International arbitration report

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1 International arbitration report 2014 issue 2 Inside this issue Energy Charter Treaty Coming up for 20 years The Q&A Teresa Cheng, Chair of the Hong Kong International Arbitration Centre Singapore Court of Appeal New ruling on active and passive remedies for challenging jurisdiction Escalation clauses English courts set up stringent test

2 Norton Rose Fulbright Norton Rose Fulbright is a global legal practice. We provide the world s pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia. Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare. Norton Rose Fulbright Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. 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International arbitration report Published by Norton Rose Fulbright 2014 issue 2 Editors-in-chief Mark Baker, US; Pierre Bienvenu Ad. E., Canada Editor James Rogers, Hong Kong References to Norton Rose Fulbright, the law firm, and legal practice are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together Norton Rose Fulbright entity/entities ). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with Norton Rose Fulbright LLP NRF /14 (UK) Extracts may be copied provided their source is acknowledged. equivalent standing and qualifications of the relevant Norton Rose Fulbright entity. 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3 Editorial Welcome to issue 2 of Norton Rose Fulbright s 2014 International arbitration report. In this issue, we take a moment to salute the Energy Charter Treaty, which celebrates its twentieth birthday this year, and we talk to Teresa Cheng, the recently appointed chair of the Hong Kong International Arbitration Centre. We also report on the HKIAC-administered Arbitration Rules; the new AAA Commercial Rules and Appellate Rules; and the Dubai International Financial Centre s law on arbitration. We don t stop there. Our case updates examine the Indian Supreme Court s decision in World Sport Group, the Singapore Court of Appeal s decision in PT First Media v Astro and the English High Court s decision in Tang Chung Wah v Grant Thornton on the validity of escalating arbitration agreements. Earlier this year, we were listed among the world s top ten arbitration practices by Global Arbitration Review. We hope that this recognition of our global reach and capabilities is reflected in this issue of International arbitration report. Mark Baker and Pierre Bienvenu Ad. E. Co-heads, International arbitration Norton Rose Fulbright Contents 02 Energy Charter Treaty Coming up for 20 years 06 The Q&A Teresa Cheng, HKIAC chair 10 HKIAC Rules A quick guide 13 Energy Arbitrators List Identifying industry expertise 14 AAA Rules The 2013 AAA Commercial Arbitration Rules 16 The governing law of the arbitration agreement Q&A 19 Investor corruption Bribery at centre of failed investor claim 22 Escalation clauses English courts set up stringent test 25 The British Virgin Islands A new venue for arbitration? 26 Singapore Court of Appeal New ruling on active and passive remedies for challenging jurisdiction 29 Supreme Court of India Fraud allegations can now be referred to arbitration 32 Dubai International Financial Centre DIFC change to arbitration law 33 A new Chinese arbitration option Shanghai FTZ Arbitration Rules IAR, Issue 1 Year in review 36 Contacts About the cover The 2014 IBA International Arbitration Day was held in Paris, France. Our cover for this issue features the statue The Law, sculpted by Jean- Jacques Feuchère, installed in 1854 at the Place du Palais-Bourbon, seat of the French National Assembly in Paris.

4 International arbitration report 2014 issue 2 Energy Charter Treaty Coming up for 20 years Deborah Ruff, Julia Belcher and Charles Golsong As the Energy Charter Treaty nears its 20-year anniversary, we examine how disputes are handled under the treaty and look at what the next 20 years might hold. 02 Norton Rose Fulbright 2014

