ICC Institute Seminar on Amicable Settlement of Disputes in International Arbitration

Katharine Menéndez de la Cuesta, Associate at Holland & Knight, Miami

Klaus Peter Berger (Arbitrator and Professor of Law, University of Cologne School of Law, Germany; ICC Institute Council member) and Patricia Peterson (Independent Arbitrator, Paris, ICC Institute member) welcomed attendees and introduced the seminar’s topic by reminding that the arbitrators’ culture certainly influences their approach in resolving a dispute. They explained how the arbitrator’s background, education or experience affect the manner in which the tribunal will conduct the arbitration and render procedural decisions throughout the arbitration.

Should arbitrators act as settlement facilitators?

Julie Bédard (Partner, Skadden, Arps, Slate, Meagher & Flom LLP, New York and São Paulo) discussed whether arbitrators should act as settlement facilitators and how culture plays an important role in this matter during the first panel. Ms Bédard explained that common law judges are usually very proactive in encouraging parties to explore and engage in alternative mechanisms to resolve their disputes. She referred to U.S. judges’ common practice to explicitly encourage parties to mediate during the early stages of litigation, and how they often require a showing that the parties tried to reach a settlement before continuing with the case. Common law arbitrators, however, usually play the opposite role by acting as deciders and rarely facilitators of a settlement. As a consequence, reaching a settlement in an arbitration before common law arbitrators is less frequent than in U.S. litigation.

Professor Berger addressed a survey conducted on rules and soft law instruments that revealed the ‘arbitrator’s role continuum’ with respect to the tribunal’s involvement in the amicable settlement of a dispute. At one end of this continuum, Professor Berger explained, is the tribunal’s lowest possible degree of involvement, i.e. no intervention at all, which is for Professor Berger the approach generally taken by common law arbitrators.1 Professor Berger next addressed intermediate degrees of involvement where (i) arbitrators consider settlement as an option; (ii) the tribunal actually contributes to the settlement in a meaningful way; or (iii) the arbitral tribunal conducts a settlement conference with the parties. At the end of the continuum is caucusing, a practice that involves separate meetings between the arbitrator and each of the parties. Professor Berger warned the attendees that, while the practice of caucusing could be very effective, it raises due process concerns.

Professor Berger also emphasized the need to differentiate between acting as mediator and facilitating a settlement. While he was hesitant to accept the premise that an arbitral tribunal should act as mediator of a dispute, he mentioned that arbitrators can facilitate settlement by suggesting the parties to mediate, or even encouraging them to do so.

Eric Franco (General Counsel, Engie, Perú) provided the user’s perspective. For Mr Franco, the chances of successfully settling an arbitration dispute are highly dependent on how engaged the parties are in the effort. In his experience, calling the CEO of the company as a witness or asking him to review the terms of reference may be crucial steps to effectively keep a company’s management involved in the process. The more involved they are, the higher the chances that the dispute is amicably resolved.

Indirect settlement facilitation by arbitrators

Cecilia Azar (Partner, Galicia Abogados, Mexico City) opened the second panel having the audience reflect on the duty of an arbitrator, which may affect the role the arbitrator plays in facilitating settlement. Generally, if the duty is to resolve a dispute, then an arbitrator may promote settlement. However, if the arbitrator’s duty is simply rendering a binding decision, then the arbitrator cannot promote settlement. For Ms Azar, the arbitrator’s main duty is to ensure the arbitration results in an enforceable award, but arbitrators are also expected to provide parties with the necessary setting to resolve the dispute efficiently. She explained that arbitrators should acquire the skill set to be able to design and promote a process that allows for constructive, integrative and dialog-driven opportunities. Ms Azar referred to several advantages in having arbitrators promote settlement, like efficiency, security and predictability or the arbitrator’s better position to identify the right moment to initiate settlement negotiations. A few disadvantages were also mentioned, such as the possible threat to the arbitrator’s impartiality or to due process, or the related risk of losing the arbitrator’s participation if the settlement effort fails.

Edna Sussman (Independent Arbitrator, New York) stated that knowing the case file from the very beginning plays a crucial role in the arbitrator’s ability to facilitate settlement. She also referred to the fact that cross-border mediation outcomes will now be enforceable under the Singapore Convention.

The attendees next had the opportunity to discuss four specific case scenarios and debate-related questions, such as whether bifurcation is a reasonable alternative, the extent to which an arbitrator should consider the chances of settlement in the scheduling of the case, or whether the tribunal may conduct a mid-arbitration review despite the opposition of one of the parties.

Direct settlement facilitation by arbitrators

Michael Schneider (Partner, Lalive, Geneva) and Peter Thorp (Independent Arbitrator, Paris) discussed timing issues involving the arbitrators’ engagement in direct settlement facilitation. They explained how generally the prospects of settlement are raised at the case management conference, when the tribunal may comment to the advisability of the settlement discussions. They also addressed the arbitrators’ opportunity to provide to the parties their preliminary views in an ‘early neutral evaluation’, and how this exercise may facilitate the settlement of the case.

Mr Scheneider and Mr Thorp moved next to address the possibility of providing in the terms of reference for an independent mediator, with the arbitrator to assist with the identification of issues. This option has proven to be a valid and effective approach to settlement facilitation in the past. Before concluding, they touched upon the impact that failed settlement negotiations may have on the arbitral proceedings and held a simulation of a settlement conference.

Drafting an award by consent: ICC practice

In the last panel, Ms Peterson provided a few guidelines on the issuance of an award by consent. She first addressed the more limited role the arbitrator plays in this context, where the award by consent must be based exclusively on the settlement terms the parties agreed to and that the arbitrator must scrutinize.

Ms Peterson also discussed circumstances where the parties may not be interested in an award by consent, e.g., if the settlement agreement will be performed at the time it is concluded. The parties are usually interested in an award by consent to enable the parties to enforce its terms.

