Arbitration

A Letter from CPR President & CEO, Allen Waxman

/ CPR Staff / Leave a comment

It has been a month since my last update to you, and certainly much has happened during this strange and challenging time. I hope that you are finding ways to tend, not only to the health of your businesses and professional lives, but also to yourselves personally. While honoring our responsibilities to our companies and clients/customers, I believe it is of paramount importance during this time also to be gentle with ourselves and each other. If it feels difficult, it is because it is difficult! We are trying to take the same counsel at CPR.  Our staff has all been working remotely, and finding ways to connect with each other over diverse platforms.  I now know the look of the kitchens, living rooms or guest rooms of each of my colleagues.  That takes us to a whole new level!

At the same time, I am so very proud of our staff in being true to our mission – managing conflict to enable purpose.  We have continued to offer insightful programming on how to prevent and resolve disputes most effectively during this time while also providing our dispute resolution services.  Your engagement and support (financial and otherwise) for us is more important than ever to enable us to pursue our mission.  Thank you.

I thought I would take this opportunity to review with you some of our activities over the last month.

CPR DISPUTE RESOLUTION REMAINS OPEN FOR BUSINESS

CPR Dispute Resolution continues to operate seamlessly, offering our full suite of dispute prevention and resolution services. Given the backlog in the courts, the time for ADR is now.  DRS’ services, rules and protocols, and Panel of Distinguished Neutrals can help resolve matters efficiently and effectively.

Arbitration – For parties in disputes during COVID-19, you may want to consider converting a pending court case to a CPR Administered Arbitration, or entering (with the other party) into an arbitration clause more appropriate under the circumstances. In both cases, you will need to enter into an arbitration submission agreement with your counterparty. Model language for doing so can be found HERE.

Mediation –CPR’s Mediation Services are also available to assist businesses in these difficult times. You can find more information on these services HERE. In addition, CPR has just announced the upcoming launch of a new COVID-19 Flat Fee Mediation Program, in collaboration with Legal Innovators and FTI Consulting, to resolve disputes below $5 million. That program is being kicked off with a free May 13 webinar.

Dispute Prevention – We have launched a new Dispute Prevention Panel, comprised of neutrals who have the experience to facilitate resolution of a dispute before it becomes a legal conflict.  You can find more information HERE.

Because our offices remain closed, new filers should continue to submit electronically at cprneutrals@cpradr.org, and all payments should be made via credit card or wire transfer (please specify in your cover email how you would like to pay); paper filings cannot be accepted. To send files via Voltage encrypted email, please email herickson@cpradr.org to be authorized.

NEW PROGRAMMING

We recently hosted one of many programs that are part of our COVID-19-related focus, titled “Stability in the Pandemic: Personal, Professional and Global Targets.” This webinar featured renowned academics Lela Love, Professor of Law and Director of the Kukin Program for Conflict Resolution at Cardozo Law School, and Sukhsimranjit Singh, Assistant Professor of Law and Practice and Managing Director of the Straus Institute for Dispute Resolution at Pepperdine University Caruso School of Law. The speakers discussed holistic methods to approach conflict while social distancing, touching on key mediation strategies and self-care techniques to create a positive and conflict-free living and work space. A recording will be available soon and can be found in our “ADR in the Time of COVID-19” section, along with numerous other resources, HERE, and I encourage you to explore and check back often for updates.

SOCIAL DISTANCING – BUT STILL SURGING AHEAD ON ALL FRONTS

CPR continues to forge ahead and grow in numerous other ways I am delighted to share with you.

New Partnerships – CPR recently announced a strategic partnership with the International Association of Defense Counsel (IADC), through which IADC named CPR as a recommended ADR services provider. The IADC will be promoting CPR membership, DRS services, and arbitration and mediation rules to its 2,500 members, which in turn will gain access to valuable CPR benefits, resources and discounts, including CPR membership and other joint programming opportunities. And this collaboration is bearing almost immediate fruit, in the form of our upcoming joint webinar, “Resolving Legal Disputes in the Era of COVID-19.”

Support for Remote Video Arbitrations – Ever responsive to the changing legal landscape, CPR quickly convened a task force that created an Annotated Model Procedural Order for Remote Video Arbitration Proceedings. The model order puts into one, user-friendly document the best practices that the arbitration community needs to navigate remote video hearings. This new model procedure is a perfect example of what CPR can do and does regularly – harnessing the rich insights and vast experience of its membership to create timely and cutting-edge resources that both benefit users and enhance the capacity for ADR, in general.

The Drive for Diversity Continues – Since my last update, CPR also took a further step toward promoting diversity in alternative dispute resolution (ADR) by launching a new clause to be used by parties who wish to pre-commit to a diverse panel of neutrals in a future dispute to be resolved by arbitration. Read the full press release HERE.

New Data Security Resources – CPR continues to take steps to help parties and neutrals address the challenges of maintaining data and cybersecurity in ADR matters. In our new website section, you will find information relating to communicating with CPR on case-related matters, cybersecurity in arbitration and other ADR proceedings, data protection and the CPR online dispute resolution platform, as well as other technology tools and member discounts for e-filing services.

Networking for Neutrals – CPR has continued its role of providing service to the ADR community by convening three Neutrals Forums in different time zones to provide a space for the exchange of questions, learning and best practices for remote proceedings during the time of COVID-19. Participants were able to discuss issues that have arisen or are anticipated to arise in such proceedings such as the potential for witness coaching and the handling of exhibits during such procedures. The CPR Annotated Model Procedural Order was circulated to attendees and several of its provisions highlighted. Neutrals, please watch your email inbox for future invitations.

A RICH SCHEDULE OF UPCOMING PROGRAMMING

Our events calendar continues to be as relevant as it is robust. Upcoming virtual events include:

New events are scheduled regularly, so be sure to check our website Upcoming Events section regularly for new offerings.

STAY SAFE AND STAY STRONG

This has been a trying but also a productive time.  Keep engaging with us as we navigate this new normal together.  We in the CPR community are a resilient and resourceful bunch, and I am confident that, with generosity and patience, we will continue to overcome these challenges together.

As always, please let us know if you have any questions or concerns, or just let me know how you are doing. (Instead of hitting reply, please drop me a note at awaxman@cpradr.org to make sure I see your message quickly.)

Warm regards,

Allen Waxman

Supreme Court Declines To Hear Arbitration Case on ‘Equal Footing’

/ CPR Staff / Leave a comment

The U.S. Supreme Court this morning declined to hear an appeal in an Oklahoma arbitration case on the so-called equal-footing principle—the idea that the Federal Arbitration Act prevents courts and legislatures from targeting rulings and laws to arbitration agreements, and instead requires  them to place arbitration on an equal footing with other contracts.

The Court denied cert on Tamko Building Products, Inc. v. Williams, Daniel, et al., No. 19-959 (case documents including party briefs available on Scotusblog at https://bit.ly/3dcPrn7).

The Oklahoma Supreme Court case declined to enforce an arbitration agreement between homeowners and shingle manufacturers where the arbitration agreement was “printed on shingle wrapping viewed only by contractors and then discarded.”

Tamko, a Galena, Kansas, building supply company, contended that the Oklahoma court’s decision violated the principle in the Supreme Court case of Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017) (available at https://bit.ly/2YvMji9), which held that the FAA couldn’t be held to higher standards than other contracts.

Tamko, according to its reply brief filed last month with the Court, contended that the Oklahoma Supreme Court “found an agency relationship that empowered contractors buying shingles to bind homeowners to the terms of sale concerning matters such as price and delivery, but not arbitration—because of the importance of the jury-trial right.”

But, it continued, “That decision blatantly violates the FAA’s equal-footing principle.”

As a result of the cert denial, the Oklahoma Supreme Court’s decision that the homeowners “never had an opportunity to make a knowing waiver of access to the courts,” stands, along with its reversal of a trial court order remanding the case for trial.

CPR’s Arbitration Committee Tackles ADR Video Conferencing 

/ CPR Staff / Leave a comment

By Michael Hotz

The International Institute of Conflict Prevention and Resolution’s Arbitration Committee  hosted an online event early this month to tackle questions from neutrals and advocates designed to help them properly use video conferencing to conduct alternative dispute resolution hearings remotely.

The event was a continuation of a series of discussions hosted by the CPR Institute examining remote mediation and arbitration practices and addressing issues neutrals are encountering conducting remote hearings.  For a roundup of earlier CPR events, see this April 2 CPR Speaks blog post. The CPR Institute’s information clearinghouse on the virus and its effects can be found on its website at the link for ADR in the Time of COVID-19.

The April 7 teleconference was moderated by White & Case New York partner Jennifer Glasser, who is vice chair of the CPR Institute’s Arbitration Committee. Three panel members included: Daniel González, a Miami-based partner at Hogan Lovells; Samaa Haridi, a partner in Hogan Lovells’ New York office, and Jorge Mattamouros, a partner in White & Case’s Houston office.

