THE INTERNATIONAL LAW
Q UAR T E R LY
a publication of the florida bar international law section
www.floridabar.org  •  www.internationallawsection.org
In This Issue:
Message from the Chair..............3
International Arbitration in
Australia....................................4
Florida Adopts UNCITRAL
Model Law on International
Commercial Arbitration to
Further Bolster Miami’s Ability
to Compete as a Viable Seat....7
The Better Approach to Deciding
28 U.S.C. §1782 Applications
for U.S. Discovery in Private
Arbitrations Abroad.................23
A View from Abroad: Corporate
Responsibility for International
Crimes? .................................31
The Evolution of International
Arbitration in Latin America.....34
Applications for Executive
Council Members and
Treasurer Sought....................37
The Florida Bar Foundation: A
Cause We Can Share.............38
The Enforcement of Foreign
Arbitral Awards in Brazil and
the Ratification of the New York
Convention.............................39
The Necessity Defense in
Bilateral Investment Treaties:
Looking Forward.....................46
Production of Electronic
Documents and Information:
New UK Practice Direction
Targets Costs of Electronic
Disclosure...............................54
Lost in Translation: American
Juror Perceptions of Foreign
Litigants..................................56
Unchartered Waters: The
Kishenganga River Project
Dispute and Arbitration Under
the Indus Waters Treaty..........57
Vol. XXV, No. 3
The Application of the UNIDROIT
Principles of International Commercial
Contracts to International Commercial
Arbitration as lex contractus
By Ludwina Klein, Warsaw
Introduction
The UNIDROIT Prin-
ciples of International
Commercial Contracts
(“PICC”),1 prepared
and published by the
International Insti-
tute for the Unifica-
tion of Private Law
L. Klein
(“UNIDROIT”) in
1994 and revised in 2004, can be defined
as “a non-legislative codification of the
general part of the law of international
From the Editor . . .
Miami, London, Sydney, Warsaw,
The Hague, Montreal and Los Angeles;
the geographic diversity of the authors
selected for this special International
Litigation and Arbitration edition of the
International Law Quarterly is truly
remarkable—and the articles themselves
are even more impressive. On the heels
of our highly successful “Focus on China”
edition, the ILQ cannot be accused of
focusing solely on Latin America. Indeed,
this journal is rapidly becoming required
commercial contracts.”2 According to
the guidelines contained in the com-
ments to the Preamble to the PICC, the
term “international” contracts should be
interpreted broadly so as to exclude only
those contracts with elements connected
exclusively with one country and where
no international aspect can be found.3
The phrase “commercial” contracts, on
the other hand, is not to be understood
in opposition to “civil” contracts, where
the former depends on the commercial
See “UNIDROIT,” page 10
reading for any truly international lawyer.
In this issue alone, we cover areas from
Peter Anagnostou’s analysis of Australia’s
newly amended International Arbitration
Act, to Omar Ibrahem’s fascinating piece
on the Kishenganga River arbitration
between India and Pakistan. In addition,
Polish lawyer Ludwina Klein provides her
excellent scholarship on the role of the
UNIDROIT Principles of International
Commercial Contracts in resolving in-
continued, next page
Winter 2011
 The International Law Quarterly
The International Law Quarterly is prepared
and published by the International Law
Section of The Florida Bar.
Edward M. Mullins, Miami
Chair
Nicolas Swerdloff, Miami
Chair-elect
Richard C. Lorenzo, Miami
Secretary
C. Ryan Reetz, Miami
Treasurer
Francisco Corrales, Weston
Immediate Past Chair
Mark R. Weiner, Tampa
CLE Chair
Clarissa A. Rodriguez, Maimi
CLE Vice-Chair
Alvin F. Lindsay, Miami
Editor-In-Chief
Angela Froelich, Tallahassee
Program Administrator
Lynn M. Brady, Tallahassee
Layout
Elizabeth Ortega
Media Contact, ECO Strategic Communications,
eco@ecostrats.com
Articles between 7 and 10 pages, double-
spaced, involving the various disciplines af-
fecting international law may be submitted on
computer disk with accompanying hard copy,
or via electronic format in Word (with the use
of endnotes, rather than footnotes.) Please
contact Alvin.Lindsay@hoganlovells.com for
submissions and for any questions you may
have concerning the Quarterly.
DEADLINE FOR next ISSUE
IS APRIL 15, 2011.
Page 2
editor’s note arbitral awards in Brazil historically,
and after ratification of the New York
from page 1
Convention. And Judy Angulo tracks
the historic transformation of arbitra-
tion in Latin America from protection-
ternational arbitral conflicts. British
ist to modern.
practitioners Neil Mirchandani and
In short, there is something here
Matthew Davis write on the UK’s new
for everyone interested in internation-
directive on the production of elec-
al litigation and arbitration, and we
tronically stored information. Jenelle
believe this publication will make ev-
LaChuisa proposes a better approach
ery international lawyer a better one.
for applying 28 U.S.C. 1782 to arbitra-
On behalf of the International Law
tions abroad. And top trial consultant
Section of The Florida Bar, our editors
Dr. Philip K. Anthony gives the sur-
and leadership, I would like to extend
prising facts on biases of U.S. jurors
my sincere thanks to those authors
to foreign litigants and tells how to
who contributed to make this edition
prepare your foreign witnesses for
another success. To everyone else, I
testimony in U.S. courts.
would encourage you to think about
Certainly Latin America is not left
what international expertise you
out. In this issue, Adam Gutin and
could provide for an upcoming edition
Britteny Keck write on Miami’s ability
of the ILQ, and write an article! Our
to compete as a viable seat of arbitra-
fine publication has never been better
tion given its competitive advantage
and, with your active and continued
in the Latin American market. Patrick
support, we will achieve our goal of
Miller discusses the necessity defense
being the world’s best journal cover-
as used by Argentina in defending
ing all areas of international law.
bilateral investment treaty arbitra-
tion in the wake of its financial crisis. Alvin F. Lindsay
Leonardo Lima provides the definitive Editor-in-Chief
analysis of the enforcement of foreign Hogan Lovells US LLP
CLEs in This Issue:
9th Annual International Litigation and
Arbitration Conference (Audio CD)
Course no. 1260
(Page 30)
Florida Quebec Forum 2011
Course no. 1268
March 18-19, 2011
(Page 44)
New Frontiers in Arbitration
Course no. 1214
June 24, 2011
(Page 53)
Winter 2011
 The International Law Quarterly

Message from the Chair

World-class seminars and conferences have always been an important part of the Section, and the 9th
Annual International Litigation and Arbitration Conference held on 4 February at the Westin Diplomat in
Hollywood, Florida, got 2011 off to an impressive start. The Conference featured speakers from around the
globe—including a recently retired Justice of the Eastern Caribbean Court of Appeal—on cutting-edge topics
and included the signing of a cooperative agreement with the State of Parana (Brazil) Bar Association. These
events were preceded the night before by a superb cocktail reception at the Viceroy Hotel’s Club 50 and a
special speakers’ dinner with a keynote address from a Brazilian Supreme Court Justice.
On behalf of the entire Section, I want to give a special thanks to the ILAC Co-Chairs Rafael Ribeiro
and Arnie Lacayo, the 9th Annual Conference Co-Chairs Santiago Cueto and Quinn Smith, the Confer-
ence Steering Committee members, and each of the presenters at the Conference for their hard work and a
job well done.
The 9th Annual ILAC built off of last year’s excellent event with strong attendance by a good cross-section
of ILS members and non-members, as well as lawyers from other states and countries. If you did not attend,
turn to pages 28-29 to see what you missed and then to page 30 to order the audio CD.
Coming up quickly on the Section’s conference calendar—this week, in fact— is the Florida Quebec
Forum 2011 (1268R). Designed to further improve relationships between Quebec and Florida, as well as in-
form the public, the forum will optimize participation by attorneys, business people and other professionals.
Scheduled for 18 and 19 March at the Fort Lauderdale Airport Hilton Hotel, the forum brings together law-
yers from Quebec and Florida, business people, bankers, accountants and financial institutions, with renown
legal experts. The focus will be current issues involving business, immigration, taxes, real estate, mortgages,
family law and insurance. Register now or on-site. For details, see the brochure on pages 44-45. The ILS ex-
tends a special thanks to Lapierre Law Center, Desjardins Bank, Lucius Smejda, Lex International
Law Firm, and Greenspoon Marder, P.A., for sponsoring this event!
Next month the ILS will be hosting a reception at the ABA Sections of Litigation and Criminal Jus-
tice 2011 Joint Annual Conference to be held 13-15 April at the Fountainbleau Resort on Miami Beach.
Go to americanbar.org for more information, and plan on joining us at this premier CLE event for civil and
criminal litigators. Make a vacation of it and stay at the Fountainbleau through 22-24 April for the ABA’s
First Annual International Legal Symposium on the World of Music, Film and Television.
On 2 and 3 May 2011, an IBA cross-border real estate conference will be held at the Mandarin Oriental
Hotel in Miami, Florida. The conference, entitled “Global Investments in Real Estate: Trends, Opportu-
nities, and New Frontiers,” will include seven substantive panel sessions on topics such as “Cross-Border
Real Estate Investments: Hot Topics”; “Distressed Deals: Turning Problems into Opportunities”; “Shopping
Centers in a Recovering Market”; and “Real Estate Development: Re-Starting the Engine.” The program will
conclude with a session entitled, “Preparing for a Major Sporting Event: Real Estate, Legal and Other Is-
sues Arising from the Olympics, as Seen from Rio.” After the real estate conference, stick around for the IBA
Leaders Conference and the Second Conference of the Americas on 4-6 May at the same location.
The latter is an opportunity for legal professionals from North America and South America to network, share
information and identify issues, concerns and opportunities across the Americas’ legal markets and jurisdic-
tions. For details on these International Bar Association events, click on the “Conferences” tab at ibanet.org.
The Section’s year winds up at The Florida Bar’s Annual Convention in June at the Gaylord Palms Resort
& Convention Center in Kissimmee. As a bookend to February’s ILAC, and continuing one of the themes of
this edition of the ILQ, the Section will be sponsoring a seminar on 24 June entitled “New Frontiers in
Arbitration” (1214R). For more information, see the CLE brochure on page 53.
Finally, if you missed one of our webinars, you can still purchase CDs for each, including the “BP Deepwa-
ter Horizon,” “China (the New Silk Road),” and “Cross-Border E-Discovery.” CDs can be purchased online, by
fax and by mail. Please go to The Florida Bar’s website for complete order information. This is a great way to
get caught up on important international legal issues at your convenience.
Edward M. Mullins
Astigarraga Davis Mullins & Grossman, P.A.

Winter 2011 Page 3

 The International Law Quarterly
International Arbitration in
Australia
International arbi-
tration in Austra-
lia is governed by
the International
Arbitration Act
1974 (Cth) (“IAA”).
On 6 July 2010,
the International
Arbitration Amend-
P. Anagnostou
ment Act 2010 (Cth)
(“IAA Amendment Act”) received
Royal Assent and passed into law.
The intent of the IAA Amendment Act
is to revise substantially the IAA in
order to promote the use of arbitra-
tion as a method of resolving disputes
arising out of transnational contracts
and increase the attractiveness of
Australia as a seat for international
commercial arbitration.
The IAA Amendment Act is com-
plemented by other regulatory and
government initiatives also intended
to modernise the national and domes-
tic arbitration laws1 and to create an
international venue for the settlement
of international disputes in Sydney,
Australia.2
The impetus behind the initial
implementation of the IAA was to en-
shrine the New York Convention into
Australian legislation to ensure the
recognition and enforcement of foreign
arbitral awards.3 Thus, the IAA per-
mitted parties to move an Australian
court for an order staying the proceed-
ings so as to enable an international
arbitration to proceed. Further, it
ensured the international enforcement
of arbitration agreements and awards
made in other states.
The legislation was substantially
amended in 1989 to incorporate the
provisions of the United Nations
Commission on International Trade
Law (“UNCITRAL”) Model Law on In-
ternational Commercial Arbitration.
This amendment was widely praised
Page 4
By Peter Anagnostou, Sydney
since Australia was one of the first
countries to adopt the Model Law.
Nevertheless, Australia’s legal and
judicial framework did not always
create the ideal environment for
international arbitration. A number of
high-profile decisions gave rise to con-
cerns about the Australian judiciary’s
approach to international arbitra-
tion.4 These deficiencies, coupled
with the growth of the Asia-Pacific
economy, have led to a strong push by
the Australian government to reform
the current legislation in an effort
to make Australia a major centre for
international arbitration in the Asia-
Pacific region.
Purpose of the IAA
Amendment Act of 2010
The new regime seeks to promote
Australia as both the seat and place
of choice for international arbitrations
as well as to provide parties with
greater certainty regarding recogni-
tion and enforcement in Australia.
On 25 November 2009, the
Attorney-General of Australia, the
Honourable Robert McClelland MP,
introduced into Parliament proposed
reforms for the IAA designed to “en-
sure the Act remains at the forefront
of international arbitration practice.”
The amendments to the IAA were
seen by the Attorney-General to be
essential in order to “emphasise the
importance of speed, fairness and
cost-effectiveness in international
arbitration, while clearly defining
and limiting the role of the courts
in international arbitration without
compromising the important protec-
tive function they exercise.”5
In general terms, the aim of the
IAA is “to facilitate international
trade and commerce by encouraging
the use of arbitration as a method of
resolving disputes.”6
The impetus for such an overhaul
of Australian international and do-
mestic arbitration legislation lies in
the following key areas: (1) to clarify
and update the application of the IAA
by adding provisions from the 2006
revision of the UNCITRAL Model
Law on International Commercial
Arbitration 1985; (2) to improve the
overall operation of the IAA; (3) to
provide greater guidance to the courts
in interpreting the IAA; (4) to provide
additional option provisions to assist
the parties to a dispute; and (5) to
clarify the circumstances in which a
court may refuse to enforce a foreign
award.
Key Amendments
The following so-called “Model
Law Plus”7 amendments of the IAA
Amendment Act may be significant in
the practice of international arbi-
tration in Australia. Notably, the
amendments apply only to arbitration
agreements entered into after 6 July
2010 unless the parties agree to adopt
them.
Enforcement of foreign arbitra-
tion awards. There are a wider
range of options when enforcing ar-
bitral awards in Australia. A foreign
arbitration award may be enforced
in Australia by a court of a State or
Territory or the Federal Court as if
it were a judgment of that court. The
IAA now provides an exhaustive list
of the grounds that mirror those set
out in the Model Law and New York
Convention upon which the enforce-
ment of an award can be challenged:
(1) the party challenging the award
was under an incapacity; (2) the
arbitration agreement was invalid;
(3) no proper notice was given to the
challenging party; (4) the dispute is
Winter 2011
 The International Law Quarterly
beyond the scope of the arbitration
agreement; (5) the tribunal or process
was or is inconsistent with the arbi-
tration agreement; (6) the award is
not yet binding on the parties; (7) the
subject matter of the dispute is not
capable of settlement by arbitration;
and (8) the enforcement of the award
would be contrary to public policy.
The amendments to the IAA make it
clear that the court does not have any
discretion to refuse enforcement on
any other ground.
Optional provisions. There is now a
necessity expressly to “opt-in” or “opt-
out” of the optional provisions of the
IAA. Unless parties agree to “opt-out,”
they will have the following rights in
arbitrations governed by the IAA: (1)
a right to request that subpoenas be
issued;8 (2) a right to apply to a court
for relief as a result of non-compliance
with a subpoena;9 (3) a right to seek
security for costs;10 and (4) a right to
apply to a court for relief in the event
that the respondent to an arbitration
refuses to participate. Similarly, un-
less parties agree expressly to “opt-in”
to the provision, there will be no right
for either party to apply to the court
for an order for the disclosure of confi-
dential material.
Impartiality of Arbitrator. There is
now a higher threshold for challeng-
ing the independence of an arbitrator.
The IAA Amendment Act contains a
long-awaited clarification of the op-
eration of the Model Law with respect
to challenges to the appointment
of an arbitrator.11 The traditional
“reasonable apprehension of bias” test
has been replaced with a test based
on whether there is a “real danger of
bias” in order to protect arbitrators
and the process from speculative chal-
lenges.12
Interim measures. The IAA has
granted parties enhanced powers to
obtain interim measures. Parties to
an international arbitration, taking
place both in Australia and overseas,
can now ask the arbitral tribunal
to order interim measures. Except
in limited circumstances, such an
interim measure will be recognised
and enforced by Australian courts, ir-
respective of the country where it was
issued.13
Appeal. There is now limited scope to
appeal or challenge an award. Appeal-
ing an award handed down by arbi-
tration now requires both the consent
of the parties and leave of the court.
Arbitration Agreements. There
are new ways in which an arbitra-
tion agreement may be formed. The
definitions used in the IAA have
been amended, whereby agreements
in writing have been extended to
cover electronic components,14 in line
with the Model Law.15 Subject to the
agreement being recorded in some
form, the agreement will be valid and
enforceable.
Model Law. Significantly, if an
arbitration agreement is interna-
tional and the seat is in Australia,
the parties can no longer “opt-out” of
the Model Law and have a domestic
arbitration with the right to apply for
leave to appeal the award.16
continued, next page

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Winter 2011 Page 5

 The International Law Quarterly
Australia
from preceding page
The above reforms provide a more
predictable framework for interna-
tional arbitration in Australia based
on the Model Law, with increased
powers for arbitrators and the benefit
of greater court assistance to the arbi-
tral process if required.
As noted, these transitional provi-
sions of the IAA Amendment Act do
not have retrospective effect, leaving
agreements made prior to 6 July 2010
subject to the unamended IAA.
Conclusion
In a speech to the Australian
Centre for International Commercial
Arbitration (“ACICA”) on 4 December
2009, the Attorney General said that
the “legislative reform is only part of
what is required to build a truly Aus-
tralian brand of international com-
mercial arbitration,” and that what is
needed is “cultural reform as to how
arbitration is conducted in Australia.”
He stressed the necessity to “invent a
form of arbitration that is tailored to
the needs of the parties—to the needs
of business.”17
This IAA Amendment Act rep-
resents only part of the enormous
change in the landscape of arbitra-
tion in Australia over the past thirty
years. Throughout the profession, the
attitudes of the various courts and
practitioners have evolved to embrace
arbitration as a legitimate mecha-
nism for the resolution of disputes.
This has been reflected in the estab-
lishment of facilities for arbitration,
such as the ACICA and the Austra-
lian International Disputes Centre
(“AIDC”).
The IAA Amendment Act is a wel-
come development to those partici-
pating in international arbitrations
with an Australian seat and is sure to
attract a good deal of attention from
both the community of Model Law
countries and the users of interna-
tional arbitration. As the demand
of the Asian economies to provide a
neutral location for dispute resolution
intensifies, Australia has emerged as
an efficient centre with enhanced sup-
port of the Australian courts.
Peter Anagnostou is the Chair of the
New South Wales Young Lawyers In-
ternational Law Committee. He is also
a member of the Australian Branch
of the International Law Association
and the Australian Forum for Inter-
national Arbitration. He is currently
a Sydney-based construction lawyer
working in-house for one of Australia’s
largest construction firms.
Endnotes:
1 The recently introduced Commercial
Arbitration Act 2010 (NSW).
2 The Australian International Disputes
Centre was officially opened by the Austra-
lian Attorney-General Robert McClelland
and NSW State Attorney General John
Hatzistergos on 10 Aug. 2010.
3 The New York Convention is “widely
recognised as the foundation instrument
of international arbitration.” UNCITRAL,
“1958 - Convention on the Recognition and
Enforcement of Foreign Arbitral Awards - the
‘New York’ Convention,” UNICTRAL website,
viewed 25 Nov. 2010, http://www.uncitral.org/
uncitral/en/uncitral_texts/arbitration/NY-
Convention.html.
4 Esso Austrl. Res. Ltd. v. Plowman, 128
A.L.R. 391 (1995) (regarding confidentiality),
and Eisenwerk v. Australian Granites Ltd., 1
Qd. R. 461 (2001) ( regarding the role of the
Model Law in the case of an ICC arbitration).
5 Robert McClelland, Austl. Atty-Gen.,
Address to the Australian Maritime and
Transport Arbitration Commission (10
July 2010), available at http://www.ag.gov.
au/www/ministers/mcclelland.nsf/Page/
Speeches_2010_1July2010-AddresstotheAus-
tralianMaritimeandTransportArbitrationCo
mmission%28AMTAC%29.
6 International Arbitration Amendment
Bill 2009, (Austl.) Australian Parliamen-
tary Library website, viewed 25 Nov. 2010,
http://www.aph.gov.au/library/pubs/bd/2009-
10/10bd163.htm.
7 These Australian-made “Model Law
Plus” provisions were developed after a care-
ful assessment of international jurisprudence
on international arbitration and the Austra-
lian common law.
8 IAA §. 23.
9 IAA § 23A.
10 IAA § 27.
11 IAA § 28.
12 IAA § 18A.
13 IAA c. IV(A).
14 IAA § 3(1).
15 Model Law art. 7, opt. 1.
16 IAA § 21.
17 Robert McClelland, Austl. Atty-Gen.,
Address to the Australian Centre for Inter-
national Commercial Arbitration (4 Dec.
2009), available at http://www.ag.gov.au/
www/ministers/mcclelland.nsf/Page/Speech-
es_2009_FourthQuarter_4December2009-
InternationalCommercialArbitrationinAus-
traliaMoreEffectiveandCertain

Ethics Questions?
Call The Florida Bar’s
CHANGE YOUR
ETHICS HOTLINE
ADDRESS ON-LINE!
Log on to The Florida Bar’s website
1/800/235-8619
(www.flabar.org) and use the form
found under “Find a Lawyer” and then
“Attorney Search.” The form is also
found under “Member Services.”

Page 6 Winter 2011

 The International Law Quarterly
Florida Adopts UNCITRAL Model Law on
International Commercial Arbitration to
Further Bolster Miami’s Ability to
Compete as a Viable Seat
By Adam Gutin & Brittney C. Keck, Palm Beach Gardens
Speaking at a recent meeting of
the Miami International Arbitration
Society (“MIAS”), renowned interna-
tional arbitration expert Jan Paulsson
challenged MIAS members to compete
on behalf of Miami to host the pres-
tigious International Council for Com-
mercial Arbitration (“ICCA”) Congress
in the near future.1 The challenge
came immediately on the heels of the
adoption by the Florida legislature of
a statute2 based on the UNCITRAL
Model Law on International Com-
mercial Arbitration with amendments
as adopted in 2006. Mr Paulsson’s
suggestion was a direct reference
to the often-asked question—what
should we do next to increase Miami’s
viability as a venue for international
arbitration?
Miami offers an interesting case of
a city trying to compete with several
other urban centers around the world
as a preferred venue for international
arbitration proceedings. The adop-
tion of the UNCITRAL Model Law
is not the first step in this effort but
merely the latest in a trend that has
been developing over the past several
decades. Efforts can be traced back
to at least the early 1980’s when
several prominent members of the
Miami business and legal commu-
nity attempted to launch an inter-
national arbitration institute called
the International Center of Florida.3
The institute lasted only a few years,
later merging with the World Trade
Center of Florida and taking on a
different purpose. But international
commercial arbitration in Miami
has continued to gain steam steadily.
For example, as of the International
Chamber of Commerce’s (“ICC”) most
recently published statistical report,
Winter 2011
Miami was the seat of more arbitra-
tions than any other U.S. city, with
the exception of New York.4 Among
other things, Miami-based practi-
tioners are seeking to exploit their
competitive advantage—geographic
location and a high number of trained
practitioners of Latin American and
Caribbean descent, fluent in both
English and Spanish—to draw arbi-
trations from Latin America and the
Caribbean.5
In adopting the Model Law-based
legislation, Florida became the
seventh U.S. state to do so, joining
California, Connecticut, Illinois, Loui-
siana, Texas and Oregon.6 The Model
Law became effective 1 July 2010.7
Its passage was the direct result of
a concerted effort by members of the
International Law Section of The
Florida Bar, many of whom are also
members of MIAS.8 The goal of the
adoption of the Model Law was to cre-
ate a sense of security among parties
and their counsel in selecting Miami
as a forum for international arbitra-
tion.9 Touting pro-business interests,
the bill steadily gained bipartisan
support and successfully navigated its
way through the Florida legislature.10
Notwithstanding the recent legisla-
tive victory, Miami’s progress has not
been without obstacles. In response to
the case of The Florida Bar v. Rapo-
port11 in 2003, members of the Florida
legal community pushed for strict
rules governing the unauthorized
practice of law.12 The case involved
an out-of-state lawyer soliciting
clients in Florida to represent them
in securities arbitration cases held
in Florida.13 Rapoport claimed that
the Federal Arbitration Act (“FAA”)
preempted Florida law and that he
was authorized to solicit and act for
parties in federal securities matters
under the FAA.14 The Florida Su-
preme Court held against Rapoport
and found him to have engaged in the
unauthorized practice of law.15 On the
heels of Rapoport, The Florida Bar
sought to implement amendments
to the Florida Rules of Professional
Conduct making it very difficult for
attorneys not licensed in Florida
to represent clients in arbitrations
in the state.16 Realizing the poten-
tially devastating effect this proposed
change in rules could have had on the
practice of international arbitration
in Miami, many international prac-
titioners fought for several years to
carve out an exception so that foreign
attorneys could represent parties in
international arbitrations.17 Conse-
quently, the revised rules contain
stricter requirements for out-of-state
counsel representing parties in
domestic arbitrations but do provide
an exception for counsel representing
parties in international arbitrations.18
The question arises whether the
adoption of the Model Law upgrades
Miami’s appeal all that much. After
all, there are numerous other coun-
tries which have adopted the Model
Law that are not at the top of the
arbitration venue lists (e.g., Bulgaria,
Cambodia, etc.).19 However, as Eduar-
do Palmer, the Miami-based attorney
at the helm of the push to adopt the
UNCITRAL Model Law, has stated:
“This is a multi-faceted mosaic that
[is being pieced] together to continue
to build on Miami’s reputation as a
leading city to conduct international
arbitration proceedings.”20
See “UNCITRAL,” next page
Page 7
 The International Law Quarterly
UNCITRAL
from preceding page
This “mosaic” is a combination of
the adopted laws discussed above,
conferences, an engaged academic
community, and of course, a support-
ive legal community. Since 2003, for
example, the ICC has been holding
an annual conference, “International
Commercial Arbitration in Latin
America: The ICC Perspective,” in Mi-
ami.21 Similarly, since 2003, the Inter-
national Centre for Dispute Resolu-
tion has held an annual International
Arbitration Conference in Miami.22
In addition, an engaged academic
community has benefited from the
development of Miami as an inter-
national arbitration venue. The law
schools at Florida International
University (“FIU”) and the University
of Miami (“UM”) both have interested
students who are vested in education
in international arbitration, at least
based on their participation in the
annual Willem C. Vis Moot in Vienna,
Austria.23 Both schools host Vis prac-
tice moots in the spring of each year.24
The FIU Vis Practice Moot attracts
schools from the United States, Latin
America, and Europe. The UM annual
moot is sponsored by The Florida
Bar’s International Law Section and
consists of all the Florida law schools
that participate in the Vis Moot.25
Also, in addition to the Vis Moot, UM
students have begun participating
in the Madrid Moot, a Spanish-lan-
guage moot focused on international
commercial arbitration,26 and FIU
students have branched into interna-
tional investment arbitration through
the Foreign Direct Investment Moot
held in Frankfurt.27 Further, both
schools have begun to invest increas-
ing time and effort in cultivating
interest in international arbitration.
UM has secured big names in the
international arbitration community,
such as Jan Paulsson, president of
the London Court of Arbitration, and
Judith Freedberg, former general
counsel to the Permanent Court of Ar-
bitration, to head up the law school’s
Page 8
new LLM program in international
arbitration.28 Spearheaded by Profes-
sors Manuel Goméz and M.C. Mirow,
FIU has also created a Global Studies
Initiative seeking to foster dialogue
regarding international legal con-
cerns by taking a more “grass roots”
approach, forming partnerships with
local law firms and holding conferenc-
es such as the International Arbitra-
tion Annual Summit. The summit’s
inaugural event took place in early
March and gathered a number of key
practitioners, policymakers and schol-
ars from Latin America and the U.S.29
Moreover, FIU has launched a com-
prehensive empirical study on the use
of arbitration in Latin America and is
planning a series of other initiatives,
both in investment and international
commercial arbitration.30
As discussed above, as of 2008,
ICC statistics reported that Miami is
currently behind only New York as an
ICC arbitration venue in the United
States.31 Concurrently, the demand
for arbitrations where one or both of
the parties are from Latin America is
drastically increasing.32 Parties from
both Latin America and abroad have
long been hesitant to entrust dis-
putes arising from their investments
and commercial transactions to local
court litigation in Latin America for a
variety of reasons.33 Currently, based
on the available statistics, there ap-
pears to be a large, untapped market
from Latin America and the Carib-
bean participating in ICC arbitrations
upon which Miami has yet to draw
fully.34 Given the combination of this
increase in demand for arbitration,
the hesitance to entrust disputes to
local litigation in South America,
and Florida’s recent adoption of the
Model Law, the Miami legal commu-
nity is continually positioning itself to
compete better as the venue of choice
for international arbitrations stem-
ming from places south of the United
States.
Adam Gutin obtained his Juris
Doctor from the Florida International
University College of Law in May of
2010. He also has a Master of Busi-
ness Administration, Bachelor of
Science in Finance, and a Bachelor of
Arts in English from the University
of Florida. Adam would like to thank
Professor Manuel Goméz, Eduardo
Palmer, Burton Landy, Brittney Keck,
his family, and friends at the Interna-
tional Law Section of The Florida Bar
for their support.
Brittney C. Keck obtained her Juris
Doctor from the Florida International
University College of Law in May of
2010. She also has a Bachelor of Arts
in Political Science from the Univer-
sity of Central Florida. Brittney would
also like to thank Professor Manuel
Goméz, Eduardo Palmer, Burton
Landy, Adam Gutin, her family, and
friends at the International Law Sec-
tion of The Florida Bar.
Endnotes:
1 For more information on MIAS, see
http://www.miamiinternationalarbitration.
com.
2 2010 Fla. Laws ch. 2010-60.
3 Andres Oppenheimer, New Arbitration
Institute Isn’t First on the Block, Miami Her-
ald, Feb. 20, 1984.
4 2008 Statistical Report, 20 ICC Int’l Ct.
Arb. Bull. 12 (2009).
5 See Miami International Arbitration
Society, Miami: An International Arbitra-
tion Center for the Americas and Beyond,
http://miamiinternationalarbitration.com/en/
miami-as-a-center-for-arbitration.html (last
visited June 30, 2010) (“Miami is also a[n
international] . . . city with a large workforce
of first-class bilingual and multilingual pro-
fessionals . . . . In addition, Miami is a more
convenient and far less expensive location to
host international arbitration proceedings re-
lating to disputes arising in the Americas.”).
6 UNCITRAL.org, UNCITRAL Model Law
on International Commercial Arbitration, as
adopted by the U.N. Commission on Inter-
national Trade Law (21 June 1985) http://
www.uncitral.org/uncitral/en/uncitral_texts/
arbitration/1985Model_arbitration_status.
html (last visited June 24, 2010) [hereinafter
Model Law].
7 2010 Fla. Laws Ch. 2010-60.
8 Florida Bar International Law Section,
Minutes of the Mid-year Executive Council
Meeting, Jan. 16, 2009, http://international-
lawsection.org.
9 Julie Kay, Miami ramps up efforts to be
the seat of international arbitration, S. Fla
Bus. J., Dec. 4, 2009.
10 See Susannah A. Nesmith, Law would
let Florida adopt U.N. arbitration model, Apr.
29, 2010, http://www.dailybusinessreview.
com/Web_Blog_Stories/2010/April/U.N._arbi-
Winter 2011
 The International Law Quarterly
tration.html.
11 TFB v. Rapoport, 845 So. 2d 874 (Fla.
2003).
12 http://arias-us.org/index.cfm?a=11.
13 TFB v. Rapoport, 845 So. 2d at 875.
14 Id. at 876.
15 Id. at 878.
16 See In re Amends. to R. Reg. Fla. Bar
and Fla. Rules of Jud. Admin., 907 So. 2d
1138, 1139 (Fla. 2005).
17 See Matthew Haggman, Court Limits
Out-Of-State Attorneys, Miami Herald, May
13, 2005. Also, for a discussion of how various
U.S. jurisdictions have dealt with the issue of
the unauthorized practice of law in regard to
arbitration, see David M. Spector & Jessica
Romero, Arbitration and The Unauthorized
Practice of Law, 13 Arias 16-19 (1st Q. 2006).
18 R. Reg. Fla. Bar 1.3.11 (d), (e).
19 See Model Law, supra note 1.
20 Kay, supra note 9.
21 ICC, ICC Conference spotlights arbitra-
tion in Latin America, Oct. 19, 2007, http://
www.iccwbo.com/id16810/index.html; see
also Miami International Arbitration Society,
Thriving Infrastructure Geared Toward In-
ternational Arbitration, http://miamiinterna-
tionalarbitration.com/en/miami-as-a-center-
for-arbitration/infrastructure.html.
22 Am. Arb. Assoc., ICDR, AAA Construc-
tion Division to Hold Miami Conference,
http://www.adr.org/sp.asp?id=37444.
23 For general information on the Moot,
see The Annual Willem C. Vis International
Commercial Arbitration Moot, http://www.
cisg.law.pace.edu/vis.html. For a list of the
participants in the Moot, including the UM
and FIU teams, see Seventeenth Annual
Willem C. Vis International Commercial Ar-
bitration Moot 2009-2010 Registered Teams,
http://www.cisg.law.pace.edu/cisg/moot/par-
ticipants17.html#uni.
24 See FIU, http://calendar.fiu.edu/main/
events/view/2010/02/06/1935; see also
M.I.A.S. Blog, http://miamiinternationalarbi-
tration.com/blog/2009/11/florida-bar-vis-pre-
moot-call-for-arbitrators/.
25 See FIU, http://calendar.fiu.edu/main/
events/view/2010/02/06/1935; see also
M.I.A.S. Blog, http://miamiinternationalarbi-
tration.com/blog/2009/11/florida-bar-vis-pre-
moot-call-for-arbitrators/.
26 MOOTMadrid, http://www.mootmadrid.
es/.
27 Foreign Direct Investment International
Moot Competition, http://www.fdimoot.org/.
28 For Director of Professional Programs
Judith Freedberg’s full biography, see Uni-
versity of M.iami School of Law, http://www.
law.miami.edu/facadmin/admin/jfreedberg.
php.
29 FIU, Global Legal Studies Initia-
tive, http://law.lawnet.fiu.edu/index.
php?option=com_content&task=view&id=461
&Itemid=838.
30 FIU, Global Legal Studies Initia-
tive, http://law.lawnet.fiu.edu/index.
php?option=com_content&task=view&id=461
&Itemid=838.
31 2008 Statistical Report, 20 ICC Int’l Ct.
Arb. Bull. 7, 12 (2009).
32 See generally Jonathan Hamilton & Mi-
chael Roche, Survey of Trends in Latin Amer-
ican Arbitration, Int’l Disputes Q. (Summer
2009), available at http://www.whitecase.com/
idq/summer_2009_1a/ (discussing the growth
of ICC commercial arbitrations in a variety
of countries in Latin America); see also, Ar-
noldo Wald, The Development of Arbitration
in the Brazilian Court (2006-2009), Arb. Rev.
of the Americas (2010), available at http://
www.globalarbitrationreview.com/reviews/21/
sections/79/chapters/819/brazil/ (discuss-
ing the increased rate of arbitration growth
specifically in Brazil).
33 See generally Nigel Blackaby & Sylvia
Noury, International Arbitration in Latin
America, Latin Lawyer Rev. (2006), available
at http://www.freshfields.com/publications/
pdfs/2006/LLReviewArbitration.pdf (describ-
ing parties’ hesitance to participate in local
court litigation in Latin American because
of risks including: unfamiliarity with local
procedures; partiality; corruption; unenforce-
ability of the judgment outside of the local
district; delay; and appeals).
34 See generally 2008 Statistical Report, 20
ICC Int’l Ct. Arb. Bull. 7, 12 (2009).

