Summer 2007

SIAC Publishes

NEW ARBITRATION RULES

by Gordon Smith, Hong Kong, and Wei Yaw Lam, Singapore

The Singapore International Arbitration Centre (SIAC) recently announced the release of the third edition of its arbitration rules.

The new edition introduces various changes to the previous rules, which were published in 1997. The changes relate principally to:

  • the appointment of arbitrators by SIAC;
  • SIAC's role as a case administrator;
  • the use and formulation of a memorandum of issues; and
  • SIAC's schedule of arbitrators' fees.

An arbitration agreement which incorporates the new rules may or may not deal clearly with the appointment of an arbitrator or arbitrators. However, the new rules define with greater certainty when arbitrators are appointed by SIAC, with the result that in circumstances where the arbitration agreement is not clear in this regard the parties are better placed to proceed with appointment of the Tribunal. The new rules provide that an arbitrator is appointed once such appointment has been confirmed by SIAC's chairman.(1)

Apart from acting as an appointing authority for arbitrators, SIAC administers cases under its superintendence principally by virtue of the arbitration agreement. The new rules empower SIAC's registrar to extend time for:

  • the completion of the memorandum of issues;(2)
  • the tribunal's submission of an award in draft form to the registrar before issue;(3)
  • the correction of an error in the awards; and
  • the making of additional awards.(4)

This refinement of the previous rules serves to guide the tribunal in adopting a more balanced approach to the proper determination of the issues, allowing an element of flexibility without sacrificing reasonable expedition. The new rules require the tribunal to submit its draft award to the registrar for scrutiny as to form without affecting the tribunal's liberty of decision.(5) An award may not be issued by the tribunal until the registrar has approved its form. The registrar may also draw the tribunal's attention to points of substance.

The new rules describe the memorandum of issues as a document "defining the issues to be determined by the tribunal in the arbitration".(6) This document is to be drawn up by the tribunal in consultation with the parties and on the basis of their written statements of their respective cases. The signed memorandum defines the issues to be decided in the award.(7)

The main purpose of the memorandum of issues under the new rules, which appears largely to reflect that of the terms of reference under the International Chamber of Commerce Rules of Arbitration,(8) is to marshal all parties to focus on addressing the issues defined therein, thereby potentially saving time and money. Preparing a memorandum of issues requires circumspection, as it is not always straightforward to define the issues for the tribunal's determination; much depends on the quality of the parties' written statements.

The formal implementation of SIAC's ongoing practice of using practice notes in its administration of cases should continue to engender transparency and certainty between parties and arbitrators, particularly in the regulation of the financial management of arbitrations.(9) The registrar may issue such notes to facilitate the administration of arbitrations.

The new rules establish a different basis for the assessment of tribunal fees, using the sum in dispute as a reference(10) instead of the arbitrators' hourly rates. This should lead the tribunal to adopt a more holistic approach to case management. In addition, parties are likely to welcome greater transparency and certainty with regard to tribunal fees.

The new rules abrogate(11) the SIAC Domestic Arbitration Rules(12) to the extent that the summary arbitration procedure remains applicable in arbitrations administered by SIAC.(13) Transitional provisions(14) for contracts that refer to the domestic rules govern the continued application of the latter.

The new rules came into effect on July 1 2007.(15) References in contractual provisions to 'the SIAC Arbitration Rules' after June 30 2007 will, prima facie, relate to the new rules.

The growing popularity of arbitration as a means of dispute resolution, especially for large contracts in Asia and beyond, has increased the demand for robust yet flexible arbitration rules. SIAC's implementation of its new rules is timely as Singapore continues to distinguish itself as the premier arbitration centre in Asia.

A copy of the rules is available at www.siac.org.sg/rules-siac.htm.


(1) Rule 5.5 provides that: "In all cases, an arbitrator shall not be deemed appointed until confirmed by the chairman. The chairman shall confirm an arbitrator as soon as practicable."

(2) Rule 17.2.

(3) Rule 27.1.

(4) Rule 28.4.

(5) Rule 27.1.

(6) Rule 17.1.

(7) Rule 17.4.

(8) Article 18, Second Edition, 1998.

(9) Rule 35.4

(10) Rule 30.1 and SIAC's new schedule of arbitrators' fees effective from July 1 2007.

(11) Schedule 1, Article 1.

(12) Second Edition, September 1 2002.

(13) Schedule 1, Article 3.

(14) Schedule 1, Articles 2 and 3.

(15) A new schedule of arbitrators' fees and supplementary practice notes for ad hoc and administered cases also came into force on the same date.

