Académique Documents
Professionnel Documents
Culture Documents
©MNoonan2009
This presentation and Copyright therein is the
property of Maureen Noonan and is prepared
for the benefit of students enrolled in the
Commercial Transactions course conducted by
the Law Extension Committee and is available
for their individual study. Any other use or
reproduction, including reproduction by those
students for sale without consent is prohibited.
©MNoonan2009
Arbitration
We look at dispute resolution
• International Commercial
Arbitration
Is this topic examinable?
Yes, either
©MNoonan2009
Some importer legal risks
Goods or services inappropriate, not what was
ordered-claim for compensation available?
Supply does not meet local standards/laws
Crime –bribing foreign officials
Tax, customs issues
Unfamiliar with particular free trade treaty
provisions
Unable to enforce rights /recover money in a
foreign country
Unable to sell items purchased
Vulnerability to local customers for problems
©MNoonan2009
Some manufacturing risks
Raw material problems
Machinery
Finance
Delivery
Quality/quantity issues
Damage to others
Failure to sell products
Title issues
©MNoonan2009
Risk and Insurance
Unskilled allocation of risks (usually based on an
incorrect assumption that they can be imposed
on other party or left to insurance) in contract
negotiation and drafting stage can lead to:
• Multiple insurances covering same risks
• Unnecessary extra costs built into prices
• Unexpected contribution results or litigation
between insurers delaying any payout.
• Unexpected legal consequences
• Some risks not covered at all
ARBITRATION
• Parties agree to resolve disputes by
arbitration in accordance with nominated
Rules.
• Parties appoint Arbitrator or panel
• Arbitration conducted
• Decision made by Arbitrator
• Binding on the parties
• Enforceable in approx 142 countries
©MNoonan2009
Arbitration process
• Can be similar to a court process
• Can be informal
• Can be remote
• Can be on “papers” only, i.e. written materials and no
oral hearing
• Parties can choose an arbitrator with expertise in their
business
• Usual to choose 1 or 3 arbitrators so no deadlock
possible
• Usually confidential, so limited precedent bank to consult
/ research.
• Important elements are a process, rules defining how
that works, and a timetable to keep it moving along.
©MNoonan2009
International Disputes
Advantages of arbitration
• Neutrality
• Flexibility
• Efficiency
• Confidentiality
• Enforceability
©MNoonan2009
Global Survey –International Arbitration- large
corporates- PWC 2007 – See: www.pwc.com
• 73% corporations prefer it to transnational litigation
• Advantages outweigh disadvantages
• Clear dispute resolution policy an important strategic asset. 65 % of
respondents had one. Minimised escalation and costs.
• Arbitration clause in contract can give a tactical advantage
• More than 75% arbitrations conducted under the auspices of an
arbitration institution such as ICC and London Court of International
Arbitration; with regional centres growing
• Legal consequences most important for choice of venue
• 91% liked finality and rejected idea of appeals
• Concern that experienced arbitrators scarce. 90% wanted arbitrator
with established reputation in their field and region.
• Corporations retain specialist arbitration counsel rather than usual
litigation lawyers to assist
• 91% in house counsel well informed about international arbitration
©MNoonan2009
Framework for International
Arbitration
UN Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 1958
(The New York Convention)
When local court faced with dispute covered by an
arbitration agreement, it must stay proceedings
and recognise and enforce arbitral awards.
Incorporated into Australian law via International
Arbitration Act 1974(Cth). Note best practice
amendments passed in June 2010 to improve its
appeal for International Arbitration.
Australian Centre for International Commercial
Arbitration. See www.acica.org.au
©MNoonan2009
International Arbitration Act (Cth)
Section 7
(2) Subject to this part, where:
(a) Proceedings instituted by a party to an arbitration
agreement to which this section applies against
another party to the agreement are pending in a court;
and
(b) (b) the proceedings involve the determination of a
matter that, in pursuance of the agreement, is capable
of settlement by arbitration;
(c) On the application of a party..the Court shall, by order,
upon such conditions (if any) as it thinks fit, stay the
proceedings….and refer the parties to arbitration……
International Arbitration Act (Cth)
Recognition of foreign awards
Section 8
(1) Subject to this Part, a foreign award is
binding….for all purposes on the parties
to the arbitration agreement…
(2) Subject to this Part, a foreign award may
be enforced in the Federal Court of
Australia as if the award were a
judgement or order of that court…..
International Arbitration Act (Cth)
Exceptions to recognition and enforcement
of foreign awards.
