Introduction to International Commercial Arbitration Steven Lim Managing

Introduction to International Commercial Arbitration Steven Lim Managing Partner, Singapore, Nabarro LLP Eurocham Breakfast Talk – Commercial Arbitration 22 September 2015

Overview § Rise in international arbitration § Foundations of modern international arbitration § Getting your arbitration clause right § Selecting a place (seat) for arbitration § Choosing institutional or ad hoc arbitration § Choosing the right institution § Investment treaty arbitration

Rise in use of international arbitration

Prevalence of Arbitration Preferred Mechanisms for Resolving International Disputes Source: Pricewaterhouse. Coopers Survey 2013

Why arbitrate international disputes? § International neutrality § International enforcement: New York Convention § Flexibility / party autonomy § Expert arbitrators § Privacy / Confidentiality § Finality of decisions

Limitations of arbitration § No appeal § Third parties / no joinder of parties

Arbitrability § Not all types of issues can be submitted to arbitration § National laws determine arbitrability and what is arbitrable in one jurisdiction may not be arbitrable in another § May be necessary to examine the following: § § the national laws of the parties involved the law governing the arbitration agreement the law of the seat of arbitration the law of the likely place of enforcement § Possible examples: § Antitrust and competition laws § Patents § Bankruptcy

Foundations of Modern International Arbitration New York Convention UNCITRAL Model Law Established Arbitration Rules / Institutions National Laws

New York Convention § Dates back to 1958 § Over 140 signatory countries § Predates the formation of UNCITRAL but promotion of the convention is part of UNCITRAL’s work

New York Convention § New York Convention requires national courts § to recognize the validity of arbitration agreements subject to specified exceptions § to refer parties to arbitration when they have entered into a valid agreement to arbitrate § to recognize and enforce foreign arbitral awards subject to a limited number of specified exceptions § Procedure for enforcing an award varies from state to state since a state enforces awards according to its own rules but must not be contrary to the New York Convention

Grounds for Non-Enforcement under the New York Convention § Incapacity of party § Invalidity of the arbitration agreement § Lack of notice or lack of fairness in the process § Arbitrator acting in excess of authority § Constitution of the tribunal or the arbitral procedure was not consistent with the agreement of the parties § Award not yet binding § Award has been set aside § Subject matter of the dispute is not arbitrable § Public policy

UNCITRAL Model Law § UNCITRAL Model Law on International Commercial Arbitration § A model law for adoption as part of domestic legislation § States enacting legislation based upon a model law have the flexibility to depart from the text § Over 60 countries have arbitration legislation based on the UNCITRAL Model Law § Model Law designed to work in conjunction with the party autonomy and the arbitration rules – “unless the parties have agreed otherwise. ” § In case of conflict between the arbitration rules and the Model Law, generally the chosen arbitration rules will prevail

Party Autonomy § GENERAL RULE: If parties have agreed on a particular matter, that agreement will control and prevail over arbitration rules, national law, international arbitration practice or international conventions and treaties § EXCEPTION: Where arbitration rules, national law, international arbitration practice or the international convention or treaty is mandatory § Generally, few mandatory requirements in arbitration rules and national arbitration laws

Arbitration Rules § One of the significant ways parties exercise their autonomy is through the inclusion, in their commercial contracts, of arbitration agreements incorporating institutional or ad hoc arbitration rules § E. g. UNCITRAL Arbitration Rules, ICC Rules, SIAC Rules, HKIAC Rules § Arbitration rules can usually be varied by party autonomy

Role of national laws in international arbitration § Law governing the parties’ capacity to enter into an arbitration agreement § Law governing the arbitration agreement and the validity of that agreement § Law governing the procedure of the arbitration (i. e. lex arbitri, usually the law of the seat of the arbitration or the legal place of the arbitration) § Law, or the relevant legal rules, governing the substantive issues in dispute (i. e. applicable law, governing law or substantive law) § Law governing recognition and enforcement of the award

Getting Your Arbitration Clause Right § Issues to consider when drafting arbitration clauses: § Scope § Choice of Law (governing the dispute / arbitration agreement) § Number and Choice of Arbitrator § Domestic or International § Place of Arbitration (seat) § Ad hoc or Institutional § Third parties § Prerequisites to commencement

