Court Intervention in International Arbitration

State Court Intervention in International Arbitration: The United States Perspective*
Carolyn B. Lamm & Eckhard R. Hellbeck**
VARIOUS INSTANCES EXIST IN WHICH PARTIES may resort to State court intervention prior to and during the course of an international arbitration. As a general matter, the extent of State court intervention is defined by the laws of the forum, which include any international treaties to which the State is a party, such as the New york Convention1 and the ICSID Convention.2 Under the New york Convention, the forum in which, or under the laws of which, the award was made has supervisory authority over the arbitration.3 In addition, 72 jurisdictions4 have adopted arbitration statutes based upon the UNCITRAL Model Law, Article 5 of which prohibits the intervention of State courts except where so provided in the Law.5
* This article is based upon a presentation given at the 27th AAA/ICC/ICSID Joint Colloquium on International Arbitration, held in Paris on November 17, 2010. ** White & Case LLP, Washington, D.C. 1 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (June 10, 1958), 330 U.N.T.S. 38 [New york Convention]. 2 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Mar. 18, 1965), 575 U.N.T.S. 159 [ICSID Convention]. 3 New york Convention, supra note 1, arts. V(1)(e), VI. 4 See UNCITRAL, Status: 1985 UNCITRAL Model Law on International Commercial Arbitration, available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_ status.html (providing a list of jurisdictions with legislation based on the UNCITRAL Model Law). 5 UNCITRAL Model Law on International Commercial Arbitration, art. 5 (as amended 2006), available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html.
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STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION
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In the United States, the Federal Arbitration Act (FAA)6 governs State court intervention in international arbitration. The FAA allows U.S. courts to intervene in limited circumstances, including to compel arbitration,7 to appoint arbitrators,8 and to compel witnesses to attend an arbitration hearing, or to sanction a witness for failing to appear.9 Additionally, the role of State courts may be defined further in the parties arbitration agreement, including any set of arbitration rules incorporated by reference. Except with respect to interim measures, neither the AAA/ICDR International Arbitration Rules10 nor the ICC Rules of Arbitration11 expressly address State court intervention prior to the issuance of the arbitral award. For ICSID arbitration, the situation is different: the ICSID Convention, which 146 States have ratified, accepted, or approved,12 constitutes a lex specialis to the general laws of the forum. In its Article 26, the ICSID Convention provides that [c]onsent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. In the words of Professor Schreuer, this provision of Article 26 has the following two main features: Exclusivity of ICSID arbitration as a remedy; and [N]on-interference with the ICSID arbitration process once it has been instituted.13 While State court intervention prior to issuance of the award is thus possible, yet limited, in AAA/ICDR or ICC arbitration, it is generally excluded in ICSID arbitration. For this reason, ICSID arbitration is often characterized as a-national, devoid of any connection with the State courts until execution of a final award. This article addresses recent developments in the area of State court interventionpredominantly in the United States contextfrom the perspectives of AAA/ICDR, ICC and ICSID arbitration, in the following instances:
9 U.S.C. 116, 201208, 301307 (1994). The FAA is not based upon the UNCITRAL Model Law, although it incorporates some of its elements. 7 9 U.S.C. 4. 8 9 U.S.C. 5. 9 9 U.S.C. 7. 10 AAA/ICDR International Arbitration Rules, available at http://www.adr.org/sp.asp?id=33994. 11 ICC Rules of Arbitration, available at http://www.iccwbo.org/uploadedFiles/Court/Arbitration/ other/rules_arb_english.pdf. 12 See ICSID, Member States, http://icsid.worldbank.org/ICSID/FrontServlet?requestType=Case sRH&actionVal=ShowHome&pageName=MemberStates_Home (listing 157 signatory States and 146 States that have deposited their instruments of ratification). 13 Christoph Schreuer et al., The ICSID Convention: A Commentary 351 (2d ed. 2009).
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ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
Compelling arbitration (I); Obtaining an anti-suit injunction in aid of arbitration (II); Enjoining the opposite party from proceeding with arbitration (III); Challenging an arbitrator (IV); Enforcing tribunal-ordered provisional or interim measures (V); and Obtaining court-ordered discovery in the United States in aid of arbitration (VI). I. COMPELLING ARBITRATION
Under the New york Convention, The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.14 Under the FAA, A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.15 In the United States, a federal or state court faced with a motion to compel arbitration will thus resolve any doubts concerning the scope of an arbitration agreement in favor of arbitration.16 U.S. federal courts have held that the proarbitration policy bias of [the FAA] is particularly strong in the context of international transactions.17 As a U.S. federal Court recently explained,
14 New york Convention, supra note 1, art. II(3) (emphasis added); see generally Carolyn B. Lamm & Jeremy K. Sharpe, Inoperative Arbitration Agreements under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention 1958 in Practice 297 (Emmanuel Gaillard & Domenico di Pietro eds. 2008) (providing further background). 15 9 U.S.C. 4 (emphasis added). 16 Moses H. Cone Meml Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 2425 (1983). 17 Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995); Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1063 (2d Cir. 1993).
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if one party to a contract containing an arbitration clause attempts to avoid arbitration and files suit in the district court, the other party may move to stay or dismiss the action on the ground that the FAA requires the arbitration clause to be enforced. 9 U.S.C. 3. If the Court identifies an arbitrable issue, it must issue a stay or dismiss under 3.18 A. AAA/ICDR and ICC Arbitration In a recent decision, the U.S. District Court for the Southern District of New york articulated the standard as follows: In deciding whether to issue an order compelling arbitration, the role of the Court is limited to determining: (i) whether a valid agreement or obligation to arbitrate exists, and (ii) whether one party to the agreement has failed, neglected, or refused to arbitrate.19 In that case, the parties had agreed to AAA arbitration in New york, and both parties had in fact made initial appearances and submissions to the ICDR.20 Rather than submitting statements of defense, however, the Respondents obtained ex parte injunctions from a court in Bombay, India, enjoining the Claimant from proceeding with the arbitration.21 The Southern District held that obtaining the injunctions constituted a refusal by the Respondents to arbitrate, despite the fact that they had made an appearance in the arbitration; accordingly, the Court issued an order compelling arbitration.22 Another recent case involved the unusual scenario where a party to an ICC arbitration agreement first successfully brought suit in a U.S. federal Court to compel arbitration but shortly thereafter returned to the Court seeking to have the arbitration clause declared void. The party argued that the arbitration agreement was substantively unconscionable because the ICCs assessment of the advance on the arbitration costs, in the amount of US$ 220,000, was confiscatory and punitive and imposed an unreasonable financial burden.23 The U.S. Court of Appeals for the Ninth Circuit found that the moving party itself had originally proposed the ICC arbitration clause for the parties contract; that it had a copy of the ICC Rules of Arbitration
Slinger Manufacturing Co., Inc. v. Nemak, S.A., No. 08-C-656, 2008 WL 4425889, at *3 (E.D. Wis. Sept. 24, 2008) (citing Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987)). 19 Amaprop Ltd. v. Indiabulls Fin. Serv. Ltd., No. 10 Civ. 1853 (PGG), 2010 WL 1050988, at *3 (S.D.N.y. Mar. 23, 2010) (quoting Jacobs v. USA Track & Field, 374 F.3d 85, 88 (2nd Cir. 2004)). 20 Id. at *12. The Claimant was a Cayman Islands corporation, whereas the Respondents were incorporated in India. 21 Id. at *2. 22 Id. at *34, 10. 23 Kam-Ko Bio-Pharm Trading Co. Ltd.-Australasia v. Mayne Pharma (USA), Inc., 560 F.3d 935, 937 38 (9th Cir. 2009).
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in its possession when it sought to compel arbitration, and that the ICC had accurately calculated the US$ 220,000 advance on the basis of the costs tables included in the ICC Rules of Arbitration and the sum alleged to be in dispute (US$ 2,527,000 or more).24 On this basis, the Court concluded that the moving party had failed to meet its burden of proving unconscionability, and it affirmed the lower courts dismissal of the declaratory relief sought and its directive to proceed with the ICC arbitration.25 Besides highlighting the U.S. courts pro-arbitration policy, this case underlines the importance of obtaining thorough legal advice from an arbitration practitioner when drafting dispute resolution clauses for international contracts, including information on the potential costs of the procedures contemplated in such clauses. B. ICSID Arbitration As Professor Schreuer explains, ICSID arbitral proceedings are intended to be self-contained26: The [ICSID] Convention provides for an elaborate process designed to make arbitration independent of domestic courts. Even in the face of an uncooperative party, ICSID arbitration is designed to proceed independently without the support of domestic courts. This is evidenced by the provisions on the constitution of the tribunal (Arts. 3740), on proceedings in the absence of a party (Art. 45(2)), on autonomous arbitration rules (Art. 44), on applicable law (Art. 42(1)), and on provisional measures (Art. 47). It is only in the context of enforcement that domestic courts may enter the picture (Arts. 5455).27 Thus, for example, where a party to an ICSID arbitration fails to cooperate in the constitution of the arbitral tribunal, the ICSID Convention allows the Chairman of the ICSID Administrative Counsel to make the necessary arbitrator appointments.28 If a party fails to participate in the arbitral proceeding, the tribunal may nonetheless go forward and render an award on the basis of the
Id. at 941. Id. at 944. 26 Schreuer et al., supra note 13, at 351. 27 Id. at 35152. 28 ICSID Convention, supra note 2, art. 38 (If the Tribunal shall not have been constituted within 90 days after notice of registration of the request has been dispatched by the Secretary-General . . . , the Chairman shall, at the request of either party and after consulting both parties as far as possible, appoint the arbitrator or arbitrators not yet appointed.); ICSID Arbitration Rule 4.