Mattamouros began by discussing his video hearings experiences. The case he explored was a hearing in a large Brazilian M&A dispute. The hearing was mostly conducted in Portuguese, but also had English language witnesses. It began before the COVID-19 pandemic, so the process had to change in response to the health and safety measures implemented internationally.

Transitioning to remote hearings was made easier, Mattamouros explained, as the parties already had established a protocol for electronic conferencing. First, the parties conducted the opening presentation, and fact witnesses’ examination and cross examination, before travel bans in the United States and Europe.

Then the parties returned home and the hearing continued online using Zoom for the examination of the expert witnesses. Mattamouros noted that platforms like Zoom have chat functions that, if not turned off, allow the witnesses to receive messages during examination. Other neutrals, the panel noted, have used WebEx or other remote conferencing platforms.

The key benefit to being able to use telecommunication services to do arbitration was the ability to conduct hearings across the globe. This is especially relevant for smaller matters, as the amount disputed doesn’t necessarily merit traveling internationally.

Panelist Samaa Haridi discussed how technology allowed her to conduct an arbitration as tribunal chair remotely from New York, despite time differences, with the parties and co-arbitrators in Dubai and London. The timing was a key issue, as it required that the parties coordinate and that the arbitrators arrange a schedule that didn’t impose too great of a burden on any one party. In her hearings, Haridi explained, it often required that she start her day earlier than usual.

Glasser observed that remote hearings may require shorter hearing days but more total hearing time, both to accommodate time differences with parties across the globe but also because it is more difficult to keep the arbitrators and parties engaged when interacting virtually.

Haridi agreed that it was harder to keep people focused when they weren’t conducting in-person meetings. This required the neutral to adjust expectations of what could be accomplished each day.

In one semi-remote hearing Haridi participated in as arbitrator, the parties  were together in one location, and two of the arbitrators were in different cities. And while the third arbitrator was located in the same venue as the parties, he sat in a separate room to maintain an appropriate balance considering the virtual participation of the other tribunal members.

To ward off potential challenges to the award on the basis of perceived lack of neutrality or unequal access to information by the arbitrators, Haridi recommended having the neutral participate in a separate room from the parties in cases such as hers where not all of the arbitrators are able to sit together with the parties in one location. This maintains the appearance of impartiality.

Daniel González stated that he has participated in remote hearings for many years, such as examining a witness by video while the neutral and parties are together in another location.  While remote hearings in the age of Covid-19 present the new challenge of all participants joining remotely from different locations, and technology is rapidly evolving to meet this challenge, it is the human factor and interaction that has not changed over time and must be carefully considered as it will present special issues for the arbitrators, the cross examiners and the witnesses on how they can carry out these virtual hearings.  For example, one challenge the program panel members agreed on is the ability to use and assess body language.

For example, during cross examination, it is difficult for the lawyer to gauge the tribunal’s reaction or for the witness to know if they are effectively conveying information to them.

Hogan Lovells’ Haridi mentioned that the lack of body language also made it harder to evaluate the credibility of a witness. This is one critical issue that led Jorge Mattamouros to state that in-person meetings were still preferable.

Another issue the panelists discussed was the sharing of documents. Remote hearing technology allows for the presentation of documents through the video conference platform.  This feature was used in all of the remote hearings conducted by the panelists.

The panel then discussed how to ensure the efficient presentation of evidence in document intensive cases that are being heard remotely.  Mattamouros commented that he combined all of the exhibits into one master PDF so the parties, tribunal, and witness could easily navigate to the relevant document and page number being referenced without losing time to find and toggle between different documents.

González noted that vendors that handle the organization and presentation of the record in conventional settings were available for virtual sessions as well. Using a third party alleviates the burden on counsel to manage the technology and document presentation.  He argued that it was best to use whatever method the tribunal was comfortable with.

The participants then discussed fairness in arbitration.

Samaa Haridi commented that the use of online hearings could create additional challenges in enforcing an arbitration tribunal’s award. A party who dislikes the ruling could challenge the award by claiming there was no due process.  It remains to be seen how courts deal with such challenges.

White & Case’s Jorge Mattamouros noted that the party’s lack of consent didn’t always establish a lack of due process. That would be determined on a case-by-case basis.

The discussion noted that there is broad leeway granted to arbitrators and mediators when establishing a fair process. Acquiring consent is a simple way of reducing the likelihood that a party can challenge the outcome successfully, but it is not the only one.

Moderator Glasser concluded by asking for the panel’s views on the future of remote hearings after the Covid-19 crisis.  The panel agreed that remote hearings are likely here to stay in some form, such as convening initial case management conferences by video rather than meeting in person.

They also agreed, however, that human interaction is a critical part of a hearing and that in-person hearings will not become a vestige of the past.  Ultimately whether to hold a remote hearing will be a fact-specific inquiry depending on the circumstances at hand.

Glasser brought up the problem that, as more arbitration is moved online, newer attorneys may get fewer stand-up opportunities to make oral argument or cross-examine witnesses. In a standard face-to-face processes, the attorney in charge can allow the novice lawyer to take control more often, as they are still in the room and provide correction and assistance instantly. In the online forum, they do not have that ability, making it much less likely that anyone would be willing to risk their case to give the newer attorney some experience.

* * *

After the discussion of the benefits and issues with virtual arbitration procedures, CPR Institute Senior Vice President Olivier P. Andre discussed the need for those using document transfer or other communication platforms to ensure that they comply with relevant privacy laws.

Without proper cybersecurity, the process can leave parties’ documents vulnerable and potentially subject the neutral to lability. He recommended consulting the CPR/FTI Consulting Cybersecurity Training, the draft ICCA-IBA Roadmap to Data Protection, and the International Council for Commercial Arbitration-New York City Bar Association-CPR Institute Cybersecurity Protocol for International Arbitration. These resources are designed to provide guidance on how to manage the risks associated with cybersecurity and privacy regulations.

* * *

CPR Arbitration Committee Chair Hagit Elul, a partner in New York’s Hughes Hubbard & Reed, announced that the committee was planning on creating an industry-specific project by corroborating with other CPR Institute industry committees such as the pharmaceutical, finance, energy, and construction committees.

The committee also discussed the CPR Institute’s Annotated Model Procedural Order for Remote Video Arbitration Proceedings, a new best-practices document for navigating arbitration hearings electronically.  The document was since released by CPR on April 21, and the details can be found on CPR’s website here.

 

Michael Hotz is a CPR Institute 2020 Spring Intern. His account relies on post-session comments from the participants.

NY Federal Judge Rejects Trumps’ Motion to Compel Arbitration

/ CPR Staff / Leave a comment

By Anne Muenchinger

A New York  Southern District matter accusing President Donald Trump, his company and his family of endorsing an allegedly fraudulent sales scheme is moving forward as litigation after the defendants tried to move the case to arbitration.

U.S. District Judge Lorna G. Scholfield refused the Trump Corp.’s motion to compel arbitration of the claims. Jane Doe, et al. v. Trump Corp., et al., 18 Civ. 9936 (LGS) (S.D.N.Y. April 8) (available at https://bit.ly/2wXWZLh).

The order is the latest development in a claim originally filed in October 2018, against Trump Corp., the president, and his three older children for racketeering and conspiracy to racketeer in violation of federal law, and six state law claims relating to unfair or untrue business practices.

The amended complaint alleged that the Trumps promoted Concord, N.C.’s ACN Opportunity LLC, a non-party to the action.  ACN is a multi-level marketing company which contracts with independent business owners, or “IBOs,” who then sell ACN’s products and services to the wider public. The ACN videophone tanked, and the plaintiffs allege they lost hundreds of thousands of dollars.

The company was endorsed and promoted by Trump Corp. through multiple media advertising channels, including during episodes of the television program Celebrity Apprentice, hosted by Donald Trump and featuring his children Ivanka Trump and Donald Trump Jr.

The anonymous plaintiff, along with other similarly placed complainants, signed up to become IBOs, citing the defendants’ endorsement as a crucial in deciding to contract with ACN.

Their action, brought individually and on behalf of a putative class, alleges that the defendants made false statements in the promotional material that concealed that the Trumps were paid for their promotion, rather than because they believed that ACN “offered a reasonable probability of commercial success.”

The defendants filed a motion to dismiss following a February 2019 amended complaint, which was granted on the racketeering and conspiracy to racketeer claims.  But state law claims of dissemination of untrue and misleading public statements, unfair competition, unfair and deceptive trade practices, deceptive practices, as well as fraud and negligent misrepresentations were permitted to proceed, with the court retaining jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d).

The Trumps notified the court on July 19, 2019, of their intention to compel arbitration, eight months into litigation. Their motion is based on the contract signed between ACN and each IBO, which includes a clause mandating the resolution of all disputes via binding arbitration under the American Arbitration Association commercial arbitration rules.

In her denial order earlier this month, Judge Scholfield not only firmly rejects the motion, but issued a scathing rebuke of the Trumps’ behavior which she denounces as “substantively prejudicial towards Plaintiffs and seeks to use the [Federal Arbitration Act] as a vehicle to manipulate the rules of procedure to the Defendants’ benefit and Plaintiffs’ harm.” Jane Doe, et al. v. Trump Corp., et al., 18 Civ. 9936 (LGS) at 15.