5 Energy Charter Treaty In 1991, at the end of the Cold War, energy-poor states in western Europe and former Soviet states in need of major investment for their vast energy resources seized an opportunity for beneficial cooperation. The European Energy Charter declaration, signed that year, outlined principles for cross-border cooperation in the energy industry, focusing on security of energy supply for the EU. The resulting Energy Charter Treaty was signed in Lisbon in December 1994 (almost 20 years ago) and came into force in April Today, the ECT has 51 states as signatories, with 4 countries yet to ratify. Of these, 14 are former Soviet states. Many others have observer status, including the US, Canada and China. The ECT offers investment protection, reducing commercial risks associated with energy sector investments by granting investors non-discriminatory treatment (national treatment and most-favoured nation treatment) by providing for compensation in case of expropriation and other losses by enabling free transfer of capital. trade in energy and energy products, based on WTO rules freedom of energy transit improvement of energy efficiency international dispute settlement, including investor-state arbitration and inter-state arbitration. Arbitration under the ECT Claims An investor can bring claims against a contracting party to the ECT (i.e. the host state) for breach of an obligation involving investment protection (article 26, ECT). Disputes should if possible, be settled amicably and a three-month consultation period be observed (article 26(1)). The consequences of failing to observe this are unclear. While some cases have held that non-observance is not a bar to arbitration, there is no principle which stipulates that an investor may ignore amicable settlement with impunity. Once the cooling-off period has come to an end, an investor can choose between a domestic court of the contracting party, ICSID (provided that both host state and home state of the investor are parties to the ICSID Convention) or international arbitration under the UNCITRAL or Stockholm Chamber of Commerce Rules. The contracting party must give its unconditional consent to the submission of a dispute to international arbitration or conciliation (article 26(3)(a)). The ECT also includes a fork in the road provision, requiring an investor to choose, from the outset, whether to pursue domestic legal proceedings or international arbitration but not both. Contracting parties listed in Annex ID of the ECT may refuse to consent to the submission of a dispute to international arbitration where the investor has previously submitted the dispute to another dispute resolution forum (article 26(3)). Contracting parties have the right to deny the investor access to the ECT s investment provisions where the claimant has no substantial business activities in the country where it is organised and is owned or controlled by nationals of a third state (article 17). Some bilateral investment treaty (BIT) jurisprudence has allowed states (where there are no contrary provisions in the BIT) to rely on denial of benefits clauses after the dispute has arisen or the request for arbitration been filed. Tribunals in disputes under the ECT, however, have held that, for the denial of access option to be effective, a contracting party must invoke the right to deny benefits under article 17 before the investor claims the benefit, not retrospectively. Definitions While the term investment in the ECT is still open to interpretation, given the relatively small number of reported cases, it is generally regarded as a fairly broad definition. For example, even a debt under an agreement for supply of equipment for a nuclear plant assigned to the claimant seems to have satisfied the test. The ECT may therefore be a more attractive option for parties who may struggle to show a qualifying investment under one of the narrower BITs. Norton Rose Fulbright

6 International arbitration report 2014 issue 2 The definition of investor is very wide: an investor is a natural person having the citizenship or nationality of, or permanently residing in, a contracting party in accordance with its applicable law, or a company or other organisation organised in accordance with the law applicable in that contracting state (article 1(7)). While the first few ECT cases were brought predominantly against eastern bloc countries, recently there has been an increase in the number of cases against western European states. 51 ECT cases In the Yukos proceedings discussed below, Russia argued that applicable rules and principles of international law bearing upon the exercise of treaty interpretation require the Tribunal to go beyond the facts relating to Claimant s formal incorporation in order to determine whether Claimant qualifies as an Investor for purposes of Article 1(7)) of the ECT. Russia also argued that the investors (did) not qualify as an Investor for the purposes of Article 1(7) of the ECT... in particular... since it is a shell company beneficially owned and controlled by Russian nationals and, as such, by nationals of the host State. The tribunal disagreed, and instead found that article 1(7) contains no requirement other than that the claimant company be duly organised in accordance with the law applicable in a Contracting Party, and went on to say that in order to qualify as a protected Investor under Article 1(7) of the ECT, a company is merely required to be organised under the laws of a Contracting Party. In another jurisdiction award in a separate case, the tribunal held that, for the purposes of article 1(7) of the ECT, it is... irrelevant who owns or controls the Claimant at any material time. Potential ECT claimants should, however, check whether the host state has already opted for the denial of access option under article 17 referred to above. Preferences Using just the data publicly available (as reported on the Energy Charter website), there is a clear preference for institutional arbitration in choice of dispute resolution mechanism. ICSID arbitration 53% SCC arbitration 20% UNCITRAL Rules 27% 15 against Russia and the republics of the former Soviet Union against other eastern European countries 11 against western European countries 6 against other countries including Mongolia and Turkey 51 ECT cases 17 reached a final award 6 settled 28 pending Binding and final Regardless of choice of procedure, an award under the ECT is binding and final. Damages The award may authorise the contracting party to pay monetary damages in lieu of other remedy so as to ensure compliance where a central government lacks (or argues it lacks) the authority to ensure compliance by a sub-national entity (article 26(8)). Annulment Any annulment proceedings must be brought under the rules of the institution in which proceedings have been brought. Annulment proceedings under ICSID, for example, will be subject to the grounds laid down in article 52 of the ICSID Convention. 04 Norton Rose Fulbright 2014

