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Professor Emmanuel Gaillard - Seven Dirty Tricks in International Arbitration

international arbitration debates・65 minutes read

The 15th annual international commercial arbitration lecture, hosted by Paolo De Rosa and featuring Professor Emmanuel Gallard, addresses the evolving challenges in arbitration practices, particularly the tactics used to disrupt proceedings and the importance of resilience against these issues. The discussion emphasizes the need for arbitrators to maintain their authority and jurisdiction in the face of local court pressures and anti-arbitration injunctions, advocating for substantive rules to counteract collusion and interference.

Insights

  • The 15th annual international commercial arbitration lecture, hosted by Paolo De Rosa, marks a significant shift in accessibility with its online broadcast, attracting nearly 1,000 registrants, a stark increase from the usual 100-200 attendees, illustrating the growing interest in international arbitration practices amidst evolving global circumstances.
  • Professor Emmanuel Gallard's focus on "seven dirty tricks" in arbitration highlights persistent challenges, such as questioning the validity of arbitration agreements and the autonomy of arbitration clauses, emphasizing the need for arbitrators to effectively navigate these tactics and maintain jurisdiction despite disruptions.
  • The lecture also underscores the contrasting approaches of different legal systems, particularly the emphasis on consent in French law versus the potential complications of just cause termination in Swiss law, raising concerns about the future stability of arbitration agreements and the integrity of the arbitration process in various jurisdictions.

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Recent questions

  • What is international arbitration?

    International arbitration is a method of resolving disputes between parties from different countries outside of traditional court systems. It involves the appointment of an independent arbitrator or a panel of arbitrators who review the evidence and arguments presented by both sides and make a binding decision. This process is often preferred for its confidentiality, efficiency, and the ability to choose arbitrators with specific expertise relevant to the dispute. International arbitration is governed by various rules and treaties, such as the UNCITRAL Model Law and the New York Convention, which facilitate the enforcement of arbitration awards across borders.

  • How does arbitration differ from litigation?

    Arbitration differs from litigation primarily in its process and formality. While litigation occurs in public courts and follows strict procedural rules set by the judicial system, arbitration is a private process where parties can choose their arbitrators and establish their own rules. Arbitration tends to be more flexible and faster than litigation, as it avoids the lengthy court schedules and formalities. Additionally, arbitration awards are generally final and binding, with limited grounds for appeal, whereas court decisions can often be appealed through higher courts. This makes arbitration an attractive option for parties seeking a more streamlined resolution to their disputes.

  • What are the benefits of arbitration?

    The benefits of arbitration include confidentiality, speed, and flexibility. Unlike court proceedings, which are public, arbitration allows parties to keep their disputes private, protecting sensitive information. The arbitration process is typically faster than litigation, as it avoids the backlog often found in courts, allowing for quicker resolutions. Additionally, parties have the flexibility to choose their arbitrators, which can lead to more informed decisions, especially in specialized fields. Arbitration also provides a more informal setting, which can reduce the adversarial nature of disputes and promote amicable resolutions. Overall, these advantages make arbitration a preferred choice for many businesses and individuals.

  • What is the role of an arbitrator?

    The role of an arbitrator is to act as an impartial decision-maker in a dispute between parties. Arbitrators are responsible for conducting hearings, reviewing evidence, and considering the arguments presented by both sides. They must ensure that the arbitration process is fair and that all parties have an opportunity to present their case. After evaluating the information, the arbitrator issues a binding decision, known as an award, which resolves the dispute. Arbitrators often have expertise in specific areas relevant to the case, allowing them to make informed decisions. Their role is crucial in maintaining the integrity and efficiency of the arbitration process.

  • What challenges does international arbitration face?

    International arbitration faces several challenges, including jurisdictional issues, enforcement of awards, and the influence of local courts. Jurisdictional challenges can arise when parties dispute the validity of arbitration agreements or the authority of arbitrators, complicating the resolution process. Additionally, while arbitration awards are generally enforceable under international treaties, local courts may resist enforcement, particularly in cases involving state entities or public policy concerns. The emergence of anti-arbitration injunctions, which prevent arbitration proceedings, further complicates matters. These challenges highlight the need for clear legal frameworks and cooperation among jurisdictions to ensure the effectiveness and reliability of international arbitration as a dispute resolution mechanism.

