Anatomy of International Arbitration · Anatomy of International Arbitration The Clause, the Forum,...

Anatomy of International ArbitrationThe Clause, the Forum, the Discovery,

the Hearing and the Sword

James E. Cousar512.469.6112

[email protected]

E.F. Mano DeAyala713.951.5827

[email protected]

Alex J. Brown713.951.5853

[email protected]

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Overview

● Overview of Thompson & Knight

● Areas of Practice

● Speaker Bios

● Litigation vs. Arbitration

● Arbitration Institutions

● The Arbitration Clause

● Pleadings/Written Submissions

● Selecting the Arbitrators

● Interim Relief/Anti-Suit Injunctions

● Discovery

● Conduct of the Arbitration Hearing

● The Award

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Overview of Thompson & Knight

● Established in 1887

● Global firm with approximately 420 attorneys

● 14 offices worldwide

● Attorneys and resources circle the globe from areas such as:► Mexico, Brazil, Argentina, and Nicaragua in Latin America

► Algeria, Libya, and Egypt in North Africa

► Angola, South Africa, and Nigeria in Subsaharan Africa

► England and France in Europe

► China and South Korea in Asia

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Areas of Practice

● Corporate and Securities

● Corporate Reorganization and Creditors’ Rights

● Environmental

● Finance

● Government/Regulatory

● Health Law

● Information Management and E-Discovery Solutions

● Intellectual Property

● Labor, Employment, and Immigration

● Oil, Gas, and Energy

● Real Estate and Real Estate Finance

● Tax, Benefits, and Estate Planning

● Technology

● Trial and Appellate

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Alex J. Brown

Partner, Houston & New York

Focuses his practice on business litigation in federal and state courts at both the trial and appellate level and in domestic and international arbitration forums

Member, American Bar Association, International Litigation Committee

Member, International Dispute Resolution Centre

J.D., 2000, University of Houston Law Center

B.A. in Political Science, 1996, magna cum laude, Texas Tech University

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James E. Cousar

Partner, Austin

Focuses his practice in regulatory and corporate dispute resolution, land use planning and municipal law, state regulatory matters, oil and gas litigation, and federal and state ethics laws and campaign finance regulation.

Represented publicly traded multinational oil company in major arbitration

J.D., 1978, with honors, The University of Texas School of Law

B.A., 1975, magna cum laude, Harvard University

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E.F. Mano DeAyala

Partner, Houston

Focuses his practice on business and energy litigation in federal and state courts at both the trial and appellate level and in domestic and international arbitration forums. He advises domestic, foreign, and multinationals on strategic agreements and business relationships.

J.D., 1992, SMU Dedman School of Law

B.B.A., 1988, The University of Texas at Austin

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Anatomy of International Arbitration

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Litigation vs. Arbitration

● Factors to Consider

► Predictability (appeal vs. no appeal)

► Neutrality

► Availability of witnesses and documents

► Costs (compared to litigation vs. other arbitration institutions)

► Speed (anybody’s guess)

► Confidentiality (not always…ICSID)

► Enforceability of awards (easier to domesticate arbitration award than foreign judgments)

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Arbitration Institutions

● ICC – International Chamber of Commerce

● LCIA – London Court of International Arbitration

● ICDR/AAA – International Center for Dispute Resolution

● ICSID – International Centre for Settlement of Investment Disputes

● Stockholm – Arbitration Institute Stockholm Chamber of Commerce

● SIAC – Singapore International Arbitration Center

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The Arbitration Clause

● Arbitration Institution vs. Ad Hoc Arbitration

● Model Clauses:

► ICC – International Chamber of Commerce

− Model Arbitration Clause:

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

Parties are reminded that it may be desirable for them to stipulate in the arbitration clause itself the law governing the contract, the number of arbitrators and the place and language of the arbitration. The parties’ free choice of the law governing the contract and of the place and language of the arbitration is not limited by the ICC Rules of Arbitrator.

− Costs

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► LCIA – London Court of International Arbitration


Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into thisclause.

The number of arbitrators shall be (one/three).

The seat, or legal place, or arbitration shall be (city and/or country).

The language to be used in the arbitral proceedings shall be ____.

