Advanced training on assessment of damages by arbitrators

Juan Pablo Argentato, Emmanuel E. Kaufman

Yves Derains (Founding Partner, Derains & Gharavi, Paris; Chair of the ICC Institute of World Business Law) opened the training by presenting the assessment of damages in international arbitration as a challenge. He referred to issued arising out of the poor command of economic and financial analysis by counsel and arbitrators, the impact that law and ethics may have on the assessment of damages and risks incurred when arbitrators fail to take into account the burden of proof, or do not provide sufficient reasoning in the award.

The Tribunal’s discretion to award damages versus the Tribunal’s duty to issue a reasoned decision

In this first panel, Fernando Mantilla-Serrano (Partner, Latham & Watkins, Paris) reminded that parties ‘want money in their pockets’ and that it is the arbitral tribunal’s duty to render an enforceable award. Mr Mantilla-Serrano also mentioned how the nature of the compensation claim, its amount and legal basis affect the arbitral tribunal’s powers. He notably referred to a French case where the tribunal’s reliance on a legal basis different than the one pleaded by the parties led to the setting aside of the award.1 Mr Mantilla-Serrano then discussed the arbitrators’ power to depart from the parties’ expert reports (and risks of ultra petita decision, due process, etc.) and the appointment of experts by the arbitral tribunal (the costs, delays, and experts who might be considered as a ‘fourth arbitrator’ for the issue of quantum).

Kathleen Paisley (Partner, AMBOS Law, Brussels) addressed – referring to Yukos – the situation generated by the parties’ submission of different financial models (‘income approach’ model vs. ‘asset-based approach’ model) as well as the situation where the arbitral tribunal would reject the parties’ models and apply a different hybrid model without previously checking with the parties.

Ms Paisley emphasised the importance of taking measures to avoid the unnecessary risk of an award being challenged. She referred to the different techniques that are available to arbitrators in order to reach a decision, such as (i) joint expert reports, (ii) requesting parties’ experts to directly assist the arbitral tribunal in the valuation of damages, or (iii) having the arbitral tribunal’s valuation confirmed by the parties’ experts (without the involvement of the parties). She noted that parties neither like unpredictability nor a decision to be based on a completely different approach.

Financial approaches to assessing damages

In the second panel, Mark Kantor (Independent Arbitrator, Washington) and Nicolas Bourdon (Partner, Accuracy, Paris) dealt with income and market approach valuation methods.

Mr Kantor discussed the underlying conceptual approaches towards compensation. He noted that several arbitral tribunals have concluded that the use of the discounted cash flow method (‘DCF’) in damages calculation is only possible if there is a going concern. Mr Kantor also briefly summarised the different standards of compensation under international law (i.e. the 2001 International Law Commission’s draft articles on ‘Responsibility of States for Internationally Wrongful Acts’), as well as under civil and common law systems.

Mr Bourdon focused on the DCF method as it is commonly applied in the income approach valuation method. He stressed that projections should be reliable when using the DCF method and that the further the valuation goes into the future, the higher the discount is. As to the market approach valuation method, he marked the importance of considering comparable companies and mentioned the difficulties encountered by innovative and disruptive businesses due to the lack of comparable activities. To Mr Bourdon, income and market approach valuation methods should be complementary and not in opposition.

Damnum emergens, lucrum cessans, and moral damages – how to calculate without double-counting

Nicolas Bourdon started his presentation by explaining that damnum emergens and lucrum cessans are both elements of direct damages that require compensation. On damnum emergens, he explained the difficulties encountered from the calculation of the value of the work performed by the employees of the injured party. On lucrum cessans, he pointed to the difficulties in predicting future earnings and how the calculation goes back to predicting cash flows. Finally, he mentioned the importance of finding a right balance between technique (science) and judgment (art) in damages assessment.

Manuel Conthe (Independent Arbitrator, Spain) stressed that moral damages are always compensatory and should be added to pecuniary damages. He noted, however, that moral damages are rarely granted.

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Award of interest: considerations for awarding compound post-award interest on costs, material and moral damages

In this final panel, Mr Mantilla-Serrano argued that arbitral tribunals have ample powers to award interest, which are only limited by the parties’ agreement and public order, and mentioned three necessary elements in an interest claim: the applicable interest rate, the time frame for the application of the interest, and the amount on which interest is calculated.

Karyl Nairn QC (Partner, Skadden Arps, United Kingdom) stressed the importance of presenting the complete interest claim early on. In her experience, this was one of the areas where most mistakes occurred in awards. She thus advocated for a rigorous and analytical presentation of the interest claim, adding that arbitrators should remind the parties do to so.

Ms Nairn also noted that it is important that the arbitrators inform the parties about what information they need to award interest (e.g. the underlying legal basis). Arbitrators expect the parties to address the source of their power to award interest (parties’ agreement or applicable law), as well as restrictions or issues of enforcement, relevant time periods (pre-award and post-award interest) and interest rates.

As a conclusion for this training session, Mr Mantilla-Serrano reaffirmed the importance of reasoned decisions on issues of damages and interest. Generally, arbitrators should avoid surprising the parties; they should communicate with the parties and ask questions when necessary in order to take an informed decision.

ICC YAF Session: Battle of the seats

Patricia Figueiredo Ferraz, Flavia Mange

The ICC YAF breakfast at the start of the first day of the Conference opened with Gustavo Scheffer da Silveira (Counsel, ICC International Court of Arbitration, São Paulo) who stressed the importance of the seat and the interferences that may occur during the arbitration depending on the seat chosen.

As explained by moderators of the panel René Irra (Partner, Cuatrecasas Mexico; ICC YAF Representative) and Marike Paulsson (Director, International Arbitration Institute & Lecturer in Law, University of Miami School of Law), this breakfast session was structured in three battles, each between two cities (Miami vs. New York City, Mexico City vs. São Paulo, and Buenos Aires vs. Santiago). The winning seat was selected by the audience as well as by Judge Jose M. Rodrigues and Judge Lisa S. Walsh from the Miami Courts’ specialised division on arbitration.

Miami vs. New York

Jennifer Permesly (Partner, Skadden, New York) and Juliana De Valdenebro (Associate, Hogan Lovells, Miami) answered questions raised by Marike Paulsson on immigration drama and parole room in US Airports and on how both cities could compete against other non-US cities involving Latin American parties or transactions. Ms Permesly highlighted that a US visa is not required for 38 nationalities and that, so far, the Trump Drama has been anecdotal. A simple letter explaining the entry into the United States would be sufficient to prevent any issues. Promoting New York, Ms Permensly mentioned that the New York Arbitration Center is fully prepared to host arbitrations in the city. Juliana De Valdenebro immediately argued that Miami is the most bilingual city in the United States and, although it does not have a hearing center, it is easy to find facilities for hearings in hotels for which costs are much lower than in New York – statistics show that New York is the most expensive city in the United States while Miami is ranked 13th.

Next, Ms Paulsson raised the issue of judiciary support of arbitration in both cities. Specifically, she asked Ms Permesly to comment on the case Figueiredo Ferraz and Engenharia de Projeto Ltda. v. Republic of Peru. Defending New York, Ms Permesly explained this case was dated 2011, was no longer cited by courts, relates to the enforcement of foreign awards and would not affect arbitrations seated in New York. She also stressed that New York judges are highly specialised in dealing with complex cases and applying the Federal Arbitration Act and are used to the arbitration framework.

Moving to Miami, Ms Valdenebro was questioned on the case Industrial Risk Insurers v. M.A.N. Gutenhoffnungshutte. Ms Valdenebro stressed that this case was dated 1994, before Florida had adopted the UNCITRAL Model Law as its arbitration law and established a specialised court for arbitration. Quoting the Figueiredo case, Ms Valdenebro noted with concern that New York courts had denied enforcement on grounds that were not in the New York Convention. The battle ended on that note, and the pool opened for votes. After disclosing that they were Miami Judges, the Judges as well as most of the audience voted for Miami.

Mexico City vs. São Paulo

Mr Irra questioned Monserrat Manzano (Partner, Von Wobeser y Sierra, S.C., Mexico) and Ricardo Aprigliano (Partner, Aprigliano Advogados, São Paulo) on the application of the principle of Kompetenz-Kompetenz in both cities. Montserrat Manzano explained that, in Mexico, the UNCITRAL Model Law is in place and is applied in a straightforward manner. When a party alleges the invalidity of the arbitration agreement before a national court, the judge will immediately refer the parties to arbitration and leave such decision for the arbitrator to decide, except when i) the opposing party proves that there is a binding court decision or arbitral award declaring the arbitration agreement invalid, or ii) the agreement is evidently null, void or inoperative.

