In two recent judgments, the Singapore High Court has affirmed its non-interventionist and pro-arbitration stance, whilst providing some useful clarity about the standards to which international arbitrators should be held.
In TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd  SGHC 186 (TMM) Chan J declined to set aside an arbitral award as there had been no breach of the rules of natural justice, whilst in BLB and another v BLC and another  SGHC 196 (BLB) Ang J remitted one narrow aspect of an award for consideration by a new tribunal, having reached the opposite conclusion.
A key feature of these two judgments is the strong emphasis on the limited supervisory role that the courts should play. In TMM the judge opined that the “integrity and efficacy of arbitration as a parallel dispute resolution system will be subverted if the courts appear unable or unwilling to restrain themselves from entering into the merits of every arbitral decision that comes before it“. Also, the judge in BLB opined that, “implicit in the reasoning of Chan J [in TMM] was the finding that curial recourse against the award had been improperly used to invite the court to judge the full merits and conduct of the arbitration”. These comments are a welcome acknowledgment that the Singaporean courts are guarded against abuse of the court’s curial jurisdiction.
Kenyan MPs have voted in favour of leaving the International Criminal Court (ICC). The vote in the Kenyan National Assembly came just before the trials of President Uhuru Kenyatta and Deputy President William Ruto in the ICC for crimes against humanity. They are accused of having orchestrated the post-election violence in Kenya in 2007 and 2008. The motion was introduced by majority leader Aden Duale who gave reasons for withdrawing from the ICC that included defending Kenyan sovereignty as well as protecting Kenyan citizens. Withdrawing from an international treaty in this way and in this context could potentially damage Kenya’s reputation as a country that respects international law and human rights, and provoke some unease among investors looking to invest in Kenya. However, the prosecutions of the Kenyan President and Deputy President also prompted an extraordinary session of the African Union last weekend on “Africa’s relationship with the International Criminal Court” which raises the possibility of the relationship of the ICC with African Union nations being redefined altogether.
Argentina has agreed to settle five separate investment treaty arbitration claims at a cost of around USD 500 million, in an historic departure from the Latin American state’s refusal to comply with awards made by international investment treaty arbitration bodies.
It was reported in an Argentine newspaper last Thursday, and confirmed by the counsel involved, that the settlements relate to the French media conglomerate Vivendi SA, British electricity and gas utility National Grid PLC, Continental Casualty Company (a subsidiary of the American financial and insurance products provider CNA Financial Corp), the American water company Azurix, and Blue Ridge Investments, the wholly owned subsidiary of Bank of America Corp. These companies were each successful in bringing claims against Argentina through the International Centre for the Settlement of Investment Disputes (ICSID) over the past 12 years, with the exception of National Grid which brought its claim under the Rules of the United Nations Commission on International Trade Law (UNCITRAL Rules) and Blue Ridge Investments, which acquired the ICSID award from the original claimant, CMG Gas Transmission.
While the details of the settlement are not yet clear, local newspapers in Argentina report that the settlement agreement involves a reduction of 15% of the original amount of the awards (USD 677 million) and 45% of the interest accrued, leading to an overall nominal discount of 25% on the amount originally claimed. The settlement is to take the form of sovereign bonds, which is a controversial choice given that Argentina has also been subject to ICSID claims regarding the state’s default on sovereign bonds, several of which are still outstanding. The settlement agreement is also reported to commit the parties benefiting from it to reinvest 10% of the amount (USD 67 million) in the purchase of additional sovereign bonds (BAADE).
On 5 October 2013, the President of Ecuador, Rafael Correa, confirmed that a commission is to be established to audit the bilateral investment treaties (BITs) that Ecuador currently has with other countries.
According to the national Ministry of Planning and Development, Ecuador intends to audit 26 BITs which are considered prejudicial to national interests. This figure establishes that the scope of the audit would thereby cover the majority of Ecuador’s current BITs, although further guidance from the government is needed as to which specific BITs will be targeted – it is highly likely that Ecuador’s BIT with the U.S. will be one. The audit committee will comprise of individuals, including academics, specialists and former judges, from various Latin American countries.
Ecuador’s actions follow a recent ministerial summit in Ecuador itself where a bloc of Latin American countries, including Bolivia and Venezuela, agreed to take collective action to oppose an ever-increasing number of lawsuits brought by multinational corporations against the governments of developing countries for alleged violations of trade agreements. Indeed, according to a study released earlier this year by the Institute for Policy Studies, a Washington think-tank, Latin American countries were the focus of around half of all investor-state lawsuits pending in March 2013 before the International Center for Settlement of Investment Disputes (ICSID).
Those wishing to invest in Ecuador, and more widely in Latin America, should, as always, continue to include appropriate contractual investment protection mechanisms as well as actively managing the structure of their investments to obtain access, where possible, to international law protections and investor-state arbitration. Although Ecuador’s actions currently only extend to the establishment of an audit committee, investors would be well-advised to keep a close eye on developments in the region.
In The London Steam Ship Owners Mutual Insurance Association Ltd v. the Kingdom of Spain  EWHC 2840 (Comm), the High Court concluded that the “Dallah principle”, i.e. the principle that a person who denies being a party to an arbitration agreement has no obligation to participate in the arbitration or take any steps in the country of seat even when the arbitral tribunal has ruled positively on its own jurisdiction, is of fundamental importance and should not be easily circumscribed. The “Dallah principle” pronounced by the Supreme Court in Dallah Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan  UKSC 46 (Dallah) was previously discussed here.