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Winter 2011 Page 9

 The International Law Quarterly
unidroit
from page 1
character of the transaction or the
“merchant” status of the parties. The
term “commercial” is instead intended
to exclude “consumer” contracts from
the scope of application of the PICC,
as such contracts may be subject
to special restrictions in some legal
systems. The PICC do not define “con-
sumer” contracts but recommend nar-
row interpretation so that the term
“commercial” contract can be given
the broadest possible meaning.4
Sixteen years after the promulga-
tion of the first version of the PICC
and six years after their amendment,
there is no doubt as to the significance
of the PICC in the practice of inter-
national commercial contracts. They
have received much attention in the
literature, as well as in the practice of
national courts and arbitral tribunals.
The general approval of the PICC is
reflected in the extensive UNILEX
database5 comprising the relevant
bibliography and case law. The value
of the PICC has been approved in at
least three contexts. First, as contem-
plated in the Preamble, they “serve
as a model for national and interna-
tional legislators.”6 Second, they are
widely used in drafting and negotiat-
ing cross-border contracts.7 Finally,
they are referred to in the process of
settling disputes arising from inter-
national transactions. In this context,
because of their non-binding charac-
ter, the PICC are relevant predomi-
nantly in international arbitration.8
The role of the PICC in resolving
arbitral conflicts is perhaps the most
controversial and therefore subject to
ongoing debate.9
The aim of this article is to assess
the extent to which the PICC can con-
tribute to international commercial
arbitration, despite their non-binding
character. In so doing, we will first
identify various contexts in which the
PICC may apply. The analysis of their
use in international commercial ar-
bitration will be limited to one of the
spheres of their applicability, namely
Page 10
their role as lex contractus, with a
focus on the drafters’ intent expressed
in the Preamble, as well as an exami-
nation of different ways in which the
PICC have been used in arbitration
practice in this context. We will also
assess whether the practical use of
the PICC in international commer-
cial arbitration corresponds with the
purpose intended by the drafters.
The following section examines the
character and the scope of the PICC.
The next section discusses their ap-
plication as lex contractus chosen by
the parties or arbitrators. The final
section is devoted to the problem of
qualifying the PICC as trade usages
and the possibility of their application
in this context. Little attention will be
given to matters relating to the appli-
cation of the PICC to State contracts
or the challenge and enforcement of
arbitral awards based on the PICC.
Other interesting aspects of the PICC,
such as the application of the PICC to
arbitration agreements themselves or
the substantive content of the PICC
and its quality, are also beyond the
scope of this article.
1. The Character and the
Scope of the PICC
The PICC as a Set of General
Rules for International
Commercial Contracts
The PICC were designed as a
neutral set of rules of international
contract law to be used “throughout
the world irrespective of the legal tra-
ditions and the economic and political
conditions of the countries in which
they are to be applied.”10 The intent
of the authors was to create a system
of rules that would be a restatement
of the law of international commer-
cial contracts reflecting the concepts
present in the majority of national
law systems and that, therefore,
could become widely accepted.11 The
drafters wanted to assimilate various
rules from both civil and common law
systems. At the same time, their am-
bition was to provide solutions best-
suited for use in commercial transac-
tions of international character, and
in certain cases preference was given
to rules that are not yet common to
the majority of legal systems but
that facilitate the overriding purpose
best.12 Thus, the PICC are not simply
restatements of the most widely ac-
cepted trade practices and usages.
At the same time, it is worth noting
that the description of the PICC as
a set of “general rules”13 does not do
them justice. Many of the provisions
are far from being abstract and in fact
contain very precise rules that easily
can be used by contracting parties, as
well as by arbitrators in their decision
making. On the other hand, in order
to provide greater flexibility and allow
adaptation to changing circumstanc-
es, many of the provisions contain
integrated safety mechanisms, such
as the “unless the circumstances indi-
cate otherwise” clause, leaving some
discretion to the arbitrators in their
application.14
The PICC—through “privatiza-
tion”—represent a new, modern
approach to the unification of in-
ternational-trade law.15 Traditional
instruments, such as international
conventions or model laws, have been
replaced by a non-binding, “soft law”
instrument adopted by an intergov-
ernmental organization. Moreover, the
fact that they do not have the force
of law may make them even more at-
tractive.16 First, they were written by
independent experts, academics and
practitioners who specialize in com-
parative contract law and, therefore,
arguably have a better understanding
of the subject than officials delegated
by national governments to participate
in drafting international conventions.
A second advantage of the PICC over
traditional legal tools is greater flex-
ibility and adaptability to changing
business realities in cross-border trade
practice, with the possibility of amend-
ment without the need for complicated
procedures similar to those required
by international conventions and
“hard” law instruments. Finally, unlike
most international law instruments,
the PICC do not apply automatically
but are based on consensus. That is
to say, their application is based on
voluntary acceptance by the parties or
arbitrators and depends on whether
Winter 2011
 The International Law Quarterly
they prove to be useful in the circum-
stances of the particular transaction.
On the other hand, the consensual
character of the PICC can at the same
time potentially limit the number of
cases in which they come into force.
The other aspect worth mentioning
is that the PICC, as a non-binding in-
strument, cannot be applied as a law
governing the merits of the dispute
by national courts that are obliged to
apply the law.
1.2 The Scope of
Regulation
The PICC are not limited to any
particular type of contract. They
begin with the Preamble, contain-
ing guidelines on the scope of ap-
plication, followed by some “general
provisions.”17 The PICC originally
contained 120 articles covering areas
such as formation and validity of the
contract, interpretation and content,
performance and non-performance, as
well as remedies for non-performance.
Since the original PICC generally
worked well in practice, most of the
2004 revisions related to comments
and illustrations, and only one “black
letter” rule was amended. Further
modifications reflected the need for
adjustment of the PICC to the needs
of rapidly developing electronic com-
merce.18 The current edition includes
five additional chapters dealing
with authority of agents, third-party
rights, set-off, assignment of rights,
transfer of obligations, assignment of
contracts, and limitation periods.
The novelty of the current version
is that it moves out of the traditional
scope of contract law and now also
covers tri-partite relationships (e.g.,
agency or assignment) as well as
some topics traditionally governed
by mandatory rules, such as limita-
tion periods. This has raised doubts
about the compatibility of the above-
mentioned changes with the soft-law
character of the PICC.19 The main
concern is the position of third par-
ties, who should not be bound by any
rules without their consent.
There are still areas that the PICC
do not cover, such as the transfer of
Winter 2011
property by sale. Moreover, there are
other aspects of transactions, such as
capacity to contract, corporate powers,
prescription or statutory interest—
aspects not regulated by the PICC—
that are traditionally governed by
domestic law. This implies the need
for application of additional rules (in
most of cases, domestic law) to supple-
ment the PICC.
1.3 The Applicability of the
PICC – General Remarks
The scope of the PICC is set out in
the Preamble which, in paragraphs
two through six, indicates a num-
ber of possible situations in which
they apply. Examination of these
provisions results in the conclusion
that the PICC work in three gen-
eral contexts: as law governing the
contract (lex contractus); as a means
of interpreting and supplementing ap-
plicable domestic law; or as a means
of interpreting and supplementing
international uniform law instru-
ments. In the last two cases, the PICC
are used as an equivalent to lex fori.
According to the Preamble, the
PICC can become the law governing
the contract in several ways. Ideally,
the parties expressly decided that
their contract be governed by the
PICC exclusively or in conjunction
with domestic law. Other situations
arise when the parties referred to
“general principles of law, the lex
mercatoria or the like,” or where
they did not make any choice as to
the governing law. In these circum-
stances, the power to decide whether
or not to apply the PICC is vested in
the arbitrators. This distinction is
reflected in the Preamble, providing
that the PICC “shall” apply when the
parties have chosen them to govern
the contract, but they “may” apply in
the other cases.
The possibility of applying the
PICC as lex contractus in the absence
of any choice of law by the parties
arose through the 2004 revisions. The
changes were introduced to reflect ar-
bitral practice. The drafters took into
account the fact that, even though
arbitrators will usually apply a par-
ticular domestic law, they may still
wish to refer to the PICC in situations
where it is apparent that the parties
wanted to exclude application of any
domestic law or where the contract
has connections to many countries,
none of which predominates.20
The second context in which the
PICC can be a useful legal tool is
when they are applied as a means of
interpreting applicable domestic law.
This provision is also a result of the
2004 edition. In the original version of
the PICC their supplementing role in
this regard was limited to situations
“when it proved impossible to identify
the relevant rule of the applicable
law.”21 This amendment was another
response to general practice of arbi-
tral tribunals.22
Finally, the last important area of
the PICC’s application is interpret-
ing and supplementing international
uniform law. In this regard, the most
significant seems to be the role of
the PICC with respect to the United
Nations Convention on Contracts
for the International Sale of Goods
(“CISG”).23 The number of interna-
tional law instruments that are being
interpreted with the use of the PICC
is growing constantly, thanks to the
official recommendations of interna-
tional organizations.24
Here, it is important to stress that
the provisions of the Preamble regu-
lating the scope of the PICC were only
guidelines for those in international
trade, as well as judges or arbitrators,
setting forth general areas in which
the PICC can prove to be a useful
legal tool. The situations set forth
therein do not constitute an exhaus-
tive list of the contexts in which the
PICC can be applied.25 There are
other possibilities for bringing them
to the arbitration proceedings; for ex-
ample, through incorporation as con-
tractual provisions or use as a means
of contract interpretation. The former
possibility is the consequence of the
parties’ freedom of contract. They
can decide to subject their agreement
to a particular domestic law and at
the same time incorporate the PICC
into their contract, either by simply
See “UNIDROIT,” next page
Page 11
 The International Law Quarterly
unidroit
from preceding page
copying their provisions or through
reference.26 In such a case, the PICC
will become a part of contractual
provisions and will need to be applied
within the applicable domestic law,
the mandatory provisions of which
will prevail over the contractual
terms.
The use of the PICC to interpret
contracts is closely connected to their
role as an equivalent of lex contrac-
tus and therefore will be discussed in
more detail in a later section.
Also worth mentioning when dis-
cussing the applicability of the PICC
are the prerequisites as to the “inter-
national” and “commercial” character
of the contracts. This has already
been discussed27 and is repeated
here only to underline that despite
the above-mentioned requirements,
the PICC can apply to all contracts,
international as well as domestic,
regardless of their commercial or non-
commercial (consumer) character.28
This is based on the permissive char-
acter of the Preamble, as well as the
express recommendations contained
in the comments.29 On the other hand,
many national legal systems regulate
domestic and international arbitra-
tion differently. Consequently, they
impose more restrictions on the par-
ties’ freedom of choice of applicable
lex contractus in the domestic cases
and limit it to the commercial con-
tracts.30
2. The PICC as lex
contractus
2.1 Arbitrators’ Freedom to
Determine the Law Governing
the Merits of the Dispute
The first point that needs to be
made when discussing the role of the
PICC as lex contractus in interna-
tional commercial arbitration is that
this form of dispute resolution is far
better suited for the use of soft-law
instruments than traditional litiga-
tion in domestic courts. Therefore,
the PICC recommend combining the
choice of law made in their favor with
an arbitration clause.31
This is justified given the benefits
to arbitrators from a concrete refer-
ence to rules governing the merits
of any dispute. Their decision is not
subject to any lex fori, which would
prevent them from applying soft-law
instruments. Instead they have lex
arbitri; that is, the law governing the
procedural aspects of the interna-
tional commercial arbitration in the
country in which the arbitral proceed-
ings take place. The vast majority of
modern arbitration laws and rules
allow the arbitral tribunal to enforce
not only choice-of-law clauses made in
favor of a particular domestic law, but
also those referring to the “rules of
law.”32 Unquestionably, the latter also
encompasses soft-law instruments
like the PICC.33 Similarly, nobody
today questions the parties’ right to
exercise their autonomy by choosing a
body of rules other than domestic law
or international law instruments.34
The position of the arbitrators is
different when no valid choice of law
was made and that determination
depends largely on the applicable
lex arbitri and the arbitration rules
chosen as well as the form of the arbi-
tration (institutional versus ad hoc).
This subject will be discussed in more
detail later in this section.35
If a dispute is brought before a do-
mestic court, the choice of law clause
designating the PICC as lex contrac-
tus probably would not be enforce-
able. Judges are bound to apply their
domestic law that in most cases does
not allow for the application (as lex
contractus) of a body of rules other
than the particular national law sys-

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Page 12 Winter 2011

 The International Law Quarterly
tem, even with an express choice-of-
law clause.36 In such a situation, the
parties’ reference to the rules of law
will be treated as mere incorporation
of contractual provisions that serve to
supplement domestic law determined
with rules of private international
law.37
The choice of the PICC as lex
contractus, by parties or arbitrators,
can in practice cause difficulties. The
first potential problem may occur if
the PICC prove to be in contraven-
tion of the mandatory rules of the
otherwise applicable law. In that
situation, even though the PICC will
exclude application of that domestic
law, in the vast majority of cases the
provisions of the former (also manda-
tory) will not be able to override the
mandatory provisions of the latter.38
The mandatory rules that should
be taken into account would be not
only those of the domestic law of the
seat of the arbitration, but also those
contained in the domestic law of the
country in which the enforcement will
be sought.39
Other complications can be caused
by the choice of the PICC excluding
the application of some of the provi-
sions classified by them as mandatory.
The PICC do not constitute a com-
plete system of rules regulating all
aspects of international commercial
contracts. Therefore, in some cases
it will be necessary to determine the
other system law to govern what is
not covered. The arbitral tribunal
facing this problem will most likely
decide to apply a particular domestic
law that has the strongest connec-
tion with the transaction. The parties
not wishing to have their agreement
governed by any domestic law are
advised to decide to incorporate the
entire PICC as governing transna-
tional law.40
2.2 Reference to the PICC
by the Parties
2.2.1 Express Choice of Law
The parties’ right to agree on the
law governing their contract is one of
the aspects of the rule of “party au-
tonomy” currently present in the vast
Winter 2011
majority of national legal systems.
In the context of arbitrators’ freedom
to determine the law governing the
merits of the dispute, a clause indicat-
ing the PICC as lex contractus will, as
a rule, constitute a valid choice of law
and will be enforced by the arbitral
tribunal.41 This is true also when
one or both of the contracting par-
ties are States or intergovernmental
organizations.42 The best approach is
to include the choice-of-law clause in
the contract, but the parties are also
free to agree on the application of the
PICC at a later stage, even after the
dispute has arisen and the request for
arbitration has been filed.
The parties can subject their
agreement exclusively to the PICC or
refer to them in conjunction with a
domestic law. In the latter case, they
can decide that their reference should
be treated as cumulative, alternative
or exclusive. Depending on which is
chosen, the arbitral tribunal will have
to base its decision on both of the sys-
tems of rules, on either of them, or on
one of them, depending on the subject
of the dispute.43 The relevant clauses
to this effect can be found in the foot-
notes to the Preamble.44 In addition,
many modern model contracts pre-
pared by international organizations,
such as the International Chamber
of Commerce (“ICC”) or the Interna-
tional Trade Centre UNCTAD/WTO,
contain reference to the PICC as lex
contractus to be applied exclusively or
in conjunction with a domestic law.45
If parties do not determine the scope
of application of the chosen bodies of
rules, and in the event of conflict be-
tween them, the decision as to which
should prevail will be left to the ar-
bitrators. In most cases, however, the
mandatory provisions of the chosen
domestic law will override the PICC.46
In this context, the most reasonable
practice seems to be combining the
choice of the PICC with another body
of rules (e.g., domestic law), given
the need for covering the areas not
regulated by the former. Alternatively,
the parties may decide to refer to the
PICC as a part of lex mercatoria. This
last solution would allow the parties
to avoid the application of any domes-
tic law.
Cases where the parties referred to
the PICC are still relatively rare, even
though arbitral tribunals have so far
treated their choice as lex contractus
very favorably.47 There are sixteen
awards reported, rendered in institu-
tional as well as ad hoc arbitration,
where the PICC were applied pursu-
ant to an express choice of the par-
ties. In some cases, parties referred
exclusively to the PICC48 whereas in
others, they were applied in conjunc-
tion with other rules such as terms
of the agreement, equity or domestic
law.49 Notably, in only three of these
cases did parties make an express
choice in favor of the PICC in their
contract.50 Of course, a larger number
of such contracts no doubt exist but
have not given rise to any dispute
yet, and thus are not reported. This
thesis seems to be confirmed by the
results of two inquiries carried out in
1996 and 1999 by UNIDROIT and the
Centre for Transnational Law (CEN-
TRAL), respectively, in which about
25% of respondents (lawyers, in-house
counsel, business people and arbitra-
tors) admitted referring to the PICC
as to lex contractus at least once.
None of the awards decided accord-
ing to the PICC chosen by the parties
as governing law has been reported
to have been set aside on the ground
of conflict with mandatory rules or
public policy.51
2.2.2 Implied Choice of
Law
As has been suggested, a good
practice in the area of cross-border
transactions is to insert the choice-
of-law clause in the contract during
its formation. In some cases, however,
parties prefer not to determine the
applicable lex contractus in their
agreement, but that does not neces-
sarily imply that a decision in this
regard has not been made. This can
occur when the parties are unsure
how to express their preferences or
when the crafting of such a clause
is considered too time consuming or
even unnecessary in the “honeymoon”
See “UNIDROIT,” next page
Page 13
 The International Law Quarterly
unidroit
from preceding page
period of negotiation. In these circum-
stances, the arbitrators may decide
that the parties’ choice has been made
implicitly (tacit choice of law).
The approach of the arbitral tri-
bunals to the tacit choice varies from
case to case. Possible indicators of the
parties’ will as to the law governing
their agreement are the language of
the contract, use of specific terms,
currency, the choice of the place of
performance or the circumstances of
the conclusion and execution of the
contract.52 The more these factors
show connection with a particular
domestic law or other set of rules, the
more probable that the arbitrators
will be willing to apply them. This
approach is also expressed in many
private international law instru-
ments, requiring that the choice must
be “clearly demonstrated by the terms
of the contract or the circumstances of
the case.” 53 According to some theo-
ries, there are two conditions that
must be fulfilled in order to establish
parties’ tacit choice. First, it needs to
be proved that they were aware of the
problem of the choice of applicable
law and, second, that it was their mu-
tual intention to solve this problem.54
The analysis of arbitral awards
shows that the arbitrators will refer
to the PICC pursuant to the interpre-
tation of parties’ tacit choice where
they believe the parties wished to
have their agreement governed by
some “neutral rules.” Examples can be
parties’ reference to the principle of
“natural justice”55 or “fairness.”56 This
approach is reasonable and is prefer-
able in such cases than referring to
vague concepts of the lex mercatoria
or general principles of law.57
2.2.3 Negative Choice of
Law
In certain cases, parties to inter-
national commercial transactions,
instead of designating the particular
lex contractus, may agree (expressly
or impliedly) on the rules that they
do not want to govern their contract.
This situation is usually described as
negative choice of law.58
Depending on the preferences of
the parties, the negative choice can
have one of three forms. First, the
parties may exclude the application of
some of the domestic laws that have
connection with the contract and at
the same time allow for the possibility
of the application of those remain-
ing. The second possibility involves
elimination of all laws connected with
the contract. Finally, the parties may
choose to derogate from all national
legal systems, even those that do not
have any connections with the con-
tract. In some cases, this effect also
can be achieved by the choice of the
international law.59
In certain exceptional circum-
stances, silence in the contract as
to the applicable law can have the
same result.60 In this situation, the
arbitrators’ approach will depend on
the results of analysis of some back-
ground information. In particular, it
will be necessary to establish whether
the absence of the choice-of-law clause