The governing law of the contract shall be the substantive law of ____.

− Costs

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► ICDR/AAA – International Center for Dispute Resolution


Any controversy or claim arising out of or relating to this contract shall be determined by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association.

The parties may wish to consider adding:

(a) The number of arbitrators shall be (one or three);(b) The place of arbitration shall be (city and/or country);(c) The language(s) of the arbitration shall be ____.

− Costs

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► ICSID – International Centre for Settlement of Investment Disputes

− Arbitration of Investment Disputes between Contracting States and Nationals of Other Contracting States

− Dispute must arise out of an “investment” in the Contracting State

■ Equity investments in companies and joint ventures

■ Service contracts

■ Technology transfers

■ Natural resource concession agreements

■ Construction and operation of a facility in host state

■ Promissory notes

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► ICSID cont’d


The [Government/Agency] of [Contracting State] and [Investor] hereby consent to submit to the International Centre for Settlement of Investment Disputes any dispute arising out of or relating to this agreement for settlement by arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

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► ICSID cont’d

− No sovereign immunity defense to liability

− Awards are immune from national court review

− Enforceable in the courts of all 135 signatory states without the need to domesticate the award

− ICSID awards are published

− Developing countries have a vested interest not to challenge theWorld Bank

− Absent express agreement, default to law of Contract State

− Costs

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► Stockholm – Arbitration Institute Stockholm Chamber of Commerce− Model Arbitration Clause:

Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

The parties are advised to make the following additions to the clause, as required:

The arbitral tribunal shall be composed of ____ arbitrators (a sole arbitrator)

The seat of arbitration shall be ____.


This contract shall be governed by the substantive law of ____ (insert jurisdiction).

− Costs

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► SIAC – Singapore International Arbitration Center


In drawing up international contracts, we recommend that partiesinclude the following arbitration clause:

Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The Tribunal shall consist of ____ arbitrator(s) to be appointed by the Chairman of the SIAC.

The language of the arbitration shall be ____.

− Costs

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► UNCITRAL (Not an Institution)


Any dispute, controversy or claim arising out of or relating to this contract, or to the breach, termination, or validity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force.

The appointing authority shall be ____.

The place of arbitration shall be ____.

The number of arbitrators shall be [one] [three] appointed in accordance with said Rules.


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● Writing● Choice of Law

► What law governs the validity of the arbitration agreement?− Law of the Contract/Law of the Arbitration (avoid ambiguity)

► What law governs the arbitration proceeding themselves?− Unless expressly agreed otherwise, the procedures of the

Institution (ICC, ICSID, LCIA, etc.) will control.− Ad hoc (UNCITRAL, etc.)

► What law applies to the substance of the dispute?− Law of the Contract/Law of the Arbitration (avoid ambiguity)− U.S. (New York, Texas), English common law (or law based on

English law such as New Zealand, Nigeria, etc.) (Retain local counsel)

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● Situs

► Consider the forum law on setting aside arbitral awards

► Consider witnesses, experts, and documents

► Consider forum law on obtaining extraordinary relief and contempt

● Discovery

► Include Built-in Discovery Mechanism even if contrary to choice of law

► IBA Rules – International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration (Bob Brodegaard will discuss)

● Confidentiality

► “The parties agree to keep and maintain confidential the evidence, testimony presented, findings and award in any arbitration contemplated herein.”

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● Default Provisions► What if Respondent Country/Party fails to pay?

− Without express language, Claimant pays for Respondent and it will be included in the award. Without express authority, Tribunal is without power to declare Respondent in default or toprovide death penalty sanctions.

− Suggestion: Add express language in the arbitration provision authorizing the Tribunal to compel Respondent to pay the administration and arbitrator fees and to declare Respondent to be in default for failure to do so. Include express language consenting and authorizing Tribunal to impose death penalty sanctions.

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● No Parallel Proceedings

► “The Parties agree not to institute litigation concerning the validity or subject matter of this Agreement and expressly authorize the Tribunal to adjudicate all matters concerning the Agreement, thearbitration provision paragraph __ and whether any dispute is subject to arbitration.”

● Limitation of Damages

► If you are likely to be a defendant in any dispute arising from the Agreement, expressly limit damages in the arbitration provision.