7 Energy Charter Treaty There has been a trend for some states to withdraw from arbitration under investment treaties Enforcement Should any party to the dispute request it, an ECT arbitration shall be held in a state that is party to the New York Convention and ECT claims are considered to arise out of commercial relationships or transactions, thus bringing them within the aegis of the New York Convention (article 26(5)(b)). Stakeholders United States The United States is not party to the ECT but does hold observer status and was heavily involved in its development. Russia In 2005, the shareholders of Yukos Oil Corporation initiated ECT UNCITRAL arbitration proceedings against Russia. Russia signed the ECT in 1994 but did not ratify it, and argued in the arbitrations that it was not bound by the ECT. However article 45 of the ECT required Russia to apply the ECT provisionally. The tribunal found that Russia could not simply apply the ECT piecemeal, and that Russia had by signing the ECT agreed that the treaty as a whole would be applied pending its entry into force, unless the principle of provisional application was itself inconsistent with Russia s constitution, laws or regulations. The tribunal concluded that the principle of provisional application was not inconsistent with Russia s constitution, laws or regulations; and that this determination of consistency was for the tribunal to make. On 20 August 2009, Russia gave notice that it wished to cease to be a provisional member of the ECT, effective on 19 October 2009 (after a mandatory 60-day notice period). Russia is, however, still under an obligation (until 19 October 2029) to afford the investment protection under Part III of the ECT to investments made before 19 October 2009 for 20 years. The next 20 years The ECT is a comparatively young treaty and the number of investor-state arbitrations is growing. Sixteen cases were filed in the last year alone (of a total of 51 cases reported by the Energy Charter Secretariat). This figure is still low compared with disputes brought under BIT provisions, but shows an upward trend. Transparency In an effort to improve transparency, the Energy Charter Secretariat is considering publishing all decisions made by the Energy Charter Conference the ECT s governing body, composed of representatives from all signatory states as well as publishing a consolidated text of the ECT which includes summaries of all known cases. The Secretariat is also preparing a commentary on the ECT. UNCITRAL The revised UNCITRAL Rules, which came into force on 1 April 2014, will apply to all future ECT disputes. Global reach While Russia s exit before ratification means that the ECT s original purpose of creating bonds between Europe and post- Soviet states is in some doubt, the Energy Charter Secretariat recently remarked that it was working closely with Russia and Ukraine to avoid an energy crisis as a result of the tensions in Crimea. The ECT is also extending its reach into Asia: Afghanistan ratified the treaty in 2013; and Pakistan (an observer since 2005) has indicated its intention to ratify. There has been a trend for some states to withdraw from arbitration under investment treaties Ecuador, Venezuela and Bolivia have all recently withdrawn from ICSID and some commentators predict that states will increasingly seek other legal frameworks for the resolution of energy disputes. The WTO General Agreement on Tariffs and Trade (for transit disputes) is one such example. However, the growth of new economies with investment no longer flowing simply from west to east and an ever-increasing need for global governance, in particular in the energy sector, suggests the ECT may yet have a promising future. Deborah Ruff is a partner and Julia Belcher and Charles Golsong are associates in the London office of Norton Rose Fulbright. Norton Rose Fulbright

8 International arbitration report 2014 issue 2 The Q&A Teresa Cheng, HKIAC chair James Rogers and Chris de Waas We speak with Teresa Cheng GBS SC JP who has replaced Huen Wong as Chair of the Hong Kong International Arbitration Centre (HKIAC). 06 Norton Rose Fulbright 2014

9 The Q&A They say that challenges are what make life interesting; overcoming them is what makes life meaningful. My challenge is ensuring that my role is fulfilled through the capitalisation of soft power as well as the consolidation of the vast experience in arbitration in Hong Kong and then connecting that with the future development of arbitration and dispute resolution internationally. The strong and experienced Hong Kong arbitration community has been active in developing arbitration and other forms of dispute resolution. I hope to bring together those efforts so that the results will be even more prominent. There are a large number of arbitral institutions growing in the region providing keen competition. Healthy competition is a challenge and it usually leads to better professional service. The HKIAC will continue to strive to remain a leader. 2 Why did the HKIAC decide last year to adopt new administered arbitration rules? Our 2008 Rules took on board several of the key changes that were ultimately adopted in the 2010 UNCITRAL Arbitration Rules and met with great success. During the past few years, however, Hong Kong adopted the 2006 UNCITRAL Model Law and we saw a few trends emerge that prompted us to amend our Rules. We have maintained our light touch, full service approach, while revising our Rules to ensure that costs and time can be appropriately controlled. 1 What are the key challenges facing you as chair of the HKIAC? The HKIAC is a homegrown arbitral institution, an icon for arbitration in Hong Kong, and will reach its 30th anniversary next year. As the chair, my main role is to work with the HKIAC Executive committee under the supervision of the HKIAC Council to develop Hong Kong s position as an eminent arbitration and dispute resolution centre. For example, we have kept the existing arrangement for parties to choose how they wish to remunerate their arbitrators on an ad valorem [ in proportion to the value ] basis or by the hour. But we have developed this choice by capping the hourly rate and by establishing practice notes to address expenses for arbitrators. This gives parties a meaningful choice, which parties and their counsel are deliberately making. The commercial reality is that multiple contracts are often entered into under one business transaction. Disputes have become more complicated and often involve multiple parties. As a result, our revisions have addressed issues that complex disputes might face. These changes have also led to a few Norton Rose Fulbright