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record before it.29 Accordingly, there is no need for the other party to seek the assistance of a State court in order to move the arbitration forward. As a corollary to the exclusivity of ICSID jurisdiction, the ICSID Convention thus removes the need for host States to subject themselves to the jurisdiction of courts in other States, as well as avoids any complications resulting from foreign sovereign immunity issues, in the pre-award phase.30 Georges Delaume has summarized the resulting obligations of a national court as follows: Within the scope of the [ICSID] Convention, domestic courts must abstain from taking any action that might interfere with the autonomous and exclusive character of ICSID arbitration. If a court in a Contracting State becomes aware of the fact that a claim before it may call for adjudication under ICSID, the court should refer the parties to ICSID to seek a ruling on the subject. Until such a ruling is made, if the possibility exists that the claim may fall within the jurisdiction of ICSID, the court must stay the proceedings pending proper determination of the issue by ICSID. Only in the event of an adverse decision by ICSID, which, for example, may result from the Secretary-Generals refusal to register a request for arbitration or from a decision of an ICSID arbitral tribunal that the issue involved does not fall within its competence, may the court in question resume hearing the case, assuming, of course, that it has an independent basis for entertaining jurisdiction over the parties and the subject matter of the dispute.31 As Delaume further explained, the rule of abstention means that no domestic court in any Contracting State can compel an ICSID arbitration, as such power would directly interfere with the prerogatives of the SecretaryGeneral of ICSID [i.e. the Secretary-Generals screening power under Article 36(3) of the ICSID Convention] and of ICSID arbitral tribunals to determine their own jurisdiction under Article 41(1) of the ICSID Convention.32 In practice, the issue of whether a State court can compel ICSID arbitration has apparently never arisen. More than 30 years ago, in MINE v. Guinea, when a dispute arose between the Liechtenstein company Maritime
ICSID Convention, supra note 2, art. 45(2) (If a party fails to appear or to present his case at any stage of the proceedings the other party may request the Tribunal to deal with the questions submitted to it and to render an award.); ICSID Arbitration Rule 42. 30 Schreuer et al., supra note 13, at 352. 31 Georges Delaume, ICSID Arbitration in Practice, 2 Intl Tax & Bus. Lawyer 58, 68 (1984). 32 Id. at 6869.
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International Nominees Establishment (MINE) and the Republic of Guinea, MINE petitioned the U.S. District Court for the District of Columbia for an order compelling Guinea to arbitrate the dispute in AAA arbitration rather than ICSID arbitration.33 The parties original arbitration agreement provided for disputes to be resolved by binding arbitration conducted by three arbitrators selected by the President of the International Centre for Settlement of Investment Disputes.34 Although the parties supplemented that agreement by a further agreement purporting to consent jointly to submit their dispute to ICSID arbitration,35 for reasons that remained undisclosed, MINE did not pursue ICSID arbitration but chose to seek AAA arbitration solely on the basis of the FAA.36 Specifically, MINE neither filed a request for arbitration with ICSID at the time (although it did do so several years later), nor did it petition the Court for an order compelling ICSID arbitration.37 The Court found that compelling AAA arbitration under the FAA was the only mechanism available to the Court in view of its inability to order the President of ICSID to appoint arbitrators.38 Although it is debatable whether the parties arbitration agreement could be construed as a consent to AAA arbitration under the FAA, the Court apparently recognized the rule of abstention imposed upon it by the ICSID Convention. Subsequently, when Guinea appealed the District Courts decision to enforce the ensuing AAA award, the U.S. Department of State intervened, urging the Court of Appeals to find that agreements to arbitrate with ICSID do not contemplate the involvement of domestic courts, at least not before a final ICSID decision is to be enforced.39 The Court of Appeals ultimately
See Maritime Intl Nominees Establishment v. Republic of Guinea, 693 F.2d 1094, 109697 (D.C. Cir. 1983) (summarizing the U.S. court proceedings commenced by MINE in 1978). 34 Id. at 1096. 35 Id. 36 Commentators have reached differing conclusions as to MINEs tactical reasoning. See, e.g., Schreuer et al., supra note 13, at 353 (explaining that MINE claimed in the U.S. Court that Guineas failure to cooperate undermined its ability to establish ICSID jurisdiction); but see Delaume, supra note 31, at 64 (explaining that the parties had agreed, for purposes of ICSID jurisdiction, to treat MINE, which was a Liechtenstein company, as a Swiss company given that Liechtenstein is not a party to the ICSID Convention, but that MINE later took the view in the U.S. Court proceedings that this agreement on MINEs nationality was ineffective); Bette Shifman, Maritime International Nominees Establishment v. Republic of Guinea: Effect on U.S. Jurisdiction of an Agreement by a Foreign Sovereign to Arbitrate before the International Centre for Settlement of Investment Disputes, 16 Geo. Wash. J. Intl L. & Econ. 451, 455 (1982) (quoting from MINEs petition to the U.S. Court that MINE had consulted with the ICSID Secretariat, and that in the ICSID Secretariats view the joint consent suffered from certain technical defects precluding ICSID arbitration). 37 Maritime Intl, 693 F.2d at 1096. 38 Maritime Intl Nominees Establishment v. Republic of Guinea, 505 F. Supp. 141 n.2 (D.D.C. 1981). 39 See Maritime Intl, 693 F.2d at 1103 (citing Brief for the United States as Intervenor and Suggestion of Interest at 54).
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overturned the District Courts decision to confirm the AAA award, albeit on other grounds.40 II. OBTAINING AN ANTI-SUIT INJUNCTION IN AID OF ARBITRATION Anti-suit injunctions in aid of international arbitration are plainly intended to protect an arbitral tribunals jurisdiction to adjudicate, and thereby enforce the parties arbitration agreement. The New york Convention does not assign a primary role to the court of any particular Contracting State (such as, for example, the court at the seat of the arbitration) to supervise the courts of other Contracting States in implementing the obligations to recognize arbitration agreements and to refer the parties to arbitration. Rather, the New york Convention places the burden on the parties to seek a reference in the forum in which litigation has been brought.41 Accordingly, under Article II of the New york Convention, it is not the role of a court in one Contracting State to enjoin a party from pursuing litigation in a court of another Contracting State. When invoking pro-arbitration policy, U.S. courts should keep this in mind, not only as a matter of policy, but even more importantly because the New york Convention has been implemented in the United States as federal law.42 As a threshold requirement, U.S. courts require the parties and the disputed issues to be identical for an anti-suit injunction to be issued. In considering whether to issue an anti-suit injunction, U.S. courts generally balance the following policy interests: (1) the interest in enforcing arbitration agreements; (2) the prevention of vexatious or oppressive litigation; and (3) principles of international comity. Anti-suit injunctions, however, are very difficult to enforce: their extraterritorial effect directly interferes with the exercise of jurisdiction by foreign courts, which may even include the court with supervisory jurisdiction over the arbitration. This is necessarily an affront to the sovereignty of other States and undermines international comity. Indeed, injunctions directed against foreign litigation are but a unilateral attempt to resolve the perceived problem of conflicting jurisdictions, and thus may not achieve their intended effect. Even if they include the imposition of sanctions against a non-complying
Id. at 1112 (reversing the District Courts conclusion that it had subject matter jurisdiction to confirm the AAA award on foreign sovereign immunity grounds, specifically that the record cannot sustain a finding that Guinea had lost its sovereign immunity by virtue of waiver or of commercial activity). 41 Id. 42 9 U.S.C. 201 et seq.
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party, they may be ineffective because foreign courts are not bound to respect them.43 They are enforceable in the issuing court to the extent that assets of the offending party are within its jurisdiction. They are effective extraterritorially only if the court issuing the injunction has both subject matter and in personam jurisdiction, and, ultimately, if the enforcing court in its discretionas a matter of international comitydecides to respect them. Although the European Court of Justices West Tankers decision requires courts of European Union Member States to accord trust to one anothers legal systems and judicial institutions and, accordingly, to refrain from issuing antisuit injunctions against each other in aid of arbitration,44 this mutual trust requirement does not apply to anti-suit injunctions restraining parties from conducting court proceedings outside the European Union. Neither are U.S. courts bound by such a requirement. The availability of anti-suit injunctions from a U.S. court, however, is not without limitations. It is certainly limited by the scope of the courts personal and subject matter jurisdiction, as well as considerations of international comity and the degree to which the U.S. forum has an interest in the parties dispute. Thus, in a recent case, the U.S. District Court for the Southern District of New york held: The power of federal courts to enjoin foreign litigation in favor of arbitration is . . . well-established. Principles of comity counsel, [however], that injunctions restraining foreign litigation be used sparingly and granted only with care and great restraint.45 A. AAA/ICDR and ICC Arbitration In deciding whether to issue anti-suit injunctions to protect an arbitral tribunals jurisdiction, U.S. courts have adopted and modified the requirements and criteria developed for anti-suit injunctions intended to protect their own
43 See generally Carolyn Lamm, Eckhard Hellbeck & Joseph Brubaker, Anti-Suit Injunctions in Aid of International Arbitration: The American Approach, 12 Intl Arb. L. Rev. 115 (2009). 44 See Allianz SpA, Generali Assicurazioni Generali SpA v. West Tankers, Inc., ECJ Case C-185/07, Judgment (Grand Chamber) (Feb. 10, 2009) (holding anti-suit injunctions to be incompatible with the essential mutual trust required under Council Regulation 44/2001 of Dec. 22, 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, 2001 O.J. (L 12) 1 (Brussels I Regulation)). 45 Amaprop Ltd. v. Indiabulls Financial Services Ltd., No. 10 Civ. 1853 (PGG), 2010 WL 1050988, at *4 (S.D.N.y. Mar. 23, 2010) (citing Suchodolski Assoc. v. Cardell Fin. Corp., No. 03 Civ. 4148 (WHP), 2006 WL 332765 (S.D.N.y. Nov. 16, 2006) (courts have enjoined foreign litigation in favor of parallel arbitration) (citing Smith/Enron Cogeneration Ltd. Pship, Inc. v. Smith Cogeneration Intl, 198 F.3d 88, 99 (2nd Cir. 1999); Smoothline Ltd. v. N. Am. Foreign Trading Corp., No. 00 Civ. 2798 (DLC), 2002 WL 273301, at *6 (S.D.N.y. Feb. 27, 2002))) and quoting Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Techs., Inc., 369 F.3d 645, 653 (2nd Cir. 2004)).
