Partial Award

Commencement and Progress of this Arbitration

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26. By this Partial Award the Respondent’s jurisdictional objections are dealt with to the extent appropriate. As shall be seen below some of the Respondent’s objections to jurisdiction fall to be dealt with by way of procedural order because they are in substance procedural objections and are matters which relate to whether the Sole Arbitrator should stay the arbitration.

The Respondent's Jurisdictional Objections and applications To Stay

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46. Aside from its substantive defences and its counterclaims, the relief sought by the Respondent is that the ICC Court declines jurisdiction to hear and determine this arbitration by reason of previous and ongoing parallel proceedings and the application of the principle of lis pendens. This relief is sought in paragraph … of the Answer to the Claimant's Request for Arbitration.

47. In the alternative the Respondent seeks secondary relief that the ICC Court stays these arbitration proceedings pending the outcome of ongoing parallel civil and criminal proceedings. This relief is sought in paragraph … of the Answer to the Claimant's Request for Arbitration.

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The First Jurisdictional Objection

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57. Lis pendens involves a court or arbitrator either declining jurisdiction or declining to proceed with the litigation or arbitral reference because there are parallel proceedings in respect of the same rights.

58. The parallel proceedings relied upon by the Respondent in this case involve both criminal and civil proceedings.

59. The Respondent relied upon international jurisprudence, which is divided as to whether lis pendens is a substantive or procedural remedy. If it is substantive, then the proceedings must be dismissed and therefore so dismissed by way of an Award. If it is procedural, then the proceedings can be stayed by way of a procedural order within the arbitration. In practical terms this might not involve much of a distinction. But it is an important one in this case because an acceptance of a lis pendens application to dismiss a claim is final, whereas the grant of a stay is not final in that a stay can be lifted and it is also discretionary.

60. I deal first with the Respondent's submissions. It has referred me to the writings of Professor Fawcett (see para. … of the Respondent's Answer to the Claimant's Request for Arbitration). These show that the doctrine of lis pendens arises because of the undesirability of parallel proceedings in respect of the same rights.

61. The principal problem with parallel proceedings is the risk of inconsistent findings …

62. The Respondent … refers also to the decision of the Swiss Federal Tribunal in Formento de Construcciones y Contratas S.A. v Colon Container Terminal SA ASA Bulletin 544 … It is referred to hereafter as Formento. That Court’s decision stated that lis pendens is a matter of substantive law. The Court’s decision was based upon Article 9 of the Federal Act on Private International Law and set aside an arbitration award because the arbitral tribunal in that case had not carried out the examination required by Article 9 of the Federal Act on Private International Law.

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69. But both parties' submissions accept that the doctrine of lis pendens applies in [Country X (the place of the arbitration and criminal proceedings]. The only difference between the parties is the jurisdictional foundation of the doctrine. In the case of the Claimant it is founded [the law and jurisprudence of in [place of arbitration and place of the criminal proceedings]. In the case of the Respondent it is founded upon international jurisprudence.

70. Under the Procedural Law of [Country X] lis pendens is a procedural remedy suspending proceedings. In international jurisprudence there is debate as to whether lis pendens is a substantive or a procedural remedy. If I was concerned with [the law of Country X] alone I would have to categorize the Respondent's application as procedural. But the Respondent's case is made in an international arbitration seated in [a country in the Middle East] and is founded in part upon the international jurisprudence referred to in paragraphs 59-62 above. I should therefore examine whether in an ICC arbitration seated in [a country in the Middle East], international jurisprudence would categorise the Respondent's application based upon lis pendens as substantive or procedural.

71. If it is substantive then I must consider its implications, given that [Country X] categorises it as procedural.

72. This question can be shortly dealt with. In civil proceedings there is wastage of costs if two sets of proceedings are on foot between the same parties involving the same subject matter. But none of those factors impinge upon the cause of action. The foundation of lis pendens is of convenience, namely which tribunal ought to determine the issues between the parties and not whether the tribunal had jurisdiction to hear the case in the first place and whether the claimant's pleaded causes of action were justified or not. The only case in international jurisprudence which categorizes lis pendens as substantive is the Formento case.

73. The Formento case deserves respect. But it is founded upon Swiss law and particularly the application of Article 9 of the Federal Act on Private International Law. On that basis alone I should disregard it as binding on me. Moreover some of the logic in the judgment is defective (or the translation is poor). For example the final paragraph on page 4 of the judgment (in exhibit … to the Respondent's Answer to the Claimant's Request for Arbitration) it refers to lis pendens leading to the duty of the court to stay the proceedings. Indeed the court stated that the arbitral tribunal ought to have stayed the proceedings (see page 9 of the judgment). A stay is a procedural act, to be contrasted with the substantive act of dismissing the action. It is therefore hard to see how it could be concluded that lis pendens in that case involved substance and was a substantive remedy.

74. In relation to criminal proceedings the question of whether a stay ought to be granted relates to public policy. In paragraphs … of its Answer to the Claimant's Request for Arbitration, the Respondent refers to and relies upon legislation and court decisions which state that in certain circumstances civil court judgments are to be stayed until a criminal claim is disposed of. Indeed in its submissions in paragraph … of the Respondent's Answer to the Claimant's Request for Arbitration, it submits that the remedy is a stay rather than dismissal of proceedings.

75. Therefore [Country X] does not require the dismissal of the action when there are criminal proceedings touching upon the same matter as in a civil claim brought by way of arbitration or litigation.

76. The cases cited by the Respondent make clear that the existence of criminal proceedings does not affect the cause of action or rights and remedies under contracts. They may in certain circumstances require a stay of proceedings. But a stay is a procedural act and therefore I must consider the question of a stay by way of procedural order rather than a Partial Award.

77. Therefore I shall not dismiss the claims in this arbitration in the basis of lis pendens or parallel proceedings (civil or criminal). Neither set of proceedings deprive the tribunal of jurisdiction to hear the disputes referred to this arbitration. But I shall consider separately the merits of the applications in respect to whether I ought to stay the proceedings by way of a procedural order.