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Guide to Regional Arbitration (volume 6 - 2018)

Whitelist / Institutions Worth a Closer Look – Special Occasions

17 November 2017

Not all “specialist” institutions specialise in a region. Some specialise in a sector or a particularly technical subject matter. It’s this type of body we mean by “special occasions”. The “occasion” in question may be a finance or an IP dispute, or one connected with a particular trade or activity – shipping, direct foreign investment or sport. Or something even more specific, such as German–Chinese trade.

Why is the specialist body needed at all? Can the mainstream providers not cover these niche areas too – simply by appointing correctly qualified arbitrators? Of course, that works too. But with focus comes efficiency and better techniques. Above all, a specialist organisation can create buy-in from the particular demographic it serves, which the ICC or LCIA may struggle to match. 

At their best, specialist providers can offer an entirely different take on arbitration. Witness, for example, the Basketball Arbitration Tribunal (not listed yet here because it is so niche as not to be relevant). But it provides a full ex aequo et bono approach as its default setting, to meet the specific needs of basketball players, their clubs and agents. 

In this chapter we white-list the following four organisations, and suggest considering two more, should the fit seem right.

White List

  • Court of Arbitration for Sport (CAS)
  • International Centre for the Settlement of Investment Disputes (ICSID)
  • The Permament Court of Arbitration (PCA)
  • World Intellectual Property Organization (WIPO)

Worth a closer look

  • Panel of Recognized International Market Experts in Finance (PRIME Finance)
  • Chinese-European Arbitration Centre (CEAC)

White list

COURT OF ARBITRATION FOR SPORT (CAS)

What is it?

An independent institution, tailor-made for the settlement of sports-related disputes.

How is it different to standard commercial/investment arbitration?

It functions mainly as an appeals body, rather than a trier of fact so to speak (though it does perform this function when the agreement demands). So CAS spends most of its time reviewing decisions issued by sports federations.

There’s also a difference in how parties agree to CAS. Regular users of arbitration have usually signed a contract. But many sportspeople have acquiescence to CAS imposed upon them when they agree to their sporting body’s code, or to an event’s rules.

What kinds of cases are most common?

The majority of cases seem to be disputes about football contracts and transfers, or doping. The court has a separate, dedicated list of arbitrators for football disputes, while the World Anti-Doping Code contains a mandatory reference to CAS for appeals by international athletes.

Since 1996, though, CAS has also served as the on-site dispute resolution body for each Summer and Winter Olympic Games – and more recently, the FIFA World Cup – for which it forms special ad hoc divisions.

What do those ad hoc divisions do?

Usually, they set up an office in the host city, for the duration of the Games, that can accept filings from participants or sports entities.

The president then establishes a panel (or sole arbitrator) and offers all potential parties the chance to argue at a hearing. There are no written submissions outside of the request. Decisions are rendered within 24 hours. As a result of this real-time work, some of CAS’s work has been pretty groundbreaking.

What sorts of disputes come up during the Olympics?

Well, in Salt Lake City, for example, an arbitral tribunal ordered a potential witness not to leave the jurisdiction during a dispute about the judging of figure skating. It’s thought to be the first time arbitrators have ever asserted such a power. And at the London 2012 Olympics, Swedish triathlete Lisa Nordén sought a reinterpretation of a photo finish after being placed second. CAS ruled that it couldn’t hear the dispute as it was against a field-of-play decision.

Most of the time, though, the disputes that occur mid-games are about qualification and eligibility.

Is there a doctrine of precedent?

There is. In the Nordén case, for example, the panel looked to earlier cases to find the principle that CAS is not able to review umpire decisions.

Is it busy?

Very. Every year the workload grows. In 2016 it heard 599 procedures, nearly 100 more than in 2015 (when it heard 498). Of those, 100 were “ordinary” procedures; 458 were appeal procedures; 28 arose from ad hoc divisions; and 12 were anti-doping matters.

That’s more than a case a day.

