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ADR Around the World
India Court Strikes Arbitration Award, Raising Questions about the Use of BITs
By Shourya Arora
In August, the Delhi High Court granted relief to the Indian government by setting aside a $562.2 million International Chamber of Commerce arbitral award made in favor of Devas Multimedia due to Devas’s sudden termination of its contract with Antrix Corp., a commercial arm of the Indian Space Research Organization, India’s state-owned national space agency. Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., ICC Case No. 18051/CYK. The main grounds for this annulment were that it was illegal and went against India’s public policy.
The Devas-Antrix saga began with the alleged wrongful termination of a 2005 agreement between two Indian companies, Devas Multimedia Private Ltd. and the Indian State-owned entity, Antrix, for the lease of an electromagnetic spectrum frequency, or S-band, on two satellites. Devas planned to provide mobile multimedia and broadband data services to the Indian market using the S-band spectrum.
Antrix terminated the contract in 2011, citing, among other things, that it was unable to obtain the necessary frequency and orbital slot coordination (the “Article 7(c) ground”) and that the CCS decision was a force majeure event rendering the performance of the Contract impossible (the “Article 11 ground”).
Devas commenced an ICC arbitration seated in New Delhi under the contract terms, claiming damages for wrongful termination. On Sept. 14, 2015, the ICC tribunal issued the award, ordering Antrix to pay USD 562.5 million in damages plus interest. But in late summer, on Aug. 29, the court annulled the arbitral award because it was patently illegal and in contravention of Indian public policy. See Bhadra Sinha, “Antrix-Devas case: What was the dispute & why SC upheld NCLAT order to wind up Devas for fraud,” The Print (Jan. 19, 2022) (available at https://bit.ly/3Vwuzyh).
This factual framework sparked two reported bilateral investment treaty arbitrations by Devas’ shareholders against India for expropriation of investments and treaty norms. The shareholders received favorable damages awards in these investment treaty arbitrations.
First, note that in January 2022, the India Supreme Court upheld Devas’ compulsory winding up on the grounds of fraud–referred to as the “Liquidation Judgment”–in the context of enforcement proceedings pending in multiple jurisdictions concerning the award discussed above and the investment treaty arbitration awards.
According to clause 34(2)(b)(ii) of the Indian Arbitration and Conciliation Act 1996, a court may annul an arbitral award if it is “in conflict with the public policy of India.” Explanation 1 to section 34 of the act’s arbitral award would be in opposition to India’s public policy only if:
- the making of the award was induced or affected by fraud or corruption;
- it contravenes the fundamental policy of Indian law; or
- it conflicts with the most basic notions of morality or justice.
Furthermore, under section 34 (2a)of the Act, a domestic arbitration award may be revoked if it is discovered to be “vitiated by patent illegality appearing on the face” of the award. Pankaj Bajpai, “Arbitral award vitiated by patent illegality appearing on face of same, calls for interference: SC,” LegitEye (Aug. 6) (available at https://bit.ly/3yRuYl9). An arbitral award cannot be set aside on patent illegality merely because of an erroneous application of the law or by reappreciation of evidence.
The Court held that the tribunal, in the Antrix-Devas case, had committed patent illegality as it (i) incorrectly excluded the pre-contractual negotiations between the parties, (ii) rendered contradictory findings on the applicability of the force majeure clause, and (iii) the finding of fraud in the winding-up proceedings established that the ICC Award “conflict[s] with the ‘most basic notions of justice,’“ and “thus antithetical to the fundamental policy of Indian law.“ (See the first link above to the opinion.) For all these reasons, the Court allowed the s34 application and set aside the ICC Award.
More recently, in February 2022, Devas brought another BIT claim against India under the India-Mauritius BIT in which Devas shareholders claim that the retaliatory investigations, seizure of funds, and raids by Indian authorities on Devas are part of an audacious scheme to avoid paying the awards. It is still unclear, however, how the August setting-aside ruling will affect the proceedings of this case, and what the ultimate outcome may be.
The Court’s decision to set aside the award is the most recent development in the Devas-Antrix saga’s 10-year history. It is probable that the claimants in the continuing India-Mauritius BIT case, which involves allegations of governmental retaliation, will rely on this judgment. The setting-aside judgment was described as “a mockery of the international arbitration system and a warning to investors that the Indian judiciary is being weaponized against those who assert their legal rights” by the claimants’ attorney.
With reasonable success, claimants Devas and its shareholders have sought to have their arbitral awards enforced in other jurisdictions. It remains to be seen whether enforcement courts defer to this setting-aside decision, even though enforcement courts typically are reluctant to enforce arbitral awards that have been annulled in the seat courts.
The dilemma for India: India is not a signatory to the ICSID Convention. This is for historical reasons, as it has always been of the view that the supremacy of its courts cannot be compromised by providing finality and immunity from the challenge for an ICSID arbitral tribunal decision.
India seems to have gotten caught on the wrong foot. At one level, it has exposed itself to criticism of not being an investment-friendly destination–an image it cannot afford, given the country’s enormous task to pull its millions out of poverty. On the other hand, there are legal issues that it must now face with billions at stake.
Lessons for India: There is now, somewhat all of a sudden, a new dimension to bilateral investment treaties (and indeed, the picture is unfolding the world over).
To begin with, India needs to examine if its current BITs need to be modified or refined in light of the recent global experience. What are the legitimate rights a foreign investor must be assured of, and where does a country need to draw the line?
Second, India must realize its inherent disadvantage in BIT investment arbitrations. It is generally recognized that investment arbitrations are skewed in favor of foreign investors. This disadvantage is further fueled by the limited pool of investment arbitrators and lawyers and the negligible participation of Indians in it. As a result, India is driven to appoint non-Indians as arbitrators or lawyers in most of its BIT disputes.
It should be a legitimate expectation of a nation as vast and commercially significant as India to participate in the decision-making process where it is involved. India thus needs to take vigorous steps to train and upgrade the skills of its law officers, and focus on giving arbitrations and arbitral institutes a boost so that locally grown talent is nurtured and emerges.
Third, India must consider whether it should accede to the ICSID Convention. More than 140 countries have ratified the Convention as of now (more have signed and are in the ratification process). Can India afford to sit outside this community of nations?
Lessons for the investors: Fighting a legal battle against a host country isn’t an ideal situation for any long-term investor. An investor’s focus must be on molding its business plans to fit in with realities on the ground, taking the thick with the thin, just as any domestic investor would. A foreign investor’s interest would be equally well served (and foreign investment not suffer) if the treaty in question is confined to protecting against seriously inequitable or unfair treatment. If a BIT is too expansive, its interpretation or application is not in the best interest of investors or the future of BITs.
The following are some recommendations for future BITs–especially for Indian BITs:
- If inserted, the “FET Standard” should be defined as exhaustively as possible. “‘Fair and equitable treatment’ includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world.” 2004 U.S. Model BIT (available at https://bit.ly/3ghp9ao). In addition, exceptions to the application of the standard should be indicated.
- There should be a saving clause for the use of regulatory powers, preferably as an exception to the FET clause. States must be free to regulate sovereign affairs without fearing an expensive investment arbitration claim. The regulation, however, should not be arbitrary or discriminatory.