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Page 14 Winter 2011

 The International Law Quarterly
was a mere omission or rather an
intentional act resulting from the
impossibility of reaching compromise.
The tendency to interpret silence
in the contract as a negative choice
of law is characteristic of disputes
involving State parties.61
In arbitral practice, the negative
choice of law is usually seen as the
reference to transnational rules.62
Thus, it is not surprising that, in
practice, arbitrators facing the prob-
lem of negative choice often decided
to refer also to the PICC. The main
arguments in favor of their applica-
tion are that the PICC represent the
“principles generally applicable in
international commerce”63 that “seem
to be a faithful transposition of rules
admitted to be applicable to inter-
national contracts between traders
engaged in international trade”64 and
that they “have earned a wide accep-
tance and international consensus in
the international business commu-
nity.”65
2.3 Reference to the PICC
by the Arbitrators
2.3.1 Incorporation as a Part of
Transnational Law
The parties’ choice, express or im-
plied, positive or negative, is not the
only situation in which the PICC can
become the applicable lex contractus.
As will be demonstrated, in the vast
majority of cases, the PICC become
relevant in this context thanks to a
decision of the arbitrators, particular-
ly where the parties subjected their
contract to transnational rules.
In order to establish whether the
PICC can be considered an expres-
sion of the transnational law, it is first
necessary to determine the meaning
of the latter. The PICC as a whole
are not composed exclusively of rules
that can be qualified as “generally
recognized principles of law and trade
usages.”66 On the other hand, the ex-
pression “transnational law” can also
be defined in broader terms so as to
include “all rules and principles other
than those by a particular domestic
law.”67 If the preference is given to
the second approach, then the PICC
Winter 2011
could potentially be regarded a part of
transnational law.
The next problem arises in the
context of the introduction to the
1994 edition, in which the drafters
expressly state that even though the
PICC, for the most part, reflect widely
accepted concepts, they “also embody
what are perceived to be the best
solutions, even if still not yet gener-
ally adopted.”68 With this language,
the authors seem to suggest that the
PICC as a whole cannot be treated as
an expression of the lex mercatoria or
commonly accepted general prin-
ciples. The question remains, then,
what is the significance of paragraph
three of the Preamble that provides
for the application of the PICC when
the parties have agreed that their
contract be governed by “general prin-
ciples of law, the lex mercatoria or the
like”? The answer seems to be in the
comment to that paragraph, where
the authors advise that the PICC can
be used “to determine the content” of
the above-mentioned systems of rules.
The foregoing implies that the PICC
are not to be considered a “codifica-
tion” of general principles of law, the
lex mercatoria, etc., but to the extent
to which they correspond to the com-
monly accepted standards, they can
be a useful tool in ascertaining the
content of the transnational rules.69
In this context, their role is to over-
come, or at least reduce, the uncer-
tainty created by the vague concepts
forming transnational law by creating
a source of rules expressed in a much
more precise way.
The analysis of the arbitral awards
available in the UNILEX database
reveals that the PICC frequently have
been used in the context of transna-
tional law. These cases can be classi-
fied into three groups.
First, there are cases where the tri-
bunal applied the PICC as an expres-
sion of the lex mercatoria70 or “general
principles of law”71 referred to in the
contract. The wording of the choice-
of-law clauses differed from case to
case; however, arbitral tribunals did
not hesitate to apply the PICC in this
context even where the relevant rules
were described as “natural justice,”72
“general principles of equity,”73 or
even “Anglo-Saxon Principles of law.”74
Second, are cases where the
arbitrators applied the PICC in the
absence of parties’ choice of law or
alongside the law chosen.75 In some
of these awards, the arbitrators went
so far as to say that the PICC are an
expression of “international prac-
tices”76 and “the central component
of the general rules and principles
regarding international contrac-
tual obligations,”77 or even that they
“contain in essence a restatement of
those ‘principes directeurs’ that have
enjoyed universal acceptance and,
moreover, are at the heart of those
most fundamental notions which have
consistently been applied in arbitral
practice.”78
Certainly, in some cases arbitrators
were clearly more cautious and de-
scribed the PICC as “useful source[s]
for establishing general rules for
international commercial contracts,”79
or expressed the view that the use of
the PICC in the context of transna-
tional law is limited, and they can be
considered a part of the lex mercato-
ria only inasmuch as they constitute
“a faithful transposition of the rules
which business people involved in
international trade recognize as ap-
plicable to international contracts.”80
There are also remarkable awards
where the PICC were applied not as
an expression of, but as an alternative
to, the vague concepts of lex merca-
toria, the nature and scope of which
are uncertain.81 This may suggest the
possibility that the PICC will at some
point take over the function of at least
some of the concepts within the trans-
national law.
Finally, in some cases arbitral
tribunals simply refused to apply the
PICC as an expression of transna-
tional law because “at present there is
no necessary connection between the
individual principles and the rules of
the lex mercatoria.”82 Most of these
awards, however, relate to the appli-
cation of the PICC as a trade usage,
which will be discussed further below.
The domestic courts tend to treat
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from preceding page
favorably the arbitral awards refer-
ring to the PICC as to the expression
of the transnational rules and uphold
their validity in the cases where the
arbitrators were not acting as amia-
bles compositeurs, or mediators.83
2.3.2 Absence of Any
Choice of Law by the
Parties
There can be various reasons
behind the absence of any valid choice
of law. First, even though it may seem
unbelievable, in certain cases parties
do not think about the choice of law
at all or do not consider this aspect
important enough to waste any time
on it. The other possibility is that
the silence in the contract is to be
interpreted as intent to exclude the
application of certain or all national
law systems. This is the previously
discussed “negative choice of law”
situation.84
The absence of any validly chosen
lex contractus can also result from the
designation of two or more national
law systems. The parties can decide
on the “split choice of law” (dépeçage),
but they have to state explicitly which
aspects of the transaction are gov-
erned by each of them. If, however, the
choice-of-law clause refers to two or
more systems of law without specify-
ing their scope of application, it will
not be valid. In certain circumstances,
the arbitrators can also interpret such
a clause as a negative choice of law.85
Finally, it is possible that there
was absolutely no consensus as to the
applicable law and therefore it needs
to be determined by the arbitrators
according to the relevant arbitration
law or rules. If that is the case, it is
still advisable first to ask the parties
about their preferences with regard
to the applicable law. Even if they did
not find this aspect important during
the negotiation and drafting of the
contract, they may be interested in
determining it in the context of the
Page 16
already existing dispute. Otherwise,
the award could be challenged on the
ground of the parties’ fundamental
right to present their case.86
The procedures to be followed by
arbitrators in determining the appli-
cable law are regulated by the lex ar-
bitri of the seat of arbitration and the
arbitration rules, if any. The solutions
adopted by arbitration laws and rules
can be divided into two categories;
namely, those allowing for the direct
choice of law and those requiring the
arbitral tribunal to make an indirect
choice with the use of the rules of
private international law.
Traditionally, in order to estab-
lish the law applicable to the merits,
arbitrators were required to apply
the rules of private international
law (usually those in the seat of the
arbitration). This indirect method
(voie indirecte) is still preferred by
the UNCITRAL Model Law, which
provides that “failing any designation
by the parties, the arbitral tribunal
shall apply the law determined by
the conflict of laws rules which it
considers applicable.”87 Consequently,
many domestic arbitration laws that
adopted the Model Law followed this
approach.88
The method of direct determina-
tion of the law applicable to the
merits (voie directe) has been adopted
by the majority of arbitration rules89
and a number of modern arbitration
laws.90 Moreover, most of them favor
the unlimited version of voie directe
and allow the arbitrators to apply the
“rules of law that they determine to
be appropriate.”91 There are, however,
some texts that require the arbitra-
tors to apply the rules of law “with
which the case has the closest con-
nection”92 or even limit their choice
to the domestic law “with which the
subject-matter of the proceedings is
most closely connected.”93
The above implies the conclusion
that most of the domestic arbitra-
tion laws impose restrictions on the
arbitrators’ freedom to determine
the lex contractus and deprive them
of the possibility of applying other
rules of law and, therefore, the PICC.
In contrast, the same cannot be said
with regard to the arbitration rules,
the majority of which allow the
arbitrators to apply the most appro-
priate rules of law. In this context,
it is important to remember that in
the cases where the parties decide
on the administered form of arbitra-
tion, the rules of the chosen institu-
tion will override provisions of the
applicable lex arbitri regulating the
same issues.94 The situation will be
otherwise only if the latter have the
status of mandatory rules. Therefore,
in practice, the limitations contained
in the arbitration law of the seat will
affect the arbitrators’ freedom pri-
marily in the case of ad hoc arbitra-
tions or where they have the status of
mandatory provisions that cannot be
excluded by any arbitration rules.95
Given that in most cases arbitra-
tors will be expected to apply the
“rules of law that they determine ap-
propriate,” the meaning of this term
is important. Specifically, under what
circumstances will the PICC be the
most “appropriate” lex contractus?
The drafters of the PICC chose a
cautious approach. In the comments,
they recommend that arbitral tribu-
nals facing the absence of the choice
of law should turn first to the domes-
tic law and apply it unless inappropri-
ate for the resolution of the particular
conflict.96 On the other hand, given
the extent of discretion left to the
arbitrators by most arbitration rules,
there is no reason why arbitrators
should always look for the solution
first in the domestic law. Therefore,
arbitrators should give as much at-
tention to the rules of transnational
law as to the relevant domestic laws.97
Moreover, it could also be argued
that rules of law such as the PICC
“meet the expectations of the parties”
better.98 The choice of arbitration is
usually motivated by the wish to have
the dispute resolved by a neutral
forum. Therefore, arbitrators should,
by reference to neutral rules, comple-
ment the decision of the parties to
submit their case to arbitration.99 The
PICC are not only neutral, but also
pass the test of appropriateness in
terms of their sophistication and ad-
vancement of the adopted solutions.100
Winter 2011
 The International Law Quarterly
In practice, on several occasions
arbitral tribunals applied the PICC as
“rules of law considered to be most ap-
propriate” before this possibility was
expressly provided for in the PICC.101
The most notable is the award ren-
dered by Arbitration Institute of the
Stockholm Chamber of Commerce
where the arbitral tribunal defined
the PICC as rules that “have wide
recognition and set out principles that
in the Tribunal’s opinion offer[] a pro-
tection for contracting parties that ad-
equately reflects the basic principles
of commercial relations in most if not
all developed countries.”102 In most
of these cases, the arbitral tribunal
followed the approach recommended
by the PICC and, before referring to
them, considered the possibility of
basing its decision on one of the oth-
erwise applicable domestic laws.
Importantly, application of the
PICC as lex contractus by arbitra-
tors in the absence of parties’ choice
of law does not, in most of the cases,
constitute a ground for the refusal of
recognition and enforcement of such
award.103
2.3.3 Arbitrators
Empowered to Decide Ex
Aequo et Bono
In the practice of international
commercial arbitration there are
situations in which the arbitrators’
duty to apply the law or rules of law
is waived. This can occur when they
have been authorized to act as ami-
able compositeurs or decide ex aequo
et bono, and it is subject to two condi-
tions. First, the applicable lex arbitri
have to provide for such possibility.
The majority of modern arbitra-
tion laws and rules expressly allow
the parties to empower the arbitral
tribunal to decide on the basis of fair-
ness, equity and justice.104 The second
requirement, expressly provided for in
most of the above-mentioned laws and
rules, is that these powers have to be
vested in the arbitrators by virtue of
parties’ express consent.
The extent to which arbitrators
acting as amiable compositeurs can
depart from any domestic laws and
Winter 2011
rules of law varies from case to case
and depends on the provisions of the
applicable lex arbitri.105 There is also
no agreement as to whether compe-
tence to decide ex aequo et bono enti-
tles the arbitral tribunal to disregard
the express terms of the contract. The
most appropriate approach seems to
be that the arbitrators should at least
not attempt to rewrite the text of the
agreement.106 Regardless of these
limitations, the arbitral tribunal is
expected to reach a solution that,
given all circumstances of the case,
seems fair and just. At the same time,
the mere fact that arbitrators are not
bound by any rules does not imply
that they cannot look for the solu-
tion in the rules expressed in soft-law
instruments. Therefore, the PICC can
be a useful tool in this context, obvi-
ously to the extent to which arbitra-
tors consider them to be the equitable
principles suitable to the decision ex
aequo et bono.107 The arbitral tribu-
nal’s decision will not be based on
the provisions of the PICC; instead,
they will be used to confirm that the
chosen solution is just and fair.
In spite of the fact that the cases
where arbitrators are authorized
to act as amiable compositeurs are
relatively rare, several do exist where
the arbitral tribunal decided to refer
to the PICC.108
3. Incorporation of the
Principles as Trade Usages
Trade usages can be defined as
“prevailing practices established
among parties to a contract or ac-
tors in the same industry.”109 In the
context of international commercial
arbitration, they can become relevant
in two ways. First, as much as other
concepts within the transnational law
(general principles or lex mercatoria),
they can be applied as lex contrac-
tus instead of otherwise applicable
domestic law. This can be the case
where the parties decided to subject
their relationship exclusively to terms
of their agreement supplemented by
relevant usages of trade. The second
opportunity for the application of
widely accepted practices is created
by the provisions of numerous arbi-
tration laws and arbitration rules
that oblige the arbitrators to take into
account the relevant trade usages or
customs.110 Similarly, some interna-
tional conventions provide that the
arbitrators should always refer to the
relevant trade usages.111
There is no certainty as to whether
the PICC and other similar soft-law
instruments can be treated as an ex-
pression of trade usages.112 The prob-
lem with making such qualification is
twofold. The first issue concerns their
status as a set of legal rules, which
seems disqualifying from the outset.
On the other hand, the term “trade
usages” also could be given a broader
meaning so as to include not only
practices but also systems of rules,
as long as they facilitate the needs of
the cross-border trade.113 The second
difficulty is caused by the fact that,
as discussed in the context of the lex
mercatoria and general principles of
law, not all of the provisions of the
PICC reflect widely accepted concepts.
Thus, the most appropriate view
seems to be that the PICC cannot be
regarded a codification of trade us-
ages, but the relevance of its particu-
lar provisions in this context should
be assessed on a case-by-case basis.114
This approach is reflected in the
practice of international commercial
arbitration. There is a trend to qualify
the PICC as trade usages, especially
where the arbitral tribunal is re-
quired to take the latter into account
according to the relevant arbitration
laws,115 rules116 or international uni-
form law instruments.117 The argu-
ments in favor of the application of
the PICC in this context range from
cautious statements that they con-
stitute “an accurate representation,
although incomplete, of the usages
of international trade”118 to submis-
sions clearly confirming their status
of “codified trade usages.”119 There are
also awards where reference to the
PICC as the “usages of international
trade” was made without detailed
justification.120
On some rare occasions, arbitra-
continued, next page
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from preceding page
tors refuse to apply the PICC as
trade usages on the grounds that the
“recourse to the PICC is not purely
and simply the same as recourse to
an actually existing international
commercial usage,”121 and they “do not
generally reflect trade usages.”122
Conclusion
The PICC may be and have been
applied as lex contractus in several
ways that can be grouped in two
categories. The first comprises cases
where the PICC have been chosen by
the parties at the time of the execu-
tion of the contract or at a later stage,
even after the dispute has arisen. The
second is when the PICC are invoked
by arbitrators despite the lack of
Page 18
reference to them by the parties. The
Preamble, underlying the consensual
character of the PICC, can be viewed
as the expression of the intent of the
drafters as to the preferred way of ap-
plication. An analysis of the arbitral
awards reveals that practice seems
to reduce these expectations. Only
rarely do parties to international
contracts choose to have their agree-
ment governed by the PICC. Arguably,
if not for arbitrators, who tend to ap-
ply the PICC as lex contractus where
the parties have referred to the lex
mercatoria, “general principles of law”
or other concepts of transnational law,
use of the PICC in this context would
be minimal. This trend, however, does
not extend to cases where there is no
choice of the applicable law or rules
of law at all. In such cases, arbitra-
tors will refer to the PICC only if they
conclude that the parties have made a
negative choice resulting in the exclu-
sion of any domestic law.
The above conclusions, revealing
that the PICC in most of the cases
are applied by the arbitrators on their
own initiative rather than pursuant
to the parties’ decision, could cause
doubts as to their soft-law charac-
ter. On the other hand, it cannot be
forgotten that unlike the hard-law
instruments, the PICC do not apply
automatically and become relevant
only if they prove to be the most ap-
propriate rules of law in light of the
circumstances of the particular case.
Regardless, the PICC contribute to
international commercial arbitration
by providing a neutral set of rules
that address the needs of the cross-
border transactions. Thus, the PICC
can increase effectiveness of inter-
national dispute resolution. Finally,
the significance of the PICC is even
greater thanks to the extensive UNI-
LEX database that makes them easily
accessible by both contracting parties
and arbitrators.
Winter 2011
 The International Law Quarterly
Ludwina Klein is a junior associate
at Salans in Warsaw, Poland. She has
an LL.M in international corporate
and commercial law from the Uni-
versity of York (U.K.) and a Master of
Laws from the University of Wroclaw
(Poland). Ms. Klein is a member of
the Chartered Institute of Arbitrators
(CIArb), the LCIA Young Internation-
al Arbitration Group ( YIAG), and the
ICC Young Arbitrators Forum (YAF).
She speaks Polish, English, Italian
and German.
Endnotes:
1 Int’l Inst. for the Unification of Private
Law [UNIDROIT], Unidroit Principles of
Interational Commercial Contracts (2004),
available at http://www.unidroit.org/english/
principles/contracts/principles2004/integral-
versionprinciples/ [hereinafter PICC].
2 Michael Joachim Bonell, Towards a
Legislative Codification of the UNIDROIT
Principles?, U.L.R. 233, 233 (2007).
3 PICC, supra note 1, Preamble cmt. 1,
available at http://www.unilex.info/dynasite.
cfm?dssid=2377&dsmid=13637&x=1.
4 Id. cmt. 2.
5 UNILEX, available at http://www.uni-
lex.info/.
6 PICC, supra note 1, Preamble para. 7;
see also Michael Joachim Bonell, UNIDROIT
Principles 2004 – The New Edition of the
Principles of International Commercial Con-
tracts adopted by the International Institute
for the Unification of Private Law, U.L.R. 5, 7
(2004).
7 Bonell, supra note 6, para. 8.
8 Michael Joachim Bonell and Tommaso
Monfeli, Rassegna giurisprudenziale sui
Principi UNIDROIT dei Contratti Commer-
ciali Internazionali, 15 Dir. Comm. Int’l 169,
170 (2001); Matthias Scherer, The Use of the
UNIDROIT Principles in International Ar-
bitration, in Commentary on the UNIDROIT
Principles of International Commercial
Contracts (PICC) 81,82 (Stefan Vogenauer
and Jan Kleinheisterkamp eds., 2009).
9 See, e.g., Klaus Peter Berger, Interna-
tional Arbitral Practice and the UNIDROIT
Principles of International Commercial Con-
tracts, 46 Am. J. of Comp. L. 129-150 (1998);
Fabio Bortolotti, The UNIDROIT Principles
and the Arbitral Tribunals, U.L.R. 141-152
(2000); Alejandro M. Garro, The Contribution
of the UNIDROIT Principles to the Advance-
ment of International Commercial Arbitra-
tion, Tul. J. Int’l & Comp. L. 93-128 (2000);
Emmanuel Jolivet, The UNIDROIT Prin-
ciples in ICC Arbitration, ICC Int’l Ct. Arb.
Bull.: Special Supplement 2005: UNIDROIT
Principles: New Developments and Applica-
tions 65-72 (2005) [hereinafter ICC Int’l Ct.
Arb. Bull.: Special Supplement 2005]; Ole
Lando, Assessing the Role of the UNIDROIT
Winter 2011
Principles in the Harmonization of Arbitra-
tion Law, Tul. J. Int’l & Comp. L. 129-44
(1995).
10 Int’l Inst. for the Unification of Private
Law [UNIDROIT], Unidroit Principles of
Interational Commercial Contracts, Introduc-
tion para. 9 (1994), available at http://www.
jus.uio.no/lm/unidroit.international.commer-
cial.contracts.principles.1994.commented/
[hereinafter PICC 1994].
11 Id. para. 8.
12 Id. See also Bortolotti, supra note 9, at
143; Julian D.M. Lew, Loukas A. Mistelis,
Stefan M. Kröll, Comparative International
Commercial Arbitration, Klu. Law Int’l 463
(2003); Loukas Mistels, The UNIDROIT
Principles Applied as “Most Appropriate
Rule of Law” in a Swedish Arbitral Award, 8
U.L.R 631, 633 (2003).
13 PICC, supra note 1, Preamble para. 3.
14 See, e.g., id., at Art. 1.12(2) and (3), Art.
2.1.8, Art. 6.1.2, Art. 6.1.4.
15 Berger, supra note 9, at 130.
16 Bonell, supra note 2, at 3.
17 Freedom of contract; no form required;
binding character of contract; mandatory
rules; exclusion or modification by the par-
ties; interpretation and supplementation of
the Principles; good faith and fair dealing;
inconsistent behavior; usages and practices;
notice; definitions; computation of time set by
parties.
18 PICC, supra note 1, Introduction para 3;
Bonell, supra note 6, at 19.
19 Bonell, supra note 6, at 29.
20 PICC, supra note 1, Preamble cmt. 4(c).
21 PICC 1994, supra note 10, Preamble
para. 4.
22 Bonell, supra note 6, at 20.
23 U.N. Convention on Contracts for the
International Sale of Goods, 11 Apr. 1980,
available at http://www.uncitral.org/uncitral/
en/uncitral_texts/sale_goods/1980CISG.html.
24 Formal endorsement of the PICC by the
UNCITRAL; Model Contracts prepared by
ICC and ITC UNCTAD/WTO.
25 Francesco Paolo Traisci, Principi
UNIDROIT, lex mercatoria e diritto del
commercio internazionale: note a margine di
un lodo arbitrale, 2 Dir. Comm Int’l 474, 479
(1999).
26 Lauro Da Gama E. Souza Jr., The
UNIDROIT Principles of International Com-
mercial Contracts and Their Applicability
in the MERCASOUR Countries, 36 Revue
Juridique Thémis 375, 400 (2002).
27 See supra p. 2.
28 Lew, supra note 12, at 463.
29 Garro, supra note 9 at 98; PICC, supra
note 1, Preamble cmt.3.
30 UNCITRAL Model Law on International
Commercial Arbitration applies only to inter-
national commercial arbitration. Similarly,
many countries made reservations under the
New York Convention that they will apply it
only to disputes arising out of legal relation-
ships that are considered commercial under
the domestic law; see, e.g., Argentina, China,
Denmark, Poland or the U.S.
31 PICC, supra note 1, Preamble cmt. para
2.
32 See Art. 28(1) of UNICITRAL Model
Law; Art. 42(1) of ICSID Convention; Art.
1496 of French Code of Civil Procedure; Art.
17(1) of ICC Rules. But, §1051(2) of German
Code of Civil Procedure obliges the tribunal
to apply the “law” unless expressly empow-
ered by the parties to act otherwise; see also
Art. 33(1) of UNCITRAL Rules and § 46(3) of
English Arbitration Act, which do not allow
for the application of the “rules of law” in any
case.
33 Berger, supra note 9, at 147; Nigel
Blackaby et. al., Redfern and Hunter on
International Arbitration 222 (2009); Lando,
supra note 9, at 135; see also § 1-302 cmt. 2
of the U.S. Uniform Commercial Code. Cmt. 2
to § 1-302, which, since the revision in 2001,
contains express reference to the PICC.
34 Friedrich Blase, Proposing a New Road
Map for an Old Minefield. The Determina-
tion of the Rules Governing the Substance
of the Dispute in International Commercial
Arbitration, 20 J. Int’l Arb. 267, 267 (2003);
François Dessemontet, Use of the UNIDROIT
Principles to Interpret and Supplement Do-
mestic Law, ICC Int’l Ct. Arb. Bull.: Special
Supplement (2002) 39, 40; Pierre Lalive, The
UNIDROIT Principles as lex contractus, With
or Without an Explicit or Tacit Choice of Law:
an Arbitrator’s Perspective, ICC Int’l Ct. Arb.
Bull.: Special Supplement (2002) 77, 79; Det-
lev F.Vagts, Arbitration and the UNIDROIT
Principles 270 (1998), <http://www.cisg.law.
pace.edu/cisg/biblio/vagts.html> (accessed
6 Aug. 2010); see also the Center for Trans-
national Law’s List of Principles, Rules and
Standards of the Lex Mercatoria.
35 See supra pp. 22-23.
36 See, e.g., Art. 3.1 of the Regulation (EC)
No. 593/2008 of the European Parliament
and of the Council of 17 June 2008 on the
law applicable to contractual obligations
(Rome I); however, the Inter-American Con-
vention on the Law Applicable to Interna-
tional Contracts 1994 in Art. 9(2) and Art.
10 allows the application of rules of law and
thus is deemed to allow the application of the
Principles.
37 Roberta Peleggi, L’applicazione dei
Principi Unidroit en vole directe alla luce di
un recente lodo della Corte Arbitrale della
Camera di Commercio, Dir. Comm Int’l 483,
496 (2004).
38 PICC, supra note 1, Art. 1.4; Bortolotti,
supra note 9, at 145-147. But see the ICSID
Convention, which does not contain such
limitation.
39 Scherer, supra note 8, at 84.
40 Lando, supra note 9, at 133. This ap-
proach was followed in ICC case No. 11018,
where the parties agreed their dispute would
continued, next page
Page 19
 The International Law Quarterly
unidroit
from preceding page
be resolved according to “lex mercatoria as
expressed by the UNIDROIT Principles.”
41 See, e.g., Art. 1054(2) of Dutch Code of
Civil Procedure; Art 182 of Swiss Law on Pri-
vate International Law; Art. 834(1) of Italian
Code of Civil Procedure; § 46(1) of English
Arbitration Act 1996.
42 Karl-Heinz Böckstiegel, The Application
of the UNIDROIT Principles to Contracts
Involving States or Intergovernmental Orga-
nizations, ICC Int’l Ct. Arb. Bull.: Special
Supplement (2002) 51, 52.
43 Scherer, supra note 8, at 86.
44 “This contract shall be governed by the
UNIDROIT Principles (2004) [except as to
Articles . . . . ]”; “This contract shall be gov-
erned by the UNIDROIT Principles (2004)
[except as to Articles . . . . ], supplemented
when necessary by the law of [jurisdiction
X].”
45 See, e.g., Art. 14 of the Model Contract
for the International Commercial Sale of
Perishable Goods issued by the ITC UNC-
TAD/WTO in 1999 and Art. 12 of ICC Model
International Franchising Contract (ICC
Publication No. 557, 2000).
46 See supra note 39.
47 The cases where the arbitral tribunal
refused to apply are very rare; see, e.g., ICC
Award No. 9419 of September 1998, available
at http://www.unilex.info, where the arbitral
tribunal found that “they cannot constitute
a normative body in themselves that can be
considered as an applicable supranational
law to replace a national law, at least as long
as the arbitrator is required to identify the
applicable law by choosing the rule of conflict
that he considers most appropriate.”
48 See, e.g., ICC Award No. 8331 of Dec.
1996, available at http://www.unilex.info.
49 See Award of 21 April 1997 rendered
in ad hoc arbitration in Paris; Award No.
A-1795/51 of Dec. 1996 of Camera Arbitrale
Nazionale ed Internazionale di Milano;
Award No. 116 of 20 Jan. 1997 of the Inter-
national Arbitration Court of the Chamber of
Commerce and Industry of the Russian Fed-
eration; all available at http://www.unilex.
info.
50 ICC Award No. 11880 of 2004; Award
of 30 Nov. 2006 of Centro de Arbitraje de
México (CAM); Award of 2009 of Permanent
Court of Arbitration (number unknown); all
available at http://www.unilex.info.
51 Markiyan Kliuchkovskyi, Applicability
of UNIDROIT Principles of International
Commercial Contracts in Courts and Arbitra-
tion Tribunals, 1 Disp. Resol. Int’l 199, 202
(2007).
52 Lalive, supra note 35, at 81.
53 Art. 3(1) of Regulation Rome I, supra
note 37; see also Art 116 § 2, of Swiss Law on
Private International Law.
54 Lalive, supra note 35, at 81.
55 See ICC First Partial Award No. 7110
of June 1995, available at http://www.unilex.
info, where the arbitral tribunal came to
conclusion that “the general legal rules and
principles, enjoying wide international con-
sensus, applicable in international contrac-
tual obligations . . . are primarily reflected
by the UNIDROIT Principles.” The arbitral
tribunal considered the PICC “to be the
central component of the general rules and
principles regarding international contrac-
tual obligations and enjoying wide interna-
tional consensus.”
56 ICC Award No. 9474 of Feb.1999, avail-
able at http://www.unilex.info.
57 Fabrizio Marrella, Choice of Law
in Third-Millennium Arbitrations: The
Relevance of the UNIDROIT Principles of
International Commercial Contracts, 36
Vand. J. Transnat’l L. 1137, 1155 (2003); but
see Lalive, supra note 5, at 81, who suggests
that the arbitrators should be more cau-
tious when assuming the tacit choice of the
principles. Similarly, Marc Blessing, Choice of
Substantive Law in International Arbitration
14 J. Int’l Arb. 39, 43 (1993) points out the
problem of imposing on the parties’ inten-
tions, which in fact they did not have.
58 The concept of negative choice has been
accepted by the majority of commentators;
see, e.g., Scherer, supra note 8, at 92; Lalive,
supra note 5, at 82; E. Allan Farnsworth,
The Role of the UNIDROIT Principles in
International Commercial Arbitration: A U.S.

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 The International Law Quarterly
Perspective on Their Aims and Application, 69 Blackaby, supra note 36, at 219; Bonell, 71 Eureko B.V. v Republic of Pol. (Award of
ICC Int’l Ct. Arb. Bull.: Special Supplement supra note 67, at 205; Garro, supra note 9, at 19 Aug. 2005 rendered in ad hoc arbitration
(2002) 21, 24; Pierre Mayer, The Role of the 113; Julian D.M. Lew, The UNIDROIT Prin- in Brussels); ICC Partial Award No. 13012 of
UNIDROIT Principles in ICC Arbitration ciples as Lex Contractus Chosen by the Par- 2004; ICC Award No. 9797 of 28 July 2000;
Practice, ICC Int’l Ct. Arb. Bull.: Special ties and Without an Explicit Choice-of-Law ICC 9474, supra note 57; award rendered
Supplement (2002) 105, 110; Blessing, supra Clause: The Perspective of Counsel, ICC Int’l in ad hoc arbitration in New York (date un-
note 58, at 44; Marrella, supra note 58, at Ct. Arb. Bull: Special Supplement (2002) known); ICC Award No. 8264 of April 1997,
1156; but see also Berger, supra note 9, at 85,88; Scherer, supra note 8, at 88; Traisci, where the arbitral tribunal concluded that
144, who notices that this concept is sur- supra note 26, at 486; views as to whether the PICC “embody . . . rules largely accepted
rounded by a lot of skepticism, and Horacio the PICC can be regarded as an expression throughout the world in legal systems and
Grigera Naón, Closing Remarks ICC Int’l Ct. of “the general principles of law, the lex mer- the practice of international contracts”; all
.Arb. Bull.: Special Supplement (2002), who catoria or the like” vary across the countries; available at http://www.unilex.info.
underlines that express or implicit indica- for detailed analysis, see Michael Joachim
tions that each party wished to avoid the Bonell, UNIDROIT Principles: A Signifi- 72 ICC 7110, supra note 56.
application of the national law of the other cant Recognition by a United States District 73 ICC 9797, supra note 72.
party are not sufficient to establish a nega- Court, U.L.R. 651, 651-53 (1999); but see, 74 LCCIA Award of 1995, available at
tive choice of law. He points out that “other Michael Joachim Bonell, A “Global” Arbitra- http://www.unilex.info.
decisive concurring factors must be present, tion Decided on the Basis of the UNIDROIT
such as the parties’ desire to have a neutral Principles: In re Andersen Consulting Busi- 75 ICC 13012, supra note 72; ICC Award
decision for their case.” ness Unit Member Firms v. Arthur Andersen No. 11926 of 2003; ICC 10422, supra note 65;
Business Unit Member Firms and Andersen Award No. 117/1999 of 2001 of Arbitration
59 ICC First Partial Award No. 12111 of
Worldwide Société Coopérative, 17 Arb. Int’l Institute of the Stockholm Chamber of Com-
7 Jan. 2003, available at http://www.unilex.
249, 251 (2001), where the author suggests merce; ICC Award No. 10114 of March 2000;
info, where the reference to “international
that the award in the Arthur Andersen case ICC Partial Award No. 9875 of Jan. 1999;
law” as the law governing the contract was
interpreted as the reference to the general proves that the arbitral tribunal did consider ICC Award No. 8261 of 27 Sept. 1996; ICC
principles of law and the lex mercatoria and, the PICC to be “a codification of international Award No. 8540 of 4 Sept. 1996, available at
as a result, the UNIDROIT Principles were principles of contract law.” http://www.unilex.info.
applied. 70 Award No. 11/2001 of 5 Nov. 2002 76 ICC 10114, supra note 76.
60 PICC, supra note 1, Preamble cmt. of International Arbitration Court at the 77 ICC 7110, supra note 63, where the
4(c); Berger, supra note 9, at 146; Piero Chamber of Commerce and Industry of the arbitral tribunal gave five reasons for its
Bernardini, International Arbitration and Russian Federation; Award of 30 April 2001 submission.
A-National Rules of Law, 15 ICC Int’l Ct. rendered in ad hoc arbitration in San José
(Costa Rica); ICC 10422, supra note 65; both 78 See ICC 9797, supra note 72, at 6.
Arb .Bull. 58, 65 (2004); ICC Award No.
7375 of 5 June 1996, available at http://www. available at http://www.unilex.info. continued, next page
unilex.info, where silence in the contract was
interpreted by arbitral tribunal as exclu-
sion of the domestic law of both parties; ICC
Award No. 15089 of 15 Sept. 2008, available
at http://www.unilex.info, where silence was
interpreted as a negative choice with regard The International Bar Association
to the parties’ respective domestic laws and
no objective connecting factor in favor of any
particular domestic law.
61 Blessing, supra note 58, at 44; Marella,
supra note 58, at 1156; Mayer, supra note 59,
at 111; Scherer, supra note 8, at 93.
62 This was the approach of the arbitral
tribunal in Primary Coal v. Compania Va-
lenciana de Cementos Portland (ICC Partial
Award No. 5953) 1 Sept. 1988, available at
http://www.unilex.info); Lalive, supra note 35,
at 82-83; Mistelis, supra note 12, at 637-639;
Scherer, supra note 8, at 92.
63 ICC Award No. 5835 of June 1996, avail-
able at http://www.unilex.info.
64 ICC Award No. 10422 of 2001, available
at http://www.unilex.info, the contract refer-
ring to “a neutral legislation as agreed by the
parties,” in the absence of parties’ agreement
the tribunal applied “rules and principles
generally recognized in international trade
(lex mercatoria) and in particular the
UNIDROIT Principles.”
65 ICC 7375, supra note 61.
66 Michael Joachim Bonell, The
UNIDROIT Principles and Transnational
Law, U.L.R. 199, 199 (2000).
67 Id.
www.ibanet.org
68 PICC 1994, supra note 10, para. 8.

