US Sup Ct Grants Review to Decide Whether New York Convention Permits Non-Signatory to Compel International Arbitration on Equitable Estoppel Grounds

By Mark Kantor

Kantor Photo (8-2012)

This morning the U.S. Supreme Court granted certiorari and agreed to hear in its next Term the international arbitration case of GE Energy Power Conversion France SAS v. Outokumpu Stainless USA LLC (Docket No. 18-1048, case documents available at https://www.scotusblog.com/case-files/cases/ge-energy-power-conversion-france-sas-v-outokumpu-stainless-usa-llc/).  The dispute addresses whether, under the New York Convention, a non-signatory can compel arbitration.  The Question Presented is:

Whether the Convention on the Recognition and Enforcement of Foreign Arbitral Awards permits a nonsignatory to an arbitration agreement to compel arbitration based on the doctrine of equitable estoppel.

As described in GE’s petition for cert, “Sometimes, a signatory to a contract may sue a non-signatory for claims that arise out of the contract.  When that happens, is the signatory bound by the arbitration clause it agreed to in the contract?  For domestic arbitration agreements, the answer is yes: Equitable estoppel allows the non-signatory to enforce the arbitration clause.  But the Eleventh Circuit [Court of Appeals] held that a non-signatory cannot compel arbitration if one of the parties is a foreign entity.  That erroneous holding deepens a 2-to-2 circuit split and warrants this Court’s review.”

Readers will note that GE’s quoted description of the issue speaks confusingly about both (i) a signatory compelling arbitration with a non-signatory and (ii) a non-signatory compelling arbitration with a signatory.  One hopes the U.S. Supreme Court will be able to distinguish the two situations and determine whether that distinction is relevant to resolving the question.  The 11th Circuit decision declining to compel arbitration rested in part on the non-US nature of one of the parties.

We shall learn within the next year how the U.S. Supreme Court believes non-signatories fit into the commercial arbitration universe.

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Mark Kantor is a CPR Distinguished Neutral. Until he retired from Milbank, Tweed, Hadley & McCloy, Mark was a partner in the Corporate and Project Finance Groups of the Firm. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). Additionally, Mr. Kantor is Editor-in-Chief of the online journal Transnational Dispute Management.

This material was first published on OGEMID, the Oil Gas Energy Mining Infrastructure and Investment Disputes discussion group sponsored by the on-line journal Transnational Dispute Management (TDM, at https://www.transnational-dispute-management.com/), and is republished with consent.

Was It Really a Foreign Arbitral Award? Ninth Circuit Says No.

By Brian Chihera

The Ninth U.S. Court of Appeals has reversed a district court’s order which had treated an order made by a Philippines arbitrator as a foreign arbitral award.

The appeals court ruled on an unusual situation.  It found that the case had been settled, and there was no outstanding dispute to arbitrate by the time the arbitrator got the case, and therefore nothing for the federal district court to confirm.

In Castro v. Tri Marine Fish Co., No. 17-35703 (Feb. 27) (available at http://bit.ly/2Zwoa8x), the three-judge appellate panel said that the arbitration decision was not a decision at all and should not be enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, best known as the New York Convention.

“We review foreign arbitral awards deferentially, but we do not blind ourselves to reality when presented with an order purporting to be one,” concluded Circuit Judge M. Margaret McKeown, writing for a unanimous Ninth Circuit panel. “To cloak its free-floating settlement agreement in the New York Convention’s favorable enforcement regime, Tri Marine asked an arbitrator to wave his wand and transform the settlement into an arbitral award. That is not sufficient to produce an award subject to the Convention.”

At the heart of the convention and related federal law, notes Circuit Judge McKeown, “is the principle insulating foreign arbitral awards from second-guessing by courts. But this appeal involves an even more fundamental question—whether we are presented with a foreign arbitral award at all. In the mine run of cases, the answer is uncontroversial: when it looks, swims, and quacks like an arbitral award, it typically is. Yet, in this unusual appeal, we have an arbitral award in name only. There was no dispute to arbitrate, as the parties had fully settled their claims before approaching an arbitrator.”

