Introduction

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The first edition of The Guide to Telecoms Arbitrations came to light in the aftermath of the covid-19 pandemic. Since then, the world has transitioned into a new normality with an ever-increasing reliance on the most advanced technologies and with artificial intelligence at the heart of many of the recent developments. With the present roll-out of 5G across the globe, the telecoms sector continues to witness radical changes and this has already affected, in many respects, the ways in which we live, work and interact in society. U-turns and a return to the past are unlikely in this new paradigm, and while legal new challenges will arise, arbitration will continue to be one of the means to resolve those challenges.

This second edition has been enriched with insightful updates and actual trends on a range of topics that remain of significant relevance for arbitrations in the telecoms sector. Predictably, and since the publication of the first edition, disputes in the sector have been on the rise.

Geopolitical tensions between world powers jostling for influence will continue to foster and exacerbate disputes in a sector that is now considered to be as strategic as the energy and defence sectors. For instance, some well-known 5G equipment suppliers have made good on their threats to take action against states that prevented them from participating in a number of lucrative tenders. If states are said to have done so to preserve their national security interests, the legitimacy and proportionality of those measures will be scrutinised by arbitral tribunals applying international law and the corpus of jurisprudence developed during the past two decades to protect foreign investors from state interference.

The outcome of these high-profile 5G arbitrations will also have wider repercussions as the state of nationality of those ‘banned’ economic champions may end up taking countermeasures against other foreign companies operating in the same sector. The return of nationalism and protectionism, which were thought to belong to a bygone era, should not be understated.

This guide continues to track both general and specific themes that are relevant to arbitration users in general but not solely. The first edition has attracted a wider audience of general counsel and transactional in-house lawyers looking to familiarise themselves with the mechanics of arbitrating disputes in the telecoms sector, the types of disputes that may come their way and some of the issues that they need to be alert to, especially when they operate in complex jurisdictions.

One frequently asked question is whether arbitration should really be the preferred method to resolve telecoms disputes. The fact that the big five tech companies (Google, Apple, Facebook, Amazon and Microsoft) initially opted for court litigation (mainly in California) in their contracts implied that they were hostile to arbitration. However, as they gained influence, prominence and global reach, arbitration is increasingly being provided for in their commercial contracts (although one pocket of resistance seems to prevail for patent and major intellectual property disputes, which, for enforceability purposes, still find their way in courts). The dichotomy between arbitration and court litigation is still relevant, therefore, and the first chapter of the guide provides an in-house perspective from Paul Werné, the former general counsel at one of the most prominent telecoms operators.[2] Nasser Ali Khasawneh and Maria Mazzawi of Eversheds Sutherland then look at the extent to which arbitration is the proper tool to resolve disputes concerning new technologies, and in particular the increasing development of artificial intelligence in some critical segments of the economy.[3]

Even when arbitration is the preferred dispute resolution method, the nature of the telecoms sector, its far-reaching and overlapping effects on a whole range of matters and the diversity of its actors (from businesses to consumers) may give rise to issues of arbitrability and its corollary, the enforcement of arbitral awards. This important issue is addressed by Emily Hay of Hanotiau & van den Berg.[4]

Although commercial arbitration in the telecoms sector is primarily driven by M&A and corporate disputes arising in a variety of scenarios, in the recent past there has been a surge in shareholder disputes that are usually prompted by the need for foreign telecoms operators to dilute their shareholding or even exit certain operations, because their continued presence in certain jurisdictions gives rise to reputational and compliance concerns (an increasingly decisive factor for a large number of telecoms operators). Although the governing law to these arbitrations will be subject to what the parties agreed to in their contracts, a chapter by Will Hooker, James Newton and Alysha Patel of Pallas Partners LLP also looks at whether there is a different approach under common law as compared with civil law.[5] Equally important are the valuation approaches most predominantly used in commercial arbitrations to assess damages, and this is explored by Kai F Schumacher and Christoph Wilmsmeier of AlixPartners.[6]

As for oil, gas and other critical minerals, spectrum[7], which is also sovereign asset, is the new scarce resource that requires the presence of heavy infrastructure to meet the ever-increasing needs of the world economy. If, traditionally, most of the telecoms infrastructure in place, such as towers, were found on land, nowadays, commercial undersea telecommunications cables carry the vast majority of digital communications (including voice, data, internet and financial transactions) and form the backbone of the global internet. This is not without challenges, especially when it comes to disputed maritime zones, as Michael J Stepek of Winston & Strawn LLP explains.[8]

