Canadian investor devices novel strategy to fund its investment arbitration with Venezuela

Canadian mining company Crystallex, which is engaging in a legal battle with Venezuela over the treatment of its investments in Las Cristinas gold project has announced a novel strategy to fund the investment arbitration. Unable to finance its outstanding debts and the costs of arbitration consequent to measures adopted by Venezuela, Crystallex is issuing securities worth US$120 million linked to the proceeds of a future ICSID win against Venezuela.

Further details of the securities, which are currently being sold through private placements, can be found here.

Vindobona Junction - Team formation: Some insights

by Smaran Shetty

The Vis problem has been out for some time now and I am sure that teams have progressed well into the substantive issues concerning this years problem. In this post, I would like to offer some insights into how work must be divided amongst team members, and what skills would be required out of such roles. 

Every Vis problem concerns two broad issues, namely questions relating to the legal propriety of the arbitral proceedings, i.e. essentially questions of jurisdiction and substantive questions relating to the breach of contract in question and resulting loss. Accordingly, any team, however big or however small will have to divide their work load along these lines. In this post I intended to outline the qualities need for each of these tasks, so as to enable teams to make the right choice, or review already decided team formations in light of my suggestions. 

Jurisdictional questions every year relate to highly arguable legal issues concerning the Arbitral rules of a certain arbitral institution that is either newly formed, or whose rules have recently been revised. Keeping that in mind, those persons involved in jurisdictional research, drafting of the memo and eventual speaking at Vienna and Hong Kong, will be required to be competent with thorough and in-depth legal research. Considering little material is available on jurisdictional issues, team members who are doing jurisdiction related research, must learn how to read the fine print, cross reference sources and most importantly be patient in finding relevant material, as chances are it will take a substantial amount of time to be able to arrive at the final argument. Jurisdiction team members will also be required to properly understand both the basics as well as the nuances of International Commercial Arbitration and must also be prepared to do cross jurisdictional research concerning the practices of Arbitral Institutions around the world. Most importantly, jurisdiction team members must at all costs operate within the confines of the law they are dealing with and must base all arguments on recognized legal principles of some kind, arguments based on personal belief or intuition, have no relevancy to a jurisdiction team member. If you are currently a jurisdictional team member and doubt whether you have the requisite skills, I strongly urge you, to convene a team meeting to re-consider whether the appropriate roles have been assigned to team members. 

On the other hand team members dealing with the substantial issues of the contract or the “merits”, will be required to posses a different set of skills to effectively execute their responsibilities. The merits of the dispute relate to certain provisions of the CISG every year, and in that sense involves the application of a static body of law, to dynamic and arguable facts of the present dispute. In terms of research, the effort involved relates to making sure all the authoritative and relevant authors/judicial decisions have been read, as opposed to finding the relevant material. Merits team members will hardly find any difficulty in research, but the task involved relates to the application of well settled legal propositions to fact situation that may or may not support the law in question. In that sense, a merits team member, unlike a jurisdictional member is not confined to merely the law. In fact merits team members are encouraged to look beyond the CISG into actual business practice and relevant data from the real world to buttress arguments based in principles of the CISG. The most convincing and compelling arguments from a merits team member, will often involve a healthy mix of law and logical assertions that fits well into the scheme of the problem (the nature of the business, character of dispute, position of parties, commodity in question). If any team member feels unsure of the ability to look beyond the law, then I suggest a reconsideration of team roles. 

Another means of dividing up work amongst a team (mostly large teams) is to divide the work based on the sides of the dispute, implying that some members do jurisdictional research only from the perspective of the claimant and some do research for the merits only from the respondent’s side. I strongly advise against such an arrangement, and may lead to disastrous results in terms of team coordination. My principal objection to such an arrangement is that fact that this results in excessive compartmentalization, inhibiting a more balance perspective of the issues involved in the problem. The best way of making an argument is acknowledging its limitations and dealing with it effectively. However when you research only from one side, you fail to recognize the argument from the other side and accordingly start to believe in the false strength of a one sided argument. 

I hope these observations help teams, and am happy to be told that I am completely wrong. I look forward to a healthy discussion in the comments section. 

You may also want to read this earlier post on the same subject.

