Sovereign immunity from enforcement is a major concern for investors. This international law principle implies that a State’s asset cannot be seized without its consent to enforce a judicial or arbitral decision, including international investment arbitration awards. Dispute resolution clauses in many contracts concluded with States contain therefore an express waiver of immunity from, among other things, enforcement. But this might not be sufficient: in NML Capital Ltd v Argentina the French Cassation Court has tightened the previous test for such waivers to be effective.
French case law has traditionally restricted the applicability of this immunity to public assets, as opposed to private assets, such as those allocated to commercial activities governed by private law. For public assets, which are in principle covered, immunity could be waived by the State whether expressly or implicitly. To be effective, such a waiver only needed to be unequivocal and refer specifically to immunity from execution rather than from jurisdiction. The only exception to this rather lenient test related to assets subject to diplomatic immunity (e.g. bank accounts of a foreign embassy) which, in light of the 1961 Vienna Convention on Diplomatic Relations, could only be effective if they expressly provided that diplomatic assets would be covered.
In NML Capital v Argentina (Cass civ 1, 28 March 2013), the Cassation Court endorsed the Court of Appeal’s decision to tighten this test. NML Capital, the owner of Argentinian bonds that had been defaulted upon, had obtained a judgement against Argentina before a US District Court for approximately US$284m. As part of its international enforcement campaign, NML Capital sought, and obtained, attachments in France against the assets of three French companies, in relation to moneys owed by them to Argentina through their local branches. Continue Reading
On November 1, 2013, the American Arbitration Association (“AAA”) introduced a new set of optional rules that provide for appellate review within the arbitration process. Under the Optional Appellate Arbitration Rules (“Appellate Rules”), an appellate tribunal may conduct a more comprehensive review of an arbitration award than the judicial confirmation process provided by existing federal and state laws in the United States. An appellate tribunal may examine an award for material and prejudicial legal errors and for clearly erroneous factual determinations. Appellate review is available only where the parties have agreed to the new rules, either by contract or stipulation.
The AAA designed the Appellate Rules for “large, complex cases where the parties think the ability to appeal is particularly important.” The AAA states that the Appellate Rules aim to provide for “high-leveled review” that is “consistent with the objective of an expedited, cost effective and just appellate arbitral process.”
The Singapore Court of Appeal has given its much-anticipated decision in the latest chapter of the long running Astro v Lippo dispute, allowing an appeal by PT First Media TBK (a Lippo company) against enforcement orders issued by the Singapore High Court in respect of arbitral awards worth US$250 million made in favour of eight companies belonging to the Astro group. (PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal  SGCA 57.)
The arbitration proceedings related to the failure of a proposed joint venture, the terms of which were contained in a Subscription and Shareholders’ Agreement. That agreement contained an arbitration agreement and was signed by various Lippo group companies (including the appellant) and the first to fifth respondents (which were companies belonging to the Astro group). The sixth to eighth respondents (which were also companies belonging to the Astro group) were not party to the Subscription and Shareholders’ Agreement but had provided funds and services relating to the proposed joint venture. Astro commenced arbitration proceedings seeking recovery of, among other things, sums invoiced by the sixth to eighth respondents and obtained an “Award on Preliminary Issues” from the tribunal that those respondents be joined to the arbitration proceedings as co-claimants.
On 1 November 2013, the South African government published a draft Promotion and Protection of Investment Bill, which is intended to replace the existing bilateral investment treaties (BITs) that currently govern investment disputes in South Africa and provide a uniform legal framework to govern all investments in the country.
The draft bill follows the South African government’s review of its BITs in 2010, the majority of which were entered into with EU states in the post apartheid-era, and subsequent announcement of its plans to phase out these treaties. South Africa has already issued cancellation notices in respect of its BITs with the Netherlands, Luxembourg, Belgium, Germany, Spain and Switzerland.
The draft bill contains a number of potential areas of concern for foreign investors.
Canada has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Canada’s ratification of the ICSID Convention will enter into force on December 1, 2013, nearly seven years after Canada initially signed the Convention.
Canada’s ratification should enhance the rights of investors under Canada’s many investment agreements. These include the North America Free Trade Agreement (NAFTA), Canada’s 24 Foreign Investment and Promotion Agreements, and the recently-completed Canada-EU Comprehensive Economic and Trade Agreement. Canada also is participating in the negotiation of the Trans-Pacific Partnership, which includes an investment chapter.
ICSID Convention Background
The ICSID Convention entered into force in 1966. The ICSID Convention currently has 158 signatories, and 150 of those countries have ratified the Convention. Notable exceptions include Mexico, Russia, India, Thailand, Vietnam, South Africa, and Brazil. The ICSID Convention’s jurisdiction is limited to disputes where the host state and the investor’s home state have both signed and ratified the Convention.
On 24 October 2013 the Kuala Lumpur Regional Centre for Arbitration (KLRCA) unveiled its revised Rules. According to the Director of the KLRCA, Datuk Sundra Rajoo, the revisions to the Rules (which comprise the KLRCA Arbitration Rules, the KLRCA i-Arbitration Rules and the KLRCA Fast Track Rules) are “evidence of KLRCA’s determination to keep abreast with both global and national developments of alternative dispute resolution. KLRCA has retained the essence of the Rules, and the modifications have been made with the sole intention of lifting Malaysia to the same competitive ranks as the best that the Asia-Pacific region can offer.”
To attract parties from overseas to arbitrate at the KLRCA, the 2013 Rules have been translated into Arabic, Spanish, Korean, Mandarin, Bahasa Malaysia and Bahasa Indonesia.