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jurisdictions. As a threshold requirement, the parties and the disputed issues must be the same in the arbitration and the litigation sought to be enjoined from proceeding. Thus, for example, in Ibeto Petrochemical v. M/T Beffen, a U.S. Court enjoined the parties from conducting parallel litigation in Nigeria, finding that both actions concerned the same issue of damages resulting from seawater contamination of an oil shipment, and ordered the parties to arbitrate their claims in London.46 Another case shows, however, that it is not necessary for the parties in the arbitration and the foreign litigation to be strictly identical. In Paramedics v. GEMS-IT, GEMS-IT first commenced arbitration against Paramedics in Miami pursuant to their arbitration agreement. Subsequently, Paramedics initiated litigation in a Brazilian court naming both GEMS-IT and its local affiliate, GE Brasil, which was not a party to the arbitration agreement, as defendants.47 The U.S. Court of Appeals for the Second Circuit found that the parties were sufficiently similar to pass the threshold requirement given that GE Brasil acted as the agent of GEMS-IT and was named in the Brazilian action primarily on the basis of its identity with GEMS-IT as part of the same group of companies.48 Once a U.S. court has determined that the threshold requirements are met, it will turn to weighing the policy interest in enforcing arbitration agreementsincluding the need to prevent vexatious or oppressive litigation which violates principles of international comityin considering whether to issue an anti-suit injunction.49 In this regard, the U.S. federal appellate courts do not seem to apply a uniform approach. Although the courts do balance these interests against each other based on the circumstances of the individual cases, the Second Circuit on the whole appears to give some preference to furthering the policy interests in enforcing arbitration agreements, while the Fifth Circuit appears to give slightly more weight to comity. In Ibeto Petrochemical v. M/T Beffen, the Second Circuit relied in part upon vexation concerns to affirm an anti-suit injunction directed against litigation in
46 Ibeto Petrochemical Indus. Ltd. v. M/T Beffen, 475 F.3d 56, 6364 (2nd Cir. 2007) (finding that the named parties were the same in both U.S. and Nigerian proceedings, and were bound by the arbitration agreement, and resolution of the case by arbitration would be dispositive of the Nigerian proceeding). 47 Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Techs., Inc., No. 02 Civ. 9369 (DFE), 2003 WL 23641529, at *13 (S.D.N.y. June 4, 2003) (citing cases applying arbitration agreements to nonsignatories who served as agents to signatories). 48 Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Techs., Inc., 369 F.3d 645, 652 (2nd Cir. 2004) [Paramedics Appeal]. 49 Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 366 (5th Cir. 2003) [Karaha Bodas Appeal] (quoting Kaepa, Inc. v. Achilles Corp., 76 F.3d 624, 627 (5th Cir. 1996)).
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Nigeria. The Court found that the Nigerian litigation might result in disparate results because the Nigerian Court might not apply U.S. law and thus might render a judgment inconsistent with the underlying arbitral award, potentially provoking a race to judgment.50 Moreover, adjudication of the same issues in separate actions would result in an inconvenience because of the movement of the witnesses between the two venues.51 Although the Second Circuit found that the parallel Nigerian litigation did not pose a threat to [its] jurisdiction because both Nigerian and U.S. courts had personal jurisdiction,52 it held that equitable considerations deter forum shopping and therefore favor anti-suit injunctions.53 Observing that the policy favoring arbitration is a strong one, the Second Circuit concluded that issuing an anti-suit injunction was fully justified in this case, even though the Nigerian litigation was initiated first in time.54 In Paramedics, the U.S. District Court for the Southern District of New york had already determined that a valid arbitration agreement existed before the anti-suit injunction was requested. For this reason, the Court was concerned that [a]ny decision to the contrary in the Brazilian court would undermine the jurisdiction of this Court and the IACAC Arbitration Tribunal.55 The Second Circuit explained further that because a foreign court might not give res judicata effect to a United States judgment, an anti-suit injunction would serve to protect the U.S. Courts jurisdiction.56 Additionally, the Second Circuit observed that [f ]ederal policy strongly favors the enforcement of arbitration agreements, and that this policy applies with particular force in international disputes.57 For these reasons, the Court affirmed the anti-suit injunction issued in that case. In another case, LAIF X v. Axtel, the U.S. District Court for the Southern District of New york declined to issue an anti-suit injunction on the ground that [w]hile there is a strong United States policy of enforcing arbitration clauses . . . there is an equally strong United States policy against interfering with proceedings before a foreign sovereign.58 On appeal, the Second Circuit repeated the arbitration policy but disagreed with the District Courts conclusion that these policies were balanced in the circumstances of the case. The Second Circuit found that the defendants initiation of litigation in Mexico
Ibeto, supra note 46, at 64. Id. at 6465. 52 Id. at 65. 53 Id. at 64. 54 Id. at 65. 55 Paramedics, supra note 47, at *15. 56 Paramedics Appeal, supra note 48, at 654. 57 Id. 58 LAIF X SPRL v. Axtel, S.A. de C.V., 310 F. Supp. 2d 578, 581 (S.D.N.y. 2004).
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in this case did not amount to sidestepping arbitration because the defendant also was participating in the arbitration and the litigation was limited to a point of Mexican lawnamely, the issue of whether the parties were bound to arbitrate under a Mexican enterprises bylaws. It also found that litigation in Mexico concerning the relationship between a Belgian investor and a Mexican enterprise in no way implicates the U.S. arbitration policy.59 For these reasons, the Second Circuit affirmed the District Courts decision to reject the request for an anti-suit injunction. None of these decisions has clearly determined whether the federal policy favoring enforcement of arbitration agreements, even in the context of international disputes, alone is sufficient for a party to obtain an anti-suit injunction, or whether vexation or other policy justifications must be shown to be present. Nor have any of these decisions explained why an anti-suit injunction is necessary or effective to ensure the enforcement of arbitration agreements. In contrast, in the context of the enforcement of an arbitral Award, a U.S. federal appellate Court has applied a different analysis. In Karaha Bodas v. Pertamina,60 the Fifth Circuit reversed the District Courts decision to grant an anti-suit injunction to prevent the defendant from pursuing a set-aside action in Indonesia. In an UNCITRAL arbitration in Geneva, Karaha Bodas Company (KBC) had prevailed on its claims that the Indonesian Stateowned energy company Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) had breached its contracts with KBC when Indonesia suspended KBCs contracts to develop geothermal energy resources and construct a geothermal power plant in West Java, Indonesia.61 On the basis of the arbitration clauses language designating Indonesian law as the procedural law of the arbitration, Pertamina sought to vacate the Award in the Jakarta Central District Court in Indonesia after its attempt to have the Swiss court set aside the Award was rejected because its deposit was not timely made.62 At KBCs request, the District Court issued an anti-suit injunction to enjoin Pertamina from pursuing its Indonesian action, reasoning that the injunction did not cause comity concerns because the Indonesian action was an attack on this Courts jurisdiction and interfere[d] with this Courts inherent authority to enforce its judgments.63 The District Court explained that its decision to
LAIF X SPRL v. Axtel, S.A. de C.V., 390 F.3d 194, 199200 (2nd Cir. 2004). Karaha Bodas Appeal, supra note 49. In the interest of full disclosure, the authors of this article note that they served as counsel for the Republic of Indonesias Ministry of Finance in this case and in related proceedings in other courts. 61 Id. at 360. 62 Id. at 361. 63 Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 264 F.Supp. 2d 470, 476, 47883 (S.D. Tex. 2002).