- The defense of “necessity” should be given a definite shape and boundaries of application. Tribunals should assess impugned actions of the state within such ambit. (States have made pleas of necessity under various investment treaties, notably the Argentina-US BIT (Article XI), which provides that the state may take measures “necessary” for “public order,” “the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security,” and its “essential security interests.” Argentina–United States of America BIT (1991) (available at https://bit.ly/3CMVGNc).)
- The respondent-state must be empowered to raise counterclaims based on the claimant’s obligations. Furthermore, the respondent-state must have equitable remedies, such as challenging the claimant’s bona fides. For this purpose, the BIT may provide a stage for determining a prima facie breach.
- The loser should pay all costs of arbitration proceedings. For instance, Norway’s Model BIT requires the “costs of arbitration shall in principle be borne by the unsuccessful Party.” See the model at https://bit.ly/3g28zeq, noting that the tribunal may apportion such costs “if it determines that apportionment is reasonable, taking into account the circumstances of the case.”
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The author, an LLM student at the Caruso School of Law at Pepperdine University in Malibu, Calif., is a Fall 2022 CPR Intern.
Will the 11th Circuit Maintain N.Y. Convention Deference for Arbitration Award Enforcement?
By Xin Judy Wang
A three-judge Eleventh U.S. Circuit Court of Appeals panel has made the unusual move of urging the full circuit to convene en banc to overturn its precedents addressing vacatur of arbitral awards.
Part of a minority among circuits, an Eleventh Circuit panel on May 27 limited the basis for vacating an international arbitral award only to the seven grounds enumerated in Art. V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, best known as the New York Convention. Deference to the New York Convention makes Alabama, Florida, and Georgia—the states covered by the Eleventh Circuit–attractive forums for international arbitration.
But this deferential position may soon change.
In Corporacion AIC, S.A. v. Hidroelectrica Santa Rita S.A., the Eleventh Circuit panel reluctantly affirmed the district court’s determination that it cannot vacate an international arbitral award on the “exceeding powers” ground. No. 20-13039 (11th Cir. May. 27, 2022) (available at https://bit.ly/3zuLRDi).
Stating it was “powerless to change the course as a three-judge panel,” the opinion, by Senior Circuit Judge Gerald Bard Tjoflat, encouraged the appeals court to convene en banc to overturn its precedents, “and hold that under a correct understanding of Supreme Court precedent the exceeding powers ground is a valid basis for vacatur under both the New York Convention and the [Federal Arbitration Act].”
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The parties to the dispute are two Guatemalan companies, Corporacion AIC, or AICSA, and Hidrolectrica Santa Rita, referred to as HSR below. The parties signed a March 2012 contract to construct a hydroelectric power plant in Guatemala, but had to discontinue the project when HSR issued a force majeure notice in response to fierce opposition by the local community—excusing performance and canceling the contract.
HSR then sought reimbursement for advance payments and commenced arbitration proceedings in the International Court of Arbitration. The arbitration, held in Miami, resulted in an order that AICSA return about $7 million and about €435,000 to HSR. AICSA was allowed to keep its earnings pursuant to the contract, about $2.5 million and about €700,000.
Dissatisfied with the decision, AICSA filed suit in Florida’s Southern U.S. District Court, petitioning to vacate the award because “the arbitration panel had exceeded its powers.”
The “exceeding powers” ground is not enumerated in the New York Convention. Instead, it comes from 9 U.S.C. § 10(a)(4)–the Chapter 1 Federal Arbitration Act provision on overturning awards. The district court denied the petition, citing Eleventh Circuit precedents that the New York Convention–codified by FAA Chapter 2–exclusively governs vacatur of an international arbitral award.
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The Eleventh Circuit first adopted its deferential position in the 1998 case Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998) (available at https://bit.ly/3O8XAf6). In Industrial Risk, the appellate court explained that the New York Convention’s defenses against enforcing an international arbitral award are “exclusive.” On similar facts of foreign parties arbitrating in Florida, the circuit declined to consider a ground of vacatur not explicitly mentioned in the New York Convention.
The circuit last confirmed this deference in Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int’l GmbH., 921 F.3d 1291 (11th Cir. 2019) (available at https://bit.ly/3HfcoWY). Also addressing an arbitration between two foreign corporations in Florida, the panel confirmed the binding force of Industrial Risk in the circuit.
In the opinion, Senior Circuit Judge Tjoflat critiqued Industrial Risk, noting that the decision did not consider whether a non-enumerated vacatur ground from domestic law may be used under New York Convention Art. V(1)(e), which states,
(1) Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
. . . .
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. [Emphasis added in this post.]
The panel reads V(1)(e) as allowing national courts to vacate an award based on domestic grounds when the forum is either the seat of arbitration or when its law is applied.
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According to the Corporacion AIC panel, this reading of V(1)(e) depends on recognizing the distinction between primary and secondary jurisdiction. A forum has primary jurisdiction when it is the location of the arbitral award or when its law is used to decide the arbitration dispute.
A forum has secondary jurisdiction when the forum’s court is not the seat of arbitration and thus may only refuse to enforce, rather than annul an award. Therefore, when, as here, the United States is the arbitration seat, a U.S. forum has primary jurisdiction to vacate the award on domestic grounds.
The panel opinion draws support from the Supreme Court case BG Group PLC v. Republic of Argentina, 572 U.S. 25 (2014) (available at https://bit.ly/3OwTopJ) (Argentina sought to vacate an award on the basis that the arbitrators lacked jurisdiction and thus “exceed their powers” under FAA 10(a)(4)). In BG Group, the Court noted that for a motion to vacate a U.S. award, federal courts should normally interpret a treaty’s intent by applying presumptions supplied by U.S. law. The Corporacion AIC panel reads this comment as a “[nod] to the idea of primary jurisdiction” by conferring a special reviewing power to the arbitration forum.
The panel boosts this distinction by pointing to a country’s heightened interest in the outcome of an award when that country’s laws are being used or when it is the location of arbitration. It goes on to suggest that a state should have a mechanism to ensure an award’s validity when the award is issued in its jurisdiction. Limiting grounds of vacatur strictly to those enumerated in the Convention would constitute “meddling with national procedure for handling domestic awards,” citing a Second Circuit case, Yusuf Ahmed Alghanim & Sons v. Toys “R” Us Inc., 126 F.3d 15, 22 (2d Cir. 1997) (available here).
More specifically, the Corporacion AIC panel reads BG Group to have applied the “exceeding power” ground in its vacatur analysis (the Supreme Court opinion stated that it could not “agree with Argentina that the arbitrators exceeded their powers in concluding they had jurisdiction.”) Though not the key BG Group opinion focus, the Eleventh Circuit panel reads this comment as the Supreme Court’s implicit endorsement of applying vacatur grounds not expressly mentioned in the New York Convention.
This is not the first time the Eleventh Circuit has adopted such a reading of BG Group. In the 2017 case Bamberger Rosenheim Ltd., (Israel) v. OA Dev. Inc., (United States), the circuit cited BG Group and “assumed without deciding” that FAA Chapter 1 applied to international arbitral awards. 862 F.3d 1284, 1287 n.2 (11th Cir. 2017) (available at https://bit.ly/3O950yG).
