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Guide to Regional Arbitration (volume 5 - 2017)

Worth a Closer Look: Special Occaisions

02 November 2016

Not all the "special occasion" institutions can trace their roots back half a century or more. Here are some of more recent provenance that could prove useful for the right case.

CHINESE-EUROPEAN ARBITRATION CENTRE (CEAC)

What is it?

A centre based in Hamburg, focused on settling disputes between Chinese and European parties, founded in 2008.

Can't existing providers – either in Asia or Europe – do this?

They can, but the idea behind CEAC has rationale. It still takes a lot of persuasion to get foreigners to agree to arbitrate in China, and a lot to get the Chinese to arbitrate anywhere else. So CEAC's pitch is that it's neutral territory for both. It helps that it's in Hamburg, a city that the Chinese know well.

Is it gaining traction?

It would appear so. CEAC clauses are said to be standard for a number of DAX and Dow Jones-listed companies for China contracts. The CEAC rules were also used in the 2013 Vis Moot, which was a boon.

Does it have any cases?

It had 10 cases registered by the end of 2012 (the most recent stats), two of which ended in an award and a further three ended with claims being withdrawn by parties.

Who's been bringing them?

At least four of the cases arise from disputes between German and western European or North American parties, with indirect links to China (such as one party being a subsidiary of the Chinese company). The aggregate value of the cases is around €60 million.

What are the rules like?

They're closely based on the most recent UNCITRAL rules with a few amendments.

Such as?

Special provisions on the appointment and challenge of arbitrators through a neutral appointing authority; a choice of law clause; a time limit for an arbitral award; and new provisions on costs, among others.

Why is it based in Hamburg?

CEAC grew out of a cooperation agreement between the Hamburg and the Tianjin Bar Associations, in 2004. The agreement led to a fringe event at an IBA annual conference in Singapore three years later, where the idea for CEAC was born.

As to the city itself, it's somewhere the Chinese feel comfortable. More than 400 Chinese businesses have offices in Hamburg. Most are there because of shipping.

Who runs it?

Its sole shareholder, but it's not really a backer, is the Chinese European Legal Association (CELA), a non-profit entity. As well as backing the centre, CELA organises meetings and workshops to try to stimulate legal exchange between China and Europe. It has also started a youth wing for the centre, Young CEAC.

PANEL OF RECOGNIZED INTERNATIONAL MARKET EXPERTS IN FINANCE (PRIME FINANCE)

What is it?

A specialist body intent to bring arbitration to complex financial disputes. It was founded in The Hague in 2012.

Who set it up?

A senior banking lawyer, Jeffrey Golden (ex-Allen & Overy), aided by former Lord Chief Justice of England and Wales Lord Woolf. It grew out of a series of lectures Golden gave before the collapse of Bear Stearns and Lehman Brothers, on the lack of a world court for financial transactions. With the assistance of the Dutch government and various lawyers, bankers and regulators, Golden got the idea for an arbitration court off the ground.

Has it been well received since?

Banks have always been wary of arbitration (and could afford to be, because they could dictate jurisdiction clauses to borrowers). But the spread of derivatives to a new sort of user – state-owned companies in emerging economies – has changed that. Banks now see that they too can benefit from arbitration.

ISDA – the organisation that provides standard contracts for use in derivatives deals – now offers a model clause that includes PRIME Finance as one of the options, alongside the ICC and LCIA and the UNCITRAL rules. ISDA agreements govern 90 per cent of the world's over-the-counter derivatives transactions. In 2016, PRIME joined forces with the PCA to pool people and know-how.

Who's on its PRIME's panel?

Around 100 names. PRIME added a raft of new names in March 2014.

Anyone famous?

There are plenty. Georges Affaki (formerly of BNP Paribas MD) stands out, as do figures such as Quinn Emanuel's Peter Calamari and the IBA's past president Akira Kawamura.

What are the rules like?

It turns out that grafting a watertight disputes procedure onto global financial markets isn't a one-draft job. A second edition of the rules was published in February 2016, even though the original rules are only four years old.

So what changes are being suggested?

The rules could be clearer on when time starts to run following the service of arbitration.

Another proposal would allow arbitrators in PRIME Finance matters to be appointed "off list", and to be of the same nationalities as the parties (not allowed at present).

There's also a suggestion, modelled after the slightly controversial article 14 of the ICSID Convention, which would provide for arbitrators to have recognised qualifications and "high moral character". So far this hasn't made it into the rules.

Is it good?

It can be. Prime Finance was runner-up in this year's GAR awards, in the most important decision category, after it managed to arbitrate a US$1.7 billion case, about a credit derivative, in just eight days.

Are there any other unusual elements?

It has a fairly rigid pricing structure, with incremental caps on administrative fees relative to the amount in dispute. Anything over €500,000 is capped at €66,400.