See Section 8, subsections 4-11.
Examples of exceptions…incapacity at time
of arbitration agreement, arbitration
agreement not valid in country where
order made, no notice of appointment of
arbitrator, decision beyond scope of
arbitration.
ACICA
The Australian Centre for International
Commercial Arbitration is a non profit
organisation formed in 1985 to provide a
framework for international commercial
arbitration and to foster Sydney as a centre
for such arbitrations www.acica.org.au
Now part of the combined domestic and
international brand Australian Disputes
Centre www. disputescentre.com.au
©MNoonan2009
Why Sydney?
• Supportive legal environment-International
Arbitration Act provides for various opt in/out
alternatives, foreign lawyers can appear,
signatory to NY Convention on Recognition and
Enforcement of arbitral awards, supportive
courts and political stability.
• Sophisticated legal profession and some
internationally respected arbitrators. Good
support services, languages, resources.
• Can be cost savings when compared with
London, NY, Paris, Geneva, HK.
The fundamentals of arbitration
1. The agreement to arbitrate
2. Applicable law of contract & other
aspects.
3. Seat of arbitration
4. The arbitrators
5. The procedure
6. Confidentiality
7. The award
The agreement to arbitrate
Agreement in contract
Empowers independent arbitrator(s) to determine
issues and disputes
Enables parties to choose arbitrator, language,
rules, jurisdiction governing procedural issues
and merits
Makes decision binding
Is enforceable under UN Convention on the
Recognition and Enforcement of Foreign Arbitral
Awards 1958 (NY Convention 1958)
The agreement to arbitrate
Decide whether parties want the agreement
to enable:
©MNoonan2009
Institutions
Advantages
Pre established and tested rules, guidelines and
practices
Established format which has proved workable
Neutral entity to collect and hold fees, deposits
List of experienced arbitrators, often by expertise
Efficient with trained and experienced staff
Physical facilities..rooms etc
Neutral and independent
Specialist forms of Arbitration
London Maritime Arbitrators Association-maritime
disputes between commercial parties
Court of Arbitration for Sport-Lausanne, NY and
Sydney
World Intellectual Property Organisation (WIPO)
Geneva
International Centre for Settlement of Investment
Disputes-involves states
WTO
Arbitral Administration
SAMPLE ISSUES
• How will arbitrators be chosen?
• What language will be used for documents and oral
hearings-who will translate
• What if one party delays or refuses to take a step
• Interim measures
• Degrees of discovery or disclosure
• Procedure at hearings
• Rules of evidence
• Fees
• Liability for costs
Arbitration Rules
Arbitrations are conducted in accordance
with rules chosen.
See for example ACICA Arbitration rules at
www.acica.org.au.
Procedural as with civil/criminal procedure
court system rules.
For other rules, see appropriate organisation
Parties can make their own if they prefer
©MNoonan2009
What does it all cost?
Appendix A to ACICA rules
Notice of Arbitration Registration fee $2,500
Admin fee
$1-$500,000 1% of amount in dispute
And upwards
Over $100m $39,000 plus 0.02% of
amount in dispute above $100m up to maximum
$60,000.
PLUS admin fee of $10,000-$60,000 and costs of
representation, presenting case.
©MNoonan2009
Cost
Cost blowouts in Arbitrator and Party costs
can mean Arbitration is as expensive (or,
sometimes, more expensive) than
transnational litigation.
Sometimes, still attractive / chosen because
of other aspects (e.g. confidentiality, or
because neither party wants to find itself in
the courts of the other).
Attitude of our courts
Mainly support
Care must be taken when drafting to avoid
multi-party, multi-contract and multi-venue
disputes.
If arbitration clause too narrow, it may limit
range of disputes that can be settled by
arbitration
©MNoonan2009
Recent case example
Giedo van der Garde BV v. Sauber Motorsport
AG[2015]VSC 80
Dutch Formula One and driver van der Garde filed an application on 5
March 2015 to enforce an arbitral award made 2 March 2015. The
arbitration was held in London 11 & 12 Feb 2015 pursuant to Swiss
Rules of International Arbitration. Sauber was ordered to “refrain from
taking any action the effect of which would be to deprive Mr. v d Garde
of his entitlement to participate in the 2015 Formula One Season….”
Quick action and resolution shows support of VSC for arbitration and
enforcement.
The Arbitral Tribunal
• How does arbitration process commence
• How many arbitrators on Tribunal?