10 International arbitration report 2014 issue 2 institutional adjustments including the establishment of a Proceedings Committee, which will provide guidance when decisions have to be made by the HKIAC under these Rules (such as joinder and consolidation). This will enhance the consistency, predictability and transparency of our decisionmaking process. 3 How do the new Rules position Hong Kong and the HKIAC in relation to other international arbitral seats and institutions? These new Rules are at the forefront of the new generation of institutional rules. We have taken great care to ensure that they reflect not only best practice but also what the users are looking for in a dispute resolution process. And we have done all of this while keeping costs competitive. Our light touch, full service approach means that we provide the services that users and their counsel need in order to conduct an arbitration swiftly and economically. Moreover, we make a wide range of services available to parties, both within the arbitration spectrum and for resolving disputes generally. For example, we have long provided services for ad hoc arbitrations where the HKIAC is identified as the appointing authority or where parties or the arbitrators wish to make use of our administration services (such as fundholding and providing hearing facilities). This service is as important to our work as is administering arbitrations under the Administered Arbitration Rules. We also provide mediation services as well as support for other forms of dispute resolution. We believe that this flexibility allows parties to get the most out of an institution. 4 Is there scope for (more) convergence of arbitral practice in the region? The arbitration practice internationally, and not just regionally, has been converging. Within Asia, almost all jurisdictions have adopted the UNCITRAL Model Law, either the 1985 or the 2006 version. The international discussions in various platforms have also provided a means of convergence on best practice in international arbitration. This convergence will continue and in the medium to long term there will be a set of norms established and adopted by the international arbitration community. 5 How important is China to the success of the HKIAC? Given the increasingly significant role it plays in the world economy, China is important to the success of many companies and organisations. For those entities based in Hong Kong, such as the HKIAC, this could not be more true. Around half of the cases handled by the HKIAC have some China element to them: this is not surprising given that China is the second largest economy in the world. The HKIAC is fortunate in that it is ideally positioned to be an attractive institution for both Chinese and foreign parties alike. Hong Kong upholds the rule of law and prides itself on its independent judiciary. This, coupled with its long-standing position as an international financial centre, makes Hong Kong a reliable venue for foreign parties. And, of course, Hong Kong s position vis-à-vis China, and its common culture and strong business connection, make Hong Kong familiar ground for Chinese parties. Being situated in such a position makes the HKIAC an easy decision for both Chinese and foreign parties. Of course, China is not our only market. Indeed, our first office outside of Hong Kong is in Seoul, Korea. And, we view other jurisdictions as strategically important to our development. Indeed, the HKIAC is hosting a road show to promote its new Rules with seminars planned in May and June for London, Germany and New York. Closer to home, seminars will be held in Hong Kong and Shanghai. 6 What are the major trends and challenges facing international arbitration in Asia Pacific? The main challenges in the region will be the growing number of cases which will increase in complexity and significance. Major businesses have been set up in the Asia Pacific region focusing on investment in the region. Investor-state arbitrations may grow, even exponentially, if investors are aggrieved. There is also a need to maintain the growth of the maritime, IP and construction arbitrations in the region, given that most of these activities are now taking place here. We need to maintain expertise in these areas and cross-fertilisation amongst various jurisdictions should be encouraged. Hong Kong is the leading international financial centre in Asia and a growing number of equity funds are set up in Hong Kong. Their activities may generate financial and investment disputes where Hong Kong is best placed to resolve these given the expertise in this area. 08 Norton Rose Fulbright 2014