It is. But CAS cases don’t take much longer than a day. And then four to five months on average for the award.

Where does it find its arbitrators – and are they sportspeople?

You can only sit as a CAS arbitrator if you are on the approved list. The list has around 300 names from 87 countries. Most of them are lawyers, usually with an interest in sport.

What does the future hold?

CAS is growing. As well as its headquarters in Lausanne, it now has offices in Sydney and New York. In the future there will probably be more. The court’s governing body has already signed a partnership agreement with the city of Shanghai to establish an alternative hearing centre in the Pudong area, and similar agreements are in place with Abu Dhabi, Kuala Lumpur and Cairo. There’s also expected to be a base in Latin America before too long.

Are there any special rules?

The rules state, “CAS arbitrators and mediators may not act as counsel for a party before the CAS,” which is the first instance of an institution saying an arbitrator or counsel can’t wear two hats.

Does it have any competition?

It’s at the top of its field, though some more generalist institutions are also handling sports matters. Germany’s DIS has its own set of rules for sports arbitrations (the DIS German Court of Arbitration for Sport). It’s less busy though – the only available statistics show it had 16 matters in 2012.

Does it have any critics?

A fair number. Some think CAS is unfair because they have no choice but to accept it – or they can’t compete. Claudia Pechstein, a German speed skater, has been pursuing a case (helped by Germany’s professional footballer’s federation) to that effect. She recently lost, but the case is headed for appeal.

An underlying problem is how CAS appoints its arbitrators. At the moment the president of the tribunal is picked by CAS’s members, which are for the most part the sports federations. So athletes worry the deck can be stacked against them in any dispute with a federation. There are also concerns that the secretary general wields a lot of personal power. Changes to CAS’s structure a few years ago went some way to creating some distance between the member federations and the tribunals – but further changes are probably needed before it is to everybody’s liking.

Is CAS doing anything in response?

It’s made some changes. There’s now better legal aid provision for poorer athletes and members of the public can attend hearings (in small numbers). But no reform of the process for appointing has yet been proposed, and that’s probably what’s needed at this point. 

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES (ICSID)

What is it?

A depoliticised place to settle investment disputes, set up by the World Bank in the 1960s.

What was wrong with the existing commercial arbitration centres?

They were considered, as an option. But there would have been issues with applicable law, enforcement, sovereign immunity, etc. It was realised that some sort of treaty was needed.

So is ICSID connected to a treaty?

It is. The Washington Convention (more generally known as the ICSID Convention), which also gives rise to the Centre, was drafted to balance the interests of investors and states and entered into force in 1966. Under it, ICSID cases follow their own rules of procedure, which are unaffected by the law of the seat, and awards are only subject to the remedies granted by the convention itself. They don’t depend on the New York Convention. Initially, the convention was ratified by more than 50 states. Today it has 159 signatories, of which 151 have ratified. Not all have been satisfied customers, however.

Who hasn’t?

Bolivia, Ecuador and Venezuela have renounced the convention in recent years, claiming ICSID arbitration is skewed in favour of investors and against sovereign states. In 2009, the Bolivian and Ecuadorian presidents even went so far as to call for the institution’s closure.

How busy is ICSID?

It had 49 new cases between July 2016 and June 2017 – more than the preceding year, and nearly matching its busiest ever period for new cases: 2015–2016, when it had 52 new cases.

An uptick in cases from eastern Europe and central Asia is evident within the current figures. But no single state has been on the receiving end of a wave of investor suits. Venezuela and Panama are the closest – with three new claims apiece.

Are all the cases brought under the convention?

Mostly. Some use the additional facility rules.

What are they?

They allow the Centre to hear cases where one state party in a dispute isn’t a member of ICSID. They were launched in the late 1970s to make the process more accessible, and to help settle arbitrations taking place under multilateral investment treaties (such as NAFTA or the Energy Charter Treaty), which provide for ICSID arbitration.

Who runs ICSID?