• Role of Institution in formation of Tribunal
• How is chair chosen?
• Can a party object to appointment of an
arbitrator? How?
• Who decides on any difficulties?
Assessing Prospective Arbitrators
• CV?
• Track record?
• Expertise, language, neutral, skills in
procedure of arbitration
• Qualifications and experience
• Reputation
• Cost
• Compatibility with other Arbitrators.
Note Local requirements related to
other party
Under Arbitration Law of the PRC 1994 (CN), the
arbitration commission is required to appoint
“fair and honest persons as its arbitrators” and
arbitrator must meet one of following:
1. Engaged in arbitration work, or worked as a lawyer
or judge for at least 8 yrs
2. Engaged in legal research or teaching in senior
positions
3. Legal knowledge and engaged in professional work
relating to economics and trade in a senior position.
Conflicts of interest
©MNoonan2009
DSU timetables
60 days Consultation, mediation
45 days Panel set up, appointments
6 mths Panel hears dispute and reports
3 wksPanel reports to WTO members
60 days Dispute Settlement Body adopts report
(if no appeal) TOTAL 1 year
60-90 days Appeals report
30 days Dispute Settlement Body adopts
appeals report. TOTAL 1.25 years
©MNoonan2009
How the panels work
• Each side presents case in writing to panel
• First hearing-complaining country and
responding country present case
• Rebuttals-written and oral
• Experts, if appropriate
• Draft panel report given to both sides
• Interim report to both sides
• Review for two weeks
• Final report given to both sides and 3 weeks
later to all WTO members
©MNoonan2009
Remedies?
• Obligation on parties to respect ruling
• Trade sanctions possible
• Reading some cases is useful
e.g. See www.wto.org and go to Case Studies
Thailand: Conciliating a Dispute on Tuna Exports to the EC
Dispute Settlement between Developing Countries-Argentina and
Chilean Price Bands
Pakistan’s Dispute Settlement with the US on Combed Cotton Yarn
exports.
©MNoonan2009
Trade with China
• Australian exports include mainly rural
products, minerals and energy-wool,
cotton, beef, dairy products, wine, iron ore,
liquified natural gas-and a few services in
education, tourism, architecture, banking
and legal.
• Also considerable outsourced
manufacturing done in China with
products/components then imported.
©MNoonan2009
Trade Disputes involving China
Resolution mechanisms include:
• Consultation
• Negotiation
• Conciliation or mediation
• Arbitration
• Litigation
©MNoonan2009
Trade Disputes involving China
• Less formal methods are preferred
• Desirable to maintain a harmonious and
consensual working relationship, so
confrontational/adversarial methods often not
helpful.
• Conciliation and arbitration therefore common
• Arbitration clauses common in JV contracts –
avoid unfamiliar Chinese court system, reduce
costs, preserve business relationships,
enforceability.
©MNoonan2009
Trade Disputes involving China
• CIETAC (China’s International Economic
and Trade Arbitration Commission) is the
mechanism China has set in place to
resolve problems in trade
• Legislative encouragement for negotiation
and conciliation first and arbitration or
litigation if that fails.
• JV contracts MUST contain provisions re
settling of disputes.
©MNoonan2009
Note local characteristics: e.g.
Indonesian contracts
• Courts do not apply a doctrine of precedents,
so litigation can take years and be
unpredictable. No procedure to enforce
foreign judgements. Need to start again or
enforce against assets o/side I.
• Indonesia is a party to the NY Convention
(enforcement of foreign arbitral awards).
There is a procedure. Also a local arbitration
law. Enforcing a foreign award can be more
difficult than enforcing a domestic one.
Local characteristics-China
• Sometimes mandatory PRC law of contract-e.g.
real estate or onshore joint venture with a Chinese
counterparty.
• Adviseable to match court choice to law of
contract-to avoid expensive expert evidence
• PRC courts will generally not recognise our
Australian court judgements, but will recognise HK
judgements. However, immunity of state owned
entities might apply.
• China is signatory to NY Convention, so arbitration
often best choice.
VIS Moots
Useful as a study tool for:
Article 20 of Contract
This contract shall be governed by the United
Nations Convention on Contracts for the
International Sale of Goods of 1980(CISG) without
regard to any national reservation, supplemented
for matters which are not governed by the CISG,
by the UNIDROIT Principles of International
Commercial Contracts and these supplemented by
the otherwise applicable national law.
The complaint & CISG Articles
Late delivery contrary to Contract-Art 33(a)