International Arbitration 2019

The International Arbitration guide provides expert legal commentary on key issues for businesses. The guide covers the important developments in the most significant jurisdictions.

Last Updated: August 19, 2019


Authors



Wilmer Cutler Pickering Hale and Dorr LLP offers one of the world’s largest and most experienced international arbitration and dispute resolution practices. The international arbitration group has been involved in more than 700 proceedings in recent years. Lawyers have successfully represented clients in a number of the largest institutional arbitrations and several of the most significant ad hoc arbitrations to arise in the past decade. The multinational team consists of nearly 70 lawyers, who are trained and qualified in a wide range of common and civil jurisdictions, and all of whom principally practise international dispute resolution. In addition to representing clients as counsel, many lawyers regularly sit as arbitrators in international arbitrations. The practice covers commercial and investment arbitration under the rules of all leading arbitration institutions and ad hoc arbitrations seated in a wide range of jurisdictions. It has represented individuals, companies, States and State-entities. Lawyers have recently handled or are currently handling disputes under the International Chamber of Commerce (ICC), American Arbitration Association (AAA/ICDR), London Court of International Arbitration (LCIA), Stockholm Chamber of Commerce (SCC), International Centre for Settlement of Investment Disputes (ICSID), Vienna International Arbitral Centre (VIAC), Hong Kong International Arbitration Centre (HKIAC), Cairo Regional Centre for International Commercial Arbitration (CRCICA) and UNCITRAL rules, and also have extensive experience with more specialised forms of institutional arbitration and ad hoc arbitrations.


Less than 50 years ago, international arbitration featured predominantly in only certain sectors, like commodity trading and insurance, and in the public international sphere for State-State disputes. Today, however, international arbitration has become the principal method of cross-border dispute resolution and, as a result, is deeply engrained in the fabric of international commerce. Anecdotal and empirical evidence, including the recurring Queen Mary University surveys on international arbitration, affirm that international arbitration is used as the default method of dispute resolution by most corporations with transnational businesses. This is unsurprising: set within the framework of the widely ratified 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), international arbitration offers an as yet unparalleled system of decision-making that is efficient, neutral and internationally enforceable. A vital ingredient in the rise of international arbitration has been its ability to innovate and adapt apace to the needs of global commerce, as some of the recent developments highlighted below demonstrate.

First, in the past year, the rise and expansion of new arbitral institutions has continued, reflecting a steady and growing appetite for arbitration at a national and regional level. In July 2018, Delos published its new arbitral rules, with a focus on time and cost-effective proceedings. The institution is also primed to open a new state-of-the-art hearing venue in London. Further East, in May 2018, the Japan International Dispute Resolution Center was established in Osaka. In March 2019, continuing the growth of arbitration in India, the Indian Government passed the New Delhi International Arbitration Centre Ordinance 2019, which establishes an autonomous and independent institution for arbitration throughout the country. Uzbekistan followed suit with the establishment of the Tashkent International Arbitration Centre in April 2019, along with a complete set of arbitral rules for the centre.

The continuing proliferation of arbitral institutions has led to some debate about whether the establishment of more institutions improves the quality of international arbitration and serves the interests of parties. To see that there may be some truth to the criticism, one need look no further than the high-profile enforcement proceedings in the United States where Chevron is resisting a USD18 billion award on the basis that, among other things, the proceedings were administered and influenced by a sham arbitral institution. Sham arbitral institutions, which have gained prominence in certain jurisdictions, like Egypt and Russia, risk undermining the legitimacy of international arbitration as whole. Yet, as shown by recent Russian legislative measures that were adopted to tackle “pocket” arbitral institutions (ie, sham institutions set up by corporations to resolve disputes involving those same corporations in a partisan manner), there are avenues to address these concerns while meeting the needs of users for more accessible regional arbitration centres.