Mr Aprigliano, for his part, asserted that São Paulo is the present and future of arbitration and had notably been chosen by the ICC International Court of Arbitration to open its first Secretariat’s office in Latin America. Tackling the question posed by Mr Irra, he explained that the Brazilian Arbitration Act was based on the UNCITRAL Model Law and was revised in 2015. Mr Aprigliano clarified that the Brazilian Arbitration Act grants the arbitrators the first call to decide on their competence and that the new Civil Procedure Code also takes a pro-arbitration approach. Bearing in mind this framework, judges do not interfere in arbitration. He concluded that the Kompetenz-Kompetenz principle applies, that São Paulo is a safe place for arbitration and that no visa is required for several nationalities.

Spurring the debate, Mr Irra questioned about anti-arbitration injunctions issued by Mexican courts. Ms Manzano replied that this was an isolated case which was reversed by the higher courts. She further argued that Mexico City is the best place for arbitrations held in Spanish in Latin America. São Paulo can have some cases in Portuguese, but it is not prepared for cases in Spanish and its courts have also interfered in the production of evidence, for instance in the Yellow Subway case. Mr Aprigliano replied that this was also an isolated case and a lower court judgment. Moving to the final topic, Mr Irra asked how safe it would be for parties to choose between Mexico City and São Paulo, with regards to the annulment of awards. While Mr Aprigliano quoted a research conducted by the Brazilian Arbitration Committee that showed that only 2% of the awards had been annulled in Brazil in the past ten years, Ms Manzano affirmed that Mexican courts have moved away from the COMISA case and that recent Mexican decisions are pro-arbitration and pro-enforcement. The winner of this battle was Mexico City.

Buenos Aires vs. Santiago

Ms Paulsson raised once more the concern of border control, this time in Buenos Aires. Juan Manuel Rey Jimenez de Aréchaga (Associate, Philipi Prietrocarrizosa Ferrero Du & Uria, Santiago) shared his experience regarding boxes of documents for a filing being stuck in customs pending the payment of a tax for ‘office materials’, causing a lot of problems and delay in the case. Agustín G. Sanz (Counsel, Three Crowns LLP, Washington) rebutted that, today, all filings are done electronically. He also noted that no city in the world is protected from administrative issues and strikes.

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Mr Irra then asked about arbitrators’ liability and protection. Mr Jimenez de Aréchaga explained that the ‘recurso de queja’ against arbitrators available in domestic arbitration in Chile does not apply in international cases. In a case seated in Santiago, with Chilean parties and a foreigner arbitrator, the Supreme Court found that the underlining facts of the contracts were international, thus dismissed the allegations against the arbitrator. 2 Mr Sanz affirmed that, in Buenos Aires, arbitrators enjoy the same type of protection that judges have.

On security of counsel in Buenos Aires, Ms Paulsson then asked about the lawyers from King & Spalding being investigated in Argentina. Mr Sanz explained that the case they were involved in dealt with the expropriation of airlines in Argentina and that the actions against King Spalding’s attorneys related to a third-party funding agreement. 3

Mr Sanz highlighted that Argentina is living through very interesting times: the UNCITRAL Model Law has been approved by the Senate, the new administration has understood that a sound dispute resolution system is the key to attract new rounds of investment needed in Argentina, and a new commercial code entered in force in 2014. Mr Jimenez de Aréchaga added that, although it is getting better, Argentina remains quite unstable and no one knows what may happen in the near future. He closed by asserting that Santiago already has a stable system and that, regarding dispute resolution, ‘boring is good’. Santiago won the last battle.

Ms. Paulsson then asked the judges for a final vote as to which of the three winning cities (Miami, Mexico and Santiago) would be the best seat for arbitration in Latin America. The honor went to Miami.

Arbitration in the face of an anti-trade political atmosphere

Juan Pablo Argentato, Hugo García Larriva

This panel addressed the challenges faced by the region with regards to state’s growing preference of bilateralism over multilateralism, possible changes to NAFTA, the need of reforms in commercial arbitration and the prospective registration and regulation of arbitral institutions in some countries.

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By way of introduction, the Chair of the panel Dietmar Prager (Partner, Debevoise & Plimpton LLP, New York) recalled that the public discourse about the usefulness and legitimacy of investor-state dispute settlement (‘ISDS’) continues to gain momentum, especially in the context of the ongoing negotiations of important international investment agreements. Critics started in Latin America and are now being echoed in various developed countries and principally in the European Union. Commercial arbitration has also been the target of attention.

In this context, Yves Derains (Founding Partner, Derains Gharavi, Paris; Chair, ICC Institute of World Business Law) analysed a recent trend in ISDS. He noted that ISDS, as originally conceived, constituted a multilateral effort to create three or four sets of rules which would govern any dispute arising from any kind of Bilateral Investment Treaty (BIT). This trend was consolidated in the 1990’s and 2000’s with the inclusion of ICSID, UNCITRAL, ICC and SCC rules in BITs. According to Mr Derains, the emerging trend is the development of particular systems for each BIT, modelled in standing courts with appellate mechanisms. This trend is fueled by the critics to ISDS directed to (i) the functioning of the system (such as the lack of transparency and consistency of decisions), and (ii) the existence of the system itself. He added that the Mauritius Convention on Transparency in Treaty-based Investor-State Arbitration could be a mean to overcome part of these critics and increase transparency and accountability in the current ISDS. 4 In terms of consistency, Mr Derains noted that diverging decisions may in fact be the result of different provisions contained in BITs and applied to different facts, thus, a multiplication of particular systems may aggravate the problem. Finally, he remarked that, in order to survive, ISDS would need to develop new mechanisms to take into account the interests of all stakeholders. In this respect, Mr Derains warned against the proposal for permanent investment arbitral tribunals which would be composed of ‘employees’ of the states and therefore afford very limited protection of investments.

Similarly, Claus Von Wobeser (Managing Partner, Von Wobeser & Sierra, S.C., Mexico) addressed the critics against NAFTA and highlighted the apparent consensus between Mexico, Canada and the United States on the need for a reform to increase transparency. Nevertheless, he pointed out that transparency has been in place since 2001 when the NAFTA Free Trade Commission allowed access to documents to non-disputing parties. Furthermore, since 2003, non-disputing parties are allowed to submit amicus curiae briefs,and since 2004, hearings within the NAFTA arbitration framework are open to the public.5 Mr Von Wobeser argued that the implementation of an investment court – modelled by the European Union’s proposal for ISDS – would create serious problems within NAFTA. He further argued that if the Mexico, Canada and the United States have not been able to agree on a list of arbitrators, they would find it hard to agree on the qualifications, mechanism of appointment and names of the said judges.

Julie Bedard (Partner, Skadden Arps, New York and São Paulo) addressed the proposal of Brazil, Russia, India, China and South Africa (‘BRICS’) to create a common framework for international arbitration, in order to harmonise BRICS’ arbitration laws, facilitate recognition and enforcement of arbitral awards and foster diversity in international arbitration by increasing appointments of BRICS’ arbitrators. Ms Bedard also addressed the lack of rules on consolidation in international arbitration.6 Consolidation could help to overcome procedural and systemic inefficiencies resulting from several authorities deciding over close-related disputes and could allow an arbitrator to have a comprehensive understanding of the dispute as a whole.

Finally, Jose Ricardo Feris (Partner, Squire Patton Boggs, Paris) referred to some initiatives that have emerged in the region to register and regulate arbitral institutions.7 The core issue behind these initiatives is whether arbitrators should be appointed by parties or by arbitral institutions. Critics to party appointments are based on high-profile cases, such as the Odebrecht case in Peru. Arbitration institutions have an important role in this issue, as a reform from the inside – from the arbitration system – would be preferable to a reform from the outside – from the states. Mr Feris argued that, in a climate of growing protectionism, the perception of a need for regulation is increased and also applies to arbitral institutions. Nevertheless, he added that it is important to understand and address the legitimate concerns beneath these proposals and critics. If there is a consensus that ethical rules should apply to counsel and arbitrators, this consensus should include arbitral institutions. He concluded that there is a need to act in a proactive manner, not in a defensive one.

