Arbitration Digest (July-August)

Adolph von Menzel

Counselor reads falsified papers, 1887

Arbitration Digest (July-August)

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

Case Law Developments

The International Commercial Chamber of the Paris Court of Appeal Holds That a Failure to Disclose Information Does Not Necessarily Lead to the Setting Aside of the Award

In a dispute between three Brazilian companies, members of a consortium developing oil offshore in Brazil, the respondents-appointed arbitrator was indirectly linked to the law firm that regularly represented the interests of the controlling shareholder of one of the respondents. Two years and a half prior to his appointment, the arbitrator had for three years served as an attorney at a Saudi Arabian law firm related to another law firm, where the controlling shareholder was a client. The Paris Court of Appeal eventually ruled that there was no evidence of “any direct or indirect, material or intellectual relation” between the arbitrator and the [respondent’s] shareholder, or that the arbitrator regularly worked for the latter.

Notably, this approach of the International Commercial Chamber of the Paris Court of Appeal differs from that of the ICSID tribunal ruling on similar facts in Eiser Infrastructure Limited and Energia Solar Luxembourg Sarl v. Kingdom of Spain (ICSID Case No. ARB/13/36), where the award was set aside due to doubts as to the impartiality and independence of the arbitrator as the latter failed to disclose his links with one of the claimant’s expert witnesses.

CAS Overturns the Manchester City Ban from the Champions League

The Manchester City football club has prevailed in challenging the decision of the Union of European Football Associations (UEFA) to ban the club from the League matches for two years, before the Court of Arbitration for Sport in Lausanne (CAS). The UEFA had held that the club overstated its sponsorship revenue in its 2012-2016 financial reports, thereby violating the rules of licensing and the principles of financial fair play. While the CAS accepted that there have been violations by Manchester City, the sanctions were reduced: thus, the CAS lifted the two-year ban of the club from the UEFA Champions League and lowered the fine from EUR 30 million to EUR 10 million. Therefore, Manchester City will be able to participate in the Champions League in the next season.

WTO Panel Concludes that the EU Rules Are Inconsistent with Its Obligations under the WTO Anti-Dumping Agreement

The dispute concerned the methodology of applying anti-dumping measures by the EU, where the EU did not take account of the costs of the Russian businesses for the acquisition of primary materials (WT/DS494/R European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia (Second complaint)). After examining the dispute, the WTO panel concluded that the principles and methods used by the EU to determine the price in anti-dumping investigations were contrary to the WTO rules, and obliged the EU to bring its internal law into accordance with its obligations under the Anti-Dumping agreement.

The American Arbitration Association (ААА) to Administer Mediations as Part of the New Program of the New York State Department of Financial Services

The American Arbitration Association (ААА) will administer mediations under the new program of the New York State Department of Financial Services. The program is aimed at supporting small businesses that suffered in the recent Black Lives Matter rallies and demonstrations in the US, in disputes with insurance companies. The fees for filing notices and administration of mediations, as well as the mediators’ fees for two-hour mediation sessions (totaling USD 750) will be covered by the insurance companies.

Investment Arbitration

Environment-Conscious: a UK Oil and Gas Company Has Put Slovenia on Notice

The UK oil and gas company Ascent Resources has notified Slovenia of its intention to bring an investment treaty claim after it was denied a permit to boost productivity at two natural gas wells without an environmental impact assessment (EIA). According to Ascent, the Slovenian laws do not  require to carry out such an EIA, and, more than that, its preliminary screening application had been filed only “out of an abundance of caution” by the investor. The company thus claims that Slovenia’s conduct violated the protections under the Energy Charter Treaty and the relevant BIT.

Kazakhstan Is Not Bound by a Soviet BIT

A UNCITRAL tribunal dismissed a USD 917 million claim by a Canadian company Gold Pool against Kazakhstan, finding that Kazakhstan was not bound by the Canadian-Soviet BIT, as it was not a successor under that BIT and never “acquiesced” to succession. In March 1996, Gold Pool received management rights over the Kazakhstan state company Kazakhaltyn JSC and three gold mines. Gold Pool was to pay off the company’s debts, restore and modernize production, but as early as in 1997, it practically went bankrupt, resulting in the termination of the agreement between the investor and Kazakhstan. Interestingly, another UNCITRAL tribunal that heard a case under the same BIT concluded that Kazakhstan could be held liable under the Canadian-Soviet BIT. This case is seen as the first case where a state other than Russia was deemed to have succeeded the USSR’s obligations under investment treaties.