11 The Q&A The HKIAC Rules are at the forefront of the new generation of institutional Rules. We have taken great care to ensure that they reflect not only best practice but also what the users are looking for in a dispute resolution process. 7 You have been involved in some key arbitration cases before the Hong Kong courts. What is your most memorable case? Are you free to tell us about it? Three cases stand out. The Grand Pacific Holdings case came to me twice first when Pacific China Holdings tried to challenge the two party-appointed arbitrators and failed; and then when they sought to set aside the award and failed. It is meaningful to see the start and end of this arbitration being properly supervised by the courts. The challenge arising from the FG Hemisphere case continues as there still seems to be misconception about its effect. It has nothing to do with Hong Kong as a seat of arbitration. It points out that insofar as enforcement under the New York Convention is concerned, the jurisdiction of a national court over a foreign state will depend on the position of state immunity adopted by the enforcing state. State immunity (immunity from suit) relates to whether and, if so, when there is jurisdiction of a state court over a foreign state, and has no bearing on arbitration. As to the Intraline Resources case, it came out at about the same time as the FG Hemisphere case, and some misunderstanding has also ensued. The Intraline Resources case deals with the concept of Crown immunity (in the US, sovereign immunity), which is a peculiar legal concept of the English common law system the state cannot be sued in its own court unless there are provisions providing otherwise. The particular entity that is being considered in this case is not a state-owned enterprise but one which is a limb of and controlled by the Ministry of Communications of the Central People s Government. It is a shi ye dan wei ( 事 業 單 位 ) and is part of the state organ. The case does not touch on the liability and obligations of state-owned enterprises in commercial contracts. It is also worth noting that, in 2003, the Ministry of Foreign Affairs issued a note declaring that state-owned enterprises are not to be treated as the state. They do not enjoy immunity afforded to the state. Indeed there are many cases in Hong Kong and elsewhere where Chinese state-owned enterprises are parties to arbitrations and litigation and no issue of immunity, state or Crown, has been raised. James Rogers is a partner in the Hong Kong office of Norton Rose Fulbright, and Chris de Waas an associate in Melbourne. Norton Rose Fulbright

12 International arbitration report 2014 issue 2 HKIAC Rules A quick guide James Rogers, Benjamin Ridgeon and Chuan Tat Yeo The HKIAC s updated light touch Rules include key provisions on joinder, consolidation, multiple contracts and single arbitrations, costs, emergency relief and expedition. 10 Norton Rose Fulbright 2014

13 HKIAC Rules In November 2013, the HKIAC introduced new Administered Arbitration Rules after a year-long consultation. It presented these as maintaining its signature light-touch approach, reinforcing the importance of party autonomy, while keeping in step with modern best practice in international commercial arbitration. Although the 2013 Rules were introduced and effective from 1 November 2013, the new provisions relating to consolidation of arbitration, multi-contract arbitrations and emergency relief will not apply to arbitration agreements concluded before the effective date unless the parties agree otherwise. Joinder Article 27 The arbitral tribunal has power to join additional parties to an arbitration if that party is bound by a valid arbitration agreement under the Rules giving rise to the arbitration. This will not prejudice the tribunal s power to subsequently decide on questions of jurisdiction arising from the joinder decision. Parties to an arbitration may submit a joinder request to the tribunal requesting further parties be joined to the arbitration. Third parties may also, of their own volition, request to be joined to an arbitration. Where a tribunal has not been constituted, the HKIAC will decide whether the requirements for joinder are prima facie [on the face of it] met. The tribunal, once constituted, will then hear any jurisdictional objections from the parties arising from the HKIAC s prior decisions on joinder. Where joinder occurs before the tribunal is confirmed, all parties to the arbitration shall be deemed to have waived their rights to designate an arbitrator, the HKIAC may revoke the appointment of any designated or confirmed arbitrator, and the HKIAC will appoint the arbitral tribunal itself. Consolidation Article 28 The HKIAC may consolidate two or more arbitrations at the request of a party and in consultation with other parties and any confirmed arbitrators, where the parties agree to consolidate and all claims in the arbitrations are made under the same arbitration agreement. The 2013 HKIAC Rules ensure modern best practice in international commercial arbitration Consolidation may also take place where the claims are made under more than one compatible agreement with a common question of law or fact in both or all of the arbitrations and with rights arising out of the same transaction or series of transactions. In deciding whether to consolidate, the HKIAC takes into account all the circumstances of the case. Single arbitration Article 29 If the following conditions are met, claims arising out of, or in connection with, more than one contract may be made in a single arbitration. Conditions All parties to the arbitration are bound by each arbitration agreement giving rise to the arbitration. A common question of law or fact arises under each arbitration agreement giving rise to the arbitration. The rights arise out of the same transaction or series of transactions. The arbitration agreements under which those claims are made are compatible. The parties are deemed to have waived their rights to object to the validity/enforcement of an arbitral award based on the arbitral tribunal s decision made under articles 27 to 29. Tribunal fees and expenses Articles 9, 10, schedules 2 and 3; and the HKIAC s practice notes Fees and expenses may be determined by applying an hourly rate or by a schedule of fees based on the sum in dispute, i.e. on an ad valorem [ in proportion to the value ] basis. While Norton Rose Fulbright

