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Law360 (December 21, 2020, 11:50 AM EST )
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| Patrick Pearsall |
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| Karthik Reddy |
Despite the significant challenges that the year has brought, the tribunals, institutions and advocates that comprise the international arbitration system have responded with remarkable resilience and adaptability, pressing ahead with virtual negotiations, arguments and evidentiary hearings to ensure the continued availability of efficient arbitral process, even as access to national courts was severely restricted.
The flexibility and dedication of all participants in the system have meant that office closures and intermittent lockdowns notwithstanding, the year has brought several important developments to the international arbitration space.
U.S. Courts Broaden Nonparty Practice and Grapple With Discovery
Starting in the U.S., fresh off its decision in Henry Schein Inc. v. Archer & White Sales Inc.,[1] the U.S. Supreme Court issued yet another significant, unanimous arbitration decision, this time broadening nonparty commercial arbitration under the New York Convention.
In GE Energy Power Conversion France SAS Corp. v. Outokumpu Stainless USA LLC,[2] the court ruled that the New York Convention does not prohibit the application of domestic equitable estoppel principles that allow nonparties to compel arbitration. The decision further opens the door for nonparty practice in U.S.-seated arbitrations, though the court declined to address the contours of equitable estoppel, leaving for lower courts the questions of when and how nonparties may compel arbitration, or themselves be compelled to arbitrate.
Meanwhile, discovery fights intensified across the U.S. as parties continued to litigate the meaning and reach of Title 28 of the U.S. Code, Section 1782. The statutory provision permits interested parties to petition U.S. courts to obtain discovery "for use in a proceeding in a foreign or international tribunal."[3]
This year, commentators noted a marked rise in Section 1782 discovery applications, potentially due to the In re: Del Valle Ruiz decision in the U.S. Court of Appeals for the Second Circuit.[4]
In an opinion that observers have described as expanding the provision's reach, the Del Valle Ruiz panel held that Section 1782 permits U.S. district courts to order discovery of documents and other evidence that are maintained outside of the U.S., as long as the district court has specific or general jurisdiction over the disclosing party.
At the same time, the U.S. appellate courts' split over whether Section 1782 applies to international commercial arbitrations continued to deepen. In March, the U.S. Court of Appeals for the Fourth Circuit joined the U.S. Court of Appeals for the Sixth Circuit in holding that private arbitration panels are "foreign or international tribunal[s]" for purposes of Section 1782.[5]
Three months later, a Second Circuit panel rejected that approach and held that Section 1782 discovery is not available in commercial arbitrations. The U.S. Court of Appeals for the Seventh Circuit followed in September, holding that Section 1782 "does not authorize the district court to compel discovery for use in a private foreign arbitration."[6] The U.S. Courts of Appeals for the Ninth and Third Circuits are considering the matter in pending cases, and given Del Valle Ruiz's impact, other courts are likely to do the same unless the U.S. Supreme Court accepts a pending invitation to weigh in sooner.
Achmea Continues to Reverberate in European Disputes
In fora in Europe and abroad, litigants continued to fight over the implications of the European Court of Justice's 2018 ruling in Slovak Republic v. Achmea BV,[7] where the court invalidated an arbitration clause in the Dutch-Slovak Bilateral Investment Treaty as inconsistent with EU law.
In May, the U.S. Court of Appeals for the D.C. Circuit dealt a blow to the European Commission's efforts to deploy Achmea retroactively.
In the case, Micula v. Republic of Romania,[8] the court ruled in favor of Swedish investors and affirmed the enforcement of a $356 million award against Romania under the Sweden-Romania Bilateral Investment Treaty. The ruling could bear on a number of enforcement actions pending in federal courts in the District of Columbia.