Michael Castro, a Philippines citizen, moved to American Samoa where he lived with his fiancé. Castro was employed by Tri Marine and worked in the company’s warehouse. He was offered a deck-hand position on a fishing vessel it owned, which he accepted.

The dispute between Castro and his employer started with an employment contract that was signed just before the fishing expedition launched. Both parties dispute the contents of what was signed. Castro said he believed that he was only signing a “a half sheet of paper with a few sentences on it” that designated the pay rate, and the employer contended that Castro signed an employment contract.

Castro, however, said that he signed the employment contract when he appeared before an arbitrator. The contract contained a clause which was applicable to all disputes or claims arising out of the employment on the vessel.

Castro injured his knee after falling down ship stairs two weeks into the trip, and immediately requested to be returned to American Samoa so he could travel to Hawaii for medical care. Tri Marine arranged for Castro to be treated in the Philippines, where he also underwent surgery for a torn anterior cruciate ligament and a torn meniscus. Castro also received physical therapy and his employer paid for the medical expenses and his monthly maintenance.

Castro approached Rhodylyn De Torres, a Tri Marine agent in the Philippines after his father had been diagnosed with kidney cancer. He negotiated a settlement of his disability claims in exchange for an advance of $5,000 to help pay for his father’s care. This was followed by an agreement in principle to release Castro’s claims in exchange for an additional $16,160.

Castro was accompanied by his fiancé when he went to see De Torres at her office to finalize the settlement. Castro was not aware of the fact that he was participating in an arbitration. Castro and De Torres both gave different versions of events of their meeting. Castro is not fluent in English and disputes that De Torres translated documents into Tagalog, the Philippine language. There was a dispute as to when the agreement was signed, although Castro did not dispute signing the agreement.

The settlement agreement signed between Castro and De Torres meant that he had released himself from any and all liability or claims. After the meeting on the release, Castro was told that he had to pick up the settlement receipt at the National Conciliation and Mediation Board, but in fact he was led to an arbitration.

Gregorio Biares was present as the arbitrator. This was the first time for Castro to be in an arbitration hearing and he was not aware of any dispute between himself and his former employer. Castro asserted that Biares hurriedly flipped through papers asking Castro to sign  and stating that the settlement was favorable to Castro. Biares reportedly told Castro that the settlement papers were “just a first payment.”

But there was no arbitral case filed by either party. Tri Marine provided Biares the release paperwork signed by Castro and a joint two-page motion to dismiss.

The New York Convention recognizes the enforcement of foreign arbitral awards. A court is obliged to confirm a foreign arbitral award unless the party resisting enforcement meets the substantial burden of proving one of the seven interpreted defenses.

The major question for the U.S. courts was whether there was an “arbitral award” that would fall under the New York Convention. In coming to its decision, the courts had to look at the definitions of “arbitration” and “arbitral award”.

The two terms, however, do not have definitions under the New York Convention and in the Federal Arbitration Act. Case law provided direction.  Using the definitions from American Law Institute’s Restatement, the Ninth Circuit decided that there was no arbitral award, tribunal or arbitration because the requirements of the parties’ arbitration agreements and the forum were not met.

Although the order was issued as an arbitral order, there were aspects of it that indicated otherwise. First, there was no dispute between Castro and his former employer Tri Marine. There was no genuine disagreement between the parties.  Therefore, they reached an agreement and there was no arbitral award handed down. Castro and Tri Marine had settled their dispute before they visited the arbitrator, with Castro releasing Tri Marine of any liability and all claims.

Arbitration is a consensual procedure, and there was no consent between Castro and Tri Marine to participate in an arbitration that was a meeting with a third party. Parties may waive contractual terms, but by his conduct, Castro did not have any intent to arbitrate the dispute in the Philippines. The meeting between the parties did not follow Philippines arbitral procedures.