Ms Peterson finally addressed the powers of an arbitral tribunal to issue an award by consent, which are governed by the law of the seat; the matters the tribunal must consider (mainly the enforceability of the award by consent); and the content of an award by consent. Referring to Article 33 of the ICC Rules, which governs the issuance of an award by consent, Ms Peterson summarized the conditions that must be met for an arbitral tribunal to issue an award by consent under the ICC Rules: (i) there must be a dispute that has been submitted to arbitration; (ii) the arbitral tribunal must be constituted and have received the file from the Secretariat; (iii) the parties must request that the arbitral tribunal issue an award by consent; and (iv) the arbitral tribunal must agree to issue such an award by consent.

Gustavo Scheffer da Silveira (Counsel, ICC Court, Sao Paulo) reviewed the ICC Court’s protocol in the approval of awards, including the different sessions in which awards are discussed, and the ICC checklist that any award must comply with.2 Mr Scheffer also flagged several issues that an award by consent must address, such as the jurisdiction of the tribunal to issue the award, the procedural history of the case, including the parties’ request of an award by consent, and the allocation of costs.

The attendees next had the opportunity to discuss four case scenarios involving the issuance of awards by consent and discuss related questions, such as whether an award by consent should be issued for each specific scenario or whether the arbitrator could refuse to render an award by consent despite the parties’ request to do so.

ICC Institute Training for Tribunal Secretaries

Mélanie Riofrio Piché, Associate at Armesto & Asociados, Madrid

Bernardo Cremades (Founding Partner, B. Cremades & Asociados, Madrid; Council Member, ICC Institute of World Business Law) opened the training session by reminding of a time when the arbitral community was reluctant to have secretaries acting in arbitration proceedings. The arbitrator’s mission being intuitu personae, concerns were expressed regarding the fact that secretaries may exercise a decision-making power, resulting in the involvement of a ‘fourth arbitrator’.3

Today, the arbitral community is still struggling in defining the specific tasks of tribunal secretaries. The debate has become more acute with recent cases such as Yukos where the undefined role of the secretary was raised in the proceedings to set aside the award.4

What is expected from a tribunal secretary?

The first panel addressed the role of tribunal secretaries and the nature of their tasks from three different perspectives: the institution, the party and the arbitrator.

Juan Pablo Argentato (Counsel, ICC International Court of Arbitration, Paris) gave a historical overview of ICC’s position on the role of the arbitral secretary, from 19795 to present. Mr Argentato argued that ICC’s position is not set in stone and has evolved to keep up with best practices. Although the institution has modified its approach with regard to the secretaries’ tasks and their remuneration throughout time, it has been consistent with one prerogative according to which under no circumstances shall the tribunal delegate its decision-making functions.

Gonzalo Jaspe (Regional General Counsel for South America, Vinci Construction, Panama) stressed that parties appreciate tribunal secretaries as they keep the proceeding running smoothly, they help move the case forward, and they contribute to a reduction in the costs of the procedure, especially when arbitrators are paid on an hourly basis.

Carmen Núñez-Lagos (Partner, Hogan Lovells LLP, Paris; Council Member, ICC Institute of World Business Law) focused on the arbitrator’s perspective and highlighted that, along with saving costs, the use of secretaries improves the quality of the proceedings, as well as the quality of the award. Ms Núñez-Lagos also drew particular attention to the inconveniences of shadow secretaries, i.e. assistants of tribunals or tribunal chairs working on cases without the parties’ knowledge.

The appointment of tribunal secretaries

Catherine Schroeder (Counsel, Derains & Gharavi, France) explained that the cases in which the appointment of secretaries is advisable depends on the amount claimed and the complexity of issues in the case. She also mentioned that, although a secretary should not be automatically appointed, it is highly recommended to do so in such complex cases. As for who should act as tribunal secretary, whether a junior lawyer, an experienced lawyer or a paralegal, that will also depend on the specific case.

In accordance with the ICC Note to the Parties and Arbitral Tribunals, tribunal secretaries must satisfy the same independence and impartiality requirements as those which apply to arbitrators, and with the exception of secretary’s reasonable personal disbursements for hearings and meetings, tribunal secretaries should not pose any additional financial burden on the parties.6

Ms Schroeder stressed on the fact that the secretary’s appointment should be done with transparency and with the knowledge of the parties in order to avoid future issues.

Overview of the tribunal secretary’s tasks and role in the organization of the proceedings

Ana Paula Montans (Independent practitioner, United Kingdom) described the secretaries’ main administrative tasks, their non-administrative tasks and the tasks in which a secretary should not be involved. In Ms Montans opinion:

  • secretaries must not advocate their position on the legal issues raised in the proceedings;
  • nor have ex parte communications without the tribunal’s authorization; and
  • when attending deliberations, secretaries should have an active listener’s position.

Ms Montans also explained the specificity of ICSID cases where counsel act as secretaries to the tribunal, and the tribunals may appoint an ‘assistant to the tribunal’.

Ms Montans finally stressed the fact that being appointed as tribunal secretary is a stepping stone and an excellent training opportunity on the way to becoming an arbitrator, and possibly appointing a secretary of their own in the future.

Diana Correa (Founding Partner, Diana Correa International, Colombia) and Andrew S. Riccio (Associate, Baker & McKenzie LLP, New York) addressed the support provided by tribunal secretaries from reception of the case file until the signature of the terms of reference. Panelists provided practical tips on the role of the secretary with respect to first contact with the parties, the drafting of the terms of reference and procedural order no. 1, and the organization of the case management conference.

This panel was followed by a prepared workshop on the drafting of terms of reference and procedural order no. 1, based on a mock case previously distributed to the participants.

Maria Claudia Procopiak (Senior Associate, Dechert LLP, London; member of the ICC Institute World Business Law) focused on the support provided by tribunal secretaries from the signature of the terms of reference until the evidentiary hearing. She instructed the participants on the practical aspects of preparing procedural orders; drafting decisions on document production under the tribunal’s direction, control and supervision; and preparing pre-hearing conferences and evidentiary hearings.