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 The International Law Quarterly
unidroit
from preceding page
79 ICC 8540, supra note 76.
80 ICC 10422, supra note 65; see also ICC
7375, supra note 61, where the tribunal
decided to “take into account the UNIDROIT
Principles, as far as they can be considered
to reflect generally accepted principles and
rules.”
81 ICC Award No. 11575 of 2003 and ICC
Award No.11265 of 2003, both available at
http://www.unilex.info.
82 ICC Award No. 9029 of March 1998,
available at http://www.unilex.info.
83 Kliuchkovskyi, supra note 52, at 205.
84 See supra pp. 17-18. note 82, available at http://www.unilex.info.
85 Scherer, supra note 8, at 94.
86 See Art. 34(2)(a)(iv) UNCITRAL Model
Law.; it is also a ground for non-enforcement
under Art. V(1)(b) of the New York Conven-
tion.
87 Art. 28(2) of UNCITRAL Model Law,
as amended in 2006; see also Art. VII of the
European Convention on International Com-
mercial Arbitration.
88 See, e.g., § 46(3) of English Arbitration
Act 1996.
89 See Art. 28(1) of AAA ICDR; Art. 19(1)
of ICC Rules; Art. 22(3) of LCIA; Art. 24(1)
of SCC Rules; Art. 59(1) of WIPO Rules. But
see also, Art. 33(1) of UNCITRAL Rules, Art.
16(1) of Vienna Rules and § 23 of DIS Rules,
which all require the arbitral tribunal to ap-
ply the “law.”
90 See Art. 1496 of French Code of Civil
Procedure; Art. 1051(2) of German Code of
Civil Procedure; Art. 187(1) of Swiss Law on
Private International Law.
91 See e.g., Art.. 17(1) of ICC Rules; Art.
24(1) of SCC Rules.
92 Art. 187 of Swiss Law on Private Inter-
national Law.
93 See § 1051(2) of German Code of Civil
Procedure; similar requirement can be found
in Art. 834 of Italian Code of Civil Procedure.
94 Lew, supra note 12, at 28; but see, Alan
Redfern & Martin Hunter, International
Commercial Arbitration 179 (2d ed., London,
Sweet & Maxwell 1991), who submit that
the arbitration rules cannot override the
applicable lex arbitri and the scope of their
application depends on the extent of freedom
provided for in the latter.
95 But see, Bernardini, supra note 61, at
65, who submits that this is always the case.
96 PICC, supra note 1, Preamble cmt. 4(c).
97 Marella, supra note 58, at 1156; Miste-
lis, supra note 12, at 638.
Page 22
98 Yves Derains, The Role of the
UNIDROIT Principles in International Com-
mercial Arbitration: a European Perspective,
ICC Int’l Ct. Arb. Bull.: Special Supplement
(2002) 9, 14; Marrella, supra note 58, at 1156;
but Scherer, supra note 8, at 91, expresses
scepticism because this goes further than the
drafters intended.
99 Garro, supra note 9, at 120.
100 Mistelis, supra note 12, at 638.
101 See recent ICC 15089, supra note 61,
where the Principles were defined as “an in-
ternational re-statement (or pre-statement)
of modern contract law in its most authori-
tative form, well-known in international
arbitration practice and endorsed by the
United Nations Commission on International
Trade Law (UNCITRAL)”; see also Award of
29 March 2005 of Institute of the Stockholm
Chamber of Commerce and ICC 112, supra
102 Arbitration Institute of the Stockholm
Chamber of Commerce, supra note 76; see
also, the commentary in Mistelis, supra note
12.
103 Scherer, supra note 8, at 104 and 108;
this is the approach in Austria, Switzerland
and France; see, e.g., OGH 18 Nov. 1982 (8 Ob
520/82), (1984) XI YB Comm. Arb. 159 and
Cass Civ 22 Oct. 1991 (89-21528), (1992) Rev.
Arb. 457; but in Germany such choice would
be a ground for setting the award aside; see
supra note 94.
104 Art. VII (2) of the European Convention;
Art. 42(3) of ICSID; Art. 28(3) of UNCIT-
RAL Model Law; Art. 187(2) of Swiss Law
on Private International Law; § 45(1)(b) of
English Arbitration Act 1996; Art.1497 of
French Code of Civil Procedure; §1051(3) of
German Code of Civil Procedure; Art. 822 of
Italian Code of Civil Procedure; Art. 17(3) of
ICC Rules; § 23(3) of DIS Rules. But see, e.g.,
Russian Federation Law on International
Commercial Arbitration, Art .28.
105 Scherer, supra note 8, at 103, suggests
that this is true also with regard to the
mandatory provisions; however, the right
approach seems that even where acting as
amiable compositeurs, the arbitrators are
still bound by the mandatory rules of the
otherwise applicable law; see, Gary B. Born,
International Commercial Arbitration 2241
(Klu. Law Int’l 2009).
106 Born, supra note 106.
107 Id. at 2240; Lalive, supra note 35, at 82.
108 See Award of 24 Feb. 2001 of Arbitral
Tribunal of the City of Panama; Award of 10
Dec. 1997 rendered in ad hoc arbitration in
Buenos Aires; Award of Camera Arbitrale
Nazionale ed Internazionale di Milano, supra
note 50; ICC Award No. 8874 of Dec. 1996; all
available at http://www.unilex.info.
109 Scherer, supra note 8, at 89.
110 See Art. 17(2) of ICC Rules; Art. 33(3)
of UNCITRAL Rules; Art. 28(4) of UNICI-
TRAL Model Law, Art. 834 of Italian Civil
Procedure Code; Art. 1054 the Netherlands
Arbitration Act 1986 but not English Arbitra-
tion Act; for the analysis of the distinction
between the meaning of “trade usages” and
“customs,” see Jovilet, supra note 9, at 71.
111 See, e.g., Art.VII (1) of the European
Convention and Art. 9(2) of the CISG.
112 See James Otis Rodner, The Applicable
Interest Rate in International Arbitration
(UNIDROIT Principles, Article 7.4.9), ICC
Int’l Ct. Arb. Bull. 43 (2004), who submits
that the Principles are a part of “interna-
tional practices and usages”; but Marrella,
supra note 58, at 53, says that it is uncertain,
and Scherer, supra note 8, at 89, says that
the answer to this question should definitely
be negative.
113 Fabio Bortolotti, Reference to the
UNIDROIT Principles in Contract Practice
and Model Contracts, ICC Int’l Ct. Arb.
Bull.: Special Supplement (2005) 57, 60.
114 Scherer, supra note 8, at 90.
115 See Award T-9/07of 23 Jan. 2008 of
Foreign Trade Court of Arbitration attached
to the Serbian Chamber of Commerce,
available at http://www.unilex.info, where
the PICC were applied as an expression of
trade usages on the basis of Art. VII(1) of the
European Convention as well as Art. 50(4) of
Serbian Law on Arbitration of 2006.
116 See ICC Awards No. 10022 of Oct. 2000
and ICC Award No. 9593 of Dec. 1998, both
available at http://www.unilex.info, where
the PICC were taken into account on the
basis of Art. 17 of ICC Rules.
117 See Awards 229/1996 of 5 June 1997 and
302/1997 of 27 July 1999 of International
Arbitration Court at the Chamber of Com-
merce and Industry of the Russian Federa-
tion, where the PICC were applied on the
basis of Art. 9(2) of the CISG as “reflection of
international trade usages.”
118 ICC Award No. 9479 of 1999, available
at http://www.unilex.info.
119 ICC Award No. 10021 of 2000; see also
Award in ad hoc arbitration in Buenos Aires,
supra note 109, where the arbitral tribunal
ruled that the PICC constituted “usages of
international trade reflecting the solutions of
different legal systems and of international
contract practice,” and Award of 4 Dec. 1996
in ad hoc arbitration in Rome, where the
PICC were described as a “parameter of the
principles and usages of international trade”;
all available at http://www.unilex.info.
120 ICC Award No. 11051 of July 2001; ICC
Award No. 9479 of Feb. 1999; ICC Award
No. 8502 of Nov. 1996; all available at http://
www.unilex.info.
121 ICC Award No. 8873 of July 1997; see
also, ICC 9029, supra note 83.
122 ICC Award No. 11256 of 2003, available
at http://www.unilex.info.
Winter 2011
 The International Law Quarterly
The Better Approach to Deciding 28 U.S.C.
§1782 Applications for U.S. Discovery in
Private Arbitrations Abroad
28 U.S.C. § 1782
authorizes U.S.
district courts to aid
foreign litigants and
“international and
foreign tribunals”
in seeking evidence
from witnesses
located within the
J. La Chuisa
U.S. In particular,
28 U.S.C. § 1782 provides:
The district court of the district in
which a person resides or is found
may order 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. . . . 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. . . .
28. U.S.C. § 1782(a) (emphasis added).1
The scope and meaning of “foreign or
international tribunal” has generated
significant debate with respect to what
adjudicative bodies qualify as “tribu-
nals” for purposes of 1782 applications
for discovery. Indeed, the question of
whether a private arbitral panel con-
stitutes a “tribunal” remains unsettled
and hangs in the balance today.
In 2004, the U.S. Supreme Court in
Intel Corp. v. Advanced Micro Devices,
Inc., 542 U.S. 241, 246-47 (2004),
suggested that the term “foreign and
international tribunal” was broad
enough to encompass “administra-
tive and quasi-judicial proceedings,”
including Intel’s antitrust complaint
Winter 2011
By Jenelle E. La Chuisa, Miami
filed with the Commission of Euro-
pean Communities. Id. at 258. Spe-
cifically, the Supreme Court found
that when Congress amended section
1782 in 1964, substituting the words
“a proceeding in a foreign or interna-
tional tribunal” for the previous “any
judicial proceeding,” it did so in order
to “provid[e] the possibility of U.S.
judicial assistance in connection with
[administrative and quasi-judicial pro-
ceedings abroad].” Id. at 258 (citing S.
Rep. No. 1580, at 7-8, U.S. Code Cong.
& Admin. News 1964, pp. 3782, 3788).
The Supreme Court went on to hold
that the European Commission was, in
fact, a section 1782 “tribunal” because
it acted as a “first-instance decision-
maker” with authority to “determine
liability and impose penalties, disposi-
tions that [would] remain final unless
overturned by the European courts.”
Id. at 258 (relying on 255, n.9).
Since the Supreme Court’s 2004
decision in Intel, there has been
considerable disagreement among
lower courts (even within the same
circuit) as to whether the definition of
“foreign tribunal” under section 1782
is broad enough to include private
arbitral tribunals.2
While grappling with this question,
most courts have afforded leeway to
“state-sponsored” arbitration (such as
those convened pursuant to bilateral
investment treaties) as meeting the
definition of “foreign tribunal,”3 while
courts remain heavily divided on the
issue of whether private panels fall
within the scope of 1782.
A “Slim Majority” of Federal
Courts Have Held That
Private Arbitrations are
Subject to 1782 Discovery
A recent district court decision on
the issue of whether a private arbitral
tribunal is a “foreign or international
tribunal” observed that “[s]ince the
Intel decision, a slim majority of
federal courts have followed a simi-
lar reasoning [to the Intel Court’s]
to conclude that private arbitrations
fall within the scope of Section 1782.”
OJSC Ukrnafta v. Carpatsky Petro-
leum Corp., 2009 WL 2877156 *3 (D.
Conn. Aug. 27, 2009).
For instance, in In re Roz Trading
Ltd., 469 F. Supp. 2d 1221 (N.D. Ga.
2006), the court concluded that: “A
finding that an arbitral panel located
in Austria4 is a ‘tribunal’ within the
meaning of §1782(a) is consistent
with the reasoning in Intel. Although
Intel did not expressly hold arbitral
bodies to be ‘tribunals,’ it quoted
approvingly language that included
‘arbitral tribunals’ within the term’s
meaning in §1782(a).” Id. at 1224-25;
see, e.g., In re Hallmark Cap. Corp.,
534 F. Supp. 2d 951, 957 (D. Minn.
2007) (arbitral panel is “tribunal” for
the purposes of section 1782); In re
Application of Babcock Borsig AG, 583
F. Supp. 2d 233, 240 (D. Mass. 2008)
(same); OJSC Ukrnafta v. Carpatsky
Petroleum Corp., 2009 WL 2877156
(D. Conn. Aug. 27, 2009) (same).
In validating the private arbitra-
tion as a “foreign tribunal,” the Roz
court noted that “[w]here a body
makes adjudicative decisions respon-
sive to a complaint and reviewable
in court, it falls within the widely
accepted definition of ‘tribunal,’ the
reasoning of Intel, and the scope of
§ 1782(a), regardless of whether the
body is governmental or private.” Roz
Trading, 469 F. Supp. 2d 1221, 1228.
Taking a similar approach, in
April 2010, the Southern District of
continued, next page
Page 23
 The International Law Quarterly
28 U.S.C. §1782
from preceding page
Florida held that a private arbitration
under England’s Arbitration Act was
a “tribunal” and subject to Section
1782. In In re Winning (HK) Shipping
Co., Ltd., 2010 WL 1796579 (S.D. Fla.
2010, Apr. 30, 2010), the court noted
that Intel “suggests that courts should
examine the nature of the arbitral
body at issue to determine whether
it functions as a ‘foreign tribunal’ for
purposes of section 1782.” Id. at * 7
(emphasis added). The court therefore
applied the “functional analysis test”5
to the arbitral tribunal to be convened
in England6 and concluded that the
anticipated proceedings fell within
the scope of section 1782. Id. at * 7-8.
Specifically, the Winning (HK)
Shipping court held that the arbi-
tration likely to occur between the
parties involved a “foreign tribunal”
because it arose pursuant to a clause
in a private agreement between two
purely private parties; the arbitrators
in the anticipated arbitration would
be able to collect evidence and issue a
decision on the merits of the dispute;
and because, to the extent applicable,
the Arbitration Act 1996 (of England)
or the rules of the London Maritime
Arbitrators Association would provide
sufficient reviewability, permitting
judicial challenges to awards under
certain circumstances. Id. at * 8-10.
A Minority of Courts Have
Conversely Held That
Private Arbitrations are
not “Foreign Tribunals”
Oddly, just a few weeks following
the Southern District of Florida’s
ruling in Winning (HK) Shipping, in
Dockeray v. Carnival Corp., 2010 WL
2813803 (S.D. Fla., May 11, 2010), the
Southern District of Florida declined
to retain jurisdiction to compel 1782
discovery in connection with a private
arbitration to be convened under the
rules of the American Arbitration
Association and the International
Centre for Dispute Resolution, calling
Page 24
into question whether private arbitra-
tions are even subject to 1782:
[E]ven assuming, in light of Intel
Corp. v. Advanced Micro Devices,
Inc., 542 U.S. 241(2004), that 28
U.S.C. § 1782 applies to private
arbitrations, but see Republic of Kaz.
v. Biedermann Int’l, 168 F.3d 880
(5th Cir. 1999) (“[W]e conclude that
the term ‘foreign and international
tribunals’ in § 1782 was not intended
to authorize resort to United States
federal courts to assist discovery in
private international arbitrations.
The provision was enlarged to
further comity among nations,
not to complicate and undermine
the salutary device of private
international arbitration.”); Nat’l
Broad. Co. v. Bear Stearns & Co., 165
F.3d 184, 191 (2d Cir. 1999) (“[O]ur
conclusion, based upon an analysis
of the text and legislative history
of § 1782, [is] that Congress did
not intend for that statute to apply
to an arbitral body established by
private parties.”), the Court declines
to “retain jurisdiction,” assuming
it needs to, to compel Carnival to
produce testimony and documents
here. (citations omitted).).
Dockeray, 2010 WL 2813803, * 10, n.4
(court compelled arbitration of claims
against Carnival brought by cruise
line operator).
Dockeray’s obvious conflict with
Winning (HK) Shipping is indicative
of the current divide among U.S. fed-
eral courts, and even within the same
court.
Indeed, other courts, including
the Middle District of Florida in In
re Operadora DB Mexico, S.A., 2009
WL 2423138 (M.D. Fla. Aug. 4, 2009),
have held that section 1782 does not
apply to permit evidence gathering in
aid of private international arbitra-
tion. In Operadora, the district court
rejected a section 1782 application in
aid of arbitration proceedings before
the International Chamber of Com-
merce (“ICC”), distinguishing Intel
on the basis that it did not involve a
private international arbitration, and
that Congress’ intent on this issue
was, in its view, ambiguous. Id. at *6,
9.
According to the court in Opera-
dora, “judicial reviewability” of the
European Commission’s ultimate
disposition of the matter was key to
the Supreme Court’s rationale permit-
ting the section 1782 application in
Intel. Id. at *10. Applying the review
process for decisions of the ICC panel
on the facts before it, the Operadora
court noted:
ICC Rules dictate that the ICC
Panel must submit its proposed
award to the ICC Court, whose
review is limited to “lay[ing] down
modifications as to the form of the
Award.” The ICC Court “may also
draw [the ICC Panel’s] attention to
points of substance,” but must do so
“without affecting the [ICC Panel’s]
liberty of decision.” The ICC Rules
[noted the Operadora Court] do not
provide for any review by a state-
sponsored tribunal.
Id. at *10.
The Operadora court appears to
have focused its analysis largely on
reviewability, which is but one part
of the analysis conducted in Intel and
other post-Intel decisions.
A similar result was reached in
In re Arbitration between Norfolk S.
Corp. and Ace Bermuda Ltd., 626 F.
Supp. 2d 882 (N.D. Ill. 2009), where
the court ruled that a private ICC
arbitration in London, England, was
not entitled to judicial assistance
under section 1782 because it is not
a “foreign or international tribunal.”
See id. at 886. The court reasoned
that although it was Congress’ intent
to expand the scope of 1782, Intel
did not specifically include private
arbitral bodies within the definition of
“tribunal.” See id. at 885. Rather, the
court took the position that section
1782 covers only “state sponsored”
arbitration, such as arbitral proceed-
ings before UNCITRAL pursuant to
bilateral investment treaties, while
admittedly relying on pre-Intel cases
and similar rulings by a minority
of courts. See id. at 884, 886. The
Norfolk court likewise found that the
“narrow circumstances” for review
of an arbitral award did not “allow
Winter 2011
 The International Law Quarterly
for judicial review of the merits of
the parties’ dispute,” such that the
arbitral panel at issue did not “fall
within the definition the Supreme
Court embraced in its Intel dictum.”
Id. at 886 (appeal dismissed following
settlement).
Yet, the Fifth Circuit recently
held that, even in the wake of Intel, a
private Swiss arbitration panel, con-
vened under UNCITRAL arbitration
rules, was not a “tribunal” within the
meaning of section 1782. See El Paso
Corp. v. Comisión Ejecutiva Hidroeléc-
trica del Río Lempa, 341 Fed. Appx.
31 (5th Cir. 2009) (citing Republic
of Kazakhstan v. Biedermann Int’l,
168 F. 3d 880 (5th Cir. 1999) (pri-
vate arbitration in Stockholm was
not a “tribunal”); but see In re Veiga,
2010 WL 4225564 (D.D.C., Oct. 20,
2010) (arbitral tribunal established
pursuant to UNCITRAL rules was a
“foreign tribunal”) (citing In re Oxus
Gold PLC, 2006 WL 2927615 *6
(D.N.J., Oct. 11, 2006) (1782 discovery
permitted in BIT arbitration); and In
re Chevron Corp., 709 F. Supp. 2d 283
(S.D. N.Y. 2010) (same).7
Permitting 1782
Applications in Private
Arbitrations Will Promote
International Arbitration
Among U.S. Companies
Doing Business Abroad
While some federal courts have
cited public policy reasons, including
that U.S.-based discovery is contrary
to the efficiency sought in internation-
al arbitration, for declining to permit
1782 discovery in private arbitral
proceedings,8 such reasoning would
appear to ignore the district court’s
discretion to decide 1782 applica-
tions, even assuming the arbitration
proceeding in question is a “foreign
tribunal.”
For instance, even after concluding
that an ICC arbitration was in fact a
“foreign tribunal,” the district court In
re Babcock Borsig AG, 583 F. Supp. 2d
233 (D. Mass. 2008) declined to permit
1782 discovery:
Section 1782 does not require a
Winter 2011
district court “to grant a § 1782(a)
discovery application simply
because it has the authority to
do so.” Intel at 264. The Supreme
Court in Intel identified two
general factors that district courts
should consider when determining
whether an application brought
under § 1782(a) should be granted:
(1) whether the person from whom
discovery is sought is a participant
in the foreign proceedings, and (2)
the nature of the foreign tribunal,
the character of the proceedings
underway abroad, and the
receptivity of the foreign tribunal
to judicial assistance. Id. at 264-65.
A district court may also consider
“whether the § 1782(a) request
conceals an attempt to circumvent
foreign proof-gathering restrictions
or other policies of a foreign country
or the United States.” Id. at 265.
Babcock, 583 F. Supp. 2d 233, 240-
241. “The district court may also deny
or narrow a discovery request that is
unduly intrusive or burdensome.” Id.
at n.6 (citing Intel, 542 U.S. 241, 265).
Although the first factor (whether
a person from whom discovery is
sought is a participant in the foreign
proceedings) is the most compelling
reason for a court to grant a 1782
application, the other considerations
are far more discretionary, leaving the
court with some room for flexibility in
its analysis.
The court in Babcock therefore
denied the 1782 application, stating:
“The apparent bad blood between
the parties, coupled with the fact
that [the applicant] had not taken
any formal steps toward initiating
arbitration . . . after allegedly discov-
ering [the] misconduct almost two
years ago, are grounds for exercising
restraint before ordering discovery in
this setting.” Babcock, 583 F. Supp.
233, 242.
The Supreme Court in Intel also
recognized the court’s discretion to
permit or condition discovery as ap-
propriate, in support of its decision to
expand the reach of 1782. See Intel,
542 U.S. 241, 260-61 (Ҥ1782(a) leaves
the issuance of an appropriate order
to the discretion of the court which,
in proper cases, may refuse to issue
an order or may impose conditions it
deems desirable”) (citing S.Rep. No.
1580, at 7, U.S.Code Cong. & Admin.
News 1964, pp. 3782, 3788).
Given the court’s discretion to
decline 1782 discovery (particularly
when the Intel discretionary fac-
tors are not satisfied), as well as the
arbitration panel’s ability to define
the scope of discovery, the better ap-
proach, as stated in In re Hallmark
Cap. Corp., 534 F. Supp. 2d 951,
956-57 (D. Minn. 2007) is for district
courts to analyze 1782 applications on
a case-by-case basis to determine the
need for and appropriateness of the
discovery sought in each particular
instance:
[T]his Court believes that the
better approach to this issue is
to reject any inflexible rule that
would categorically exclude all
private arbitrations from the
definition of “tribunal.” Rather,
a district court should consider
whatever arguments might exist in
a particular case against extending
Section 1782 to arbitration bodies
as part of its exercise of discretion
in deciding whether to grant the
application. . . .
Even if the district court would
permit the discovery, nothing prohib-
its the arbitration body from never-
theless conditioning its acceptance of
the evidence as it sees fit, or even re-
fusing to allow the resulting evidence
to be introduced or admitted.
Id. at 957 (citing Intel, 542 U.S. 241,
262).
Such an approach would permit
parties to a private international arbi-
tration to, at a minimum, seek the dis-
covery they deem necessary to prove
their respective claims and defenses,
while at the same time still empower-
ing the arbitral tribunal to regulate
the scope and extent of discovery, as
well as the admission of evidence at
the final hearing. Moreover, parties
who wish to opt out of discovery in the
U.S. may expressly stipulate in their
arbitration agreement that Section
1782 applications are prohibited. Or,
Page 25
 The International Law Quarterly
28 U.S.C. §1782
from preceding page
conversely, parties who jointly wish
to avail themselves of such discovery
can agree in advance to the use of
1782 discovery proceedings in the U.S.
Similarly, a private arbitration tribu-
nal may determine that in order to
adjudicate the parties’ claims fully, it
requires evidence in the U.S. that is
otherwise outside of its jurisdiction.
A more flexible approach to decid-
ing 1782 applications would permit
the court to consider the arbitration
tribunal’s need for evidence in the
U.S., rather than simply denying the
request on the grounds that the pro-
ceeding is not “foreign tribunal” and is
thus ineligible for 1782 evidence.
Providing a more accommodating
method for determining 1782 requests
in connection with private arbitra-
tions, rather than attempting to
fashion a bright-line rule, might also
have the effect of quelling some reluc-
tance on the part of U.S. practitioners
and corporations to arbitration of
international disputes, given the fear
that international arbitration permits
little or no discovery.
Contrary to the arguments that
permitting 1782 discovery in private
arbitrations will open the floodgates
to discovery disputes in the U.S.,
making section 1782 available to all
private arbitral proceedings similarly
could incentivize more companies
engaged in international transac-
tions to consider arbitration as a more
ADVERTISE
IN THE ILQ!
Contact
Elizabeth Ortega
ECO Strategic Communications
eco@ecostrats.com
Page 26
appealing alternative to litigation,
potentially reducing the number of
international lawsuits on the federal
court dockets.
Until the Eleventh Circuit or the
U.S. Supreme Court weighs in on
the issue, the split of authority in
this circuit, as well as among the
federal circuits, presents uncertainty
and considerable challenges to the
international lawyer when advising
clients on the risks of litigation versus
arbitration, or when developing case
strategies without knowing the avail-
ability of discovery in the U.S.
Jenelle E. La Chuisa is an attorney
at Astigarraga Davis, where she focus-
es her practice on international com-
mercial arbitration and litigation. She
has extensive experience representing
multi-national companies in a variety
of commercial contract disputes.
Endnotes:
1 Courts have construed the statutory
language of 28 U.S.C. § 1782 to require the
following basic jurisdictional elements prior
to its application:
(1) The request must be made by a foreign or
international tribunal, or by any interested
person; (2) the request must seek evidence,
whether it be the testimony or statement of
a person or the production of a document or
other thing; (3) the evidence must be for use
in a proceeding in a foreign or international
tribunal; and (4) the person from whom dis-
covery is sought must reside or be found in
the district of the district court ruling on the
application for assistance.
In re Clerici, 481 F. 3d 1324, 1331-32 (11th
Cir. 2007); see also Intel Corp. v. Advanced
Micro Devices, Inc., 542 U.S. 241, 246-47
(2004).
2 Prior to Intel, the Second Circuit had
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held that a private arbitration before the
International Chamber of Commerce was not
a tribunal for purposes of section 1782, find-
ing that “when Congress in 1964 enacted the
modern version of § 1782, it intended to cover
governmental or intergovernmental arbitral
tribunals and conventional courts and other
state-sponsored adjudicatory bodies,” not
private parties before a private organization,
such as the ICC in Paris. Nat’l Broad. Co. v.
Bear Stearns & Co., 165 F.3d 184, 190 (2d
Cir. 1999). Not long after, the Fifth Circuit
in Republic of Kazakhstan v. Biedermann
Int’l, 168 F. 3d 880 (5th Cir. 1999), similarly
held that a private arbitration in Stockholm
was not a “tribunal” within the meaning of
Section 1782, citing public policy reasons.
“Arbitration is intended as a speedy, economi-
cal, and effective means of dispute resolution.
The course of the litigation before us sug-
gests that arbitration’s principal advantages
may be destroyed if the parties succumb to
fighting over burdensome discovery requests
far from the place of arbitration.” Id. at 883.
3 See, e.g., In re Oxus Gold PLC, 2006
WL 2927615 * 6 (D. N.J. 2006, Oct. 11,
2006) (1782 discovery permitted when the
arbitral proceedings were “authorized by the
sovereign states of the United Kingdom and
the Kyrgyzstan Republic for the purpose of
adjudicating disputes under the Bilateral
Investment Treaty”); see also In re Chevron
Corp., 709 F. Supp. 2d 283 (S.D. N.Y. 2010)
(UNCITRAL investment arbitration panel
seated in Ecuador, and established by an
international treaty between the U.S. and
Ecuador, is a “foreign tribunal.”).
4 The commercial tribunal at issue was
before the International Arbitral Centre of
the Austrian Federal Economic Chamber in
Vienna.
5 The court adopted this test from the
Middle District of Florida’s decision in In re
Operadora DB, S.A., 2009 WL 2423138 (M.D.
Fla. Aug. 4, 2009).
6 The tribunal was to be convened under
the rules of the London Maritime Arbitrators
Association.
7 Notably, the Chevron case currently is
on appeal before the Second Circuit, where
the court, on 16 November 2010, denied a
motion to stay the lower court’s order requir-
ing a deposition and document production,
choosing instead to set an expedited briefing
schedule and oral argument on the matter. In
re Chevron, Case No.: 10-1966 (2d Cir. 2010).
8 See, e.g., Operadora DB Mexico, 2009
WL 2423138 (“Empowering arbitrators or,
worse, the parties, in private international
disputes to seek ancillary discovery through
the federal courts does not benefit the arbi-
tration process. Arbitration is intended as a
speedy, economical, and effective means of
dispute resolution.”) (citing Biedermann Int’l,
168 F. 3d 880, 883, supra, note 3).
Winter 2011
 The International Law Quarterly

Page 27 Winter 2011

 The International Law Quarterly

Section

Rafael Ribeiro, Ministro João Otávio Noronha (speaker), Luis Claudio Ferreira (sponsor),
Fernando Serec (speaker and sponsor), Elizabeth Leonhardt (speaker), Quinn Smith (vice chair of
conference).

Section Chair Edward M. Mullins with Gary Davidson, (L-R): Neil Klein (speaker), Henk Milne (speaker and sponsor),
member of the Section’s Executive Council (R). Eduardo Palmer.

Winter 2011 Page 28

 The International Law Quarterly

Scene
9th Annual
International
Litigation and
Arbitration
Conference
Westin Diplomat
Hollywood, Florida
February 4, 2011

(L - R): Raphael Ribeiro,Quinn Smith (ILAC Program Vice Chair ), Ministro João Otávio
Noronha, Ed Davis (Past Section Chair), Ed Mullins (Section Chair), Fernando Serec,
and Luis Claudio Ferreira.

ILAC Program Chair Santiago A. Cueto, Giselle Cueto, and Sean

Santini.
Ed Mullins and Mauricio Gomm Santos (Brazil Foreign Legal
Consultant) sign a cooperative agreement between the
International Law Section and the Parana Bar Association of
Brazil at the Conference.

Winter 2011 Page 29

 The International Law Quarterly

CLE The Florida Bar Continuing Legal Education Committee and the
International Law Section present

9th Annual International Litigation and

Arbitration Conference
COURSE CLASSIFICATION: INTERMEDIATE LEVEL

Audio CD (Recorded Friday, February 4, 2011)

Course No. 1260C

AUDIO CD ORDERS
The audio CD for the 9th International Litigation and Arbitration Conference includes all litigation and arbitration sessions for a total
of 9 hours of CLE credit. Topics include: privacy and censorship; judge’s panel on international receivership litigation; hot topics on
international litigation; managing international arbitration or arbitrator; your client has been sued in the U.S., now what?; hot topics in
international arbitration; extraterritorial application of U.S. laws; and an international arbitration case study: The Ecuador v. Chevron case.