DUBAI: THE NEXT BIG THING

by Philip Chong, London, and Tom Canning, Dubai

The Dubai International Arbitration Centre (DIAC) introduced its new Arbitration Rules (new Rules) on 7 May 2007. The new Rules reflect the quality of the review undertaken by the Board of Trustees and demonstrate DIAC's ambition to be amongst the leading international arbitration centres in the world.

The new Rules remove some of the obvious limitations of their predecessors and appear to incorporate some of the best provisions of other, more well established sets of rules (such as the ICC, LCIA and UNCITRAL).

The overarching theme of the new Rules appears to be to increase the Tribunal's discretion to determine procedural issues in the absence of the specific agreement of the parties. The Rules also seek to introduce certainty to some of the fundamental elements of the arbitration process. They provide that, in the absence of agreement:

  • The seat of the arbitration will be Dubai.
  • The language of the arbitration will be the same as the language of the arbitration agreement.
  • The Tribunal shall decide what governing law applies based on which law is most "appropriate".
  • The dispute will be determined by a sole arbitrator unless a three person tribunal appears appropriate in the circumstances.
  • The award will be final and binding on the parties and the parties irrevocably waive their rights to any form of appeal to any State Court "insofar as such waiver shall validly be made".

One of the most important elements of the new Rules is the ability of the Tribunal to grant interim relief. In a region where the ability to obtain injunctive relief from the State Court is severely limited, and, correspondingly, the enforcement of an injunction made by a foreign court is likely to be fraught with difficulty, this provision will be viewed by the international community as a significant step forward for the expeditious administration of justice in the UAE. The provision actually goes further than other rules as the Tribunal, under the new Rules, "may issue any provisional orders or take other interim or conservatory measures it deems necessary" (emphasis added).

However, the key to Dubai's emergence as a leading centre for International Arbitration lies not just with the establishment of a robust and user-friendly set of institutional rules (which the DIAC's new Rules undoubtedly are). Rather, the key lies with the supervision of the arbitration process and the enforceability of the award within the UAE. Here too, great progress has been and is being made.

The UAE ratified the New York Convention on 19 November 2006 and did so without any limitation of its obligations under the Convention. While, to the writers' knowledge, enforcing an arbitral award under the auspices of the New York Convention is yet to be tested in the UAE, the ratification of the Convention's full terms is undoubtedly a significant milestone. If the UAE is to succeed in becoming an 'arbitration-friendly' state, it is of course crucial that, in practice, its courts uphold international arbitration awards under the Convention.

In another important development, a new federal-level draft Arbitration Law, was released for public comment in September 2006. Its release triggered significant consultation between the relevant government ministries and the public and private sectors. The government received considerable comment from, among others, international law firms. The persons responsible for drafting the legislation are being assisted by a working group whose number include leading international arbitrators from around the world.

Given the UAE's, and Dubai's in particular, commitment to attracting foreign investment, the development of its international arbitration regime is important to foster confidence in the region. The DIAC's new Rules are a significant and welcome stride forward.

HALL STREET ASSOCIATES, L.L.C. v. MATTEL, INC.:

Narrow Legal Issue, Broad

PHILOSOPHICAL DIVIDE

by Juan M. Alcalá, Austin

The Federal Arbitration Act (“FAA”) provides four statutory grounds for vacating an arbitration award:

  1. where the award was procured by corruption, fraud, or undue means;
  2. where there was evident partiality or corruption in the arbitrators, or either of them;
  3. where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
  4. where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

In the First, Third, Fourth, Fifth, and Sixth Circuits, however, parties to an arbitration agreement may agree to non-statutory grounds for vacating arbitration awards. Parties in the Ninth and Tenth Circuits, on the other hand, may not make such agreements and are, instead, constrained by the four statutory grounds in the FAA.

This fall, the United States Supreme Court will consider the split in authority in the case of Hall Street Associates, L.L.C. v. Mattel, Inc. In addressing this question, the Court will be confronted with a philosophical dilemma concerning the purpose of the FAA: Is the purpose of the FAA to give effect to the contracting parties’ agreements or is it to encourage the expeditious and efficient resolution of disputes?

The Case

This case arose from a property lease between Petitioner Hall Street and Respondent Mattel, for a property containing a well with water apparently contaminated by trichloroethylene. Hall Street alleged Mattel was required to test the well water for contaminates under the Oregon Drinking Water Quality Act (“ODWQA”), but had failed to do so.