− “Notwithstanding anything in this Agreement to the contrary…”

■ Consequential, punitive, exemplary, non-economic damages

■ To avoid any ambiguity between the choice of law provision and the limitation of damages provision

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Pleadings

● International arbitration is focused primarily on written submissions► Notice of Arbitration

► Statement of Claim

► Statement of Defense

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Pleadings

● Parties have considerable freedom when drafting pleadings► Names and addresses of the claimant

► Copy of the relevant agreement, if any, including the arbitration agreement

► A brief statement of the factual circumstances of the case and relief sought

► A statement regarding the number of arbitrators, the location of the arbitration proceeding, language to be used, and the applicable arbitration rules

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Pleadings

● Common Law Style► Material facts

► No argument

► No exhibits

► No legal authorities

● Advantages► Flexibility

► Surprise

► Impact Crescendoes

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Pleadings

● Civil Law Style► Less formal, more narrative

► Argumentative

► Exhibits and case law

● Advantages► Impact early on

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Written Submissions

● Reply► Briefly address key issues in Statement of Defense

● Rejoinder► Briefly address key points in Reply, if necessary

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Written Submissions

● Witness Statements► Signed statement of a fact witness or expert

► Submitted before or with a party’s memorial/pre-hearing brief

► Required of any witness who is expected to testify at the hearing

► Most often a substitute for direct examination

► Any witness who submits a written statement is expected to testify on cross examination at the hearing

► Rebuttal and/or supplemental witness statements usually permitted

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Written Submissions

● Memorials or Pre-Hearing Briefs► Further develops the arguments of both sides in the case

► Includes documents, witness statements, expert reports, and legal authorities

► Longer and more comprehensive than initial pleadings

● Post-Hearing Briefs► Summary of the evidence presented at the hearing on key

issues

► Answer specific questions posed by the tribunal during the hearing

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Selecting Arbitrators – The Tribunal

● In the absence of an arbitration clause that sets the number of arbitrators, arbitration rules provide a mechanism favoring one or three arbitrators.

● ICC, LCIA, AAA, WIPO► One arbitrator unless administrator decides otherwise

● UNCITRAL, IACAC, ICSIC► Three arbitrators

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● Arbitrator Considerations► Arbitration experience

► Legal background – common or civil law attorney

► Experience in governing law

► Industry experience

► Availability

► Nationality

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● Neutral Appointment Procedure► Under most regime rules, the parties designate an arbitrator,

and the administering institution appoints the third arbitrator.

► Others allow the party appointed arbitrators to appoint the third arbitrator.

● Nationality of Neutral Arbitrator► ICC, LCIA, ICSID

− National of a third state

► AAA, UNCITRAL, IACAC

− Discretion of arbitration institution

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● Challenging Arbitrators► All arbitration rules require arbitrators to be impartial and

independent.

► A party may challenge an arbitrator whenever circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality and independence.

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Interim Relief

● Provided for under arbitral rules, domestic laws, and international conventions► Injunctions

► Security for costs

► Attachment

► Protection of property

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Interim Relief

● ICC, AAA

► Tribunal may take “whatever interim measures it deems necessary,including injunctive relief and measures for the protection and conservation of property.”

● LCIA, IACAC

► Tribunal may take “any interim measure it deems necessary in respect of the subject matter of the dispute, including the conservation of goods forming the subject matter of the dispute.”

● ICSID

► “A party may request that provisional measures for the preservation of rights be recommended by the Tribunal. The tribunal may also recommend provisional measures on its own initiative or recommend measures other than those specified in arequest.”

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Interim Relief

● Common Standard for Interim Relief► Urgency

► Imminent harm

► Preserve status quo

► Likelihood of success on the merits

● Tribunals consider the laws of the arbitration seat or wherever the relief is sought

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Interim Relief

● Resort to local courts► If the panel has yet to be seated

► To attach assets of a party

► To enjoin a third party

● Provided under arbitral rules, domestic laws, and international conventions

● Consider adding language in arbitration clause that permits parties to resort to local courts for interim relief

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Anti-Suit Injunctions

● Issued upon the request of a party that the other party be enjoined from initiating or from proceeding with arbitration.

