Académique Documents
Professionnel Documents
Culture Documents
in International Arbitration:
The United States Perspective*
* 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.
94
State Court Intervention in International Arbitration 95
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:
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:
6
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).
96 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
I. COMPELLING ARBITRATION
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 pro-
arbitration 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).
State Court Intervention in International Arbitration 97
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
18
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).
98 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
24
Id. at 941.
25
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.
State Court Intervention in International Arbitration 99
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:
29
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.
100 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
33
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).
State Court Intervention in International Arbitration 101
overturned the District Courts decision to confirm the AAA award, albeit on
other grounds.40
40
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.
102 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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 anti-
suit 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
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)).
State Court Intervention in International Arbitration 103
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 non-
signatories 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)).
104 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
50
Ibeto, supra note 46, at 64.
51
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).
State Court Intervention in International Arbitration 105
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 State-
owned 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
59
LAIF X SPRL v. Axtel, S.A. de C.V., 390 F.3d 194, 199200 (2nd Cir. 2004).
60
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).
106 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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.
64
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.
State Court Intervention in International Arbitration 107
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 pro-
arbitration 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.
73
Id. at 368.
74
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.
108 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
B. ICSID Arbitration
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).
State Court Intervention in International Arbitration 109
84
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.
110 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
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).
State Court Intervention in International Arbitration 111
99
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.
112 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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.
105
See Delaume, supra note 31, at 6869.
106
Attorney General v. Mobil Oil NZ Ltd., [1987] 2 NZLR 649, reprinted in 4 ICSID Rep. 117
(1997).
107
Id. at 12223, 126.
108
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).
State Court Intervention in International Arbitration 113
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
111
ICSID Convention, supra note 2, art. 14(1).
112
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).
114 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
115
Id. para. 29.
116
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.
State Court Intervention in International Arbitration 115
123
Id. at Conflict of Interest.
124
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.
116 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, Decision on Disqualification
129
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.
118 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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.
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.
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.
State Court Intervention in International Arbitration 119
The major exception to the above rule occurs in arbitration under the
auspices of the ICSID Convention, for the following reasons:
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
140
New York Convention, supra note 1.
141
ICC Rules of Arbitration, art. 23(2).
120 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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).
State Court Intervention in International Arbitration 121
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
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.
122 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
State Court Intervention in International Arbitration 123
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.*.
124 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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 then-
novel 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.
State Court Intervention in International Arbitration 125
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:
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:
160
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.
126 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNAL
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
163
Id. at *15.
164
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.
State Court Intervention in International Arbitration 127
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
Id.
172
Id. at 10809.