Friday - February 4, 2011 12:00 noon – 1:15 p.m. 4:00 p.m. – 5:00 p.m.
Luncheon (included in registration Plenary Session:
9:30 a.m. – 10:30 a.m. fee)
Plenary Session: Judge’s Panel: International Aspects to
1:30 p.m. – 2:30 p.m. Receivership Litigation
Privacy/Censorship (Blackberry cases, Moderator: Edward H. Davis, Jr.,
Breakouts Sessions:
China, etc.) Astigarraga Davis Mullins & Grossman
Moderator: Edward M. Mullins, Your Client Has Been Sued in the US –
Now What? P.A., Miami
Astigarraga Davis Mullins &
Grossman P.A., Miami Moderator: Martin Kenny 5:00 p.m. – 7:00 p.m.
Hot Topics in International Arbitration Reception (included in registration fee)
Panelists:
Richard Ovelmen, Jorden Burt L.L.P., Moderator: Richard C. Lorenzo, Hogan &
Miami Hartson L.L.P., Miami
Thomas R. Julin, Hunton & Williams, 2:30 p.m. – 2:45 p.m.  Break CLE CREDITS
Miami
2:45 p.m. – 3:45 p.m.
10:30 a.m. – 10:45 a.m.  Break CLER PROGRAM
Breakouts Sessions:
(Max. Credit: 9.5 hours)
10:45 a.m. – 11:45 a.m. Extraterritorial Application of U.S.
Laws General: 9.5 hours
Breakouts Sessions:
Moderator: Nick Swerdloff, Hughes Ethics: 0.0 hours
Hot Topics in International Litigation
Moderator: Carlos F. Concepción, Hubbard & Reed, Miami
CERTIFICATION PROGRAM
Concepción Martinez & Bellido, Miami International Arbitration Case Study: (Max. Credit: 9.5 hours)
Managing International Arbitration/ The Ecuador vs. Chevron Case Civil Trial: 4.5 hours
Arbitrators Moderator: Sergio A. Pagliery, Sergio A. International Law: 9.5
Moderator: C. Ryan Reetz, Squire, Pagliery P.A., Miami
Sanders & Dempsey L.L.P., Miami

•  COURSE MATERIAL (1260M) •  AUDIO CD (1260C)

Cost $60 plus tax (includes electronic course material)
(Certification/CLER credit is not awarded for the purchase of the $400 plus tax (section member)
course book only.) $445 plus tax (non-section member)

To order the audio CD or course material, go to

flORIDabar.org/CLE and search by course number 1260R.

Winter 2011 Page 30

 The International Law Quarterly
A View from Abroad:
Corporate Responsibility for
International Crimes?
Since relocating to the Nether-
lands, my colleagues have often asked
the question: As a Florida lawyer,
what are you doing in The Hague?
During my moments of weakness
(which usually occur when it is in-
tensely cold and rainy in The Neth-
erlands but perfect beach weather in
South Florida), I have asked myself
the same question.
Aside from the weather—which
nevertheless provides some of the
world’s most beautiful tulips—The
Hague (the “City of Peace and Jus-
tice”) has much to offer an interna-
tional lawyer. It is home to over 130
international institutes and agencies
and hosts more than 300 internation-
al businesses. It is the headquarters
of several international organizations
and U.N. organs such as the Inter-
national Court of Justice (ICJ), the
International Criminal Tribunal for
the former Yugoslavia (ICTY), the
International Criminal Court (ICC),
the Organisation for the Prohibition
of Chemical Weapons (OPCW) and
Europol. It also possesses numerous
research centers and academic insti-
tutions, such as The Hague Academy
of International Law, the TMC Asser
Instituut, the Clingendael Institute,
the Institute of Social Studies and
the Grotius Centre for International
Legal Studies, that focus on interna-
tional law. For this reason, The Hague
is often referred to as the de facto
judicial capital of the United Nations.
In 2009, I moved to The Hague to
earn an LL.M. in Public International
Law at Leiden University, which is
the oldest university in The Nether-
lands and a research leader in public
international law. During my year of
study, I attended hearings at the ICJ
and the ICC, as well as the criminal
Winter 2011
By Neil Fishman, The Hague
trials of Charles Taylor at the Special
Court for Sierra Leone (SCSL) and
Radovan Karadži at the ICTY. I also
attended a variety of conferences and
symposia on issues of public interna-
tional law.
One common theme in The Hague
this past year has been the need to
develop more robust criminal liability
for corporations implicated in inter-
national crimes and human-rights
abuses. It should be recalled that the
creation of the ad hoc tribunals (the
ICTY and the International Criminal
Tribunal for Rwanda) raised the level
of consciousness in the legal commu-
nity and the general public about the
need to prosecute those responsible
for international crimes including war
crimes, crimes against humanity and
genocide. The prosecutors at these
tribunals have typically focused their
attention on political and military
leaders.
A recent example of the global at-
tention generated by such trials took
place last summer in The Hague in
the SCSL case against Charles Taylor,
the former President of Liberia who
was charged with eleven counts of
crimes against humanity and war
crimes for his alleged involvement
in the Sierra Leone civil war during
1996 to 2002. On 5 August 2010, the
prosecution called as a witness super-
model Naomi Campbell, who testified
that associates of Taylor provided her
with uncut diamonds after a charity
dinner with the former warlord and
other dignitaries in South Africa. The
prosecution sought Ms. Campbell’s
testimony to prove that Taylor was
not truthful during his testimony in
front of the SCSL.1 The intense media
scrutiny of Ms. Campbell’s involve-
ment with Taylor and her subsequent
testimony at the tribunal underscores
the public peril for those who, per-
haps unwittingly, associate with those
accused of international crimes.
While Ms. Campbell’s contact with
Taylor was brief and perhaps unin-
tended, others purposefully embraced
the chance to profit from relationships
with political leaders such as Taylor.
One example is Guus Kouwenhoven,
a Dutch businessman who forged
a close relationship with Taylor’s
political regime to profit from a poorly
regulated Liberian timber sector,
which was heavily exploited during
Liberia’s civil war. Mr. Kouwenhoven
is currently being prosecuted in
Dutch national courts for a variety of
criminal offenses including complic-
ity in the commission of war crimes
and the violation of a United Nations
arms embargo.2
In 2009, I served as a legal consultant
for the Truth & Reconciliation Com-
mission for Liberia (TRC) and assist-
ed in drafting the section of its final
report related to economic crimes
committed during the Liberian civil
war. The TRC Final Report succinctly
described the destructive relationship
between Liberian government and
business:
S u c c e s s i v e g o v e r n m e n t s ,
including the Taylor regime,
established a massive patronage
system with domestic and
foreign-owned corporations in
several critical economic sectors,
such as timber, mining and
telecommunications, and granted
illegal benefits to the corporations
in exchange for financial and
military support. Corporations and
private individuals engaged in a
continued, next page
Page 31
 The International Law Quarterly

responsibility
from preceding page
host of illegal and anti-competitive
activities such as tax evasion,
bribery, looting, forced displacement
of civilians, money laundering, arms
smuggling, and illegal price fixing.3
Such experiences have motivated
international efforts to increase
criminal liability for corporate actors
that are involved in international
crimes and human rights abuses.
One recent event was the confer-
ence, “Corporate Liability for Pillag-
ing Natural Resources,” which was
co-sponsored by the Open Society
Justice Initiative and several other
institutions at the Peace Palace in
The Hague on 29 October 2010. The
purpose of the conference was to
introduce to the legal community a
recently published manual, Corporate
War Crimes. The manual is intended
to “act as a catalyst for reinvigorat-
ing [the] prosecution of the war crime
of pillage and to bring accountability
to companies that illegally trade in
conflict commodities.”4 The conference
brought together judges and lawyers
from leading international tribunals
and institutions. It also featured an
address by Luis Moreno Ocampo,
the ICC Prosecutor, on the future
prospects of international criminal
liability for corporate actors.
While political leaders are increas-
ingly being held individually respon-
sible for international crimes under
international criminal law, there is
significantly less case law in inter-
national or national courts that has
held corporations and their officials
responsible for international crimes.
Nevertheless, the tide appears to be
turning. Legal scholars now fre-
quently acknowledge that the illegal
exploitation of natural resources pro-
vides the financing for deadly conflict.
Consequently, there is also increased
recognition of the importance of
holding responsible those businesses
that contribute to the commission of
international crimes.
The legal content of pillage is well
established under international law.
Under international humanitarian
law, pillage has been prohibited since
the Hague Regulations of 1907.5 It
was also reaffirmed as a war crime
by the 1949 Geneva Conventions and
the 1977 Additional Protocol II, which
governs non-international armed con-
flicts. The ad hoc tribunals included
pillage as a criminal offense under
their jurisdiction. Further, the Statute
of the ICC provides that pillage is a
crime under its jurisdiction. Although
the United States is not a party to
the ICC Statute, as of 12 October
2010, 114 nations have ratified it.
Under the complementarity system
established by the statute, these state
parties are obligated to criminalize
pillage in their domestic legislation.
As evidenced by the German Code,
however, not all will define pillage
in the same way.6 Because pillage is
an international crime, some states

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Page 32 Winter 2011

 The International Law Quarterly
have gone so far as to provide their
courts with universal jurisdiction
for prosecuting alleged offenders.7
Such domestic legislation expands
the emerging transnational “web of
liability” for corporate actors involved
in international crimes.8
According to the ICC Elements of
Crimes, pillage is evidenced by the
following legal requirements:
(a) The perpetrator appropriated
certain property;
(b) The perpetrator intended to
deprive the owner of the property
and to appropriate it for private
personal use;
(c) The appropriation was with-
out the consent of the owner;
(d) The conduct took place in the
context of and was associated with
an international or non-interna-
tional armed conflict; and
(e) The perpetrator was aware of
factual circumstances that estab-
lished the existence of an armed
conflict.9
The Corporate War Crimes Manual
succinctly analyzes many of the ICC
elements, including the armed-conflict
requirement, the ownership of natu-
ral resources, exceptions, consent,
and the required mental elements for
the crime of pillage and jurisdiction.
The conclusion to be drawn from the
manual is that there is a substantial
body of international and national
case law that has outlined the con-
tours of the war crime of pillage.
Consequently, prosecutors and human
rights advocates may find generous
legal support—if they choose to pur-
sue legal action—against corporations
that are implicated in pillage.
Of course, it also should be noted
that the war crime of pillage is only
one manner in which a corporate
actor may incur criminal liability for
involvement in international crimes.
International criminal law has al-
ready established aiding and abetting,
for example, as a form of responsibil-
ity. Aiding and abetting is considered
the “practical assistance, encourage-
ment or moral support which has a
substantial effect on the perpetration
Winter 2011
of the [international] crime.”10 The
aider and abettor is also required to
have both knowledge that his or her
acts assist in the commission of the
perpetrator’s crime11 and an aware-
ness of the essential elements of the
crime committed by the principal
perpetrator.12 Consequently, corporate
actors that knowingly provide assis-
tance that substantially aids the com-
mission of international crimes may
also be exposed to criminal liability
under the legal concept of aiding and
abetting in both international courts
and certain national jurisdictions.
Of course, one would expect the
vast majority of corporations to be mo-
tivated to avoid the negative publicity
and other effects of being associated
with those who commit international
crimes. Nevertheless, there is a need
to increase the business community’s
awareness of legal developments in
international criminal law. For inter-
national lawyers who advise corpora-
tions, the developments in The Hague
with respect to corporate criminal
liability certainly merit attention.
Neil Fishman, LL.M. (Leiden), J.D.
(Florida International), previously
served as a legal consultant for the
Truth & Reconciliation Commission
for Liberia (TRC) and the program
coordinator of the Center for Interna-
tional Law & Justice at Florida A&M
University College of Law. He is cur-
rently a legal intern in the Chambers
of the International Criminal Tribu-
nal for the former Yugoslavia (ICTY).
He may be contacted at neilfishman@
gmail.com. The views expressed in
this article are those of the author
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alone and do not necessarily reflect the
views of the TRC, ICTY or the United
Nations in general.
Endnotes:
1 Prosecutor v. Charles Taylor, Case No.
SCSL-03-01-T, Prosecution Motion for the
Issuance of a Subpoena to Naomi Campbell,
20 May 2010, para. 13.
2 See Dutch Supreme Court quashes
Court of Appeal decision in Guus K. case,
The Hague Justice Portal, April 20, 2010,
http:// www.haguejusticeportal.net/eCache/
DEF/11/630.TGFuZz1FTg.html; for an analy-
sis of the lower court’s decision, see Larissa
van den Herik, The Difficulties of Exercising
Extraterritorial Criminal Jurisdiction: The
Acquittal of a Dutch Businessman for Crimes
Committed in Liberia, 9 Int’l. Crim. L. Rev.
211-26 (2009).
3 Truth and Reconciliation Commission
for Liberia, Dec. 3, 2009, Final Report, vol.
III, para. 4.
4 James Stewart, Corporate War Crime,
Open Soc’y Inst., Oct. 2010, available at
http://www.soros.org/initiatives/justice/focus/
anticorruption/articles_publications/publica-
tions/pillage-manual-20101025.
5 Id. at 11.
6 Id. at 14, citing to the German Code of
Crimes against International Law.
7 Id. at 87-8, referring to the criminal
codes of Germany and Spain.
8 For a comparative legal analysis of
international criminal law and the transna-
tional criminal law with respect to potential
corporate liability for international crimes,
see Robert Thompson, Anita Ramasastry and
Mark Taylor, The Expanding Web of Liability
for Business Entities Implicated in Interna-
tional Crimes, 40 Geo. Wash. Int’l. L. Rev.
841-902 (2009).
9 2000 ICC Elements of Crimes, U.N. Doc.
PCNICC/2000/1/Add.2.
10 Prosecutor v. Furundžija, Case No.
IT-95-17/1-T, Judgement, 10 Dec.1998, para.
191-3.
11 Id., para. 249.
12 Prosecutor v. Blagoje Simi, Case No.
IT-95-9-A, Judgement, 28 Nov. 2006, para. 86.
Page 33
 The International Law Quarterly
The Evolution of International
Arbitration in Latin America
Latin America has
come a long way
from its previous
isolationist policies
in the field of inter-
national arbitra-
tion. Although the
region continues to
pose challenges for
J. Angulo
international ar-
bitration practitioners, it now boasts
a full house of ratifications and new
laws supporting international arbitra-
tion. Latin American states have a
growing involvement in international
trade across a wide range of indus-
tries including energy, transportation,
telecommunications, entertainment,
chemicals, labor and agriculture. As a
result of this growth, Latin America
has sought to adopt a dispute reso-
lution culture favorable to foreign
investment. Among the most notable
trends and developments adopted in
the region are the wide recognition of
the arbitration clause, increased coop-
eration between the arbitral tribunals
and the judiciary, and ratification of
the 1958 United Nations Convention
on the Recognition and Enforcement
of Foreign Arbitral Awards (the “New
York Convention”) and UNICTRAL
model law on International Com-
mercial Arbitration (the “UNCITRAL
model law”). All of the aforementioned
have become key elements in over-
coming political, cultural and econom-
ic barriers in the region.
Moving Past the Calvo
Doctrine
Historically, Latin America has had
a hostile attitude towards interna-
tional arbitration. This hostility was
partly based on the Calvo Doctrine,
which required that foreign investors
be treated on an equal footing with
Page 34
By Judy Angulo, North Miami
locals. For many years, Latin Ameri-
can states rejected international
arbitration due to the suspicion that
it granted greater rights to foreign
investors, in breach of the Doctrine.
Things have now changed substan-
tially, and the mentality and target
of most Latin American states is to
attract international investors, for
whom they are open to granting the
necessary and generalized protection
through the means of the Convention
on the Settlement of Investment Dis-
putes Between States and Nationals
of Other States (the “ICSID Conven-
tion”) included in their Bilateral
Investment Treaties (“BITs”).1 In the
case of investor-state arbitration,
the foreign direct investment (“FDI”)
inflow seen in the region during the
1990’s was accompanied by the execu-
tion of relevant agreements such as
NAFTA and other BITs that provide
for arbitration proceedings before
ICSID or ad hoc tribunals under UN-
CITRAL arbitration rules. Currently,
the ICSID Convention is in force in
fourteen Latin American States. Ad-
ditionally, nineteen Latin American
States have ratified the 1975 Inter-
American Convention on Interna-
tional Commercial Arbitration (the
“Panama Convention”), while the New
York Convention has been ratified
by nineteen Latin American States.
Additionally, eleven Latin American
States have adopted, with slight
changes, the UNCITRAL Model Law
(either in its 1985 or 2006 version).2
The increasing importance that
arbitration is assuming in Latin
America is today undisputed, but the
future looks significantly different
depending on the type of proceedings.
While commercial arbitration seems
to be evolving at a slow but steady
pace, the explosion in investor-state
arbitration has raised increasing re-
sistance among some Latin American
States.
Another important factor to con-
sider when dealing with the Latin
American region is that it is neither
easy, nor is it proper, to include all
Latin American States in one gen-
eral opinion. There is no such thing
as “Latin American arbitration.”
Each and every state has its own
legislation, institutions and by-rules,
and even group efforts made at the
regional level have not yielded any
uniform results. Commercial inter-
ests in the region vary over time and
with changes of government and their
policies. What may have been true of
Venezuela a decade ago is no longer
the case, owing to a new government
that has extremely different priori-
ties; thus, even traditional commer-
cial allies have been substituted by
others. We need to question tradition-
al paradigms if we are to meet today’s
challenges.3
The foregoing should help facilitate
a more thorough understanding of the
state of arbitration in contemporary
Latin America. In light of this foun-
dational review, the following summa-
ry serves as a review of some of the
recent developments in three of Latin
America’s more active arbitration
fora—Argentina, Brazil and Ecuador.
Argentina
Argentina is a party to the New
York Convention and the Panama
Convention. This ensures the enforce-
ment of foreign arbitral awards in Ar-
gentina4 as well as awards rendered
in Argentina for which enforcement
is sought in another member state.
Argentina is a party to the ICSID
Convention and is the State with the
greatest number of cases pending
resolution before the ICSID. 5 As a
Winter 2011
 The International Law Quarterly
result of the political and economic
crisis suffered in 2001-2002, Argenti-
na enacted the Emergency Laws that
heavily interfered with the interests
and rights of foreign and national
investors. The implementation of the
Emergency Laws led to a considerable
number of foreign investors submit-
ting claims and requesting arbitration
before ICSID or UNCITRAL arbitra-
tion panels.
There were twenty-eight pend-
ing cases against Argentina before
ICSID tribunals as of mid-December
2009, with total potential liabilities
estimated by private sector analysts
in the $12 billion range. Ten of these
pending ICSID cases were filed under
the U.S. BIT. Over the past five years,
several ICSID claimants who repre-
sent a substantial share of the total
value of claims against Argentina
suspended their ICSID proceedings to
facilitate further negotiation with the
government. A number of the pending
cases have reached their final stages.
As of January 2010, the Government
of Argentina has not complied with a
September 2007 final ICSID judg-
ment awarding approximately $133
million plus interest in favor of a U.S.
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Winter 2011
investor, nor a September 2009 final
ICSID judgment awarding $165 mil-
lion plus interest in favor of another
U.S. investor. 6
Two cases recently received annul-
ment decisions in investment arbitra-
tion involving Argentina. In Sempra
Energy International v. Argentine
Republic (ICSID Case No. ARB/02/16),
Decision on Annulment of 29 June
2010 (C Söderlund, President, DAO.
Edward, AJ Jacovides), the Sempra
ad-hoc committee annulled the award
in its entirety based on the “manifest
excess of powers (article 52(1)(b) of
the Convention) owing to the failure
of the Arbitral Tribunal to apply Ar-
ticle XI of the BIT between the [U.S.]
and [Argentina].” In Enron Creditors
Recovery Corp. v. Argentine Republic
(ICSID Case No. ARB/01/3), Decision
on Annulment of 20 July 2010 (G
Griffith, President, PL Robinson, Per
Tresselt), the Enron ad-hoc committee
annulled the findings on liability and
damages by the tribunal, finding that
it had manifestly exceeded its powers
(article 52(1)(b) of the Convention)
in failing to apply the proper law to
the dispute. 7 These decisions, which
annulled two awards in excess of
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$100 million against Argentina, lend
further support to a State’s defense
of necessity in times of economic and
political turmoil and suggest that the
scope of annulment committee review
may be more expansive than previ-
ously thought. They have also contrib-
uted to the continuing uncertainty
regarding the proper application of
the “necessity” clause—a standard
provision in bilateral investment
treaties that exempts State actions in
extraordinary circumstances from the
protection of the treaties.
Brazil
Milestones in Brazil’s development
are: in 1996, the enactment of the
Arbitration Law;8 in 2001, the recog-
nition of the constitutionality of that
law by the Federal Supreme Court;9
and, in 2002, the ratification of the
New York Convention on the Recog-
nition and Enforcement of Foreign
Arbitral Awards.10 Since 2006, Brazil-
ian companies have been some of the
leading users of the International
Chamber of Commerce (“ICC”) in
Latin America, achieving the position
of fourth-most-active country that
continued, next page
Page 35
 The International Law Quarterly
latin america
from preceding page
year. São Paolo and Rio have been
increasingly chosen as the places of
arbitration, leading the ICC Latin
American ranking in recent years.11
Brazilian courts also have been
pivotal in the increasing numbers
of arbitrations. Since the end of the
twentieth century, their attitude
towards arbitration has moved from
skepticism to enthusiasm. Arbitra-
tion agreements and awards have
been duly respected. Recent research
that was coordinated by the Brazil-
ian Arbitration Committee and the
Law School of the Fundação Getulio
Vargas, and was published in August
2009, reached such a conclusion. It
showed that arbitration has been
developing as a consistently useful
method of private resolution and that
arbitration has counted on broad ac-
ceptance and cooperation from Brazil-
ian courts.12
Ecuador
Ecuadorian law permits interna-
tional arbitration when the parties
have agreed to it and when certain
stipulated requirements have been
met. Arbitration is regulated by the
Arbitration and Mediation Law that
follows the UNCITRAL Model Law
and was enacted on 4 September
1997.13 It allows the state to submit
itself to domestic or international
arbitration. Once the arbitrators have
issued their arbitration sentence or
award, their decision is not subject to
appeal. If one of the parties solicits it,
however, the award may be clarified
or amplified. Because it is a private
and single-step process, arbitration
in Ecuador is much more agile and
expedient than traditional litigation.
For the purpose of promoting, attract-
ing and protecting foreign invest-
ment, Ecuador signed the ICSID
Convention in 1986 (which became
fully ratified in 2001), has executed
numerous BITs, and remains a party
to the World Trade Organization.
Page 36
The administration of President
Rafael Correa has openly voiced its
doubts about ICSID impartiality, al-
leging that the Centre favors only the
interests of the developed countries
and of those countries’ companies
coming to invest in Ecuador. At the
end of 2007, President Correa sent a
letter to ICSID stating his intent to
limit Ecuador’s consent to submit to
arbitration on issues pertaining to the
utilization of natural resources such
as oil, gas and minerals.14 The new
constitution, prepared by the Na-
tional Constituent Assembly (“NCA”)
and approved by referendum on 28
September 2008, contemplates the
existence of arbitration and includes
provisions relating to its treatment
and regulation. Additionally, the
2008 constitution expressly prohibits
Ecuador from entering into interna-
tional treaties or instruments waiv-
ing jurisdiction with a view towards
international arbitration involving
contractual and commercial issues.
In summary, the execution of treaties
allowing arbitration in investment
cases has not been prohibited—that
is, not for contractual or commercial
reasons, nor under the standards on
international public law on invest-
ment. Rather, the prohibition refers
to contractual or commercial matters
where the state is the counterparty of
private persons. Not surprisingly, Ec-
uador pulled out of the ICSID in July
2009. Its neighbor Bolivia has pulled
out as well.
Latin America takes
center stage
The result of all of the above fac-
tors has been an explosion of inter-
national arbitrations in the region,
to the point where Latin America
has become one of the hottest topics
of discussion in arbitration circles.15
In the last several years, high-profile
conferences relating to Latin Ameri-
can arbitration have taken place in
London, Paris, Rio, New York, Miami
and Dallas. The 2009 ICC data16 show
significant and constant growth in
the Latin American market. Ap-
proximately 12% of the 817 new cases
filed in 2009 involved the region.17
The ICC Conference on International
Commercial Arbitration in Latin
America held last year in Miami
showcased 330 participants from over
thirty countries, yet another sign that
international arbitration in Latin
America is steadily becoming a topic
demanding both scholarly and public
attention. The increasing number of
regional commercial exchanges and
the quality of experts in the field of
arbitration, as well as a high level
of trust in arbitration versus litiga-
tion in many national court systems,
appear to be some of the reasons for
this recent growing success.18 Im-
provement of case law on important
matters relating to arbitration will
further help establish a uniform point
of view promoting a positive approach
to arbitration.19
Challenges Ahead
Although Latin America has come a
long way from the days of the Calvo
Doctrine, political unrest in the region
bears watching. The leftist political
wave spreading throughout the region
has already left its mark on interna-
tional arbitration, as evidenced by
Ecuador and Bolivia pulling out of the
ICSID and by recent changes taking
place in Venezuela. Another concern
is the considerable confusion about
the applicable arbitral rules in the
States in the region, given the coex-
istence of international and regional
conventions in addition to arbitration
laws that have evolved at the regional
and national level. The courts can be
misused to intervene in arbitration
proceedings through challenges based
on alleged constitutional rights (such
as amparos and mandados de segu-
rança).20
In conclusion, the desire to pro-
mote international arbitration in
Latin America clearly exists, and a
common language and understanding
of arbitration seem to have developed
within the region. With few excep-
tions, arbitration has turned into a
well-accepted means for dispute reso-
lution, actively encouraged by states’
legislation and frequently based in
Winter 2011
 The International Law Quarterly
tested legal frameworks under inter-
national guidelines and treaties. The
growth in the number of arbitrators
appointed in either institutional or ad
hoc arbitrations is another sign of the
continuing progress made.
Judy Angulo is Co-Chair of the
International Law Section Member-
ship Committee. She was born in
Colombia, has business ties to South
America and has travelled through-
out the region. She received her B.A.
in International Studies from the
University of Miami and her J.D. from
St. Thomas University. She practices
commercial litigation in North Miami
at Florida Insurance Advocates.
Endnotes:
1 Rafael Rodriguéz-Mercenio, Arbitration
in Latin America: Friend or Foe?, The Ameri-
cano, Oct. 13, 2010, http://theamericano.
com/2010/10/13/arbitration-latin-american-
friend-or-foe/.
2 UNCITRAL, 1985 UNCITRAL Model
Law on International Commercial Arbitra-
tion, as adopted by the U.N. Commission on
International Trade Law (21 June 1985),
available at www.uncitral.org/uncitral/en/
uncitral_texts/arbotration/1985Model_arbi-
tration_status.html.
3 Guido Santiago Tawil, Strengthen-
ing International Arbitration’s Presence
in the Americas, Arb. Rev. of the Americas
pp 391-394, and the entire opinion published
in Revista Trimestral de Jurisprudencia
(from Federal Supreme Court), No. 190/908.
10 Decree 4,311, enacted on 23 July 2002.
11 2006 Statistical Report, 18 ICC Int’l Ct.
of Arb. Bull., 5-16 (2007), and 2007 Statisti-
cal Report, 19 ICC Int’l Ct. of Arb. Bull.,
5-16 (2008).
12 The initial report of the research,
“Arbitragem e Poder Judiciário,” is avail-
able at www.cbar.org.br/PDF/Relatorio final
pesquisa GV CBAR.pdf. The second part of
this research, focused on the setting aside
of domestic arbitral awards, is available at
www.cbar.org.br/PDF/Pewuisa GV-CBAR
relatorio final I etapa 2fase 24.06.09.pdf.
13 The AML was codified in Official
Register No. 417 dated 14 Dec. 2006. Previ-
ously, the original text of the AML had been
amended by the Amendatory AML Law
published in Official Register No. 532 dated
25 Feb. 2005.
14 See http://iscsid.worldbank.org/ICSID/
Index.jsp. See also Ecuador partially with-
draws from ICSID, Latin Lawyer (Dec. 2007).
The pertinent portion of the communication
reads as follows: “The Republic of Ecuador
will not consent to submit to the jurisdiction
of the International Centre on Settlement of
Investment Disputes (ICSD) the differences
Applications for Executive
Council Members and
arising on matters pertaining to treatment
of investments deriving from economic ac-
tivities relating to the utilization of natural
resources such as oil, gas, minerals or others.
All instruments containing the willingness
previously expressed by the Republic of Ec-
uador of submitting those disputes to the ju-
risdiction of the Centre and not yet perfected
by means of the express and explicit consent
of the other party before the date of presen-
tation of this notice are withdrawn by the
Republic of Ecuador, effective immediately as
of this date.”
15 Nigel Blackaby and Sylvia Noury, Inter-
national Arbitration in Latin America, Latin
Lawyer (Sept. 2005).
16 Approximate percentages and informa-
tion provided by José Ricardo Ferris at the
ICC Latin American Committee meeting
held in Paris on 24 Sept. 2010.
17 International Commercial Arbitration
in Latin America, Arb. Rev. of the Americas
2011. Information provided at the ICC Conv.
on Int’l Arb. in Latin America held in Miami
on 8 Nov. 2010.
18 Rodriguéz-Mercenio, supra note 1.
19 International Commercial Arbitration in
Latin America, supra note 17.
20 Id.