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enforce the Award had already resolved the issues raised in the Indonesian courts, that Indonesian law did not apply to vacate the arbitral Award, and that Switzerland, not Indonesia, was the proper forum for setting aside the arbitral Award under the New york Convention.64 On appeal, the Fifth Circuit reversed the District Courts decision, holding that KBC had not demonstrated that the factors specific to an anti-suit injunction weigh in favor of granting that injunction.65 Instead of discussing an abstract policy of favoring arbitration, the Fifth Circuit observed that the New york Convention66 distinguishes between courts with primary and secondary jurisdiction, and permits primary jurisdictions to set aside or confirm awards according to national law while restricting the review by secondary jurisdictions to the limited grounds in Article V.67 The Fifth Circuit avoided deciding: (1) whether Switzerland, as the jurisdiction in which the arbitration had in fact taken place, was the only primary jurisdiction, as the District Court in Texas had found; or (2) whether the Indonesian courts, as the jurisdiction under the laws of which the Award was made, given that the arbitration clause referenced Indonesian procedural law in addition to substantive law, also had primary jurisdiction to set aside the Award, as the Jakarta Central District Court had decided68 after the Texas District Courts decision.69 Instead, the Fifth Circuit applied the liberal approach to anti-suit injunctions and weighed domestic judicial interests including the need to prevent vexatious or oppressive litigation and to protect the courts jurisdictionagainst principles of international comity.70 The Fifth Circuit concluded that an anti-suit injunction was not appropriate because the New york Convention envisioned simultaneous litigation proceedings in multiple jurisdictions to enforce an arbitral award.71 First, the Court held that the Indonesian litigation was not vexatious or oppressive because it did not cause any inequitable hardship, frustrate the speedy and efficient determination of the awards enforceability, or result in problematic duplicative litigation.72 The Court did not find any inappropriate hardship,
Id. Karaha Bodas Appeal, supra note 49, at 364. 66 New york Convention, supra note 1. 67 Karaha Bodas Appeal, supra note 49, at 368. 68 Id. at 363. As discussed in subsequent litigation, the Indonesian Supreme Court later reversed the decision of the Central District Court of Jakarta to set aside the award, concluding that only a Swiss court had power to set aside the award. See In re Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 500 F.3d 111, 115 (2d Cir. 2007). 69 Karaha Bodas Appeal, supra note 49, at 37172. 70 Id. at 366 (internal parentheses omitted). 71 Id. at 367. 72 Id. at 366. The Courts use of the word duplicitous instead of duplicative appears to be a mistake.
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delay, or duplicative litigation because the New york Convention provides for multiple simultaneous proceedings,73 permits U.S. courts to enforce awards notwithstanding annulment elsewhere,74 and allows differing standards of review for courts in primary and secondary jurisdictions.75 Second, the Court held that the Indonesian litigation did not threaten the integrity of the district courts jurisdiction or its Judgment enforcing the Award76 because Article V of the New york Convention granted U.S. courts discretion to enforce annulled awards.77 Finally, the Fifth Circuit concluded that international comity weighed against an anti-suit injunction because the dispute involved a company owned by Indonesia, the injunctions effect tended to clash with the general principle that a sovereign country has the competence to determine its own jurisdiction and grant the kind of relief it deems appropriate, and an anti-suit injunction would demonstrate an assertion of authority not contemplated by the New york Convention.78 The Fifth Circuit balanced the competing interests of preventing vexation, protecting jurisdiction, and promoting international comity, and ultimately vacated the anti-suit injunction. Instead of invoking an amorphous proarbitration policy, the Court enforced the arbitration policy it found in its reading of the New york Convention. The Court determined that the New york Convention established the balance between domestic judicial concerns and international comity, and that the arbitration policy regarding enforcement of arbitral awards militated against issuing an anti-suit injunction, despite the expense, inconvenience, and delay that KBC would incur in the Indonesian litigation. The Fifth Circuits approach may be seen as reasonable in light of the fact that the United States has ratified the New york Convention and has incorporated it into its domestic law. Therefore, the New york Convention factors into both sides of the equation, the domestic interests and the interest of international comity. As Article II(3) of the New york Convention places the burden on the parties to seek a reference to arbitration in the forum in which the litigation is pending, courts should refrain from enjoining foreign litigation where the parties themselves have the opportunity to seek such a reference.
Id. at 368. Id. at 369. 75 Id. at 370. 76 Id. 77 Id ([T]he Indonesian annulment only has an effect here to the extent that our courts choose to recognize it.). 78 Id. at 373.
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B. ICSID Arbitration Under the ICSID Convention, consent to ICSID arbitration makes such arbitration the exclusive remedy,79 and arbitral tribunals have the right to determine their own jurisdiction.80 It has been the consistent practice of ICSID tribunals to protect this right by directing the parties to stay any parallel, interfering national court litigation until a final decision on jurisdiction has been made in the ICSID arbitration. For example, in SGS v. Pakistan, the ICSID Secretary-General had just registered SGSs request for arbitration when the Supreme Court of Pakistan handed down a judgment in connection with an ongoing local arbitration, enjoining SGS from pursuing the ICSID arbitration.81 The Court based its injunction on the grounds, among others, that SGS had waived the right to resort to ICSID arbitration by virtue of participating in the local arbitration and in prior Swiss litigation, and had not made an investment within the meaning of the applicable PakistanSwitzerland BIT.82 SGS immediately applied to the ICSID Tribunal, once it was constituted, for provisional measures requiring Pakistan to cease its efforts to stay the ICSID arbitration. Finding that it had the power to determine its own jurisdiction under Article 41 of the ICSID Convention and on this basis to protect the right of access to international adjudication, the ICSID Tribunal ordered Pakistan to desist from having the Pakistani Court hold SGS in contempt, and recommended that the local arbitration be stayed until the ICSID Tribunal issued a decision on jurisdiction.83 III. ENJOINING THE OPPOSITE PARTy FROM PROCEEDING WITH ARBITRATION As the above-mentioned cases illustrate, there is a strong presumption in favor of arbitration under the New york Convention, and also in many domestic
ICSID Convention, supra note 2, art. 26. Id. art. 41. 81 Socit Gnrale de Surveillance S.A. v. Pakistan, through Secretary, Ministry of Finance, Judgment (S. Ct. Pakistan, July 3, 2002), reprinted in 8 ICSID Rep. 356, 382 (2005). 82 Id. at 358. 83 SGS Socit Gnrale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Proc. Order No. 2 (Oct. 16, 2002), reprinted in 8 ICSID Rep. 388, 39294 (2005). In its subsequent Decision on Jurisdiction, the Tribunal affirmed its jurisdiction over SGSs treaty claims but declined jurisdiction over SGSs contract claims, which were the subject of the local arbitration and the preceding Swiss litigation. SGS Socit Gnrale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision on Jurisdiction (Aug. 6, 2003), reprinted in 8 ICSID Rep. 406, 439, 441, 44748 (2005).
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legal systems. As a general rule, arbitration agreements will be upheld and enforced. Nonetheless, a party to an arbitral proceeding may attempt to have a State court restrain the opposite party from proceeding with the arbitration. A. AAA/ICDR and ICC Arbitration A stark example of a partys resort to State courts to interfere with an arbitration in this manner is the ICC arbitration commenced by the Italian company Saipem against the State-owned oil and gas company of Bangladesh, Petrobangla, concerning a contract to build a pipeline. The arbitral Tribunal, composed of three eminent arbitrators, was seated in Dhaka, in accordance with the parties arbitration agreement.84 In the course of the proceedings, the ICC Tribunal issued several procedural decisions against Petrobangla, whereupon Petrobangla filed an action in the local court seeking the revocation of the arbitrators authority based on alleged arbitrator misconduct.85 Petrobangla also petitioned the local court to stay all further proceedings of the ICC arbitration and to restrain the opposite party and/or the tribunal by and from proceeding further with the said arbitration.86 The Supreme Court of Bangladesh issued a temporary injunction, which was later confirmed and maintained.87 After Saipem had an opportunity to file objections against Petrobanglas request to remove the arbitrators, the State court issued a decision revoking the arbitrators authority on the grounds that the Tribunal has manifestly been in disregard of the law and as such the Tribunal committed misconduct without, however, adding any reasoning to support such a grave conclusion.88 The ICC Tribunal nonetheless decided to carry on its proceeding on the ground that the challenge or replacement of the arbitrators in an ICC arbitration falls within the exclusive jurisdiction of the ICC Court and not of the courts of Bangladesh.89 Petrobangla thereupon obtained a further injunction from the Bangladesh Supreme Court restraining Saipem from pursuing the ICC Arbitration.90 The ICC arbitration proceeded nevertheless and concluded with an Award in favor of Saipem.91 Petrobangla then sought to have the Bangladesh
See Saipem S.p.A. v. The Peoples Republic of Bangladesh, ICSID Case No. ARB/05/7, Award, para. 25 et seq. (June 30, 2009) (describing the proceedings conducted by the ICC Tribunal, which was composed of Dr. Werner Melis (Chairman), Prof. Riccardo Luzzatto and Prof. Ian Brownlie, QC). 85 Id. paras. 3435. 86 Id. para. 36. 87 Id. paras. 37, 39. 88 Id. para. 155. 89 Id. para. 45. 90 Id. para. 47. 91 Id. para. 48.
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Supreme Court set aside the Award, which the Court declined to do on the ground that the Award was already null and void under the laws of Bangladesh, based on the Courts prior revocation of the arbitrators authority.92 Saipem subsequently instituted an ICSID arbitration against Bangladesh on the basis of the BangladeshItaly Bilateral Investment Treaty claiming expropriation and other treaty breaches. The ICSID Tribunal reviewed the ICC Tribunals procedural orders that the Bangladeshi Court had cited as the basis for its finding of arbitrator misconduct, and could not find the slightest trace of error or wrongdoing.93 It concluded that the Bangladeshi courts abused their supervisory jurisdiction over the arbitration process94 by exercising it for an end which was different from that for which it was instituted and thus violated the internationally accepted principle of abuse of rights.95 The ICSID Tribunal also found that the State Courts revocation of the arbitrators authority, together with their issuance of several anti-arbitration injunctions, violated Bangladeshs obligation under Article II(1) of the New york Convention to recognize international arbitration agreements because it de facto prevent[ed] or immobilize[d] the arbitration that seeks to implement that [arbitration] agreement thus completely frustrating if not the wording at least the spirit of the Convention.96 Finally, the ICSID Tribunal found that the acts of the Bangladeshi Courts constituted an expropriation of Saipems residual contractual rights under the investment as crystallized in the ICC Award and awarded Saipem compensation in the amount of the ICC Tribunals award.97 A recent decision of the U.S. District Court for the Southern District of New york addressing a treaty-based arbitration, as opposed to arbitration based on a contract, is also noteworthy in this context. In Ecuador v. Chevron, the Court held that the strong presumption in favor of arbitration [under U.S. federal law] is particularly true where the arbitration is pursuant to an international treaty, here a treaty between Ecuador and the United States.98 In that case, Ecuador and other petitioners were seeking a court order to enjoin Chevron from pursuing an UNCITRAL arbitration it had commenced against
Id. para. 50. Id. para. 155. 94 Id. para. 159. 95 Id. para. 161. 96 Id. paras. 16667 (quoting Stephen M. Schwebel, Anti-Suit Injunctions in International Arbitration: An Overview, in Anti-Suit Injunctions in International Arbitration 34 (Emmanuel Gaillard ed. 2004)). 97 Id. para. 202. 98 Republic of Ecuador v. Chevron Corp., No. 09 Civ. 9958 (LBS), 2010 WL 1028349, at * 1 (S.D.N.y. Mar. 16, 2010), aff d, Nos. 101020-cv(L), 101026(Con), 2011 WL 905118 (2nd Cir. Mar. 17, 2011).
