Significant reforms of arbitration legislation proposed
Draft revisions to China’s Arbitration Law have been published. The proposed reforms would significantly alter the legislative landscape in China, modernizing laws that have been largely unaltered since their enactment in 1994 and bringing them into line with international best practice. This includes permitting foreign arbitration institutions to establish operations in Mainland China and “conduct foreign-related arbitration business;” permitting parties to a Chinese-seated arbitration to submit their “foreign-related commercial disputes” to ad hoc arbitration; recognition of the kompetenz-kompetenz doctrine that the tribunal can determine its own jurisdiction; and empowering tribunals to grant interim measures. The consultation period has now closed and the publication of the final text is awaited. Read more.
Hong Kong and Mainland China enhance law on mutual enforcement of arbitral awards
New provisions on the mutual enforcement of arbitral awards between Hong Kong and Mainland China have come into force. A framework on mutual enforcement on arbitral awards between the two jurisdictions was signed in November 2020 but several key provisions only took effect at the end of May 2021. These include allowing award creditors to apply for enforcement of an award simultaneously in the Mainland and Hong Kong; creditors seeking enforcement in the Mainland may apply for preservation or mandatory measures before or after the Mainland court's acceptance of an enforcement application; and that all arbitral awards made in the Mainland can now be enforced under the Arrangement. Read more.
Non-compliance with pre-condition to arbitration is a question of admissibility, not jurisdiction
The Hong Kong High Court has found that a party’s failure to comply with a pre-condition to arbitration contained in the arbitration agreement was a question of admissibility, not a question of the jurisdiction of the arbitral tribunal. The case involved a challenge to an arbitral award based on an allegation that an escalation clause in the arbitration agreement had not been complied with. Upholding the award, the court ruled that it is for the tribunal to determine whether the party has complied with pre-conditions to arbitration, and not for the courts to interfere with those conclusions. The judgment has implications for the significant number of commercial contracts in Hong Kong and beyond containing escalation clauses. Read more.
Emergency arbitration awards enforceable in India
The Supreme Court of India has ruled that emergency arbitral awards are recognized under Indian law and may be enforced. Section 17 of India’s Arbitration and Conciliation Act 1996 makes provision for interim awards by a tribunal but does not explicitly mention emergency awards. The present case concerned an award issued by an emergency arbitrator in a Dehli-seated arbitration under SIAC arbitration rules. Overturning a stay against enforcement of the award issued by a lower court, the Supreme Court ruled that emergency awards are “exactly like an order” of an arbitral tribunal and may be enforced as such. The court noted both the lack of any provision in the legislation preventing emergency awards, as well as the legislative history of section 17 favoring a pro-arbitration approach. The decision paves the way for the enforcement of emergency awards in India. Read more.
Third-party funding extended to additional categories of legal proceedings
Singapore has extended its third-party funding framework to cover additional categories of legal proceedings. TFP has been permitted in Singapore since 2017 and but only for international arbitration proceedings and related court and mediation proceedings. The newly extended TPF framework permits TPF in domestic arbitration proceedings, certain proceedings commenced in the Singapore International Commercial Court and related mediation proceedings. Singapore’s Professional Conduct Rules will also be amended to reflect the use of TPF in SICC proceedings for registered foreign lawyers, including disclosure obligations relating to TPF and financial interests in third-party funders. Read more.
Two nations ratify Mauritius Convention on transparency in investor-state arbitration
Benin and Iraq have ratified the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, better known as the Mauritius Convention. The Convention aims to apply greater transparency to investor-state disputes, by extending the application of the UNCITRAL Rules on Transparency. This includes the publication of disputing parties, a notice of arbitration and response, and public hearings and oral arguments. Benin and Iraq are only the eighth and ninth jurisdictions to ratify the Convention, joining Australia, Bolivia Cameroon, Canada, Gambia, Mauritius and Switzerland. It will enter into force for Iraq on 20 February 2022 and for Benin on 19 July 2022. Read more hereand here.
Intra-EU disputes cannot be arbitrated under ECT
The Grand Chamber of the European Court of Justice had ruled that the investor-state dispute settlement mechanism under the Energy Charter Treaty is not applicable to intra-EU disputes. Following the reasoning of the ECJ’s 2018 decision in Achmea, which held intra-EU BITs to be incompatible with EU law, the court found that although the “ECT is an act of EU law”, the tribunal that would hear an intra-EU dispute under the ECT is outside the judicial system of the EU, and in particular, is incapable of seeking a preliminary ruling from the ECJ on the proper application of EU law. Therefore, the ECT dispute settlement mechanism does not apply to disputes between EU member states. The practical implications of the ruling have yet to be seen. Despite the Achmea decision, attempts to defend claims or annul awards arising from intra-EU BITs based on lack of jurisdiction have largely been unsuccessful, so we may see a similar view arising from ECT tribunals tasked with deciding intra-EU ECT disputes. Read more.