Technological aspects

Stephanie Cohen (Independent Arbitrator, New York) addressed the issue of cybersecurity. Tribunal secretaries, as well as arbitrators, should take reasonable measures to safeguard the information handled against cyber intrusion into the arbitral process, including:

  • Baseline cybersecurity measures, i.e. every day tools such as securing devices with strong passwords and multi-factor authentication, using privacy screen and running anti-malware and virus protections.
  • Case-specific cybersecurity, i.e. as addressed in the ICCA-CPR-New York City Bar Association ‘Draft Cybersecurity Protocol for Arbitration’.7

The award

The last panel focused on the award itself, and the role of the secretary in deliberations and the drafting of the award. Bernardo M. Cremades and Carita Wallgren-Lindholm (Arbitrator, Finland; Chair, ICC Commission on Arbitration and ADR; Ex-officio Council Member, ICC Institute of World Business Law) explained that these specific tasks depend on the style of each tribunal.

As a final remark, Luis O’Naghten (Partner, Baker & McKenzie LLP, Miami) stated that judicial clerks assist judges in discharging their responsibilities without being considered as an illegitimate derogation to the judge’s decision-making function. There is no reason why this should not apply to tribunal secretaries.

In conclusion, whilst the event illustrated that there are still opposing views on whether secretaries’ tasks should exceed administrative tasks, it seems clear that the tribunal and the secretaries are at the service of the parties. Therefore, secretaries may perform any task assigned to them as long as there is an approval by the parties, and provided that the tribunal does not waive or delegate its decision-making responsibility. This is why transparency in appointing arbitral secretaries, defining their fees and their exact role in the proceeding is fundamental.

ICC Miami Conference, Day One – Morning

Rodrigo Bordachar Urrutia, Partner, Bordachar & Meneses BAM Abogados, Santiago, Chile

Opportunities & threats of China-Latin American disputes

The first panel of the 16th ICC Miami Conference chaired by Kim Rooney (Arbitrator and Barrister, Gilt Chambers, Hong Kong) dealt with the opportunities and threats of China-Latin American disputes. The topic has acquired increasing importance as Chinese investments in Latin America have rapidly increased in the last decade.

Laura Pinheiro de Oliveira (Partner, Lapa Advogados, Brazil) opened the discussion with a general overview on the agreements signed between China and Latin American states. China has 11 bilateral investment treaties (with Argentina, Barbados, Bolivia, Chile, Colombia, Jamaica, Guyana, Mexico, Peru, Trinidad & Tobago and Uruguay) and other three trade and investment partnerships (with Costa Rica, Peru and Chile). The latter agreements are more diplomatic than effective – they offer low protection to the investment – are not enforceable and usually contain declarations of mutual cooperation on some economic sectors.

Subsequently, Rodrigo Jijón-Letort (Partner, Pérez Bustamante & Ponce, Ecuador) explained how China has changed the Latin American concept of international financing. In the past, Latin American countries who sought funding for their infrastructure projects had to ask for loans to cooperation agencies and multilateral organizations as the Inter-American Development Bank or the International Monetary Fund. But those loans were conditioned to ethical and moral commitments, such as the strengthening of democracy, the fight against corruption, and even the changes in their economic policy. To the eyes of locals, such conditions were considered as an imposed foreign intervention on their own politics.

Lately, China has become a relevant financial actor in Latin American countries. While at the very beginning, China used its financial aid as a tool for expanding its political influence, it nowadays focuses its economic aid in a pure win-win commercial transaction. By way of example, loans are now conditioned to the execution of public works by Chinese workforce. According to Rodrigo Jijón-Letort, Chinese investments in Ecuador are associated to direct loans to the State as well as credits conditioned to public works. 61% of the public work is already financed by Chinese credits, representing 57% of the whole public investment in Ecuador.

One of the reasons that may explain the increasing influence of China is the Belt & Road Initiative (BRI). As Sally Harpole (independent arbitrator and mediator, attorney, California) in turn explained, the BRI began five years ago, as a tool of the Chinese government for global integration. It is not limited to commerce, but also strives for cultural integration.

One of the effects derived from such strategy has been a cultural clash in the Chinese-Latin American relations. The main problem is the lack of appropriate contract negotiation. For instance, the panel noted that Chinese contractors could further consult with different stakeholders that could be affected by infrastructure projects, such as indigenous people, and further consider environmental protection in their projects. But this gives rise to a two-way issue: While Chinese parties need to grasp the contractual and commercial realities of the Latin American region, actors in Latin America (states, private parties and commercial partners) have to make efforts to understand the Chinese legal culture.

Considering these cultural differences and the importance of long-term relations for Chinese investors, ICC created the Belt and Road Commission to drive the development of ICC’s existing procedures and infrastructure to support Belt and Road disputes. Chinese do not like disputes; they are focused on dispute prevention and prefer to renegotiate a contract rather than to proceed to arbitration or judicial litigation.

The livestream of this opening session, and the welcome address by Katherine González Arrocha (Director for the Americas, Arbitration & ADR, ICC Court, Panama City) and the opening keynote speech by Alexis Mourre (President of ICC Court, Paris) is available online.

Disputes between states or state entities

Alexander G. Fessas (Secretary General of the ICC Court, Director of ICC Dispute Resolution Services, Paris) recalled that so much has been written and said on ICC Arbitration with states and state-owned entities. The 2012 amendments to the ICC Arbitration Rules and the more recent procedural innovations towards increased efficiency in ICC Arbitration have also specifically considered issues related to the involvement of state entities.

Over the last decade, arbitration cases involving states or state-owned entities have increased constantly, and so has the use of ICC Rules; ICC cases with state or state-owned entities rose to approximately 15% in both 2017 and 2018. While some BITs provide for ICC Arbitration, panelists highlighted that Chinese parties who invest abroad are state-owned companies and their contracts include ICC clauses. It was also noted that other states which do not have any investor treaties ratified, such as Brazil, incorporate a reference to the ICC Rules in state contracts with foreign investors.