Hall Street filed suit in Oregon state court claiming, among other things, that Mattel be required to indemnify it from all actions by any parties relating to the condition of the property. Mattel removed the case to the United States District Court for the District of Oregon. After an unsuccessful attempt to settle the case through mediation, the parties informed the District Court that they would seek the court’s approval of an agreement to arbitrate and that such agreement would allow for de novo review of the arbitrator’s legal rulings.

The case proceeded to arbitration under the judicially approved arbitration agreement. The arbitrator initially found that Mattel had violated the ODWQA, but that it had not violated any applicable environmental laws. Mattel was not therefore liable to indemnify Hall Street.because of a contractual exception that excluded liability if Mattel was in compliance with applicable environmental laws.

Hall Street moved to vacate the arbitrator’s award, seeking de novo review of the arbitrator’s legal conclusion that Mattel’s alleged violation of the ODWQA was not in violation of an applicable environmental law. The District Court ruled that the arbitrator’s conclusion on this point was erroneous. On remand, the arbitrator entered an amended decision in Hall Street's favor based on the District Court’s ruling.

The Appeal

Mattel appealed the District Court’s enforcement of the parties’ agreement that the arbitrator’s conclusion of law could be reviewed de novo, arguing that, under the Ninth Circuit’s en banc decision in Kyocera v. Prudential-Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003), the FAA did not permit judicial review of an arbitrator’s decision beyond the four statutory grounds outlined in the FAA. The Ninth Circuit agreed with Mattel and reversed the District Court’s vacatur of the arbitrator’s initial award, noting that, under Kyocera, the terms of an arbitration agreement controlling the mode of judicial review are unenforceable and severable. On remand, the District Court once again reversed the arbitrator’s initial award, finding that the arbitrator had exceeded his powers within the meaning of 9 U.S.C. §10 because the award was based on an implausible interpretation of the lease agreement. Mattel again appealed to the Ninth Circuit. The Ninth Circuit once again reversed the District Court, holding that “implausibility” is not a valid ground for voiding an arbitration award under either 9 U.S.C. §§ 10 or 11.

After the Ninth Circuit denied en banc review, Hall Street petitioned the United States Supreme Court for a writ of certiorari. The Court granted review and scheduled to hear arguments this coming fall.

The Issue

The issue before the Court is relatively straight forward—may parties to an arbitration agreement agree to non-statutory grounds for vacating an arbitration award (including de novo review of legal findings)?

The First, Third, Fourth, Fifth, and Sixth Circuits all appear to answer the question in the affirmative. See, e.g., Puerto Rico Telephone Co., Inc. v. U.S. Phone Mfg. Corp., 427 F.2d 21 (1st Cir. 2005), cert. denied, 126 S.Ct. 1785 (2006); Roadway Package System, Inc. v. Kayser, 257 F.3d 287 (3rd Cir. 2001), cert. denied, 534 U.S. 1020 (2001); Syncor Int’l Corp. v. McLeland, 120 F.3d 262 (4th Cir. 1997), cert. denied, 522 U.S. 1110 (1998); Gateway Technologies, Inc. v. MCI Telecommunications Corp., 64 F.3d 993 (5th Cir. 1995); Jacada, Ltd. v. Int’l Mktg. Strategies, 401 F.3d 701 (6th Cir.), cert. denied, 126 S.Ct. 735 (2005).

The Ninth and Tenth Circuits disagree. See Kyocera v. Prudential-Bache Trade Services, Inc., 341 F.3d 987 (9th Cir. 2003) and Bowen v. Amoco Pipeline, Inc., 254 F.3d 925 (10th Cir. 2001).

This simple legal issue, however, is premised on a fundamental philosophical divide concerning the purpose of the FAA. Those courts favoring expanded review of arbitration awards argue that the FAA’s ultimate purpose is to enforce the terms of the arbitration agreement. Those courts with a narrow interpretation of the FAA contend that allowing private parties to contract for broader review standards would “jeopardize the very benefits of arbitration, rendering informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process.” Kyocera, 341 F.3d at 999.

Impact on International Arbitration

While Hall Street Associates, L.L.C. v. Mattel, Inc. is concerned with a domestic arbitration, the Court's consideration of both the legal and philosophical issues to be determined in this case will also have an impact on international arbitration.

With respect to the narrow legal issue, it is important to note that the FAA has been interpreted to permit vacatur of awards in an international arbitration on the same grounds available in domestic cases, at least where the arbitral award is rendered in the United States, and both the confirmation or vacatur is also sought in the United States. See, e.g., Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2nd Cir. 1997). How the Court decides the narrow legal issue will, thus, have an impact on the parties’ choice of situs.