Roundtable on Expedited Procedure Rules

María Angélica Burgos, Patrícia Sá Moreira de Figueiredo Ferraz

Members of the panel: Alexander G. Fessas (Moderator) Secretary General, ICC International Court of Arbitration, Paris, Tina Cicchetti, Independent Arbitrator, Vancouver Arbitration Chambers, Teresa Garcia-Reyes, Senior Counsel, Litigation, Baker Hughes, a GE Company, Houston, Rafael Rincón Partner, Zuleta Abogados Asociados, Bogotá, Gustavo Scheffer da Silveira, Counsel, ICC International Court of Arbitration, São Paulo.

In the roundtable on the ICC Expedited Procedure Provisions (‘ICC EPP’), the panellists held a fluid conversation on several challenges posed by this type of proceeding under the ICC Arbitration Rules.

The discussion was kicked off by asking the audience about their feeling when they first came across the ICC EPP: an overwhelming majority of the audience felt ‘interested’, while only a small minority felt ‘excited’ about these new rules.

Featuring a Venn diagram, the speakers showed that parties want arbitration to be fast, good and cheap, but that arbitration can usually only have two of these features: an arbitration might be good and cheap, but not necessarily fast, or it might be fast and good but perhaps not cheap. Precisely, the idea of an expedited procedure is to preserve all three features. The speakers suggested that the preparation and effective cooperation between the stakeholders involved are key to securing all three features in an arbitration.

Given this context, panellists asserted there was a need to simplify the arbitral process, as costs in particular, largely depend on how the proceedings are conducted. In this respect, the ICC EPP are now an alternative available to parties, who can pursue smaller claims in arbitration while having the safeguards of institutional rules and the involvement of an institution to guarantee that said proceeding is effective. Notably, the ICC Court can conduct an ‘inappropriateness test’ to determine whether the expedited procedure is suited to a given case. External counsel should also explore whether expedited rules are appropriate for a given case. In fact, the availability of arbitration for a new sort of cases might create opportunities for more firms to participate in the arbitration market.

Panellists then turned to the qualitative criteria for identifying proper cases for an expedited procedure. The panel inquired on the confusion and risks involved in assuming that small cases equate to simple cases. Flexible rules are therefore necessary to avoid this trap: regardless of the amount in dispute, Article 30 of the ICC Rules enable parties to agree to the ICC EPP or the ICC Court to determine that the application of the expedited procedure is inappropriate.

The roundtable noted that the quest for rapidity in international arbitration is not new. The first ICC Arbitration was resolved in two months in 1923, whereas today arbitrations tend to last several months and even years. The panellists outlined key strategies for counsel to ensure a successful expedited procedure:

  • be involved early and work closely with the client’s business side;
  • precisely understand the goals and concerns of the client in order to determine if an expedited procedure is the best fit;
  • identify potential arbitrators early and keep an eye on new, up-and-coming arbitrators;
  • avoid late introduction of evidence and unnecessary production of documents.

The roundtable noted that the expedited procedure, like emergency arbitration, had been quite successful in the first months after their launch. The possibility of opting in the ICC EPP is noteworthy, as most expedited procedure arbitrations to date have been started after parties decided to opt in those rules, which would otherwise not have been applicable to their dispute.

When consulted on its main concerns with respect to the application of the ICC EPP, the audience identified, in the following order: due process, party autonomy in the constitution of the arbitral tribunal and the reasoning of awards. On due process, the roundtable highlighted that the arbitral tribunal has the duty of producing an enforceable award and that the proceedings must be conducted in accordance with the parties’ agreement. Panellists were quite surprised with the polling results that indicated that one of the audience’s concerns was with the parties’ right to select their arbitrators, considering that there have been positive results with sole arbitrators and with arbitrators appointed by the ICC Court. As to the reasoning of awards, panellists noted that ICC opted specifically for having reasoned awards in the expedited procedure. Panellists also highlighted that another concern might be the abuse of process by parties but acknowledged that such concern existed in other arbitration proceedings; the institution should maintain its supervision in order to avoid the disguise of a standard claim in the ICC EPP.

To conclude, the roundtable discussed two national court decisions involving arbitrations conducted under expedited rules. First, Noble Resources International Pte. Ltd v. Shanghai Good Credit International Trade Co. Ltd. (2017), where a court in Shanghai refused enforcement of an award rendered by a sole arbitrator in an expedited procedure on the basis that the arbitration agreement provided for a three-member tribunal. Second, AQZ vs ARA (2015), where the Singapore High Court upheld an award in which SIAC’s expedited procedure rules had been applied. The panellists commented on these cases and drew some lessons from them such as the importance of enforcing the parties’ agreement and that of including a starting date for the default application of the ICC EPP (only applicable to contracts concluded after 1 March 2017, date of entry in force of the ICC EPP) in order to avoid disputes on the temporal scope of the ICC EPP. On due process, panellists concluded that institutions should carefully monitor proceedings and that arbitrators should promptly address due process concerns with parties.

Settlements in arbitration: Issues to consider and to avoid

María Angélica Burgos, Patrícia Sá Moreira de Figueiredo Ferraz

Ana Vermal (Partner, Proskauer International Arbitration Group, Paris) and Carlos de los Santos (Partner, Head of Litigation and Arbitration Group, Garrigues, Madrid) first reminded that settlements in arbitration may be considered by parties and their counsel as a means to reduce costs, avoid a long and sometimes unnecessary procedure, and eliminate or reduce the risks inherent to arbitration, especially in cases where the parties’ arguments and claims are relatively weak. Additionally, through settlements, parties may recover part of the amount in dispute and preserve their commercial relationship.

According to the PricewaterhouseCoopers and Queen Mary University of London 2008 International Arbitration Survey ‘Corporate Attitudes and Practices: Recognition and Enforcement of Foreign Awards’ (available at http://www.arbitration.qmul.ac.uk/research/), 25% of counsel reported achieving a settlement before receiving an arbitral award and 7% reported settlements that were followed by an arbitral award by consent. Also according to this survey, settlements most often occur before the first hearing or before the hearing on the merits. In the 2015 survey ‘Improvements and Innovations in International Arbitration’ which explored what users thought counsel could do more or better, 60% of the respondents selected the option to ‘encourage settlement, including the use of mediation during an arbitration’ among their multiple answers.

Focusing on the cons of settlement, the speakers remarked that parties may face some difficulties in the settlement process, including concerns over confidentiality, expiry of limitations periods, being granted authorisation to negotiate the terms of the settlement, and enforcement of the settlement agreement in the event one of the parties does not voluntarily comply.

In order to maximize the chances of reaching settlement, Ms Vermal and Mr de los Santos underlined some tactics that parties, and especially their counsel, may resort to. During the contract negotiation, multi-tier dispute resolution clauses that provide for negotiation, mediation or both as preliminary steps prior to arbitration may be considered. These clauses tend to eliminate the concern that a proposal to mediate may be seen as a sign of weakness. Moreover, even if they fail, the negotiation or mediation process may help the parties to narrow the issues to eventually be arbitrated.

On the drawbacks of a multi-tier dispute resolution clause, Ms Vermal explained that this clause might cause a waste of time and expenses if the parties are already entrenched in their positions. Further, it may also impair a party’s ability to secure interim measures and may result in the expiry of the statute of limitations period. Therefore, in order to minimize those problems, the speakers recommend that the multi-tier dispute resolution clauses contain a clear language as to what is required. In this sense, they recommended the parties and their counsel to observe the IBA Guidelines for Drafting International Arbitration Clauses, especially with respect to the following items:

  • specify a period of time for negotiation or mediation – preferably a short period of time – in order to prevent the parties from using the negotiation or mediation process to delay or gain other tactical advantage;
  • avoid the trap of making arbitration permissive (‘may’), rather than mandatory (‘shall’); and
  • define the disputes to be submitted to negotiation, mediation and/or arbitration in identical terms.

Once proceedings are on track, Ms Vermal and Mr de los Santos emphasised that counsel should regularly and honestly evaluate the prospects of success of the claim as well as gain a good understanding of their client’s overall interests, and not only its legal position, in order to properly advise the client on its best options. Bifurcation can also assist in assessing whether a dispute is ripe for settlement.