2012 ICC RULES OF ARBITRATION: ASIA LAUNCH

Singapore witnessed the Asia Launch Conference of the New ICC Rules of Arbitration on 12 October, exactly one month after they were first released on 12 September this year. The ICC Rules of Arbitration, which are used worldwide to resolve hundreds of business disputes each year, have been newly revised to take account of current requirements and developments in arbitration practice and procedure since the last revision in 1998. The new vintage is the fruit of two years of active work within the ICC Commission on Arbitration, a think tank of 620 dispute resolution specialists from 90 countries. A core group comprising Commission members and representatives of the Secretariat of the ICC International Court of Arbitration have drawn on their own professional experience and feedback from a 200-member task force to draft the new Rules. This conference unveiled and explained the changes made to the Rules in its third revision and was a first hand opportunity for practitioners to acquire a comprehensive overview of the changes in readiness for the subsequent entry into force of the new Rules, and to have a direct exchange with several of the experts from the drafting group.

The Conference was organised at Maxwell Chambers which is the world's first integrated dispute resolution complex housing both best-of-class hearing facilities and top international ADR institutions.

The gathering was welcomed by Ms. Kim Kit Ow, Director, ICC Arbitration and ADR, Asia. Mr. Philip Jeyaretnam, Chairman of the Maxwell Chambers and Managing Partner of Rodyk & Davidson LLP and Mr. Alvin Yeo, member of ICC Commission on Arbitration, Senior Partner- WongPartnership LLP gave brief introduction to ICC Arbitration with their opening remarks.

The first session was on the General Provisions and Arbitral Tribunal. Mr. John Beechey, Chairman, ICC International Court of Arbitration, Paris and Mr W. Laurence Craig, Co-Chair of the Taskforce on the Revision of the ICC Rules of Arbitration gave the audience an overview of the same.

The focus of the first part of the session was on the opening provision of the Rules and the changes made to it seeking to provide clarification on the respective roles of the Court, its Secretariat and arbitral tribunals. It also clarified that ICC arbitration is available for a full range of disputes, including both commercial arbitration and treaty investment arbitrations. Other changes to the rules, which were presented in the session recognized the specifics of treaty investment arbitrations and arbitrations involving states or state entities. Articles 4 and 5 concerning the Request for Arbitration and the Answer are key provisions in the Rules, as these documents set the initial stage for the arbitration. The session addressed the revisions made to these provisions and explained the requirements which parties will have to meet when submitting the Request and the Answer. In addition, revisions to the rules explicitly allowing for tailor-made confidentiality orders as well as other modifications concerning confidentiality were presented.
An often used maxim says that "an arbitration is only as good as the arbitrator" and the provisions concerning the constitution of the arbitral tribunal are at the core of any set of arbitration rules. The session focused on the revisions made to those provisions, including the appointment of the arbitrators by the Court (Article 13), the arbitrators’ duty of impartiality and independence (Articles 11 and 14), and the notification of reasons for Court’s decisions concerning challenges, non-confirmation and replacement of arbitrators.

The question and answer session was moderated by Mr. Alan Thamiayah, independent Arbitrator at the Arbitration Chambers. An interesting question was posed by Mr.Nish Shetty, Partner, Clifford Chance on the fate of contracts which were entered into by virtue of decisions of the highest court of Singapore which allowed SIAC to administer arbitration under ICC Rules but are now in conflict with the new ICC Rules which specifically mention that only ICC can administer case under its rules. The answer to this given by the panel was that only time will tell how such cases are dealt but it would be advisable that such clauses were amended to avoid any problem.

The second session had Mr.Jason Fry, Secretary General, ICC International Court of Arbitration and Mr.Peter Wolrich, Chaiman, ICC Commission on Arbitration on the panel. The discussion was on Improving the Time and Cost efficiency.

One of the primary goals of the rules revision was to find ways to encourage the controlling of time and cost in arbitration. This effort was specifically requested and encouraged by the corporate users of ICC arbitration. The session presented the revisions in order to permit the Secretariat to constitute the arbitral tribunal more rapidly (Article 6(3)) and improve the turnaround time for draft awards (Articles 27, 31). The new provisions addressed to parties and arbitral tribunals concerning the conduct the arbitration proceedings in an expeditious and cost-effective manner and the corresponding cost provisions were also presented (Articles 22- 24, Appendix V, Article 36). Finally, a user’s perspective was presented by the panel.

The question and answer session was moderated by Mr. Chelva Rajah, ICC Court Member for Singapore. Interesting questions were put by the users of ICC Rules of Arbitration which were satisfactorily answered by the panel.