In its decision, the court also clarified the scope of Section 72 of the Arbitration Act 1996 (Act), which deals with the rights of a person who does not take part in arbitral proceedings.
This case provides a good example of the option available to a Respondent with good grounds for objecting to the tribunal’s jurisdiction, and which prefers not to participate in the arbitration, to wait until the Claimant seeks to enforce the award, and only then raise its objection.
On 2 October 2013, the First Minister of Scotland, Alex Salmond, launched the International Centre for Energy Arbitration (ICEA). The ICEA is a joint venture between the Scottish Arbitration Centre and the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee (CEPMLP) which aims to attract energy sector dispute resolution to Scotland.
This is an interesting initiative in an industry sector which has always enjoyed particular prominence in arbitration. Whilst the activities of the ICEA will have particular relevance to those energy companies operating in the North Sea, the ICEA also aims to attract work from the broader international energy dispute resolution arena. The ICEA is a centre for arbitration, not an arbitral institution, but amongst its first activities will be to consult the industry with a view to preparing arbitral rules tailored to energy sector disputes.
September saw the release of TDM Journal’s special aniversary issue: Ten Years of TDM. The TDM Journal is a comprehensive and innovative journal comprising contributions from well-known arbitration practitioners on the management of international disputes with a focus on the rapidly evolving area of investment arbitration, as well as other significant areas of international investment. The 10th anniversary issue includes contributions from six Herbert Smith Freehills practitioners:
Looking to the Future: Three “Hot Topics” for Investment Treaty Arbitration in the Next Ten Years: Matthew Weiniger, Partner, and Mike McClure, Senior Associate.
“International” Arbitration in an Increasingly Regional World: Claudia Ludwig, Senior Associate, and Joanne Greenaway, Professional Support Lawyer.
Commentary on the US Solicitor General’s Office (CVSG) brief in BG Group PLC v. Republic of Argentina (May 2013): Laurence Shore, Partner, and Amal Bouchenaki, Of Counsel.
These articles were first published in Transactional Dispute Management, Volume 10, Issue 4, September 2013 and are reproduced with the kind permission of Transactional Dispute Management (www.transnational-dispute-management.com).
Recent years have seen rapid growth in the use of arbitration as a means of resolving disputes in the financial services sector, an area where English or New York court jurisdiction has traditionally been favoured by market participants. This trend has been driven by the perceived advantages of arbitration, notably the superior enforcement mechanisms for arbitration awards (as compared to court judgments) under the New York Convention. This is of particular importance given the increasing prevalence of cross-border finance transactions involving emerging markets jurisdictions, where arbitration awards are often more readily enforceable than foreign court judgments. The availability of a neutral forum, and the ability to choose arbitrators with specialist expertise, are also important advantages for some parties in the financial services sector.
The growing popularity of arbitration as a dispute resolution option for finance transactions is reflected in the consultation by the International Swaps and Derivatives Association (ISDA) on the use of arbitration under its Master Agreements, which began in January 2011 and has now concluded. It is also reflected in the establishment of the Panel of Recognised International Market Experts in Finance (P.R.I.M.E. Finance), a specialist arbitration forum targeting complex financial disputes. P.R.I.M.E. Finance celebrated its first anniversary earlier this year, and reports significant progress since opening its doors for business in January 2012.
In this blog, we review both developments and their impact on the arbitration landscape. A version of this blog was first published on 23 August 2013 in the Global Arbitration Review.
Herbert Smith Freehills Partners Stéphane Brabant, John Ogilvie and Paula Hodges have published an article in the October issue of PLC Magazine entitled “Dispute Resolution in Africa – The Philosophy of Risk”. The article examines the options for resolving disputes in Africa-related transactions and highlights the key points that investors should consider when approaching litigation, arbitration or crisis management in Africa. To read the full article, please click here.
This article was first published in the October 2013 issue of PLC Magazine, and is reproduced by kind permission of Practical Law Publishing Limited 2013.
In March 2013, Herbert Smith Freehills launched its groundbreaking Guide to dispute resolution in all 54 of Africa’s diverse jurisdictions. To access an extract of the guide, please click here. If you would like to request a copy please email email@example.com.
For more information, please contact Stéphane Brabant, John Ogilvie, Paula Hodges, or your usual Herbert Smith Freehills contact.
Paula HodgesPartner, head of global arbitration practiceEmail
+44 20 7466 2027
Tuesday 22 October 2013, 1-2pm UK time.
Investors are increasingly alive to the investment protections offered by bilateral and multilateral investment treaties. Yet not all investment treaties are the same, with some offering stronger or more extensive protections than others. With careful advance planning, investors can make their investments using the right vehicle and transaction structure to ensure the best treaty protections possible.
In the third webinar in our investment treaty series, our speakers will use their experience and insight to guide you through some of your options for investment treaty planning to maximise your investment treaty protection, raising some potential hurdles and pitfalls along the way. Our speakers will also discuss other commercial factors influencing the choice of transaction structure, including taxation planning, and cover additional or alternative methods of investment protection.
- Laurence Shore, Partner, International Arbitration, New York
- Emmanuelle Cabrol, Partner, International Arbitration, Paris
- Christian Leathley, Partner, International Arbitration, London
- Andrew Cannon, Senior Associate, International Arbitration, London
If you would like to register for this event please contact Jane Webber.
The webinar will be recorded. If you are unable to listen to the event on the day please still register and then you will be able to access the recorded version later.