In regard to the role of the Arbitral Tribunal, Ms Vermal and Mr de los Santos explored whether the Tribunal should act as a ‘facilitator’ for a possible settlement due to the efficiency of conflict resolution as the main objective of the arbitration. In this respect, the legal tradition of the arbitrator may influence his/her position regarding the possibility to assist the parties in reaching a settlement. For example, civil law arbitrators might tend to understand that their mission includes assisting the parties in reaching a possible settlement, whereas arbitrators from the common law tradition, might tend to consider that their sole function is to decide the dispute. The speakers noted that some possible shortcomings to arbitrators partaking in settlement efforts are that they might pre-judge the dispute and that the parties might feel judged and not entirely free to discuss settlement options. However, Mr de los Santos observed that arbitrators have been increasingly assisting the parties with respect to settlements. Parties should however consent in writing to such power of the tribunal, which should in turn follow guidelines on conflict of interests and the ‘Rules for the Facilitation of Settlement in International Arbitration’ of the Center for Effective Dispute Resolution (CEDR), a management and resolution consultancy dedicated to improve the way organizations prevent manage and resolve conflict deadlock.

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The speakers presented an overview of the hybrid dispute resolution methods that combine the advantages of several dispute resolution mechanisms (‘med-arb’, ‘arb-med’, ‘arb-med-arb’, and ‘mediation and last offer arbitration’ (MEDALOA or ‘baseball’ arbitration where if the mediation fails, the mediator becomes an arbitrator who has to decide among each parties’ proposals). The speakers however indicated that although much is written about these hybrid methods, they appear to be rarely used in practice. According to the study ‘The combined use of mediation and arbitration in commercial dispute resolution: results from an international study’,8 half of respondents had only seen the combined use of mediation and arbitration in less than 10% of their cases, and such figure included situations in which mediation simply precedes arbitration.

Lastly, the speakers cautioned that one should be careful in the preparation of settlement agreements as they often give rise to disputes. Some suggestions included considering all formal requirements for the validity and enforcement of the settlement agreement and including appropriate dispute resolution provisions (preferably identical to those in the original contract).

Conducting a Dispute Board: A workshop

Emmanuel E. Kaufman, Gustavo Scheffer da Silveira

Through a very interactive workshop, Jaime Gray (Partner, NPG Abogados, Lima) and Aisha Nadar (Senior Consultant, Advokatfirman Runeland AB, Stockholm) explained the function of dispute boards, as well as the nature and specifics of their operation.

First, the speakers explained the differences between arbitration and dispute board proceedings. While arbitrators will decide the dispute based on parties’ submissions, members of the dispute boards, who are primarily selected for their technical expertise, can conduct their own investigations with or without submissions of the parties. Mr Gray and Ms Nadar remarked that while arbitral awards can be enforced through courts, a determination made by a dispute board (‘DB’) will not be enforceable in some jurisdictions, unless it is requalified as an arbitral award. As this is a matter of local law, enforcement of dispute board determinations will very much depend on the specific jurisdiction where enforcement is sought.

Mr Gray and Ms Nadar emphasised that dispute boards are a proactive and preventive alternative dispute mechanism that helps the parties avoid or minimize disputes. Focusing on the salient features of the 2015 ICC Dispute Board Rules, which updated the previous 2004 version, the speakers highlighted the particularities of a standing dispute board, which is typically set up upon the signature or commencement of performance of a mid- or long-term contract, to help the parties avoid or overcome any disagreements or disputes that arise during the implementation of the contract.

One of the principal innovations of the 2015 ICC Dispute Board Rules is to spell out the three basic functions of dispute boards, so as to emphasise the importance of informal assistance (Articles 16 and 17, ICC Dispute Board Rules) and formal referrals of disputes (Article 18, ICC Dispute Board Rules). Because a standing DB is kept informed of the developments of the construction project and has good knowledge of the project as well as its actors and issues that may arise, it can operate as a real-time, on-site dispute, resolution mechanism. When the dispute board is on site, its members can quickly assist the parties assessing the issues and help them find a suitable solution. Furthermore, as those members are normally independent specialists, they can provide a ‘reality check’, aligning the parties’ expectations with the reality of the situation, thereby favoring the performance of the contract.

In order to properly perform their mission, dispute board members must have the parties’ trust regarding their qualification and independence, and particularly at two moments; at the constitution of the DB and during site visits by the DB members. Trust is of particular importance in long term contracts, such as construction projects and public private partnerships, where the dispute board will have an active role during the entirety of the performance of the contract. Regarding appointment, Ms Nadar explained that, to establish the necessary trust between the DB and the parties, only individuals, not companies, can be appointed as DB members. Mr Gray also mentioned that the selection of the members of a dispute board should be driven by the characteristics of the project (‘listen to the music of your specific project’) and that contrary to practice in international arbitration, dispute board members are jointly appointed by all parties (Article 7, ICC Dispute Board Rules). During site visits, DB members meet the parties’ representatives and observe the execution of the project first hand; by speaking to the parties’ representatives, DB members can better understand the parties’ expectations on the DB’s role and the proper way to approach the issues at stake.

The speakers emphasised the role of the ICC’s International Center for ADR in assisting the parties when appointing or challenging DB members, fixing their fees, or reviewing the DB’s decisions.

Mr Gray pointed out that ICC does not however administer the dispute board.

The speakers distinguished between different types of dispute boards:

  • ‘Dispute review boards’ issue recommendations, which the parties may voluntarily comply with and will become final and binding unless a party issues a notice of dissatisfaction within 30 days (Article 4, ICC Dispute Board Rules).
  • ‘Dispute adjudication boards’ issue decisions which are immediately binding on the parties (Article 5, ICC Dispute Board Rules).
  • ‘Combined dispute boards’ may issue either recommendations or decisions (Article 6, ICC Dispute Board Rules) but can only render a decision upon the request of one party and without the objection of the other. If a party objects, the dispute board will first have to decide whether to issue a decision or a simple recommendation.

Mr Gray and Ms Nadar highlighted the informality of the process before dispute boards, particularly in connection with the participation of the parties’ representatives involved in the performance of the contract. Furthermore, hearings before dispute boards are less formal than arbitration hearings, especially in the way dispute board members’ questions are answered, the rules of procedure are less strict and counsel is generally less involved in dispute board hearings.

In response to questions from the audience, the speakers clarified certain differences between standing and ad-hoc DBs regarding compensation. Ms Nadar explained that, in principle, members of ad-hoc dispute boards are paid on a daily basis, while members of standing dispute boards are also paid a management fee.

As the audience also raised questions on the impact of cultural differences on dispute board proceedings, Ms Nadar remarked that DB members must be mindful that parties from different backgrounds are more or less direct when dealing with differences and disputes, and should therefore establish a specific process to communicate with the parties to address such cultural differences. That said, there was also a consensus that programmes, schedules and methodologies used in construction projects are the same or comparable around the world. As emphasised by the speakers, these similarities can help to settle disputes and to enter into reasonable agreements.

Finally, Mr Gray and Ms Nadar concluded by describing dispute boards as an insurance policy against the costs of the parties’ failure to contain a dispute; they can help avoid delays in projects and save arbitration costs by resolving disputes during the implementation of the projects.

Parallel Session ‘Use of technology in arbitration proceedings’

Flavia Mange, Hugo García Larriva

This session addressed how the use of information technology (‘IT’) in international arbitration has changed the way in which the different actors involved in such proceedings interact. The speakers highlighted the advantages and risks of using IT in arbitration proceedings.

The first issue addressed was whether it was necessary for parties to agree on the use of IT. Silvia Marchili (Partner, King & Spalding, Houston) pointed out that it is extremely uncommon to find an agreement to arbitrate providing for a general use of IT, and that any specific provision would be the risk of being outdated considering the fast evolution of IT and the duration of arbitral proceedings. Erik Schäfer (Attorney-at-Law, Cohausz & Florack, Düsseldorf; Co-Chair, ICC Task Force on IT in Arbitration9) added that, the ICC Rules of Arbitration, like virtually all other arbitration rules, do not require, forbid, or address the use of IT, therefore, it would be up to the parties and the tribunal to agree on the specific use of IT. A general consensus of the speakers was that this issue should be addressed while discussing the terms of reference.

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Another important issue addressed by Mr Schäfer was the form in which the communications between the parties and the Tribunal should be made. Since an international arbitration will likely involve parties and arbitrators that are based in various countries, the use of e-mail is predominant in order to increase efficiency and save costs. Ms Marchili added that searchable PDF has become the electronic format that is generally used for written submissions and that there is an increasing use of cloud-based services or File Transfer Protocols (‘FTP’) for the transmission of large volume of documents. Notwithstanding the above, both speakers agreed that under certain circumstances, i.e. when there are material concerns regarding confidentiality, whether the electronic communications will be received, or any other legal concerns, information should also be transmitted by courier service or other non-electronic means.