ICC and SIAC licensed as permanent arbitration institutions
The ICC and SIAC have become the third and fourth foreign arbitral institutions to be granted licenses to operate as permanent arbitration institutions in Russia, joining HKIAC and VIAC. Licencing as a PAI allows foreign arbitral institutions to administer international commercial arbitrations and certain types of corporate disputes involving Russian companies. The licensing regime, which was introduced in 2019, is not compulsory for foreign institutions, but arbitrations administered by institutions without a license are usually considered ad hoc, which can complicate the enforcement of any resulting award. The move is seen as a positive step in the development of arbitration in Russia and will increase choice for parties wishing to arbitrate in the jurisdiction. Read more.
Supreme Court rules on proper procedure for service of enforcement proceedings on sovereign state
The UK Supreme Court has found that in proceedings to enforce an arbitral award against a foreign state, the procedure set out in section 12(1) of the State Immunity Act 1978 - service via the UK’s Foreign, Commonwealth and Development Office to the state’s Ministry of Foreign Affairs - is “mandatory and exclusive.” Overturning the Court of Appeal, it found that service cannot be dispensed with by the court, even in the exceptional circumstances that existed in the present case - the FCDO indicated service on the State of Libya may not be possible, due to the political situation there. The Supreme Court also found that this requirement is proportionate and does not infringe on a party’s right to a fair trial under Article 6 of the European Convention on Human Rights. Read more.
First opt-out class action approved by UK tribunal in Merricks judgment
The UK Competition Appeal Tribunal has certified the first opt-out collective action since the UK class actions regime was introduced in 2015. The application had been dismissed on first consideration but after a series of appeals that went all the way to the Supreme Court, the plaintiff has been granted a Collective Proceedings Order in his GBP 14 billion claim against Mastercard, brought on behalf of 46.2 million people relating to interchange fees. In light of the Supreme Court’s decision, the CPO application was unopposed and unanimously approved by the Tribunal, paving the way for what is likely to be one of the highest value claims ever brought in the UK. However, the Tribunal held that the plaintiff could not claim compound interest in collective proceedings, nor could he include within the class anyone who had died before the claim was issued. Read more.
Brazilian Superior Court confirms limitation period for seeking annulment of arbitral awards
The Superior Court of Justice, Brazil’s highest court for non-constitutional matters, has clarified the limitation period for requesting the annulment of an arbitral award. Under the Brazilian Arbitration Act, a party has 90 days to bring proceedings seeking the annulment of an arbitral award. What was less clear was whether this time period also applied to the use of annulment as a defense when seeking to resist enforcement proceedings. The court said yes - where a defense is filed after the expiry of the 90 days, it may continue to rely on statutory defenses, but can no longer request an annulment. Read more.
BC Court enforces foreign judgment relating to land in Canadian legal first
The British Columbia Court of Appeal, the highest appellate court in the province of British Columbia, has recognized and enforced the judgment of a foreign court concerning title to land, the first time a Canadian court has done so. Courts have traditionally refused enforcement of such judgments, following the Canadian Supreme Court’s 1934 decision in Duke v Andler. However, the BC court felt that the reasoning of a Supreme Court decision from 2006 involving the enforcement of foreign non-monetary orders had overtaken the reasoning in Duke, leaving the court free to enforce the judgment of a German court, which ordered the transfer of a BC property from one party to another. Given the controversy surrounding the decision, it is thought likely the Supreme Court would grant leave to appeal, should it be sought. Read more.
Ecuador rejoins ICSID Convention despite opposition from legislature
Ecuador has ratified the ICSID Convention following a Constitutional Court ruling that the National Assembly, which is opposed to the move, was not required to give its consent. Ecuador was previously an ICSID member but withdrew in 2009. The ICSID Convention is a multilateral treaty that seeks to encourage international investment through the provision of an independent and effective dispute-settlement institution for investors and states. The Convention entered into force for Ecuador on 3 September 2021. Although the move is welcome news for investors, there is concern that Ecuador may seek to oppose ICSID claims against it on constitutional grounds. Read more.