The Ninth Circuit opinion stated that the parties’ free-floating settlement agreement did not transform into an arbitral award and the fact that there was an arbitrator present does not make it an arbitral award. The appeals court concluded that Tri Marine could seek to enforce the release as a contract matter, but the arbitrator’s order was not an award and it did not fall under a foreign arbitral award.

The author, a CPR Institute Summer 2019 intern, graduated last month with an LLM in dispute resolution from the University of Missouri School of Law in Columbia, Mo.

Identifying the Blind Spots: Self Reflection in the Field of International Arbitration

Sophie Nappert, selected lecturer at the 2018 Proskauer International Arbitration Lecture, discusses the tumultuous perception of international arbitration and calls for the industry to look inward

By Sara Higgins

During the 2018 Proskauer International Arbitration Lecture, renowned international arbitrator Sophie Nappert took some of the industry’s leading lawyers to task. Her address, cheekily titled “Disruption Is the New Black”, examined what she identified as “blind spots” in the field of international arbitration (IA). Branding disruptive innovation as the poster child for progress, Nappert opined that it will inevitably impact the legal field, during these times of tectonic change and revolution, in a way that forays the very heart of international arbitration – a self-governed justice system that derives its jurisdiction from party consent.

Nappert opened with the current IA landscape. She painted a rather gloomy picture, revealing the sobering fact that in-house counsel consider external lawyers to be the primary obstacle to achieving collaborative, adjudicative and non-adjudicative dispute resolution.

Nappert also pointed to growing skepticism of the arbitral process around the world. “When the Chief Justice of the UK Supreme Court, in one of the most arbitration-friendly jurisdictions on the planet, bemoans the negative influence of arbitration on the development of English law; when the EU, a behemoth not known for its nimble footing, performs a 180-degree turn in less than a year from its initial, resolutely pro-ISDS stance towards pushing forward a court proposal complete with appellate jurisdiction on fact and law”, it might be time for some self-reflection. Nappert asked us to consider, “whether, heady on its nearly unbounded autonomy, on the vast deference granted to it by state courts and legislation and assisted by the unparalleled ease of enforcement of its decisions afforded by the New York Convention (NYC), the current model of IA has overreached itself at the expense of quality of procedure and output.”

In pondering her own question, Nappert praised the unprecedented expansion of IA into areas once considered non-arbitrable but cautioned that “It has made us oblivious to some substantial blind spots, focused as we are on driving the IA chariot forward towards the next development.” She identified three such blind spots, though undoubtedly there are others: diversity, corruption and artificial intelligence.

Diverse panels increase institutional legitimacy

“Current voices in scholarship posit that the above disruptive phenomena present an important opportunity to address shortcomings, and notably as regards the diversity in composition of panels, as a vector towards a better and more legitimate decision-making in investment and commercial arbitration,” Nappert said.

She shared a number of statistics demonstrating diversity in the field – or rather lack thereof. “At ICSID, 19% of the 195 appointments made in 2017 to ICSID tribunals or ad hoc committees were women. This can be compared with 2016, where 13% of appointees were female. Of the 37 appointments of women in 2017, there were 18 different individuals who were nationals of a dozen different states, thus reflecting some regional diversity.” “The SCC reports 254 appointments for 2017, of which 18% were female. When the appointment was made directly by the SCC, 37% of the appointees were female. When made by the parties – 8%; when made by co-arbitrators – 0%. For regional diversity, 231 of the 254 appointments were from Europe, followed by Australasia and North America with 5 each, I from South America, 3 from Asia and 2 from Africa.”

The 2018 Queen Mary/White & Case International Arbitration Survey showed that respondents were generally ambivalent as to whether there is a causal connection between a diverse panel of arbitrators and the quality of that panel’s decision-making. Nappert argued that this might be the wrong query to make altogether. In her opinion, “At a time where the legitimacy of IA is in crisis, in the eyes of others a more diverse tribunal is a more representative, and thus more legitimate, tribunal; and from the prism of enhanced legitimacy the desirability for diversity in tribunal composition is undebatable.”  She stressed that the quest for more diversity ought not to be made at the expense of quality and competence.