As to the use of IT for conferences and hearings, Mr Schäfer highlighted that there has been a fast evolution in terms of quality, accessibility and affordability. In his experience, the use of IT for procedural conferences has become a standard in the field. Nevertheless, Ms Marchili noted that, even though it is widely used in law firms for other purposes, people are still reluctant to use videoconferencing for the examination of witnesses.

Regarding the risks of using IT, Ms Marchili stated that it would be naive to believe that, in an increasing interconnected world, there would be no threats. Cases such as Panama Papers and WikiLeaks have showed that cybersecurity is a major issue to consider when using IT, even more when some arbitrations, particularly those involving sovereign interests, can attract some degree of public interest. Mr Schäfer commented that the use of encrypted information, secure servers and passwords might reduce the risks of cyber-attacks.

For the future, Mr Schäfer envisages a progressive development and use of artificial intelligence. Tools such as search engine optimisations and e-discovery software, alongside with more complex and refined algorithms, will likely merge into the daily work of more lawyers and arbitrators. Nevertheless, for the peace of mind of this audience, Ms Marchili stated that is very unlikely that humans would be replaced by machines as counsels or arbitrators.

The consensus of the panel was that the use of IT presents more advantages than risks, nonetheless, they warned that the abuse of IT – particularly the ‘copy and paste’ – could jeopardize quality in international arbitration, in the form of longer submissions and endless awards.

Third party funding in Latin America

Flavia Mange and Hugo Garcia Larriva

In this session, Jeffery Commission (Investment Director, Vannin Capital, Washington, DC) and Narghis Torres (Founder & CEO, LexFinance, Lima, Peru) offered insight on real case experiences and described the different products related to third party funding available to parties and their counsel.

Jeffery Commission started his presentation by stressing that third-party funding (‘TPF’) is commonly used or at least known in international arbitration. He referred to the results of the 2015 Queen Mary survey on International Arbitration (http://www.arbitration.qmul.ac.uk/research/2015/), showing that only 9% of those interviewed were not aware of the existence of third-party funding, 12% had used it, 27% had seen TPF used by others, and 51% were aware of that facility but had never used or seen it used in practice. He also recognised that TPF is more frequently used in investment disputes due to the nature, costs and length of the claims. Given the transparency requirements in investment arbitration, we know that TPF was used and disclosed in 22 investor-state arbitrations (https://www.italaw.com/browse). This figure, however, does not reflect the numerous cases where the funding was not made public.

Turning to the question of who the funders are, Mr Commission explained that there are specialised funds working in the field, but big law firms also act as funders when they pitch cases on a contingency basis; he noted that alternative fee arrangements had been used in at least ten investor-states cases he studied.

Mr Commission described some innovative funding structures, such as loan agreements The funding is not necessarily intended to fund a dispute, but can instead finance a company’s ability to pursue other projects, although the funder is rewarded through a percentage of the recovery in a specific pending case.

He identified key cases involving TPF in the region, including:

  • Crystallex International Corporation vs. Bolivarian Republic of Venezuela (ICSID Case No. ARB(AF)/11/2) in which the funder collected 70% of the net value of the arbitration award of US$ 1 202 billion after having invested between US$ 25 and US$ 27 million during the dispute, and Rusoro Mining Ltd. vs. Bolivarian Republic of Venezuela (ICSID Case No. ARB(AF)/12/5), another billion-dollar award where the claimant used TPF in Latin America.
  • Mr Commission distinguished those cases from Philip Morris vs. Uruguay (ICSID Case No. ARB/10/7) where the respondent’s defense was funded by the Bloomberg and Gates Foundations – which support governments to litigate certain cases, such as those related to tobacco control laws.
  • Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic (ICSID Case No. ARB/09/1) one of the most recent funded investor-state disputes, involved Argentina’s nationalisation of two airlines. In this case, the funder invested US$ 13 million and estimated receiving US$ 140 million. The funder agreement and the assignment of the award process are discussed in detail in the award.
  • In at least two other cases, namely Sourth American Silver Limited v. Bolivia (UNCITRAL, PCA Case No. 2013-15) and Serafín García Armas and Karina García Gruber v. The Bolivarian Republic of Venezuela (UNCITRAL, Caso CPA No. 2013-3), the tribunal issued an order requiring disclosure of the identity of the funder and, in its decision on security for costs, mentioned the fact that one party was funded by a TPF.

The second speaker, Mr Narghis Torres, stated that arbitration is well developed in Latin American and involves various stakeholders, including the funders. Focusing on data about the increased caseload of arbitration, he stated that the costs related to disputes are increasing every year. He estimated that, in Latin America specifically, there is a potential investment of more than US$ 16 million in arbitration costs in the next four years, for which clients will have to pay or seek funding. Financial services may vary according to the client’s risk profile and be triggered either in the merits phase or only at stage of enforcement.

Mr Torres explained that ‘LexFinance’ is an asset manager that invests in disputes related to Iberian America through three different lines of business: arbitration funding, later stage financing, and special situations.

The different types of products offered by ‘LexFinance’ include:

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New products they offer include:

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In response to a question from the audience on the level of involvement of a funder in the arbitration, Mr Torres explained that it would depend on the funder but that, usually, any strategy that would imply more time or cost (e.g. the joinder of an additional party) would be discussed with the funder.

Mr Torres then added that he could see new trends with regards to the secondary market, the funding of states or state entities, and in cases arising out of corruption.

Calculation of damages for delay claims in construction disputes

Patrícia Sá Moreira de Figueiredo Ferraz

Wendy MacLaughlin (Vice President, HKA, Brisbane, Australia) and Pedro Batista Martins (Partner, Batista Martins Advogados, Rio de Janeiro) presented the calculation of damages for delay claims in construction disputes from the perspectives of an expert and an arbitrator.

Ms MacLaughlin explained that, from a civil engineer’s perspective, there is a considerable difference between delay and disruption with regards to quantification of damages.

On the one hand, a delay should be expressed in an actual period of delays and not on forecasts. In this sense, delay requires proof of actual costs incurred (unless stated otherwise). Ms MacLaughlin highlighted that, with respect to prolongations in construction projects, the actual delay periods should (i) be quantified at the time the delay occurs – meaning that retrospective methods of delay analysis are required and, by contrast, prospective methods such as ‘time impact analysis’ or ‘impacted as-planned’ are not appropriate, (ii) be based on the ‘as planned v. as built’ method in window periods where the critical path over time is established on the basis of the progress of the works.

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Disruption, on the other hand, implies that the project is less efficient due to problems that are beyond the parties’ control. Consequently, the calculation of damages regarding disruption requires the following elements: (i) demonstration of cause and effect, (ii) measurement information found in the available records, and (iii) identifying why productivity differ at different periods (‘measured mile analysis’). To illustrate this approach, Ms MacLaughlin presented a practical example that demonstrated the importance of having the respective documents available for analysis, i.e. production documents (output), fuel and plant documents (input).

Next, Ms MacLaughlin emphasised that fuel costs for non-productive hours as well as labour costs for non-productive hours should be considered for the quantification of unproductive time.

Finally, Ms MacLaughlin concluded that disruption analyses like the ‘measured mile’ can only be done properly if the data is available.

Mr Martins focused his presentation on the quantification of damages from the arbitrator’s perspective and explained the importance of framing the facts and causes in accordance with civil liability rules in order to determine who caused the damage and to which extent.

With respect to construction contracts in particular, Mr Martins highlighted that (i) given their long term duration, contractual terms tend to be incomplete, (ii) they involve the participation of several companies, with activities that are interdependent and impose daily routines; and (iii) tend to include rigid and tight contractual terms that fail to deal adequately with supervening events. As a result, due to their complexity, these agreements frequently give rise to unresolved delays that result in arbitration with multiple claims from all parties involved.

Mr Martins emphasised the importance of verifying the nexus between cause and effect, which tends to be more complex in construction sector causes for the damage may be multiple. Mr Martins further explained that arbitrators may face difficulties related to evidence in construction arbitrations due to some missing information (i.e. non-existence of construction diaries, unsigned diaries, non-returned diaries).