Meanwhile, the European Commission's effort to invalidate intra-EU bilateral investment treaties made progress on the other side of the Atlantic. In May, 23 EU member states signed an agreement to terminate their intra-EU bilateral investment treaties. Though the agreement left untouched the multilateral Energy Charter Treaty, several EU states have pressed the European Court of Justice for a ruling as to whether the Achmea decision has implications for the treaty.[9]
This effort followed a separate request by the Supreme Court of Sweden, which in February asked the European Court of Justice whether Achmea requires the court to set aside two awards against Poland made under Poland's investment treaty with the Belgium-Luxembourg Economic Union, even though Poland failed to timely object to jurisdiction.[10]
Arbitration on the Rise Globally
The popularity of arbitration as a dispute resolution mechanism has continued to rise throughout the world. This year, African parties increasingly resorted to commercial and investor-state arbitration, now comprising more than 10% of arbitrations administered by the London Court of International Arbitration, and more than 15% of disputes involving the International Centre for Settlement of Investment Disputes.[11]
Moreover, an increasing number of disputes are being brought before arbitral centers on the continent, with growing caseloads at the Cairo Regional Centre for International Commercial Arbitration, the Kigali International Arbitration Center, the Lagos Court of Arbitration and the Nairobi Centre for International Arbitration.[12]
Robust growth continued in Asia, as well, with predictions of a post-pandemic boom in arbitration in Singapore, where the government proposed new, streamlined arbitration legislation in September.
Capitalizing on its increasing popularity as an institution, the Singapore International Arbitration Centre recently announced the opening of its first office outside of Asia, in New York City, and signed a memorandum of understanding with the Hainan International Arbitration Court to promote international arbitration in China.[13]
In Latin America, where watchers also anticipate a "substantial increase in disputes in the region" in the wake of the COVID-19 pandemic, in July, the Latin American Arbitration Association created a new standing arbitration "observatory."[14]
Under the leadership of Guido Tawil and Eduardo Zuleta Jaramillo, the observatory will monitor arbitration-related developments across Latin America, with the goal of working with state authorities, arbitral institutions, chambers of commerce, and other stakeholders to monitor and help resolve issues affecting and pertaining to arbitration in the region.[15]
Arbitrator Impartiality and Institutional Transparency
The year also featured two high-profile developments in the field of arbitrator impartiality.
In June, Washington-based ICSID made headlines when it annulled a $144 million arbitral award against Spain, made after a tribunal concluded that Spain improperly curtailed several renewables subsidies.
The ad hoc ICSID committee that annulled the award concluded that an arbitrator who sat on the arbitral panel had improperly failed to disclose business relationships that he had with the claimants' expert witnesses. The much-debated decision, Eiser Infrastructure Ltd. and Energía Solar Luxembourg SARL v. Kingdom of Spain, marked the first time that ICSID annulled an award on grounds related to a tribunal's constitution.[16]
In another disclosure case, the U.K. Supreme Court weighed in on arbitrator impartiality in Halliburton Co. v. Chubb Bermuda Insurance Ltd.[17] The impartiality issue in Halliburton arose during a coverage dispute concerning the Deepwater Horizon explosion, when Chubb's arbitrator failed to disclose his involvement in other cases concerning the disaster.
Applying the Arbitration Act, the court explained that arbitrator disclosure is typically required where circumstances might reasonably lead an objective observer to have justifiable doubts as to the arbitrator's impartiality.[18]
The case was closely watched by arbitral institutions and practitioners seeking further clarity on standards for arbitrator disclosure and disqualification, particularly after the U.S. Supreme Court decided in June not to grant certiorari in another high-profile arbitrator-bias case, Monster Energy Co. v. City Beverages LLC,[19] in which the Ninth Circuit vacated a commercial award for insufficient disclosure.
The year saw further development of an emerging trend toward transparency in the field of commercial arbitration. In November, the International Bar Association and Jus Mundi launched a partnership to collect, organize and publish nonconfidential commercial arbitration awards, with the goal of enhancing access to legal information and shaping the development of international arbitration.
The partnership announcement followed the International Chamber of Commerce's decision in 2019 to publish certain summary information about arbitrations, including the industry sector and identities of counsel, as well as arbitral awards subject to objection by any of the parties.[20]
While confidentiality must and will remain a crucial aspect of international commercial arbitration, the developments can be expected to enhance the uniformity and predictability of arbitral decisions within the limits of party autonomy.