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Circuit Judge Adalberto Jordan wrote a Corporacion AIC concurrence taking a different path that reached back to the Convention’s 1958 adoption. He agreed with the majority opinion that Industrial Risk and Inversiones were wrongly decided, and the appeals court should apply FAA § 10 grounds to vacate a New York Convention award.
The disagreement lies in his rationale. He applied FAA § 10 not because the vacatur standards are incorporated into the New York Convention through Art. V(1)(e), but rather that § 10 should apply, as domestic law, directly to the vacatur of an international award made in the United States.
The New York Convention draws from two earlier treaties, the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards. The former mandated award enforcement only in the seat of arbitration, and the latter broadened its scope by providing for award recognition and enforcement in countries other than the seat.
The problem with the two Geneva Treaties was “double exequatur,” referring to the Geneva Convention’s requirement that an award can only be recognized and enforced (in countries other than the seat) if it was already “final in the country in which it ha[d] been made.” This created an extra hurdle for international enforcement of arbitral awards. The New York Convention eliminated the double exequatur by no longer requiring the seat’s recognition for enforcement elsewhere.
Circuit Judge Jordan recognized this significant modification but maintained that the New York Convention left intact the binary framework of the Geneva Treaties. There remain different responsibilities and authorities between the arbitral seat and other states. The arbitral seat can vacate an award, but other States may only recognize and enforce an award (which parallels the majority opinion’s definition of primary and secondary jurisdiction). Jordan drew attention to the Convention’s text–Art. V(1) starts with “Recognition and enforcement of the award may be refused. …” Therefore, Art. V(1)(e) only addresses recognition and enforcement in other states. Jordan’s opinion states that the New York Convention (and its counterpart, FAA Chapter 2) do not enumerate the grounds on which a court can vacate an international arbitral award.
Accordingly, to “fill the gap” of the New York Convention, vacatur should be governed by domestic law. Jordan cited the 2020 U.S. Supreme Court international arbitration case of GE Energy Power Conversion Fr. SAS Corp. v. Outokumpu Stainless USA, 140 S. Ct. 1637 (available at https://bit.ly/3xKmpHJ) (“the New York Convention was drafted against the backdrop of domestic law” and “the Convention requires courts to rely on domestic law to fill [its gaps]”).
Circuit Judge Jordan also looked to the United Kingdom and Switzerland’s permission to challenge international arbitral awards on native grounds. He suggested that the FAA’s 9 U.S.C § 208, on the FAA’s application, was drafted to reflect this binary framework. Courts, the concurrence suggests, should apply domestic law for award vacatur for arbitrations held in the United States (§ 208 – “Chapter 1 applies to actions and proceedings … to the extent that chapter is not in conflict with this chapter or the [New York Convention]. . . .”).
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As recognized by Circuit Judge Jordan’s concurrence, the number of international arbitrations has been rising in the Eleventh Circuit. The circuit’s deference to the New York Convention for award enforcement likely plays an important role in its popularity.
It is unusual for a panel to urge a rehearing en banc to overturn circuit precedents, especially when the majority and concurrence provide two different routes for the basis of overturning the precedents. How Corporacion AIC will continue to develop in the circuit or at the U.S. Supreme Court will significantly affect international arbitration in the circuit and beyond.
Attorneys for the parties did not immediately reply to email requests for comment.
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The author, who will be a second-year student at Columbia University Law School in New York this fall, is a 2022 CPR summer intern.
Supreme Court Bars Discovery Assistance for Private Overseas Arbitration Panels Under U.S. Law
By Tamia Sutherland & Russ Bleemer
The U.S. Supreme Court this morning restricted the use of 28 U.S.C. § 1782 for discovery in international proceedings to “[o]nly a governmental or intergovernmental adjudicative” body, but not cross-border arbitration matters.
The unanimous 9-0 decision in consolidated cases by Justice Amy Coney Barrett—her first arbitration opinion as a member of the nation’s high Court—clarifies the use of the 1964 law, which recently split the federal circuit courts over its reach for arbitration parties.
“Interpreting §1782 to reach only bodies exercising governmental authority is consistent with Congress’ charge to the Commission,” wrote Barrett–referring to the 1960’s Commission on International Rules of Judicial Procedure, to improve U.S. laws reaching overseas–in today’s decision in ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, which was consolidated with and covers AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518.
The opinion can be found here.
The issue was whether 28 U.S.C. § 1782 can be invoked in international arbitrations to obtain U.S.-style discovery for evidence. This inquiry looked at whether the statutory language—“foreign or international tribunal”—extends to arbitration panels.
The opinion had little problem removing arbitration discovery requests from a private arbitration tribunal in ZF Automotive, where a federal district court permitted discovery under the statute in the U.S. for parties in the court’s jurisdiction. The Sixth U.S. Circuit Court of Appeals denied a ZF Automotive request to stay the order.
Today’s opinion, however, states that the legislative history behind the statute, as well as a comparison to the domestic-focused Federal Arbitration Act, which allows far narrower discovery than Section 1782, puts the law’s focus on discovery for governmental bodies, not private arbitration tribunals.
The Court had more difficulty with the AlixPartners case, which involved the government of Lithuania. But the Barrett opinion says that the parties’ actions under a bilateral investment treaty are the key here–the parties were acting more like private parties than governmental entities in setting up an ad hoc ADR process.
“An ad hoc arbitration panel, by contrast, is not a pre-existing body, but one formed for the purpose of adjudicating investor-state disputes,” wrote Barrett, “And nothing in the treaty reflects Russia and Lithuania’s intent that an ad hoc panel exercise governmental authority.”
AlixPartners focused on investor-state arbitration, in which one of the parties is the Lithuanian government. In AlixPartners, the respondent is a Russian entity representing investors pursuing claims before an ad hoc UNCITRAL-rules arbitral tribunal against Lithuania for the investors’ financial losses resulting from the insolvency of a Lithuanian bank. The Second U.S. Circuit Court of Appeals permitted discovery, finding that the ad hoc panel qualified under Section 1782 as a “foreign or international” tribunal rather than a private arbitration matter.
The Barrett opinion notes that the inclusion of arbitration in the BIT did not automatically make the process a governmental proceeding meriting the use of Section 1782. “Instead,” wrote Barrett, “it reflects the countries’ choice to offer investors the potentially appealing option of bringing their disputes to a private arbitration panel that operates like commercial arbitration panels do.”
[The publisher of this blog, CPR, urged the Court in an amicus brief to hear the AlixPartners case last year, without taking a merits position on the case. Details are available here.]
In ZF Automotive, a private commercial contract with ZF Automotive’s German parent required that disputes be arbitrated before the German Arbitration Institute, an arbitration provider. The ZF Automotive case, however, was brought in Detroit before the commencement of the Germany private international arbitration.
The U.S. District Court allowed the requested discovery. On appeal to the Sixth Circuit, ZF Automotive, in an unusual move, petitioned for certiorari before judgment to bypass waiting for the Sixth Circuit to decide its appeal. The Sixth Circuit, as noted, declined to stay the lower court’s order. Respondent Luxshare had requested and was granted discovery for the arbitration, in which it alleged fraud against ZF Automotive, under Section 1782. The Supreme Court granted certiorari on Dec. 10, and reversed the lower court decision today.