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Ecuador on the basis of the U.S.Ecuador Bilateral Investment Treaty. As the Court explained: The explicitly stated purposes of the treaty were to encourage investment by Americans in Ecuador and Ecuadorians in the United States by assuring investors that an independent, neutral tribunal exists to arbitrate claims such as the claim here that Ecuador is seeking to impose liability unlawfully. . . . It is Chevrons claim that this is what Ecuador is not in the process of doing. Thus a motion to stay here strikes at the core purposes of the treaty between Ecuador and the United States.99 Finding that Chevrons Notice of BIT Arbitration presented at least one arbitrable issue, the Court denied the motion to enjoin the arbitration.100 On appeal, the U.S. Court of Appeals for the Second Circuit affirmed the District Courts decision finding that, under the applicable UNCITRAL Arbitration Rules, it was for the arbitral tribunal to decide on Ecuadors jurisdictional objections.101 Although this case concerned an UNCITRAL arbitration, its rationale certainly is instructive for court proceedings involving treaty arbitrations conducted under other arbitration rules, such as those of the AAA/ ICDR or ICC.102 A remarkable counter-example is the injunction recently issued by the Supreme Court of Belize enjoining Dunkeld International Investment Ltd., a Turks and Caicos company, from pursuing an UNCITRAL arbitration it had commenced against Belize on the basis of that countrys Bilateral Investment Treaty with the United Kingdom.103 The Court based its decision on the grounds that the arbitration was vexatious and oppressive because it duplicated three actions already pending in the same Court concerning the same dispute, and only served to increase the costs of litigation.104
Republic of Ecuador v. Chevron Corp., No. 09 Civ. 9958 (LBS), 2010 WL 1028349, at *1 (S.D.N.y. Mar. 16, 2010). 100 Id. at *2. 101 Republic of Ecuador v. Chevron Corp., Nos. 101020-cv(L), 101026(Con), 2011 WL 905118, at *7 (2nd Cir. Mar. 17, 2011). 102 See, e.g., Agreement Between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of Investments, art. 10(2) (allowing the investor to choose among ICC, domestic, Stockholm Chamber of Commerce and UNCITRAL arbitration). 103 Attorney General v. Dunkeld Intl Invest. Ltd. et al., Claim No. 1042 of 2009, Decision and Order (S. Ct. Belize Feb. 5, 2010). 104 Id. paras. 5060.
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B. ICSID Arbitration The courts of State parties to the ICSID Convention may not enjoin parties from pursuing ICSID arbitration for the following two reasons: under the exclusivity rule of Article 26 of the ICSID Convention, once the parties have consented to ICSID arbitration, which they may have done even before an arbitration has been instituted, they may not resort to State courts with respect to the dispute, or the type of disputes, covered by the parties consent. Additionally, under Article 41 of the ICSID Convention, an ICSID tribunal shall be the judge of its own competence. A State court of a State party to the ICSID Convention must therefore defer to the ICSID tribunal for the determination of the tribunals jurisdiction.105 In 1987, the High Court in Wellington, New Zealand, had occasion to address this issue in a dispute between Mobil Oil and the Government of New Zealand.106 Shortly after Mobil had filed a request for arbitration against New Zealand and the ICSID Secretary-General had registered the request, the Government petitioned the Court for an interim injunction to restrain Mobil from pursuing the ICSID arbitration on the ground that the dispute was outside of the jurisdiction conferred upon ICSID by the parties agreement.107 Upon Mobils application, the Court stayed the proceeding in order to allow the ICSID Tribunal, once constituted, to determine its own jurisdiction.108 In so doing, the Court expressly recognized an ICSID tribunals power, under Article 41(1) of the ICSID Convention, to determine its own jurisdiction.109 It also thereby implicitly recognized the exclusivity rule enshrined in Article 26 of the ICSID Convention. IV. CHALLENGING AN ARBITRATOR Commentators suggest that arbitrator challenges have been increasing over recent years, and that they are often mounted as a tactic to disrupt and delay arbitral proceedings.110 Whether the number of challenges has indeed risen is difficult to tell because many proceedings remain confidential. Moreover, even if the absolute number of arbitrator challenges per year has risen, this may
105 106
See Delaume, supra note 31, at 6869. Attorney General v. Mobil Oil NZ Ltd., [1987] 2 NZLR 649, reprinted in 4 ICSID Rep. 117
(1997). Id. at 12223, 126. Id. at 139. 109 Id. at 128. 110 See, e.g., Ana Stani, Challenging Arbitrators and the Importance of Disclosure: Recent Cases and Reflections, 16 Croat. Arb. Y.B. 205 (2009).
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not represent a relative increase because the number of arbitral proceedings has increased dramatically in the last several years. Anecdotal evidence certainly shows that parties, at times, will not shy away from resorting to unfounded arbitrator challenges in an attempt to delay the proceedings and increase the costs for the other side. In challenges to arbitrators brought in ICC and ICDR arbitrations, the State court with jurisdiction over the seat of arbitration may be called to decide on the challenge. While this is not the case for arbitrator challenges brought under the ICSID Convention, ICSID cases have nonetheless demonstrated the wide range of grounds on which parties have pursued challenges, as well as the applicable standards for evaluating allegations of arbitrator bias. A. ICSID Arbitration Under Article 14(1) of the ICSID Convention, an arbitrator must be of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment.111 In addition, the ICSID Convention establishes certain nationality requirements.112 Article 57 of the ICSID Convention allows a party to propose to a . . . Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14 . . . . Recent published cases show that parties have sought to disqualify arbitrators on a broad range of grounds that, in some cases, one might consider frivolous. Indeed, in the vast majority of these cases, the challenge was rejected. Despite this showing of creativity on the part of parties in devising grounds to challenge arbitrators, there does not appear to have been any attempt to involve State courts in such challenges. In any event, given that the ICSID Convention clearly reserves the authority to decide on arbitrator challenges for the other tribunal members or the chairman of the ICSID Administrative Council,113 a State court would appear to lack authority to entertain such challenges. In Cemex v. Venezuela, Venezuela challenged the Claimant-appointed arbitrator, Robert von Mehren, on the ground that that he was a retired partner of a law firm that was representing another claimant against Venezuela in another ICSID arbitration, Holcim v. Venezuela, that also involved measures taken by the Venezuelan Government concerning the cement industry.114 Venezuela
ICSID Convention, supra note 2, art. 14(1). Id. arts. 38, 39. 113 Id. art. 58. 114 Cemex Caracas Investments B.V. and Cemex Caracas II Investments B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/08/15, Decision on Disqualification Proposal, para. 21 (Nov. 6, 2009).
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argued that Mr. von Mehrens continuing relationship with the law firm gave rise to an appearance of a lack of impartiality.115 The other two arbitrators116 dismissed the challenge without ruling on its substance because they found that Venezuela had not promptly filed its proposal to disqualify Mr. von Mehren, as required under ICSID Arbitration Rule 9(1). It found that Venezuela had let more than five months lapse since it learned about the underlying facts before it even raised the issue with the Tribunal and then waited another month before filing the proposal.117 In PIP v. Gabon, Gabon challenged the Claimant-appointed arbitrator, Prof. Ibrahim Fadlallah on the ground that he had been the president of another ICSID tribunal that had issued an award against Gabon in a case that involved certain similar factual and legal issues, on which Prof. Fadlallah already had taken a position.118 The Chairman of the ICSID Administrative Council rejected the challenge finding that Gabon had failed to prove the links between the two cases and to establish a manifest lack of impartiality.119 In Perenco v. Ecuador, Ecuador challenged the Claimant-appointed arbitrator, Judge Charles N. Brower, on the basis of a published interview in which he had commented on Ecuadors attitude toward ICSID generally and, in particular, with respect to provisional measures ordered in this, and a parallel, ICSID arbitration.120 In this case, the parties had agreed in advance that any arbitrator challenge would be resolved by the Secretary-General of the Permanent Court of Arbitration at The Hague (PCA) on the basis of the IBA Guidelines on Conflicts of Interest in International Arbitration.121 Pursuant to the IBA Guidelines, an arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so during the entire arbitration proceeding . . . .122 The Guidelines also provide that an arbitrator shall withdraw
Id. para. 29. See ICSID Arbitration Rule 9(4) (unless a disqualification proposal relates to a majority of the tribunal members, the other members consider and vote on the proposal in the absence of the arbitrator concerned). 117 Cemex, supra note 114, paras. 4445. 118 Participaciones Inversiones Portuarias SARL v. Gabonese Republic, ICSID Case No ARB/08/17, Decision on Disqualification Proposal, paras. 1415 (Nov. 12, 2009). 119 Id. para. 34. Gabon had refused to submit the award in the other case as evidence of the alleged links between the two cases. Id. paras. 11, 31. The Chairman of the ICSID Administrative Council was called upon, under ICSID Arbitration Rule 9(4) and (5), to make the decision because the other two tribunal members were unable to agree. Id. paras. 1, 12. 120 In the Matter of a Challenge in ICSID Case No. ARB/08/6 between Perenco Ecuador Ltd. and The Republic of Ecuador & Empresa Estatal Petroleos del Ecuador (Petroecuador), PCA Case No. IR-20091, Decision on Challenge, para. 27 (Dec. 8, 2009) [Perenco Challenge Decision]. 121 Id. para. 9. 122 IBA Guidelines on Conflicts of Interest in International Arbitration, General Principle.