This panel composed of Blanca Gómez de la Torre (Arbitrator, Pactum Dispute Resolution Consulting, Ecuador), Andrés Jana (Partner, Bofill Mir & Alvarez Jana, Chile), Carolyn B. Lamm (Partner, White & Case LLP, USA; Member, ICC Institute of World Business Law), Ignacio Torterola (Partner, GST LLP, USA) addressed the current state of art and debated on whether a permanent international investment tribunal is necessary.8

It is not difficult to conclude that the presence of state entities creates specificity on the arbitration procedure. But contrary to what could be assumed, having a state party in the procedure does not necessarily require great procedural changes to the rules of arbitration. Publicity and transparency are principles that are required by the state constituencies for accountability of their authorities. But public interest is also addressed by arbitrability, applicable law and public order. As a conclusion, the state-owned entity has, by including an arbitration agreement, adapted its public interest to the commercial arbitration principles.

The last topic discussed in this panel was whether it is possible to allow counterclaims from the state. The mechanism works as an offer to arbitrate from the host state to the investor, which is accepted by the investor at any time. But the same offer may not allow the state to submit a counterclaim to the investor. The state may have a similar claim when the investor doesn’t comply with the legal requirements, human rights or rights of the indigenous people (in Latin American countries) and environmental obligations. Some recent cases were discussed:

  • In Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Ecuador made two counterclaims based on Article 25 of ICSID Convention. Burlington initially opposed to the jurisdiction, but then agreed to it.
  • One other example is the case Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (ICSID Case No. ARB/07/26) based on the Argentina-Spain BIT, which doesn’t exclude counterclaims, where the tribunal finally held its jurisdiction according to Articles 25 and 46 of the ICSID Convention and Article 10 of the BIT.

ICC Miami Conference, Day One – Afternoon (parallel sessions)

Esperanza Barron Baratech and Nora Fredstie

Associates at Latham & Watkins, Paris

Assessment of damages in international arbitration: ICCA/ASIL Damages Tool

In December 2016, ICCA and the ASIL joined forces and established the ICAA-ASIL Task Force on Damages (the ‘Task Force’).9 The Task Force has developed an innovative damages tool, which was presented during this session by Kathleen Paisley (Partner, Ambos NBGO, Brussels) and Mark A. Kantor (Independent Arbitrator, New York), both members of the Task Force. Santiago Dellepiane (Managing Director and Co-Chair of the Economics & Damages practice, Berkeley Research Group, New York) provided an independent review of the tool.

Ms Paisley and Mr Kantor explained that the tool is a mind map, organized as a decision tree. It will not give you the answers but will give you the options. For example, while researching legal issues, you will have to choose whether you are operating under civil law, common law, or pure international law at the start of the process. The tool will then outline a road map that must be considered for each step. Mr Kantor pointed out that in addition to being used as guidance by the legal and damages evaluation team, it will make it very clear if opposing counsel is omitting a step.

Mr Dellapiane noted that the tool draws attention to issues that are often overlooked, although being important aspects, such as interest. He explained that the tool will give practitioners a very good idea of the questions involved.

In the Q&A session, the audience asked if there would be industry specific versions of the tool. Ms Paisley and Mr Kantor answered that, at the moment, it is unsure whether the Task Force will consider developing separate versions and this is currently being discussed within the Task Force.

The audience also asked if the arbitral tribunal could refer to the tool in the terms of reference. Ms Paisley explained that it is more likely that the tool will not expressly be mentioned in the terms of reference but rather the Arbitral Tribunal will use the tool as a checklist and as a guide on quantum.

The tool will be circulated for comments at the end of 2018, and they are hoping to publish the final tool in the first quarter of 2019.

The future of the future: Technology in international arbitration

Stephanie Cohen (Independent Arbitrator, New York) started by demystifying access to artificial intelligence (AI) by pointing out that international arbitration practitioners resort to AI on a daily basis, through the use of tools as simple as Google translate or as sophisticated as the research database Investor State Law Guide.10 Ms Cohen then engaged the debate with the audience as to whether AI could serve the promises of international arbitration (lower cost, fairness, speed and efficiency, diversity, transparency and predictability etc.). In short, can AI replicate the work of humans in IA? Can it replace institutions by identifying the ideal settlement momentum or proposal?

Ms Cohen drove a passionate debate among the attendees, who oscillated between acceptance (we cannot escape IA and should therefore fully include it in our practice) and defiance (the artificially enhanced arbitrator will only replicate and amplify human bias and mistakes). Ms Cohen also pointed out the psychological benefits of ‘human-based’ arbitration, which allows the catharsis of story-telling through the parties’ narrative and witness evidence. The discussion highlighted the potential risks and benefits of AI in international arbitration, increased awareness to new technological developments and to the need that the arbitration technology adjusts to its time.

Save my money: Interim and precautionary measures in international arbitration

The panel was composed of José Manuel García Represa (Partner, Dechert LLP, Paris) and Diana Paraguacuto-Mahéo (Partner, Foley Hoag LLP, Paris; Member of the ICC International Court of Arbitration). They presented a very comprehensive analysis of the rules applicable to arbitral relief and its interactions with national court proceedings. In addressing the interplay between arbitral tribunals and judicial courts, the panel highlighted tactical considerations such as chances of enforcement and time constraints.

The panel then analyzed the feedback and data collected in the past six years since the entry into force of the ICC Emergency Arbitrator Provisions in 2012. The general feedback reflects user satisfaction, even though a poll within the attendees reflected that they are still very seldom used among practitioners. This notwithstanding, the data shows the diversity of emergency arbitration, with 15 proceedings seated in Latin America, and 33% of the parties to ICC Emergency Arbitrator proceedings coming from Latin America.11

The panel concluded its presentation by examining security for costs in commercial arbitration and considered that, in spite of the constant debate, the presence of third-party funding should not be taken into account by tribunals when deciding on requests for provisional relief.

Arbitration in the banking and finance sector

The Panel was composed of Claudia Salomon (Partner and Global Co-Chair, International Arbitration group, Latham & Watkins), and Javier Gútierrez de Cabiedes (Head of Litigation Practice, Caixa Bank, Spain).