During a two-week, four-argument deep dive into arbitration law and practice in March (see this CPR Speaks link for previews, argument summaries, and reports on the decisions issued so far here), the Supreme Court heard these Sec. 1782 consolidated arguments as well as an oral argument from the U.S. Solicitor General’s office.
Veteran Assistant Solicitor General Edwin Kneedler’s contention that the Court should be cautious in accepting respondents’ arguments because any expansion of the scope of Section 1782’s reach should be addressed by Congress is reflected in the decision-making process, and the U.S. government’s brief is cited by Justice Barrett. Full details on the March 23 ZF Automotive oral arguments are available on this CPR Speaks blog here.
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Sutherland, a former year-long 2021-2022 CPR intern, will be a third-year law student at the Howard University School of Law, in Washington, D.C. this fall. Bleemer edits Alternatives to the High Cost of Litigation for CPR and John Wiley & Sons.
One Declined, One Pending: Scotus Asked to Enforce an Arbitration Award against a Sovereign and an Oil Company
By R. Daniel Knaap
The U.S. Supreme Court earlier this week declined to hear a case where Saudi Arabian landowners sought to enforce an arbitration award against the Saudi Arabian Oil Co., best known as Saudi Aramco.
The long-running matter, rooted in a nearly 90-year oil development land lease agreement, isn’t over. There’s a companion case from the same petitioners before the Court–against Chevron Corp., Saudi Aramco’s predecessor in the oil exploration and production deal–scheduled to be considered at a Supreme Court conference on June 16.
The Saudi Aramco case explores the limits of sovereign immunity in the face of a request to enforce an arbitral award against a government-tied entity. Now, at least in the Fifth Circuit’s view, the matter’s complex back story was sufficient to deny enforcement of the award against the state-owned enterprise in the absence of a 28 U.S.C. §1605 exception to foreign sovereign immunity.
In contrast, the Chevron case involves the issue of whether its predecessor’s arbitration agreement applies to the dispute.
The petitioners instituted two different enforcement proceedings regarding an $18 billion International Arbitration Center award against Saudi Aramco (Al-Qarqani v. Arab AMOCO, 2020 WL 6748031 (S.D. Tex., Nov. 17, 2020) and Chevron (Al-Qarqani v. Chevron Corp., 2019 WL 4729467 (N.D. Cal., Sept. 24, 2019).
Both the California and Texas U.S. District Courts refused to confirm the award. The Ninth Circuit affirmed the California district court, holding that the enforcement petition should be denied on the merits and not dismissed for failure to state a claim. Al-Qarqani v. Chevron Corp., 8 F.4th 1018 (9th Cir. 2021) (available at https://bit.ly/3zhYVvM). It further denied the petitions for rehearing and rehearing en banc, Al-Qarqani v. Chevron Corp., 2021 U.S. App. LEXIS 33976 (9th Cir. Cal., Nov. 16, 2021).
The case continues. A petition for certiorari in the nation’s top Court for Waleed Khalid Abu Al-Waleed Al Hood Al-Qarqani, et al. v. Chevron Corp., No. 21-1153, is pending and distributed for the June 16 conference.
In the Saudi Aramco case, the Fifth Circuit vacated the Southern District of Texas’s judgment, remanding with instructions that the case should be dismissed for lack of jurisdiction since Saudi Aramco qualified as a foreign state immune from suit under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §1603. Al-Waleed v. Saudi Arabian Oil Co., 19 F.4th 794 (5th Cir. 2021) (available at https://bit.ly/3zgvSZC).
The petition for certiorari in that case, Waleed Khalid Abu Al-Waleed Al Hood Al Qarqani, et al. v. Saudi Arabian Oil Co., No. 21-1335, was denied on May 31; Tuesday’s order declining cert is available here.
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According to the Supreme Court filings and lower court decisions, the case concerns a dispute between Saudi landowners and Saudi Aramco, which is Chevron’s successor in interest and fully owned by the Kingdom of Saudi Arabia. In 1933, an agreement was concluded between Chevron’s predecessor, Standard Oil Co. of California, and Saudi Arabia, which provided for rent payments to private landowners of oil-rich land, who were not a party to the agreement.
A deed of concession was concluded in 1949, which transferred the property from the landowners to Arabian American Oil Co., now Saudi Aramco. The petitioners, heirs of the landowners that were a party to the 1949 deed, claim that the land was leased, not sold, and that the 1933 agreement arbitration provision was imported into the 1949 deed. The petitioners initially sought back rent in Saudi Arabian courts. That proceeding took place in 2011, and a “Saudi Legal Committee” found that the 1949 deed was a sale, not a lease. 19 F.4th 794, 797.
The petitioners commenced arbitration proceedings at the International Arbitration Center in Egypt against Aramco and Chevron entities. Aramco rejected the arbitration and did not participate in the proceedings. The Chevron entities objected but nominated an arbitrator. Initially, the tribunal held that it lacked jurisdiction, but the proceedings were reopened by a panel with different members, resulting in an opinion in favor of the petitioners, awarding them $18 billion. Id. In the aftermath of the arbitration, an Egyptian court convicted two IAC administrators and three arbitrators of fraud, forgery, and other crimes relating to the second proceeding. Id.
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The Saudi Aramco petition presented the following questions: whether a foreign sovereign or instrumentality of a state that (1) is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards–the New York Convention–may assert the FSIA as a defense to enforcement of a foreign arbitral award, (2) accepts and accedes the United Nations Conventions on Jurisdictional Immunities amounts to an express waiver of sovereign immunity under the New York Convention, and (3) fails to timely file a cross appeal from a U.S. district court order that denied the sovereign’s assertion of the FSIA as a defense amounts to waiver and bars a subsequent request for a jurisdictional dismissal on appeal that is based on the merits.
Since certiorari was denied, the Fifth Circuit’s judgment stands. It held that Saudi Aramco is a foreign state under the FSIA since it was “a distinct legal entity incorporated under Saudi law, a majority of whose shares are owned by the Kingdom of Saudi Arabia and whose principal place of business is in Saudi Arabia” and thus “presumptively immune from suit in the courts of the United States.” 19 F.4th 794, 800. This immunity was not waived by the exceptions set out in FSIA’s 28 U.S.C. §1605(a). It was not waived under §1605(a)(1) because “the dispute underlying the arbitral award at issue … is clearly outside its scope,” since neither Saudi Aramco, its predecessor, nor the petitioners were party to the 1933 agreement. Id.
The immunity was also not waived under §1605(a)(2) by Saudi Aramco conducting business in the United States since the arbitration took place in Egypt and “did not cause a ‘direct effect’ in the United States.” Id., at 801.
The expropriation exception provided in §1605(a)(3) also does not apply because the action is to enforce an arbitral award, “not litigation of a property dispute involving international law.” Id.
Finally, immunity also was not waived under §1605(a)(6)’s arbitration agreement exception since neither Saudi Aramco, its predecessor, nor the petitioners were party to the 1933 agreement, and the 1949 deed did not mention arbitration nor did it refer to the 1933 agreement’s arbitration clause. Therefore, the Fifth Circuit concluded, the action should be dismissed for lack of jurisdiction instead of denying the petition for enforcement. Id. at 801-2.