14 International arbitration report 2014 issue 2 parties are free to choose between them, the hourly rate method will prevail if parties cannot agree. These schedules also contain the standard terms on which a tribunal is appointed. The HKIAC also issued separate practice notes on cost implications, setting out more detail. Where an hourly rate is used to determine the arbitrators fees, the agreed hourly rate must not exceed a rate set by the HKIAC (currently HK$6,500 the US dollar equivalent is US$835). If fees are determined on an ad valorem basis, the revised schedule of fees has been simplified, making it easier for parties to estimate and control costs (schedule 3, article 6). Emergency relief Article 23 and schedule 4 Emergency relief is an urgent interim or conservatory measure available to a party to an arbitration before the constitution of an arbitral tribunal. A party requiring emergency relief may, at the same time as or following the filing of a notice of arbitration but prior to the constitution of the tribunal submit an application to appoint an emergency arbitrator following the procedures set out in schedule 4. The emergency arbitrator cannot subsequently act as an arbitrator without the parties agreement, and the emergency arbitrator s power ends once the tribunal is constituted. Where the request for emergency relief is granted, an emergency arbitrator is normally appointed within two days and a decision rendered within 15 days from the date on which the case file was passed to the emergency arbitrator. Decisions, orders or awards from an emergency arbitrator have the same effect as an interim measure. They are binding on parties, and can be modified, suspended or terminated by the emergency arbitrator or the arbitral tribunal. Meanwhile, parties are not prevented from seeking urgent interim or conservatory measures from a competent judicial authority. Expedited procedures Article 41 Before the tribunal is constituted, a party can apply to the HKIAC for the arbitration to be conducted in accordance with an expedited procedure if there is exceptional urgency; or if the amount in dispute does not exceed HK$25 million (US$3,200,000) and the parties are agreed. Where the expedited procedure applies, the proceedings are heard by a sole arbitrator (unless the arbitration agreement provides otherwise and the parties do not agree to alter the effect of that agreement). The claim is determined based on the documents alone, unless the arbitrator decides that it is appropriate to hold one or more hearings. The award is normally made within six months, with reasons stated in a summary form. Jurisdiction of tribunal Article 19 The arbitral tribunal s power to rule on its jurisdiction is made explicit under the 2013 Rules. This includes ruling on any objection concerning the existence, validity or scope of an arbitration agreement. The HKIAC may decide on jurisdictional questions before the tribunal is concluded. The arbitration may proceed if the HKIAC is prima facie satisfied that an arbitration agreement under the 2013 Rules may exist. A regional trend Following the introduction of the 2013 HKIAC Rules, the Japanese Commercial Arbitration Association introduced changes to its rules on 1 February 2014, echoing some of the changes made by the HKIAC, including the introduction of emergency arbitrator procedures and interim relief. These are now common features of the arbitration rules of a number of leading international arbitration institutions. James Rogers is a partner and Benjamin Ridgeon is a senior associate in Norton Rose Fulbright s Hong Kong office; Chuan Tat Yeo is an associate in the Singapore office. References hkiac.org jcaa.or.jp 12 Norton Rose Fulbright 2014

15 Energy Arbitrators List Identifying industry expertise Kevin O Gorman An arbitral tribunal with industry-specific expertise can be critical for the resolution of complex arbitration cases. The Energy Arbitrators List will assist in the identification of arbitrators in international energy disputes. The Energy Arbitrators List is a no-cost, online list of arbitrators with wide-ranging experience in deciding energy disputes. The database is searchable by geographic area, expertise, keyword, language and nationality. Visitors to the site can search for arbitrators who have heard cases across 13 industry categories. Industry categories Core upstream contracts Downstream / refining and marketing Gas price redeterminations Gas processing / LPG Independent power generation Investor / state disputes LNG Marketing and trading / commodities Petrochemicals Pipelines and midstream Renewable energy Technical upstream contracts Utility and energy regulatory The Energy Arbitrators List was created almost a decade ago by an ad hoc industry group. The recently updated list was agreed by an international review committee of energy experts. Members of the review committee include industry participants, corporate counsel, private practitioners, and representatives of state and private energy companies. The Energy Arbitrators List is supported by the International Centre for Dispute Resolution (ICDR ). Upon request, the ICDR will provide fee-based administrative assistance such as enhanced list-selection or conflicts-checking procedures. The review committee considers applications from experienced arbitrators for listing on an annual basis. Kevin O Gorman is a partner in the Houston office of Norton Rose Fulbright. Kevin co-chairs the steering committee of the Energy Arbitrators List. Reference energyarbitratorslist.com Norton Rose Fulbright

16 International arbitration report 2014 issue 2 AAA Rules The 2013 AAA Commercial Arbitration Rules Aníbal Sabater and Alex Altman In 2013, the most significant amendments to the AAA Commercial Arbitration Rules in 14 years came into effect. Despite their wide scope, the amendments will probably be noted chiefly for enacting the Optional Appellate Arbitration Rules. 14 Norton Rose Fulbright 2014