The 2013 revisions follow on from the previous revision to the Rules made in 2012. They also follow on from the recent passing in September 2013 by the Malaysian Parliament of the Legal Profession (Amendment) Act 2013 which removes the prohibition against foreign lawyers staying in the country for more than 60 days and dispenses with the need for foreign lawyers to obtain immigration approval to enter Malaysia for the purposes of arbitration proceedings.
The substantive changes to the KLRCA Arbitration Rules are:
The Ministry of Justice in Vietnam (the “MoJ”) has recently taken further steps to promote the greater use of commercial arbitration to settle disputes in Vietnam.
In particular, the MoJ has sought to improve the organisation and transparency of the main arbitral centres in Vietnam and ensure that there is an adequate legal framework in place to support the arbitration process. The MoJ’s recent steps include:
- In June 2013, its request that those arbitration centres publically announce their panels of arbitrators and its publication of such panels on the MoJ’s own website;
- In August 2013, its request that the provincial Departments of Justice in the cities where the centres are operating (Hanoi, Ho Chi Minh City and Can Tho) report on their implementation of the Vietnam’s Law on Commercial Arbitration 2010; and
- On 18 October 2013, its joint hosting with the Vietnamese Chamber of Commerce and Industry, and the Vietnam Lawyers’ Association, of a conference on “Setting Aside Arbitration Awards and Recognition and Enforcement of Foreign Arbitration Awards in Vietnam”.
Although concerns remain amongst foreign investors regarding difficulties and delays which can be experienced when seeking to enforce foreign arbitral awards in Vietnam, the MoJ’s steps have been welcomed. Although foreign investors will generally prefer to specify an “off-shore” arbitration seat (such as Singapore or Hong Kong) in their Vietnam-related contracts, there is an expectation that, at least for disputes of relatively low value and/or complexity, Vietnam will become a more viable alternative seat.
For an overview of the current status of arbitration law in Vietnam, please click here.
For more information on Hogan Lovells’ Dispute Resolution practice in Vietnam, please click here.
Two recent decisions the Singapore High Court confirm the principle of minimal curial intervention in arbitral awards and highlight the limited rights of appeal to the Singapore courts for parties who elect to arbitrate.
There is no provision under the Singapore International Arbitration Act (“IAA”) or the 1985 UNCITRAL Model Law for the courts to set aside arbitral awards in cases of errors of law or fact on the part of the arbitral tribunal. Applications to the Singapore courts for an arbitral award to be set aside can only be made on the basis of a breach of natural justice, under Clause 24 of the IAA, and/or that the award deals with issues beyond those referred to the Tribunal, under Article 34 of Model Law (which is incorporated into the IAA).
In TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd  SGHC 186 the applicant alleged that the sole arbitrator had breached natural justice by failing in his duties:
- to give reasons and explanations in the Award,
- to attempt to understand the parties’ submissions,
- to deal with every argument presented; and
- not to look beyond the parties’ submissions.
On 2 October, the Scottish Arbitration Centre and the Centre for Energy Policy, Mineral Law and Petroleum (CEPMLP) launched the International Centre for Energy Arbitration (ICEA) in Edinburgh. The ICEA is a joint venture between the two partners.
The initial work of the ICEA has been split into two phases. The first phase of the project is a six-month research period involving the consultation of energy companies on what they want from the arbitration process. The second phase involves evaluating the research with a view to developing a bespoke set of energy arbitration rules. The Scottish Arbitration Centre has stated that it intends the ICEA to develop numerous other projects, notably establishing a panel of energy arbitration experts.
The launch of ICEA is an interesting development focussing on an industry that is one of the largest users of arbitration. No doubt the initial focus will be on securing North Sea related disputes. However, the presence of many skilled energy professionals, energy companies and service providers in Scotland may in time see the scope of arbitrations dealt with by the centre widen beyond local disputes. The initiative will also encourage users to arbitrate in Scotland, which with the enactment of the Arbitration (Scotland) Act 2010 has a modern arbitral regime ready and willing to be put to the test.
In The Lao People’s Democratic Republic v Sanum Investments Ltd and another and another matter  SGHC 183, the Singapore High Court issued subpoenas against a partner at Ernst & Young (E&Y) to produce E&Y’s internal documents and working papers in support of two related bilateral investment treaty arbitrations.
A central issue in the arbitration proceedings was an allegation that an audit, in which E&Y had participated, had been improperly conducted. All three parties to the arbitrations agreed that E&Y’s internal documents and working papers were relevant and material to this allegation, and requested E&Y to provide them. When E&Y refused, the Lao PDR applied to the Singapore High Court for a subpoena against a partner at E&Y, Mr Lawrance Lai, to produce the documents under section 13(1) of the International Arbitration Act (Cap 143A, 2002 Rev Ed).
In spite of Mr Lai’s objections, the court issued the subpoenas on the basis that the documents were necessary, relevant and material to the arbitrations. The court was influenced by the fact that all the parties to the arbitrations considered this to be the case.
The court distinguished between the purpose of a subpoena to produce documents and a discovery application, noting that the test for the former is generally more stringent. The court noted the breadth of the subpoenas, but held that the subpoenas were sufficiently precise not to be an application for discovery in disguise.
The case highlights that auditors and other third party professional advisers may, in certain circumstances, be required to divulge their own internal working papers to an arbitral tribunal where this is considered necessary for the proceedings.
*A version of this article was originally published by Practical Law Arbitration http://uk.practicallaw.com/country/arbitration