The cert denial allowing the Fifth Circuit decision to stand in turn appears to provide some answers to the petitioner’s questions presented.
First, a foreign sovereign or instrumentality of a state that is a signatory to the New York Convention may assert the FSIA as a defense to enforcement of a foreign arbitral award. Second, a foreign sovereign or instrumentality of a state that accepts and accedes the United Nations Convention on Jurisdictional Immunities does not amount to an express waiver of sovereign immunity under the New York Convention. The third question, however, was not explicitly addressed since the appeal was found to be timely.
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The author, a law student at Columbia University Law School in New York, is a 2022 CPR Summer intern.
Supreme Court Hears Arguments on Whether Section 1782 Allows Discovery for Use Before International Arbitration Tribunals
By John Pinney & Russ Bleemer
The U.S. Supreme Court today heard almost two hours of argument on whether 28 U.S.C. § 1782 allows parties to seek a federal district court order for discovery of evidence for use before international arbitral tribunals.
In consolidated cases this morning, the Court not only heard arguments from the parties’ counsel but also conducted a potentially pivotal discussion with an attorney from the U.S. Solicitor General’s office. The government sided with the petitioners and argued against Section 1782’s application for both private international and investor-state arbitrations.
A key issue that emerged during today’s argument was whether the phrase “foreign or international tribunal” should be the focus or whether the single word “tribunal” alone should form the basis of the court’s consideration of whether Section 1782 allows U.S. federal district courts to provide judicial assistance to international arbitral tribunals.
The Court itself was hesitant about arbitration matters’ inclusion in the law, which is titled “Assistance to foreign and international tribunals and to litigants before such tribunals.” There are “too many problems extending this,” said Justice Stephen G. Breyer to respondent counsel urging foreign arbitral tribunals’ access to the law, asking whether the decision should simply be, “[G]o to Congress [and] get it worked out.”
Soon after, Justice Neil Gorsuch said that including arbitration tribunals “runs very counter to our intuitions that arbitration which is that it is supposed to be quick. . . . And [Sec.] 1782 is a very liberal grant of discovery.”
The cases were differentiated by the types of arbitration involved. ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, is a private arbitration, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518, is investor-state arbitration, involving the government of Lithuania.
The Court granted certiorari for the two cases argued today in December, shortly after another case addressing the same issue argued today was dismissed in late September. That case, Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794, was voluntarily dismissed on the eve of argument that had been set for Oct. 5, during the first week of the Court’s 2021-2022 term.
[CPR Speaks blog publisher CPR filed an amicus brief in Servotronics and today’s AlixPartners urging the Court to take the cases because of the significance of their issues to international arbitration, but not in support of either side. These briefs were written principally by co-author John Pinney. For details, see John Pinney, “International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases,” CPR Speaks (Dec. 10) (available here).]
The first of the two consolidated cases argued today was ZF Automotive, which arises from a private commercial contract with ZF Automotive’s German parent that requires any disputes to be arbitrated before the German Arbitration Institute. The ZF Automotive case was brought in Detroit prior to commencement of any private international arbitration in Germany. The district court allowed the requested discovery. On appeal to the Sixth Circuit, ZF Automotive, in a most unusual move, petitioned for certiorari before judgment to bypass waiting for the Sixth Circuit to decide its appeal. The Supreme Court granted certiorari on Dec. 10.
The second case, AlixPartners, involves an investor-state arbitration arising from a bilateral investment treaty between Russia and Lithuania. Interestingly, the AlixPartners case is an appeal from the Second Circuit, which in its decision distinguished NBC (see details below), as well as the Second Circuit’s more recent In re Guo, 965 F.3d 96 (2d Cir. 2000), to allow Section 1782 discovery for investor-state cases.
By accepting both a private international arbitration case (ZF Automotive) and an investor-state arbitration case (AlixPartners), the Supreme Court is poised to decide definitively whether any non-governmentally created tribunal can be a “foreign or international tribunal” within the meaning of Section 1782. That was the key focus in today’s arguments.
The cases have attracted 12 amicus briefs – five in support of the petitioners opposing Section 1782 discovery, four in favor of Section 1782 discovery, and three in support of neither side.
The most significant amici is the United States, which opposes Section 1782 discovery in both private and investor-state arbitrations, arguing that the term “tribunal” does not include international arbitral tribunals, whether they be created either for private international arbitrations or under bilateral or multi-national investment treaties. The Solicitor General requested and was granted the right to argue orally for the United States today in support of petitioners.
As noted above, a key issue that emerged early in today’s arguments was whether the Section 1782 phrase “foreign or international tribunal” should be the focus or whether the single word “tribunal” alone should form the basis of the court’s consideration of whether the law allows U.S. federal district courts to provide judicial assistance to international arbitral tribunals.
The 58-year-old statute states, “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, including criminal investigations conducted before formal accusation. . . .”
The petitioners opposing Section 1782 discovery–Roman Martinez, deputy office managing partner in the Washington, D.C. office of Latham & Watkins on behalf of ZF Automotive, and Joseph T. Baio, senior counsel at New York’s Willkie Farr & Gallagher, for AlixPartners–argued that the entire phrase, “foreign or international tribunal,” must be considered, and that the phrase has never been used with respect to an arbitral tribunal.
The respondents, on the other hand, focused on the word “tribunal” and argued that it has frequently been used with respect to arbitral tribunals, both contemporaneously in 1964 when the statute was enacted and in current usage. The respondent attorneys arguing on behalf of, respectively, Luxshare and the Fund for Protection of Investor Rights in Foreign State, were Andrew Rhys Davies, a New York partner at Allen & Overy, and Alexander A. Yanos, a New York and Washington partner in Alston & Bird.
Veteran Assistant Solicitor General Edwin Kneedler’s argument, which split the four party appearances, appeared to be given weight, especially in relation to how allowing discovery under Section 1782 might affect the United States’ relations with foreign governments. His argument contended that there is no meaningful distinction between private international arbitral tribunals and arbitral tribunals established under investment treaties, mainly because neither are “governmental.”
If you have a U.S. court engaged in discovery, said Kneedler, “it creates the potential for . . . controversy and . . . for having the United States involved . . . in something that is really none of its business.”
The takeaway from Kneedler’s arguments was that the Court should be cautious in accepting respondents’ arguments because any expansion of the scope of Section 1782’s reach should be addressed by Congress. Congress “had specifically in mind formality,” he concluded.
Kneedler’s point resonated with both Justices Gorsuch and Breyer in the argument that immediately followed by Andrew Rhys Davies, arguing for Luxshare to allow discovery under Sec. 1782 for the company’s arbitration in Germany. Davies had a difficult time answering Gorsuch’s repeated inquiries on why a definitive Sec. 1782 extension shouldn’t be left to Congress. Davies ultimately countered that there was no need because the full statute answers the application question by putting it in the U.S. District Court’s hands.
Breyer shrugged the answer off, and said there may be too many problems extending the statute, referring to timing of the discovery requests in the arbitration proceeding, including before a tribunal is established.