Ms Salomon was the co-chair of the ICC Task Force on Financial Institutions and International Arbitration. The ICC Task Force conducted interviews with approximately 50 financial institutions and banking counsel from around the globe and issued a Report in 2016 containing its findings and recommendations in relation to Financial Institutions and International Arbitration based on these interviews and other materials.12

One very interesting topic discussed by Mr Gútierrez de Cabiedes and Ms Salomon was the finality of awards. Ms Salomon explained that the ICC Task Force had found that financial institutions search for the finality of awards. However, on some occasions, institutions wanted the option to appeal awards, as long as this did not undermine certainty. She explained that in such situations, an upfront agreement delimiting the situation when the award can be appealed is helpful. The AAA-ICDR model arbitration clause indicated that parties can provide for an option on, inter alia, appeal. While the ICC standard arbitration clause does not provide for that option, the ICC Court has administered arbitrations where the arbitration clause allowed for appeal. Mr Gútierrez de Cabiedes explained that, in his view, the real benefit of arbitration is that it can easily be tailored to the specificities of the dispute but that the option to appeal an arbitration award raises several issues. Most parties or counsel, when choosing arbitration, assume that there is no such appeal as one main benefit from a final arbitral award. There is a business need to clear disputes and keep moving, for better or for worse. In jurisdictions where there is some ability to appeal an arbitral award, parties/counsel may decide to expressly exclude this.

Another noteworthy point that was discussed is why financial institutions no longer use arbitration. Ms Salomon explained that the ICC Task Force discovered that, in the financial industry, enforceability is seen as a key advantage. For loans and financing in developing markets, rating agencies look more favorably on arbitration, especially if the jurisdiction is considered risky. Other attractive aspects of arbitration include expertise, flexibility, and the ability to tailor proceedings. However, many disputes are still settled through domestic litigation.

Mr Gútierrez de Cabiedes explained that the financial industry trustfully rely on the two big financial centers, London and New York, as they are perceived as reliable, quick, and highly sophisticated. Furthermore, there is a lack of knowledge concerning arbitration in the financial industry and law firms should aim towards improving it. The way to foster such knowledge, and particularly confidence, is to provide the individuals in the financial industry with concrete examples. However, a primary problem is multiparty contracts, as they are complicated and unlikely to go to arbitration.

During the Q&A session, members of the audience defended the use of arbitration in situations involving multiparty contracts by arguing that, the more complex the dispute, the more appropriate it is to take it to arbitration. The panelists however explained that it was statistically more likely that all parties would agree to arbitration if there are fewer parties.

ICC Miami Conference, Day Two

Renata Lorenzi Iório, Associate at Correia, Fleury, Gama e Silva Advogados in Sao Paulo

ArbitralWomen diversity toolkitTM : From bias to inclusivity in arbitration

In this first panel of the day, moderator Louise Barrington (Independent Arbitrator, Canada; co-founder of ArbitralWomen) introduced the debate on the relevance of diversity in arbitration mentioning that there is constant movement towards integration of women, but that the effort is still far from sufficient. In the speaker’s view, not only men try to keep women out of the market, but women also sometimes consider themselves not prepared or not ready for certain jobs. The speaker understands that those factors (among others as geography and age) give rise to assumptions towards women. Ms Barrington referred to studies that have shown that diverse corporate boards provide for different points of view and perspectives, include more debate, require justified arguments and lead to better decisions.

Santiago Soria (Partner, Marval O’Farrell & Mairal, Buenos Aires) emphasized that arbitration panels which are composed of men and women can be more creative and innovative. From an Argentinian perspective, Mr Soria brought some relevant historical data: the first female lawyer of the country graduated in 1909; the diploma registry, however, was denied on the grounds that it offended family principles. From 1922 to 1935, only six female lawyers graduated in all La Plata universities, which represented 0.88% of graduates. Nowadays, women have reached prominent position in Argentinian universities: 80% of the higher grades of La Plata universities are assigned to women. In Córdoba, this rate reaches 56% and 55% in Buenos Aires and Torcuato. Mr Soria also pointed out that female groups are winning moot court competition more frequently.

Eduardo Damião Gonçalves (Partner, Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, Sao Paulo; Vice-President, ICC International Court of Arbitration) addressed the Brazilian perspective, referring to some initiatives that have recently emerged in the country. He stressed that Brazil is one country with great diversity and is still facing big challenges related to inclusion. According to Mr Damião Gonçalves, the common expression ‘great minds think alike’ is not a rule, and different minds on a panel probably lead to richer decisions. Mr Damião Gonçalves referred to research by a group of law firms in Brazil, which shows that the number of women in arbitral tribunals is constantly increasing, and reached 25% in 2016.

Speakers were then urged by the moderator to answer what is holding progress back if everyone agrees diversity is a good thing. Ms Louise Barrington showed a video about ‘unconscious bias’, exploring the fact that people unconsciously categorize and judge each other, and that there is no ‘cure’ for it. On the other hand, it is possible to control it with constant self-awareness.

In this regard, Santiago Soria addressed the fact that, in a Berwin Leighton Paisner Survey released in 2017,13 50% of the interviewed lawyers considered desirable that an arbitral tribunal be balanced, but only 12% actually considered gender issues when establishing a list of potential arbitrators. He concluded that affirmative actions are extremely important to protect arbitration; otherwise, female lawyers may rethink whether arbitration is a proper form to resolve disputes.

Eduardo Damião Gonçalves added that it is not only unconscious bias which is holding us back, but also the fact that many people do not even realize that there is an issue that needs to be addressed. Mr Damião affirmed that the issue should be addressed as although the statistics show that women education has rocketed, this has still not been translated into leadership.

As a conclusion, Mr Soria and Mr Damião pointed out some measures their law firms already took towards diversity, such as the creation of a specialized committee to discuss the matter, development of different opportunities in the career for women, extended maternity leave, home office for parents and flexible working hours.

Shutting down business: When a party to an arbitral proceeding goes impecunious, bankrupt or insolvent

Ana Serra e Moura (Deputy Secretary General, ICC International Court of Arbitration) chaired the panel and asked the following questions to the audience through the ICC mobile application ‘ICC Events’:

1) Have you ever had a client whose financial straits prevented him/her from starting an arbitration proceeding?