Second, interactions between technology and arbitration are becoming an increasingly common feature of the arbitral landscape at a legislative and institutional level. For instance, the new United Arab Emirates Arbitration Law that entered into force in May 2018 specifically includes provisions allowing the use of modern technology, such as video-conferencing, for the cross-examination of witnesses and experts not physically present at the hearing. The 2018 HKIAC Rules contain provisions that allow parties to upload documents and written communications to a secured online repository. The HKIAC Rules also require the tribunal to actively consider using technology to streamline proceedings.

Third, diversity in arbitration continues to make progress, driven in part by initiatives such as the Equal Representation in Arbitration Pledge (“Pledge”) and Arbitral Women. The Pledge, in particular, gained significant momentum last year, rapidly developing from a proposal to tackle the under-representation of women in international arbitration to a worldwide campaign, now with signatories in more than 110 countries. The progress in gender, generational and geographical diversity is confirmed by statistics from leading arbitration institutes, which show notable increases in diverse arbitral appointments. The ICC, for instance, reported that in 2018 the number of female arbitrator appointments in ICC proceedings nearly doubled between 2015 to 2018 from 136 to 273, while 35% of the arbitrators it appointed were below the age of 50. In geographical terms, the ICC also appointed arbitrators from more than 87 jurisdictions, which was a new record. In 2018, the LCIA appointed arbitrators from 34 jurisdictions and 43% of all its appointments were female arbitrators. Statistics from leadings institutions – the SCC, SIAC and HKIAC – reflect similar trends. While international arbitration still has some distance to cover in enhancing diversity, in terms of both arbitrator and counsel representation, the growing emphasis on diversity signals promising change.

Fourth, December 2018 saw the launch of the highly anticipated Inquisitorial Rules on the Taking of Evidence in International Arbitration (also known as the “Prague Rules”). Developed in part as a civil law alternative to the IBA Rules on the Taking of Evidence in International Arbitration, the Prague Rules adopt a more circumscribed approach to fact finding, with a view to minimising the increasing costs and complexity of document disclosure in international arbitration. Notably, the Rules place the onus on the parties to produce the documents they intend to rely on (Article 4.1) and discourage any form of document production, including electronic discovery (Article 4.2). While it is too early to predict how widely the Prague Rules will be adopted, there can be no doubt that they offer an attractive alternative framework for arbitrators and parties alike, particularly those with a close nexus to and familiarity with civil law systems.

Fifth, in February 2018, with a mandate from the Ministers of Law of all 53 Commonwealth Member States, the Commonwealth Secretariat launched its study on the challenges and solutions to accessing international commercial arbitration across the Commonwealth. The study is premised on the socio-economic benefits that arbitration can provide, including the role it can play in enhancing access to justice, meeting the United Nations Sustainable Development Goals and enhancing cross-border trade. With a focus on proposals for arbitral reform and capacity building, the study could unlock potential for greater use of international arbitration within the Commonwealth, whose Member States make up nearly 2.4 billion of the world’s population.

While international arbitration has, for the most part, witnessed positive developments, the investment arbitration sphere continues to weather storms. In the aftermath of the March 2018 decision of the Court of Justice of the European Union (“CJEU”) in Slovak Republic v. Achmea B.V., the past year has, unsurprisingly, seen a focus on the future of investor-State dispute settlement in the European Union (“EU”) and the broader policy ramifications of the decision for the field. Reinforcing the EU’s shift away from investor-State arbitration, in April 2019 the CJEU rendered its long-awaited decision affirming the compatibility of the investor-State dispute settlement mechanism – an “investment court system” – in the EU-Canada Comprehensive Free Trade Agreement. In January 2019, EU Member States agreed to terminate all intra-EU investment treaties by the end of 2019 and, building off a July 2018 communication from the European Commission, a number of Member States also declared that the effect of Achmea extends to invalidate intra-EU investor-State dispute settlement under the Energy Charter Treaty (“ECT”).

These measures have been met with equal force by tribunals holding that Achmea does not apply to arbitrations under the ECT or, for that matter, other multilateral instruments involving non-EU Member States, such as the ICSID Convention. A crucial question remains whether domestic courts in the EU will be prepared to enforce such awards.