Davies insisted the statute as it currently exists contemplates those decisions by the federal court, but Gorsuch jumped back into the conversation immediately, noting that such moves runs counter what arbitration is supposed to be, characterizing Sec. 1782, as noted, as “a very liberal grant of discovery.”
Source of the Review
The Court’s review on this issue can be attributed to a 3-to 2-circuit split created when the Sixth U.S. Circuit Court of Appeals decided Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019) (“FedEx”). At the time, the only circuit court decisions on the issue had been decided in 1999 by the Second Circuit (National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999)) and the Fifth Circuit (Republic of Kazakhstan v. Biedermann Int’l., 168 F.3d 880 (5th Cir. 1999)). In both cases, the courts ruled that the phrase “foreign or international tribunal” in Sec. 1782 did not apply with respect to private international arbitral tribunals.
After the Sixth Circuit decided FedEx, the Fourth Circuit followed the Sixth Circuit in Servotronics Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020), but in a parallel case also brought by Servotronics, the Seventh Circuit instead followed the Second and Fifth Circuits in Servotronics Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2021), holding that Sec. 1782 did not apply with respect to private international arbitral tribunals.
All of these cases came in the wake of the only U.S. Supreme Court facing Section 1782 head on, Intel Corp. v. Advanced Micro Devices Inc., 542 U.S. 241 (2004). Today’s arguments discussed extending discovery to arbitration tribunals in light of Intel’s inclusion of matters quasi-judicial and administrative bodies.
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For an amicus argument against allowing Sec. 1782 discovery, see analysis by Derek T. Ho & Eliana M. Pfeffer, “Discovery in Aid of Foreign Arbitration Proceedings Unfairly Imposes Tremendous Costs on U.S. Companies,” 40 Alternatives 58 (April 2022) (available at https://bit.ly/3JUXs13).
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Today’s consolidated cases are expected to be decided before the Court’s term ends at the end of June. The transcript and audio of the Sec. 1782 arguments are available on the Supreme Court’s website here. Justice Clarence Thomas has missed this week’s arguments — hospitalized with an infection, according to the Court’s Sunday announcement — but will participate using the briefs and the transcript.
While Court watchers’ eyes this week have been on the confirmation hearings in the U.S. Senate Judiciary Committee, the continuing business of the nation’s top Court is a two-week deep dive into arbitration. The arbitration focus will resume with arguments on Monday morning with Southwest Airlines Co. v. Saxon, No. 21-309. That employment case will consider whether workers who load or unload goods from vehicles that travel in interstate commerce, but do not physically transport such goods themselves, are interstate ‘transportation workers’ exempt from the Federal Arbitration Act.
Highlights from Morgan v. Sundance Inc., No. 21-328 — an employment arbitration case that was the first of the March arbitration cases, argued earlier this week — can be found on CPR Speaks here. The four-case run will conclude next Wednesday with Viking River Cruises v. Moriana, No. 20-1573, which focuses on the relationship between the FAA and California’s Private Attorneys General Act. For background on Viking River, see Mark Kantor, “US Supreme Court to Review Whether Private Attorney General Action Can Be Waived by an Arbitration Agreement,” CPR Speaks (Dec. 16) (available here).
And one 2021-2022 term arbitration case, Badgerow v. Walters, No. 20-1143, awaits decision. Details on the case from the Nov. 2 arguments is available on CPR Speaks here.
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Pinney is counsel to Graydon Head & Ritchey in Cincinnati. On CPR’s behalf, he acted as counsel of record in an amicus brief urging the U.S. Supreme Court to accept the Servotronics and AlixPartners cases, as detailed above. Details on the brief can be found on CPR Speaks here. His AlixPartners brief on CPR’s behalf can be found on the Supreme Court docket page linked at the top or directly at https://bit.ly/3pzZpHj. Bleemer edits Alternatives to the High Cost of Litigation for CPR at altnewsletter.com. Tamia Sutherland, a second-year law student at the Howard University School of Law, in Washington, D.C., assisted with the preparation of this post.
Supreme Court Preview: Wednesday’s Combined Arguments Will Seek to Extend Federal Discovery Law to Arbitration Tribunals
By Tamia Sutherland
The U.S. Supreme Court will continue its two-week, four-argument deep dive into arbitration law and practice on Wednesday morning with an international law case. It will consider the consolidated arguments in ZF Automotive US Inc. v. Luxshare Ltd., No. 21-401, and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States, No. 21-518.
The issue that the Court has agreed to decide is whether 28 U.S.C. § 1782 can be invoked in international arbitrations to obtain U.S.-style discovery for evidence. The question is whether the statutory language—“foreign or international tribunal”—extends to arbitration panels.
There is a circuit split on the issue, which is detailed at length at John Pinney, “International Arbitration Is Back at the Supreme Court with Today’s Cert Grant on Two Section 1782 Cases,” CPR Speaks (Dec 10, 2021) (available here).
ZF Automotive US, ZF Friedrichshafen AG (ZF AG) is a German corporation. It sold its Global Body Control Systems business unit to respondent Luxshare, a Hong Kong limited liability company. Luxshare alleges that after the deal with ZF AG closed, it learned that ZF US―a Michigan-based automotive parts manufacturer and a subsidiary of ZF AG―fraudulently concealed material facts during the negotiation and diligence process.
The Master Purchase Agreement provided that the transaction is to be governed by German law, and requires that all disputes be resolved “by three (3) arbitrators in accordance with the Arbitration Rules of the German Institution of Arbitration (DIS).”
In contrast to the private arbitration of ZF Automotive, AlixPartners focuses on investor-state arbitration, in which one of the parties is the government. In AlixPartners, the respondent Fund now before the Supreme Court is a Russian entity pursuing claims before an ad hoc UNCITRAL-rules arbitral tribunal against Lithuania for investors’ financial losses resulting from the insolvency of a Lithuanian bank.
The Fund brought its § 1782 request for discovery in New York against AlixPartners, a financial consulting firm that had advised the Lithuanian government regarding the bank’s insolvency.
More information on the cases and their parallels to Servotronics, Inc. v. Rolls-Royce, PLC, No. 20-794 , a case dismissed by the Court last September before its hearing in the wake of an arbitration award, is available in John Pinney’s post linked above. [The post also contains links to a CPR amicus brief in AlixPartners authored principally by Pinney urging the Court to take the case, but not in support of either side.]
On Wednesday, the consolidated arguments will include an argument by the U.S. Solicitor General, Elizabeth Barchas Prelogar. In an amicus brief in support of the petitioners, Prelogar and her office argue that Section 1782 “does not authorize judicial assistance to obtain discovery for use in an arbitration, before a nongovernmental adjudicator, to which the parties consent.”
The amicus defines a foreign or international tribunal under the law as “a governmental adjudicator that exercises authority on behalf of one or more nation-states. It criticizes the approaches of the two federal circuits courts permitting arbitration discovery as “unsound.”
The Court’s calendar with the arguments’ timing is available here; the arguments will be available live, audio-only, via www.supremecourt.gov.
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For an amicus argument against allowing Sec. 1782 discovery, see analysis by Derek T. Ho & Eliana M. Pfeffer, “Discovery in Aid of Foreign Arbitration Proceedings Unfairly Imposes Tremendous Costs on U.S. Companies,” 40 Alternatives 58 (April 2022) (available at https://bit.ly/3JUXs13).
