Y-ADR Mock Procedural Hearing under CPR Rules for Administered Arbitration of International Disputes – An Overview

By Ksenia Koriukalova

On September 8, 2016 CPR’s Young Attorneys in Dispute Resolution (“Y-ADR”) held the Mock Procedural Hearing under the CPR Rules for Administered Arbitration of International Disputes at the offices of Williams & Connolly LLP in Washington, DC.

The mock case involved a multi-million-Euro energy dispute between business parties from both sides of the Atlantic. Vento, a French energy business company, and Vento España, its wholly-owned Spanish subsidiary operating a windmill plant, initiated arbitration against Wind Corporation, a windmill manufacturer based in Chicago, Illinois. The claim arose out of the purchase by Vento España of 25 windmills produced by Wind Corporation, at the price of €1 million per unit, with the right of first refusal with respect to 25 additional units to be produced by the manufacturer following the execution of the contract. Claimants alleged that Respondent breached the right of first refusal provision by selling windmills to a different buyer.

In late June 2016, Claimants filed their notice of arbitration based on the arbitration clause found in Vento España’s contract with Respondent, which called for arbitration under the CPR Rules for Administered Arbitration of International Disputes (CPR Rules). One month later, Respondent submitted its notice of defense and counterclaim objecting to the tribunal’s jurisdiction on the grounds that one of the Claimants, Vento, did not sign the contract containing the relevant arbitration clause.

Meanwhile, three arbitrators were appointed to hear the case on August 1, 2016. Two of the arbitrators were appointed pursuant to CPR’s screened selection process provided in Rule 5.4 of the CPR Rules. Under this selection process, two out of three arbitrators are designated by the parties without them knowing which party designated each of them. It is worth noting that CPR’s unique Screened Selection Process was the winner of the 2016 Global Arbitration Review (GAR) Innovation Award.

Pursuant to Rule 9.3 of the CPR Rules, the arbitrators scheduled the initial pre-hearing conference promptly after their appointment to discuss the procedural issues of the case. The Y-ADR event simulated this pre-hearing procedural hearing before the tribunal composed of Dana MacGrath (Sidley Austin LLP), Patrick Norton (Law Offices of Patrick M. Norton), and Allan B. Moore (Covington & Burling LLP). David L. Earnest of Shearman & Sterling LLP, C.J. Mahoney of Williams & Connolly LLP, Mallory B. Silberman of Arnold & Porter LLP, and Laura J. Stipanowic of Smith, Currie & Hancock LLP played the roles of party representatives and counsel.

The first issue argued before the tribunal was whether the question of the tribunal’s jurisdiction should be considered separately leading to bi- or even trifurcation of the arbitral proceedings. Respondent stated that because one of the Claimants, Vento, was not a signatory of the contract containing the relevant arbitration clause, the tribunal had no jurisdiction over its claims. In support of its argument on separate consideration of the question of jurisdiction over the non-signatory, counsel for Respondent referred to Guideline 2 of the CPR Guidelines on Early Disposition of Issues in Arbitration, which lists jurisdiction and standing as issues for which early disposition may be appropriate. The tribunal ruled against separate consideration of Respondent’s jurisdictional objections, primarily due to the tight time-frame of the arbitration. According to the arbitration clause, the arbitrators had to conduct an oral hearing on the merits within six months and render the award within nine months of its constitution. Another reason for denying the request for bi- or trifurcation were potential overlaps between the facts of the case relevant for deciding both on Respondent’s jurisdictional objections and on the merits of the dispute.

Next, the parties and the tribunal discussed the necessary length of the merits hearing and the dates suitable for all expected participants. This task appeared to be not an easy one because of the parties’ different positions on the optimal hearing length, other commitments of the chair of the tribunal, and the approaching holiday season.

The third issue the arbitrators had to decide was the number, sequence and content of written submissions, as well as the timing and scope of the disclosure. Claimants, European companies, insisted on limited document exchange and referred to the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration to support their position. Respondent, a U.S. corporation, sought broad discovery and depositions, and argued that they were possible under the CPR Protocol if allowed by the tribunal or agreed upon by the parties. Claimants and Respondent also had different views on the number and content of submissions. The arbitrators ordered to have two rounds of simultaneous pre-hearing submissions, with the first round containing full positions of each party supported by evidence, and the second one being the response to the opposing party’s brief. The tribunal also decided that the discovery process with the use of the Redfern schedule should take place before the first round of written submissions. Respondent’s request for depositions was denied.

At the end of the procedural hearing, the chair of the tribunal asked the parties to consider settlement negotiations, and draw their attention to relevant Rules 9.3(e) and 21 of the CPR Rules.  Rule 9.3(2) of the CPR Rules expressly provides the possibility for the parties to engage in settlement negotiations, with or without the assistance of a mediator, as one of the matters to be discussed during the pre-hearing conference. Counsel and their clients discussed the possibility but, ultimately, there was no agreement between the parties to engage in mediation.

The mock pre-hearing conference provided a realistic picture of how various procedural issues are discussed and determined at an early stage of arbitral proceedings. It also demonstrates how CPR Rules and other tools available to the parties in CPR arbitrations are used in practice. Well-prepared party representatives and arbitrators made the proceedings very dynamic and interesting to observe. The recording of the hearing is available to CPR members (who are logged into the website) HERE.

Ksenia Koriukalova is a CPR Fall intern

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