Scholfield added, “Such tactics undermine a fundamental purpose of the FAA to support the economical resolution of claims.” Id.

The defendants argued that the contractual obligations arising out of ACN’s contract with each IBO equally apply to them under a theory of equitable estoppel, or agency, so the claims must be submitted to arbitration.

The central question for the court to resolve was whether the plaintiffs had in fact agreed to arbitrate any disputes with the defendants under either of the two cited doctrines, since the Trumps were not a party to the plaintiffs-ACN contracts. Additionally, in the event that an agreement was established, the court examined whether the defendants had waived their right to mandatory arbitration of the claims.

On the theory of equitable estoppel, Judge Scholfield wrote that a signatory to an arbitration clause may be compelled to arbitrate a dispute against a non-signatory “where (1) ‘the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed,’ and (2) there is ‘a relationship among the parties of a nature that justifies a conclusion that the party which agreed to arbitrate with another entity should be estopped from denying an obligation to arbitrate a similar dispute’ with the non-signatory.” Id. at 6 (citations omitted).

Because the claim is based upon misleading and unfair statements which allegedly induced the plaintiffs to enter the agreement, Scholfield ruled that the claims are sufficiently intertwined with the agreement.

But the opinion holds that the relationship prong needed to find equitable estoppel is not fulfilled in this case, rejecting the defendants’ proposition that the plaintiffs were aware of the defendants’ paid relationship with ACN.

Rather, the opinion states that the “business relationship was expressly hidden,” and applies Second Circuit precedent denying estoppel to “a defendant aligned with the signatories to allegedly accomplish wrongful business practices”. Id. at 9.

Similarly, the Trump’s failure to disclose their relationship with ACN was central in the court’s reasoning with regard to the agency claim. That basis of the claim was also denied, as arbitration agreements may only apply to non-signatory agents where such agents are disclosed. Id. at 12.

On the waiver, the court examined the time elapsed from the commencement of litigation to the request for arbitration, the amount of litigation to date, and the proof of prejudice. All of these elements, the court explains, lean in favor of the plaintiffs in this case.

The opinion found probative that Trump Corp. notified the court of its intention to arbitrate eight months after the outset of litigation, and after full adjudication of a motion to dismiss; a motion to proceed pseudo-anonymously; multiple motions to seal, and several discovery disputes.

Prejudice is established, the Scholfield explained, where “the defendant seeks to benefit from information obtained through judicial proceedings that would be unavailable in arbitration,” and where the defendants want to “use arbitration as a means of aborting a suit that did not proceed as planned in the District Court.” Id. at 15 (internal citations omitted).

So the case will continue before the Southern District of New York.

Only a day after the order, Bloomberg reported that in a teleconference hearing, Judge Schofield ordered Hollywood studio Metro-Goldwyn-Mayer, current owner of the Celebrity Apprentice, to release hundreds of hours of unaired footage from the two episodes in which ACN principals were featured. See Erik Larson, “MGM Told to Hand Over Trump’s ‘Apprentice’ Tapes in Scam Suit,” Bloomberg (April 9) (available at https://bloom.bg/3cFNz6q).

* * *

Muenchinger is a CPR Institute Spring 2020 intern, and an LLM student at the Benjamin N. Cardozo School of Law at Yeshiva University in New York City.

 

Supreme Court Rejects NFL’s Rams Bid to Arbitrate

/ CPR Staff / Leave a comment

By Russ Bleemer

The U.S. Supreme Court this morning declined to hear Rams Football Co., et al. v. St. Louis Regional Convention & Sports Complex Auth., No. 19-672, a case involving a prominent question in the arbitration field.

Rams Football is a Missouri state appeals court case on arbitrability and the so-called delegation clause—the arcane lawyers’ law on who gets to decide whether a case is decided by arbitrators or the courts.

The case had been listed for Friday Court conferences, according to Scotusblog, at least eight times this before the Court turned it down at Friday’s conference, and noted the denial in this morning’s order list.

The CPR Speaks blog discussed Rams Football at length in David Chung, “Under Consideration: The Supreme Court May Be Ready to Tackle Arbitrability–Again” (March 23) (available at https://bit.ly/2wx0Nmf).

The Supreme Court set out the law on delegation clauses in First Options v. Kaplan, 514 U.S. 938 (1995) (available at http://bit.ly/2WEXGnF)—a case argued and won by Chief Justice John G. Roberts Jr. when he was a Washington, D.C., partner in Hogan & Hartson—which held that courts should review arbitrability and should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.

And the standard has been elusive ever since.

Problems with arbitrability may be growing.  In addition to the Rams Football case, last year’s Supreme Court decision on the subject,  Henry Schein, Inc., et al. v. Archer and White Sales, Inc., 139 S.Ct. 524 (2019) (available at http://bit.ly/2YLDkWQ), was remanded, reheard, decided, and is back before the Court on basically the same issue.

In last year’s decision, the Court held unanimously that parties to a contract have the ultimate say in whether to have an arbitrator or a court resolve disputes on questions of arbitrability.  Schein’s main holding was that a court couldn’t refuse to enforce arbitration because it believed the claims for arbitration were “wholly groundless”; it sent the case back on remand to the Fifth U.S. Circuit Court of Appeals, and the remand decision about the delegation clause is back before the Court for cert consideration.

So far as it is known, the new Schein has not yet made it to the Court’s conference table.  For more on Schein, see Philip J. Loree Jr., “Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court,” CPR Speaks (Feb. 19) (available at http://bit.ly/3bQXQgl).

See also, Philip J. Loree Jr., “Schein’s Remand Decision Goes Back to the Supreme Court. What’s Next?” 38 Alternatives 54 (April 2020) (available https://bit.ly/3aYy7Sg), and  Richard D. Faulkner & Philip J. Loree Jr., “Schein’s Remand Decision: Should Scotus Review the Provider Rule Incorporation-by-Reference Issue?” 38 Alternatives 70 (May 2020) (available at http://altnewsletter.com/ on May 1).

Late last month, an appellate court in Florida in a split decision trashed the concept of incorporating by a reference to American Arbitration Association rules as “clear and convincing evidence” of parties agreeing to an Internet app clickthrough contract as sending the arbitrability decision to an arbitrator. Doe and Doe v. Natt and Airbnb Inc., Case No. 2D19-1383 (Fla. 2d DCA March 25) (available at https://bit.ly/3byW6r6).

The Rams issue, according to the team’s cert request petition was

Whether the Federal Arbitration Act permits a court to refuse to enforce the terms of an arbitration agreement assigning questions of arbitrability to the arbitrator if those terms would be enforceable under ordinary state-law contract principles in a non-arbitration context.

For now, the Missouri Court of Appeals decision affirming a trial court’s decision denying arbitration and sending the case to trial stands, and the case is remanded to trial.

* * *

Scotusblog’s case page, available at https://bit.ly/2QANwjk, contains the Rams’ cert petition, the respondent’s brief in opposition, and the Rams’ reply.

Russ Bleemer is the editor of Alternatives

COVID-19 & CPR Administered Arbitration

/ CPR Staff / 1 Comment

CPR DR Logo_Black Text

The COVID-19 health crisis is causing unprecedented disruptions and damage to the world’s economy and business relationships. Many commercial disputes are surfacing as parties find it impracticable or impossible to perform their contractual obligations.  At the same time, the crisis is also considerably slowing down the resolution of pending court cases, exacerbating the already significant backlog of cases in many courts.

In this context, we would like to remind you that CPR Dispute Resolution and its Case Management Team remain available to assist businesses in these difficult times.

To avoid any delays in the resolution of your dispute, you may want to consider converting a pending court case to a CPR Administered Arbitration.  If your contract already provides for arbitration as the dispute resolution mechanism, but your arbitration clause is no longer appropriate under the circumstances, you may also want to consider using CPR administered arbitration.  In both case, you will need to enter into one of the following arbitration submission agreements with your counterparty:

For a US domestic Dispute:

“We, the undersigned parties, hereby agree to submit to arbitration in accordance with the International Institute for Conflict Prevention and Resolution (“CPR”) Rules for Administered Arbitration (the “Administered Rules” or “Rules”) the following dispute:

[Describe briefly]

We further agree that we shall faithfully observe this agreement and the Administered Rules and that we shall abide by and perform any award rendered by the arbitrator(s). The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., and judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. The place of arbitration shall be (city, state).”

For an international dispute:

“We, the undersigned parties, hereby agree to submit to arbitration in accordance with the International Institute for Conflict Prevention and Resolution (“CPR”) Rules for Administered Arbitration of International Disputes (the “Rules”) the following dispute:

[Describe briefly]

We further agree that we shall faithfully observe this agreement and the Rules and that we shall abide by and perform any award rendered by the arbitrator(s). Judgment upon the award may be entered by any court having jurisdiction thereof. The seat of the arbitration shall be (city, country). The language of the arbitration shall be (language).”