Honduras ratifies Singapore Mediation Convention
Honduras has joined UNCITRAL's Convention on the Enforcement of Mediation Settlements, better known as the Singapore Mediation Convention. The Convention, which came into force last September, seeks to encourage confidence in mediation by creating an international mechanism for enforcement of mediation settlement agreements, similar to how the New York Convention acts as a framework for the enforcement of arbitral awards. Honduras joins Singapore, Fiji, Qatar, Saudi Arabia, Belarus and Ecuador as parties to the Convention. It will come into force for Honduras on 2 March 2022. Read more.
Supreme Court limits consumer lawsuits with ruling on Article III standing
The US Supreme Court has issued a significant decision relating to the harm required to be suffered by a plaintiff in order to have standing. By a 5-4 majority, the court in TransUnion LLC v. Ramirez found that proceedings based solely on the risk of future harm, are not “cases” or “controversies” under the US Constitution and so do not meet the “injury in fact” requirements for a plaintiff to establish standing to sue (known as Article III standing), summarized by Justice Kavanagh as “No concrete harm, no standing.” This ruling, which follows the Supreme Court’s 2016 decision in Spokeo v. Robins, is likely to have significant consequences for class action litigation, given that claims based on alleged procedural violations of statutorily created rights remain common. Read more.
Trends in updates to arbitral rules
The past few months have seen many institutions around the world update their institutional arbitration rules. This includes updates from ACICA, AFSA, AIAC, ICSID (proposed), JAMS, JCAA, SWISS, and WIPO. We also saw updated rules from the ICC and ICDR earlier in the year. Whilst the changes differ between institutions, common themes include enhanced provisions relating to multi-party and multi-contract disputes, use of technology such as electronic filing and virtual/hybrid hearings, expedited procedures, emergency arbitrators, transparency and the publication of awards. Many of these arbitration rules are reflected in our Comparison of Arbitration Rules tables, with global and regional versions, which can be found here.
Updates from UNCITRAL Working Group III
UNCITRAL's Working Group III, which is considering reform of investor-state dispute settlement, has released a report on its 40th session, which was held in Vienna in May. The Working Group released a revised work plan, which, amongst other things, was extended to 2026, as well as a draft note considering methods for implementing the Code of Conduct for Adjudicators in International Investment Disputes, which was released earlier this year. Following the meeting, the Working Group also released a draft paper on third-party funding in ISDS. This considered potential models for regulation of TPF, disclosure requirements, potential sanctions and a code of conduct for third-party funders. Read more.
UNCITRAL publishes expedited arbitration rules
UNCITRAL has announced that its new Expedited Arbitration Rules have been adopted without objection from member states. The rules, which require both parties to consent to their application, offer a modified version of UNCITRAL’s Arbitration Rules, with simplified procedures and shortened timeframes. Measures include shortened timeframes for appointing a tribunal and responding to a notice, the appointment of a sole arbitrator unless parties agree otherwise, and awards being made within six months from the date of the constitution of the arbitral tribunal. Work on these rules has been ongoing since February 2019, when UNCITRAL's Working Group II was tasked with their creation. The group is due to meet again in New York at the end of March 2022 and is expected to finalize a draft explanatory note to the new rules. Read more.
ICCA launches guidelines on standards of practice in international arbitration
The ICCA has launched its new Guidelines on Standards of Practice in International Arbitration. The guidelines aim to reflect the broad consensus in the international arbitration community as to the general principles of civility expected of all participants during the course of international arbitration. The guidelines were informed by surveys of professional standards, ethical rules, and civility guidelines from a wide range of jurisdictions, carried out by a diverse panel of arbitration experts, with the aim of ensuring the guidelines reflect the breadth of jurisdictions, cultures and situations in which international arbitration is utilized. They are not intended to be mandatory, although could be incorporated in an arbitration agreement. Read more.
ICSID releases papers on mediation in investment disputes
The International Centre for the Settlement of Investment Disputes has released two papers on investment mediation. Background Paper on Investment Mediation is a step-by-step introduction to the role of mediation in resolving investment disputes, how the mediation process works in practice, and the key ways that participants can set themselves up for successful outcomes. Overview of Investment Treaty Clauses on Mediation is a survey of all known dispute resolution clauses in bilateral investment treaties, free trade agreements, and dispute resolution provisions in model treaties that provide for mediation in some form. It is intended as a resource for governments considering mediation as a dispute-resolution option in future investment treaties and contracts. ICSID launched the first institutional mediation rules for investment disputes in 2018, with proposed updates released in June this year. Read more.