Mr Martins underlined the role of experts in construction arbitrations. The expert report should be didactic and present the case in a succinct and objective manner. Mr Martins concluded by noting that lawyers have a key role to play when reframing complex technical issues in expert reports for the understanding of the arbitral tribunal.

Levelling the playing field: How to address conflicting ethical issues between parties and counsel from different jurisdictions

María Angélica Burgos

Gabriela Álvarez-Ávila (Partner, Curtis-Mallet Provost, Mexico City) and Christian Leathley (Partner, Herbert-Smith Freehills, New York) addressed the different ethical standards that could apply in international arbitration as a response to improper conduct, such as the so-called ‘guerilla tactics’.

Mr Leathley noted that the starting point for ethical rules was the arbitration agreement, then the mandatory rules of the seat or of the jurisdiction in which lawyers are qualified. He noted that ethical ‘hard-law’ is grounded in national laws but that, recalling Catherine Roger’s words and given the diversity of ethical standards that could apply, arbitration nowadays faces an ethical ‘no man’s land’.10

Parties may take advantage of this grey area and advance practices that might be seen as good- lawyering and advocacy by some, and as a wrongful conduct by others (i.e. attempts to stop hearings, abuse of document disclosure, etc.). Mr Leathley indicated three possible approaches to reconcile the different standards: (i) the double deontology rules implemented in certain regulations or organisations, (ii) the conflicts of laws approach and (iii) the harmonisation of ethical standards (for instance the suggested LCIA General Guidelines for the Parties’ Legal Representatives, annexed to the 2014 LCIA Arbitration Rules). He however stated that the scope of debate is limited given the fact that ‘hard law’ remains concentrated in national laws. Mr Leathley then inquired the audience on whether they had seen the IBA Guidelines on Party Representation referenced in terms of reference and/or the first procedural order; 75% of the attendees responded in the affirmative.

Ms Álvarez-Ávila then referred to the IBA Guidelines on Conflict of Interests and those on Party Representation as useful standards and reference for parties, counsel and arbitrators. The application of these Guidelines is however subject to parties’ agreement and is not meant to replace domestic regulations. She then discussed cases that had addressed ethical issues, such as Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, 11 which referred to the IBA Guidelines on Party Representation, and Caratube International Oil Company v. The Republic of Kazhkaztan, 12 which referred to the IBA Rules on the Taking of Evidence in International Arbitration.

Issues discussed demonstrated the need for the development of ethical rules, or rules on the conduct of proceedings regarding, for instance, the tribunal’s powers to preserve the integrity of proceedings, ex-parte communications with arbitrators, false representation of facts and law, submission of false documents, preservation of evidence, communications with experts and preparation of expert witnesses by lawyers.

Speakers mentioned that self-regulation of counsel could be helpful, although not as decisive as ‘hard-law’ (and its corresponding ‘hard-sanctions’), and outlined the following measures, which could be effective in deterring ethical misconduct.

  • Tribunals should address ethical issues at the outset of the arbitration. Parties should be invited to agree on the rules applicable to ethical issues and on the power of the Tribunal to take action against misconduct early on, before misconduct arises.
  • Tribunals should have a proactive role and use the tools at their disposal in response to improper conduct, such as adverse inferences, decisions on costs and possibly admonish counsel.
  • The Tribunal should refer improper conduct to the corresponding national authorities in case of ethical misconduct so that they can take action. Speakers also called upon practitioners to report on other counsel’s ethical misconduct, noting that most instances usually stall at the point of referring the matter to domestic authorities.

Meanwhile, attendees confirmed that 50% of them had raised ethical misconduct before the arbitral tribunal, and that in 75% of the cases, arbitrators did not do anything in response to ethical violations.

ICC & Arbitral Women session ‘Expertise: a woman’s no man land?’

María Angélica Burgos, Patrícia Sá Moreira de Figueiredo Ferraz

Ana Carolina Weber (Partner, Eizirik Advogados, Rio de Janeiro, Board Member, ArbitralWomen), moderator of the panel, introduced the discussions which focused on the status of women acting as experts in international arbitration.

Juliette Fortin (Managing Director, FTI Consulting, Paris) first recalled that, according to the ‘Who’s Who Legal’ there had been an increase of 8% of women serving as experts in international arbitration from 2011 to 2017; half of the female experts being located in the United Kingdom. In 2016, the ICC Centre for ADR however only reported one female expert and, as of 1 November 2017, Arbitral Women’s search tool for experts included 34 female candidates.

Jan Paulsson (Partner, Three Crowns, Washington D.C.) mentioned that he had no preconception of what the appropriate number of women experts in dispute resolution should be. He stated he had seen a surprising number of women engineers acting as experts and witnesses and ascertained that this number would increase when lawyers realise the added value of women and how their involvement can make a difference before a tribunal. Lawyers have not yet realised that diversity is in itself positive, important, and can be a true asset.

Alessandra Ribas Secco (Expert/Auditor, Ribas Secco Consultoria, São Paulo) noted that, in Brazil, very few women are in leadership positions and this should be improved.

Miguel Nakhle (Senior Vice-President, Compass Lexecon, Houston) stated that even though many experts come from professions in which women are under-represented, he had seen an increase in the number of women experts in international arbitration. He affirmed that there will certainly be a new generation of female experts in the coming years.

Ms Fortin then asked panellists to comment on possible reasons and solutions to improve participation of women as experts in arbitration procedures.

Mr Paulsson suggested being very realistic regarding promises. He considered that the reason why there are few female experts testifying before juries was because jury consultants advise that a jury will be more sensitive to an ‘experienced’ ‘old’ man. Lawyers do not want to take risks. Mr Paulsson then questioned whether there was a right number of female participation. Is 50% right? Is 20% wrong? Should we do something about it?

He remarked that there are disadvantages to every profession but that discrimination of people in the same level of competence is intolerable.

Mr Nahkle supported the view that the goal should not be a number but rather that every person who is competent enough should be afforded an opportunity. Facing unconscious biases that we may all have, and which may exist against women experts, and discussing these issues are part of the solution. Women should not be discouraged by numbers because this situation will change.

Panellists then shared their views on whether there were differences in approaches between male and female experts. Ms Ribas Secco argued that the differences rely on the mindset; women tend to stay as ‘main advisor’ or ‘right-hand’. Women should first change their mindset, and then work towards changing the environment. Mr Paulsson stressed that he did not read an expert report as written by a man or by a woman. Ms Frotin and Mr Nahkle asserted that the main element was preparation. The approach may vary from person to person, but is not a gender issue.

To conclude, the panellists identified some key challenges and steps for increasing the participation of women as experts in arbitration procedures: (i) women should convince themselves that they want to pursue certain career goals, study and practice in the selected field; and (ii) secure the support of their firms and families.

At the end of the session, the audience raised the following noteworthy points. First, the real challenge for women is to obtain equality of access; once a female expert has the possibility to serve as an expert, she then just needs to prove that she is competent. Second, some professions need to improve the way they promote the profession to younger generations (including giving younger professionals opportunities, such as testifying as part of the expert team, and mentoring opportunities). Third, firms should implement policies regarding maternity leave that would help them retain their professionals. And finally, the clients’ perspective and their perception of selection of experts need to change. However if jury consultants provide advice that is based on unconscious bias, the sporadic participation of female experts in international arbitration might be difficult to overcome.

A ‘compliance’ approach to arbitration

Hugo Garcia Larriva, Emmanuel Kaufman

José Astigarraga (Partner & Global Head of Arbitration, Reed Smith LLP, Miami) introduced this panel which addressed the impact of corruption and criminal investigations on the arbitration proceedings and arbitrators’ legal duties in this regard.

Clávio Valença Filho (Partner, Valença Galíndez Arbitation, São Paulo) distinguished between corruption being brought as a jurisdictional issue, where, in investment arbitration, the condition of ‘legality of investments’ could impact the arbitrators’ jurisdiction to decide on the merits, or as a substantive issue in the context of transnational public policy. He also distinguished between a contract for which the subject-matter would be corruption and a contract tainted with or obtained through corruption.