Why use CPR Administered Arbitration?

Quality

  • Quality comes from experience – Over the years, CPR’s Distinguished Neutrals have handled more than one trillion dollars in disputes
  • Parties remain in control of the process
  • Peer-reviewed and innovative rules
  • Cases managed by highly experienced, accessible and multilingual attorneys

Efficiency and Lower Costs

  • Time is money – CPR’s Rules have been designed to increase efficiencies, lowering overall costs, benefitting all parties
  • Easy commencement process – No cumbersome paper filing requirements
  • Rapid appointment of the Tribunal, typically within 2-4 weeks
  • Efficient timeline with built-in benchmarks and accountability
  • CPR is a savvy yet unobtrusive administrator, which maximizes direct tribunal-party interaction
  • Mediation/settlement encouraged at any stage
  • Administrative fees based on a scale of amounts at issue, capped at US$34,000, split among the parties, for disputes over US$500 millions
  • Arbitrators free to set up their fees on a case by case basis but must disclose their rates up front during the selection process

Integrity

  • Arbitrators must be independent and neutral
  • Arbitrators must disclose potential conflicts of interest and their availability up front during the selection process
  • Innovative and award winning “Screened Selection Process” for party-appointed arbitrators – Arbitrators are appointed without knowing which party made the selection to enhance neutrality and independence
  • Broad confidentiality applies to all participants: parties, arbitrators and CPR
  • Tribunals must apply the rule of law
  • Awards must be written and reasoned and they are reviewed for format, clerical, typographical or computational errors before being issued by CPR
  • Arbitrator challenges are decided by an independent Challenge Review Panel

CPR’s Panel of Distinguished Neutrals comprises those among the most respected and elite arbitrators in the US and around the world. It includes prominent attorneys, retired judges, academics, as well as highly-skilled business executives, legal experts and dispute resolution professionals who are particularly qualified to resolve all business disputes including those involving multi-national corporations or issues of public sensitivity. Focusing in more than 30 practice areas, CPR’s esteemed arbitrators have provided resolutions in thousands of cases  worldwide. Click here for more information about CPR’s Panel of Distinguished Neutrals.

FAQs

  • How do I file a case?  To file a case, email your Notice of Arbitration to cprneutrals@cpradr.org.  Include contact information for all parties, including e-mail addresses. You will also need to pay a US$1,750 non-refundable deposit by wire or credit card.  As soon as you file your Notice of Arbitration, CPR will contact you.
  • What are the key features of the 2019 CPR Administered Arbitration Rules? You can click here to learn more about the key features of the rules.
  • How do I find out more about the administrative fees? For the full schedule of fees, visit our website here.
  • How are arbitrator challenges decided? Challenges on the ground of independence and impartiality are decided pursuant to the CPR Challenge Review Protocol.
  • How to I contact the case management team if I have additional questions? Contact Alveen Shirinyans at ashirinyans@cpradr.org or Helena Tavares Erickson at herickson@cpradr.org

The CPR European Advisory Board presents: “Meet CPR Distinguished Neutrals Based in Europe: Bernardo M. Cremades Sanz-Pastor”

/ CPR Staff / 2 Comments
File634497153616234884

Bernardo M. Cremades Sanz-Pastor

The CPR European Advisory Board (EAB) is proud to introduce its new CPR Speaks blog series: “Meet CPR’s Distinguished Neutrals in Europe.”  CPR’s panel of neutrals contains many experienced and skilled Neutrals, acting as arbitrator and/or mediators in dispute resolution around the globe.  Through a Q&A, covering some of the main and hot topics discussed in the world of international disputes resolution, this new blog posts series offers you an insight into the views of some of Europe’s leaders in the field. 

Bernardo M. Cremades Sanz-Pastor is the first Europe-based CPR Distinguished Neutral to have answered our Q&A. Enjoy the read and please feel free to reach out to the featured Distinguished Neutral or the authors of these posts for any questions.

By Kathleen Fadden (consultant with AMGEN) and Vanessa Alarcon Duvanel (King & Spalding LLP)

Bernardo Cremades is the founding partner of Spanish law firm B Cremades y Asociados based in Madrid.  He is without doubt a pioneer in the field of international arbitration and enjoys world-wide recognition.  His experience includes international commercial and investment arbitration.  He regularly acts as arbitrator in Spanish domestic and international disputes relating to commercial contracts and investment protection.  In addition, Bernardo regularly speaks at conferences on topics of international arbitration around the world.  As a commercial lawyer was involved in some of Spain’s most important M&A transactions.

Bernardo kindly agreed to grant us an interview for the CPR EAB blog series profiling CPR Neutrals in Europe.  His insights are a must read for anyone regardless of the level you find yourself in your career. We thank Bernardo Cremades for his honesty and the time he has dedicated to sharing his experience and insights.

  1. How did you get your start as a neutral?

When I was young, I lived a very quiet life dedicated exclusively to university teaching and research.  Despite my youth, the Court of Arbitration of the International Chamber of Commerce nominated me to preside over an arbitral tribunal in Vienna, in the proceeding known by its Parties NORSOLOR v. PABALK.  It was a commercial dispute regarding a purchase-sale and technical assistance contract between a Turkish and a French company.  As the arbitration was taking place in the city of Vienna, and no contractual provision gave the arbitral tribunal further powers, we had to arbitrate in law. The contract did not specify the applicable law, so the option of applying French or Turkish law was not possible as we would have reached diametrically different conclusions depending on which one was selected. This was not satisfactory. We thought the best solution would be to apply the general principles of law, invoking the Lex Mercatoria. Once the arbitration award was issued, one of the parties appealed for the annulment of the award before the Austrian courts, eventually reaching the Supreme Court. The argument in support of the annulment was that a tribunal, which was obliged to render a decision in accordance with the law, had used the general principles of law. In the challenging party’s opinion, this converted an arbitration in law into an equity decision. The Supreme Court understood that, in international law, the general principles are a source of law and, therefore, considered that our arbitration decision was correct. When one of the parties subsequently attempted to execute the award in Paris, the same problem arose: the argument was that our decision converting the arbitration into one in equity violated public order. It reached the Court of Cassation, which reiterated the doctrine admitted by the Austrian Supreme Court: the application of the Lex Mercatoria did not transform the arbitration; it remained de jure due to the legal nature of the general principles of International Law [Soc. Pabalk Ticaret Ltd Sirketi v. Soc. anon. Norsolor, Cour de Cassation (1re Ch. Civ.), 3 October 1984′, Journal of International Arbitration, (© Kluwer Law International; Kluwer Law International 1985, Volume 2 Issue 2) pp. 67 – 76]. Our decision sparked numerous doctrinal opinions and generated a lively debate. My quiet, academic life transformed into an active professional life dedicated to the world of arbitration.

  1. Who is your dispute resolution hero/heroine?

In an arbitration between the company FIAT and the Government of Spain in which the future of the SEAT car factory was discussed, I was fortunate to work with a co-arbitrator who would mark my arbitration conduct in the future. I am referring to Berthold Goldman, who can undoubtedly be considered the father of modern international arbitration. After the different hearings we held with the parties, the tribunal deliberated at length. Berthold Goldman defended with passion the claims of the FIAT company until the President tipped the balance in favour of my views. From that moment, Professor Goldman’s enthusiasm became an example of chivalry as he took me by the arm through one of the halls where we were deliberating and told me: “you have won, and you can rest assured that the arbitration award is going to be issued by unanimity.” This is an example that I have always remembered when faced with the temptation to issue a dissenting opinion.

  1. What is the one advice you want to give to the younger generation looking for a first appointment as neutral?

Join a team and learn the profession of arbitrator, acting as secretary to the tribunal, or as counsel under the direction of an experienced arbitrator. Time will make you an arbitration expert, able to consider flying solo.

  1. Were you ever the first in doing something?

 The award mentioned above in response to the first question where we invoked the Lex Mercatoria as the applicable law opened a wide discussion and generated controversial points, especially in the debate between arbitration experts of Anglo-Saxon and continental law.

In the ABBOTT vs. BAXTER dispute, under CPR administration, we based our decision on good faith when the applicable law was that of Ontario (USA) [Baxter Int’l Inc. v. Abbott Labs., 540 U.S. 963 (2003)]. This is what we understood from an international litigation on trademark law and the award was ratified by the US Supreme Court.

In the HESHAM TM AL WARRAQ arbitration against the Republic of Indonesia [Hesham T. M. Al Warraq v. Republic of Indonesia, UNCITRAL, Final Award, 15 December 2014], we used as a basis to accept jurisdiction, the ICO (Organization of Islamic Cooperation) Treaty, the second largest intergovernmental organization. Our decision set a precedent for numerous subsequent arbitrations.

In the world of investment arbitration, the LANCO case against the Argentine Republic opened the door to investment protection arbitration in cases where the arbitration agreement consisted of the public offer for submission to arbitration by the receiving State of the investment, and for the legitimate investor to initiate an arbitration proceeding for the alleged breach of the treaty by the receiver of the investment [Lanco International Inc. v. The Argentine Republic, ICSID Case No. ARB/97/6]. In this arbitration, different issues were raised that will later be the subject of numerous awards, such as the principle of attribution of responsibilities to the State regarding breaches of intra-State public entities.

