Arbitration Digest (June-July)

Adolph von Menzel

Counselor reads falsified papers, 1887

Arbitration Digest (June-July)

Russian Arbitration Center at the Russian Institute of Modern Arbitration has published the digest of arbitration news for the last month.

New Regulatory Developments in Russia:

The Presidium of the Supreme Court Approves a New Review of Court Practice on Separate Matters Related to Courts Taking Measures to Combat Illegal Financial Operations

According to the new clarifications of the Presidium, the state authorities (the Prosecutor General’s Office, the Federal Financial Monitoring Service, the Federal Tax Service, and the Federal Customs Service) may challenge arbitral awards based on newly discovered circumstances, where such circumstances evidence that the participants of the proceedings had violated the anti-money laundering laws (Review, para. 3.1).

The Supreme Court noted that courts may refuse to recognise or enforce a foreign arbitral award, or to issue a writ of execution for an arbitral award, if the true aim of arbitration consisted in creating the semblance of a civil-law dispute and thus securing a formal ground for the transfer of funds, including from Russia, into foreign jurisdictions. The enforcement of such awards is contrary to the public policy of the Russian Federation (Review, para. 10).

 A New Opportunity for Arbitrating Disputes Related to Sport

At its Plenary Session on 10 June, the State Duma has examined a number of Government-lodged draft laws amending the Labour Code, the Civil Procedure Code, and the Federal Law “On Physical Culture and Sport.”

Pursuant to the proposed amendments to the Labour Code, individual labour disputes of athletes and coaches in professional and high performance sports may be referred to (apart from commissions for labour disputes and courts) arbitration administered by a permanent arbitral institution (PAI) that hears disputes in the sphere of professional sports and high performance sports. The rules of arbitration of individual labour disputes must be approved by the non-profit organisation to which the PAI is accountable, in consultations with the trade union of physical culture and sports workers.

The second draft law suggests, among other things, amending Article 22.1 of the Russian Civil Procedure Code, excluding, from the list of non-arbitrable disputes, the individual labour disputes of athletes and coaches in professional and high performance sports, where the arbitration agreement between the relevant parties provides that their disputes shall be resolved in a PAI-administered arbitration.

The State Duma has approved the draft laws in the first reading.

The State Duma Adopts the Draft Law on the Criminal Responsibility of Arbitrators for Corruption in the First Reading

According to the explanatory note to the draft law, the lack of criminal responsibility of arbitrators for obtaining unlawful remuneration materially raises the risk of corruption-related offences among arbitrators, aimed at deriving benefits and advantages for themselves and other persons contrary to the objectives of their mandate.

The draft law proposes to supplement the Criminal Code with Article 200.7, providing for criminal responsibility for bribing arbitrators and for the unlawful receipt by arbitrators of money and other valuables, services, as well as to amend Article 151(2)(1)(a) of the Russian Criminal Procedure Code accordingly.

Case Law Developments:

Frankfurt Court of Appeal Finds That Dissenting Opinion Violates Public Policy

The Frankfurt Court of Appeals (Oberlandesgericht) has recently taken the view that the publication of a dissenting opinion by the minority arbitrator violates the procedural ordre public, thus constituting a reason to set aside the arbitral award pursuant to Section 1059 para. 2 no 2 b) of the German Code of Civil Procedure (Zivilprozessordnung, ZPO)[1]. Under the German law, dissenting opinions may be issued only by the Federal Constitutional Court (Bundesverfassungsgericht), while all other courts are prohibited from publication of dissents, as it would violate the confidentiality of the court’s deliberations (Beratungsgeheimnis).