The third session was on a completely new area that has been introduced by ICC through its new Rules. It was on Emergency Arbitrator Provisions. The session was presented by Mr.Christopher Lau, Member of ICC Commission on Arbitration and Mr Vinayak Pradhan, President of the ICC Commission on Arbitration.

The 2012 ICC Rules for Arbitration includes provisions permitting parties to seek the appointment of an Emergency Arbitrator to decide upon urgent conservatory or interim measures that cannot await the constitution of the arbitral tribunal. The session presented the revisions made to the rules in this respect, as well as the wholly new Appendix which sets out the rules for emergency arbitrator proceedings (Article 29, and the Appendix).

The question and answer of this session was moderated by Ms.Kim Kit Ow, Director, ICC Arbitration and ADR, Asia. The presenters were asked all sorts of questions. There was an interesting discussion which ensued on the weight of "order” given by an emergency arbitrator as it is difficult to enforce under the New York Convention for not being an "award" but instead being an "order".

The fourth session which was presented by Ms. Francesa Mazza, Counsel, ICC International Court of Arbitration and Mr Andrew Foyle, ICC Court member, barrister, One Essex Court was on the new area of Multi-Party, Multi-Contract arbitration and consolidation.

The Court has seen a considerable increase in cases involving multiple parties or multiple contracts in the past decade, which reflects an increasing complexity of the transactions underlying the disputes giving rise to ICC arbitrations. The 2012 Rules of Arbitration contain for the first time a chapter devoted to arbitrations involving multiple parties or contracts and consolidation. This session presented those new provisions and related provisions concerning the fixing of the advances on costs in such situations (Articles 7, 8, 9, 10 and 36) and focused on how they will operate in practice.

The question and answer session was moderated by Mr.Yu-Jin Tay, Counsel, Sherman & Sterling. The questions asked by the audience touched various angles of such complex situations but were well answered by the presenters.

The concluding remarks were given by Mr. John Beechey and Mr.Peter Wolrich which was followed by cocktails.

I soon plan to come out with an analysis of the New ICC Arbitration Rules.

More on White Industries Arbitration: When did it start and who are the real players?

In a previous post, I shared a piece written by Mr. Prabhash Ranjan and me on the White Industries investment arbitration. However, there is much that is not really known in India about this arbitration. For instance, I was surprised when Bar & Bench reported that Additional Solicitor General Mr. Vivek Tankha represented India at the proceedings, as investment arbitration is a complex area of law which cannot be handled by a lawyer specializing in domestic laws, however eminent he may be (Palkhivala's arguing before the ICJ on substantive points is an exception, like Palkhivala himself is). Further, no one really seemed to know when the request for arbitration was filed and who the arbitrators were.

Last night, I had the opportunity to have a chat with Mr. Luke Eric Peterson, a legal journalist reporting on investment arbitration proceedings at IA Reporter. Surprisingly, he had many more details on this case than that have been reported in India. It was he who first reported the existence of the dispute on July 7, 2011. He was kind enough to agree that he would remove the "pay wall" on that article and make it freely accessible here. The article discusses the complete details of the panel, the legal teams, etc. Please note that the article mentions Singapore as the venue which was subsequently shifted to London.

Thanks Luke!

This raises a larger question. In India is there any obligation on the government to inform the public or their representatives in the Parliament when the country is involved in an international dispute? Will cover that in a later post.

Supreme Court of India on Joinder in Arbitration.

The Supreme Court (SC) of India has given an excellent example of its maturity to deal with complex arbitration matters. In the case of P.R Shah, Shares & Stock Broker (P) Ltd. (“Appellant”) V M/s. B.H.H Securities (P) Ltd. & Ors (“Respondent”) the SC has dealt with the issue of joinder in very straight forward terms. The SC held that a joinder is possible when facts and circumstances require so, more so when the claimant has arbitration agreements with both the other parties, the claims against them cannot be separated and when the party being joined is so inextricably linked to the other party in its function and management. The Judgement of the case is available here. It was decided by SC on 14 Octoer, 2011.