SIAC Model Clause Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for the time being in force, which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration shall be [Singapore]. * The Tribunal shall consist of ___** arbitrator(s) to be appointed by the Chairman of the SIAC. The language of the arbitration shall be ___. *Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace “[Singapore]” with the city and country of choice (e. g. “[City, Country]”). **State an odd number. Either state one or three

Dealing with Third Parties § Arbitration consensual process – limitation with regard to third parties § Is the contract part of or related to one contractual chain or scheme? § If non-party interest may be relevant, should provide a mechanism for involving the non-party § Consolidation clauses § Umbrella dispute resolution clauses

Place of Arbitration § Where do you arbitrate? § Usually neutral country § Is it a contracting state to the New York Convention? § CIArb London Centenary “Safe Seat” Principles § A clear effective, modern international arbitration law – law recognizes, assists but does not interfere e. g. – interim relief / setting aside • Availability of court access and an independent competent judiciary with expertise in international arbitration and respectful of the parties’ choice of arbitration as their method of settlement of disputes § Availability of legal expertise and good counsel and no restrictions on appointment of arbitrators or counsel

Place of Arbitration § Accessibility and safety – easy access free from unreasonable constraints on entry, work and exit for parties, witnesses, counsel and arbitrators. § Facilities – availability of infrastructure for arbitration – hearing rooms, hotels, transcription services § Ease of commuincation § Education – commitment to education of counsel, arbitrators, the judiciary, experts, users and students of the character and autonomy of international arbitration and to the further development of learning in the field of arbitration.

Place of Arbitration § Ethics – professional and other norms which embrace a diversity of legal and cultural traditions, and the developing norms of international ethical principles governing the behaviour of arbitrators and counsel e. g. – IBA guidelines on Conflicts of Interest / on Third Party Representation § Enforceability – adherence to international treaties and agreements governing and impacting the ready recognition and enforcement of foreign arbitration agreements, orders and awards made at the Seat in other countries § Immunity – a clear right of arbitrator immunity for civil liability or anything done or ommitted to be done by the arbitrator in good faith in his or her capacity as arbitrator

Place of Arbitration § Location of evidence and witness § Costs – of travel, facilities, arbitrators and counsel § If no seat chosen, usually arbitral tribunal (or in under some rules institutions) will decide on seat

Choice of Law § Three important choices to be made for governing law § law governing substance of contract and dispute § law governing the arbitration agreement § law governing the arbitration (usually law of the seat – recommended)

Ad Hoc or Institutional § Ad Hoc Arbitration § No arbitral institution administers or supervises the arbitration § Usually parties select preexisting set of procedural rules designed to govern ad hoc arbitrations (e. g. UNCITRAL Arbitration Rules) § Sometimes an appointing authority is designated (e. g. arbitral institutions, courts, individuals)

Ad Hoc or Institutional § Institutional Arbitration § Proceedings are administered by an organization (e. g. SIAC, HKIAC, ICC) § Usually in accordance with its own rules of arbitration

Ad Hoc or Institutional Example of Ad Hoc – UNCITRAL § Promulgated by UNCITRAL in 1976 § UNCITRAL does not act as an administrator or charge fees § Designed for use in ad hoc international arbitrations § Provides a tried and tested procedural framework § Rules of many arbitral institutions are based on these rules

Ad hoc or Institutional § If institutional, ensure institution is correctly named and rules are incorporated – use model clause where there is one § No excuse for pathological clauses § Consider the rules that go with choice of institution § If ad hoc, consider if clause should include detailed provisions for conduct of arbitration e. g. appointment of arbitrators, default provisions, discovery, interim relief

Number and choice of arbitrators § Usually one or three § Rules usually have default provisions § Provide for how arbitrators will be chosen § Appointing authority § Based on list § Also consider appointment of presiding arbitrator (if there is one)

Advantages to institutional arbitration? § Cost § Speed § Support and Guidance § Arbitrator Selection § Financial Management § Enforceability

Advantages to institutional arbitration? § Use of model clauses – avoidance of pathological clauses § Incorporation of best practices through continual rules review and development § Availability of emergency procedures § Challenges to arbitrators § Availability of commentary on rules, procedure and practice § Publication of awards

Choosing the Right Arbitral Institution Which arbitration institution should you choose? § Internationally recognised institution § Well developed rules incorporating latest best practices § Internationally experienced supervisory board or institutional court § Experienced and sophisticated case management team