Treasurer Sought
2010, available at http://www.globalarbi-
trationreview.com/reviews/21/sections/77/
chapters/810/strengthening-international-
arbitrations-presence-americas/.
4 Argentina has made a reservation Six slots will be opening up on the Section’s Executive Council in 2011.
whereby it will apply the New York Conven- Qualified candidates should have been active in the Section for a suf-
tion only to awards on commercial matters ficient time to show commitment, and should have led a major project
issued in the territory of another member or conference or run a committee. Interested persons should forward a
state.
resume along with a cover letter explaining what you have done for the
5 World Bank website: http://worldbank.
org/icsid/cases/cases.htlm, accessed Oct. Section and why you would like to join the Executive Council.
2010.
The Section is also seeking applications for Treasurer, a position that
6 Dep’t of State website: http://www.state.
gov/e/eeb/rls/othr/ics/2010/138028.htm, ac-
puts the person in line for Chair. Applicants for Treasurer must come
cessed Oct. 2010. from the existing Council membership. Again, those interested should for-
7 Adriana Braghetta, International Com- ward a resume along with a cover letter explaining what you have done
mercial Arbitration in Latin America, Arb. for the Section and why you would like to become Treasurer.
Rev. of the Americas 2010, p.2.
8 Law No. 9,307 enacted on 23 Sept. 1996. Applicants for Executive Council and Treasurer must send their ma-
9 Ag.Reg. na Sentença Estrangeira
terials no later than March 31, 2011, by email to Chair Ed Mullins at
Contestada (SEC) 5206-7, Full Session of emullins@astidavis.com; the Chair-Elect, Nicolas Swerdloff at swerdlof@
the Federal Supreme Court (STF), report- hugheshubbard.com; and past Chairs Francisco Corrales at fcorrales@
ing Justice Sepúlveda Pertence, judgment pkslegal.com and J. Brock McClane at jbm@mcclanepa.com. Please also copy
of 12 Dec. 2001, available at www.stf.gov.br.
The prevailing opinions of Justice Nelson current Executive Committee Members Richard Lorenzo at richard.lorenzo@
Jobim and Ellen Gracie are published in the hoganlovells.com and C. Ryan Reetz at ryan.reetz@post.harvard.edu.
Revista de Direito Bancário, do Mercado de
Capitais e da Arbitragem, No. 11, Jan/Mar
2001, pp 361-374 and No. 13, Jul/Sep 2001,

Winter 2011 Page 37

 The International Law Quarterly

The Florida Bar Foundation:

A Cause We Can Share
By John A. Noland, President, The Florida Bar Foundation

I hope lawyers in Florida will join me in supporting a common cause: The Florida Bar Foundation.
The Foundation, a 501(c)(3) public charity, is a means through which lawyers can support a commonly held
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The Florida Bar Foundation’s mission to provide greater access to justice is accomplished through funding of
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the nation’s first Interest on Trust Accounts (IOTA) program. Over the past 29 years, the Florida IOTA program
has distributed more than $350 million to help hundreds of thousands of Florida’s poor receive critically needed
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legal aid organizations in Florida comes from The Florida Bar Foundation.
Domestic violence, predatory lending and foreclosure, and access to public benefits are among the types of cases
flooding legal aid offices throughout the state. For the sake of those throughout Florida with nowhere else to
turn for legal help but to Legal Aid, your support of The Florida Bar Foundation is vital.
Gifts to the Foundation provide added value to your local legal aid organization because of Foundation ini-
tiatives such as salary supplementation and loan repayment programs to help retain legal aid attorneys, a
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The Foundation is unique as a funder in providing leadership, along with its financial support, by working with
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Page 38 Winter 2011

 The International Law Quarterly
The Enforcement of Foreign Arbitral
Awards in Brazil and the Ratification of the
New York Convention
By Leonardo Daldegan Lima, Montreal
Introduction
Since the sixteenth
century, when
Brazil was still a
Portuguese colony, it
has evolved unique-
ly with accompany-
ing consequences to
its commerce with
L. Lima
the world.1 Even
though the huge South American na-
tion has always depended on the ex-
port of primary goods—or goods sold
as they are found in nature2—through
the years Brazil has succeeded in
diversifying into a highly industrial-
ized nation.3
At this level, as one of the largest
economies in the world, Brazil’s role
in international commerce has be-
come critical.4 With the largest gross
domestic product in Latin America,
Brazil has continued to increase
its exports even through the global
economic crisis.5 Inevitably, with the
growth of its economy, there has also
been increasing international invest-
ment and, consequently, a rise in
international contracts settled in the
country.
Plainly, with this increase in
contracting, Brazil needed to ensure
a modern legal system that would
provide sufficient protection to all in-
vestors conducting business there. In
this regard, to deal with the eventual
conflicts that come from these private
agreements,6 arbitration arose.7 To
give support to its new role in the
international trade community, Brazil
had to adjust its legislation8 concern-
ing international arbitration proceed-
ings, since the provisions previously
applied were not compatible with the
demands of the international invest-
ment community.
Although arbitration existed in
Winter 2011
Brazilian law since the Ordenações
Filipinas9 in the sixteenth century,
there has often been a conflict be-
tween the Brazilian legislation—
mainly the LICC10 (Introduction
Law of Brazilian Civil Code)—and
the principle of party autonomy, the
main component of the institution of
arbitration. Thus, the institution of
arbitration was always kept under a
certain level of repression by Brazil-
ian legislation.
The divergence between provisions
in Brazilian law prevented parties to
an international contract established
within the country from choosing
their rules. On the other hand, the
interpretation of LICC11 and its pref-
erence for the law of the place where
the act occurred12 always prevailed,
causing a level of discontent among
international investors, who wanted
more autonomy to choose the arbitra-
tion rules most convenient for them.
With the 1996 enactment of Lei No.
9.307 de 23 de Setembro de 1996—the
Brazilian Arbitration law (hereinafter
“Lei 9307/96”)—arbitration proceed-
ings in Brazil began the process of
catching up to modern investor expec-
tations. This law introduced essen-
tially the same provisions as the New
York Convention,13 which had not yet
been ratified by the Brazilian govern-
ment. In the new law, outmoded provi-
sions were removed, like the obliga-
tion to formalize a new submission
agreement (compromisso arbitral) to
complement the arbitration clause in
the contract14; the need for a Brazilian
court to “homologate”15 any arbitral
award; as well as the requirement of
double homologation where the inter-
national arbitration award was made
(duplo exequatur).16
Despite the importance of the
enactment of that law, which revolu-
tionized Brazilian arbitration pro-
ceedings, Brazil still had not ratified
the New York Convention itself. For
international investors, ratification
would signal that Brazil was ready to
provide the true juridical protection
for their investments. Finally, in 2002,
Brazil ratified the New York Conven-
tion and, since then, international
arbitration in Brazil has changed
significantly.17 This article discusses
the evolution of the enforcement of
foreign arbitral awards in Brazil
through ratification of the New York
Convention.
A. Enforcement of Foreign
Arbitral Awards in Brazil
Before Ratification of the
New York Convention
1. Brazilian economic changes
and consequences concerning
arbitration
Until 1822, as a Portuguese colony,
Brazil had little significance in inter-
national trade. Its commerce, consist-
ing primarily of agricultural exports,
was considered to be that of Portu-
gal.18
By the beginning of the twenti-
eth century, Brazil had left behind
its dependence on the exportation
of agricultural products and become
a country with a considerable and
solid industrial base.19 With devel-
opment policies, Brazil built core
industries, like iron smelting, mining
and oil, that improved its economic
status and, consequently, increased
its participation in the international
market.20 Brazil then entered into
secondary industries, like auto manu-
facturing, resulting in further devel-
opment. After the two world wars,
Brazil realized spectacular growth in
continued, next page
Page 39
 The International Law Quarterly
arbitral awards in brazil
from previous page
its economy due to the industrializa-
tion that occurred through the early
1960’s. At this time the new federal
capital of Brasilia was planned and
built, symbolic of a new Brazil.21
Throughout that time, however,
arbitration was rarely used in the
country. In fact, in any commercial
dispute arising out of international
contracts in which there was a Brazil-
ian party, arbitration clauses were
not considered valid by Brazilian
judges, because those clauses were
interpreted as essentially illusory
promises to agree to arbitrate in the
future.22 Therefore, no legal provision
existed for foreign arbitral awards to
be enforced in Brazil.
Subsequently, with rising Cold
War tensions, and political and social
upheaval, many problems arose in
Brazilian society. Notwithstanding
the continued growth of the Brazilian
economy, quality of life for the people
did not improve, such that most of the
population lived in poverty.23 Con-
sequently, Brazil elected a socialist
candidate as its president, causing
further social tension in the coun-
try. Eventually, this tension led to a
takeover by the military and, with it,
serious consequences.
Despite the civil strife, Brazil’s
economy saw an increase in its ex-
ports and the “milagre econômico,”24
a phase when economic growth
increased to levels never before seen.
Techniques for bio-fuel were discov-
ered using Brazil’s abundant sug-
arcane at the fortuitous time of the
1970’s oil crisis. Brazil expanded its
exports of industrialized goods and
began to produce soy, which quickly
became one of the country’s main
export products.
But despite the steady and con-
siderable growth of its economy,
Brazil continued to ignore arbitra-
tion. Brazilian courts still considered
arbitration clauses only a promise
to arbitrate in the future (pactum in
contrahendo); and double exequatur
Page 40
continued to be required to enforce
any foreign arbitral awards.
In the 1980’s, there were a suc-
cession of changes in the country, as
much politically as economically. A
democratic movement removed the
military forces and, in 1988, Brazil
promulgated its current Constitution,
called A Constituição cidad.25 Many
scholars consider the 1980’s to be an
economically lost decade due to the
stagnation of the Brazilian economy
and the loss of international credit.26
The institution of arbitration re-
mained ignored.
By the 1990’s, Brazil began a
process of economic stabilization in
which inflation was strictly controlled.
This stabilization, however, brought
recession and more stagnation.27
But over the last decade, Brazil has
retaken its position as an exporting
country. It diversified its economy and
reached a status as one of the largest
in the world.28
Thus, it finally became impera-
tive for Brazil to modernize and to
establish mechanisms to resolve trade
conflicts quickly in order to attract
international investments on a large
scale. This could only happen through
a complete makeover of its arbitration
rules.29
2. Arbitration in Brazil up to
1996
The institution of arbitration
technically existed in Brazil since
the colonial period of the sixteenth
century. At that time, as a Portuguese
colony, Brazil was under the authority
of Felipe I, King of Spain, since the
two Crowns—Portuguese and Span-
ish—were united. Provisions called
Ordenações Filipinas were enacted
regarding trade in the colony and
the institution of arbitration ap-
peared for the first time under the
name Dos Juízes Árbitros (The Judge
Arbitrators).30
In the provisions of Ordenações
Filipinas regarding arbitration, it was
possible to appeal from an arbitral
award to a judge, regardless of wheth-
er there was any clause in the agree-
ment to the contrary. The arbitral
award, however, did not depend on the
judge’s homologation.31 The provisions
also provided that “if each of the par-
ties do not appeal from the arbitral
award in the due time, this award will
be enforced by the trial judges.”32
Years after its first appearance in
Brazilian law and after its gradual
disuse, the institution of arbitration
resurfaced in the Brazilian imperial
period, when the country had just
become independent from Portugal in
1822. In the first Brazilian Constitu-
tion, in 1824, Article 160 stated that:
“[I]n civil or criminal cases, the par-
ties may nominate arbitrators. Their
awards will be enforced, without ap-
peal, if pre-matched by the parties.”33
Subsequently, in 1850, when the
first Brazilian Commercial Code34 was
enacted, there was a provision stating
that “the social issues arising out of
partnerships, during the existence of
the company or society, including its
liquidation or its shares, shall be sub-
mitted to an arbitrator.” Nonetheless,
this provision was revoked sixteen
years later.
Also in 1850, commercial arbitra-
tion was regulated by Regulation 737,
in which Article 411 distinguished
consensual arbitration from man-
datory arbitration.35 At that time,
arbitrators made awards based on
the commercial legislation and on
the “promise to arbitrate” clauses.
In 1867, the Brazilian government
enacted a provision, the Decreto 3.900,
regulating arbitration proceedings in
Brazil.36 This enactment stated that
arbitrators would judge by fairness, if
authorized by the parties.
In 1939, the Brazilian Civil Proce-
dure Code37 was enacted, including
provisions regarding arbitration. The
provisions, however, did not clearly
define how arbitral disputes would be
resolved. And worse, they set forth the
requirement of homologation of all
arbitral awards by trial judges. Also,
there was no reference to the “promise
to arbitrate” clause (cláusula compro-
missória),38 which would be treated in
the amendment to the Civil Procedure
Code in 1973.
Despite language addressing
the cláusula compromissória in the
1973 amendment, the institution
Winter 2011
 The International Law Quarterly
of arbitration remained unsettled
because of divergence concerning
this promise-to-arbitrate clause that
remained merely a promise to submit
future disputes to arbitration, not an
actual agreement that could itself be
submitted as the basis for conven-
ing an arbitration. Most cases ended
up in state courts, because one party
could simply refuse to sign the subse-
quent agreement or submission. Thus,
at that time, there was no certainty
for investors doing business in Brazil
since Brazilian law could not afford
protection in their trade disputes.39
In addition to the issues concern-
ing the cláusula compromissória
and its non-enforcement, there also
remained the problem concerning ho-
mologation of arbitral awards.40 The
Civil Procedure Code of 1973 gener-
ally stated that all arbitration awards
made in Brazil had to be approved by
the Supremo Tribunal Federal, the
Federal Brazilian Supreme Court,
which would use a “homologation
procedure” to determine if Brazilian
law had been properly applied.41
Thus, international arbitration was
an unattractive option in Brazilian
disputes:
[F]irst, when arbitrating in
Brazil there was a requirement to
conclude a post-dispute submission
agreement (o compromisso)
to supplement the arbitration
clause in the contract (a cláusula
compromissória), in the absence of
which the judicial courts retained
jurisdiction; secondly, the award
had to be formally approved by
the Brazilian courts in a process of
“homologation”; thirdly, when the
dispute had been arbitrated outside
of Brazil the courts of the place of
arbitration and the Brazilian courts
needed to “homologate” the award
to ensure that the requirements
of both the law of the place of
arbitration and Brazilian law had
been fulfilled.42
In many cases, in an interna-
tional dispute involving the cláusula
compromissória, a Brazilian party
defied the obligation of application of
arbitration proceedings made in the
Winter 2011
agreement by maliciously submitting Indeed, prior to its enactment,
the dispute to Brazilian state courts, the institution of arbitration seemed
which sometimes would not properly all but forgotten in Brazilian com-
apply the law, and which would take merce due to the obstacles created
years to resolve the matter in any by the cláusula compromissória’s
event. As Blackaby noted, “Concerns mere promise to solve eventual or
have been voiced that this basic future conflicts through arbitration,
protection for foreign investments is which had no effect in practice, and
sometimes lacking in Brazil, which by the need to homologate arbitral
has long been regarded as the ‘black awards to give them the same effect
sheep’ of Latin America in its ap- as State court judgments.45 The need
proach to arbitration.”43 for homologation alone removed any
cost advantage to arbitration, and any
3. The Brazilian Arbitration supposed benefit of confidentiality
Law (Lei 9.307/96)
was also lost by having to seek ap-
The Brazilian Arbitration Law, Lei
proval of the State courts.46
9307/96, was revolutionary for Brazil-
Observing the principle of party
ian arbitration. The new law brought
autonomy, Lei 9.307/96 gave parties
clarity and simplicity to commercial
arbitration proceedings.44 continued, next page
Section Calendar
Mark your calendars for these important dates.
For more information contact: Angela Froelich: 850-561-5633 /
afroelic@flabar.org
April 13-15, 2011
ILS Reception at ABA Sections of Litigation and
Criminal Justice Conference
Fountainbleau Resort, Miami Beach
May 2-3, 2011
International Bar Association
“Global Investments in Real Estate” Conference
Mandarin Oriental Hotel, Miami
May 5-6, 2011
2nd International Bar Association
Conference of the Americas
Mandarin Oriental Hotel, Miami
June 24, 2011
(At The Florida Bar Annual Convention)
“New Frontiers in Arbitration” (1214R)
ILS Executive Council Meeting
Gaylord Palms Resort & Convention Center, Orlando
Page 41
 The International Law Quarterly
arbitral awards in brazil
from previous page
the freedom to choose their own rules
concerning the arbitration proceedings
and determine arbitrators to make
decisions based on fairness or on the
general principles of law.47 Important-
ly, regarding foreign arbitral awards,
the new Arbitration Law eliminated
the double homologation (duplo ex-
equatur). The Superior Tribunal of
Justice (hereinafter, “STJ”)48 now ho-
mologated the foreign arbitral awards
directly by determining whether there
is any offense to Brazilian public order
or to its good customs.
The Lei 9.307/96 was essentially
well accepted by the international
trade community. Shortly after its
enactment, however, the question of its
constitutionality was raised by way of
an appeal contesting an arbitral award
made by a Spanish arbitrator, for
which the Brazilian Federal Supreme
Court denied homologation, alleging
lack of official registration of the arbi-
tral award by the Spanish court.
Five years after the enactment of
the law, in 2001, the Brazilian Supreme
Court finally judged that Lei 9.307/96
was constitutional, holding that it was
not necessary for the Spanish award to
be homologated by the Spanish Court,
since in Spain any arbitral award has
as much legitimacy and authority as
any State court decision.49
Although, the 1996 Arbitration
Law was a large step forward toward
modernizing Brazilian arbitration law,
a final step came in 2002 when the
New York Convention was ratified.50
Although the Arbitration Law had
included nearly identical language to
the New York Convention, true com-
fort came to the international trade
community only after the constitu-
tional affirmation by the country’s
Supreme Court, coupled with its ratifi-
cation of the New York Convention.51
B. Enforcement of foreign
arbitral awards in Brazil
after New York Convention
1. The ratification of the
Page 42
New York Convention by the
Brazilian government
The New York Convention was
ratified through Legislative Decree52
No. 52/2002, and with it Brazil en-
sured the validity of foreign arbitral
awards, as long as the basic principles
of public order, reciprocity, and due
process were observed.53 The New
York Convention also brought other
important provisions to the Brazil-
ian legal system.54 All foreign awards
formerly rendered under bilateral
conventions, all awards rendered
under the Bustamante Code,55 and
all awards rendered under any other
system56 were absorbed under the
New York Convention. Notably, the
STJ57 enforces foreign awards under
the newly ratified Convention, when
formerly only the Brazilian Supreme
Court had that authority.
Thus, it can be stated there are two
procedures for enforcement of foreign
arbitral awards in Brazil by the STJ:
the arbitral awards subordinated to
the New York Convention, which are
the vast majority of foreign awards;
and the arbitral awards subordinated
to the Protocol de Las Leñas—con-
cerning the members of MERCOSUL,
an economic and political agreement
among Argentina, Brazil, Paraguay
and Uruguay, as well as other local
countries with associate-member sta-
tus—which are enforced through the
exequatur or enforcement of rogatory
letters.58
Notably, the newly ratified New
York Convention has not yet been
discussed in the STJ decisions. To the
contrary, the STJ continues to refer-
ence the Brazilian Arbitration law, Lei
9.307/96, as the legal basis for conced-
ing or not conceding the enforcement
of the foreign arbitral awards.59 Curi-
ously, there is no mention of the New
York Convention in the STJ decisions,
despite the fact that the Convention
is in plenary and universal binding
force in the Brazilian legal system.
This is likely because the New York
Convention has essentially the same
provisions as the Brazilian Arbitra-
tion Law; thus, absent conflict, there
is no need for the New York Conven-
tion to prevail. In this regard, there is
a decision of the STF stating that any
international treaty ratified by the
Brazilian government revokes a prior
law.60 On the other hand, any newly
enacted law also revokes a prior in-
ternational treaty, since both of them
have the same hierarchy.61
2. The importance for Brazil of
the ratification of the New York
Convention
The New York Convention, by vir-
tue of its ratification by the Brazilian
government, has absolute primacy
over existing legal dispositions in the
domestic law. As noted, however, Lei
9.307/96 and the New York Conven-
tion are very similar.62 Nonetheless,
the ratification of the New York Con-
vention represented one of the most
important steps in the consolidation
of international arbitration in Brazil.
The New York Convention, of
course, is the most important treaty
on the recognition and enforcement of
foreign arbitral awards in the world.63
Thus, it ensured more juridical safety
in international trade and commerce
with Brazil. Perhaps future Brazilian
STJ decisions may even take ad-
vantage of the comparative doctrine
and jurisprudence arising from the
New York Convention as persuasive
authority.64
Even as solely an emotional crutch,
the importance of the ratification of
the New York Convention in Brazil
cannot be overstated. As the near uni-
versally adopted legal infrastructure
for international commercial disputes,
it provides the key to the effective en-
forcement of international awards.65
Conclusion
The Brazilian economy has devel-
oped from that of Portugal’s agricul-
tural outpost to one of the world’s
greatest economic machines. For
many years, however, the country’s
system of resolving international
disputes lagged behind the rest of the
world and hindered investment into
a country whereby foreigners would
always worry that any resulting
disputes would have to be resolved
by “local” courts which, at best, would
Winter 2011
 The International Law Quarterly
take considerable time for resolution.
Lei 9.307/96 was an important first
step. But the ratification of the New
York Convention—although too long
in coming—finally gave Brazil an
international commercial legal foun-
dation in keeping with its economic
status in the world.
Leonardo Daldegan Lima is a
member of the Brazilian Bar Associa-
tion (OAB 29.926). He graduated
with a Master of Laws (LL.M – Busi-
ness Law in a Global Context) from
the University of Montreal in 2010.
Endnotes:
1 Lael Brainard & Leonardo Martinez-
Diaz, Brazil as an economic superpower?:
Understanding Brazil’s Changing Role in the
Global Economy, at vii (2009).
2 Id.
3 Id. at 2.
4 Ralph Lattimore & Przemyslaw Kowal-
ski, Brazil, in Globalisation and Emerging
Economies: Brazil, Russia, India, Indonesia,
China and South Africa 211 (2008).
5 Id. at 212-16.
6 Philippe Fouchard et al., Fouchard,
Gaillard, Goldman on International Com-
mercial Arbitration 11 (2d ed. 1999).
7 Etiene Maria Bosco Breviglieri & Denis
Marcos Veloso Soares, Contratos Interna-
cionais Firmados no Brasil: A Possibilidade de
Escolha da Legislação Aplicável Mediante a
Lei de Arbitragem (2007).
8 Id.
9 Márcio A. M. Moraes, Arbitragem nas
Relações de Consumo 151 (1st ed. 2006).
10 Decreto-Lei 4.657 de 04 de setembro de
1942, L.I.C.C., D.O.U., 09 Sept. 1942, art. 9.
11 Id.
12 Beat Walter Rechsteiner, Direito Inter-
nacional Privado: teoria e prática 133-55 (9th
ed. 2006).
13 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 10
June 1958, 21. U.S.T. 2517, 330 U.N.T.S. 38
[herinafter New York convention].
14 Nigel Blackaby, Arbitration and Brazil:
A Foreign Perspective in Arbitration Interna-
tional, 17 Arb. Int’l 129, 131 (2001).
15 Id. at 132. Homologation is a technical
term, derived from the Greek homologeo
for “to agree,” generally used to signify the
granting of approval by an official authority
16 Id.
17 Brazil ratified the New York Convention
on 07 June 2002.
18 Lattimore & Kowalski, supra note 4, at
211.
Winter 2011
19 Tamás Szmrecsányi & Wilson Suzigan,
História Econômica do Brasil Contemporâneo
3 (2d ed. 2002).
20 Id. at 4.
21 Bianor Scelza Cavalcanti et al., Desen-
volvimento e Construção Nacional: Políticas
Públicas 165 ( 2005).
22 Pactum in contrahendo.
23 Marieta de Moraes Ferreira, João Gou-
lart: entre a memória e a história 57 (2006).
24 Adriana Lopez & Carlos Guilherme
Mota, História do Brasil: Uma Interpretação
834 (2008).
25 Constituição da República Federativa do
Brasil de 1988.
26 Antônio Carlos Robert Moraes, Territó-
rio e História no Brasil 142 (2005).
27 Werner Baer, A Economia Brasileira
217 (2nd ed. 2002).
28 Lattimore & Kolwalski, supra note 4, at
237.
29 Irineu Strenger, Arbitragem Comercial
Internacional 44 (1996) .
30 Romeu Falconi, A gênese das Ordenações
Filipinas, Novos Estudos Jurídicos, vol. 10,
n.2, (27 March 2007), https://www6.univali.
br/seer/index.php/nej/article/view/411.
31 Strenger, supra note 29, at 13.
32 Ordenações Filipinas (1603), available
at http://www.planalto.gov.br/ccivil_03/revis-
ta/Rev_03/ordenamento%20jur%20brasil.
htm.
33 Constituição Política do Império do
Brazil, Secretaria de Estado dos Negócios do
Império do Brazil, (22 April 1822), available
at http://www.planalto.gov.br/ccivil_03/consti-
tuicao/constitui%C3%A7ao24.htm.
34 Lei 556 de 25 de junho de 1850, Código
Comercial Brasileiro, Brazilian Commercial
Code (25 June 1850), available at http://www.
planalto.gov.br/ccivil_03/Leis/L0556-1850.
htm.
35 Mariulza Franco, Aspectos da Arbitra-
gem, Revista Unipar (Article presented to
Universidade Paranaense) (31 March 2008),
http://revistas.unipar.br/juridica/article/
viewFile/1288/1141.
36 Marcos Paulo Félix da Silva, A arbitra-
gem como alternativa à execução das obri-
gações no âmbito empresarial, Buscalegis,
(Florianópolis: UFSC, 14 March 2007), http://
www.buscalegis.ufsc.br/revistas/index.php/
buscalegis/article/viewFile/32706/31905.
37 Decreto-lei 1.608 de 18 de setembro de
1939, Código de Processo Civil Brasileiro,
Brazilian Civil Procedure Code (18 Sept.
1939), available at http://www.planalto.gov.
br/CCIVIL/Decreto-Lei/1937-1946/Del1608.
htm.
38 Strenger, supra note 29, at 25.
39 Aloísio Gonçalves de Castro Mendes,
Direito Processual Romano, Ajuferjes 14
(13 March 2009) http://www.ajuferjes.org.br/
PDF/011DireitoProcessualRomano.pdf>.
40 Strenger, supra note 29, at 31.
41 Blackaby, supra note 14.
42 Id.
43 Id.
44 Lei 9.307 de 23 de setembro de 1996,
Dispõe sobre a arbitragem, D.O.U., 24 Sept.
1996.
45 Strenger, supra note 29, at 43-52.
46 Id.
47 Id.
48 Through the Emenda Constitucional
45/2004, a constitutional amendment, com-
petence to enforce foreign arbitral awards in
Brazil was given to the Brazilian STJ. Before
the amendment, the Brazilian Supreme
Court had that authority. Strenger, supra
note 29, at 52-53.
49 Horacio Grigera Naón, Arbitration and
Latin America: Progress and Setbacks, Fresh-
fields Lecture, 21 Arb. Int’l n.2 (2005).
50 Strenger, supra note 29, at 43-52.
51 Brazilian Supreme Court decision deter-
mining the constitutionality of the Brazilian
arbitration law. (S.T.F. – S.E. – 5.206 – D.J.U.
(19 Dec 2001).
52 Decreto Legislativo 52, de 25 de abril
de 2002, About the ratification of the New
York Convention (25 April 2002), available
at http://www.planalto.gov.br/ccivil_03/De-
creto/2002/D4311.htm.
53 Strenger, supra note 29, at 142.
54 Id. at 131.
55 Decreto 18.871 de 13 de agosto de
1929, Código de Bustamante, About Private
International law (Havana, 13 Aug 1929),
available at http://www2.mre.gov.br/dai/bus-
tamante.htm.
56 Such as the Panama Convention from
1975, the Montevidéu Convention from 1979,
the Geneva Protocol from 1923 and the ‘Lex
mercatoria’ system from UNCITRAL.
57 Superior Tribunal de Justiça (STJ) is
the Brazilian Superior Tribunal of Justice.
Until 2004, the enforcement of all the foreign
arbitral awards in Brazil was done by the
Brazilian Supreme Court (STF).
58 Strenger, supra note 29, at 133.
59 Id. at 138.
60 Supremo Tribunal Federal (STF): The
Brazilian Supreme Court.
61 ‘Lex posteriori derogati priori,’ S.T.F. –
Ac. 80.004, R.T.J. 83/809 (01 Jun 1977).
62 Strenger, supra note 29, at 86-111.
63 Clávio de Melo Valença Filho, Ratifica-
ção da convenção sobre o reconhecimento e
execução de sentenças arbitrais estrangeiras
(Nova Iorque, 1958), y. 5, n. 16 (São Paulo:
Revista de Direito Bancário, do Mercado de
Capitais e da Arbitragem, 2002) at 387-90.
64 Strenger, supra note 29, at 106.
65 Miguel Virgós Soriano, Arbitraje comer-
cial internacional y El convenio de Nueva
York de 1958, n.6679 (2007) at. 1.
Page 43
 The International Law Quarterly

CLE The Florida Bar Continuing Legal Education Committee and the
International Law Section present

Florida Quebec Forum 2011

COURSE CLASSIFICATION: iNTERMEDIATE LEVEL

Live Presentation:  March 18 - 19, 2011

Fort Lauderdale Airport Hilton  •  1870 Griffin Road
Fort Lauderdale, FL 33004  •  954-920-3300
Course No. 1268R

Friday, March 18, 2011
8:30 a.m. – 9:00 a.m.
Late Registration & Welcoming Remarks
by Florida and Quebec Attorneys
9:00 a.m. – 9:50 a.m.
Joint Legal Representation of Foreign
Clients in Florida and Quebec. Ethics.
Using Notaries
Pamella A. Seay, Florida Gulf Coast
University, Port Charlotte
Andrew Penhale, Quebec
William H. Hill, Jr., Ponte Vedra Beach
9:50 a.m. – 10:40 a.m.
Execution of a Foreign Judgment in
Quebec and Florida; Practical, Financial
and Legal Aspects & Ethics
Francesca Russo, Espinosa Trueba P.L.,
Miami
Frédérique Sabourin, Quebec
Valerie Duane-Dray, Valerie Y. Duane‑Dray,
P.A., Fort Lauderdale
10:40 a.m. – 11:00 a.m.  Break
11:00 a.m. – 11:50 a.m.
Accidents in Florida Involving
Non‑Residents and Insurance Law
Nancy Lapierre, Plantation
Lu Chan khuong, Quebec
Claude Gélinas, Quebec
11:50 a.m. – 12:40 p.m.
Establishing and Managing a Florida
Enterprise
Joseph B. McFarland, Lavigne, Coton &
Associates, P.A., Orlando
Francisco A. Corrales, Silverberg & Weiss,
P.A., Weston
12:40 p.m. – 2:00 p.m.
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U.S. Income & Estate Tax Consequences
of U.S. Investment Structures for
Canadians
William H. Newton III,
William H. Newton III, P.A., Miami
Steven Garellek, Berger Singerman P.A.,
Boca Raton
2:50 p.m. – 3:40 p.m.
Current Mortgage Laws and
Considerations in Florida
Thomas L Raleigh, III, Akerman Senterfitt,
Orlando
Laurence D. Gore, Laurence D. Gore &
Associates, P.A., Fort Lauderdale
3:40 p.m. – 4:00 p.m.  Break
4:00 p.m. – 4:50 p.m.
Current Immigration Rules and Practices
in Canada and the U.S. Criminal
Antecedents, Request for Pardon and
Extradition
Herschel Gavsie, Greenspoon Marder P.A.,
Fort Lauderdale
Glenn M. Cooper, Glenn M. Cooper &
Associates P.A., Plantation
Mark R. Weiner, Weiner Law Group, P.A.,
Tampa
4:50 p.m. – 5:40 p.m.
Acquiring and Managing Florida
Real Estate
Lucius Smejda, LEX International Law Firm,
P.A., Miami
Robert Kiderchah, LEX International Law
Firm, Quebec
6:00 p.m. – 7:30 p.m.
Honors Reception
Saturday, March 19, 2011
8:30 a.m. – 9:00 a.m.
Opening Remarks
9:00 a.m. – 9:40 a.m.
Accidents In Florida Involving
Non‑Residents and Insurance Law
Nancy Lapierre, Plantation
Claude Gélinas, Quebec
Lu Chan khuong, Quebec
9:40 a.m. – 10:10 a.m.
Consumer Protection Laws: How to
Protect Yourself
Rachel Journeault, Quebec
Francisco A. Corrales, Silverberg & Weiss,
P.A., Weston
Nancy Lapierre, Plantation
10:10 a.m. – 10:20 a.m.  Break
10:20 a.m. – 10:50 a.m.
Current Immigration Rules and Practices
in Canada and the U.S.
Herschel Gavsie, Greenspoon Marder P.A.,
Fort Lauderdale
Elke Rolff, Rolff Law P.A., Miami
10:50 a.m. – 11:20 a.m.
Taxation of Individuals and Tax Planning
in Florida
Lucius Smejda, LEX International Law Firm,
P.A., Miami
Daniel Veilleux, President, Dejardins Bank,
Florida
11:20 a.m. – 12:00 p.m.
Acquisition, Financing and Rental of
Real Estate in Florida
Lucius Smejda, LEX International Law Firm,
P.A., Miami
Robert Kiderchah, LEX International Law
Firm, Quebec
Marie-Eve Paré, Quebec
12:00 p.m. – 1:00 p.m.
Detailed Question and Answer Session,
along with Canadian Consular Clinic
for Passports / Visas - Information and
Forms