Relevant Facts:
The Appellant and the Respondent, both were members of the Bombay Stock Exchange (“Exchange”). The Respondent raised and referred a dispute against the Appellant and one another party (the Other Party) under the Rules, Bye-Laws and Regulations of the Exchange seeking an award. In the arbitration reference, the Respondent alleged that Appellant and the Other Party were sister concerns with a Common Director and that the Director of the Appellant approached the Respondent for a transaction on behalf of the Other Party. In respect of the transaction the Respondent issued and delivered the contract and bill in favour of the Other Party. When the amount was due towards the Other Party the Appellant issued a Credit Slip in favour of the Respondent. The said Credit Slip was rejected by the Exchange and so the Respondent approached the Appellant and the Other Party for a cheque for the said amount. The Appellant issued a cheque accordingly on behalf of the Other Party for a lesser amount though. Further, to settle the amount, the Director asked the Respondent to issue all the bills in the name of the Other Party. The Director accepted the Bills assuring payment and that both the Appellant and the Other Company were jointly and severally liable to pay the amounts due.

After several attempts by the Respondent when the money still remained due, the Executive Director of the Exchange permitted the Respondent to file arbitration claim against both the Appellant and the Other Party. Both the Appellant and the Other Party filed objections which had several common grounds with identical wordings. The Appellant denied that the transaction was done for the Other Party and contended that arbitration reference was bad in law on account of misjoinder of parties and misjoinder of causes of action. It was submitted by the Appellant that while it was a member of Exchange, the Other Party was not and hence different set of Arbitration Rules would govern each arbitration. The Dispute was heard by three member Arbitral Tribunal consisting of Justice D.B Deshpande, Mr.Hemant V. Shah and Mr. Sharad Dalal.

While the majority view of the tribunal was that both the Appellant and the Other Party (both were respondents in the arbitration proceedings) were liable for the amounts claimed, the minority view which was of Justice Deshpande who in spite of agreeing with the other two was of the opinion that the Tribunal as appointed by the Exchange had no jurisdiction to hear Respondent’s claim against the Appellant. The award was made as per the majority view that the Other Party shall pay the Respondent and in case of failure the Appellant shall do that. The Other Party neither contested the award nor paid the amount. The Appellant on the other hand filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) challenging the award.

Single Judge Bombay High Court (HC) Bench:
The application was dismissed by the HC. The HC upon a contention placed by the Appellant held that if in a dispute between a member and non-member an identical or connected claim against another claim cannot be referred for a common arbitration and the Claimant is compelled to resort to two proceedings before different fora, then there is a possibility of multiplicity of findings at variance with each other.

Intra Court Appeal by Division Bench:

The Division Bench too dismissed the appeal filed by the Appellant.

Appeal by Special Leave to SC:
Three contentions were raised:
I. A single arbitration is not possible against both the parties because while one is a member of the Exchange, the other is not and both have different bylaws governing the arbitration.
II. The Arbitral Tribunal should have held that there was no contract between the Respondent and the Appelant.
III. The tribunal has passed the award by using their personal knowledge and not on the basis of record placed before them.
On the first contention, the SC held that it should be noticed that the arbitration was an institutional arbitration under the Exchange and not an adhoc arbitration. “As the Exchange has permitted a single arbitration against both, there could be no impediment for single arbitration.” Giving an example court held:
“If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration.”
On second contention, the SC stated that it cannot sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence.
On the last contention, the court held that:
“An arbitral tribunal cannot of course make use of their personal knowledge of the facts of the dispute, which is not a part of the record, to decide the dispute. But an arbitral tribunal can certainly use their expert or technical knowledge or the general knowledge about the particular trade, in deciding a matter. In fact, that is why in many arbitrations, persons with technical knowledge, are appointed as they will be well-versed with the practices and customs in the respective fields. All that the arbitrators have referred is the market practice. That cannot be considered as using some personal knowledge of facts of a transaction, to decide a dispute.”
Thus, the SC dismissed the appeal.

Comments:

This judgment is a welcome decision by the SC given with a very simple and crisp rational. This case also shows the benefit of an institutional arbitration which can be useful to overcome issues which might be problematic in adhoc arbitrations.
With regard to complex issues regarding multi-party arbitration and multi-contract arbitration involving issues of joinder, the New ICC Rules of Arbitration which come into effect from January 2012 are worth having a look at. I shall soon be posting about the New ICC Arbitration Rules, the Asia launch of which I had a chance to attend in Singapore.

On the White Industries investment arbitration

Today's Financial Express has a piece co-authored by Mr. Prabhash Ranjan and me on the ongoing investment arbitration between India and the Australian investor White Industries. The piece, titled 'BIT of a problem down under' can be accessed here.