How can IA promote diversity?

Accepting that diversity among panelists is the goal, Nappert believes this issue should be championed at the institutional level. “Institutions have a powerful statement to make by enshrining diversity in their rules as a factor for consideration in the nomination and appointment of arbitrators, alongside and to the same extent as other credentials,” she stated. Chastising the “lip-service” treatment currently afforded diversity, Nappert called for institutional rules to anchor this value in the field. She suggested that institutional rules should consider enshrining diversity as a factor in considering appointment, to the same extent as nationality is currently accepted as such a factor.

Allegations of corruption

Nappert next considered IA’s approach to allegations of corruption in the field, calling for greater self-reflection in the wake of Belokon v Kyrgyzstan, where the Paris Court of Appeal famously annulled an Award as infringing public policy, after reconsidering the case on its merits and finding  sufficient evidence of money laundering. She warned, “That a state court in a country famous for its respect for, and deference to, arbitration tribunals should consider it necessary to reopen the merits of a matter should be a cause for concern, and immediate action on our part, lest we are failing to put our house in order in the eyes of others.” She added that between the ICCA, the IBA, and the ILA, there is no lack of fora to host an open discussion about corruption in the field. Nappert seemed to imply that in failing to have such a discussion with the goal of establishing best practices, IA is missing an opportunity to improve public perception and strengthen its legitimacy.

The rise of artificial intelligence

The final blind spot that Nappert addressed in her lecture was artificial intelligence. Arbitral outcomes can be computed using a series of algorithms that, to whatever degree of certainty, offer parties a predictable outcome that might be seen as mitigating some of the risks of dispute resolution. “Scientists and suppliers of algorithms,” observed Nappert, “are currently warning litigation and arbitration users that human decision-making as we exercise it on a daily basis is no better than a lottery. In addition to being costly, time-consuming, and resource-depleting, it is unpredictable and inevitably subject to bias.”

Though not claiming to be a computer scientist, Nappert spoke on the importance that IA query “how algorithms come to their decisions; where the boundary lies between the machine’s capacity for predictive and prescriptive analysis and the human decision-making mind; [and] the public policy implications of robot-assisted justice and how these awards are reviewed by state courts, notably under Article V of the New York Convention.”

She postured that the introduction of AI into IA could create a dispute settlement system tendering predictability and speed for users, and even the ability to suggest commercial solutions to their disputes to prevent reoccurrence — a tool she ventures would speak powerfully to users.

Preserving the “human element”

If this is the inevitable future of dispute resolution, how can IA fight to stay not only relevant, but valuable? To no one’s surprise, IA’s strongest asset is its fundamental value – the notion that parties have a stake in selecting the decision-makers who will ultimately decide their fate. Though an algorithm could eliminate human unpredictability, the ability to select the decision makers in one’s own dispute is what makes arbitration appealing at a basic – and yes, emotional – level.

Nappert discussed briefly the role of human emotion in arbitration and seemed to defend it as an inherent, underlying thread of dispute resolution. She called for “arbitral institutions proactively to dialogue with AI scientists and providers to ascertain in an ethical manner, how lawyers are made to understand the way algorithms work, how exactly machine speak translates into the human language, and how we can carry on selling the human values underpinning decision making, so that we have an economically competitive and intelligible answer to give to scientists, suppliers of algorithms, and users.”

IA must put its house in order

Nappert ceded that these blind spots – diversity, allegations of corruption and artificial intelligence – are not the only ones IA possesses. But, while they need to be addressed as soon as possible, reacting to these blind spots is no longer enough, in Nappert’s opinion. “In the face of rapidly-paced and seismic disruption, we need to be proactive lest we become the Kodak and Blockbusters of dispute resolution,” she cautioned.

The IA community is largely governed by its own practitioners serving on boards and steering committees, including in arbitral institutions. This close relationship should be taken advantage of to show the rest of the legal community, and the world at large, that IA can keep its own house in order. Nappert concluded, “If we show that this closeness can deliver the benefit of building consensus on best practice and policing our own terrain in a forward-looking manner, we will make strides towards the continued legitimacy and relevance of IA in the face of disruption.”