The SALINI arbitration against the Kingdom of Morocco extended the concept of investment to administrative concessions [Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4]. Investment protection arbitration had been specially designed with a view to litigation derived from investments related to natural resources. After SALINI, the concept of investment protected by arbitration grew.

In the LUCCHETTI arbitration against the Republic of Peru [Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v. The Republic of Peru, ICSID Case No. ARB/03/4], arbitration protection was questioned when corruption was involved in making the investment, on the grounds that those whose hands are stained should not be subject to any international protection, including arbitration.

  1. What makes your conflict resolution style unique?

As in any profession, I believe that it is most important to be well educated and then to devote many hours to preparation. The arbitrator must read all the submitted documents carefully and be able to respond to the parties’ requests. There is nothing worse than storing the documentation and only dealing with it when the time comes for the hearing. Many arbitrations are unnecessarily lengthy because the arbitrators do not know the substance of the matter sufficiently well to make decisions as proceedings progress.

  1. What was the most difficult challenge you faced as a neutral?

The main challenge of the arbitrator today is to expedite the proceeding.  Today arbitration has ceased to be the artisanal activity it was many decades ago. We are facing a large arbitration industry.  To prevent that the proceedings be excessively long, the arbitrator must coordinate the agendas of the parties and their lawyers; respond promptly to excessively large document discovery requests; and try to minimize the duration of the hearings. The theatricality of certain “cross-examinations” should also be interrupted when deemed unnecessary and the abundance of witnesses and experts is sometimes unnecessary.

  1. What is the most important mistake you see counsel make?

In the written phase, counsel can write excessively long and repetitive documents, when they should perhaps concentrate their efforts more on writing an executive summary for ease of reading. In the oral phase, counsel often forgets that his or her main mission is to convince the arbitrators and not to be so aware of the transcript or the client present in the meeting room.

  1. If you could change one thing about commercial Arbitration, what would it be?

Every effort should be made to reduce the duration and the excessive costs (that can sometimes be scandalous) of arbitration proceedings.

  1. Some specific topics:

    a) What is your approach to cybersecurity and data protection in international dispute resolution?

 The requirements of cybersecurity and data protection in arbitration require both lawyers and arbitrators to strengthen the technological infrastructure of their firms. Before, during and after the arbitration there are security and protection rules that must be firmly maintained as arbitration frequently deals with very sensitive topics requiring strong guarantees.

b) Taking of evidence in arbitration: are you IBA Rules or Prague Rules? And why?

The IBA Rules emerged – and I can testify to this since I was part of the drafting team of the first version – as a result of a real need to unify criteria between common law and continental law jurists. It is rare to see an arbitration proceeding today without, at least, a reference to the IBA Rules, which have become a true customary international procedural law. In fact, there is much talk about the Prague Rules in conferences and colloquiums, but I have never seen them applied or invoked in arbitration proceedings. The authors of the Prague Rules wanted to draw attention to the excessive costs and duration of the arbitration proceedings and they can serve as a wake-up call in the daily life of our arbitrations or even be taken into account when modifying the IBA Rules in the future, giving greater space to criteria from civil law legal systems. The message of the Prague Rules is very interesting, but in practice its application should be questioned, simply by analysing the fourth paragraph of its first article when it states that “At all stages of the arbitration and in implementing the Prague Rules, the arbitral tribunal shall ensure fair and equal treatment of the parties and provide them with a reasonable opportunity to present their respective cases.”  If the aim with these rules was to avoid the due process paranoia, different articles of these rules, such as the aforementioned article, question their effectiveness – which is why arbitrators are reluctant to use them. It cannot be forgotten that the purpose of the IBA Rules was limited to the taking of evidence, while the title of the Prague Rules is “Rules on the Efficient Conduct of Proceedings in International Arbitration”.

  1. What do you see as the next “big thing” in global dispute prevention and resolution?

An important event in the world of dispute prevention and resolution is the emergence of third-party funding. Many arbitration proceedings are initiated today because the claimant and possibly the defendant have funding to undertake costly arbitration proceedings and subsequent court proceedings. Third-party financing is acquiring a very important dimension and is introducing the system of syndicated foreign currency loans to the financing of large litigations. Litigation has become a financial asset, and funders monetize their financing activity with the outsourcing of parts of the financing. Litigation and especially arbitration awards are bought and sold. A true secondary market has been created for the financial assets that arbitrations have become.

  1. For which types of conflicts would you recommend ADR?

I consider that ADR is recommendable for particularly personalized disputes. In terms of investment protection, it is unthinkable to reach agreements with sovereign states, which would undoubtedly be analysed in the country in question under the inquisitorial magnifying glass of corruption. I believe that disputes with consumers or those that occur in family businesses are very suitable for resolution through ADR. Equally, agreements between companies whose directors have full powers are good ADR candidates, since the positive result of a conciliation or mediation is only possible when those acting on behalf of the companies have sufficient decision-making capacity to reach a negotiated agreement. In construction disputes and, in general, disputes in which many awards are discussed, dispute boards are highly recommended. The periodic presence of the dispute board members from the beginning of the construction solves many problems that are not intelligible over time.

  1. In your view, what makes CPR unique?

Its speed. Arbitration administration centres have become excessively bureaucratic institutions, with internal policies regarding the appointment of arbitrators which are not always in the best interests of the parties to the dispute. Arbitration administration centres are service companies and as such they must compete with others; their speed of action is probably the most attractive asset to their clientele.

  1. Do you have an anecdote you would like to share? 

There is much talk about the clash of cultures in international arbitration and it is undoubtedly greatly exaggerated. I remember many years ago at the meetings of the former ICCA, the representative of China, the famous and much-loved Professor Tang, insisted that I should participate in arbitrations in China to learn the difference between how arbitration proceedings are run in different cultures. I was appointed arbitrator under CIETAC to resolve a dispute between a French car company and its distributor in China. Professor Tang presided over the tribunal and from the first day he tried to get the parties to reach agreements under his mediation. On the third day, after seeing that the President’s attempts to mediate between the parties were unsuccessful, both parties formally told us that if they had gone to CIETAC it was precisely for us to resolve their differences in arbitration, and could we please set aside the conciliation and mediation attempts – which we did. It was a good lesson for me that maybe the much talked-about cultural differences are not so true in practice. A good and experienced president of the tribunal should know when he or she can help the parties to reach an agreement and when the limits of arbitration prevent it.

 

Approach of the European Union to Bilateral Investment Treaties Concluded Between the Member States: Initial Thoughts on Draft Plurilateral Agreement for the Termination of Intra-EU BITs

/ CPR Staff / Leave a comment

 

eabpolisharticleEU flag

By Krzysztof Wierzbowski[1] and Aleksander Szostak[2]

The compatibility of investment protection treaties entered into between EU member states (the ‘Intra-EU BITs) with the regulatory framework of European Union law has been a controversial issue for quite some time. It can be recalled that the decision of the Court of Justice of the European Union (the ‘CJEU’) in Achmea (formerly Eureko) v. Slovakia (the ‘Achmea Decision’) declared investor-state dispute settlement clauses in intra-EU BITs as contrary to EU law. In particular the CJEU stated that disputes before arbitral tribunals based on intra-EU BITs may relate to matters of interpretation and/or application of the EU law. While a preliminary ruling procedure under Art. 267 TFEU enables courts and tribunals of member states to file a request pertaining to the interpretation and application of the EU law, no arbitral tribunal constitutes a court or tribunal under the meaning of the provision and, therefore, such arbitral tribunal cannot request a preliminary ruling.

As decisions of arbitral tribunals are final and, therefore, in principle, cannot be appealed to the national courts, the CJEU has found here a threat to proper interpretation and application of the EU law, which in turn has an adverse effect on the autonomy of the EU law .

The direct implication of the Achmea Decision is that investor-state arbitrations based on intra-EU BITs are not compatible with the EU law and should not be initiated. This may have a severe impact on foreign investors engaging in the European market and the foreign direct investment protection system in the EU.

In line with commitments contained in political declarations issued by the representatives of the governments of the EU member states on 15 January 2019, EU member states have quite recently reached an agreement on the text of a plurilateral treaty for the termination of intra-EU BITs.[3] Although it appears that the official text of the plurilateral treaty is not publicly available, its draft text has been leaked (the “Termination Treaty”) and may provide much needed insight into the future shape of EU policy towards protection of EU investors in the EU and the fate of intra-EU BITs. [4]

The fate of intra-EU BITs

According to the text of the Termination Treaty, intra-EU BITs listed in an annex to the Termination Treaty are to be terminated and shall not produce legal effects. Intra-EU BITS will therefore be terminated by means of mutual consent of contracting parties through a plurilateral treaty, which may prove to be the most efficient method of terminating all of intra-EU treaties in a consistent manner.