Vindobona Junction - 45 pages and 6 months

-By Smaran Shetty-

The problem for the 19th Willem C Vis International Commercial Arbitration Moot Court Competition has finally released and may be accessed here. Although drastically shorter than the previous years problem, at 45 pages, the newest problem, promises to give participants a good deal of issues to grapple with. Although most people think there is nothing much to be said regarding how the problem is to be read, I disagree. With a little guidance, and the right approach, participants will be guaranteed to have a clearer understanding of the facts and issues involved in a much lesser period of time. 

Considering the length of the problem, it is advisable to approach the problem with a little caution. In fact, due to its length (unlike most other moot problems) Judges in Vienna often refer to the problem as the “Case File” or “Record”, instead of the generic “Problem”. 

The most valuable advice I received regarding reading the problem, was to ensure that in the first  reading, you ensure that you read the entire problem,  from start to the end. In fact I was advised that irrespective of your role in the team (arbitration or merits), the first few readings of the problem should be of the whole problem to get an holistic idea of the problem. I could not agree more, the first couple of readings should be of the entire problem, and participants should not stop to research certain points while reading. Make a note of the words you don’t understand, or acronyms that you are unsure about to look up later, but make sure that the first couple of readings are uninterrupted and focussed. In reading the problem in this manner, repeatedly, a participant is sure to understand the whole narrative, which will prove instrumental in the oral rounds. Another piece of advice which I found rather helpful was to ensure that you read the problem, multiple times in the first few days. This helps to ensure that the small details of the problem, like names and dates and other significant details of fact and law are cemented in the minds of the participants. 

After you have read the entire problem multiple times, then you can get to work on research and analysis. But before you do so, make sure you do a few things. First, make sure that you make a profile of both parties involved in the dispute. This involves writing the down the names of the Claimant and Respondent, where they operate, what they do, who controls them, who their legal counsel are, what are they names of their employees etc ... Although these details seem peripheral, inevitably it’s the small details and obscure pieces of information that help in making innovative arguments. 

It also proves immensely helpful to write out a time line of all the mentioned dates, from the first meeting of the parties to the filing of the request for arbitration. This process helps condensing an expansive problem into a matter of two pages. Also, a time line helps teams pin point when exactly things went wrong, or who was responsible, and how much time elapsed between important dates. 

I hope with this seemingly irrelevant information, teams enjoy the process of working on the moot which will extend well into the next 6 month, and I wish all concerned the best of luck. 

All that left to say, is happy reading.

PS: The length of the problem is sure to increase by a minimum of 10 pages, once Procedural Order Number 3 is released. 

Vindobona Junction is back; It's coffee with Smaran this time

This post is to introduce Smaran Shetty to our readers, who will be regularly contributing Guest Posts on Vindobona Junction for the duration of the 2012 Vis Moot (and, we hope, beyond that). Smaran is an undergraduate student, currently in the 3rd year at the National University of Juridical Sciences, Kolkata. He participated in the 18th edition of the Vis Moot in Vienna, last year and reached the octa-finals. Without more introduction, here is his introductory post. 

The Willem C VisInternational Commercial Arbitration Moot Court Competition, is perhaps one of the biggest mooting events in the world, and brings law students from diverse legal traditions together to argue over, whether their client was right in what they did. The moot, now in its 19th year has been growing from strength to strength, and I am led to believe that it is one of the few moots (if not the only one), recognized by the United Nations. Although the teams and stature of the moot have only increased, there is a stark silence when it comes to open forum’s where participants, arbitrators and coaches can give out advice and discuss the moot, in an open manner that befits the globalized Vis Community. I think that’s why Lexarbitri's efforts in starting this section of the blog, goes a long way in making the learning process for the moot more democratic and open.

Through the course of 8 odd months running up to the moot, I hope to blog about various aspects of the moot, that participants may often overlook, and attempt to simplify, those issues that are often complicated by teams. I however do not intended to delve into substantive issues into the problem, as I believe that no team, however strong or weak, requires spoon feeding. Instead I hope that this space allows me to best communicate the mountain of knowledge that I gained last year in doing the moot, and hope that in the process participants are eased into a process that they are sure to remember for their lifetime.

I hope to be very regular with my blogging, and intend to give out some advice before the problem actually comes out. I look forward to an active debate on the blog, and I am sure with the collective expertise of the past bloggers, this space can indeed become an indispensable aspect of preparation.

At this junction I would like to offer a caveat. The views contained in this blog, are my personal view points about how to moot and moot practices in general. I do not profess to be an expert at moot, or that my word is the final word. Instead, what I have to say, is just one perspective, in a sea of conflicting and complementary perspectives.

Happy Mooting Everybody !!!!