 

Sophie Nappert is a dual-qualified lawyer in Canada and the UK. She is an arbitrator in independent practice based in London, specializing in international disputes. Sophie is ranked in Global Arbitration Review’s Top 30 List of Female Arbitrators Worldwide and is commended as a “leading light” in the field by Who’s Who Legal. She won the 2016 Global Arbitration Review Award for Best Speech for her address at the EFILA Annual Lecture, International Investment Arbitration: Escaping from Freedom? The Dilemma of an Improved ISDS. http://www.3vb.com/our-people/arbitrators-associate-members/sophie-nappert

Sara Higgins is a legal intern at CPR and a third-year law student at Northeastern University School of Law. Sara recently completed the New York State Bar Association Commercial Arbitration Training for Arbitrators and Counsel and previously worked for the United States Attorney’s Office in Boston, Massachusetts.

Second Circuit Backs Overturning Award That Had Been Annulled At Arbitral Seat

By Ugonna Kanu

The Second U.S. Circuit Court of Appeals this summer affirmed a New York Southern District federal court decision to vacate the trial court’s previous enforcement of an arbitral award after the award was annulled at its seat in Malaysia.

In Thai-Lao Lignite (Thailand) Co., Ltd. v. Government of the Lao People’s Democratic Republic, Docket Nos. 14-597, 12-1052, 14-1497 (2d Cir. July 20, 2017)(available at http://bit.ly/2wS9HpS)(available at http://bit.ly/2vKDHnE), a commercial dispute arose between Thai-Lao Lignite (Thailand) with its subsidiary, Hongsa Lignite (Lao PDR), and the Government of the Lao People’s Democratic Republic, which the parties submitted to arbitration in Malaysia.

According to the Second Circuit opinion, in the 2009 Kuala Lumpur arbitration, a panel of three U.S. lawyers conducting the matter under the United Nations Commission on International Trade Law Arbitration Rules found the defendants—the government of Laos–in breach over a dispute on mining rights the defendants had granted to the mining company petitioners.

The tribunal awarded the petitioners about $57 million.

The case, the opinion states, addresses “how a district court should adjudicate a motion to vacate a judgment that it has entered enforcing a foreign arbitral award, when that award has later been set aside by courts in the arbitral seat.” It examines the interaction between a Federal Rule of Civil Procedure 60(b) motion and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention.

After a period for challenging the award expired, the petitioners successfully brought enforcement proceedings in the United States and United Kingdom. But almost a year after the award, the defendants applied at the Malaysian courts for the award to be set aside on the grounds that the arbitrators exceeded their jurisdiction by addressing disputes under contracts not covered by the relevant arbitration agreement.

The motion setting aside the award was granted in 2012. Then, returning to the United States, the defendants moved to vacate the order enforcing the award.

U.S. District Court Judge Kimba Wood relied on Federal Rule of Civil Procedure 60(b), in which the court can relieve a party from a final judgment if the judgment is based on an earlier judgement that has been vacated or reversed.

Wood analyzed the FRCP in conjunction with the New York Convention Article V(1)(e), which gives courts the discretion to refuse to recognize or enforce an award on party’s request under specific circumstances. In 2011, a year after confirming the award, Wood vacated the judgment to enforce, following the Malaysian nullification.

On appeal, the Second Circuit affirmed Wood’s decision to vacate her original judgment. In backing the district court decision, the Second Circuit referred to the clash between the federal rules and the convention. The appellate decision cited TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928 (D.C. Cir. 2007)(available at http://bit.ly/2vR2S7S), where a unanimous panel, in an opinion written by Circuit Judge Susan L. Carney, noted that the convention’s “text appears to leave the District Court with discretion to enforce an award that has been annulled in the primary jurisdiction—after all, it does not say that enforcement of the award ‘must’ be refused—[but] held . . . that the scope of that discretion is ‘constrained by the prudential concern of international comity.’”