● The proper forum to challenge the jurisdiction of an arbitral tribunal is the tribunal itself, or if necessary, a court located in the same jurisdiction as the pending arbitration.

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Discovery

● By agreement at time of contract

● Party autonomy – by subsequent agreement – legal budget of attys & arbitrations

● If no agreement

► Not likely to have depositions, but will get witness statement

► Discrete, limited document production – no “fishing expedition”

− LCIA Rules, Articles 15, 22

− ICC Rules of Arbitration, Article 20

− UNCITRAL Arbitration Rules, Articles 24, 25

− ICDR Arbitration Rules, Article 19

− SIAC Arbitration Rules, Article 24

− Stockholm Arbitration Rule 26

− ICSID Rules 33, 34

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Discovery

► IBA Rules on the Taking of Evidence in International Commercial Arbitration ─ becoming more popular

− Tries to accommodate common law and civil law

− See, e.g. Article 3 (provides for document requests) and Article 4 (complete and detailed witness statement)

► 3rd parties – if arbitration in U.S. – FAA

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Discovery

● 28 USC § 1782

► § 1782: Assistance to foreign and international tribunals and to litigants before such tribunals

− (a) The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal…

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Discovery

● Applicability to International Arbitration

► In re Roz Trading Ltd., 469 F.Supp.2d 1221 (N.D. Ga. 2006)

► Oxus Gold PLC, Misc. No. 06-82, 2007 WL 1037387 (D.N.J. 2 April 2007)

► In re Application of Hallmark Capital Corporation, 53 F.Supp.2d 951 (D. Mn. 2007)

► Intel v. Advanced Micro Devices, 542 US 241 (2004)

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Conduct of the Arbitration Hearing

● Much depends on the legal background of arbitrators and lawyers► Civil vs. common law► Inquisitorial versus adversarial

● Openings► Usually written submission► Sometimes short statement

● At early stage (“pre-hearing” period) set ground rules► Time limits – “chess clock”► Order of witnesses

− By party / by topic / by availability

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● No recognized rules of evidence► In discretion of arbitrators

− “the arbitral tribunal shall determine the admissibility, relevance, materiality, and weight of the evidence offered”; UNCITRIAL Article 25 (6); see also, ICDR Article 20(6); IBA Article 9 (1); Stockholm Article 26 (1); ICSID Rule 34

● Privilege recognized to varying degrees● Direct examination usually is in the form of written

statement► Consequences: Not time to relax and have arbitrators

observe Testimony before Cross− Frequently, allow short oral direct

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● Most rules provide for cross-examination► LICIA Article 20; Singapore Arbitration Rule 22.3; Stockholm

Article 29 (3); IBA Article 8 (2); ICSID Rule 35► Purpose:

− Elicit helpful facts− Credibility

► Can one go beyond witness statement► Style of Cross

● But some rules are silent► ICC

● Sequestration of witnesses

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● Americanization of International Arbitration► Much more discovery is being allowed

► Hearings becoming more like U.S. trials

► Ever increasing importance of cross-examination and oral advocacy

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The Award

● Competence/competence

► In first instance, arbitral tribunal decides if it has jurisdiction

− Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006)

● Forum non conveniens – monde re

● Minimum contacts – Base Metals

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The Award

● Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York” or “1958” Convention) / Federal Arbitration Act Chapter 2► 142 of 195

► FAA § 207 – 3 years to apply to enforce award

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The Award

► Grounds to refuse enforcement of New York Convention− Incapacity, invalid agreement− Lack of notice− Award not within terms of submission− Arbitral tribunal or procedure not within terms of agreement− Award not binding or set aside “by a competent authority of the

country in which, or under the laws of which, that award was made”

− Subject matter may not be arbitrated− Contrary to public policy – Generally very narrow grounds

■ Manifest disregard?● Some circuits yes; some no.

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The Award

● Inter-American Convention on International Commercial Arbitration (the “Panama” Convention) / FAA Chapter 3► 3 years to enforce

► Relationship with New York Convention

− Applies in U.S. only if the majority of the parties are citizens of signatory states and are members of OAS

● Grounds for refusal► Same as New York Convention

● Hague Convention on choice of court agreements

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Conclusion

and

Questions

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