Patrick W. Pearsall is a partner and Karthik P. Reddy is an associate at Allen & Overy LLP.
Disclosure: Allen & Overy represented the claimants in Eiser Infrastructure Ltd. and Energía Solar Luxembourg SARL v. Kingdom of Spain, ICSID Case No. ARB/13/36, referenced above.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] 139 S. Ct. 524 (2019).
[2] 140 S. Ct. 1637 (2020).
[3] 28 U.S.C. § 1782(a).
[4] 939 F.3d 520 (2d Cir. 2019).
[5] Servotronics, Inc. v. Boeing Company
, 954 F.3d 209, 216 (4th Cir. 2020); In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 723 (6th Cir. 2019).[6] Servotronics, Inc. v. Rolls-Royce PLC
, 975 F.3d 689, 690 (7th Cir. 2020), petition for cert. filed (U.S. Dec. 7, 2020) (No. 20-794).[7] Case No. C-284/16, 2018 E.C.R. 158.
[8] No. 19-7127 (D.C. Cir. May 19, 2020).
[9] See, e.g., Sebastian Perry, Belgium Seeks ECJ Opinion on Revamped ECT, Global Arbitration Rev., Dec. 3, 2020, https://globalarbitrationreview.com/achmea/belgium-seeks-ecj-opinion-revamped-ect.
[10] Tom Jones, Swedish Court Consults ECJ Over Poland Award, Global Arbitration Rev., Feb. 26, 2020, https://globalarbitrationreview.com/achmea/swedish-court-consults-ecj-over-poland-award.
[11] Robert Wheal et al., White & Case LLP, Institutional Arbitration in Africa: Opportunities & Challenges, Sept. 17, 2020, https://www.whitecase.com/publications/insight/africa-focus-autumn-2020/institutional-arbitration-opportunities-challenges.
[12] Id.
[13] Jack Ballantyne, SIAC Launches in New York, Global Arbitration Rev., Dec. 2, 2020, https://globalarbitrationreview.com/siac-launches-in-new-york; Press Release, Singapore International Arbitration Centre, SIAC Signs Memorandum of Understanding with the Hainan International Arbitration Court, Nov. 30, 2020, https://www.siac.org.sg/69-siac-news/681-siac-signs-memorandum-of-understanding-with-the-hainan-international-arbitration-court.
[14] Press Release, Instituto Ecuatoriano de Arbitraje, Creación del Obesrvatorio Permanente sobre el estado del arbitraje en América Latina, July 7, 2020, https://iea.ec/noticias/creacion-del-observatorio-permanente-sobre-el-estado-del-arbitraje-en-america-latina/; Thomson Reuters, Practical Law Arbitration, Latin American Arbitration Association Launches Permanent observatory Body to Monitor Arbitration in Latin America, July 14, 2020.
[15] Press Release, Instituto Ecuatoriano de Arbitraje, Creación del Obesrvatorio Permanente sobre el estado del arbitraje en América Latina, July 7, 2020, https://iea.ec/noticias/creacion-del-observatorio-permanente-sobre-el-estado-del-arbitraje-en-america-latina/; Thomson Reuters, Practical Law Arbitration, Latin American Arbitration Association Launches Permanent observatory Body to Monitor Arbitration in Latin America, July 14, 2020.
[16] The law firm of Allen & Overy LLP represented parties in the arbitration.
[17] [2020] UKSC 48.
[18] See Ashurst, Arbitrator Appointments & Apparent Bias: The Supreme Court Decision in Halliburton v Chubb, Nov. 27, 2020, https://www.ashurst.com/en/news-and-insights/legal-updates/arbitrator-appointments-and-apparent-bias---the-supreme-court-decision-in-halliburton-v-chubb/.
[19] 940 F.3d 1130 (9th Cir. 2019).
[20] Int'l Chamber of Commerce, Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration Under the ICC Rules ¶¶ 36, 42, 43, 44 (Jan. 1, 2019).
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