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Summary

00:00

International Arbitration Lecture Explores Disruption Tactics

  • The 15th annual international commercial arbitration lecture at Washington College of Law is hosted by Paolo De Rosa, head of international arbitration at Arnold and Porter, a sponsor for over 10 years.
  • This year’s lecture is broadcast online for the first time, attracting nearly 1,000 registrants, a significant increase from the typical 100-200 attendees at in-person events.
  • The COVID-19 crisis has prompted adaptations in international arbitration practices, including changes in team organization, client communication, evidence collection, and hearing conduct.
  • Professor Emmanuel Gallard will address "seven dirty tricks" used to disrupt arbitration, a persistent issue in the field, highlighting the need for effective responses from arbitrators and courts.
  • The lecture recalls past speakers, including notable figures like Jerry Axen, Julian Liu, and James Crawford, emphasizing the event's prestigious history over 15 years.
  • Professor Gallard, a leading figure in international arbitration, has a distinguished career and is associated with the French tradition in private international law.
  • The discussion will focus on the methodology of addressing disruptive tactics in arbitration, debating whether to apply substantive rules or identify applicable law.
  • The first dirty trick involves claiming the underlying contract is void, which does not affect the arbitration agreement's autonomy, allowing arbitrators to proceed with jurisdiction.
  • The second trick targets the arbitration agreement directly, questioning its validity, but the principle of competence-competence allows arbitrators to determine their jurisdiction despite such challenges.
  • The lecture aims to provide insights into the resilience of arbitration systems against disruptive tactics, illustrating the ongoing evolution of international arbitration practices.

20:27

Validity and Challenges in Arbitration Agreements

  • The arbitration clause's validity is questioned, as jurisdiction must derive from substantive arbitration law, not merely the clause itself, which requires objective legal backing.
  • This principle is widely accepted in France since the 1971 impacts case and is included in modern arbitration laws, such as Article 16 of the Model Law.
  • The rule allows arbitrators to determine their own jurisdiction, even if the arbitration agreement is deemed null, which can seem illogical but is essential for arbitration's functionality.
  • A recent ICC award (number 17 818, 2019) highlighted jurisdiction issues stemming from forged signatures on contracts, emphasizing the importance of arbitration law techniques.
  • The negative effect of competence-competence allows arbitrators to proceed with cases despite jurisdiction challenges, while courts may defer to arbitration if a prima facie agreement exists.
  • The principle of competence-competence has gained acceptance in many jurisdictions, including Latin America and Asia, with notable endorsements from Hong Kong and Singapore.
  • Article 139 of the Iranian Constitution requires parliamentary approval for state-owned entities' arbitration agreements, which can be used to evade arbitration obligations.
  • Pro-arbitration countries assert that state entities cannot use domestic laws to avoid arbitration agreements they have accepted, as seen in Swiss and Spanish arbitration laws.
  • French courts apply a principle of validity for arbitration agreements, focusing solely on consent rather than applicable laws, reinforcing the enforceability of such agreements.
  • Anti-arbitration injunctions, which prevent arbitration proceedings, have emerged globally, disrupting arbitration processes in various countries, including India, Brazil, and Mexico.

