Arbitration Law - Assignment Example

? ARBITRATION LAW By 19, Mar PART A This scenario has elements of an investor arbitration, since Tourist Drivers Limited is fully owned by the state of Languada. In a similar case, GSS Group v. National Port Authority1 a case involving a corporation fully owned by the state of Liberia; the Court found that the corporation “is encompassed by the relevant statutory definition of the term, ‘foreign state’. In this scenario, TGL should deal with Tourist Drivers Limited as if it were dealing with the government of Languada. Generally, Arbitration Act gives the parties latitude to decide how their disputes should be solved.2 It shall be essential for Toop Gearbox Limited (TGL), to ensure that certain provisions are incorporated in the arbitration clause. First the seat of the arbitration3 should be in England or any other country signatory to Convention on the Settlement of Investment Disputes between States and Nationals of Other States, or Panama Conventions to ensure enforcement of arbitral awards.4 The seat should, as far as possible, be outside jurisdictions known for judicial interference. For example, the Argentine Supreme Court, in June 2004 Cartellone decision,5 held that waivers were invalid when issues of public policy are at stake.6 Secondly, the clause should include a commitment by the company to resolve disputes through arbitration such that rights and duties of each party cannot be determined by a unilateral action of the host state. With regards to the laws applicable, article 4(2) of ICSID convention gives the parties autonomy to decide the law that is applicable to them, whether national law or international law. Article 4(2) requires an ICSID tribunal, in the absence of agreement by the parties on applicable law, to apply laws that are applicable in the state party that is a party to the dispute, and rules of international law that are applicable. In AIG Capital Partners Inc. v. Republic of Kazakhstan, a tribunal ruled that the law applicable was the law of the host State “read with and controlled by the provisions contained in the BIT.7 To a scenario, where the law applicable is the law of Languada, the clause should stipulate that the law both substantive and procedural applicable is English law. The scope8 of the clause should be wide and cover all the possible disputes that are likely to arise from the contract. With regards to an arbitral tribunal,9 TLG should advocate for an institutional rather than ad hoc one. Most importantly, the government of Languada should expressly waive its immunity with regards to both jurisdiction and execution of the arbitral award. Enforcement proceeding against assets of state owned companies may implicate issues under state and foreign law. Moreover, they should structure the clause so as to gain access to the arbitral jurisdiction established by international investment treaties.10 In conclusion, TLG should consider including the model clause proposed by ICSID or any other international body such as ACICA.11 Word count: 475 References. Arbitration Act 1996 s 1(c)Arbitration Act 1996 s 3 Arbitration Act 1996 s 3 Arbitration Act s 15 Case law GSS Group v. National Port Authority Civil Action No. 09-1322 (PLF) (D.D.C. Mar. 2011. AIG Capital Partners Inc. v. Republic of Kazakhstan. Internet Sources Applicable Law in Investor-State Arbitration, http://www.arbitration-icca.org/media/0/12112009316810/applicable_law_in_investor-state_arbitration.doc (accessed March 19, 2012). Asit Ranjan Mishra, Mint, New Delhi. India rejects investor-state clause in FTA with EU. July 4. Sierra club of Canada. http://www.sierraclub.ca/en/main-page/india-rejects-investor-state-clause-fta-eu( Accessed 19t march 2011) Others Bishop R, Crawford J & Riesman M. cases. Foreign investment disputes: cases, materials, and commentary.(Kluwer Law International. 2005 Dugan, C. Enforcement Against Assets of State-owned Companies. (September 2009). Dugan C, Rubin, N, Wallace D, & Sabahi, B. Investor-state Arbitration. (Cambridge University Press 2008). Greenberg, S, Kee, C, Weeramantry R .International Commercial Arbitration: An Asia-Pacific Perspective. Cambridge university press. (Cambridge University Press.2011). Moser, M. Investor-state arbitration: lessons for Asia. 2008. Reed, L, Paulsson, J, Blackaby, N & Rawding N. Guide to ICSID arbitration. International Convention on the Settlement of Investment Disputes between States and Nationals of Other States Article 4(2) PART B Arbitration agreements Arbitration agreement is defined in the arbitration Act12 to mean, an agreement to submit to arbitration present or future disputes (whether they are contractual or not). Such an agreement must be in writing.13 Arbitration is an alternative to litigation and gives the parties the latitude to decide the seat of arbitration,14 the language and rules applicable15 and the impartial person (arbiter) to make the decision. The decision of the arbitrator is final, and not subject to appeal but a party can challenge in court any award of the tribunal as to its substantive jurisdiction16, if there is serious irregularity,17 or on a point of law.18 The effect of an arbitration agreement under ICC rules is to submit parties to the rules in existence at the commencement of the proceeding unless they agree to be governed by the rules at the time of the arbitration agreement.19 Even if, the respondents fails to file an answer or questions the existence, validity or the scope of the agreement, the arbitration shall proceed if the court is prima facie satisfied that an arbitration agreement under the rules may exist.20 In