The Thai-Lao Lignite opinion endorsed TermoRio, where the D.C Circuit affirmed a decision denying enforcement of an annulled award, stating “when a competent foreign court has nullified a foreign arbitration award, United States courts should not go behind that decision absent extraordinary circumstances.” (Quoting the TermoRio appellees’ brief).  The D.C. Circuit said the exception to enforcement would be where a judgment is contrary to U.S. public policy.

The Second Circuit opinion notes that TermoRio followed the Second Circuit view on foreign awards in Baker Marine Ltd. v. Chevron Ltd., 191 F.3d 194 (2d Cir.  1999)(available at http://bit.ly/2uQIFBN). In Baker, the appellate court upheld the district court’s refusal to enforce an award that had been annulled in Nigeria, the arbitration seat, because to do otherwise would give a losing party “every reason to pursue its adversary with enforcement actions from country to country until a court is found, if any, which grants the enforcement.”

The result would be a loss of finality and conflicting judgments, as well as overall difficulty in maintaining a uniform and predictable arbitral framework and to prevent producing regularly conflicting judgments.

The Second Circuit’s Thai-Lao Lignite opinion suggested that the result would have been different if the decision of the foreign court was contrary to the “fundamental notions of what is decent and just” in the United States.  It based this public policy exception on Corporación Mexicana de Mantenimiento Integral, S. De R.L. de C.V. v. Pemex-Exploración y Producción, 832 F.3d 92, 107 (2d Cir. N.Y. Aug. 2, 2016)(available at http://bit.ly/2xcyLXZ).

In that case, the Second Circuit affirmed a district court enforcement decision to confirm an award that had been nullified at the primary jurisdiction in Mexico, on the grounds that the Mexican appellate court had retroactively applied Mexican law and deprived the plaintiff of a remedy, contrary to fundamental U.S. public policy.

The Second Circuit Thai-Lao Lignite panel notes that it held its opinion until a U.S. Supreme Court cert petition in Corporación Mexicana had been decided. The request was denied earlier this year.

But in Thai-Lao Lignite, the U.S appeals court saw no grounds for public policy concerns.  A question as to the defendant’s delay in challenging the award, and its dilatory tactics in discovery matters arising in the U.S. courts, were viewed by as justifiable by the district court; “these factors would not have materially changed the outcome,” the opinion states, considering the district court’s reasons for vacating the award.

The author is an attorney in Nigeria who has just completed her L.L.M. in Dispute Resolution at the University of Missouri-Columbia School of Law.  She was a CPR Institute 2017 summer intern.

Brexit and ADR, Untangling the Complexities

The United Kingdom’s recent referendum vote to leave the European Union (EU) is just a few weeks old, and dealmakers are rightfully concerned about its ramifications. The falling pound, the most immediate consequence, is just one of many factors that could affect pending deals with British companies. Many parties entered into contracts with UK-based companies with certain assumptions based upon the country’s membership in the EU. Now, with the UK’s situation uncertain, the lawyers are lining up to figure out next steps.

On July 18, CPR’s arbitration committee convened a panel on the topic of Brexit’s impact on cross-border arbitration and litigation involving the UK, hopefully clearing up some of the mystery. The panel was moderated by Jean-Claude Najar (France) of Lazareff Le Bars, and featured Tim Hardy (UK) of CMS Cameron McKenna LLP, Vanessa Alarcon Duvanel (Switzerland) of White & Case LLP, and Clifford J. Hendel (Spain) of Araoz & Rueda Abogados, S.L.P.

As explained by Mr. Hardy, Brexit’s main immediate impact on cross border litigation in the EU is the uncertainty as to what will happen post-exit to the existing unified regime for dispute resolution applying to all Member States. Since 1973, the UK has been required to adopt unifying arrangements to avoid duplicate litigation in different States through a series of rules intended to determine that the court of only one State can have jurisdiction and that the decision of that court should be respected by all other courts of Member States. Initially, the incorporation of these reciprocal arrangements into the legal framework of Member States was undertaken through a  series of treaties – each requiring each State to approve, ratify and implement each Treaty.  As this was extremely cumbersome and slow, subsequently, EU Regulations were implemented directly applying the rules into the law of each member state.

