Many expressed the view that this was because the governing law is usually selected by the corporate lawyers before the negotiation of the dispute resolution clauses.
The survey confirms that 68 per cent of respondents believe that the choices made in relation to the governing law, seat, institution and rules influence one another. In particular, a number of interviewees considered that the choice of governing law informs the choice of seat.
The most important factors influencing parties’ choice of law were the perceived neutrality and impartiality of the legal system (66 per cent), the law that was considered most appropriate for the type of contract (60 per cent) and the respondents’ familiarity with the particular law (58 per cent). More experienced users also considered which laws would provide a strategic advantage regarding enforcement of the award and how the contract would be interpreted.
In terms of the most preferred law (other than the law of their home jurisdiction), 25 per cent of respondents chose English law. This was followed by Swiss (9 per cent), New York (6 per cent) and French (3 per cent) laws. English law was cited as the most recently used governing law by 40 per cent of respondents, followed by New York law (17 per cent).
“38 per cent of respondents said they would still choose arbitration even if it did not offer confidentiality.”
This is a powerful endorsement of English law, which according to the survey is preferred because of its “predictability”, “certainty”, “developed jurisprudence” and respect for principles such as freedom of contract.
The survey suggests that choice of seat is most influenced by the “formal infrastructure” available (62 per cent). This includes the arbitration law and the court’s record of enforcing arbitration agreements and arbitration awards and the degree of neutrality and impartiality.
“Parties would like to see arbitrators exerting greater control over the proceedings to reduce delays.”
London was named as the preferred seat of arbitration (30 per cent), followed by Geneva (9 per cent), Paris, Tokyo and Singapore (7 per cent each) and New York (6 per cent). Respondents were also asked which five seats their organisation had used most frequently in the past five years. The most commonly cited seat was London, followed by Paris, New York, Geneva and Singapore (which has emerged as the most popular seat in Asia).
The IC International Court of Arbitration (IC) was the most preferred arbitration institution (50 per cent), followed by the London Court of International Arbitration (14 per cent). Whilst, on the whole, it seems users are generally satisfied with the quality of the IC, the survey results suggest that there is still a perception that arbitral institutions are costly in general.
Arbitrator selection and performance
In terms of the selection of arbitrators, 68 per cent of respondents rated open-mindedness and fairness over experience of arbitration (62 per cent), quality of awards, (58 per cent), relevant legal knowledge (55 per cent), reputation (54 per cent) and availability (51 per cent) as the key factors that influence corporations’ decisions about arbitrators.
Lack of availability was, however, identified as an area of “increasing concern”. Many respondents considered that arbitrators should be required to publish information about their pending commitments as this was seen as a factor which can lead to delays.
This issue has notably already been identified by the IC which recently imposed a requirement on arbitrators to describe their availability over the following 12/18 months by completing a Declaration of Acceptance, Availability and Independence.
The survey reveals that 43 per cent of respondents prefer a “proactive case management style” from the tribunal. It is anticipated that one particular change following the IC’s review of its current rules will be greater emphasis on active case management by the tribunal. The survey suggests that this move would be welcomed by corporate counsel.
A disappointing number of respondents (50 per cent) stated that they had been dissatisfied with the performance of an arbitrator and the survey reveals strong support for a review or assessment of arbitrators’ performance at the end of the arbitration (75 per cent).
This is perhaps one of the most challenging issues for arbitral institutions in the future. In principle it seems right that the users of arbitral institutions should be allowed the opportunity to provide feedback on the performance of arbitrators as “consumers” of the arbitration product. However, the difficulty is ensuring that such feedback is captured and reported in an objective manner.
Whilst confidentiality is important to corporate users (62 per cent considered it to be “very important”), the survey suggests that it is perhaps not as fundamental as one might think: 38 per cent of the respondents said they would still choose arbitration even if it did not offer confidentiality. Confidentiality is therefore only one of several reasons (including procedural flexibility, enforceability of awards, impartiality and neutrality) why parties choose arbitration.