On this last point, Juan Fernández Armesto (Armesto & Asociados, Madrid) indicated that contracts that provide for corrupt payments should be declared null and void, and contracts obtained through corruption could have different consequences depending on each legal system. In this regard, Mr Fernández Armesto also tackled the issue of parallel administrative investigations, such as tax, antitrust or criminal investigations, during the arbitration. He mentioned that arbitrators could not in principle stop the investigations, but that, conversely, a court could order to stop the arbitration proceedings. Mr Fernández Armesto however noted that courts may not be able to stop investment arbitration proceedings that arise out of an international treaty and specified that the impact of parallel criminal or administrative proceedings would differ whether the arbitral tribunal is seated in the same country or abroad.

Luis Alfredo Barragán (Partner, Brigard & Urrutia, Bogotá) referred to the red flags towards detecting corruption or criminal behavior. He referred to contractual behaviors that create strong suspicions, such as the direct assignment of contracts in public tenders or an unexplained or disproportionate payment of commissions for consulting services. He mentioned that nowadays it is very difficult to ignore these red flags. Different standards of proof apply to corruption depending on the jurisdiction; a strict standard of proof may create difficulties in proving corruption despite the identification of red flags.13

Mr Barragan also mentioned the influence of corruption allegations that go public and become subject to public and media scrutiny. For instance, in a case seated in Colombia, arbitrators resigned following the public disclosure of corruption allegations, as in the opinion of the arbitrators, these allegations modified the basis of the dispute and justified investigations by the competent criminal authorities.

Jennifer Kirby (Principal, Kirby Arbitration, Paris) addressed the arbitrators’ duties under the umbrella of compliance in the context of commercial arbitration. She first mentioned that arbitrators should take a pragmatic approach and emphasised that situations relating to criminal conducts do not happen very often in practice.

In the case of corruption or parties’ criminal behaviors prior to the transaction, Ms Kirby mentioned that arbitrators should not forget that they are not police officers. Arbitrators have to decide the case that was brought to them and if the corruption issue is material for the case, arbitrators should decide the case in a straightforward and appropriate manner. Where arbitration itself is used for criminal purposes, as in money laundering, Ms Kirby noted that these cases are not rare and can normally be seen in smaller disputes. In these cases, the best approach for arbitrators, to not be involved in money laundering, is to reject the case on legal grounds. If this is not possible, arbitrators should discuss with the arbitral institution.

To conclude the session, Mr Astigarraga mentioned the results of the live poll showing that cases dealing with corruption are not common. According to the poll, 60% of the audience had never dealt with a case involving corruption allegations. Mr Astigarraga emphasised the importance of alerting the arbitral institution in case of suspicions so as to coordinate the next steps to be taken.

Being an arbitrator today: Current challenges

María Angélica Burgos, Patrícia Sá Moreira de Figueiredo Ferraz

Sandra González (Partner, Ferrere, Uruguay) opened the discussions by reminding that arbitrators face various and new challenges and that this panel would include insights from institutions as well as topics addressing professional liability risk and conflict management, proactive arbitration, the ‘due process paranoia’ and the arbitrator’s ‘back-office’.

Ana Serra e Moura (Deputy Secretary General, ICC International Court of Arbitration, Paris) described the main changes in arbitration in the last 15 years. Challenges against arbitrators have increased and institutions have reinforced their expectations and their role towards efficient procedures. ICC requires for instance that the arbitrator informs of his/her availability for the next two years during the selection and appointment process. Institutions, today, face the challenge of responding to the needs and expectations of different players in arbitration (parties, arbitrators, counsel). Furthermore, Ms Serra e Moura highlighted the efforts of the institutions in recent years to increase the diversity in arbitration with respect to gender, nationality and other aspects; in 2011, 7.2% of arbitrators in ICC cases were women, whereas in 2016, this proportion reached 14.8%. Towards more transparency, ICC implemented a policy to publish the names of the arbitrators on its website. Ms Serra e Moura concluded that both efficiency and quality are essential elements of the arbitration procedure.

Using the LivePoll app, the majority of the audience (56.7%) confirmed that, in their opinion, arbitral institutions were doing enough to respond to the demands for efficiency and transparency.

Eduardo Silva Romero (Partner, Head of International Arbitration Global Pratice, Dechert LLP, Paris) discussed professional liability risks and conflicts management and highlighted that, in his view, international arbitrators should only be liable in very exceptional and extraordinary circumstances. Adjudicators need to adjudicate the disputes that have been entrusted to them with sufficient peace of mind. Therefore, the integrity of international arbitration must be preserved by limiting parties’ claims against arbitrators that would be based on adverse awards or decisions. Mr Silva Romero referred to the so-called ‘immunity of arbitrators’ found in various legal systems but also to the general consensus that there is no absolute immunity in favour of arbitrators. Arbitrators should be liable to the parties for fraud and intentional wrongdoing (i.e. Section 29 of the English Arbitration Act 1996). He also noted that there seems to be consensus that an arbitrator’s mere negligence is covered by immunity. According to the live poll, half of the audience supported this perception (50.5%) and considered that arbitrators should not be granted immunity in cases of gross negligence.

Juan Pablo Argentato (Counsel of the ICC International Court of Arbitration, Paris) presented the scope of proactive arbitration. First focusing on cases in which the arbitrator provided preliminary views on the issues in dispute, Mr Argentato stated that preliminary views could be useful to parties if they had expressly requested such views. On the contrary, parties who were not expecting preliminary views from the tribunal might consider that the arbitrator prejudged the case. Mr Argentato then explained that the arbitrator can contribute to the efficiency of the procedure with simple requests directed to the parties. For instance, the arbitrator could request experts of both parties to meet and establish the controversial issues in the dispute. Finally, with respect to summary dismissal, Mr Argentato emphasised that the ICC Rules do not have a specific provision on this issue but that the ICC Note to Parties and Arbitral Tribunals encourages the early disposal of ‘manifestly unmeritorious claims or defenses’, when appropriate. 14

Eduardo Damião Gonçalves (Partner, Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, São Paulo) tackled the ‘due process paranoia’ syndrome. He explained that this syndrome, for which the ‘patient’ could be either the lawyer or the arbitrator, include the following symptoms:

  • procedural misbehaviour during the proceedings (submission of aggressive petitions, veiled threats to attack the procedure and the arbitrators, etc.) for lawyers, and
  • authoritarian conduct, or on the contrary granting baseless parties’ requests, for arbitrators.

According to the speaker, arbitrators should keep control of the proceedings and seek a balance between expeditiousness and effectiveness. Furthermore, Mr Damião Gonçalves emphasised that state judges now tend to respect the discretion and competence of the arbitrators. Therefore, the arbitrators must not succumb to any pressure or threats from the parties.

The last speaker of this panel, Matthieu de Boisséson (Arbitrator, Littleton Chambers, London), closed the session with an analysis of the arbitrator’s ‘back-office’ and his/her management of a large number of documents. Mr de Boisséson addressed the concerns as to whether the arbitral secretary could become a ‘fourth arbitrator’ and emphasised that the secretary can help managing the procedure, but that the responsibility for proper conduct of the proceedings and the decision-making are exclusively within the tasks of the arbitrators. In order to avoid, or at least to minimize parties’ complaints in this respect, certain requisites should be observed, such as a formal consent from both parties after checking the curriculum vitae of the candidate to act as secretary. With respect to the issue of management of a large number of documents, Mr de Boisséson underlined that nowadays there are many IT systems that may assist arbitrators in organising documents, although in some circumstances, hard copies of documents remain very useful.

Closing roundtable: A fresh look at the application of the New York Convention in the Americas

Flavia Mange, Gustavo Scheffer da Silveira

Marike Paulsson (Director, International Arbitration Institute & Lecturer in Law, University of Miami School of Law), as moderator, explained that the session would reproduce a UN Assembly session and introduced the delegates from their corresponding countries, who would discuss proposals for amendments to the New York Convention (the ‘Convention’) on five specific issues. A live poll reflected the views of the audience throughout the session.

1. Enforcing decisions on provisional measures under the New York Convention

Since the text of the New York Convention does not expressly include provisional measures, Dyalá Jiménez (Arbitrator, DJ Arbitraje, Costa Rica) expressed Costa Rica’s concerns about the effectiveness of the system, given that some jurisdictions do not enforce decisions on provisional measures taken in international arbitration cases. While in her view the Convention already allows this, it is admittedly not clear. For jurisdictions without a stance in this regard and with no specific legal provisions for enforcement of decisions on provisional measures (such as the ones included in the 2006 version of the UNCITRAL Model Law, which Costa Rica adopted) this presents a challenge.