Supreme Court of Canada Deals Blow to Uber, Declares Arbitration Clauses Invalid as a Result of ‘Surge Pricing’

On June 26, 2020, the Supreme Court of Canada (“SCC”) released a decision in the case Uber Technologies Inc. v Heller (“Heller”), which involved a challenge to Uber’s standard agreement with drivers requiring disputes to be resolved by private arbitration pursuant to the International Chamber of Commerce’s (“ICC”) rules and in accordance with the Netherlands law. Mr. Heller, an Uber driver, commenced a class action against Uber alleging that it breached the Ontario Employment Standards Act, 2000 (“ESA”) by not treating drivers as employees and not providing them the benefits and protections employees are entitled to under the ESA. He sought over $400 million CAD in damages. Mr. Heller asserted that arbitration clause with Uber was invalid because it was unconscionable. The SCC agreed with Mr. Heller and found the arbitration clause void.

Korean Gaming Company Enjoys Winning Streak

South Korean videogame developer WeMade has received favorable awards in three arbitrations over an online role-playing game series. WeMade announced that an ICC tribunal had held China’s Shanda Games and two affiliates – South Korea’s Actoz and Shanghai-based Lansha Information Technology – liable in a dispute over ownership rights for the game The Legend of MIR 2.

It follows victories in two other arbitrations last month, one a SIAC award against Lansha over the license agreement for the game’s sequel, The Legend of MIR 3; and the other a US$240 million KCAB award against a subsidiary of another Chinese company, Kingnet, for Kingnet’s alleged breach of a license agreement for the game.

WeMade co-developed and co-owned The Legend of MIR 2 with Actoz, with the game achieving cult status (200 million players) in the Chinese gaming industry since its launch in 2001 under the license granted to the two Chinese respondents.

Spain Will Face Billion-Euro Claim Over Oil Spill

The dispute relates to The Prestige, an oil tanker which split in two off the coast of Spain in 2002 resulting in 50,000 tonnes of oil polluting miles of Spanish, French and Portuguese coastline. Following a clean-up operation, Spain brought a €4.3 billion claim against the insurance club, which had been the vessel’s insurer. France also joined the Spanish civil proceedings, seeking €67 million. However, the insurance club declined to appear in the Spanish courts, claiming that both states were bound by an English law arbitration clause in a contract contained in the club’s rules. The club commenced two arbitrations against Spain and France in London, seeking declaratory relief. In 2013 the appointed arbitrator declared that the club was not liable to France or Spain in respect of the civil claims.

At the enforcement stage in the English courts, Spain and France brought jurisdictional challenges, claiming that they were not bound by the arbitration clause and relied on sovereign immunity. The Court dismissed all of the states’ objections, holding that the state’s direct action right against the insurer was merely a right to enforce the club’s contract of insurance, not an independent right of recovery. By making that claim under the contract of insurance, the judge found, the states had essentially become parties to the contract, waiving their sovereign immunity.

Despite the aforementioned, the civil claims in Spain continued. At the same time club maintains that Spain has agreed in writing to submit the relevant disputes to arbitration. The club is therefore seeking €1.4 billion in compensation in its arbitration over Spain’s decision to pursue litigation, as it violates the written agreement.

Investment Arbitration

The USMCA Entry into Force

The U.S. – Mexico – Canada Agreement (USMCA) entered into force on 1st July 2020– the day when the investment chapter of the North American Free Trade Agreement (NAFTA) expired. There is one standout development in the USMCA for Canada: its non-participation in the investor-State dispute settlement mechanism (“ISDS”). Chapter 14 of the USMCA continues to provide ISDS for Mexican investors in the U.S. and U.S. investors in Mexico. The Comprehensive and Progressive Agreement for Trans Pacific Partnership (“CPTPP”) provides for ISDS for Canadians and Mexican investing in Mexico and Canada respectively. There is no similar arrangement between Canada and the United States.