Singapore International Arbitration Centre (SIAC) § 5 th Edition 2013 Rules § Ad Valorem Fee Structure § Arbitrators’ fees are based on a fee schedule § Administrative fees lower than that of the ICC’s § Scrutiny of the Award § Innovations § Emergency Arbitrator § Expedited arbitration § § SIAC Court of Arbitration New Users’ Council Continual rule review – 2015 /16 Rules revision announced Alstom Technology v. Insigma Technology § SIAC / Singapore Courts flexible approach – SIAC administers arbitration using ICC rules

Hong Kong International Arbitration Centre (HKIAC) § Started out providing facilities and support services for ad hoc international arbitrations § HKIAC Administered Arbitration Rules (2013) § based on UNCITRAL Arbitration Rules § emphasis on flexibility and party autonomy (e. g. parties choose whether the arbitrators should be compensated on the basis of agreed rates or in accordance with a fee schedule) § ‘light touch’ administration § Implements emergency arbitrator procedure / expedited procedure

Investment Treaty Arbitration – What is it? § Founded in public international law and not private law § Host state (country receiving investment) assumes investment protection obligations in treaty (with investor's home state) § Theory – to encourage investments § Host state makes an open invitation to investors from contracting states to arbitrate disputes § Offer found in investment arbitration provision in treaties § Disputes commonly referred to ICSID but UNCITRAL is a popular alternative

Investment Treaty Arbitration – Types of treaties § Multilateral treaties § ASEAN Agreement for the Promotion and Protection of Investments § Energy Charter Treaty (only Asian members: Japan and Mongolia)

Investment Treaty Arbitration – Bilateral treaties § Cambodia has signed 21 BITs, of which 11 are in force (China, France, Germany, Japan, South Korea, Netherlands, Singapore, Thailand) § Singapore has 19 BITs § Thailand has 39 BITs § Indonesia has 59 BITs § Malaysia has 66 BITs § China has more than 130 BITs § India has signed 82 BITs, of which about 72 are in force

Investment Treaty Arbitration – Who is an investor? § Natural persons who are nationals of a contracting state § Companies incorporated in the host state but controlled directly or indirectly by nationals of a contracting party

Investment Treaty Arbitration – Who is an investor? § Broad reach of concept of nationality § Companies can choose nationality to benefit from a treaty, selecting most favourable regime from potential applicable treaties § e. g. in investor-state arbitrations involving Dhabol power plant project in India, multinational companies brought claims under the Mauritius-India BIT by structuring the investment through Mauritius

Investment Treaty Arbitration – What is an investment? § Usually defined broadly covering every kind of asset or every kind of investment § Concept has evolved from conventional notion of an inflow of funds into the host state and covers direct and indirect investments and contractual and other transactions having economic value § Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka – hedging agreement was an investment § e. g. construction contract, acquisition of promissory notes issued by host state § Clearly investment in a power plant project, refinery or production sharing contract is an investment

Investment Treaty Arbitration – Host state obligations § Host state obligations in investment treaties: § Fair and equitable treatment § May not be reduced to a precise statement of a legal obligation § Leaves considerable room for judgment of 'fairness' and 'equity' in light of all the circumstances of the case

Investment Treaty Arbitration – Host state obligations § National and most favoured nation treatment § Applies to substantive rights in other treaties § May also apply to procedural rights (Emilio Agustín Maffezini v The Kingdom of Spain - Argentine investor could rely on less stringent procedural requirements in Chile-Spain BIT) § Free transfer of funds related to investments

Investment Treaty Arbitration – Host state obligations § Umbrella clause - observance of specific investment undertakings § So called because it puts contractual commitments under the treaty's protective umbrella § e. g. ASEAN Agreement § Each Contracting Party shall observe any obligation arising from a particular commitment it may have entered into with regards to a specific investment of nationals or companies of the other Contracting Parties

Investment Treaty Arbitration – Procedural matters § Fork in the road provisions § Some treaties contain a clause that if the investor submits a dispute to the local courts of the host state, or to any other agreed dispute settlement procedures, it loses the right to arbitrate § Fork in the road provisions have been read restrictively by arbitral tribunals to only apply where the same investment protection claims were raised in the earlier action

Thank You If you have any questions, please do not hesitate to contact: STEVEN LIM 12 Marina Boulevard, #35 -01 Marina Bay Financial Centre Tower 3 Singapore 018982 Phone: +65 6645 3281 s. lim@nabarro. com