Is the sky the limit? Given the significant needs for telecommunications services these days, the satellite industry is now viewed as the solution to the problem of finding new terrestrial sites to erect towers or new maritime routes to install undersea cables, both of which are far from being satisfactory from an environmental perspective. The increasing presence of the satellite industry in the telecoms sector is very likely to entail new forms of disputes that may be subject to arbitration. This is covered in detail by Laura Yvonne Zielinski, president of the Space Arbitration Association.[9]

Part II of the guide is devoted to investment treaty arbitration in the telecoms sector. There is self-evidently a tension between the state’s sovereign right to regulate and the protection of the investor’s rights. The chapters in this part of the guide, authored by Reza Mohtashami KC, Leilah Bruton and Farouk El-Hosseny at Three Crowns LLP, and Babatunde Fagbohunlu and Inyene Robert of Aluko & Oyebode respectively, revisit the latest jurisprudence of the right to regulate and its limits[10] and also look more closely at the obligations of the investor and how these obligations have been revamped in more recent investment treaties.[11]

There are then two chapters that focus on recent developments. The Huawei saga has brought a new light to the defence of necessity,[12] as explored by David Hunt, Ben Love, Gina Rossman and Sagar Gupta at Boies Schiller Flexner LLP, whereas armed conflict, coups d’état and civil unrest in different parts of the world continue to pose challenges to the sector, as explained by Michael Darowski and Romilly Holland of McDermott Will & Emery.[13] Finally, Lucrezio Figurelli and Richard Caldwell, of The Brattle Group, provide a useful overview of issues of compensation and the approach taken by investment treaty tribunals in recent cases.[14]

The final chapter provides a geographical perspective on telecoms arbitration in the European Union by Julien Fouret, Tejas Shiroor and me, of Eversheds Sutherland. Other regions will be covered in the online edition.

This second edition brings together leading arbitration practitioners who have a wealth of experience in telecoms arbitrations. It is hoped that, by focusing on a sector that will be affecting the world of arbitration in the coming years, this guide will continue to be helpful for the arbitration community, in-house counsel and anyone with an interest in telecoms arbitrations.

I warmly thank the contributors, all of whom have helped bring this initiative to fruition and have participated in this second edition. As always, I am very grateful to the team at Global Arbitration Review, including David Samuels and Mahnaz Arta for their continued support – and, for their patience, Jelani Franklin and Emily Wolfin.

Wesley Pydiamah

September 2023


Footnotes

[1] Wesley Pydiamah is a partner at Eversheds Sutherland.

[2] See Chapter 1, ‘An In-House Perspective on Telecoms Arbitrations’.

[3] See Chapter 2, ‘Arbitration and the Advent of New Technologies’.

[4] See Chapter 3, ‘Issues of Arbitrability in Telecoms Arbitrations’.

[5] See Chapter 4, ‘M&A Arbitrations in the Telecoms Sector’.

[6] See Chapter 5, ‘Valuation Approaches in Telecoms Arbitrations: Commercial Arbitrations’.

[7] Spectrum means the radio frequencies allocated to the mobile industry and other sectors for communication purposes. At present, licensing and auction rounds for 5G spectrum are being held in numerous countries across the world.

[8] See Chapter 6, ‘Claims in Disputed Maritime Areas: Resolving International Disputes Arising from Activities Relating to Submarine Cables in Disputed Maritime Areas’.

[9] See Chapter 7, ‘The Rise of Satellite Arbitrations’.

[10] See Chapter 8, ‘Standards of Protection: The State’s Sovereign Right to Regulate and its Limits’.

[11] See Chapter 9, ‘Standards of Protection and the Obligations of the Investor’.

[12] See Chapter 10, ‘Is the People’s Good the Highest Law? The Concept of Necessity in Investor-State Protections’.

[13] See Chapter 11, ‘Civil Unrest and Investor–State Claims in the Telecommunications Sector’.

[14] See Chapter 12, ‘Valuation Approaches: Investment Treaty Arbitrations’.

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