17 AAA Rules Optional Appellate Arbitration Rules The Optional Appellate Arbitration Rules are available to users of the AAA and its international division, the ICDR. In either case, when both parties agree in writing, an underlying award can undergo a full review, akin to that which the second instance dispenses in court cases. This review will be conducted by an appeal tribunal, comprising three members appointed under the AAA s list system. Their award is deemed final, replacing the underlying (first instance) award, and thus still subject to court challenges as the laws of the seat of the arbitration may allow. The AAA Rules The amendments are multifaceted. 1. Mediation Mediation is now expected in all AAA commercial cases for any claim or counterclaim over US$75,000. The mediation will take place concurrently with the arbitration and must not delay the proceedings. Parties do have the right to decline to participate in the mediation. (Rule R-9) 2. Disclosure There is a new (more demanding) disclosure standard: arbitrators must reveal any circumstance likely to give rise to justifiable doubt as to the arbitrator s impartiality or independence, including any bias or any financial or personal interest in the result of the arbitration or any past or present relationship with the parties or their representatives. (Rule R-16). On the other hand, parties themselves now have the burden of disclosing circumstances they are aware of that may pose an arbitrator conflict. Failure to do so may result in a waiver of that party s right to object to the appointment of the arbitrator. (Rule R-17) 3. Disposition The arbitrator has the authority to allow the filing of and make rulings upon a dispositive motion. This discretion is not unfettered. The arbitrator may only allow a dispositive motion where it has been shown that the motion is likely to succeed and narrow the issues in the case. (Rule R-33) 4. Interim relief Emergency relief proceedings are now an opt-out, as in the ICDR system. In other words, unless the parties to an AAA commercial arbitration otherwise agree in writing, any of them can appoint an emergency arbitrator to entertain interim relief applications that cannot wait for the appointment of the tribunal proper. 5. Sanctions An AAA commercial arbitrator can impose sanctions, upon application, where a party fails to comply with its obligations under these rules or with an order of the arbitrator but may not enter a default award as a sanction. Where a sanction limits any party s participation in the arbitration or results in an adverse determination of an issue or issues, the arbitrator must require the applicant to provide evidence and legal basis for such a sanction. The arbitrator must also provide a written opinion setting forth the reasons for sanctions. (Rule R-58) 6. Early case management There is significant emphasis on early case management, fleshing out the content of the preliminary (or scheduling) hearing. (Rule R-21) 7. E-discovery The rules now account for e-discovery and empower the arbitrator to require the parties, when documents to be exchanged or produced are maintained in electronic form, to make such documents available in the form most convenient and economical for the party in possession of such documents. (Rule R-22). 8. Seat of arbitration When an arbitration clause does not name the place of arbitration, the AAA may (as in the ICDR system) determine the issue subject to the final review and decision of the arbitrator. (Rule R-10) 9. Deadlines Many deadlines have been changed from 15 to 14 calendar days. (Examples include the period in which to answer the arbitration notice or counterclaim, or to challenge arbitrators.) Aníbal Sabater is a partner and Alex Altman is an associate in the New York office of Norton Rose Fulbright. Norton Rose Fulbright

18 International arbitration report 2014 issue 2 The governing law of the arbitration agreement Q&A Sherina Petit and Marion Edge One way to reduce the cost of arbitration proceedings is through careful drafting. Disputes around the interpretation of an arbitration agreement arise surprisingly often and resolving them through negotiation or interlocutory hearings is an expensive business. In the last issue, Deborah Ruff and Charles Golsong provided guidance on negotiating an ICC arbitration agreement involving a state or state entity. Our Q&A looks at the governing law of the arbitration agreement. 16 Norton Rose Fulbright 2014