Delays in proceedings
Respondents believe that the parties contribute most to the length of arbitral proceedings (31 per cent). However, 30 per cent consider that the tribunal is best placed to keep the arbitration timetable on track. The survey also reveals that parties would like arbitration to become more streamlined and disciplined and would like to see arbitrators exerting greater control over the proceedings to reduce delays.
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Dispute resolution in London
TheCityUK* has produced an analysis of the dispute resolution market in London, with a particular focus on arbitration and ADR. Its report – “Dispute Resolution in London & the UK 2010” – provides a detailed assessment of the city’s dispute resolution capabilities, statistics on referrals to London-based dispute resolution centres, and the market’s future prospects.
The London attraction
The report paints a positive picture of the dispute resolution market in London, with significant growth seen across all institutions. The long-term growth in international dispute resolution is linked to an increase in cross-border transactions from which disputes originate, with more recent growth attributed to the difficult economic climate. The Commercial Court saw the highest number of claim forms issued since the Woolf reforms to civil procedure in 1999. The international nature of London dispute resolution is evident from the fact that 75 per cent of those actions involved at least one foreign party. In roughly one-half of cases, the only link to the UK is the parties’ choice of London for dispute resolution.
What is the attraction of London? The report points to a number of key factors, including the arbitration friendly framework provided by the Arbitration Act 1996 and the courts’ freedom from political influence, supported by an impartial judiciary. A depth of expertise in relation to complex cases was also cited, from specialist institutions to individual arbitrators, mediators and experts, together with international law firms and barristers able to provide specialist advice and advocacy. London is also seen as a venue offering flexibility in procedures offered by different institutions, as well as party autonomy in language and law. Confidentiality in arbitration proceedings is implied by law.
The London Court of International Arbitration (LCIA) has seen a rapid increase in the number of disputes referred to it in recent years, doubling from 137 in 2007 to 285 in 2009. Over 90 per cent of these disputes are international, even though most are seated in London.
The ICC International Court of Arbitration (ICC) also saw a significant increase in cases filed, rising from 599 in 2007 to 817 in 2009. The largest number of ICC arbitrations was conducted in Paris where the institution is based (113), but London was the second most popular venue (73). The quality of London arbitrators was confirmed in the appointment statistics for IC arbitrations – Swiss and English arbitrators topped the list, each with 22 per cent of all IC appointments. Germany, the USA and France followed, with 8 per cent each of appointed arbitrators.
A significant growth in referrals to arbitration was reported by the London Maritime Arbitrators Association (LMAA). Individual appointments rose by 38 per cent – from 2,673 in 2007 to 4,326 in 2009.
The International Centre for the Settlement of Disputes (ICSID) has seen a four-fold increase in disputes between states and investors since 2000. London is a key venue for tribunals, holding the highest number of merits hearings after Paris and Washington in 2009.
As we reported in our last issue (September 2010), mediations are also on the rise, with the Centre for Effective Dispute Resolution (CEDR) reporting that approximately 6,000 civil and commercial mediations a year are now conducted in the UK. This is almost double the number reported for 2007.
There is much for London to celebrate in this report, but competition from both established and emerging international arbitration centres remains fierce.
* TheCityUK is an independent body established with the support of the City of London Corporation (in consultation with government and industry) for promoting the UK-based financial and professional services industry.
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This article reviews the arguments and recent developments regarding the controversial judgment in Jivraj v Hashwani  EWCA 712, which ruled that an arbitration clause was void because the appointment provisions specified that the arbitrator was to be Ismaili (see our last issue, September 2010).
This may mean that if a clause specifies that a sole arbitrator or chairman must come from a neutral country or specifies some other nationality-based qualification, the whole arbitration clause may be void. The International Chamber of Commerce (ICC) and London Court of International Arbitration (LCIA) have intervened in the application for permission to appeal to the UK Supreme Court against the judgment in this case.
Recap of the case
An arbitration clause specified that any dispute between the parties must be decided by a panel, all of whom must be “respected members of the Ismaili community”. One of the parties attempted to appoint a non-Ismaili, and the other challenged the appointment. The Court of Appeal decided that the arbitrator was “in employment” under the Employment Equality (Religion and Belief) Regulations 2003. The Directive to which the Regulations give effect states that it is concerned with discrimination affecting access to the means of economic activity. The definition of employment in the Regulations includes a “contract personally to do any work”. An arbitrator - so the court held – had a contract personally to work and this afforded him access to economic activity, so his job was, for purposes of the Regulations, no different from a solicitor or plumber.