Voting participants answered:

  • Yes: 70%
  • No: 20%
  • Discussed the matter with the client, but the financial condition did not prevent from starting the proceeding: 10%

2) Should the right of access to justice triumph over party autonomy to submit a dispute to arbitration?

Voting participants answered:

  • Pacta sunt servanda: 54%
  • Access to justice: 46%

3) Have you ever worked on an arbitration proceeding during which one of the parties went bankrupt?

Voting participants answered:

  • Yes: 50%
  • No: 50%

4) When bankruptcy is filed in a country that is not the seat of the arbitration proceeding, should the arbitration proceeding continue or end?

  • Arbitration should continue: 90%
  • Arbitration should end: 10%

Stephan Adell (Partner, Squire Patton Boggs, Paris and Santo Domingo) recalled the French decision Société Licencing Projects SL v Société Pirelli.14 In the arbitration proceeding, the respondent, who had filed counterclaims, was declared insolvent and could not pay the advance on costs. As a result, the ICC Court admitted the claimant’s (Pirelli) claims and decided not to consider the respondent’s (‘LP’) counterclaims. LP initiated the proceeding to annul the award grounded on the right of access to justice and equal treatment. The Paris Court of Appeal annulled the award on these two grounds. The French Supreme Court set aside the Court of Appeal’s decision, stating that the dismissal of the counterclaim could be contrary to the access to justice only when counterclaims are inseparable from the main claims.

The speaker addressed the conflict between pacta sunt servanda and access to justice, emphasizing the importance of considering the special features of each case. In most cases, the simple allegation of lack of funds is not enough ground to annul an arbitral clause; however, exceptional situations may lead to the annulment of the clause.

Ms Serra e Moura raised the issue that this understanding could make room for abuses, given that in approximately 50% of the arbitration proceedings one of the parties allege financial straits, to what Mr Adell pointed that concrete proof of the financial situation should be required.

Sabina Sacco (Partner, Lévy Kaufmann-Kohler, Geneva) addressed the possible impacts of cross-border insolvency or bankruptcy proceedings in on-going arbitration proceedings. Her presentation focused on the situation in which a party to an ongoing arbitration is declared insolvent in a jurisdiction that is not the seat of the arbitration.

As she explained, a party’s insolvency can affect (i) that party’s capacity to arbitrate, if its capacity to contract is restricted by the lex concursus; (ii) the validity of the arbitration clause, which may become null or ineffective; (iii) the substantive arbitrability of the dispute, if the lex concursus determines that disputes involving insolvent parties cannot be submitted to arbitration, or limits the scope of an arbitral award to determining liability (without allowing orders for payment); or (iv) the arbitration proceeding, by mandating its suspension or termination, or involving a trustee.

However, the effects of the lex concursus in its own forum cannot be automatically extrapolated to international arbitration. The effect of the insolvency in the arbitration will be a question for the arbitral tribunal to determine, and different tribunals may come to different conclusions. In this context, Ms Sacco recalled the parallel arbitrations involving Vivendi and Elektrim, in which an ICC tribunal seated in Geneva and an LCIA tribunal seated in London reached radically different conclusions as to the impact on the arbitrations of Elektrim’s insolvency, which had been declared in Poland. The ICC tribunal found that the insolvency affected Elektrim’s capacity to arbitrate and, after finding that this was a matter governed by Polish law, discontinued the arbitration. By contrast, the LCIA tribunal determined that English law was applicable, and continued the arbitration in accordance with English law.

In the speaker’s view, there is no automatic answer regarding the termination or continuance of the arbitral proceeding in a scenario of insolvency of one of the parties. This is a question for the arbitral tribunal to determine, and its reasoning should follow a two-step process.

First, the arbitral tribunal should decide whether it should acknowledge the insolvency. If the insolvency has been declared in the seat of the arbitration, it must be acknowledged. In case of a foreign insolvency, tribunals tend to turn to the applicable cross-border insolvency law to determine if it must be acknowledged or not.

Second, if the arbitral tribunal acknowledges the insolvency, it must determine the effects of the insolvency on the arbitration proceeding. If it determines that the foreign lex concursus is a mandatory rule or loi de police, it must apply it. Otherwise, it must conduct a careful conflict of laws analysis involving the characterization of the situation created by the foreign lex concursus (i.e., classifying it within a particular legal category), the identification of the rule of conflict applicable to that category, and the application of the substantive law identified by the conflict rule. When making these decisions, the arbitral tribunal should be guided by the principles of validation of the award, perpetuatio fori, legal certainty, and due process. It should also bear in mind its duty to render an enforceable award at the seat, and consider that, as a practical matter, the enforcement of the award might be denied if the award contradicts public policy at the place of enforcement.

Cecilia Azar (Partner, Galicia Abogados) firstly reminded the alternative of third party funding for parties in financial straits, but called the attention to the facts that most funders have restrictions with regard to the value in dispute and some legislation prohibit the execution of remunerated contracts by the insolvent company.

Ms Azar also shared her experience, explaining how Mexico has been addressing those issues. As reported by the speaker, in Mexico, bankruptcy or insolvency does not relieve a party of its obligations under a pre-existing arbitration agreement, which remains binding. Under Articles 84 and 86 of the Commercial Insolvency Law, the insolvent party continues to be obligated to carry out the arbitration until its conclusion, even with the vigilance of the conciliator. In addition, Article 127 of the Commercial Insolvency Law incorporates the right of a creditor under an arbitral award to request recognition of its credit, by providing certain information related to it. Said credit shall be included in the decision on recognition, degree and priority of credits.

Economic realities in the construction sector

Gustavo Scheffer da Silveira (Counsel, ICC International Court of Arbitration, Sao Paulo) introduced the panel reminding of the relevance of the construction sector in world economy and how it is reflected in the number of arbitration proceedings. In 2017, 23% of the ICC arbitrations related to construction matters.