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if facts or circumstances exist, or have arisen since the appointment, that, from a reasonable third persons point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrators impartiality or independence . . . . Doubts are justifiable if a reasonable person and informed third party would reach the conclusion that there was a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision.123 As the IBA Working Group that drafted the Guidelines explained, a challenge to the impartiality and independence of an arbitrator depends on the appearance of bias and not actual bias.124 The PCA Secretary-General sustained the challenge, concluding that there was such an appearance of bias in this case because the combination of the words chosen by Judge Brower and the context in which he used them have the overall effect of painting an unfavorable view of Ecuador in such a way as to give a reasonable and informed third party justifiable doubts as to Judge Browers impartiality.125 In Urbaser v. Argentina, the two Tribunal members hearing the challenge stated the standard to be applied as follows: What matters is whether the opinions expressed . . . are specific enough that a reasonable and informed third party would find that the arbitrator will rely on such opinions without giving proper consideration to the facts, circumstances, and arguments presented by the Parties in this proceeding.126 In that case, the Claimants challenged the Respondent-appointed arbitrator, Prof. Campbell McLachlan on the ground that the views he had expressed in his scholarly publications on two issues that the Claimants considered critical for the case: the most-favored-nation clause and the state of necessity.127 Applying the standard quoted above, the Tribunal members concluded that the mere showing of an opinion, even if relevant in a particular arbitration, is not sufficient to sustain a challenge for lack of independence or impartiality of an arbitrator.128
Id. at Conflict of Interest. Perenco Challenge Decision, supra note 120, para. 43 (quoting IBA Working Group, Background Information on the IBA Guidelines on Conflicts of Interest in International Arbitration (2004)). 125 Id. para. 48. 126 Id. para. 44. 127 Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Disqualification Decision, paras. 2025 (Aug. 12, 2010). 128 Id. para. 45.
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In Alpha Projektholding v. Ukraine, Ukraine challenged the Claimantappointed arbitrator, Dr. yoram Turbowicz, on the basis that he and the Claimants counsel had attended law school together about 20 years earlier.129 The two other Tribunal members issued a 30-page decision dismissing the challenge because Ukraine had not proven any fact that would indicate a manifest lack of impartiality or independence.130 B. AAA/ICDR and ICC Arbitration Under Article 7.1 of the ICC Rules of Arbitration, an arbitrator must be and remain independent of the parties involved in the arbitration. Additionally, Article 15.2 requires the arbitral tribunal to act fairly and impartially. Under Article 11.3, the ICC Court of Arbitration decides on the admissibility and merits of any arbitrator challenges. The ICC Courts decisions are not published. Article 7(1) of the ICDR International Arbitration Rules similarly requires arbitrators to be impartial and independent. Under Article 8 of the ICDR International Arbitration Rules, a challenge can be successful only if circumstances exist that give rise to justifiable doubts as to the arbitrators impartiality or independence. These standards appear comparable to the standard for ICSID arbitration. Unlike in ICSID arbitration, however, the rules for ICC and ICDR arbitration do not contain a requirement that the lack of independence or impartiality be manifest for a challenge to succeed. Moreover, unlike in ICSID arbitration, the State court with jurisdiction over the seat of the arbitration may be seized with an arbitrator challenge. In that case, the court will apply the national arbitration laws in effect at the seat, as well as the applicable arbitration rules. The way in which these different standards can impact challenge proceedings became apparent in the challenge of Prof. Emmanuel Gaillard in Telekom Malaysia v. Ghana, an UNCITRAL arbitration brought on the basis of the Ghana Malaysia Bilateral Investment Treaty. In that arbitration, Ghana challenged Prof. Gaillard, the Claimant-appointed arbitrator, on the ground that he was concurrently acting as an advocate in another investor-State arbitration in which he was seeking the annulment of an arbitral award on which Ghana relied as a legal authority in its argument in the instant arbitration. Ghana argued that Prof. Gaillards commitment to represent a certain position on behalf of his clients in the other case would undermine his ability to remain impartial towards Ghanas
Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Decision on Disqualification Proposal (Mar. 19, 2010). 130 Id. para. 83.
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opposite position on that issue in the instant arbitration. Ghanas subsequent challenges of Prof. Gaillard were rejected by both the arbitral Tribunal and the Secretary-General of the Permanent Court of Arbitration (as the appointing authority). Ghanas further challenge to the District Court of The Hague, which was the seat of the arbitration, however, yielded a different result. Applying Dutch law, which provides that, in determining whether justified doubts exist with respect to an arbitrators independence or impartiality, the Court must take an objective point of view, which includes taking account of appearances. On this basis, the Court concluded that Prof. Gaillards role as an advocate, in which he will regard it as his duty to put forward all possibly conceivable objections against the very award on which Ghana sought to rely, was incompatible with his role as an arbitrator, in which he was called upon to rule on Ghanas opposite position as to that Award.131 The issue of an arbitrator challenge resolved by the ICC Court of Arbitration has recently arisen in litigation before the U.S. District Court for the District of Columbia. In an action brought by Argentina to vacate an UNCITRAL Award rendered in favor of BG Group, Argentina put forth the argument, among others, that the Award should be vacated because the ICC Court had exceeded its authority by failing to disqualify one of the members of the UNCITRAL arbitral Tribunal.132 The Court found that this claim was without merit because Argentina had neither disputed the ICC Courts authority to rule on the arbitrator challenge nor submitted any evidence establishing the arbitrators partiality.133 Two recent decisions of the Swiss Supreme Court134 highlight the issue of whether, and to what extent, a partys multiple appointments of the same arbitrator exposes the arbitrator to challenge. These decisions concerned two parallel ICC arbitrations held in Zurich, with identically composed arbitral tribunals. One of the parties sought the set-aside of both awards on the ground that, according to a press report, the ICC Court of Arbitration had declined to confirm the arbitrator appointed by the other party in another case because that party had appointed the same arbitrator at least ten times.135 The Swiss Supreme Court rejected the set-aside request, finding that the alleged relationship between the other party and the arbitrator was not sufficiently established, and because
131 The Republic of Ghana v. Telekom Malaysia Berhad, Civ. No. HA/RK 2004.667, Challenge Decision (D. Ct. The Hague Oct. 18, 2004); see Joseph Brubaker, The Judge Who Knew Too Much: Issue Conflicts in International Adjudication, 2 Berkeley J. Intl L. 111, 13031 (2008) (discussing this case in the context of other cases involving issue conflicts). 132 Republic of Argentina v. BG Group PLC, 715 F.Supp.2d 108, 121 (D.D.C. June 7, 2010). 133 Id. 134 X. v. Y., Cases Nos. 4A_256/2009 and 4A_258/2009, Judgments (Swiss S. Ct. Jan. 11, 2010). 135 Id. para. 3.1.1.
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the requesting party had failed to challenge the arbitrator during the arbitration and thus had waived the right to rely on this ground to seek a set-aside.136 In the UK, on the other hand, the English Court of Appeals decision in Jivraj v. Hashwani137 gives rise to concern in the context of arbitrator challenges. In that case, the Court held that an arbitration agreement providing that the arbitrators should be respected members of the Ismaili community was void because it violated English anti-discrimination regulations prohibiting employers from discriminating on the basis of religion when choosing employees. Strictly speaking, this case did not involve an arbitrator challenge, but rather an action to set aside an arbitral award on the ground that the underlying arbitration agreement was void. Nonetheless, this decision may open a Pandoras Box of arbitrator challenges whenever the applicable arbitration rules or the parties arbitration agreement contain certain requirements for arbitrators, such as nationality requirements, that may arguably be seen as discriminatory. V. ENFORCING TRIBUNAL-ORDERED PROVISIONAL OR INTERIM MEASURES138 Differences also exist in State court enforcement of tribunal-ordered provisional or interim measures in an ICC or ICDR arbitration between two private parties as compared to an ICSID arbitration between a host State and a private investor. A. The Arbitral Tribunals Power to Issue Provisional Measures The arbitration rules of all three institutions recognize the power of the arbitral tribunal to issue provisional measures.139 Parties are, of course, also free to include provisions in their arbitration agreement giving the tribunal the power to order such measures. The power of a tribunal to order interim remedies, however, is not simply controlled by the applicable arbitration agreement and rules. It is also subject to the municipal laws of the jurisdiction within which the arbitration takes place, for at least two reasons.
Id. para. 3.1.2. Nurdin Jivraj v. Sadruddin Hashwani, [2010] EWCA Civ 712. 138 An earlier version of this chapter was published as Carolyn B. Lamm & Lee A. Steven, The Enforcement of Tribunal-Ordered Provisional Measures, in Commercial Mediation and Arbitration in the NAFTA Countries 215 (Luiz M. Daz & Nancy A. Oretskin eds. 1999). 139 ICSID Arbitration Rule 39; ICDR International Arbitration Rules, art. 21; ICC Rules of Arbitration, art. 23.