such a scenario, any decision as to the jurisdiction of the tribunal shall be undertaken by the tribunal itself.21 In this scenario, there is clearly an arbitration clause agreed by the parties for the arbitration to be subject to the International Chamber of Commerce (ICC) rules, the substantive law being the law of Languada and the seat of arbitration being in England. Separability of the arbitration agreement. An arbitration agreement is separable from the rest of the agreement and shall not be invalidated merely because the agreement is invalid.22 ICC rules empower the tribunal to decide on the existence, validity or the scope of the arbitration agreement.23 In Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd,24Court of Appeal held, “even though the underlying contract is void for illegality the arbitration clause could still survive as the illegality of the underlying contract do not impeach the arbitration agreement This suggests that, in any of case of invalidity of the arbitration agreement, the contract shall hold. In the scenario, the government of Languada wants to pass a retrospective legislation to invalidate the arbitration agreement. Matters to be submitted to arbitration in accordance with the arbitration agreement. Disputes within the scope of the arbitration can be referred for arbitration. In this scenario, it shall apply to all disputes of a commercial nature, rather than public acts of a sovereign state. Commercial dispute has been defined under UNCITRAL model law on Commercial Arbitration “… to cover matters arising from all relationship of a commercial nature, whether contractual or not.” The dispute in this scenario arises from contract termination and is, therefore, a commercial case irrespective of the reasons advanced and is thus within the scope of the agreement. Law applicable to arbitrability. Issues of arbitrability, if raised during arbitration proceedings, are determined by reference to the law of seat of arbitration or the law of the arbitration agreement if this is different.25 The court in Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd,26 held, “any doubt relating to the scope of arbitral issues should be resolved in favour of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defence to arbitrability.” Substantive law governs various aspects of arbitration; inter alia issues concerning arbitrability of the dispute and the validity of the arbitral award. These are the issues that TLG is likely to face in this dispute. Consequently, Languada can challenge arbitrability of the dispute based on the substantive law. Arbitrability is typically divided into “subjective arbitrability” and “objective arbitrability”. Subjective arbitrability refers to arbitrability ratione personae, that is, whether a particular entity, mostly a state or a public body, can become a party to an arbitration agreement, and thus whether the dispute can be submitted to arbitration. On the other hand, objective arbitrability concerns itself with the subject matter or ratione materiae. Curial law (Procedural law) distinguished from lex arbitri (substantive law). Curial or procedural law is distinguishable from lex arbitri. ‘Lex arbitri is a set of mandatory rules of law applicable to the arbitration at the seat of the arbitration. The curial or procedural law is the law that governs the procedure of the arbitration”.27 “International commercial arbitration is presumed to be governed by the law of the place in which it is held”28 . In Bulgarian Foreign Trade Bank Ltd v Al Trade Finance Inc., the Swedish Supreme Court held that, the arbitration agreement should be overseen by the law of the seat of arbitration and in that case Swedish law. Immunity of sovereign states. According to the leaked advice, Languada seeks to rely on state’s immunity. It holds the position that, as a sovereign, it is not under the jurisdiction of any arbitral tribunal and that even if the arbitration proceeds, it is immune from enforcement proceedings. This raises the two forms of state immunity relevant to international arbitration: jurisdictional immunity and state immunity from execution (Greenberg S et al 2011).The arbitration clause is silent on the issue of immunity. An agreement to arbitrate under English Law is viewed as an operative and effective waiver of immunity from the substantive proceedings.29 According to Shaw M (2006) state immunity extends only to purely governmental activities (acts jure imperii) as opposed to commercial activities (acts jure gestionis). In Ipitrade Int’l, S.A V Federal Republic of Nigeria,30 the court held that Nigeria’s agreement to arbitrate constituted a waiver of sovereign immunity. Having consented to ICC rules, even if the government of Languada fails to accept the jurisdiction of the tribunal, the tribunal shall proceed under article 6(3) that states that ‘if any party refuses or fails to take part in the arbitration or any stage thereof, the arbitration shall proceed notwithstanding such refusal or failure.’ Immunity and enforcement of the award According to Annacker & Creig (2004) “even if a state’s consent to commercial arbitration implies consent to all natural and logistical consequences of the commercial arbitration, this does not necessarily include enforcement of the awards. Immunity from execution is separate from immunity from jurisdiction. While arbitration might result in an award recognizable under the New York convention, immunity from execution can reduce chances of actual recovery. A waiver of immunity from execution cannot be implied on the basis of the arbitration agreement.” This position has been echoed in FG Hemisphere Associates V Democratic Republic of Congo31 . Nevertheless, in Creighton V Qatar32 it was held that a state’s acceptance of arbitral rules that stipulate something similar to article 28(6) of the ICC rules is sufficient to waive both immunity from jurisdiction and immunity from execution. The article stipulates, ‘every award shall be binding on the parties. By submitting the dispute to arbitration under these rules , the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse in so far as such waiver can validly be made.’ In the enforcement proceedings of the Noga awards33 against Russia, in France, the French court held that, bank accounts belonging to the embassies were diplomatic assets and despite a waiver in which Russia specifically waived immunity against execution, it did not precisely refer to waiver of sovereign immunity accorded to diplomatic assets. With respect to enforcement against commercial property in Hong Kong, in the Democratic Republic of Congo v FG Hemisphere Associates LLC,34 the Hong Kong Court of Final Appeal held that a State enjoys absolute immunity from enforcement proceedings in Hong Kong. An arbitration award set anyplace in the world will encounter the same obstacle regarding sovereign immunity when sought to be enforced in Hong Kong.35 The Swiss supreme court has set the following conditions for enforcement against state36, that, a) the foreign State ought to have acted in a private or commercial capacity (de iure gestionis); (b) the transaction from which the claim touching the foreign State arises must have a qualified connection to Switzerland; and (c) the asset to be attached must not be intended for uses incumbent upon the foreign State in the exercise of its sovereign authority.37 Consequently, since the parties in this scenario have chosen the ICC rules, both immunities were waived given that the arbitration clause was silent on the same.38 With regards to enforcement, it shall be possible for property in Switzerland only. Conclusion 1. ICC shall have jurisdiction over Languada. 2. Enforcement shall be possible against commercial assets outside Hong Kong and not diplomatic asset. 3. ICC shall apply trade custom and lex arbitri to cure Languada retrospective laws Word count: 1460 References: Legislation: Arbitration Act 1996 sec 6(1) Arbitration Act 1996 sec 5(1) Arbitration Act 1996 sec 3 Arbitration Act 1996 sec 4(3) Arbitration Act 1996 sec 66 Arbitration Act 1996 sec 67 Arbitration Act 1996 sec 68 Arbitration Act 1996 sec 69 Arbitration Act 1996 sec 7 Case law: Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd (1993) QB 701 Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd (1993) QB 701 at 702 Bulgarian Foreign Trade Bank Ltd v Al Trade Finance Inc. Ipitrade Int’l, S.A V Federal Republic of Nigeria 465 F. Supp. 824(D.D.C 1978. Creighton V Qatar 127(4) JDI (clunet) 1054 (2000). FG Hemisphere Associates V Democratic Republic of Congo (2010) 2 HKC 487 Lesotho Highlands Development Authority v Impregilo SpA (2005) UKHL 43, (2006) 1 A.C. 221. FG Hemisphere Associates V Democratic Republic of Congo (2010) 2 HKC 487 Internet Sources: Scherer, M & Giroud S. Swiss Federal Supreme Court provides guidance on rules of State immunity applicable to enforcement of ICSID awards. Kluwer Law International, available at http://kluwer.practicesource.com/blog/2011/swiss-federal-supreme-court-provides-guidance-on-rules-of-state-immunity-applicable-to-enforcement-of-icsid-awards/ Sovereign immunity in the enforcement of Awards against States, Transanational notes. Available at http://blogs.law.nyu.edu/transnational/2011/09/sovereign-immunity-in-the-enforcement-of-awards-against-states/ Other References: International Chamber of commerce Rules Article 6(1) International Chamber of commerce Rules Article 6(3) International Chamber of commerce Rules Article 6(1) International Chamber of commerce Rules Article 28(6) Andrew, Keren, Arbitration of Commercial Disputes, page 109 A. Redfern, M. Hunter, Law and Practice of International Arbitration, Sweet Maxwell, 4th Edition, 2004, page 92. Annacker & creg ,State Immunity And Arbitration (ICC international court of Arbitration bulletin 70 pg 71. 2004 15(c)) Bjorklund A.2009. State Immunity and the Enforcement of Arbitral Awards. International Investment law for the 21st century. Dugan, C. Enforcement Against Assets of State-owned Companies. (September 2009). Dugan C, Rubins, N, Wallace D, & Sabahi, B. Investor-state Arbitration. (Cambridge University Press 2008). Dunham P and Greenberg S, Balancing Sovereignty and Contractor’s Rights in International Construction Arbitration Involving State Entities’ (2006) 23(2) international construction law review 13 Greenberg, S, Christopher K, &Weeramantry j. International commercial Arbitration; An Asia- pacific Perspective.( Cambridge University Press 2011) Gaillard E.2011. France: The “Noga” case and the Seizure of the Sedov (International Arbitration Court Decisions - 3rd Edition. International Convention on the Settlement of Investment Disputes between States and Nationals of Other States Article 4(2) International Arbitration Law Review, Joanna Dingwall Keren A, Arbitration of Commercial Disputes, page 499 Keren, A ,Arbitration of Commercial Disputes page 500 Keren, A, Arbitration of Commercial Disputes page 500 Greenberg, S, Kee, C, Weeramantry R .International Commercial Arbitration: An Asia-Pacific Perspective. Cambridge university press. (Cambridge University Press.2011). Moser, M. Investor-state arbitration: lessons for Asia. 2008. Reed, L, Paulsson, J, Blackaby, N & Rawding N. Guide to ICSID arbitration. Read More