Guido Santiago Tawil (Independent Arbitrator, Buenos Aires) opened his presentation identifying the types of bonds existing in construction contracts, such as performance bond, pre-payment bond, retention bond and parent company bond. The most common is the performance bond, which main features are the following: (i) by its nature, it is a transaction independent of the underlying contract; (ii) payment is made without proving the indebtedness or default; (iii) the bond contract and the fulfillment of its terms are relevant; (iv) supporting imports usually range between 5% and 15% of the total price of the underlying contract. The speaker stressed the consequences of the unconditionality of the bond, highlighting the potential cross default, possible abuses of warranty requirements; and the shifting of the burden of proof (in which debtor must prove that the claim in unfounded).

Mr Tawil shared his experience in arbitrations that involved bonds in construction contracts. According to him, it is common that the contractor requests:

  • the renewal or extension of the bond that expires during the course of the arbitration (positive injunction);
  • orders to avoid the execution of the bond alleging an improper requirement; or
  • orders to freeze the funds of the bond until the arbitral tribunal decides on its destination.
  • damages repair related to the improper performance of a guarantee and precautionary measures before emergency arbitrators (Article 29 and Appendix V of the ICC Rules).

Mr Scheffer da Silveira highlighted the economic function of bonds when they have direct impact on the pricing of contracts. He pointed out that the request of orders to avoid the performance of bonds to emergency arbitral tribunals is extremely common, and unlike state courts, which tend to grant the request even if there is no fraud or abuse of power, arbitral tribunals have an economic vision of the bond and tend to protect it, unless fraud or abuse of power are present.

Diana Bowman (Legal Manager, VINCI Energies International & Systems, Paris) focused on the increasing contract management under the new FIDIC Contracts (2017 edition). The first edition of red, yellow and silver books was released in 1999 and the second edition was launched in 2017, with three new agreements: the new fifth edition of its Client/Consultant Model Services Agreement, the new FIDIC Joint Venture Agreement and the Sub-Consultancy Agreement.

FIDIC itself clarifies that the new versions have ‘the main goal to increase clarity and certainty’, with emphasis on ‘dispute avoidance’ and by introducing ’step-by-step project management and procedural mechanisms’ should ‘lead to fewer disputes and more successful projects’. Ms Bowman highlighted the most relevant changes on the new FIDIC Contracts.

  • The creation of new requirements for giving notice, new time limits and creation of new deeming provisions (i.e. Sub-Clauses 3.7.3, 3.7.5, 4.4, 5.2, 6.12, 10.1, 11.19, 20.2.2, 20.2.4, etc.).
  • The development of Engineer’s role, which becomes more central and more crucial, focusing on encouraging dialogue between parties in an endeavor to avoid disputes (Sub-clause 3.7.1) and increasing opportunities to issue determinations.
  • New provisions on claim process: the separated treatment and definitions of parties claims and parties disputes, in order to enlighten that claims are normal, while disputes are exceptions, and they should have different proceedings; the reciprocal process for the Contractor’s and Employer’s claims (both must go through the exact same process); the new provision for Engineer’s initial response to notice of claim, in order to stop arguments about a claim notice not being delivered on time.
  • The provision of a standing board now called ‘Dispute Avoidance/Adjudication Board’, which FIDIC recommends be appointed at the start of the Contract to visit the site on a regular basis and assist the parties for the duration of the Contract.

The speaker concludes that the new FIDIC Contracts brought a number of positive changes such as to codify existing practices, encourage best practices increase contract management and encourage joint effort. This may cause the need of more vigilance and inputs, but it will hopefully mean less disputes.

Noiana Marigo (Partner, Freshfields Bruckhaus Deringer, New York) commented on the multi-tier dispute resolution clauses as a tool for ensuring cash flow. The School of International Arbitration at Queen Mary University of London together with White & Case report that 49% of respondents of a survey in 2018 stated a preference for the use of a multi-tier dispute resolution clause combining arbitration and alternative dispute resolution, in comparison to 39% of respondents to the same survey in 2015.15

Through the ICC live poll, the speaker asked the audience who had already used multi-tier dispute resolution clauses and who considered it efficient. The result was that 87% had already used multi-tier dispute resolution clauses and 43% considered it efficient. Multi-tier dispute resolution clauses are a popular choice in construction contracts due to three main factors: (i) difficulty of choosing only one dispute resolution method in view of the great diversity of possible disputes arising from construction contracts; (ii) in some cases they are relationship-saving; and (iii) they can serve as a tool to ensure cash flow as such clauses can provide for cheaper resolution of disputes; they may achieve a pay out earlier in the process or stagger any pay outs resulting from the dispute; and they can narrow the issues to be arbitrated by settling certain issues on which the parties are able to find common ground. To conclude, Ms Marigo reminded that the efficiency of the multi-tier dispute clauses depends on the parties’ true interest in using it and on a careful wording.

Júlio César Bueno (Partner, Pinheiro Neto Advogados, Sao Paulo) closed the session with the analysis of global claims, explaining that they are not claims that contain all the possible matters. Using The Society of Construction Law: Delay and Disruption Protocol,16 global claims are claims ‘in which the Contractor seeks compensation for a group of employer risk events but does not or cannot demonstrate a direct link between loss incurred and the individual employer risk events’.

Global claims originate in a context in which extra costs are a reality. Studies indicate that the average of extra costs in construction contracts is 30%. Due to the complexity and duration of construction contracts, the extra costs and delays are related to separate causes, but in many cases, the sub-division of the causes and their respective effects may be difficult or even impossible to define. Global claims serve the situations in which the contractor can neither individualize each event which caused the delay and the extra cost, nor the direct consequence of each event. Here, the causal relation may be loosened and interpreted according to the peculiarities of each case.

60th Anniversary of the New York Convention: ‘The More Favorable Right Provision Under Article VII(1): Lessons from the Americas’

Albert Jan van den Berg (Partner, Hanotiau & van den Berg, Brussels) closed the 16th ICC Miami Conference by addressing issues related to Article VII of the New York Convention (the ‘Convention’).

He started his presentation explaining that the Convention carries an ambiguity with regard to Articles V and VII:

  • Article V provides permissive standard, under which the Court may refuse to enforce the award;
  • Article VII mandates that the Court must consider claims and protect any rights that a party has under the domestic laws of the country where the award is sought to be relied upon.