As a matter of certain standard, investment protection treaties provide for a solution applicable in the case of termination of the treaty. Investors enjoy continued protection for a set period of time, thereby not being surprisingly deprived of certain rights that might have been taken into account when the investment decision was made and implemented.

Interestingly, the Termination Treaty provides that such sunset clauses contained in intra-EU BITs, gguaranteeing the continued protection of investments existing prior to the termination of the relevant BIT, shall be terminated together with respective intra-EU BIT and shall not produce legal effects. Whether such termination by the Termination Treaty, without modification of intra-EU BITs by removing the sunset clauses from the legal framework and, subsequently, terminating each of BITs entirely, will be effective may be debatable (in particular by affected investors).

The Termination Treaty adds a degree of uncertainty with respect to the application of the Energy Charter Treaty (the ‘ECT’) in intra-EU relations. The Termination Treaty provides that it does not cover intra-EU proceedings initiated on the basis of the ECT and that this matter will be dealt with at a later stage. This may put many EU member states and foreign investors currently engaged, or considering engaging in intra-EU proceedings based on the ECT, in a disadvantageous position. It is noteworthy that recent years have witnessed a number of intra-EU ECT claims directed by foreign investors against for instance Spain (concerning reform of renewable energy sector).

The Termination Treaty appears to endorse the view that the legal framework of the EU sufficiently protects investors engaging in the European market. After all, by exercising some of the fundamental freedoms, such as freedom of establishment and free movement of capital, investors from EU member state fall within the scope of application of the EU law and enjoy protection under inter alia primary and secondary EU law as well as general principles of EU law.[5] It may however be doubtful that EU law and the national law of member states will always be perceived to de facto guarantee effective procedural and substantive protection to foreign investors engaging in the European market. One may identify a number of concerns associated with the potential bias of national judges, political pressure exerted by governments, corruption and malfunctioning of the domestic judiciary in general, which indicates that the view expressed in the Termination Treaty may be debatable.

One size does not fit all: concluded, pending and new arbitration proceedings

Although the Termination Treaty stipulates that all intra-EU BITs listed in an annex shall be terminated and shall not produce legal effects, it additionally addresses the status of arbitration proceedings under intra-EU BITs. In particular, the Termination Treaty distinguishes between three categories of arbitration proceedings under intra-EU BITs:

  • New arbitration proceedings

The Termination Treaty defines these as arbitration proceedings initiated on or after 6 March 2018 (i.e., on or after the date of Achmea Decision).

The Termination Treaty stipulates that arbitration clauses in intra-EU BITs shall not serve as legal basis for new arbitration proceedings as defined above.[6] This indicates that any intra-EU investment treaty arbitration initiated after the Achmea Decision will be declared as ineffective.

  • Concluded arbitration proceedings

The Termination Treaty defines these as:

Arbitration Proceedings which ended with a settlement agreement or with a final award issued prior to 6 March 2018 [the date of Achmea Decision] where:

  1. the award was duly executed prior to 6 March 2018, even where a related claim for legal costs has not been executed or enforced, and no challenge, review, set-aside, annulment, enforcement, revision or other similar proceedings in relation to such final award was pending on 6 March 2018, or
  2. the award was set aside or annulled before the date of entry into force of this Agreement;[7]

These intra-EU investment treaty arbitration proceedings will not be affected by the Termination Treaty. Accordingly, any award, final decision, or settlement issued before 6 March 2018 will not be considered as invalid, or not effective.

  • Pending arbitration proceedings

The Termination Treaty defines pending arbitration proceedings as arbitration proceedings initiated prior to Achmea Decision (i.e. 6 March 2018), which do not qualify as concluded.[8]

For this category of arbitration proceedings, the Termination Treaty provides a mechanism which aims at assisting the parties to the pending proceedings in finding an amicable settlement of a dispute – the so-called Structured Dialogue.[9] At the outset, it is interesting to note that the Structured Dialogue mechanism to a large extent resembles procedure for investor-state mediation.

The mechanism enables foreign investors to initiate settlement procedure with a state party to the pending arbitration proceedings within six months from the termination of intra-EU BITs, thereby providing the legal basis for respective pending arbitration proceedings to become converted to or substituted by, the specific  kind of mediation.[10] The settlement procedure is overseen by an impartial facilitator whose task is to find an amicable, lawful and out of court and out of arbitration settlement of the dispute. Settlement of the dispute shall be reached within 6 months.

While the facilitator shall be designated by an agreement of parties (i.e. foreign investor and state), and shall possess in-depth knowledge of EU law, the Termination Treaty does not seem to require an in-depth knowledge of public international law, or, more importantly, international investment law.[11] Although it is doubtful that parties would appoint a facilitator that is not an expert in public international and international investment law, the lack of express requirement in this respect may lead to undesirable situations that may undermine of the Structured Dialogue mechanism.

Interestingly, the Termination Treaty provides an additional option to foreign investors that enables them to seek the judicial remedies under national law against a measure adopted by the state, such measure being subject to such initiated arbitration proceedings. In such case, national time limits for bringing legal action do not apply provided that investor satisfies several conditions.[12] It is noteworthy that the provisions of intra-EU BITs that initially provided legal basis for the parties to settle their dispute, will not be considered as part of applicable law in proceedings before a national court. Clearly, this implies that investors will not be able to base their claims on substantive provisions of intra-EU BITs, which may severely limit the possibility to lodge a successful claim against a state.

Pending and New Arbitration Proceedings: what about recognition and/or enforcement?

The Termination Treaty provides that state parties to intra-EU BITs on the basis of which pending and/or new arbitration proceedings were initiated, shall inter alia request the national court of EU state and any 3rd state, to set aside an award issued in such proceedings, or to annul it or to refrain from recognizing and/or enforcing it, as applicable.[13]

Therefore, many arbitration awards issued after Achmea decision will, at least in EU member states, be ineffective.

Although the Termination Treaty covers intra-EU BITs only (as listed in the Annex to the Treaty), it deserves to be noted that one may extend the reasoning of the CJEU in Achmea Decision regarding incompatibility of investor-state dispute settlement clauses in intra-EU BITs with EU law to BITs concluded between EU member states and 3rd states.

In particular, disputes covered by such BITs and settled through investor-state arbitration may relate to matters concerning treatment of foreign investors engaging in the European market and, thereby, interpretation and application of EU law. While it is rather doubtful that tribunals constituted on the basis of such BITs will reject jurisdiction over a dispute, there is a threat to effective recognition and enforcement in the European Union of awards issued in such arbitrations.

The national court faced with a request for recognition or enforcement of such arbitral award, or the CJEU faced with a request for a preliminary ruling, may declare that the arbitration between a non-EU foreign investor and EU member state adversely affects the autonomy of the EU law and, therefore, recognition and enforcement of such awards should be refused. It can be expected that a request for a preliminary ruling from the CJEU on this matter will be made.

This would have a devastating impact on the effectiveness of guarantees contained in such BITs. In addition, this approach, if adopted, would severely impact recognition and enforcement mechanism contained in the ICSID Convention. Namely, Art. 54 of the ICSID Convention provides that each contracting state shall recognize an award rendered by an ICSID Tribunal as binding and enforce the pecuniary obligations imposed by that award as if it were a final judgment of a court where recognition is sought. As the mechanism does not leave room for any ground on which the recognition could be refused, potential refusal by national courts to recognize awards issued in arbitrations under ICSID rules would adversely affect the effectiveness of the ICSID Convention and possibly pose a threat to its existence.

Concluding remarks

Although the official text of the Termination Treaty is not publicly available, its leaked draft may serve as a valuable source indicating the fate of intra-EU BITs.

Some of the solutions provided under the Termination Treaty, such as the mode of termination of legal effects of sunset clauses, or retroactive effect of the Termination Treaty with respect to the claims that arose and could constitute the basis of New Arbitration Proceedings, may be controversial and will most probably be contested by affected investors. It remains a matter of separate discussion what avenue the investors may have in order to effectively contest the ex post deprivation of their rights.

Some investors may decide to engage in the treaty shopping practice and seek protection under BITs other than intra-EU ones. It remains an open question whether BITs concluded between EU member states and 3rd states will be affected by the reasoning of the CJEU in Achmea Decision.

ENDNOTES

[1] Krzysztof Wierzbowski is Senior Partner at Eversheds Sutherland Wierzbowski in Warsaw, Poland.

[2] Aleksander Szostak LL.M. is a lawyer at Eversheds Sutherland Wierzbowski.

[3] See. Statement: EU Member States agree on a plurilateral treaty to terminate bilateral investment treaties [24 October 2019] available at: https://ec.europa.eu/info/publications/191024-bilateral-investment-treaties_en.

[4] Draft text of the treaty is available at: https://www.iareporter.com/articles/revealed-previously-unseen-draft-text-of-eu-termination-treaty-reveals-how-intra-eu-bits-and-sunset-clauses-are-to-be-terminated-treaty-also-creates-eu-law-focused-facilitation-p/.

[5] See. Point XI of the preamble to Termination Treaty.

[6] Art. 5 Termination Treaty.