Meg Kinnear, who was appointed in 2009, heads the 50-strong secretariat. Before that, ICSID didn’t have a full-time secretary general, which was odd given the size of the role. Instead it was a job performed part-time by the general counsel of the World Bank (not a tenable state of affairs). Kinnear spends much of her time addressing complaints about the ICSID process – its slowness, the fact that awards can be hollowed out by an annulment committee. She’s also sought to educate states better on how to get the most out of the system. 

Does the system have critics?

Yes. There was a whole conference in Paris in late 2015 devoted to things perceived to be wrong with ICSID (see www.globalarbitrationreview.com/article/1034993/is-icsid-a-monarchy). There are complaints from both sides: from counsel who represent investors, and from those who have leanings towards the state view. Often, though, they agree on things. Both groups complain about the amount of power in the hands of the secretary general, and the emergence of a coterie of ICSID insiders: arbitrators who are appointed time and time again.

Are those concerns valid?

The secretary general certainly has some important functions to play. For example, if a matter goes to annulment (the ICSID version of review), it is she who decides the make-up of the annulment committees, which can determine the result. The secretary general can at times be called on to resolve an arbitrator challenge, if there’s a deadlock by the other arbitrators on the case (who are supposed to rule on challenge decisions). 

It’s also true that certain arbitrators appear far more at ICSID than others, and that there are names on its approved list who never receive a case. Within ICSID the point is made: difficult cases need experienced people. This is also true for annulment committees – only more so.

But critics still think this leads to too many developed world arbitrators appearing, and they say that reduces the legitimacy of the system.

What’s the solution?

There probably isn’t one. Changing the treaty would be all but impossible to organise. Without that, the best ICSID’s secretariat can do is listen to concerns and do what it can, within the current rules.

Is ICSID doing anything to improve things?

It’s been listening to the criticism, yes, and appears to be taking it seriously. It is now working on a new set of rules to address many of the complaints. Meg Kinnear outlined her six priorities for the reform in May, namely: a streamlined process for appointing arbitrators; a code of conduct for arbitrators; an improved process for challenging arbitrators; rules on the disclosure of third-party funding; more guidance on how to allocate costs after a case; and more steps intended to put decisions and orders into the public domain. 

Is there any sign that ICSID business is suffering?

Not really, but it is fair to say that other institutions are also getting an increased investment treaty caseload, some of which might have gone to ICSID if people liked it more. It’s hard to know: sometimes people avoid ICSID because they think that the Centre doesn’t exercise meaningful control over arbitrator fees, and that other institutions are better on this score Where treaties allow, there’s plenty to attract users to well-regarded centres elsewhere – the ICC, SCC and even SIAC are all potential destinations that are happy to take on an investment treaty caseload.

THE PERMANENT COURT OF ARBITRATION (PCA)

What is it?

An intergovernmental institution in The Hague, initially set up to hear state-to-state disputes.

Initially? What changed?

Its mission broadened. The PCA was established in 1899 (under the Convention for the Pacific Settlement of International Disputes at the first Hague Peace Conference) to facilitate dispute resolution between states. It gained authority to hear disputes between states and private parties during the 1930s – the trigger was an arbitration between the Chinese government and the Radio Corporation of America over telegraphic communications between the two countries. In 1962, the PCA published new rules on investor–state disputes, which influenced the first ICSID Convention in 1965. Today, it’s investor–state disputes that dominate the PCA’s work.

What sets it apart from other investor–state administrators?

Well, for a start it has a palace – the Peace Palace – albeit shared with the International Court of Justice. This specially built home is more than decor; it’s actually symbolic of the whole project. States, unsurprisingly, don’t much like getting sued. They tolerate it better when it comes with due pomp and ceremony. The Palace is one part of that. Another factor is the PCA secretariat’s attention to detail, which makes the parties feel at ease. They’re famous for going the extra mile. To have a case at the PCA is to experience the Rolls-Royce of arbitrations.