Secondly, the interpretation that Article VII(1) of the Convention applies in respect of the application of Article V: Consequently, the provisions of the Convention, including Article V, do not prevent a party ‘to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon’.17

The misconception brought by the speaker emerges from the above: Article VII(1) allows to interpret and apply the Convention’s provisions, including Article V, in a manner more favorable than the ordinary meaning of the text.

To avoid confusion or misconception, Mr van den Berg addressed the importance of finding the rationale of Article VII. In his view, the New York Convention is aimed at facilitating the enforcement of foreign arbitral awards. Although there are minimum requirements that must be observed by a court in a Contracting State with regard to the enforcement of the award, if domestic law or other treaties make enforcement easier, a petitioner can rely on that regime. As examples, Mr van den Berg analyzed some domestic law regimes.

  • Article 1525 of the French Civil Code of Procedure provides that the Court of Appeal may only deny recognition or enforcement of an arbitral award on the grounds listed in Article 1520. This Article incorporates, by reference, the grounds for setting aside as grounds for refusal of enforcement of an award made abroad, and does not include the ground of an award having been set aside at the seat.
  • Article 1076 of the Dutch Code of Civil Procedure applies to the enforcement of foreign awards and includes requirements for the request for recognition or enforcement and grounds for their refusal. Legislative history states that Article 1076 was inserted in light of the more-favorable-right provision in Article VII(1) of the Convention.
  • Article 36 of the UNCITRAL Model Law on International Commercial Arbitration applies to the enforcement of arbitral awards issued abroad. The grounds for refusal are the same as those contained in Article V of the Convention.

Another issue addressed was the divergence of views related to the ‘cherry picking’, in other words, whether Article VII in fine excludes the application of the more favorable domestic law, or whether an award creditor applying for enforcement under the domestic law can additionally seek selective application of the Convention. Mr van den Berg argued that a party should not be allowed to pick and choose between the Convention and another basis for the enforcement of a foreign award.

The speaker also presented an overview of the legislative history, from the origin of the more-favorable-right provision in 1927 (Art. 5 of the Geneva Convention)18 to the 1955 Draft Convention, which included Article 5 of the Geneva Convention, and finally to the 1958 Convention, which replaced ‘the right’ (Art. 5 of the Geneva Convention) by ‘any right’ (Art. VII(1) of the Convention). Mr van den Berg further referred to divergent court precedents and commentators around the world regarding the principle of (no) cherry-picking. He reminded the following:

  • A Court should not mix multiple enforcement regimes, as it causes (i) uncertainty about the meaning and content of the Convention; (ii) lack of uniformity in the judicial interpretation and application of the Convention; (iii) adverse effect on the structure and balance of rights/obligations under the NY Convention.
  • Although Article VII(1) does not mention the enforcement of an arbitration agreement, an analogous interpretation is justified and supported by UNCITRAL’s Recommendation (UN DOC A/6/17, Annex II).19

To conclude, the speaker endorsed that Article VII(1) should be seen for what it is: the possibility of requesting enforcement of a foreign award on a basis other than the Convention, if available and if more favorable. In the speaker’s view, other interpretations may jeopardize the Convention.


1
See Klaus Peter Berger, J. Ole Jensen, ‘The Arbitrator’s Mandate To Facilitate Settlement’, Fordham International Law Journal, Vol. 40, 2017(3), available at https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=2653&context=ilj.

2
The ICC Award Checklist is available at https://iccwbo.org/publication/icc-award-checklist-1998-2012-icc-arbitration-rules/ and

3
See e.g., C. Partasides, ‘The Fourth Arbitrator? The Role of Secretaries to Tribunals in International Arbitration’, Arbitration International, Vol.18, Issue 2, 1 June 2002.

4
See Dmytro Galagan, Patricia Živkovićh (Kluwer blog, 27 Feb. 2015), http://arbitrationblog.kluwerarbitration.com/2015/02/27/the-challenge-of-the-yukos-award-an-award-written-by-someone-else-a-violation-of-the-tribunals-mandate/.

5
‘Memento des pratiques arbitrales de la CCI’, 11 oct. 1979, doc. 410/3865.

6
ICC Note to the Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration (1 Jan. 2019), paras. 189-190, https://iccwbo.org/publication/note-parties-arbitral-tribunals-conduct-arbitration/.

7
Available at https://www.arbitration-icca.org/media/10/43322709923070/draft_cybersecurity_protocol_final_10_april.pdf.

8
The European Commission (EC) has advocated for the creation of a ‘new and transparent system for resolving disputes between investors and states’. One of the EC proposals is the establishment of a permanent investor-state court that will ensure the transparency of investor-state procedures and the due process, as it is perceived that arbitral tribunals’ awards tend to favor investors rather than states.

9
See https://www.arbitration-icca.org/projects/ICCA-ASIL-Task-Force-on-Damages.html

10
See https://www.investorstatelawguide.com/

11
Statistics updated on the basis of 88 ICC Emergency Arbitrator cases.

12
The ICC Report on Financial Institutions and International Arbitration (2016) and Supplementary Materials (2018) are available at https://iccwbo.org/dispute-resolution-services/commission-on-arbitration-and-adr/.

13
‘Diversity on Arbitral Tribunals: Are we getting there?’, Berwin Leighton Paisner Survey (2017), www.blplaw.com/media/download/BLP-_Diversity_on_Arbitral_Tribunals_-_Survey_Report.pdf.

14
Paris Court of Appeal, 17 Nov. 2011, RG: 09/24158.

15
The surveys are available at http://www.arbitration.qmul.ac.uk/research/2018/.

16
Published by the Society of Construction Law (UK) – 2nd edition, February 2017 – https://www.scl.org.uk/sites/default/files/SCL_Delay_Protocol_2nd_Edition.pdf

17
Art. VII(1) of the Convention provides: ‘The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon’.

18
Art. 5 of the Geneva Convention provides: ’The provisions of the above Articles shall not deprive any interested party of the right of availing himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon’.

19
Available at http://www.newyorkconvention.org/uncitral/recommendations.