Page 44 Winter 2011

 The International Law Quarterly
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Winter 2011 Page 45

 The International Law Quarterly
The Necessity Defense in Bilateral
Investment Treaties: Looking Forward
The necessity
defense is a corner-
stone of internation-
al law. Essentially,
it is the recogni-
tion that although
States may contract
with other States
P. Miller to oblige them to
certain activities,
they cannot abdicate their fundamen-
tal responsibility to maintain order
within their societies. At its core it is
a pragmatic doctrine, acknowledging
that no one obligation is more impor-
tant than the integrity of the interna-
tional system as a whole.
The term “state of necessity” refers
to exceptional cases where the only
way for a State to safeguard an es-
sential interest against a grave and
imminent peril is to breach a less se-
rious or less urgent international ob-
ligation.1 This language underscores
the fact that states of necessity occur
in very rare circumstances. Numerous
jurists have highlighted the poten-
tial for abuse that would arise from
granting a broad reading of what is
“necessary”; several tribunals have
decided that the measures undertak-
en were not the only means of avert-
ing an imminent peril. Although the
defense has been met with very strict
interpretations, it is still a prevailing
doctrine of customary international
law and has been codified in the fol-
lowing language by the International
Law Commission’s Articles on State
Responsibility:
Article 25. Necessity
Necessity may not be invoked by
a State as a ground for precluding
the wrongfulness of an act not in
conformity with an international
obligation of that State unless the
act:
Page 46
By Patrick Miller, Miami
is the only way for the State to
safeguard an essential interest
against a grave and imminent peril;
and
does not seriously impair an
essential interest of the State or
States towards which the obligation
exists, or of the international
community as a whole.
2. In any case, necessity may not be
invoked by a State as a ground for
precluding wrongfulness if:
(a) the international obligation
in question excludes the possibility
of invoking necessity;
or
(b) the State has contributed to
the situation of necessity.2
The recent Argentine financial cri-
sis has demonstrated that the neces-
sity defense can play a decisive role
in international investment adjudica-
tion.3 Argentina may be liable for as
much as $17 billion dollars due to the
emergency measures undertaken at
the peak of the crisis—measures that
effectively shifted substantial losses
upon foreign investors.4 In response,
those investors have filed claims in
international tribunals like the Inter-
national Centre for the Settlement of
Investment Disputes (“ICSID”), under
the protections granted them through
bilateral investment treaties (“BITs”).
In virtually every action where a
tribunal found jurisdiction over the
claim, Argentina has asserted the
necessity defense as a justification for
its alleged treaty violations. The tri-
bunals have analyzed necessity based
on International Law Commission
(“ILC”) Article 25 (entitled “Neces-
sity”), as well as the specific Necessity
Provision (Article XI) in the U.S.-
Argentina BIT. In the few cases that
have been decided on the merits by
tribunals, the necessity defense has
proven critical to the determination of
Argentina’s liability. This article will
examine those cases and describe the
recurring issues arbitrators have con-
sidered when analyzing the necessity
defense.
Tribunal Decisions 2005-
2009
In the late 1980’s and early 1990’s,
Argentina began a vast privatization
regime of its formerly government-
owned utilities industry5 by asking
private foreign companies to partner
with local, formerly government-
owned entities, to provide services
more efficiently. Argentina also
passed various regulatory measures
to incentivize those foreign inves-
tors.6 Concurrently, Argentina signed
numerous BITs with other capital-
exporting countries, hoping to as-
suage foreign investor fears about
entering the newly privatized market.
Argentina even introduced a pegged
currency system that calculated the
Argentine peso to the U.S. dollar at a
ratio of one-to-one.7 In the early years,
the privatized utility industries gave
Argentina efficient and reliable en-
ergy, and the overall economy looked
quite promising.
The constraints of maintaining the
pegged currency later forced Argen-
tina into macroeconomic dysfunction
and, by 1999, the country began a
precipitous economic decline.8 Once
there became significant distrust over
the viability of the peg and the ability
of Argentina to pay its foreign debts,
many Argentines began converting
their savings from pesos to dollars.9
“In one day alone, the Argentine peso
lost 40% of its value.”10 This then
created a run on the banking indus-
try, and the Argentine government
reacted by capping the amount of
Winter 2011
 The International Law Quarterly
money citizens could withdraw from
their bank accounts.11 Throughout the
collapse, “income per person in dollar
terms . . . shrunk from around $7,000
to around $3,500,” and “unemploy-
ment [rose] to perhaps 25%.”12 This
turbulent economic decline led to
mass unrest and protests.
The protests eventually cost tens
of lives, and President De la Rua
resigned from office. Then, in a matter
of weeks, three more presidents were
appointed and resigned from office,
culminating in President Duhalde’s
appointment. The Duhalde govern-
ment reacted to the mass outrage
by, among other things, passing the
Emergency Law, which changed sev-
eral of the basic regulatory structures
that had previously incentivized
foreign companies to operate in the
Argentine market.13 These measures
significantly reduced the investor’s
ability to recoup an investment. Sev-
eral investors entered into negotia-
tions with the Argentine government
to modify their agreements while
many other investors decided to take
their grievances to international arbi-
tral tribunals, claiming a violation of
the rights they held under BITs.
This article will focus solely on
disputes between American inves-
tors and Argentina, thus limiting the
scope of the inquiry to claims under
the U.S.-Argentina BIT. The U.S.
investors have generally claimed that
three specific BIT rights were vio-
lated: (1) they were the victims of ex-
propriation without compensation; (2)
they were not given fair and equitable
treatment; and (3) various contracts
they had with the Argentine govern-
ment had been abrogated (umbrella
clause claim).14 Argentina sought to
defend itself, in part, by claiming that
those measures were necessary to
maintain public order and referred
the tribunal to the customary interna-
tional law definition of “necessity,” as
well as Article XI of the U.S.-Argenti-
na BIT. The Article reads:
This Treaty shall not preclude
the application by either Party
of measures necessary for the
maintenance of public order, the
Winter 2011
fulfillment of its obligations with
respect to the maintenance or
restoration of international peace
or security, or the Protection of its
own essential security interests.15
There have been five different IC-
SID tribunal decisions, all with simi-
lar facts, arising from the Argentine
crisis. The first four cases are: CMS
v. Argentine Republic;16 LG&E v. Ar-
gentine Republic;17 Enron v. Argentine
Republic;18 and Sempra v. Argentine
Republic.19 The main issues in all four
of those cases will be discussed first
because they all used the ILC Articles
on State Responsibility’s definition of
“necessary” to interpret the Necessity
clause in the U.S.-Argentina BIT.20 In
the fifth case, involving Continental
Casualty v. Argentine Republic,21 the
tribunal used a separate interpretive
method than the first four for ana-
lyzing necessity, so that case will be
taken up last.
The four tribunals uniformly held
that Article XI is not self judging.22 A
self-judging clause would give defer-
ence to the State in its interpretations
of whether the violating measure was
necessary and whether an emergency
existed. The tribunal would then
decide only whether the State had
exercised its determinations in good
faith. Since the tribunals found that
the clause was not self judging, they
went on to consider whether or not
the measures were necessary de novo.
Notably, however, the LG&E tribunal
stated: “Were the Tribunal to conclude
that the provision is self-judging,
Argentina’s determination would be
subject to a good faith review anyway,
which does not significantly differ
from the substantive analysis pre-
sented here.” 23
All four tribunals found three
main subsets of the necessity defense:
(1) whether an emergency situation
existed; (2) whether the measures
violating the treaty were the only
available options; and (3) whether the
state contributed to the creation of
the emergency situation.24
The respective claimants all ar-
gued that Article XI should include
only military incursions or political
upheavals, thus precluding consider-
ation of the economic emergency. The
tribunals all agreed that an economic
crisis could rise to the level of emer-
gency required by the treaty and by
customary international law, though
the tribunals differed on whether this
economic situation actually rose to
that level. The LG&E tribunal found
that during the period from Decem-
ber 2001 until 26 April 2003, there
was in fact an Article XI emergency
situation,25 whereas the CMS, Enron,
and Sempra tribunals found that
the crisis did not rise to that level.26
Although the three tribunals were
unconvinced that the crisis rose to
the level of an emergency, they still
went on to discuss the other relevant
questions concerning the necessity
defense.
The classification of the crisis as
an emergency appears to be highly
dispositive as to whether the other
elements of the necessity test will be
met. The Sempra tribunal seemed
to allude to this idea when it stated:
“This Tribunal must note, first, that
in addition to differences in the legal
interpretation of the Treaty in this
context, an important question that
distinguishes the LG&E decision
on liability from CMS, and for that
matter also from the recent award
in Enron, lies in the assessment of
the facts.”27 The “facts” concerned the
extent of the crisis. The emergency
situation is certainly a threshold is-
sue, but it may also be determinative
as to whether or not the tribunal will
preclude damages, irrespective of the
other subsets of the defense.
An important aspect of the CMS
decision was that the Emergency Law
and tariff readjustments were not Ar-
gentina’s only option for dealing with
the economic crisis.28 Enron agreed
with this analysis.29 The Sempra
tribunal interpreted the “only option”
aspect quite restrictively: “A rather
sad global comparison of experiences
in the handling of economic crises
shows that there are always many
approaches to addressing and resolv-
ing such critical events. It is therefore
continued, next page
Page 47
 The International Law Quarterly
necessity defense
from preceding page
difficult to justify the position that
only one of them was available in
the Argentine case.”30 This reasoning
creates a situation that if any alter-
native is available, Article XI cannot
be invoked. Other courts in different
contexts have used a much more nu-
anced approach by asking questions
like: What policy has the best chance
of succeeding? Does this policy have a
less violative effect than others? What
policies could be reasonably enacted
during an emergency situation?
The LG&E tribunal did not ap-
proach its analysis of the tariff read-
justment by considering whether it
was the only available option: “Article
XI refers to situations in which a
State has no choice but to act. A State
may have several responses at its
disposal to maintain public order or
protect its essential security inter-
ests. In this sense, it is recognized
that Argentina’s suspension of the
calculation of tariffs in U.S. dollars
and the PPI adjustment of tariffs
was a legitimate way of protecting its
social and economic system.”31 The
tribunal considered whether or not
the State’s only option was to act and
then concluded that the activity was
legitimate.
As far as whether or not Argentina
contributed to the crisis, the tribunals
generally fall along the same line. The
CMS tribunal found that through its
economic policies of the 1980’s and
1990’s, Argentina actually contributed
to the crisis, negating its use of Article
XI under customary international
law.32 The Enron tribunal discussed
this issue but did not make a conclu-
sive determination because there was
conflicting testimony. The tribunal
simply concluded that since the other
aspects of necessity were not met, it
did not need to rule expressly on the
contribution issue.33 Sempra came
to a similar determination that the
evidence was mixed as to whether it
was endogenous or exogenous factors,
but the tribunal also intimated that
Page 48
the State’s contribution may have pre-
cluded necessity even if an emergency
had been found.34
LG&E tribunal stated that the
claimant had the burden of proving
that Argentina contributed to the
crisis, and that it had not.35 This has
been criticized as contrary to the gen-
eral course of affirmative defenses,36
but it seems reasonable if one consid-
ers the notion that a State contribut-
ing to an emergency is actually more
like an affirmative defense against
the affirmative defense of necessity.
Just for good measure, the tribunal
also added that “the attitude adopted
by the Argentine Government has
shown a desire to slow down by all
the means available the severity of
the crisis.”37
The Continental Casualty case
arose from similar facts, but the
analysis here is separate because the
interpretative method is quite differ-
ent from the previous four cases. The
tribunal began by noting that it was
required to interpret the language of
the treaty before turning to custom-
ary international law and the ILC
Articles on State Responsibility.38 The
tribunal then advised that since ILC
Article 25 Necessity may be claimed
in a variety of circumstances, whereas
Article XI of the BIT may be invoked
only in the specified conditions under
the treaty, a tribunal must read the
ILC language more restrictively than
the Article XI language. 39
The CMS Annulment Panel also
criticized the tribunal for interpret-
ing “necessity” based on ILC language
before the BIT language. Although
it concluded that the tribunal inti-
mated that the same analysis would
take place under the treaty, and that
it had demonstrated a rationale for
its decision, that precluded annul-
ment.40 The later cases have all found
that the lex specialis rule applies and
have considered the BIT language
before examining customary interna-
tional law, though they usually have
found that the vague language of
the treaty eventually directs them to
customary international law and the
ILC Articles anyway. Continental is
unusual because it expressly states
the analysis would be more restrictive
under customary international law.
This is a dramatic pronouncement
that goes further than the first four
tribunals toward granting deference
to Argentina, but the real shift is the
tribunal’s decision that WTO jurispru-
dence should guide its interpretation
of what is necessary to protect an es-
sential security interest. The tribunal
found that the older U.S. Friendship,
Commerce and Navigation Treaties
provided the basis for the later model
BIT language, and that since these
treaties were also the basis for GATT
Article XX and later WTO jurispru-
dence, it was appropriate to look to
those WTO decisions for interpreta-
tive guidance.41
The tribunal found that in the
WTO context, tribunals have granted
broad scope for what constitutes an
essential security interest, and the
situation before it fell within that cat-
egory. In deciding whether it was the
only option, the tribunal referred to
the Article XX holdings that it should
balance several factors: “the relative
importance of interests or values fur-
thered by the challenged measures,
the contribution of the measure to the
realization of the ends pursued by it
and the restrictive impact of the mea-
sure on international commerce.”42 It
found that the measures “were in part
inevitable, or unavoidable, in part in-
dispensable and in any case material
or decisive in order to react positively
to the crisis, to prevent the complete
break-down of the financial system.”43
The tribunal also quickly dismissed
the notion that Argentina contributed
to the financial crisis, noting that the
international financial community
promoted those very economic poli-
cies.44 The tribunal concluded that
the measures Argentina took were
allowed under the circumstances of
the treaty and under Article XI and
awarded Continental Casualty a mere
$3 million damages for a subset of one
of their claims.
This brings up the final contro-
versial element of the necessity
defense—the question of to what
continued, next page
Winter 2011
 The International Law Quarterly
extent it precludes liability. The CMS,
Sempra and Enron tribunals did not
find an adequate necessity claim, so
they did not expressly approach the
issue. The Continental tribunal began
by clarifying that if Argentina is suc-
cessful in their Article XI claim, this
would in fact preclude Continental
from claiming any rights under the
treaty; thus, the tribunal awarded
basically no damages to Continental.45
The LG&E tribunal seemed to find a
middle ground, holding that during
the time of crisis, which was narrowly
proscribed, LG&E was precluded from
claiming its BIT rights. After the im-
mediate crisis passed, however, this
further derogation of rights was found
in breach of the BIT, and LG&E was
awarded roughly $57 million for this
damage.46
So we have seen that the Argentine
tribunal decisions are not necessarily
predictable or reliable because dif-
ferent tribunals have used different
analyses and come to different con-
clusions. This is certainly not to say
they are unjust; only that if a State
is concerned about predictability or
deference in times of emergency, it
may be inclined to craft its own neces-
sity clauses with greater specificity.
The next section will examine the
two most recent annulment decisions,
those annulling both the Sempra and
Enron tribunal awards.
The Annulment Decisions
of 2010
In the summer of 2010, both the
Sempra and the Enron Annulment
Committees annulled their respective
tribunal awards due to issues involv-
ing Argentina’s necessity defense.
They found that the tribunal’s neces-
sity defense analysis was flawed to
the point of manifestly exceeding the
powers of the tribunal.
The Sempra Annulment Commit-
tee found that the tribunal failed to
apply the applicable law, which fail-
ure was a manifest excess of powers,47
by making its necessity determina-
tion solely after reviewing the Article
25 language without also analyzing
the defense based on Article XI of the
Winter 2011
BIT. 48 The Committee noted that the
tribunal determined it should use the
Article 25 analysis because it provides
legal elements for the necessity de-
fense.49 After comparing the language
from the different Articles, however,
the Committee found it apparent
“that Article 25 does not offer a guide
to interpretation of the terms used
in Article XI. The most that can be
said is that certain words or expres-
sions are the same or similar.”50 The
Committee further distinguished the
operative functions of the two texts—
Article XI outlines the events neces-
sary to preclude wrongfulness under
the treaty, whereas Article 25 presup-
poses international wrongfulness
and lays out conditions for preclusion
under customary international law.51
The Committee also noted that it is
not necessary that parties to trea-
ties outline their necessity preclusion
articles along the lines of customary
international law; rather, they might
choose to grant themselves broader
preclusion during times of emergency
than available through Article 25.52
Since the tribunal used Article 25 as
the applicable law, it failed to apply
the true applicable law, which was
Article XI of the BIT. This failure was
a manifest excess of its powers.53
After determining that there was
a failure to apply the applicable law
resulting in an excess of powers,
the Committee went on to discuss
whether this excess of powers was
manifest. The Committee noted that
to determine if an excess was mani-
fest, it must be obvious from reading
the award and that since the tribunal
relied only upon its interpretation of
Article 25, this was a manifest excess
of powers.54 The Committee did not
go on to determine whether Article XI
would insulate Argentina from liabil-
ity, leaving such a determination for a
future tribunal.
The Enron Annulment Committee
did not speak to the issue of whether
the tribunal should have applied
Article XI after interpreting Article
25. The Committee decided that
the tribunal’s interpretation of the
subsets of Article 25 failed to apply it
accurately and that this failure was a
failure to apply the applicable law.
The Enron Committee found that
the tribunal’s determination that
Argentina had other ways of dealing
with the crisis, thereby precluding Ar-
ticle 25 Necessity, failed to apply the
applicable law.55 The Committee be-
gan by stating that there are different
ways of interpreting the “only way”
provision in Article 25. The Commit-
tee acknowledged that it could mean
“any other way possible,” and since
there was an expert economist’s testi-
mony stating there were other ways,
this would have been sufficient.56 The
Committee found, however, that the
tribunal needed to do a legal analysis
articulating that the “only way” provi-
sion literally meant that any other
alternative negates necessity.
The Committee went on to discuss
other interpretations of the “only way”
provision. The “only way” language
could also mean that “there must
be no alternative measures that the
State might have taken for safeguard-
ing the essential interest in question
that did not involve a similar or grav-
er breach of international law.”57 In
this interpretation, a tribunal would
have to measure whether the other
alternatives were more violative.
Another interpretation might take
into account the relative effectiveness
of the various options, requiring the
tribunal to weigh the options for their
respective efficacy.58 Another question
regarding the “only way” provision is
just who decides? Is it for the tribu-
nal, with the benefit of hindsight, to
decide there were other ways? Or, do
the representatives deserve a margin
of appreciation under the circum-
stances for determining whether
other options truly existed?59 The
Committee’s cursory reading of the
tribunal demonstrated that the latter
took the position of the claimant’s ex-
pert economist over the position of the
respondent’s expert economist, and
that this was an annullable failure
to apply the applicable law because
the tribunal did not provide a legal
analysis of Article 25(1)(a).60
The Committee then explained
continued, next page
Page 49
 The International Law Quarterly
necessity defense
from preceding page
that it could not ascertain whether
or not the tribunal made a deter-
mination regarding Article 25(1)(b)
concerning Argentina’s obligations
toward the international community
as a whole.61 The Committee went on
to state that since it could not find
whether the tribunal made such a
determination, that would constitute
a failure to state reasons for that deci-
sion, within the meaning of Article
52(1)(e) of the ICSID Convention.62
The Committee then turned to the
issue of whether Argentina contrib-
uted to the state of necessity. In that
portion of the decision, like in the
“only way” section, the Committee
found that there are several inter-
pretations of this provision, “and that
the tribunal was necessarily required,
either expressly or sub silentio, to de-
cide or assume the correct interpreta-
tion in order to apply the provision to
the facts of the case.”63 The Commit-
tee noted that a literal interpretation
of the passage means that any causal
link would negate the use of necessity.
The Committee goes on to state that
the tribunal seemed to imply that
some measure of fault is required for
there to be contribution, but that its
determination that Argentina contrib-
uted to the state of emergency was
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again based only on the testimony of
the claimant’s expert economist. Simi-
lar to the “only way” analysis above,
the Committee found that the tribu-
nal failed to identify, by legal analysis,
how Argentina contributed to the
crisis64 and this failure amounted to
a failure to apply the applicable law
under Article 52(1)(b) of the ICSID
Convention.65
The Committee then turned to the
relationship between Article XI of the
BIT and Article 25, stating that its
position as an annulment commit-
tee was not to decide the substantive
content of the two texts, or whether
they can be applied simultaneously.
The Committee stated that such a
determination is for the tribunal, but
since the Committee already found
annullable errors in the customary
international law analysis, it did not
proceed to any further issues regard-
ing the treaty.66
The Committee annulled the tribu-
nal award because a different inter-
pretation of the necessity defense may
have precluded liability, though the
Committee made it clear that it was
not in the position of deciding wheth-
er the necessity claim, if analyzed cor-
rectly, would insulate Argentina from
liability. 67
Conclusion
These various decisions are a
testament to the notion that reason-
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able minds may, and often do, differ.
The Continental and LG&E tribunal
decisions are now in the annulment
process, and the Sempra and Enron
disputes may revert to the tribunal
stage. No simple solution or trend ap-
pears in this line of cases that would
lead toward consistency of these
awards going forward. The aim of
this article was merely to lay out the
important issues of the necessity de-
fense as they have been addressed by
various arbitrators. As the number of
investment disputes increase over the
coming years, more practitioners will
be forced to grapple with the nuances
of the necessity defense. Hopefully,
this attempt to point out the various
issues will aid in the effort for greater
clarity and predictability in the fu-
ture.
Patrick Miller graduated from
University of Miami School of Law in
May of 2010. He has recently obtained
his license from The Florida Bar and
begun practicing law in the Miami
area.
Endnotes:
1 Draft articles on Responsibility of States
for Internationally Wrongful Acts, in Report
of the International Law Commission on the
Work of Its Fifty-third Session, U.N. GAOR,
56th Sess., Supp. No. 10, U.N. Doc. A/56/10
(2001), Art. 25 cmt. 1 (2001), available at
http://untreaty.un.org/ilc/texts/instruments/
english/commentaries/9_6_2001.pdf.
2 Id. at Art. 25.
3 It may be interesting to note that the
author of the draft articles, James Crawford,
was an expert witness for the claimant, CMS,
in their ICSID case.
4 Charity L. Goodman, Uncharted Waters:
Financial Crisis and Enforcement of ICSID
Awards in Argentina, 28 U. Pa. J. Int’l Econ.
L. 449, 479 (2007).
5 Harout Samra, Five years Later: The
CMS Award Placed in the Context of the
Argentine Financial Crisis and the ICSID
Arbitration Boom, 38 U. Miami Inter-Am. L.
Rev. 667, 674 (2007).
6 For instance, Argentina passed the
“Gas Law” referred to in paragraph 38 of
the LG&E decision. The Gas Law created
an agency to calculate tariffs and to oversee
the energy industry. See LG&E v. Argentine
Republic, ICSID Case No. ARB/02/01 (3 Oct.
2006), para. 38.
7 Id. at para. 36.
8 Samra, supra note 5, at 676.
Winter 2011
 The International Law Quarterly
9 LG&E, supra note 6, at para. 63.
10 William Burke-White and Andreas von
Staden, Investment Protection in Extraordi-
nary Times: The Interpretation and Applica-
tion of Non-Precluded Measures Provisions in
Bilateral Investment Treaties, 48 Va. J. Int’l.
L. 307, 309 (2008).
11 Samra, supra note 5, at 676.
12 White, supra note 10, at 310.
13 “The Emergency Law adopted measures
modifying public-service contracts, such
as establishing that tariffs and prices for
public services were to be calculated in pesos,
instead of U.S. dollars; abolishing all clauses
calling for tariff adjustments in U.S. dollars
or other foreign currencies; eliminating all
indexing mechanisms; and directing the
Executive Branch to renegotiate all public-
service contracts.” See LG&E, supra note 6,
at para. 65.
14 The relevant U.S.-Argentina BIT provi-
sions concerning these claims are found in,
respectively: (1) Article IV.1 concerning ex-
propriation; (2) Article II.2a concerning fair
and equitable treatment; and (3) Article II.2c
concerning the umbrella clause; see Treaty
With Argentina Concerning the Reciprocal
Encouragement and Protection of Invest-
ment. (Entered into force 1994), available at
http://www.bilaterals.org/article.php3?id_ar-
ticle=435.
15 Id. at Art. XI.
16 CMS Gas Transmission Co. v. Argentine
Republic, ICSID Case No. ARB/01/8 (12 May
2005).
17 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01.
18 Enron Creditors Recovery Corp.. v. Ar-
gentine Republic, ICSID Case No. ARB/01/3
(22 May 2007).
19 Sempra Energy Int’l v. Argentine Re-
public, ICSID Case No. ARB/02/16 (28 Sept.
2007).
20 Due to its limited jurisdiction, the CMS
Annulment decision does not have much
substance, although there is some notewor-
thy dicta that will be relevant for our inquiry
into the later cases.
21 Continental Casualty Co. v. Argentine
Republic, ICSID Case No. ARB/03/9 (5 Sept.
2008).
22 The discussion of self judging is brief
in this article because the tribunals have
uniformly agreed that Art. XI is not self
judging, but the issue has been contentious
throughout the cases.
23 See LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 214.
24 Another subset of the necessity defense
arises from ILC Art. 25(1)(B), which states
that necessity is not available if the measure
seriously impairs an essential interest of the
other state or the international community.
This situation did not rise to that level, so
this subset was rarely discussed. Another
question relates to how long the emergency
situation occurred, and thus how long the
Winter 2011
measures were legitimated by Art. XI; only
LG&E addressed this question.
25 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 226.
26 The Sempra tribunal went on to say
“it also readily accepts that the changed
economic conditions have an influence on the
questions of valuation and compensation.”
See Sempra Energy Int’l. v. Argentine Re-
public, ICSID Case No. ARB/02/16, at para.
346. Interestingly enough, two members of
the CMS tribunal and one member from the
LG&E tribunal made up the Sempra tribu-
nal.
27 Id. at para. 346.
28 CMS Gas Transmission Co. v. Argentine
Republic, ICSID Case No. ARB/01/8, at para.
323.
29 Enron Creditors Recovery Corp. v. Argen-
tine Republic, ICSID Case No. ARB/01/3, at
para. 309.
30 Sempra Energy Int’l. v. Argentine Repub-
lic, ICSID Case No. ARB/02/16, at para. 350.
31 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 239.
32 CMS Gas Transmission Co. v. Argentine
Republic, ICSID Case No. ARB/01/8, at para.
325.
33 Enron Creditors Recovery Corp. v. Argen-
tine Republic, ICSID Case No. ARB/01/3, at
para. 311.
34 “This means that there has to some
extent been a substantial contribution of the
State to the situation giving rise to the state
of necessity, and that it therefore cannot be
claimed that the burden falls entirely on
exogenous factors. This state of affairs has
not been the making of a particular adminis-
tration, given that it was a problem that had
been compounding its effects for a decade.
Still, the State must answer for it as a
whole.” See Sempra Energy Int’l. v. Argentine
Republic, ICSID Case No. ARB/02/16, at
para. 354.
35 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 256.
36 Sarah Hill, The Necessity Defense and
the Emerging Arbitral Conflict in its Applica-
tion to the U.S.-Argentina Bilateral Invest-
ment Treaty, 13 Law & Bus. Rev. Am. 547, 562
(2007).
37 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 256.
38 Continental Casualty Co. v. Argentine
Republic, ICSID Case No. ARB/03/9, at para.
164, available at http://www.investment-
treatynews.org/documents/p/24.aspx.
39 “The strict conditions to which the ILC
text subjects the invocation of the defence of
necessity by a State is explained by the fact
that it can be invoked in any context against
any international obligation. Therefore ‘it
can only be accepted on an exceptional basis.’
This is not necessarily the case under Art.
XI according to its language and purpose
under the BIT. This leads the Tribunal to the
conclusion that invocation of Art. XI under
this BIT, as a specific provision limiting the
general investment protection obligations
(of a ‘primary’ nature) bilaterally agreed by
the Contracting Parties, is not necessarily
subject to the same conditions of application
as the plea of necessity under general inter-
national law.” See id. at para. 167.
40 CMS Gas Transmission Co. v. Argentine
Republic, ICSID Case No. ARB/01/8, Decision
of the ad hoc Committee on the Application
for Annulment of the Argentine Republic. (25
Sept. 2007), para. 124-127. The Committee
goes on in paragraph 135 to state in dicta
that this might have swayed its decision if a
court of first instance. It is important to note
that Argentina invoked the ILC language
only when it argued the case before the CMS
Tribunal, so it was not necessarily the tribu-
nal’s fault for considering only that language.
41 “Since the text of Art. XI derives from
the parallel model clause of the U.S. FCN
treaties and these treaties in turn reflect
the formulation of Art. XX of GATT 1947,
the Tribunal finds it more appropriate to
refer to the GATT and WTO case law that
has extensively dealt with the concept and
requirements of necessity in the context of
economic measures derogating to the obliga-
tions contained in GATT, rather than to
refer to the requirement of necessity under
customary international law.” See id. at para.
192. It might be important to note that the
President of the Continental tribunal was
also a member of the WTO Appellate Body.
42 Id. at para. 194. This language was
quoted from Panel Report, EC Tyres, para.
7.104, summing up the Appellate Body case
law in Korea-Beef, para. 164; EC- Asbestos,
para. 172; U.S.-Gambling, para. 306; Domini-
can Republic-Cigarettes, para. 70.
43 Id. at para 197
44 “Our analysis in the preceding para-
graphs shows that the economic and
exchange policies whose ultimate unsustain-
ability led to the crisis were regarded as
sound economic policies that had been ben-
eficial for years to Argentina’s economy. The
fixed parity/convertibility/currency board
system was praised by the international
financial community and by many qualified
observers.” Id. at para. 235.
45 They were awarded $2,800,000 for a
very narrow claim, where it was decided that
a particular restructuring of a smaller con-
tract was a breach of the fair and equitable
treatment obligation. Id. at para. 305.
46 LG&E v. Argentine Republic, ICSID
Case No. ARB/02/01, at para. 226.
47 The fact it found the tribunal did not ap-
ply the applicable law precluded a discussion
of whether the tribunal did not accurately ap-
ply the law, rising to a level of manifest error.
See Sempra Energy Int’l v. Argentine Republic,
ICSID Case No. ARB/02/16, Decision on the
Argentine Republic’s Request for Annulment
of the Award (29 June 2010), para 165.
48 ”In this case, the Committee finds that
the following sentence in paragraph 388 of
continued, next page
Page 51
 The International Law Quarterly
necessity defense
from preceding page
the Award demonstrates that the Tribunal
failed to apply the applicable law: Since the
Tribunal has found above that the crisis
invoked does not meet the customary law
requirements of Article 25 of the Articles on
State Responsibility, it concludes that neces-
sity or emergency is not conducive in this
case to the preclusion of wrongfulness, and
that there is no need to undertake a further
judicial review under Article XI given that
this Article does not set out conditions differ-
ent from customary law in such regard.” Id.
at para. 207.
49 Id. at para. 196.
50 Id. at para. 199.
51 Id. at para. 200.
52 Id. at para. 202.
53 “The Tribunal adopted Article 25 of
the ILC Articles as the primary law to be
applied, rather than Article XI of the BIT,
and in so doing made a fundamental error in
identifying and applying the applicable law.”
Id. at para. 208.
54 Id. at para. 218-219.
55 Enron Creditors Recovery Corp. v. Ar-
gentine Republic, ICSID Case No. ARB/01/3,
Decision on the Application for Annulment of
the Argentine Republic (30 July 2010), para.
377.
56 Id. at para. 367.
57 Id. at para. 370.
58 Id. at para. 371.
59 Id. at para. 372.
60 “The Committee concludes that in
determining that the measures adopted were
not the ‘only way,’ the Tribunal did not in fact
apply Article 25(1)(a) of the ILC Articles (or
more precisely, customary international law
as reflected in that provision), but instead
applied an expert opinion on an economic is-
sue. In all the circumstances the Committee
finds that this amounts to a failure to apply
the applicable law, as ground of annulment
under Article 52(1)(b) of the ICSID Conven-
tion.” Id. at 377.
61 Id. at para. 379.
62 Id. at para. 384.
63 Id. at para. 386.
64 Id. at para. 391.
65 Id. at para. 393.
66 “In the circumstances, there is no occa-
sion for the Committee to go further and to
express any view on the correctness or other-
wise of the Tribunal’s findings with respect
to the substantive operation and content of,
and interrelationship between, Article XI and
the customary international law principles of
necessity, and the Committee does not do so.”
Id. at para. 405.
67 Id. at para. 406-408.