The Court of Appeal further decided that being Ismaili was not a “genuine occupational requirement” which would have provided an exception to the Regulations. Although the court accepted the argument that Ismailis commonly decide disputes within their own community, the arbitrator was deciding the dispute according to English law (not under an ex aequo et bono clause) and he did not need to be Ismaili to do so.
“The English courts have a good record of supporting international arbitration.”
The result was that the whole arbitration clause was rendered void and the parties would have to litigate if they did not agree a new clause. Appointment provisions are usually an important factor in securing agreement to an arbitration clause and so the clause could not survive without the appointment provisions.
This case has caused considerable debate because of the possibility that it may be applied to more common clauses. The Court of Appeal acknowledged its judgment was likely to have wider implications. The current uncertainty is at best unhelpful and at worst capable of causing long-term damage to London’s pre-eminent standing as an international arbitration centre.
The Supreme Court has now granted permission to appeal. It is anticipated that some interested third parties such as the ICC and the LCIA may apply for permission to intervene. Although the clause in Jivraj was unusual, the institutions are concerned about the application of the principles in the judgment to their appointment procedures. Other institutions and organisations may also intervene in support.
Retaining the confidence of the parties
The ICC and LCIA Rules provide that the sole arbitrator or chair of the arbitrators should have a neutral nationality (ie, different from that of the parties). Under the Equality Act 2010 (which on 1 October 2010 superseded the Race Relations Act 1976) this appears to constitute direct race discrimination. The exception for an occupational requirement may not apply because arbitrators are presumed to be capable of applying the law in a fair and unbiased way even if they have the same nationality as one of the parties. In any event, there are already provisions in the Arbitration Act 1996 to prevent actual and perceived bias.
“There is every reason to believe the decision in Jivraj will be confined to its particular facts.”
The prospect of arbitration clauses being declared void has led some commentators to recommend that when parties are negotiating an IC or LCIA arbitration clause, they should consider excluding this aspect of the appointment provisions.
The English courts have a good record of supporting international arbitration. There is every reason to believe the decision in Jivraj will be confined, therefore, to its particular facts. Retaining the confidence of international parties by allowing them to choose, if they wish, a sole arbitrator or chairman of neutral nationality is permitted under the Equality Act as an occupational requirement. Retaining the parties’ confidence in this way is a legitimate aim and
the appointment provisions are a proportionate way of achieving it. Additionally, if the provisions are unlawful, then they might be severed from the rest of the institutional rules. There are also arguments that arbitrators are not “in employment” because the parties do not exercise control over them.
This is a Europe-wide question because EU treaties contain the principle of equal treatment on grounds of nationality. Although the question has not yet come before other European courts, arbitration practitioners across Europe are watching the outcome of the Supreme Court appeal with interest.
It is anticipated that the appeal will be heard by the Supreme Court in late 2011.
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New UNCITRAL rules
By Ben Allen and Adam Hunter
UNCITRAL (the United Nations Commission on International Trade Law) has revised its frequently cited International Arbitration Rules . Arbitration agreements coming into effect after 15 August 2010 will now be subject to the following changes:
- Parties no longer have to agree in writing that the UNCITRAL rules will apply to the arbitration. Any record that displays an agreement to be bound by the Rules is sufficient (Article 1).
- The Notice of Arbitration may now be transmitted electronically; arguments that address sufficiency of notice will no longer hinder the constitution of the tribunal (Articles 2 & 3).
- Parties waive the right to bring any claim against the arbitrators and the appointing authority based on any act or omission in connection with the arbitration (other than intentional wrongdoing) (Article 16).
- Third parties may now be joined to the proceedings and claims made against them in response to the Notice of Arbitration (Article 17).