[7] Art.1(4) Termination Treaty.

[8] Art.1(5) Termination Treaty.

[9] Art.9 Termination Treaty.

[10] Art.9(1) Termination Treaty.

[11] Art.9(8) Termination Treaty.

[12] Art.10 Termination Treaty.

[13] Art.7 Termination Treaty.

The views expressed in this article are those of the authors and do not necessarily reflect the views of The CPR Institute.

CPR Takes to the Web As ADR Continues in the Face of the Coronavirus Crisis

/ CPR Staff / 1 Comment

By Anne Muenchinger, Federica Romanelli & Michael Hotz

CPR on Monday hosted an online event, ADR in the Time of COVID-19: How Neutrals & Advocates Can Use Zoom for Mediations & Arbitrations, a 90-minute training dedicated to helping neutrals and advocates use the Zoom Professional online meeting platform, and how to integrate online tools into alternative dispute resolution practices.

Chicago-based attorney Thomas Valenti, an arbitrator and mediator who heads his own firm, and is a member of CPR’s Panels of Distinguished Neutrals, conducted the session.  Held via the platform he was discussing, Valenti showed more than 200 participants the ins and outs of Zoom Professional and how to adapt it for ADR-centric tools such as preliminary hearings, screening arbitration expert witnesses, and private party-mediator caucuses during interparty negotiations.

Monday’s lunchtime session was a follow-up to a March 17 online CPR Institute Mediation Committee where committee members, including Valenti, compared online platforms and electronic mediation techniques.

Details of both sessions are below, as well as information about an American Bar Association online ADR program held last week.

* * *

At the March 30 program, Valenti led a discussion centered around security issues, a key concern for neutrals in using online tools.  Valenti explained the many Zoom features that control access to information, including “end-to-end encryption” of meetings; identification processes; password protection for meetings; waiting rooms that control meeting attendance; the ability to lock meeting rooms once all parties are present, and auditory signals when someone enters or leaves the room.

Valenti discussed essential resources for guidance in the process of moving to an online forum, including  the ICCA-NYC Bar-CPR Protocol on Cybersecurity in International Arbitration, which provides a framework for information security measures for individual arbitration matters. He also noted Zoom’s own white paper and documents on the subject.

Valenti strongly advised using the Protocol’s Schedule A, which contains a “Baseline Security Measures” checklist and provides neutrals with the right questions about their online practice. The spirit of the Protocol, he said, is to offer a framework within which neutrals can make decisions and best adjust online tools to their individual practices and client needs.

Valenti noted the CPR Institute’s participation in the Protocol’s construction by its Working Group. CPR representatives included Senior Vice President Olivier P. André, along with Hagit Elul of Hughes Hubbard & Reed, and Micaela R.H. McMurrough, Covington & Burling, both New York-based partners at their respective firms.

Several Zoom features were explained and demonstrated, including breakout rooms, which can be used for private meetings and caucuses; screen sharing and white boards, which allow for information display or form filling on the spot, and document annotation by all attendees.

A recording of the session will be available soon on the CPR Institute’s new website Resources coronavirus clearinghouse page, ADR in the Time of COVID-19.

Valenti warned that users must recognize the potential shortcomings of online ADR. The assessment of body language will be limited, and there are no guarantees that there is no one sitting off camera or that the meeting is not being recorded.

Meeting participant Dean Burrell, of Morristown, N.J.’s Burrell Dispute Resolution, suggested a tactic he uses to deal with potential issues: He said he asks the parties to scan the room every so often to confirm no one else is present.

Another concern often raised is whether the session is being recorded; Valenti pointed out, however, that this concern is similar to any other mediation or arbitration with the use of smartphones. Hosts should acknowledge that the process is not perfect, but that risks can be minimized.  He said hosts should ask participants if someone else is in the room and not to record the session.

But beyond the  COVID-19 crisis, online ADR practice provides a useful tool for reducing costs and improving efficiency.

For arbitrators, online tools such as Zoom can help them stand out among tech-averse peers, and market themselves as having the ability to continue to push matters forward.

For mediators, online tools should be an addition to an experienced mediator’s set of skills, and can easily be used to set up documents, type in agendas, and set goals during a session. Hosts can also pass control to another party, and use different colors to identify each participant.

Valenti’s demonstration featured a video with Giuseppe Leone, founder of Virtual Mediation Lab, and showed that online mediation is not a new phenomenon. But the COVID-19 crisis is providing the ADR world with an opportunity to move itself forward with technology—not just as a substitute, but as a way to improve its practices.

Valenti recommended that the session host prepare all necessary documents beforehand and have them available on the host computer before beginning the online session, ready for display and sharing. Additionally, mediators should be more conscious about time when conducting an online, as the experience initially will be different from one in a physical space.

Hosts should also be conscious of the level of skill and familiarity that parties and counsel have with these online tools.

Valenti suggested using the initial pre-hearing conference, as set out under CPR Institute Administered Arbitration Rule 9.3, and in the 2019 CPR Rules for Administered Arbitration of International Disputes as an opportunity to test each participant’s level of comfort.

So an easy way to introduce online tools is to switch from a phone call to a video conference for the initial prehearing.

* * *

The genesis of Monday’s CPR members and neutrals-only Zoom training was CPR’s March 17th Mediation Committee meeting.

The Mediation Committee meeting featured two speakers–Kathleen Scanlon, Chief Circuit Mediator for the Second U.S. Circuit Court of Appeals in New York, and James South, Managing Director, Senior Consultant and Mediator for the Center for Effective Dispute Resolution (CEDR) in London—who presented their perspectives on a variety of mediation issues, including a comparative look at mediation practices on either side of the Atlantic, before focusing on mediating during the coronavirus pandemic.

The Committee then heard how CAMP (the Second Circuit’s mediation and settlement program), CEDR, CPR and the New York District office of the Equal Employment Opportunity Commission are dealing with mediations through the COVID-19 pandemic.

Kathleen Scanlon began by discussing the benefits of Sonexis (see sonexis.com) as a conferencing system.  She explained that it delegates pin numbers to each participant and allows the mediator to create private rooms for each party and join them as needed. Parties can then notify the mediator when they want to talk with the mediator.

She said there hasn’t been too much difference, anecdotally, between the success rates of mediating in person and with teleconference. Still, the video/audio approach leads to more accidental interruptions. It also decreases the ability to read body language, which can affect trust. The teleconference process also can be more tiring for the mediator to manage.

CEDR’s James South then stated that he uses Zoom.  Meeting participant Thomas Valenti agreed, also recommending the business version of Zoom to conduct more complicated mediations—which prompted the Monday, March 30 session he led, discussed above.

The Mediation Committee meeting participants, who like the March 30 session also participated by Zoom, agreed that it is critical that the conferencing technology used complies with privacy and confidentiality rules like Europe’s General Data Protection Regulation (best known as the GDPR). It also was recommended that the parties should consult the ICCA-NYC Bar-CPR Cybersecurity protocol.

James South noted that many mediations had been going on normally during the early stages of the coronavirus pandemic, but that he expected that to change over time. He said he has found that parties have been flexible, and been willing to move to video conferencing. He noted that he is unsure if this will survive the crisis, or is only due to the current state of affairs.

South, however, was confident that any reduction in mediation will return to normal levels.

* * *

Committee members then had a lengthy discussion of the issues surrounding the health crisis.  CPR Institute Senior Vice President Helena Tavares Erickson commented that she had provided to members of CPR’s Panels of Distinguished Neutrals a list of services that they could use to mediate effectively during the crisis.

Erickson noted that CPR Dispute Resolution Services offers its neutrals the option of using a secure document exchange, which allows for online text chat in different chat rooms. (For CPR Institute Dispute Resolution filing details, see www.cpradr.org/dispute-resolution-services/file-a-case.)

Meeting participant David Reinman, who is supervisory ADR coordinator of the New York District’s U.S. Equal Employment Opportunity Commission office, reported that his unit has a program that is currently handling all mediation by video or phone. The EEOC also is allowing parties to reschedule if they insist on in-person mediation. Parties who need translators or other special accommodations may invoke applicable proceedings, too.

Tom Valenti asked about screening procedures when conducting in-person mediations. It was noted that many law firms are forcing people to sign waivers stating that they hadn’t been in at-risk places. Given current advisories and shutdowns, however, it’s unclear that such waivers are effective. If parties want to continue doing face-to-face mediation—which has ceased entirely in many shutdown locations for the duration of the emergency–best practice would be to state that they haven’t been in contact with anyone who is infected.

Meeting participants noted, however, such mandatory declarations on disclosing other parties’ infection status could potentially violate HIPAA rules.

Various other online platforms and training options were compared among the participants near the meeting’s conclusion.

* * *

Beyond CPR’s online training event and meeting, and the resources noted, including the new CPR Institute website Resources clearinghouse page, ADR in the Time of COVID-19, others in the legal world and the dispute resolution community have tackled the move online.

For example, the American Bar Association webcasted a panel of experts on continuing with mediations, arbitrations and similar ADR commitments while coping with coronavirus.