One of the arguments used by jurisdictions that deny enforcement of provisional measures is that those decisions are provisional in nature and that Article V(1)(e) of the Convention requires the awards to be final, in line with legal commentary. In contrast, other courts found the Convention applicable to interim measures, such as the United States, where the ‘binding nature’ of the decision is found to mean that ‘decisions of substantive intent to create immediate action’ are covered under the Convention.

Given the lack of uniformity, Dyalá Jiménez proposed a modification of two articles of the Convention:

  • Add the following language in Article I, paragraph 2: ‘The term arbitral award shall also include decision of interim measures made in accordance with this paragraph’.
  • Article VI should have a second paragraph, stating ‘If an application for an interim measure has been made, the authority before which the decision is sought may, if it considers appropriate, on its own initiative or on the application of the party against whom the decision is invoked, order the requesting party to place suitable security’.

Ms Paulsson opened the floor for further comments and some delegates support of the proposal. The pool was opened for voting with the question: ‘Can interim measures be enforced in the current text of the New York Convention?’ Almost 56% said ‘yes’.

2. Enforcing annulled awards

Christa Mueller García (Partner, Mueller Abogados, S.C. Mexico), delegate from Mexico, had a proposal to change the wording ’may’ to ‘shall’ in Article V of the Convention. Ms Mueller described the three main schools of thought according to which a) if an award is vacated, it ceases to exist, b) an international award is not integrated in the State that set it aside, therefore its existence remains, and c) a foreign judgment setting aside an award is generally conclusive, unless it violates the basic principles of justice.

Ms Mueller argued that in the context in which the Convention was drafted, the predominant view was that an award that is set aside ceased to exist and was impossible to be executed.

Moving to how some courts have applied this provision, specifically the United States’ decision in the PEMEX cases that ruled that a State court should refrain from enforcing a vacated award, unless there are ‘adequate reasons’. Ms Mueller stated this creates a very complex and uncertain scenario to what the effects of a vacated award should be. To avoid this uncertainty, she proposed the following:

  • Article V(1)(e) should clearly state that a court cannot enforce an award set aside by the court of the seat.

A discussion ensued among the members of the panel where Dyalá Jimenez and Xavier Andrade Cadena (Partner, Andrade Veloz Abogados, Ecuador) questioned the convenience of the proposal.

Opening the second pool, Ms Paulsson invited the audience to vote on the question ‘Should the Court of origin have primacy and exclusive jurisdiction over the finality of the award? ‘’Shall’’ instead of ‘’may’’?’ The results showed that 70% replied ‘no’.

3. The public policy exception

Moving to Article V(2)(b) and the public policy exception, the Chilean delegate Francesco Campora (Partner, Loy Letelier Campora, Chile), reminded that the delegates were not in agreement on this concept when drafting the convention. Proposals made by Brazil and Peru to further clarify the term were rejected, hence the challenge of interpreting an undetermined concept. This has led to abuses in the use of the public policy exception, which is constantly referred to in frivolous claims or based on a national notion. Mr Cámpora defended a need to find a common concept of public policy, which in his view should be something like ‘the minimum principles of justice that are accepted by the civilized nations’. He commented a recent Colombian decision Tampico Beverages Inc. v. Productos Naturales de la Sabana S.A. Alquería that referred to the concept of international public policy.

Mr Campora presented the following proposal:

  • include ‘international’ before public policy in Article V(2)(b): ‘The recognition or enforcement of the award would be contrary to the international public policy of that country’.

Ms Paulsson questioned whether the proposal would solve the ambiguity. Mr Andrade, delegate for Ecuador, affirmed it would be utopian to believe that a consistent application of an undefined term could be achieved.

‘Is there a need to redefine "public policy" in Article V(2)(b) for Latin America?’ was the next question placed at the pool. Only 36,2% of the public favored the need to redefine the term.

4. Soft laws

Ms Paulsson began the fourth meeting highlighting the importance of soft law and suggested transforming the proposed amendments on a supplementary commentary.

José Antonio Moreno Rodríguez (Managing Partner, Altra Servicios Legales, Paraguay), the Paraguayan delegate, commented on a study conducted by international organisations in the region regarding soft law. He submitted that already the body of soft law provides with enough material to harmonise soft law and to apply it. Mr Rodríguez stated that Judges are already taking into account different instruments of soft law in the interpretation of treaties, so this should be done more frequently by judges applying the Convention.

Ms Jiménez informed that she disagrees with such proposal because soft law is a secondary source of law, whereas modifying the Convention would give more certainty and provide for a primary source of law to judges. Mr Rodríguez argued that modifying the Convention would imply incorporating the modifications in all Contracting States. He stressed that soft laws could be easily incorporated and have certainty too.

The vote on the fourth pool was launched and the majority of the audience (75%) replied ‘No’ to the question ‘Soft Law instead of replacing the Convention?’.

5. Implementation of the New York Convention in Latin America

The last meeting addressed the implementation of the Convention. The delegate from Ecuador, Mr Andrade, expressed his concerns with nationalism in the implementation of the Convention in Latin America. Although countries are not allowed to establish more onerous condition for the recognition and enforcement of awards, per Article III Mr Andrade shared that in Ecuador, since a new law passed in 2015, stricter criteria to enforcement of foreign arbitral awards have been imposed.

Mr Andrade claimed that this is not a cultural issue, but rather a political one. Mr Andrade therefore stated that it is not a good political moment to seek to review or modify the Convention, considering the existence of nationalist governments in the region.

Ms Paulsson posed the question: ‘Is good faith enough for the signatory countries to properly implement the Convention under the local law?’ Over 80% of the audience replied in a negative way.

Recalling that the delegates only addressed some of the problems of the Convention and only from a Latin American perspective, Ms Paulsson affirmed that what had been discussed should be enough to persuade conference attendees that something needs to be done. She also recalled the role of ICC in the Geneva and New York Convention, the major changes in the world order over the past years, and asked ICC to take part in the discussion as to whether a protocol or a supplementary commentary to the New York Convention is needed.



1
Overseas Mining Investments Ltd c/Commercial Caribbean Niquel SA (C. Cass., 1ère civ., 29 juin 2011, n° 10-23321)


2
See Elina Mereminskaya, Recent Dismissal of a ‘Recourse of Complaint’ against an Arbitrator Acting in an ICC Arbitration, Santiago Court of Appeals, 20 July 2017 ICC Dispute Resolution Bulletin, 2017-3.


3
https://gettingthedealthrough.com/article/5723/icsid-tribunal-issues-argentine-airlines-award


4
United Nations Convention on Transparency in Treaty-based Investor State Arbitration, 10 December 2014.


5
NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001), Statement on non-disputing party participation (7 October 2003), Joint Statement: A Decade of Achievements, (16 July 2004).


6
Ted Howes and Allison M Stowell, ‘The Consolidation Dilemma: Is There Finally a Pragmatic Solution?’, Dispute Resolution international Vol 10 No 1 April 2016.


7
See the proposed amendment to the 2008 Peruvian Arbitration Act ‘Proyecto de Ley N( 1088/2016-CR’, https://globalarbitrationreview.com/article/1149314/proposed-law-could-see-exodus-of-institutions-from-peru.


8
Dilyara Nigmatullina, Journal of International Arbitration, Vol. 33 (2016), Issue 1, pp. 37–82.


9
‘Report of the ICC Commission on Arbitration and ADR Task Force on the Use of Information Technology in International Arbitration – An Updated Overview of Issues to Consider when Using Information Technology in International Arbitration’ dated 2017, available at https://iccwbo.org/publication/information-technology-international-arbitration-report-icc-commission-arbitration-adr/.


10
C. Rogers, ‘The Ethics Of Advocacy In International Arbitration’, Chapter 3 in The Art of Advocacy in International Arbitration - 2nd Edition, R. Doak Bishop and Edward G. Kehoe(Eds).


11
Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24


12
Caratube International Oil Company LLP v. The Republic of Kazakhstan, ICSID Case No. ARB/08/12


13
On red flags and standards of proof, see articles and extracts of awards in ICC International Court of Arbitration Bulletin, Special Supplement 2013: ‘Tackling Corruption in Arbitration’ and Dossier of the ICC Institute of World Business Law: ‘Addressing Issues of Corruption In Commercial and Investment Arbitration’ (Dossier XIII, 2015).


14
See para. 59 of the Note, available at https://iccwbo.org/publication/note-parties-arbitral-tribunals-conduct-arbitration/.