- New interim measures outline the Tribunal’s power to require the applicant to provide security, to alter or terminate the interim measure imposed and use costs and damages awards to prevent or compensate for abuse of the procedure (Article 26).
- The revised Rules introduce the right to external review and correction of arbitrators’ fees (Article 41).
An important omission in the Rules is a requirement of confidentiality. Although in some jurisdictions a duty of confidentiality is implied as a matter of law, this is not the case in every country. As confidentiality is not governed by the Rules, parties may wish to include this clause in their individual agreements.
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Increased arbitration practice
Ogilvy Renault and Deneys Reitz have joined Norton Rose Group, creating a disputes practice that, as of June 1, 2011, will span 38 offices on five continents, with over 100 international disputes lawyers in Asia, Europe, North America, Australia, Africa and the Middle East. This combination brings Canada’s leading international arbitration practice and South Africa’s leading disputes practice into a global firm with a growing presence in the most important arbitration centres, including London, Paris, Dubai, Singapore and Hong Kong. The combined practice currently has over 150 arbitration cases, in a portfolio estimated at over US$15 billion (excluding cases in which lawyers from the firm are sitting as arbitrator).
International Who’s Who of Commercial Arbitration 2011
Joe Tirado has been named in the Global Arbitration Review’s International Who’s Who of Commercial Arbitration 2011 as a leading arbitration specialist.
2010 Australian Insurance Law Association Prize
Professor Robert Merkin, a consultant to the Norton Rose Group, has been awarded the Australian Insurance Law Association’s 2010 prize for contribution to Australian insurance law and insurance education.
Singapore partner Guy Spooner has been appointed to serve on the board of the Singapore International Arbitration Centre (SIAC) Board of Directors. Singapore partner KC Lye has been invited to join the Kuala Lumpur Regional Centre for Arbitration panel of arbitrators. Dubai senior associate Henry Quinlan has been appointed to the panel of arbitrators of the Cairo Regional Centre for International Commercial Arbitration.
Article on extensions to the Singapore courts’ support for arbitration
KC Lye has written an article for SIAC on recent statutory amendments which empower Singapore courts to assist foreign seated arbitrations.
IBA Mediation Committee e-book
Joe Tirado and senior associate Amanda Greenwood have contributed a chapter on “Opening Statements” to the recently released IBA Mediation Techniques e-book.
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Focus on London: Professor Robert Merkin
Professor Robert Merkin is a consultant based in Southampton. He is Research Professor of Commercial Law at Southampton University. He has published books and articles on insurance, reinsurance and arbitration law and is co-editor of the Lloyd’s Law Reports.
I am a lawyer because…
Actually, officially, I’m not, as I have never qualified, but don’t tell anyone. Maybe one day…
What gives you greatest satisfaction, professionally?
Achieving clarity from the impenetrable, in writing, teaching and giving advice.
Hearing one of my three daughters saying, “Dad, you were right.” Still waiting.
How do you spend your weekends?
Sadly, work often features at weekends. But, that aside, enjoying the beautiful Devon scenery. If Spurs have lost, trying frantically to avoid all mentions of the game in the media. If Spurs have won, watching the game on as many TV programmes as possible.
If you weren’t a lawyer, what would you be doing?
Collecting rejection slips for my latest novel, scouring “guitarist wanted” ads and trying to get my half-marathon time down to one that avoids me being overtaken by someone in a dustbin costume and four men dressed as nurses carrying a stretcher containing a rugby player.
Who are your heroes?
Groucho Marx, John Le Carré, John McLaughlin and, of course, Harry Redknapp.
What’s on your iPod?
CSNY, Miles Davis, Roy Harper, Joni Mitchell, Jack Bruce and 15,000 others.
And your favoured arbitration centre?
Sadly, my home town of Sidmouth in Devon (population 13,000, average age about 90) does not have an International Arbitration Centre, but I’m working on it.
What is your biggest vice?
They are many and varied, although mostly not illegal. As to the biggest, it depends who you ask, but probably white chocolate.
What is your biggest mistake?
Consistently assuming that, if a film or concert is really bad in the first ten minutes, then it is going to get better – it won’t, but I never learn that cutting my losses is the least painful solution.
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