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The author, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern.
‘Negotiating the Nonnegotiable’: Highlights from the March ACR-GNY Round
By Tamia Sutherland
The Greater New York Chapter of the Association for Conflict Resolution, a nonprofit organization with nine chapters nationwide dedicated to enhancing the practice and public understanding of peaceful, effective conflict resolution, held its latest monthly roundtable breakfast on the topic of negotiating in an era of discontent.
The Feb. 3 event, co-sponsored by CUNY Dispute Resolution Center at John Jay College, was attended by more 230 guests, and marked ACR-GNY’s 246th roundtable breakfast. The monthly events started soon after the 9/11 attacks to convene and build the ADR community.
The event presented keynoter Daniel Shapiro, the founder and director of the Harvard International Negotiation Program, an associate professor in psychology at Harvard Medical School/McLean Hospital, and an affiliate faculty member at the Program on Negotiation at Harvard Law School. He is a frequent public speaker and author of Negotiating the Nonnegotiable (Penguin 2017), which served as his presentation’s theme.
The meeting was divided into three parts: a 30-minute networking reception, the keynote presentation, and a question-and-answer session with Shapiro.
The meeting kicked of with welcoming remarks from Maria R. Volpe, Professor of Sociology, Director of the Dispute Resolution Program at John Jay College of Criminal Justice in New York, and Julie Denny, a mediator in Morristown, N.J., and a board member as well as former president of ACR-GNY.
Shapiro began by highlighting some of the polarized and emotionally charged public conflict issues in the world right now, such as challenges to democracy, race relations, the pandemic, etc., which have now “entered the home.” He outlined the purpose of his presentation, which included introducing the “lures” that he identified, which he explained exacerbate conflict and make it emotionally charged.
Shapiro illustrated his point by analogy to a boat trying to make it to a sunny island while undercurrents pull the boat toward a waterfall edge. In this analogy, the boat represents the conflict resolution process, the island represents the cooperative mindset, the undercurrents represent the five lures he has identified, and the waterfall edge represents the tribal, divisive mindset that is insular, self-righteous, and closed.
In the broader context of ADR literature, Dr. Shapiro explained that Getting to Yes, by Roger Fisher and William Ury, illustrates the rational way for the boat to get to the island, or a process to get to the parties to embrace a cooperative mindset rather than a divisive mindset.
Furthermore, Beyond Reason, by Roger Fisher and Dr. Shapiro, addresses the emotional dimension involved in getting the boat to this hypothetical island or getting parties in a process to embrace the cooperative mindset. Shapiro said his book, Negotiating the Nonnegotiable provides language to discuss hidden emotional dynamics and provides a lens to analyze the lack of rationality in dispute resolution processes, which are the undercurrents that typically drag parties away from engaging in a cooperative mindset while resolving a dispute.
The language Shapiro used to characterize the lures/undercurrents pulling the conflict resolution process away from a cooperative mindset and toward a tribal mindset were:
- “Vertigo”–becoming so consumed in a conflict that one can think about nothing else but the perpetrator, the grievance, and everything they’ve done.
- “Taboos”–an action, thought, or feeling that is difficult to discuss because a community deems it unacceptable.
- “Repetition Compulsion”–repeating the same dysfunctional pattern of behavior as a result of an addicting part of our identity.
- “Assault on the Sacred”–responses to an attack on the most meaningful part of one’s identity.
- “Identity Politics”–the process of allying with a person or group to advance a point.
To illustrate the lure of taboos, Dr. Shapiro said participants at the roundtable breakfast would be placed into break-out rooms of two with a stranger. Participants were then asked to share their (1) political affiliation, (2) salary or family net worth, (3) perception of the attractiveness of the other participant, and (4) perception of the other participant’s age.
Before Shapiro finished the instructions and ultimately let participants know that the activity would not happen, at least 10 participants dropped off the zoom call. Other participants admitted to fixing their hair, considering lying, and having general feelings of nervousness for the exercise. The participants’ actions unintentionally and clearly illustrate taboos as an undercurrent that moves individuals away from a cooperative mindset. Moreover, there was no conflict here.
Following the completion of his presentation, Dan Shapiro conducted a question-and-answer session where roundtable participants discussed in-depth questions about the lures presented.
ACR posts the program videos at https://www.acrgny.org/RTB-Videos. Information on the March Roundtable Breakfast, “Ombuds Confidential,” can be found at https://www.acrgny.org/event-4705858.
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The author, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern.
CPR International Conference Highlights: ‘Effects on Cross-Border Disputes After the Singapore Convention’
By Bryanna Rainwater
According to the Singapore Convention on Mediation’s website, the Convention is a “multilateral treaty which offers a uniform and efficient framework for the enforcement and invocation of international agreements resulting from mediation.”
The speakers at the Oct. 6 CPR International Conference kickoff panel, “Effects on Cross-Border Disputes After the Singapore Convention” gave more context to the current legal landscape after the Convention has come into force.
The Convention was passed by resolution by the U.N.’s General Assembly in 2018, and signed into effect in August 2019. It has been hailed as a huge boost for mediation because it provides support for the effectiveness of the agreements the process produces.
The panel’s moderator was Javier Fernández-Samaniego, managing director of Samaniego Law with offices in Madrid and Miami. The speakers included: Sara Koleilat-Aranjo, a partner at Al Tamimi & Co., in Dubai; Michael Mcilwrath, founder and CEO of MDisputes, an ADR consulting firm in Florence, Italy, and a former vice president of litigation at Baker Hughes Co.; and Jan O’Neill, a professional support lawyer at Herbert Smith Freehills in London.
Koleilat-Aranjo said that mediation has “established itself as a viable, typically cost-effective, non-contentious, means to resolve disputes.” She noted that “up until the advent of the Singapore Convention, there wasn’t really . . . a legal instrument, at an international scale which sort of provided a passport . . . of enforcement of mediated settlement agreements.”
Koleilat-Aranjo discussed differences between the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), best known as the New York Convention, and the Singapore Convention. She noted that the Singapore Convention dispenses with reciprocity—the New York Convention only provides enforcement of an arbitration award that has been made in a jurisdiction that also has adopted the treaty–and that “the Singapore Convention adopts a transcendental approach, meaning . . . unlike the New York Convention, there isn’t really typically a place of mediation that is defined” like how the earlier treaty addresses the seat of arbitration.
Koleilat-Aranjo referred to what she calls “a certificate of origin,” which is when the parties must prove that settlement resulting from mediation occurred in order to enforce the award. She noted that this presents the novel issue of how to prove that a mediation award was given, particular outside of an “institutional framework,” so that it can be enforced via the Convention.
There are currently 54 Convention signatories, and eight states that have ratified it–seven at the date of the discussion, and one added since the CPR International Conference.
Koleilat-Aranjo noted that two of the nations that have already ratified the treaty, Qatar and Saudi Arabia, are in the Middle East. She said that this reaffirmed the popularity of mediation in those countries, and that this is not surprising considering the cultural and religious influences and attitudes toward the process. She said that in Arabic, the mediator is called the “agent of peace,” and that mediation has been used in Arab nations for many types of different dispute settlements.