With respect to the broader philosophical issue, the Court’s discussion (and ultimate decision) will impact the view of the United States’ commitment to the expeditious and efficient resolution of commercial disputes.

News from the

ARBITRATION INSTITUTIONS

Serbia signs the ICSID Convention

Serbia has ratified the ICSID Convention, bringing the total of ICSID contracting states to 156. The Convention will enter into force in Serbia on 8 June 2007.

Bolivia Notifies World Bank of Withdrawal from ICSID and Pursues BIT Revisions

Bolivia has formally notified the World Bank of its formal withdrawal from the ICSID Convention. It is the first nation to have done so. Bolivia has also announced that it intends to pursue revisions to the 24 bilateral investment treaties to which it is a party. These revisions will be sought in three areas: the definition of investment; performance requirements; and dispute resolution.

Ecuador Announces that it Intends to Terminate US Investment Treaty

The Republic of Ecuador has indicated its intention to terminate a bilateral investment treaty with the United States Government. Ecuador’s Foreign Affairs Minister, Maria Espinosa, has announced that her Government does not wish to maintain the treaty with the United States, but is open to exploring other avenues for the mutual protection of investments between the United States and Ecuador.

The treaty came into force in May 1997. Under the terms of the treaty, either party was able unilaterally to terminate it after it had been in force for 10 years (by providing one year's notice).

If terminated, the agreement provides that the treaty protections will continue to be available for a further period of ten years, for “investments made or acquired prior to the date of termination”.

New ICC Secretary General Appointed

The International Chamber of Commerce (the "ICC") has announced the appointment of Jason Fry to the position of Secretary General of the ICC International Court of Arbitration. Mr Fry has been a member of the ICC International Court of Arbitration for seven years, representing New Zealand, and will be joining the Secretariat of the Court full time in his new position.

Permanent Court of Arbitration Establishes a Facility in Africa

The Permanent Court of Arbitration has established a regional facility in South Africa to facilitate dispute resolution on the African continent.

Canada and India Conclude BIT

On the 29 June 2007, Canada and India concluded a bilateral investment treaty based on Canada's Foreign Investment Protection and Promotion Agreement model. This will bring the number of bilateral investment treaties that Canada has entered into with developing and newly industrialized countries to a total of 23.

Centre for Effective Dispute Resolution (CEDR) Launches Commission on Settlement in International Arbitration

The CEDR has launched a Commission on Settlement in International Arbitration, which held its inaugural meeting on 10 July 2007 attended by representatives from over 25 jurisdictions.

The Commission has been launched to investigate the different approaches to settlement within the framework of international arbitration, in light of criticisms that the procedures can be slow and expensive, with settlement rates said to be lower than those achieved in commercial state court proceedings.

The Commission is expected to hold a number of meetings during 2007 and early 2008, with a view to publishing its findings next year.

Forthcoming Arbitration Events

Specialized Arbitration & Advocacy Skills in International Oil & Gas Disputes – Dundee University – 27-31 August 2007

This course provides an insight into international arbitration involving the oil & gas industry. The course identifies a broad variety of issues that can arise in the course of oil & gas arbitrations and discusses the complexities of oil and gas contractual provisions and disputes.

Centre for Transnational Law and German Institution of Arbitration – 5th Summer Academy on International Commercial Arbitration, Cologne – 3-6 September 2007

This seminar will discuss all international arbitration stages and participants will have an opportunity to plead or examine witnesses with feedback from the workshop leaders within highly interactive seminar sessions.

European Court of Arbitration – 1st Mediterranean-Middle East Forum, Rome – 7-8 September 2007

This program will look at issues within arbitration in this region focusing on foreign investments, corporate law, enforcement of foreign awards and whether state courts' provide assistance in arbitration proceedings or are a hindrance.

British Institute of International and Comparative Law – 9th Investment Treaty Forum Public Conference, London –
14 September 2007

This conference will examine the emerging jurisprudence of international investment law. Topics for discussion include the role of precedent in the expanded world of international courts and tribunals, most-favoured nation treatment and the use of umbrella clauses.

ICC/Programme de l'Institut de Dix Ans – Seminar on International Commercial Arbitration, Paris – 17-20 September 2007

This seminar will examine the latest developments at the ICC International Court of Arbitration. Participants will develop first–hand experience and knowledge of the ICC Rules and practice of International Commercial Arbitration, highlighting differences in cultures and legal practices.