(Nearly) One Thousand and One Investors to Pay Security for USD 5 Million Costs

An ICSID tribunal in Theodoros Adamakopoulos and others v. Republic of Cyprus (ICSID Case No. ARB/15/49) has ordered 956 Greek and Luxembourg investors that brought a claim against Cyprus to pay USD 5 million security for costs, noting the “unique” difficulties that the state could face in recovering costs from so many claimants. The investors filed their ICSID claim in 2015 under the Cyprus-Greece BIT and the BLEU (Belgium-Luxembourg Economic Union) – Cyprus BIT, seeking to recover their deposits or bonds from the Bank of Cyprus and the now-defunct Laiki Bank. According to the investors, their assets had been confiscated by Cyprus via a mandatory “bail-in” of investments after a EUR 10 billion aid agreement was made with the European Commission, the European Central Bank and International Monetary Fund.

Attachment of the Assets of the National Bank of Kazakhstan Lifted in Sweden

A Stockholm appeal court concluded that the assets held by a central bank fall under the state immunities pursuant to the UN Convention on Jurisdictional Immunities of States and Their Property. The court thus repealed the previous decisions attaching the funds held by the National Bank of Kazakhstan. These acts of the lower courts had been rendered in favor of the Moldavian investors Anatolie and Gabriel Stati seeking to enforce an USD 453 million arbitral award (Anatolie Stati, Gabriel Stati, Ascom Group SA and Terra Raf Trans Traiding Ltd v. Kazakhstan (SCC Case No. V 116/2010)).

An Egyptian Court to Hear a Billion-Dollar BIT Claim

A Cairo administrative court is hearing a claim under the Egypt-Thailand BIT worth USD 1 billion. The claim was brought by a Thai investor with a share in the company that operated a gas pipeline between Egypt and Israel, discontinued at the outset of the Arab Spring (PTT Energy Resources Company Limited v. Arab Republic of Egypt).

Notably, in 1985, Thailand signed the ICSID Convention, but never ratified it. This means that at present, investment arbitration is unavailable. At the same time, the claimant submits that the BIT vests Egyptian courts with the jurisdiction over its claims on the breach of the BIT protections. It is thus a case where the host state’s courts are invited to assume the role of arbitral tribunals and rule on a BIT claim in the first instance.

Arbitration News

VI Russian Arbitration Day to Be Held Online on 25 August 2020

This year one of the most successful arbitration conferences in Russia – Russian Arbitration Day (RAD) – will be organized online on 25 August 2020.
The programme of the conference consists of three main sessions, dedicated to investment arbitration, general issues in arbitration and procedural issues in international arbitration. As part of the event, the presentation of translation of the book “International Arbitration: Law and Practice” by Gary Born will take place.
The event will be broadcast live in two languages – Russian and English.
Participation is free of charge, registration is available here.

Registration for IV Corporate Arbitration Moot Court Named after Professor V.P. Mozolin Is Now Open

Russian Institute of Modern Arbitration (RIMA) announced the opening of registration for teams and arbitrators for the IV National Annual Corporate Arbitration Moot Court named after Professor V.P. Mozolin. For more convenience, the RIMA introduced the new online system, allowing prompt exchange of information and documents between participants and arbitrators.

Each year this moot court unites hundreds of students from different Russian regions, making the competition one of the largest and most prestigious in Russia. Moot court is held in Russian language and in accordance with applicable Russian law.

This year the case touches upon the questions of extension of arbitration agreement to the former CEO, responsibility of the controlling person of the entity, parallel proceedings in different arbitral institutions, challenging the transaction based on its contradiction to law and morality.

The further information will be available here.

Conference on Private Law and Arbitration in Kaliningrad

On 24-25 September 2020 Russian Institute of Modern Arbitration will hold an offline Conference in Kaliningrad dedicated to topical issues of private law and arbitration.

Speakers will discuss private law in modern realities, arbitration of corporate disputes, assistance and control of state courts over arbitration, arbitration in post-COVID era.

The official language of the conference is Russian. Participation is free of charge, although the registration is required.

The 9th Baltic Arbitration Days

The 9th Baltic Arbitration Days will take place in Riga at the Dzintari Concert Hall in Jurmala and in the Riga World Trading Center. The two-day event, where the RAC is one of the media sponsors, will take place on 16 and 17 August 2020. Due to COVID-19 and the related travel restrictions, this year’s conference will be held both offline and online. The event’s participants will discuss such topics as arbitration in transport-related disputes, arbitration and IT, third-party funding in arbitration disputes in Central and Eastern European countries, as well as the recent developments in international arbitration.

Young IMA Summer Drinks

On 7 August 2020 the first offline event, organized by the Young Institute of Modern Arbitration (YIMA) with the support of the Monastyrsky, Zyuba, Stepanov & Partners Law firm, took place. In an informal atmosphere the participants of the event discussed further development of arbitration, the latest arbitration news and the impact of the COVID-19 on arbitration. Also the re-election of the co-chairs and heads of Young IMA committees was announced.

Young IMA is a platform for young practitioners in arbitration and ADR, launched to promote and to develop a unified professional community of young Russian professionals.

If you want to become a member of Young IMA, please fill in the Registration form.