The 90-minute March 20 web panel, “ODR in the ERA of COVID-19: Experts Answer Your Questions,” featured panelists including Hamline-Mitchell School of Law Prof. David Larson; online dispute resolution pioneer Colin Rule, who is a Stanford Law School lecturer, and University of Missouri School of Law Prof. Amy Schmitz. It also was hosted on Zoom.

The panelists shared a presentation while providing useful links on a side chat and taking Q&A from the attendees on another window—an electronic version of social distancing that has been repeated, and is rapidly become an ADR standard operating procedure.

The panel provided a list of advice for neutrals wanting to add tech tools to their toolbox.  It focused on accessibility; preparing lists; ensuring a competent approach; accessing live assistance as needed; analyzing online providers (see, e.g., http://odr.info/provider-list/); taking stock of the role for non-verbal communication; assessing whether the disputants will communicate synchronously; confidentiality; considerations for designing an ODR system; ensuring fairness; and ethical considerations.

The ABA panel concluded on ODR resources, providing the following links:

  • Cyberweek 2019; the NCTDR hosts Cyberweek annually at its website.
  • com, a collaborative resource guide.
  • Amy J. Schmitz and Colin Rule, The New Handshake: Where We Are Now (June 27, 2017). International Journal of Online Dispute Resolution 2016 (3) 2; University of Missouri School of Law Legal Studies Research Paper No. 2017-18. Available at SSRN: https://ssrn.com/abstract=2991821

* * *

Muenchinger is a CPR Institute Spring 2020 intern, and an LLM student at the Benjamin N. Cardozo School of Law at Yeshiva University in New York City, focused on the March 30 session discussed in this article.  The section on the CPR Mediation Committee meeting was prepared by CPR Institute Spring 2020 intern Michael Hotz. The section on the ABA seminar was prepared by CPR Institute Spring 2020 intern Federica Romanelli. Alternatives’ editor Russ Bleemer assisted with the research and writing.

 

 

Under Consideration: The Supreme Court May Be Ready to Tackle Arbitrability–Again

/ CPR Staff / Leave a comment

By David Chung

A Fifth Circuit case on whether a matter was correctly sent to arbitration was distributed for conference at the U.S. Supreme Court for the fifth time over the past two months on Friday, March 20, so the Court could consider hearing it.

The case didn’t appear on this morning’s order list, but that fact alone may be indicative of a lot more arbitration at the nation’s top court.

Any arbitration case before the Court would gain notice on its own in the ADR world.  But the new petition for certiorari is even more noteworthy because the Court had appeared to have decided the issue just a little more than a year ago in its previous term.  Henry Schein, Inc., et al. v. Archer and White Sales, Inc., 139 S.Ct. 524 (2019) (available at http://bit.ly/2YLDkWQ), the Court held unanimously that parties to a contract have the ultimate say in whether to have an arbitrator or a court resolve disputes on questions of arbitrability.

But Schein’s main holding was that a court couldn’t refuse to enforce arbitration because it believed the claims for arbitration were “wholly groundless,” and the nation’s top court sent the case back on remand to the Fifth U.S. Circuit Court of Appeals.

The remand order was a step before actual arbitration, however.  The Court asked the Fifth Circuit to decide whether the contract’s delegation clause really pointed to an arbitrator deciding arbitrability.

The appeals panel looked at the contract again and said it didn’t, and found the decision was for the courts, again.

And the defense petitioned the Supreme Court to hear Schein, an appeal that was filed at the end of January and has not yet made it to a Court conference.  See Philip J. Loree Jr., “Schein Returns: Scotus’s Arbitration Remand Is Now Back at the Court,” (Feb. 19) (available at https://bit.ly/2U8ZumI); see also, Philip J. Loree Jr., “Schein’s Remand Decision Goes Back to the Supreme Court. What’s Next?” 38 Alternatives 54 (April 2020) (available next week at altnewsletter.com and on Lexis & Westlaw; CPR Institute membership access after logging in at www.cpradr.org/news-publications/alternatives).

But while Schein was being relitigated, at the same time and on the same issue about the extent of the reach of the clause that delegates arbitration decision making, The Rams Football Co. LLC v. St. Louis Regional Convention & Sports Complex Auth., No. 19-672, already was in front of the Court for consideration on whether it should be heard.

Closely mirroring Schein, the Rams issue, according to the team’s cert request petition is

Whether the Federal Arbitration Act permits a court to refuse to enforce the terms of an arbitration agreement assigning questions of arbitrability to the arbitrator if those terms would be enforceable under ordinary state-law contract principles in a non-arbitration context.

The case has made it to conference stage, repeatedly, without a denial or a “cert granted” or, indeed, any procedure other than rescheduling. The cert petition is dated Nov. 21, 2019, and the counsel of record is Paul Clement, a Washington, D.C., partner in Kirkland & Ellis who is a frequent participant in Supreme Court cases who, according to the Above the Law blog, argued his 101st case at the Court early this month.  See “Neil Gorsuch’s Frustration With Kirkland & Ellis Partner Paul Clement On Full Display,” Above the Law (March 4) (available at https://bit.ly/39dZS7A).

The Court had denied a stay in the case in October without comment.

Despite a government shutdown, including much of the judicial branch, the Court, after canceling oral arguments indefinitely, has continued its normal business of opinion writing and conferences, out of which come its orders, including cases it agrees to hear, and cases it denies. The Court’s Friday conference resulted in an order list earlier today, but Rams was not mentioned and should be back for consideration in the next conference, scheduled for Friday, March 27, with the latest version of Schein waiting to be listed.

The case is about a dispute between the NFL’s Rams, and three Missouri government entities, the St. Louis Regional Convention and Sports Complex Authority, the City of St. Louis, and the County of St. Louis.

The dispute is over an agreement on the Rams’ use of the former Edward Jones Dome stadium in St. Louis.  The team departed for Anaheim, Calif., after the 2015 season amidst a storm of controversy over owner E. Stanley Kroenke’s remarks about St. Louis’s viability as an NFL-hosting city. The Rams sought arbitration over whether it should pay damages in the wake of the team’s move to become the Los Angeles Rams for the second time in the team’s existence.

The agreement included an arbitration clause that incorporated terms by reference, stating that all disputes would be conducted “in accordance with the most applicable then existing rules of the American Arbitration Association.”  Those rules send the question of who decides whether a case should be arbitrated to an arbitrator, not a court.

The petitioner, the Rams, asserts that the key Missouri appellate court decision in a series of cases that include rulings by the state supreme court, should have simply “‘respect[ed] the parties’ decision as embodied in the contract’ by recognizing that it has ‘no power to decide the arbitrability issue.’” Petition for Writ of Certiorari citing Henry Schein, 139 S. Ct. at 528 (brief available at https://bit.ly/2U85jAG).

The Rams’ petition claims the “clear and unmistakable” test of whether the parties intended for an arbitrator, rather than a court, to decide whether an arbitration agreement should be arbitrated was too strict.  It contends the standard applied by the appellate court violated “an application of equal-footing principles,” which the Supreme Court requires under the Federal Arbitration Act—that is, that arbitration contracts are treated the same as other contracts.

While the Rams contend the parties clearly and unmistakably agreed to arbitrate under the then-existing AAA rule, the petition argues that the incorporation of the rule sending the arbitrability question to the arbitrator should have been recognized by state court to keep the arbitration contract on an equal footing with other contract principles.

The state respondents strongly dispute that the Missouri appellate court ignored the Court’s equal-footing principle.  It also asserted the parties could have never unequivocally agreed to arbitrate the issue because the AAA rule did not have the arbitrability provision when they signed the contract.

While conceding the applicable version of AAA rule confers power to the arbitrators to decide arbitrability, the respondents claim the incorporation principle is irrelevant to the case.  Instead, they argue that “[p]ursuant to fundamental Missouri contract law, the parties must agree to all essential terms of an agreement at the time of contracting.”  (Respondent’s Brief in Opposition to Petition for Writ of Certiorari (available at https://bit.ly/2U8ZumI).

Thus, “there must be an actual agreement to delegate at the time of contracting.” Id.

Despite the respondents’ denial of a division among federal and state courts on the applicable standard, the Rams’ petition claims that some state courts, including Missouri, are requiring an extraordinary degree of clarity for the “clear and unmistakable” test, which the petition says is contrary to how every federal court addresses the issue.

The petitioner urges that the Court provide guidance regarding the clear and unmistakable test, which it says is critical since the respondents’ position not only defies the FAA’s equal footing principle but also has been the subject of repeated requests for Court clarification, citing four cases the Court declined to hear between 2014 and 2018. The petition also notes that the situation has seen “every federal court resisting special rules disfavoring arbitration and only state courts on the anti-arbitration side of the dispute.”

Scotusblog’s case page, available at https://bit.ly/2QANwjk, contains the Rams’ cert petition, the respondent’s brief in opposition, and the Rams’ reply

* * *

The author is a CPR Institute Spring 2020 intern.  Alternatives’ editor Russ Bleemer assisted with the research.