19 The governing law Q&A Standard arbitration agreements rarely make provision for the governing law of the arbitration agreement. But problems can arise when this is not dealt with in the agreement making provision for this is good practice. 1 Which law applies? In international arbitration it is not unusual for the laws of more than one state to apply. You need to consider: the law governing the substantive contract the law governing the arbitration procedure or legal seat the law governing the arbitration agreement the law of the state(s) where the award will be enforced. 2 Is the law governing the arbitration agreement the same as the law of the contract? Not necessarily. Usually, the agreement to arbitrate takes the form of a clause within a broader contract. The arbitration agreement is a contract in its own right and separable from the substantive contract in which it sits. This reflects the parties presumed intention that their agreed procedure for resolving disputes should remain effective even if the substantive contract is found ineffective. The doctrine of separability means that it is possible for an arbitration agreement to be governed by a different law than the governing law of the substantive contract. To avoid uncertainty it is best to specify the law of the arbitration agreement. 3 What law governs the arbitration agreement if it is not specified in the arbitration agreement? This is a difficult question and will depend upon the circumstances of the case and the approach taken by the arbitral tribunal or national court considering the issue. This lack of clarity can lead to expensive satellite proceedings which would be unnecessary if the law governing the arbitration agreement were specified in the arbitration agreement. 4 How do the English courts determine the law governing the arbitration agreement if it is not specified? The Court of Appeal laid down guidelines on this in the case of Sulamérica v Enesa. Following the English common law rules around the determination of governing law generally, the governing law of an arbitration agreement is to be determined by undertaking a three-stage enquiry into express choice; implied choice; and closest and most real connection. 5 How do the English courts apply this test in practice? In Sulamérica, a dispute had arisen under insurance contracts relating to a hydroelectric generating plant in Brazil. The English court had to determine whether Brazilian or English law applied as the governing law of the arbitration agreement. In the absence of an express agreement, the court considered first whether a governing law could be implied. The policies contained a Brazilian governing law clause and an arbitration clause with a London seat. An express choice of law governing the substantive contract is a strong indication of the parties intention concerning the agreement to arbitrate, unless there are other factors present which point to a different conclusion. These may include the terms of the arbitration agreement itself or the consequences for its effectiveness of choosing the proper law of the substantive contract. Although there were powerful factors in favour of an implied choice of Brazilian law as the governing law of the arbitration agreement, two important factors pointed the other way. The first was the choice of an English seat. The choice of another jurisdiction as the seat of the arbitration suggests an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. This suggests that the parties intended English law to govern all aspects of the arbitration agreement, including matters touching on the formal validity of the agreement and the jurisdiction of the arbitrators. The second factor was the consequences of the choice of the law of Brazil as the law governing the arbitration agreement; i.e. that it could not be enforced without both parties consent. It was asserted that if Brazilian law applied to the arbitration agreement, then it was only enforceable with the consent of both parties, and the judge noted that there was at least a serious risk that a choice of Brazilian law would significantly undermine that agreement. There was nothing to indicate that the parties intended to enter into a one-sided arrangement of that kind. On that basis, Brazilian governing law could not be implied and the question then turned to the law with the Norton Rose Fulbright

20 International arbitration report 2014 issue 2 Law governing an arbitration agreement in the absence of an express choice Does the substantive contract include a governing law clause? Yes This indicates the parties intention as to the governing law of the agreement to arbitrate, in the absence of any indication to the contrary. Are there any factors to negate the implied choice derived from the express choice of law in the substantive contract? Yes No The choice of a different jurisdiction for the seat of the arbitration is a factor pointing the other way. There may be others, such as the effect on the validity of the arbitration clause of the application of the law governing the substantive agreement. No The law governing the seat of arbitration will usually apply. The law governing the substantive contract will usually apply. closest and most real connection. Lord Justice Moore-Bick noted that an agreement to arbitrate in London does not have a close juridical connection with the system of law governing the policy of insurance, whose purpose is unrelated to that of dispute resolution. Instead, it has its closest and most real connection with the law of the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective. In this case, the arbitration agreement had its closest and most real connection with English law, so English law governed the arbitration agreement. 6 What law governs the arbitration agreement if the terms of the arbitration clause are agreed by an agent without the principal s authority? In a recent English Commercial Court case, Habas Sinai, an agent (in contravention of the principal s instructions) agreed a contract with no governing law provision and an arbitration clause providing for ICC arbitration in London. In the absence of any express governing law provision in the substantive contract, the governing law of the arbitration agreement would normally be the law of the seat, i.e. English law. It was argued that in this case the seat should be ignored because it was agreed without actual authority. The governing law would then be that with the closest connection to the substantive contract, which would be Turkish law (which was the intention of the principal). This argument was rejected on numerous grounds. There was no logical link between the question of agent s authority and the question of the law with which the contract was most closely connected. Such a finding would give special treatment to actual authority for conflicts of law purposes and could affect the validity of many contracts which would otherwise be binding because the agent had ostensible authority. The judgment deals with some complex principles in relation to agency and conflicts of law. 7 How do you draft a provision designating the governing law of an arbitration clause? Simple wording such as the governing law of this arbitration agreement shall be the law of [England] is effective. Care should also be taken to consider the wider implications of the choice of law and advice sought where necessary. Sherina Petit is a partner and Marion Edge is a senior knowledge lawyer in the London office of Norton Rose Fulbright. References Sulamérica CIA Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] EWCA Civ 638 Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Company Ltd [2013] EWHC Norton Rose Fulbright 2014