Read more about the topic: http://arbitrationblog.kluwerarbitration.com/2020/06/22/the-usmca-cusma-t-mecs-entry-into-force-introducing-a-new-era-in-regional-isds-with-nafta-2-0/?doing_wp_cron=1593896122.9043500423431396484375

Iraq Faces Billion-Dollar Claim over Cement Plant

A German company has filed a US$1 billion ICSID claim against Iraq over the alleged expropriation of its cement production business (AHG Industry GmbH & Co. KG v. Republic of Iraq, ICSID Case No. ARB/20/21). The dispute relates to investment in a cement plant, rehabilitated by the AHG under the license agreement. Later Iraqi government officials terminated AHG’s license due to alleged absence of progress at the plant and began litigation in a local court. Following a six-year legal battle, an Iraqi appeals court ruled that the government’s allegations of delay were unsupported and that AHG’s rehabilitation schedule had been reasonable. Finally, in February 2018, a division of the Iraqi army invaded the factory and AHG was expelled from the premises.

ICSID Reviews the Claim under an Intra-EU Bilateral Investment Treaty

In the case of Addiko Bank AG and Addiko Bank d.d. v. Republic of Croatia (ICSID Case No. ARB/17/37) Addiko filed its Austria-Croatia BIT claim in 2017 in response to Croatian legislation that converted the denomination of loans from Swiss francs to euros. The amendments to the Croatian law were connected with the Swiss central bank’s decision in 2015 to abandon exchange rate controls. An ICSID tribunal hearing an Austrian bank’s claim against Croatia has ruled that investor-state arbitration under an intra-EU bilateral investment treaty is compatible with the EU legal order. Remarkably, in 2018, the CJEU issued its landmark ruling in Achmea, finding that the investor-state arbitration provisions in the Netherlands-Slovakia BIT were incompatible with EU law.

Arbitration Events:

SIAC Announces Revisions of Its Arbitration Rules

The last revisions of the Arbitration Rules of the Singapore International Arbitration Centre were in 2016. SIAC will take into account recent developments in the international arbitration practice and procedures in order to better serve the needs of businesses, financial institutions and governments that use SIAC. SIAC invites any interested parties to submit their commentaries on improving the Rules.

Paris Arbitration Week

This year, the Paris Arbitration Week was held online. The online sessions featured both prominent international arbitration specialists and the representatives of arbitral institutions. The speakers discussed such issues as online arbitration during pandemic, personal data protection, force majeure, and international economic sanctions. The experts from African countries also took part in the Paris Arbitration Week, covering the topics of development of mediation in Africa, the prospects of virtual hearings, investment disputes in African countries, and the relations between arbitral tribunals and state courts in Africa.

 UNCITRAL Has Held a Virtual Panel Series on the Effects of the COVID-19 Pandemic on International Economic Relations

In the framework of the 53rd Session of UNCITRAL, the Secretariat organized panel series on the effects that the pandemic brought on the international economic relations. The RAC Executive Administrator Yulia Mullina participated as a speaker at the panel on the long-term impact of the pandemic on arbitration from the viewpoint of an arbitral institution.

Registration for the Winter International Arbitration Academy

On 11-16 January 2021, the Russian Institute of Modern Arbitration will host the Winter Academy on the “Transformation of Arbitration: Beyond the Limits of the Imaginable.” The Academy programme includes six days of courses, lectures and workshops on international commercial arbitration taught by top foreign and Russian alternative dispute resolution experts. The courses will be taught in English. To apply for participating in the Academy, fill in the form at https://forms.gle/BHqLB7gPmnTGLqBt5 by 5 September.

[1] Code of Civil Procedure as promulgated on 5 December 2005 (Bundesgesetzblatt (BGBl., Federal Law Gazette) I page 3202; 2006 I page 431; 2007 I page 1781), last amended by Article 1 of the Act dated 10 October 2013 (Federal Law Gazette I page 3786) // URL: https://www.gesetze-im-internet.de/englisch_zpo/englisch_zpo.html#p3674 (дата обращения 13.07.2020).

Authors:

Valeria Butyrina
Arina Akulina
Dmitry Khristenko
Ekaterina Bubnova
Regina Enikeeva
Alina Shirinyants