To exit the EU the UK will have to repeal the European Communities Act which will automatically repeal all Regulations but it will not repeal all treaties. Accordingly, a complex situation could develop where arguably some treaties will survive and may be applicable and relevant to determining parties’ positions if disputes arise. “One would hope,” said Mr. Hardy, “that the legislature will do what it can to avoid this mess. But at the moment, we don’t know what steps will be taken to address and tidy it up.”

As for the practice of international arbitration in the UK or London, Mr. Hendel explained, there is no reason to think that Brexit will have any legal effect because the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which is the lifeblood of international arbitration, is immune from what will happen with Brexit. The situation is different, however, in the world of judicial dispute resolution. Mr. Hendel referenced the falling away of important EU regulations concerning the automatic recognition and enforcement of judgments throughout the EU, jurisdiction and choice of courts, as well as choice of law, in two years’ time or so, unless the UK takes action before then through negotiation with the EU or unilateral action to keep these legal mechanisms in place. These regulations currently provide an important degree of harmonized certainty on how to deal with everyday issues that arise in EU cross-border disputes, and Brexit will inevitably undermine this certainty. Mr. Hendel noted that the UK might have an incentive to preserve this framework one way or another in order to preserve its perceived supremacy in the financial and legal industries.

Ms. Duvanel examined how Switzerland has managed in the years since it voted in 1992 not to join the European Economic Area (EEA) to overcome isolationism vis-à-vis the EU. Although it took several decades, Switzerland managed to negotiate and ratify bilateral agreements with the EU to harmonize its legislation with that of the EU. For example, the Lugano Convention addresses the issues relating to jurisdiction and recognition and enforcement of judicial decisions between Switzerland and the EU. In the end, she explained that Switzerland has its own set of legislation, but that much of it is inspired by the EU, “fully harmonized but always a bit later.” The harmonization of the two legislative systems has been long and difficult for Switzerland, and it is likely to be difficult for the UK as well. She stressed, however, that all of that had no effect on international arbitration in Switzerland. Switzerland remains very attractive. Swiss arbitrators are among the most nominated in the world in international arbitration cases. Switzerland is the second most chosen seat for international arbitration and Swiss law is one of the most chosen applicable law due to the stability of the Swiss legal system.

From an in-house perspective, explained Mr. Najar (who held various senior legal positions in GE for close to 24 years), companies must analyze the potential consequences of Brexit on their contracts governed by English law, particularly long-term contracts, and determine how to best mitigate the uncertainty related to the impact of Brexit. There is a wide array of potential issues to consider, such as currency fluctuation, access to the EU market, organization setups, employees’ rights, corporate governance, and specific regulations. Dispute resolution clauses will also need to be reviewed closely. Najar pointed out that some companies had already started to opt out of the UK, in favor of jurisdictions such as France and Switzerland, several years ago out of other concerns, such as costs or being closer to a civil law environment. Najar stressed that English law enjoys a longstanding and solid reputation as the governing law in many contracts. However, it incorporates many elements of EU law, and Brexit will therefore create some uncertainty as these elements are being pulled out of English law. Since businesses do not like uncertainty, Brexit might deter companies from choosing the UK as a seat or English law as the applicable law.

For anyone involved in business in the UK, CPR’s European Advisory Board (EAB) is an excellent resource for efficient dispute prevention and resolution. The EAB, a highly experienced and distinguished group of sophisticated practitioners and users from Europe’s leading law firms and corporations, has recently released a European Mediation and ADR Guide. Developed under the leadership of CPR’s EAB, the Guide provides a valuable overview of the most widely used alternative dispute resolution processes (particularly mediation) and when they might be suitable, with practical suggestions on how to make use of them.

While Brexit may seem like an ugly divorce, the fallout for companies doesn’t have to be messy.