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1. International arbitration conventions, including the New york Convention,140 generally do not address the issue of whether an arbitral tribunal has the power to grant provisional measures. Thus, an arbitral tribunal is not likely to grant provisional relief unless the applicable municipal law so permits. 2. Even if a tribunal orders provisional relief, a municipal court is not likely to enforce such an award unless the applicable municipal law permits such relief and allows for court enforcement. The major exception to the above rule occurs in arbitration under the auspices of the ICSID Convention, for the following reasons: 1. ICSID arbitration, by virtue of its international character, operates as a self-contained system not subject to the control of any national jurisdiction. 2. The ICSID Convention, in its Article 47, expressly gives tribunals the power to order provisional relief. Therefore, it is incumbent upon all State Parties to the Convention, as a matter of international treaty obligation and notwithstanding possible contrary municipal law, to recognize and enforce any provisional relief recommended by an ICSID tribunal. Before turning to the legal regime in the United States for enforcement of tribunal-ordered provisional measures, it is important to remember why enforcement may be necessary. An arbitral tribunal generally has no power to enforce its own orders. Although a party to an arbitration risks incurring the displeasure of a tribunal, and thus prejudicing its case, if it refuses to comply with a provisional measure, it nevertheless can choose to ignore the order without immediate consequence. Thus, the only way the prevailing party can ensure that the adverse party complies with tribunal-ordered provisional measures is to seek enforcement by the appropriate judicial authority. The ICC Rules of Arbitration clearly recognize this, providing that [t]he application of a party to a judicial authority for . . . the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal.141
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New york Convention, supra note 1. ICC Rules of Arbitration, art. 23(2).
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B. Enforcement of Tribunal-Ordered Provisional Measures in the United States International arbitration in the United States is controlled by the FAA, which is silent on the question of a tribunals power to order provisional measures. U.S. courts, however, have recognized the inherent power of a tribunal under the FAA to order provisional measures and will therefore enforce such orders in appropriate circumstances. Of course, it is the nature of the appropriate circumstances that will determine whether or not a court will enforce tribunalordered provisional measures in a particular case. Disputes over enforcement usually focus on three key areas: (1) the scope of the tribunals authority; (2) the courts power to review the tribunals order; and (3) whether court review or enforcement of the order is appropriate. 1. The Scope of an Arbitral Tribunals Authority to Award Provisional Measures U.S. courts have held that the FAA permits arbitral tribunals to order provisional measures provided that the parties to the arbitration agreement have, either expressly or impliedly, so agreed. In situations where the arbitration agreement or applicable arbitration rules do not directly address the issue of tribunal-ordered provisional measures, U.S. courts have reached different conclusions on the presumption to be applied in determining whether the tribunal has power to award provisional measures. Most U.S. courts have recognized the power of a tribunal to order provisional measures as long as this power is not in some way inconsistent with the parties arbitration agreement. That is, there is a presumption in favor of recognizing the power. A few courts have even stated that a tribunals power to order provisional measures can be implied from the agreement to arbitrate itself.142 A few U.S. courts, however, have reversed the presumption, holding in essence that tribunals lack the power to issue provisional measures unless the parties expressly (or at least by clear, unambiguous implication) authorize the tribunal by agreement.143 The difference between these court decisions on the presumption to be applied should become increasingly insignificant as more
142 See, e.g., Konkar Maritime Enterprises, S.A. v. Compagnie Belge dAffretement, 668 F.Supp. 267, 271 & n.3 (S.D.N.y. 1987) (rejecting the assertion that the arbitral panel exceeded its powers under the arbitration agreement by ordering the posting of a security, having found that [t]he issue of security . . . was implicit in the submission of the main dispute to the Panel.). 143 See, e.g., Swift Industries, Inc. v. Botany Industries, Inc., 466 F.2d 1125, 113234 (3rd Cir. 1972) (order of a cash security bond was in excess of the arbitrators authority because the parties agreement did not mention a bond as a remedy).
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and more arbitration rules expressly grant broad powers to the tribunal to order provisional measures. No U.S. court has held that parties may not agree to vest a tribunal with power to award provisional measures, and most decisions actually reject such a conclusion. Thus, as long as the parties expressly agree to give the tribunal the power to order provisional measures, either directly in an arbitration agreement or indirectly by incorporating by reference a set of arbitration rules, U.S. courts will have the power to enforce tribunal-ordered provisional measures.144 2. The Power of a U.S. Court to Review Tribunal-Ordered Provisional Measures Section 10 of the FAA specifically permits enforcement only of final awards. Parties resisting the enforcement of provisional measures have sometimes argued that a provisional measures order is an interim award (i.e. not final) and therefore not subject to judicial enforcement. U.S. courts have resolved this apparent restriction on their power to enforce provisional measures by distinguishing between two kinds of interim awards. Courts will not review or otherwise enforce partial or interim awards that deal with the substantive issues of the dispute (e.g. a finding on liability with a deferral on the amount of damages). However, courts will enforce interim remedies such as preliminary injunctions and attachments of property because such remedies are considered separate from the merits and, as such, constitute final awards on a distinct issue.145 The articulated policy is that certain provisional measures are necessary to preserve the integrity of the arbitral process and, unless immediately enforced, would be rendered meaningless. Such tribunal-ordered measures are therefore considered final orders that can be reviewed for confirmation and enforcement by U.S. courts under the FAA.146
144 But see Charles Constr. Co. v. Derderian, 586 N.E.2d 992, 99596 (Mass. 1992) (Although this Court did state that the power of a tribunal to order provisional measures can be implied from an agreement to arbitrate, it nevertheless found this rule inapplicable to the facts of the case before it. The Court narrowly construed the scope of the applicable arbitration rules chosen by the parties to restrict the type of provisional measures the tribunal could order.). This case suggests that drafters of arbitration clauses should look closely at the intended arbitration rules to make sure that the rules wording unambiguously provides the arbitral tribunal with sufficiently broad powers. 145 See, e.g., Pacific Reinsurance Mgmt. Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 102223 (9th Cir. 1991) (discussing the difference between the two kinds of interim awards); Publicis Commcn v. True North Commucn, Inc., 206 F.3d 725 (7th Cir. 2000) (finding that an order of an international arbitral tribunal directing one party to turn over certain tax records to the other party is final for purposes of enforcement because the content of a decisionnot its nomenclaturedetermines finality.). 146 Pacific Reinsurance, supra note 145, at 1023.
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3. Whether Court Review and Enforcement of Tribunal-Ordered Provisional Measures are Appropriate The standard for judicial review of an arbitral tribunals award of provisional measures (i.e. the grounds for vacating the award) is essentially the same as that of a final award on the merits of the case.147 U.S. courts permit arbitral tribunals broad, but not unlimited, discretion to fashion appropriate provisional relief. Most courts agree with the position advocated by the Court in Sperry International Trade,148 which stated that [u]nder New york law arbitrators have power to fashion relief that a court might not properly grant. On the other hand, courts have also denied enforcement where the provisional measure is considered in excess of the authority granted by the applicable statutes, rules, and agreements.149 U.S. courts hold that it is never appropriate to grant provisional measures affecting third persons not party to the arbitration (e.g. attachment of funds owed the adverse party by a third party, such as debt or a bank account).150 A tribunals ability to award provisional measures derives from the arbitration agreement, and it therefore has no power over persons who have not agreed to the arbitration of the dispute. Consequently, U.S. courts will not enforce any tribunal-ordered provisional measures that purport to order a non-party to act or refrain from acting in a certain way. VI. OBTAINING COURT-ORDERED DISCOVERy IN THE UNITED STATES IN AID OF ARBITRATION Section 1782 of the U.S. Judicial Code, which permits a U.S. court to order discovery of evidence for use in a proceeding in a foreign or international tribunal, has received increased attention this year.151 The ongoing dispute
147 See id. (listing the criteria the Court should consider in a review of tribunal-ordered provisional measures). 148 Sperry Intl Trade, Inc. v. Government of Israel, 689 F.2d 301, 306 (2nd Cir. 1982). 149 See Charles Constr. Co., supra note 144, at 99596. 150 Even state courts may decline to order pre-award attachment of funds allegedly owed the adverse party by a third party. See, e.g., E.T.I. Euro Telecom International N.V. v. Republic of Bolivia, No. 08 Civ. 4247 (LTS), 2008 U.S. Dist. LEXIS 57538, at *24, 12 (S.D.N.y. July 30, 2008) (vacating pre-award order of attachment in favor of E.T.I. in an ICSID arbitration commenced against Bolivia because the attached funds did not belong to Bolivia but rather to the State-owned company Entel, and E.T.I. failed to show how the funds constituted an attachable debt obligation to Bolivia); see also E.T.I. Euro Telecom International N.V. v. Republic of Bolivia, [2008] EWCA Civ 880 (July 28) (same, on the ground that Entel was not a party to the ICSID arbitration). 151 28 U.S.C. Section 1782 provides as follows: (a) The district court of the district in which a person resides or is found may order
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between Chevron and the so-called Lago Agrio plaintiffs, as well as Ecuador, has generated more than a dozen such discovery orders by federal district courts across the United States, and several appeals have been noted. It remains to be seen whether the various federal appellate courts will take the opportunity to resolve some of the persisting uncertainties surrounding the issue of whether, and to what extent, Section 1782 applies to international arbitration. In Intel Corp. v. Advanced Micro Devices, Inc., the U.S. Supreme Court, in 2004, held that Section 1782 granted district courts the authority to order discovery in aid of proceedings before the Directorate-General for Competition of the European Commission in the context of an antitrust complaint.152 It did not directly address the issue of whether international arbitrations fall within the ambit of Section 1782. Reviewing the legislative history of that provision, however, the Supreme Court quoted an article by Prof. Hans Smit to the effect that Congress understood the term tribunal to include investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal and administrative courts.153 After Intel, several U.S. district courts have granted discovery under Section 1782 to parties in international arbitrations, while others have denied such discovery, instead following pre-Intel precedent. Prior to Intel, the Second and Fifth Circuits had held that the terms foreign or international tribunal were limited to governmental or inter-governmental
him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. By virtue of his appointment, the person appointed has power to administer any necessary oath and take the testimony or statement. The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing. To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or other thing produced, in accordance with the Federal Rules of Civil Procedure. A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege. (b) This chapter does not preclude a person within the United States from voluntarily giving his testimony or statement, or producing a document or other thing, for use in a proceeding in a foreign or international tribunal before any person and in any manner acceptable to him. 152 Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 258 (2004). 153 Id. (quoting Hans Smit, International Litigation under the United States Code, 65 Colum. L. Rev. 1015, 102627 & nn.71, 73 (1965) (emphasis added)). Prof. Smit served as Reporter to the Commission and Advisory Committee on International Rules of Judicial Procedure, which drafted the revised version of Section 1782 that Congress adopted in 1964. Smit, id. at 1015 n.*.