The panel discussed the reservations carve-out in Article 8 of the Convention, which provides that, when adopted by a ratifying state, “the Convention would not be applicable to settlement agreements to which its government or other public entities are a party.”
Saudi Arabia, Koleilat-Aranjo noted, has carved out a reservation per its Royal Decree 96 (April 9, 2020), which mirrors the convention carve out: It does not allow mediation to apply to the government, government officials, governmental agencies, or any person acting on behalf of those agencies. She explained that the Saudi economy is tied in with the government, so this is broad reservation, with many international transactions tying private overseas parties to government actors.
Mike Mcilwrath gave his perspective on why the Convention has not yet been ratified by European Union nations. He said that the EU was “hostile to the convention during the drafting stage. They did not support it.” He added that this is likely because of the “coordinating effort” of the EU as a unified front, making it more difficult for individual states to sign on separately.
Mcilwrath noted that the EU chose to go to court over concerns about the AstraZeneca Covid-19 vaccine, rather than mandating mediation, which is a sign of the EU’s trend of choosing not to mediate.
HSF’s Jan O’Neill had a differing view, and–echoing Mcilwrath’s description of Italy likely supporting the Convention on its own but for the current EU hesitancy–noted that the U.K. also “has been left to its own devices” since Brexit. She added that “the U.K. is of course a very mediation friendly jurisdiction, [with a] very long-standing sophisticated mediation infrastructure.”
As a result, she said that she believes that the U.K. will sign the Convention eventually, noting that “there is a sense on the ground . . . it feels like it will happen. They’re certainly not sensing any hostility.”
She said she that the U.K. is familiar with mediation and ADR, but that priorities are stuck on the most pressing issues–the pandemic and the Brexit economy.
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CPR has posted a video of the full panel discussion. You can find it here after logging into the CPR website. Videos from the other September CPR International Conference panels can be found here.
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Panel moderator Javier Fernández-Samaniego has prepared an article analyzing the Singapore Convention developments and expanding on the panel discussion for CPR’s monthly newsletter, Alternatives to the High Cost of Litigation. His article is scheduled to appear in the December issue.
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The author, a second-year student at Brooklyn Law School, is a 2021 CPR Fall Intern.
From CPR’s International Conference Last Month: How to Work Effectively with Your In-House Counsel
By Mylene Chan
During the 2021 CPR International Conference, held online Oct. 6-7, CPR’s Young Leaders in Alternative Dispute Resolution Steering Committee presented “How to Work Effectively with Your In-House Counsel.”
The panel was moderated by Y-ADR’s Steering Committee member Elizabeth Chan, an associate at Three Crowns in London, and included Daniel Huth, Legal Counsel of Global Litigation Europe & MENA for Shell in London; Hemma Lomax, Senior Corporate Counsel, Snap Inc., in Santa Monica, Calif.; Brittany Mouzourakis, Counsel-Litigation at Detroit’s General Motors Co., and Megan Westerberg, Assistant General Counsel, Eisai U.S., Woodcliff Lake, N.J. (Links to the participants can be found on CPR’s website at https://bit.ly/3qlhryI.)
The panel’s focus was on providing advice for young practitioners on developing business relationships and working with in-house counsel. Young practitioners are often told to “think commercially” and to draft advice that reflects commercial acumen. As young practitioners gain more experience, they are expected to manage client relationships and case matters efficiently and within budget. This panel discussed how young practitioners could gain visibility with the client, how they could understand their client’s commercial objectives, and how they could win clients’ trust and confidence.
The panel opened with a discussion on effective pitching to the client. One panelist advised that young practitioners at the pitch table should project confidence, passion, and knowledge of the subject. Even if a rainmaker is present, junior practitioners should not think of themselves as window dressing because the in-house counsel listening to the pitch wants to hear from the junior practitioners as well for other perspectives.
Another panelist explained that the presence of junior practitioners at the pitch table underscores the law firm’s commitment to workforce diversity, which is an important criterion for many in-house counsel in selecting outside lawyers.
To raise visibility, the panelists encouraged young practitioners to find a few moments around the pitch to greet the potential clients, build rapport and to get to know the client. Young practitioners should take the initiative to interact with in-house counsel directly to create face-time opportunities, such as offering to buy in-house counsel a coffee to network.
The panelists also urged young practitioners to publish; the publication does not have to be in a formal journal but could be a blog. Many young practitioners also gain visibility through re-posting on LinkedIn and piggybacking on others’ posts. Newcomers to ADR practice should start networking early on, and one easy method is through joining relevant online communities.
In addition to finessing interpersonal skills, young practitioners also must learn how companies approach risks, including the practices that they put in place to avoid, mitigate, and remediate risk.
The panelists elaborated that if young practitioners are cognizant of the principles of risk control, they will have a holistic view and better understanding of the company, putting those practitioners in an excellent position to help companies resolve conflicts–which will inevitably happen–and to move past impasses.
The panelists cautioned that in-house lawyers and company executives do not think alike, contrary to what many young practitioners appear to believe. For example, a vice president may or may not approach risk and compliance the same way as a manager.
Many young attorneys appear to harbor the erroneous assumption that companies have properly trained their staff and have the appropriate monitoring programs in place when, in fact, in-house counsel may expect external lawyers to guide companies in risk management through baby steps.
Young practitioners should be mindful of the collaboration dynamics between inside and outside counsel so that they can contribute accordingly. When an arbitration or legal proceeding launches, the initial step is for the internal and external counsel to determine the appropriate questions to ask, the respective roles, and the documents to be collected in order to develop a case strategy.
The next step is to consider the staffing of the team, and the rule, the panel members agreed, is the broader the better. The team should ascertain the length, cost, and insurance coverage, and of course, they must discuss the assessment of the case, including the strengths and weaknesses of each claim. The panelists agreed that there should be full collaboration all the way through the matter between inside and outside counsel.
For enhanced communication with outside counsel, young practitioners should understand that in-house counsel hire outside lawyers for their energy, expertise, and resources to facilitate decision making, so outside counsel must learn to synthesize complicated ideas and present information succinctly.
Since inside counsel may receive hundreds of emails per day, the communication must be concise and easy to digest. In such communications, young practitioners should lay out options, make a recommendation, and explain the relevant reasoning. In-house counsel often want bullet points that they can easily parse through, not legal briefs, so that they can interface with business colleagues seamlessly. Understanding the life cycle of decision-making at companies and partnering with the in-house counsel is also critical for aspiring young practitioners.
The panelists concluded by giving their final advice for young practitioners: (1) be nosy and greedy, be a creator not just a consumer; (2) just jump in, be genuine and sincere; (3) take the initiative to be heard; and (4) distinguish oneself from the team, ask the right questions, help clients avoid surprises, and dare to challenge.
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A video of “How to Work Effectively with Your In-House Counsel” from the 2021 CPR International Conference has been posted on CPR’s website at https://bit.ly/3qlhryI.
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The author, an LLM candidate at Pepperdine University Caruso School of Law’s Straus Institute for Dispute Resolution, in Malibu, Calif., is a 2021 CPR Intern.