42:02

Arbitration Authority Amid Local Court Challenges

  • Anti-arbitration injunctions can be ignored; arbitration institutions have rules allowing them to appoint replacement arbitrators when faced with such injunctions, as outlined in Article 15 of ICC rules.
  • Arbitrators must assess their own jurisdiction without delegating this power to courts, as established by evolving case law that supports truncated tribunals proceeding under certain circumstances.
  • An example is the April 10, 2015 award by a tribunal chaired by Juan Fernandez Armesto, which upheld its jurisdiction despite a Mexican court's injunction against arbitration in Bolivia.
  • The tribunal emphasized respect for local courts but asserted that the Chihuahua judge lacked jurisdiction to interfere, allowing arbitration to continue under Bolivian law.
  • The Salini Ethiopia tribunal, chaired by the author, issued an award on June 30, 2009, despite Ethiopian court interference, asserting the tribunal's authority to render decisions.
  • The Ethiopian case illustrates that arbitrators should resist local court pressures and continue proceedings to avoid denying justice, regardless of local court decisions.
  • In Nigeria, case law supports arbitration for state-owned companies, but local courts may issue anti-suit injunctions, which arbitrators should challenge to maintain their authority.
  • A sophisticated tactic involves non-signatories disrupting arbitration by filing claims to nullify agreements, often seen in U.S. and Russian contexts, complicating arbitration processes.
  • In Russia, interested parties can nullify transactions under Article 1663 of the Civil Code, allowing them to bypass arbitration agreements, creating challenges for arbitrators.
  • The response to such tactics should involve developing substantive rules to address collusion and interference, inspired by criteria established by English courts for similar situations.

01:01:45

Collusion and Arbitration Law Challenges Explained

  • Commonality of interest between parties, such as parent and subsidiary relationships, can indicate collusion, especially when suspicious timing is present, as established in English case law.
  • The 2012 BNP Paribas case in England highlighted that suspicious timing serves as a proxy for proving collusion, which is often difficult to substantiate directly.
  • In the LCIA case number 142 7730, an award was issued in October 2017 by Doug Jones, addressing a party's use of a parent company to evade jurisdiction.
  • Swiss law recognizes that duration contracts, including arbitration agreements, can be terminated for just cause, a principle that has been broadly accepted by Swiss authorities.
  • The Swiss Federal Tribunal has extended the just cause termination rule to all duration contracts, raising concerns about its implications for arbitration agreements.
  • The majority of Swiss legal authorities support the view that arbitration agreements can be classified as duration contracts, allowing for potential termination under just cause.
  • The vagueness of the just cause test could lead to increased litigation, potentially disrupting arbitration proceedings and causing significant delays and costs.
  • The contrast between Swiss and French arbitration laws highlights that French law focuses solely on consent for arbitration agreements, avoiding complications from just cause arguments.
  • If Swiss law adopts the just cause termination for arbitration agreements, it could pose a significant risk to the arbitration system in Switzerland.
  • The speaker advocates for a substantive rules methodology over a choice of law methodology, emphasizing the need for clarity and stability in arbitration agreements.

01:20:35

Balancing Arbitration and Judicial Influence

  • Respect for the judicial system is emphasized, suggesting that declining an offer should be framed as a respectful acknowledgment of the country's legal framework rather than a rejection of authority.
  • Historical context is crucial for understanding the evolution of legal rules, indicating that legal systems develop progressively and may not always align with intuitive reasoning.
  • The importance of arbitration in various countries is highlighted, with a focus on the challenges local judges face when pressured by state-owned entities during arbitration processes.
  • Document production in arbitration often references IBA rules, but lacks clarity on the burden of proof, leading to disputes over which party must provide evidence.
  • The issue of legal privilege in document production is complex, with varying protections for attorneys across jurisdictions, necessitating a transnational approach to ensure equality among parties.
  • Arbitrators are encouraged to render awards despite local injunctions, as failing to do so could undermine the arbitration process and allow one party to manipulate the system.
  • Different legal theories exist regarding the recognition of annulled awards, with the French and American approaches offering distinct methodologies for enforcement.
  • The interaction between arbitration outcomes and local court decisions is critical, as local courts may lack the autonomy to challenge powerful state entities.
  • The experience from the Chromaloid case illustrates that arguments raised post-arbitration may not hold weight if not presented during the proceedings, highlighting the importance of thorough legal representation.
  • The discussion underscores the need for a balanced approach to arbitration, advocating for the recognition of awards while maintaining oversight of local judicial influences to protect the integrity of the arbitration process.

01:38:02

Critique of Biased Local Court Awards

  • The speaker expresses dissatisfaction with an award that differentiates between biases based on presentation, arguing that all local court decisions are inherently biased and lack international authority, while acknowledging this perspective is currently a minority view.
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