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entities, and did not include private arbitral panels.154 Since Intel, federal district Courts in Delaware, Georgia, Massachusetts and Minnesota have held that those terms did include private arbitration, including ICC and Vienna International Arbitration Center arbitration.155 Conversely, federal district Courts in Illinois and Texas have denied requests for discovery orders, holding that Section 1782 did not apply to private arbitration.156 The Federal District Court in New Jersey concurred with this view but found that the arbitration in the case before it, an UNCITRAL arbitration on the basis of a bilateral investment treaty (BIT), was not private but rather was being conducted within a framework defined by two nations and is governed by the Arbitration Rules of the United Nations Commission on International Trade Law, and on this basis found that granting discovery was not clearly erroneous or contrary to law.157 As mentioned, this year has seen a flood of Section 1782 discovery requests by Chevron, and also by Ecuador, relating to the Lago Agrio dispute, which includes litigation brought by residents of Lago Agrio against Chevron in Ecuadorian courts concerning the environmental impact of Chevrons investment, as well as an UNCITRAL arbitration brought by Chevron against Ecuador on the basis of the EcuadorU.S. BIT.158 In this context, federal district courts in California, Colorado, the District of Columbia, Georgia, New Jersey, New Mexico, New york, Tennessee, and Texas have issued discovery orders. In several of these cases, appeals have been docketed in the various federal appellate courts.159 As these cases concern an UNCITRAL arbitration brought on the
154 See Natl Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2nd Cir. 1999) (denying discovery from a third party in connection with an ICC arbitration in Mexico); Republic of Kazakhstan v. Biedermann Intl, 168 F.3d 880, 88182 (5th Cir. 1999) (following Natl Broadcasting, observing that [t]here is no contemporaneous evidence that Congress contemplated extending 1782 to the thennovel arena of international commercial arbitration, and denying discovery from a third party in aid of an arbitration conducted under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce). 155 See In re Application of ROZ Trading Ltd., 469 F.Supp.2d 1221 (N.D. Ga. 2006) (Vienna Centre arbitration); In re: Application of Hallmark Capital Corp., 534 F.Supp.2d 951 (D. Minn. 2007) (Israeli arbitration); La Comisin Ejecutiva, Hidroelctica del Ro Lempa v. Nejapa Power Co., No. 08135-GMS, 2008 WL 4809035 (D. Del. Oct. 14, 2008) (Swiss arbitration); In re: Application of Babcock Borsig AG, 583 F.Supp.2d 233 (D. Mass. 2008) (ICC arbitration in Germany). 156 See La Comisin Ejecutiva Hidroelctica del Ro Lempa v. El Paso Corp., 616 F.Supp.2d 481 (S.D. Tex. 2008) (same Swiss arbitration as in Comisin Ejecutiva before the U.S. District Court for the District of Delaware, supra note 155); In re an Arbitration in London between Norfolk Southern Corp. et al. and ACE Bermuda Ltd., 626 F.Supp.2d 882, 884 (N.D. Ill. 2009) (Board of Arbitration in London). 157 In the Matter of the Application of Oxus Gold Plc., No. 0682-GEB, 2007 WL 1037387, at *5 (D.N.J. Apr. 2, 2007) (UNCITRAL arbitration under U.K.Kyrgyzstan BIT). 158 In re Application of Chevron Corp., No. 10 MC 00002 (LAK), 2010 WL 4910248, at *3 & n. 8, *11 (S.D.N.y. Nov. 10, 2010) 159 Id. at *3 & n.8.
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basis of a treaty, it is not likely that any of the appellate courts will address the issue of whether private arbitration is covered by Section 1782 because there does not appear to be any disagreement, even on the basis of pre-Intel precedent, that treaty-based UNCITRAL arbitration is not considered private for the purposes of that provision.160 Nevertheless, it will be interesting to see whether the federal appellate courts will adopt the recently issued, elaborately explained interpretation of Section 1782 by Judge Kaplan of the U.S. District Court for the Southern District of New york.161 Judge Kaplan held that Section 1782 authorized, but did not require, the District Court to order discovery under the following three cumulative conditions: (1) The person from whom discovery is sought resides or is found in the district of the district court to which the application is made, (2) The discovery is for use in a proceeding before a foreign tribunal, and (3) The application is made by a foreign or international tribunal or any interested person.162 Citing Intel, Judge Kaplan then enumerated the following four discretionary factors that a district court should consider in exercising its discretion once the above statutory requirements are met: (1) Whether the material sought is within the foreign tribunals jurisdictional reach and thus accessible absent Section 1782 aid; (2) The nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court jurisdictional assistance; (3) Whether the Section 1782 request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and
See id. at *15 (finding that an UNCITRAL tribunal established by an international treaty, is a foreign tribunal for purposes of Section 1782 applications). 161 See, e.g., Chevron Corp. v. Berlinger, 629 F.3d 297, 31011 (2011) (affirming an earlier Section 1782 ruling of the S.D.N.y. without, however, reaching the issue of whether a treaty-based international arbitration qualifies as a proceeding in a foreign or international tribunal). 162 In re Application of Chevron Corp., supra note 158, at *14.
160
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(4) Whether the subpoena contains unduly intrusive or burdensome requests.163 In the only case thus far concerning a pending ICSID arbitration, Caratube v. Kazakhstan, the U.S. District Court for the District of Columbia recently denied a Section 1782 request.164 Assuming, without deciding, that the request met the statutory requirements, including whether an ICSID tribunal qualified as a foreign or international tribunal under Section 1782, the Court turned directly to the discretionary factors.165 The Court first analyzed the ICSID Tribunals receptiveness to discovery obtained on the basis of Section 1782. Under this standard, authoritative proof that a foreign tribunal would reject evidence obtained with the aid of section 1782 would weigh against granting such discovery.166 The Court found that in this case no such authoritative proof existed. Rather, the ICSID Tribunal had expressed concern for the maintenance of its control of the arbitration proceedings but had declined to order Caratube to cease and desist from pursuing this petition, and it reserved judgment on whether it would accept as evidence documents obtained through this section 1782 proceeding.167 Analyzing the nature of the ICSID Tribunal and the character of its proceedings, the Court found that in this case the ICSID Tribunal had put in place a detailed schedule governing the arbitration proceedings more than one year before Caratube made its Section 1782 application, and that discovery between the parties was to close less than one month thereafter.168 The Court also found that the evidence before it suggested that Caratube was attempting to circumvent the ICSID Tribunals control of the arbitrations procedures.169 Moreover, the Court found that under ICSID Arbitration Rule 43 and the IBA Rules on the Taking of Evidence in International Commercial Arbitration, which the parties and the ICSID Tribunal had agreed should guide the discovery process in the arbitration, enabled the ICSID Tribunal on its own to seek discovery assistance under Section 1782.170 However, by unilaterally filing this petition, Caratube has side-stepped these guidelines, and
Id. at *15. In re Application of Caratube Intl Oil Co., 730 F.Supp.2d 101 (D.D.C. 2010). 165 Id. at 105. 166 Id. at 106. 167 Id. 168 Id. 169 Id. at 107. 170 Id. at 108.
163 164
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has thus undermined the Tribunals control over the discovery process.171 For all of these reasons, the Court declined to issue a discovery order under Section 1782.172 CONCLUSION How great then is the risk that a State court will intervene during the course of an arbitration? With ICC and AAA/ICDR arbitration, the risk varies with the jurisdiction that is the situs of the arbitration. For this reason, it is important, when selecting the arbitral situs, to review its law and, on this basis, to assess the extent to which courts will intervene. With ICSID arbitration, however, the risk of State court intervention is limited or non-existent.
171 172
Id. Id. at 10809.

Court Intervention in International Arbitration

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Court Intervention in International Arbitration

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State Court Intervention in International Arbitration: The United States Perspective*

Carolyn B. Lamm & Eckhard R. Hellbeck**

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL

STATE COURT INTERVENTION IN INTERNATIONAL ARBITRATION

Id. Id. at 10809.

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