The ICCA Publishes a Report on Gender Diversity in International Arbitration

The representatives of the world’s leading arbitral institutions, such as the VIAC, HKIAC, ICC, and ICDR, have published a Report on gender diversity in arbitral appointments and proceedings as part of the Reports of the International Council for Commercial Arbitration (ICCA). The Report contains a detailed analysis of the issue of the lack of gender diversity in arbitration, possible solutions, as well as the statistics of appointment of women as arbitrators at various arbitral institutions.

It should be noted that in 2017, the Russian Arbitration Center joined the international movement Equal Representation in Arbitration Pledge that supports women practitioners in international arbitration and calls for maintaining the gender balance. In this view, the RAC’s annual statistics include information on the number of women appointed as arbitrators. Thus, among the arbitrators appointed to resolve disputes in 2019, 42% are women. This result exceeds the same figure for 2018 by 14%.

The ICC Releases Dispute Resolution Statistics

The ICC has published its statistical report for 2019. Last year, the ICC Court registered a record 869 cases, including many cases involving Indian and Chinese companies. The Report also includes a summary of its milestone 2,500th case: a corporate dispute between parties from the Middle East and India, registered in December 2019. The statistics report also features information on women arbitrators: the total number of women appointed as arbitrators increased as compared to 2018 (rising from 18.4% in 2018 to 21% in 2019). Out of the 312 women appointed as arbitrators, 134 (43%) were appointed by the ICC Court itself, while another 131 (42%) were confirmed by the ICC Court based on party and co-arbitrator nominations.

The ICC Russia Discloses Its Research on the Attitude of Financial Organizations toward Arbitration

The Russian National Committee of the International Chamber of Commerce (ICC Russia), together with the KIAP, Attorneys at Law, completed its research on the attitude of financial organizations toward arbitration. 24 banks, 1 insurance company and 1 development institute took part in the survey, whose results underlie the research.

The major findings of this research concern the effect that a foreign element has on the referral of disputes to arbitration and the level of awareness of this dispute resolution method among financial organizations. Thus, according to the survey, in 57.7% of cases, the arbitration clause was included into contracts with foreign counterparties established abroad. Among the advantages of arbitration, the organizations involved noted the possibility of enforcing the award in other countries (46.2%) and of choosing foreign law (30.8%). Furthermore, the financial organizations emphasized the role of the duration of the dispute resolution process (50%) and the confidentiality of arbitration (30.8%).

When choosing an arbitral institution, the majority of respondents were driven by the institution’s reputation (76.9%) and positive practice of enforcement of its awards (69.2%).

The factors that would persuade financial organizations to resort to arbitration more often have included the possibility of a state court entering interim (provisional) relief at the tribunal’s request (53.8%) and the expedited procedure (42.3%).

The LCIA Publishes its Updated Arbitration Rules

The LCIA released the revised Arbitration Rules that will become effective on 1 October 2020. New Rules are designed in accordance with best practices, bringing the Rules in line with modern international arbitration trends. The LCIA Rules now provide for the early determination mechanism, allowing to dismiss unmeritorious claims or claims falling out of jurisdiction on the early stage of arbitration. The other development provides greater powers to the LCIA Court and arbitral tribunals to order the consolidation of claims and proceedings or concurrent conduct of arbitrations. Amid the consequences of the COVID-19 pandemic, the LCIA Rules now address the virtual hearings in greater detail, establish the primacy of electronic communications and provides for the opportunity to issue E-awards.

The Russian Supreme Court Publishes a Review of the Practice on Compliance with Pre-Trial Complaint Procedure

Russian procedural legislation provides for mandatory pre-trial procedures for the majority of commercial disputes considered in state courts. Generally, the claimant needs to send a complaint (claim) to the respondent before commencing litigation. Although it is not obligatory to send a pre-arbitration complaint in the course of arbitration, parties still can agree on certain conciliation procedures in their contract. In this respect the guidelines, provided in the review of the Supreme Court on the pre-trial complaint procedure may be of high importance in arbitration if applied based on analogy.

The Supreme Court has found that the obligatory pre-trial complaint procedure is deemed complied with, if the claimant changes the amount of the claim, for instance, due to increase of the period of the delay in the statement of claim filed to the court.  It is necessary for compliance with the pre-trial complaint procedure to claim the debt and the penalties caused by the delay, while the final value of the claim may be specified later in the statement of claim.

The Supreme Court also noted that a complaint need not be filed in case of a counterclaim, if the counterclaim and the response to the complaint under the initial claim are the same in substance.

Additionally, the Supreme Court explained that the parties may agree on the addresses and modalities of submission of complaints in their agreement: thus, in particular, a complaint may also be submitted by fax, email, or courier.

Authors:

Valeria Butyrina
Arina Akulina
Ekaterina Bubnova
Regina Enikeeva
Mikhail Makeev
Alina Shirinyants