Yet, as noted in this Chapter last year, these measures far from mark the demise of investment arbitration. While efforts are undoubtedly underway to recalibrate the system, investor-State arbitration remains the norm in a number of contemporary investment treaties. At a multilateral level, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”), which entered into force in December 2018, retains mechanisms on investor-State arbitration. Accounting for nearly 13.4% of the global gross domestic product and approximately USD13.5 trillion in trade, the CPTPP is a strong endorsement of the importance of investor-State arbitration. Bilateral treaties show similar trends, including the Australia-Peru Free Trade Agreement (pending entry into force) and the updated China-Singapore Free Trade Agreement.

Importantly, and despite contrary intermittent signals from the Trump administration, the successor to the North American Free Trade Agreement (“NAFTA”) – the United States-Mexico-Canada Agreement (“USMCA”) – retains investor-State arbitration mechanisms, albeit in more limited form. Notably, while investor-State arbitration is set to phase out for Canada, save for “Legacy Claims” (ie, ongoing investment arbitrations under NAFTA and claims filed in relation to investments by investors under NAFTA within three years of its termination), it still remains afoot between Mexico and the United States (in relation to claims for discrimination and direct expropriation, save for government contracts where there are no restrictions on the substantive protections that can be litigated). Reflecting the growing emphasis on securing the State’s right to regulate in the public interest, the USMCA also contains more circumscribed protections for investors, and confers greater express recognition for the regulatory power of States.

ICSID is also continuing apace with the process of revising its rules and regulations. Following a public consultation, the ICSID Secretariat published the proposed amendments in an initial working paper in August 2018. Subsequent consultations with Member States led to the publication of the second working paper in March 2019. Reflecting contemporary trends in investment arbitration, the 885-page paper – published in English, French and Spanish – details proposals on expedited arbitration, third party funding, provisional measures, security for costs and transparency.

In sum, despite indications to the contrary, notably in the investment arbitration sphere, international arbitration has remained resilient this past year. There are now 160 State parties to the New York Convention, making it one of the most widely ratified treaties in the world. That figure is only set to grow, with more States, like Somalia, taking active steps towards accession. States are also actively looking to modernise their arbitral legislation, with the UNCITRAL Model Law on International Commercial Arbitration now in effect in 80 States and 111 jurisdictions. As the caseload of established arbitral institutions continues to expand, new regional arbitral institutions are being established to meet a growing demand from users. With increasing cross-border trade and globalisation, the use of international arbitration is only likely to increase in the coming years.

Authors



Wilmer Cutler Pickering Hale and Dorr LLP offers one of the world’s largest and most experienced international arbitration and dispute resolution practices. The international arbitration group has been involved in more than 700 proceedings in recent years. Lawyers have successfully represented clients in a number of the largest institutional arbitrations and several of the most significant ad hoc arbitrations to arise in the past decade. The multinational team consists of nearly 70 lawyers, who are trained and qualified in a wide range of common and civil jurisdictions, and all of whom principally practise international dispute resolution. In addition to representing clients as counsel, many lawyers regularly sit as arbitrators in international arbitrations. The practice covers commercial and investment arbitration under the rules of all leading arbitration institutions and ad hoc arbitrations seated in a wide range of jurisdictions. It has represented individuals, companies, States and State-entities. Lawyers have recently handled or are currently handling disputes under the International Chamber of Commerce (ICC), American Arbitration Association (AAA/ICDR), London Court of International Arbitration (LCIA), Stockholm Chamber of Commerce (SCC), International Centre for Settlement of Investment Disputes (ICSID), Vienna International Arbitral Centre (VIAC), Hong Kong International Arbitration Centre (HKIAC), Cairo Regional Centre for International Commercial Arbitration (CRCICA) and UNCITRAL rules, and also have extensive experience with more specialised forms of institutional arbitration and ad hoc arbitrations.