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 The International Law Quarterly

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Moderator: Nicolas Swerdloff, Hughes Hubbard & Reed L.L.P., Miami, Incoming Chair, ILS

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Jaime A. Bianchi, White & Case L.L.P., Miami

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Eduardo Palmer, Eduardo Palmer P.A., Coral Gables
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Winter 2011 Page 53

 The International Law Quarterly
Production of Electronic Documents
and Information:
New UK Practice Direction Targets
Costs of Electronic Disclosure
By Neil Mirchandani and Matthew Davis, London
The new Practice
Direction (PD 31B)
on the disclosure
of electronic docu-
ments will certainly
focus in-house
counsel on their
company’s record-
management poli-
N. Mirchandani
cies and litigation
strategies. This,
however, may not be
a bad thing if it al-
lows these organisa-
tions to take greater
control of the costs
of electronic produc-
tion or disclosure.
M. Davis
The Story So Far
Parties involved in litigation in
England and Wales must disclose only
the documents on which they rely, or
that support or adversely affect their
own, or another party’s, case. Civil
Procedure Rule (“CPR”) 31.6. The par-
ties are obliged to carry out a “reason-
able search” (CPR 31.7) for disclosable
documents. “Document” is defined as
“anything in which information of any
description is recorded” (CPR 31.4),
which includes electronically stored
information. Since 1 October 2005,
disclosure of electronic documents
has been covered by paragraph 2A of
the Practice Direction to CPR Part 31
(paragraph 2A).
Two key decisions on electronic
disclosure are Digicel (St Lucia) & Ors
v. Cable & Wireless Plc & Ors ([2008]
EWHC 2522) and Earles v. Barclays
Bank Plc ([2009] EWHC 1). In both
cases, the judges commented on per-
Page 54
ceived shortcomings in complying with
paragraph 2A’s requirement to meet
to discuss the scope of the reasonable
search for electronic documents.
The New Regime:
Key Points
On 1 October 2010, PD 31B
replaced paragraph 2A. PD 31B
formally applies only to multi-track
claims—that is, claims that are not
suitable for allocation to the small-
claims track or the fast track (CPR
26.1(2)) that were started on or after
1 October 2010. Judges, however, are
given express discretion to apply PD
31B in any case. As they are likely to
do so if electronically stored informa-
tion is a significant part of disclosure,
we expect that PD 31B will come to
represent best practice for dealing
with any electronic disclosure issue
that might arise, even in cases where
it does not formally apply.
A key change is that, as soon as
litigation is contemplated, parties’
legal representatives must notify
their clients of the need to preserve
disclosable electronic documents.
PD 31B also sets out the points that
parties should (where appropriate)
discuss before the first case manage-
ment conference (“CMC”) (a hearing
at which the judge will typically make
the first order for directions in a case,
setting down the timetable to trial).
These points of discussion include:
• The categories of electronic docu-
ments within the parties’ control;
the computer systems, electronic
devices and media on which any
relevant documents may be held;
the storage systems that exist; and
any document retention/destruc-
tion policies that might apply.
• The preservation of electronic
documents.
• The scope of the reasonable search
for electronic documents. Some
non-exhaustive factors that may
be relevant include: the number of
documents involved; the ease and
expense of retrieval of any particu-
lar document; the availability of
the documents or contents of docu-
ments from other sources; and the
significance of any document that
is likely to be located.
• The tools and techniques (for
example, filtering or searching)
that should be considered to reduce
the burden and cost of disclosing
electronic documents.
• The exchange of electronic docu-
ments, including their format and
the accompanying information to
be provided.
• The basis for charging for, or shar-
ing, the cost of the disclosure of
electronic documents.
PD 31B states that the primary
source of disclosure is normally “rea-
sonably accessible data” and that a
party requesting the specific disclo-
sure of electronic documents that
are not reasonably accessible must
demonstrate that the relevance and
materiality of the documents justify
the cost and burden of retrieving
them.
To facilitate the required discus-
sions, PD 31B appends an Elec-
tronic Documents Questionnaire that
contains a statement of truth. The
questionnaire is voluntary (unless its
Winter 2011
 The International Law Quarterly
completion is ordered by the court)
but, in the event that one is produced,
PD 31B states that the person signing
the statement of truth should at-
tend any hearing at which disclosure
is likely to be considered. Careful
consideration will therefore need to be
given to who might be the appropriate
person to sign the statement of truth.
The person should be someone with
a suitable level of knowledge of the
party’s systems and electronic infor-
mation.
In addition, the parties will now
need to inform the court before the
first CMC as to whether they have
reached agreement about electronic
disclosure. If not, the parties are re-
quired to identify the issues that the
court should address so that it can
give directions (perhaps requiring one
or more of the parties to complete the
questionnaire if they have not already
voluntarily done so).
Other points
Other points to note from PD 31B
are as follows:
• It may be reasonable to search for
electronic information using key-
word or other automated searches
if a full review of each and every
document would be unreasonable,
but PD 31B warns against the inju-
dicious use of such techniques.
• Save where otherwise agreed or
ordered, electronic information
should be provided in its native
format (in a way that preserves
metadata relating to the creation of
each document). Also, save where
redactions have been applied, any
available searchable OCR (optical
character recognition) versions of
documents should also be provided.
• If electronic documents are best ac-
cessed using technology that is not
Visit the Section Website: internationallawsection.org
Winter 2011
readily available to the party en-
titled to disclosure and that party
reasonably requires additional
inspection facilities, the party mak-
ing disclosure should co-operate in
making available such reasonable
additional inspection facilities as
may be required.
Practical implications
It will be critical for in-house and
external counsel to be aware of what
is required as they, along with the
party’s IT and records management
personnel, are likely to be intrinsi-
cally involved in the steps required by
PD 31B and may end up signing the
statement of truth in the Electronic
Documents Questionnaire.
Organisations with an up-to-date,
clear and enforced records manage-
ment policy, and a litigation readi-
ness policy, will be far better placed
to comply with PD 31B and identify,
preserve and collect their electronic
documents in an efficient and cost-
effective manner. Focussing the collec-
tion of documents should also reduce
the overall costs of the review and
production of documents for disclo-
sure.
By understanding its electronic
documents at an early stage, a party
will be able to conduct the required
discussions with the other party not
just in relation to what they have
and will produce, but also in terms of
what documents are required from
the other side.
Some have argued that PD 31B
will increase the already heavy cost
burden of disclosing electronic docu-
ments. Although it may be true that
more work may need to be done at
an earlier stage, it should be borne in
mind that the sheer volume of elec-
tronic information is what is driving
up costs. PD 31B did not create this
situation; it is part of a solution. Also,
the PD 31B requirements are really
just an amplification of those found
in paragraph 2A but, in practice, the
latter was often ignored.
The investigation and discussion
required by PD 31B will provide the
foundations for determining (whether
through agreement or a direction
from the judge) the boundaries of
a reasonable search for electronic
documents. In this way, the overall
costs of the review and disclosure of
electronic documents (which are often
a significant proportion of the overall
costs in a case) can be controlled, and
expensive disputes over disclosure
can be limited to those areas that are
unavoidable.
Neil Mirchandani is a litigation
partner at Hogan Lovells Interna-
tional LLP where he focuses on clients
in the investment banking and funds
sectors. Neil has experience in a broad
range of corporate disputes, and is
adept at using technology in large-
scale litigation to achieve cost savings.
Since 2008, Chambers has listed Neil
as a leading dispute-resolution lawyer,
describing him as “truly commercial”
with a commitment to “finding solu-
tions even in the most adverse circum-
stances.”
Matthew Davis is the litigation-sup-
port lawyer for Hogan Lovells Inter-
national LLP. Previously a litigation
lawyer for ten years, Matthew advises
legal teams and their clients on the
selection and best use of technology in
regulatory investigations, arbitrations
and litigation, including strategies
and techniques for dealing with large-
scale electronic disclosure projects.
This article was first published in the
November 2010 issue of PLC Maga-
zine.
Page 55
 The International Law Quarterly
Lost in Translation: American Juror
Perceptions of Foreign Litigants
By Dr. Philip K. Anthony, Los Angeles
When a foreign com-
pany is informed
that its officers,
directors, and high
ranking employees
will be required
to testify at a jury
trial in the United
States, there is
P. Anthony
usually immediate
concern on the part of the involved
individuals. Equally so, their Ameri-
can counsel often have reservations.
Almost always, the first question
asked by all involved focuses on the
extent to which the biases and preju-
dices of an American jury might creep
into juror perceptions of and attitudes
toward foreign defendants.
Specifically, trial teams want to
know the extent to which foreign
litigants will be penalized merely for
the fact that they are foreign. Will the
American adversary (when there is
one) be favored and given the benefit
of a doubt when issues are close calls?
Will the foreign parties be perceived
as less credible, less believable, or less
likable than their American counter-
parts? And, ultimately, will the ver-
dict go against the foreign company?
Interestingly, jury research over
the years has consistently shown that
jurors are relatively blind toward the
origins of a litigant. Whether litigants
are Japanese, Israeli, Chinese, or Ger-
man, jurors, during deliberations, are
rarely focused on nationalities.
Many of the juror behaviors antici-
pated by trial teams—and which have
frequently been cited by trial lawyers
concerning foreign parties—in fact,
rarely take place. Counter to what
many trial lawyers have expressed,
jurors do not “hate Japanese defen-
dants because they have forced prod-
ucts upon America and destroyed our
automobile industry.” Likewise, Amer-
Winter 2011
ican juries do not focus on World War
II or Nazi Germany when German
defendants are present. Our research
has shown that jurors do not fear the
rise of China, much less castigate Chi-
nese defendants because of such fears.
Overall, jurors discuss plaintiffs and
defendants in civil litigation on the
merits of the facts and theories being
debated at the trial, not on the basis
of one party being foreign.
Nonetheless, the lack of bias exhib-
ited toward a foreign defendant may
at times, actually work against the for-
eign party in unexpected ways. Jurors
typically take witnesses at face value
without concern for their national
origin but, in the process, they do not
take into account cultural differences
a particular witness may possess.
Consider, for instance, the impor-
tance of this perception by jurors: A
Japanese witness takes the stand and
during testimony, laughs repeatedly,
covering her or his mouth while laugh-
ing. In Japanese culture, such expres-
sion is often the reaction to embarrass-
ment about the nature of the subject.
The question asked by the examining
attorney may be considered too direct,
not appropriately subtle. Though the
answer itself may not be at all damag-
ing to the Japanese witness, he or she
does not wish to answer a question so
publicly, directly or candidly, and is
very uncomfortable having to talk so
openly about someone else.
In this setting, most jurors see
only a witness. They do not stop to
ask themselves what the standard
demeanor is for a Japanese citizen.
In part they don’t ponder the issue,
because they have no experience with
the nuances of behavior in different
cultures. Additionally, jurors likely
do not have prior experience with the
American court system or with the
role of a juror. As a result, American
jurors in this setting ask themselves:
Why is the witness laughing? Do they
not take this seriously? Is the witness
uncaring and arrogant? Have they
been caught in a lie? The American
jurors do not ask themselves: Why
is the “Japanese” witness laughing?
This is but one example, but for every
culture there are subtleties in the
testimony of foreign litigants that are
not factored into the thought process
of most American jurors.
What can be done about this
general problem? First and foremost,
foreign parties to litigation who are
going to have their depositions taken
and/or ultimately testify at trial need
to have a thorough understanding of
American culture prior to beginning
testimony preparation at a content
level. They need to be shown exam-
ples of how American juries perceive
their mannerisms. If jury research
has been undertaken in advance of
trial, the details of surrogate juror
reactions to the witness often can be
shared with the witness prior to trial
preparation. The witness thereby can
be sensitized to the expectations of
the American jury. Where possible,
showing the witness a videotape of
her or his own testimony can be an
effective way to help the witness be-
come self-aware. Once this first step
of sensitization and cultural familiar-
ization is complete, preparation for
testimony can be far more efficient.
In conclusion, a trial team represent-
ing a foreign defendant should not
be concerned that the client will be
treated unfairly, but the team should
be cognizant of the fact that American
juries are likely to apply the same
standards and expectations to both
the foreign and domestic witness.
Dr. Philip K. Anthony is the CEO of
DecisionQuest, a leading trial-consult-
Page 56
 The International Law Quarterly
ing firm. Over a career spanning more
than 30 years— and more than 1,000
civil trials in all 50 states—Dr. Antho-
ny has built a reputation as one of the
nation’s leading and most sought-after
trial consultants. He has shared his
expertise as a frequent lecturer at the
Unchartered Waters:
The Kishenganga River Project Dispute and
Arbitration Under the Indus Waters Treaty
The Indus Waters Treaty (the
“Treaty”)1 is regarded as one of the
most significant and successful agree-
ments ever executed between India
and Pakistan.2 The Treaty’s resilience
through multiple wars and political
instability between the two parties is
in large part due to its well-thought-
out, multi-layered, dispute-resolution
mechanisms. One of the mechanisms
provided for in the Treaty is arbitra-
tion under the auspices of a to-be-cre-
ated court of arbitration.3 Interesting-
ly, the creation of this unique court of
arbitration could involve the President
of the World Bank, the Secretary Gen-
eral of the United Nations, the Presi-
dent of the Massachusetts Institute of
Technology, the Rector of the Imperial
College of Science and Technology
in London, the Lord Chief Justice of
England, and the Chief Justice of the
United Parties Supreme Court.4
While other dispute-resolution
mechanisms provided for in the Trea-
ty have been utilized, before 2010, in
the approximately fifty-year history of
the Treaty, the arbitral provisions of
the Treaty have never been invoked
to resolve a dispute.5 In June 2010,
however, Pakistan for the first time
invoked the arbitral provisions of the
Treaty in an action to resolve a dis-
pute regarding India’s plans to build
a 330-megawatt hydroelectric power
Page 57
American College of Trial Lawyers, the
American Bar Association (ABA), the
Association of Business Trial Lawyers
(ABTL), Practising Law Institute, and
the National Institute for Trial Advo-
cacy (NITA), to name just few—and he
has brought a wealth of experience to
By Omar K. Ibrahem, Miami
plant on the Kishenganga River (the
“Kishenganga Project Dispute”).6 This
article provides a brief overview of the
arbitral provisions of the Treaty and
the ongoing arbitration of the Kishen-
ganga Project Dispute.
Background of the Treaty
The Indus waters begin in the
Himalayan Mountains of Indian-held
Kashmir and flow between Pakistan
and India, eventually emptying into
the Arabian Sea south of Karachi,
Pakistan. Disputes over the Indus
waters predate the independence of
India and Pakistan from British rule.
Prior to 1935, the Indus waters were
under the jurisdiction of one politi-
cal authority, British India, and any
disputes regarding the Indus waters
were resolved by executive order.7 In
1935 the Government of India Act put
water under provincial jurisdiction
and disputes began to arise between
the provinces, most notably Punjab
and Sindh.8 The disputes centered
around Sindh’s concern that the Pun-
jabi irrigation works would disrupt
the water flow to the Indus, negative-
ly affecting Sindhi irrigation.9 In 1935
and 1941 the British government
established two dispute-resolution
commissions—the Anderson Com-
mission and the Rau Commission—to
bear as an author or contributor to six
books and numerous articles on the
nuances of trial strategy. Dr. Anthony
may be reached at 310.618.9600 or
via e-mail at panthony@decisionquest.
com.
examine the dispute.10 Before the
provinces could reach a final agree-
ment, however, the subcontinent was
partitioned in 1947. The resulting
international boundary between India
and Pakistan was drawn through the
state of Punjab. With the source of the
Indus waters in India, Pakistan was
left threatened by the prospect of In-
dian control over the tributaries that
fed water into the Pakistani portion of
the basin.11
Between 1947 through 1951 India
and Pakistan engaged in fruitless
bilateral negotiations to resolve the
disputes over the Indus waters. The
impasse was broken when David
Lilienthal, the former head of the Ten-
nessee Valley Authority, suggested in
a Collier’s Magazine article that the
dispute over the Indus waters could
be resolved better by engineers from
the two parties with the World Bank
acting as a neutral mediator, rather
than by the parties’ politicians.12 The
President of the World Bank, David
Black, who was a close friend of Lil-
ienthal, acted on this suggestion and
offered up the World Bank to serve as
a neutral mediator.13 Both India and
Pakistan accepted the World Bank’s
offer and, after almost a decade of
negotiation, the Treaty was born.
continued, next page
Winter 2011
 The International Law Quarterly
indus waters treaty
from previous page
Dispute Resolution Under
the Treaty
Due to the violent history between
the two nations, the Treaty includes a
detailed, multi-layered, dispute-reso-
lution mechanism intended to facili-
tate peaceful resolution.14 The Treaty
identifies three escalating tiers of
disputes that may arise concerning
the application and interpretation of
the Treaty between the parties: “ques-
tions,” “differences” and “disputes.”
The Treaty provides a different reso-
lution mechanism for each.
First, the Treaty created a stand-
ing Permanent Indus Commission
(the “Commission”) to examine
“questions” concerning the interpreta-
tion or application of the Treaty. The
Commission is made up of one Com-
missioner from each State.15 While,
the main goal of the Commission
is to operationalize the Treaty and
facilitate cooperation between the two
parties,16 Article IX of the Treaty pro-
vides that any “question” concerning
the interpretation or application of
the Treaty is to be first examined by
the Commission.17 If the Commission
is unable to resolve such a “question”
by agreement, then the “question”
escalates into a “difference” between
the two parties.
A “difference” is referred to a
neutral expert who, ideally, is to be
appointed by agreement between the
parties.18 If the parties cannot agree
on a neutral expert, or on a third par-
ty to appoint a neutral expert, then
the neutral expert would be appointed
by the World Bank.19 According to
Annexure F of the Treaty, the neutral
expert must be an eminent engineer.
Thus, the Treaty provides only for a
limited set of “differences” that the
neutral expert may resolve. The Trea-
ty lists twenty-three types of “differ-
ences” that fall under the jurisdiction
of the neutral expert, and most of the
listed “differences” are technical in
nature.20 “Differences” outside the list
Page 58
in Annexure F do not fall within the
authority of the neutral expert and
would have to be settled by a “Court
of Arbitration,” referred to in Article
IX and Annexure F of the Treaty but
detailed in Annexure G.
If the neutral expert determines
that the “difference” (or part of it)
referred to him or her does not fall
under the expert’s jurisdiction as
prescribed by the Treaty, then the
“difference,” or that part, becomes a
“dispute” to be resolved by a court of
arbitration or by agreement of the
parties.21 Additionally, the Commis-
sion, or either party, can unilaterally
deem a “difference” a “dispute” and
submit the dispute to the court of
arbitration.22 Although the Treaty
provides that the decision of the neu-
tral expert is final and binding, it also
provides that if any issue not within
the competence of the neutral expert
should arise out of his or her decision,
then that issue should be settled in
accordance with the procedures pro-
vided for in the Treaty, which would
likely involve the court of arbitra-
tion.23
Notably, although the Treaty
identifies three escalating tiers of dis-
putes, the dispute-resolution process
in the Treaty is not hierarchical.24
A “question” referred to the neutral
expert is not an appeal of a deci-
sion of the Commission. Rather, it is
referred to the neutral expert because
the Commission cannot resolve it.
This is to be expected with complex
questions, given that the Commis-
sion consists of two persons, each
representing one of the two countries.
Moreover, the decision of the neutral
expert is final and binding and, as
such, cannot be appealed to the court
of arbitration. Indeed, the Treaty
provides that any decision within the
competence of the neutral expert is
binding not just on the parties, but
also on any court of arbitration.25
As noted above, should an ini-
tial “question” between the parties
transform into a “dispute,” then the
Treaty provides for the “dispute” to be
resolved by the court of arbitration.
Under the Treaty, courts of arbitra-
tion must consist of seven arbitrators,
with each party having a right to
appoint two.26 The remaining three
arbitrators are referred to as “um-
pires,” and they are selected through
a complex and detailed mechanism.
First, according to the Treaty, In-
dia and Pakistan agreed to maintain
a standing panel of umpires consist-
ing of four people in each of the fol-
lowing three categories: “(i) Persons
qualified by status and reputation
to be Chairman of the Court of
Arbitration who may, but need not,
be engineers or lawyers. (ii) Highly
qualified engineers. (iii) Persons
well versed in international law.”27 If
the standing panel has been proper-
ly constituted, then the parties must
first attempt to reach an agreement
on the remaining three arbitrators
by choosing one of the four standing
panel members from each category.
If the parties cannot agree, they are
to decide by drawing lots.28 Accord-
ing to the Appendix to Annexure
G of the Treaty, the parties had
nominated the following individuals
to the standing panel: the Secretary
General of the United Nations or
the President of the World Bank
for category (i), the President of the
Massachusetts Institute of Technol-
ogy or the Rector of the Imperial
College of Science and Technology
in London for category (ii); and the
Chief Justice of the United Parties
or the Lord Chief Justice of England
for category (iii). Since four mem-
bers had not been nominated for
each category, the standing panel
had not, according to the Treaty,
been properly nominated.
In the event the standing panel is
not properly nominated, the Treaty
provides that the parties can agree
on the umpires, provided that the
umpires are from one of the stated
categories. If the parties cannot agree,
the parties must then attempt to
agree on one or more persons to help
them in selecting the remaining three
umpires.29 If the parties cannot agree
to one or more persons to assist them,
then the parties will draw lots for the
names of persons from the categories
noted above to make the necessary
selection for that category.30
Winter 2011
 The International Law Quarterly
The Kishenganga Project
Dispute and Arbitration
Under the Treaty
As previously noted, in June 2010
Pakistan for the first time invoked the
arbitral provisions of the Treaty to re-
solve the Kishenganga Project Dispute
with India.31 The essence of the dispute
is Pakistan’s claim that India, by di-
verting the course of the river to build
the Kishenganga hydroelectric power
plant, would reduce Pakistan’s water
flow by one-third during the winter,
thereby constituting a violation of the
Treaty.32 India argues that it is well
within its Treaty rights to build the
Kishenganga power plant, which it has
been planning since the late 1980’s.33
Prior to Pakistan initiating arbitration,
Pakistan and India had attempted
to reach a resolution for the past two
decades but were unable to do so. 34
As provided for in the Treaty, when
Pakistan instituted arbitral proceed-
ings it nominated Bruno Simma, a
German jurist currently serving as a
justice on the International Court of
Justice, and Jan Paulsson, an inter-
nationally recognized attorney and
arbitrator, as its party-appointed
arbitrators.35 India, for its appointed
arbitrators, selected Peter Tomka, a
Slovak national who, like Bruno Sim-
ma, is a justice on the International
Court of Justice, and Lucius Caflisch,
a professor at the Graduate Institute
of International Studies in Geneva.36
Because the standing panel called
for in the Treaty was not properly
constituted, India and Pakistan first
attempted to agree on the selection
of the remaining three umpires from
the categories noted above, but they
were unable to do so.37 The next step
was to determine if they could agree
on one or more persons to assist them
in selecting the three umpires. Again,
they were not able to reach an agree-
ment. As a result, in July 2010, they
drew lots. The Secretary General of
the United Nations was selected to
appoint an umpire from category (i)
to become the chair of the Court of
Arbitration. The Rector of the Impe-
rial College of Science and Technology
in London was selected to appoint an
Winter 2011
umpire from category (ii). And, the
Lord Chief Justice of England was
selected to appoint the umpire from
category (iii).38
The Secretary General of the
United Nations appointed Stephen
Myron Schwebel, an American jurist
who previously served on the Inter-
national Court of Justice.39 Professor
Howard S. Wheater was selected as
an umpire by the Rector of the Impe-
rial College of Science and Technology
in London. The Lord Chief Justice of
England selected Justice Sir Franklin
Beman, as the third umpire.40
With the Court of Arbitration
finally constituted, hearings began
in the dispute on 14 January 2011.41
Although the dispute concerns a pub-
lic matter—water rights—the Treaty
provides that “deliberations” by the
members of the court of arbitration
are private, and “discussions” in the
court of arbitration are private, absent
agreement from both the parties and
the tribunal. As such, the public will
likely not learn much about the arbi-
tration until its ultimate resolution.
Conclusion
In the approximately fifty-year his-
tory of the Treaty, its complex and
multi-layered dispute-resolution
mechanism has effectively functioned
to facilitate peaceful outcomes be-
tween the two parties. Although not
yet resolved, the mere fact that an
arbitration panel has been conformed
in the Kishenganga Project Dispute is
testament to the success of the Trea-
ty’s dispute-resolution mechanism
in deftly navigating Indo-Pakistani
politics toward the peaceful resolution
of potentially explosive issues.
Omar K. Ibrahem, an attorney in
Miami, focuses his practice on com-
mercial litigation and arbitration. He
can be reached at Omar@okilaw.com.
Endnotes:
1 Indus Waters Treaty, India-Pak., Sept.
19, 1960, 419 U.N.T.S. 125, also available at
http://web.worldbank.org/WBSITE/EXTER-
NAL/COUNTRIES/SOUTHASIAEXT/0,,cont
entMDK:20320047~pagePK:146736~piPK:58
3444~theSitePK:223547,00.html (last visited
February 6, 2011).
2 Manav Bhatnagar, Reconsidering the
Indus Waters Treaty, 22 Tul. Envtl. L.J. 271,
278 (Summer 2009).
3 Indus Waters Treaty, supra note 1, at
art. IX and annex. F.
4 Id. at annex. F.
5 Amol Sharma and Tom Wright, India
and Pakistan Feud Over Indus Waters, Wall
St. J., March 30, 2010.
6 Amy Kazim, India and Pakistan to
Arbitrate Water Feud, Fin. Times (June
18, 2010), available at http://www.ft.com/
cms/s/0/2587c9b4-7aba-11df-8549-00144feab-
dc0.html#axzz1DDGugDBe.
7 Aaron T. Wolf and Joshua T. Newton,
Water Conflict Management and Transfor-
mation at Oregon State University, Case
Study of Transboundary Dispute Resolution:
the Indus Waters Treaty, (2008), http://www.
transboundarywaters.orst.edu/research/case_
studies/Documents/indus.pdf (last visited
Feb. 6, 2010).
8 Id.; see also, Bhatnagar, supra note 2, at
272-73.
9 Id.
10 Bhatnagar, supra note 2, at 272-73.
11 The Henry L. Stimson Center, The Indus
Waters Treaty: A History, http://www.stimson.
org/research-pages/the-indus-waters-treaty-
a-history/ (last visited Feb. 6, 2011).
12 Wolf and Newton, supra note 7; Colleen
P. Graffy, Water, Water Everywhere, Nor Any
Drop To Drink: The Urgency of Transnational
Solutions to International Riparian Disputes,
10 Geo. Int’l Envtl. L.Rev. 399, 426-27 (Win-
ter 1998).
13 Wolf and Newton, supra note 7; see also,
Bhatnagar, supra note 2, at 273
14 Indus Waters Treaty, supra note 1, at
arts. VIII-IX, annex. F and annex. G.
15 Indus Waters Treaty, supra note 1, at
art. VIII.
16 Sandeep Gopalan, India-Pakistan Rela-
tions: Legalization and Agreement Design, 40
Vand. J. Transnat’l L. 687, 699 (May 2007).
17 Indus Waters Treaty, supra note 1, at
art. IX.
18 Indus Waters Treaty, supra note 1, at
annex. F.
19 Id.
20 Id.
21 Indus Waters Treaty, supra note 1, at
art. IX and annex. F.
22 Id.
23 Id.
24 Salman M. A. Salman, The Baglihar
Difference and its Resolution Process- A Tri-
umph for the Indus Waters Treaty?, 10 Water
Pol’y 105, 107 (2008).
25 Indus Waters Treaty, supra note 1, at
annex. F.
continued, next page
Page 59
 The International Law Quarterly

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indus waters treaty 32 Sharma and Wright, supra note 5. Kishanganga arbitration court, The Hindu,
33 Id. Oct. 30, 2010, http://www.thehindu.com/
from previous page
news/national/article857632.ece (last visited
34 Id.
Feb. 6, 2011).
26 Indus Waters Treaty, supra note 1, at 35 UN court to hear Pakistan-India water
dispute, The Peninsula, Jan. 14, 2011, http:// 39 Id.
annex. G.
www.thepeninsulaqatar.com/pakistan/ 40 Mushtaq Ghumman, International
27 Id. afghanistan/139014-un-court-to-hear-paki- Court of Arbitration to hear Kishanganga
28 Id. stan-india-water-dispute.html (last visited project dispute on January 14, Bus. Recorder,
29 Indus Waters Treaty, supra note 1, at Feb. 6, 2011). Jan. 3, 2011, http://www.brecorder.com/news/
annex. G. 36 Id. top-stories/1143059:news.html (last visited
30 Id. 37 Id. Feb. 6, 2011).
31 Kazim, supra note 6. 38 Gargi Parsai, Stephen Schwebel to head 41 Id.

Page 60 Winter 2011