Has it heard any particularly famous cases?

A host of them. In the early years, Norwegian Shipowners and Religious Properties raised important issues of state responsibility and the international minimum standard in the treatment of states. They helped to establish that expropriation required compensation.

The arbitration “trial of the century” – Yukos v Russia – took place there, resulting in the largest recorded award in arbitration history (US$50 billion) for the claimants. That’s now in the Dutch court system (where Russia appears to have regained the upper hand).

How busy is it?

It had 148 cases on its docket in 2016, a rise of 10 on the year before; however, the number of new matters fell slightly, from 42 in 2015 to 40 in 2016. More than half of these are under multilateral or bilateral investment treaties and national investment laws, and the rest from contracts with state entities. It also had 49 requests to act as an appointing authority, which is a common function it undertakes.

In 2016, the PCA concluded an arbitration between the Philippines and China over maritime rights in the South China Sea, one of the most politically sensitive disputes in recent years. The tribunal ruled in favour of the Philippines, and said China didn’t have any historic claim to 90 per cent of the sea. China has said it won’t respect the award.

Who runs the show?

Hugo Hans Siblesz is the current secretary general. Brooks Daly is his deputy and the court’s principal legal counsel.

What else is unique?

It has several unique sets of rules. One is dedicated to arbitration concerning natural resources and the environment; another is for disputes relating to outer-space activities. In contrast to some, it’s continuing to expand its user base. In 2016, the Bahamas, Djibouti and Kosovo joined the organisation, bringing the total number of member states to 121.

The PCA has also just opened a permanent office in Singapore, to service the number of PCA matters now taking place there. It has a similar office in Mauritius (though fewer cases have so far been heard there).

WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO)

What is WIPO?

A UN-backed agency that gives a global forum for IP services.

What arbitration services does it offer?

It has its own dedicated ADR centre, offering arbitration, mediation and expert determination services on disputes between private parties.

What kind of disputes does it see?

Patent and software licence, trademark and distribution agreement, pharmaceutical product, and research and development agreement claims on the contractual side. Infringement claims on the non-contractual side. Patent-related matters still take up the lion’s share of the caseload.

How busy is it?

In all, it’s handled nearly 500 ADR matters since it began offering ADR in 1994. As it doesn’t distinguish between arbitration, mediation and expert determination in that figure, it’s not possible to say how many it’s done of which. But there was a steep uptick in requests for ADR last year: 60 new matters versus 29 in 2015 and 18 in 2014. Sixty new cases is the most there’s ever been.

Why the increase?

WIPO hasn’t really said – but with the growing role of technology in all aspects of life, it probably isn’t a surprise.

What are the rules like?

They’re from mid-2014. They include the 2010 changes to the UNCITRAL rules (increased powers of joinder and consolidation and extra powers over arbitrator appointment were introduced). They also include a mandatory preparatory conference between the parties and tribunal within 30 days of the tribunal being formed – and allow for emergency relief.

Aside from expertise in IP, is there any reason to use it?

Users get access to the WIPO Electronic Case Facility, which allows them to submit documents and communications to an online docket, and which helps cut down on time and costs.

Where is WIPO based?

The main office is in Geneva. Since 2010 it’s had a space at Maxwell Chambers, Singapore too.

Who does it appoint as arbitrator?

WIPO maintains a database of over 1,500 neutrals from 70 countries for arbitrator and mediator appointments. The general list is kept under wraps, but WIPO publishes its dedicated list of domain-name panellists on its website.


Worth a Closer Look

The world of specialist arbitration providers has a few more recent arrivals. Here are two that we think are 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 – help with such disputes?

They can, but that doesn’t mean there’s not a niche. 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 a place that is neutral territory and specialises in precisely this work makes a lot of sense. Plus, it is in Hamburg, where many Chinese firms have a base.

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. It hasn’t released statistics lately.

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 (though it’s not really a backer) is the Chinese European Legal Association (CELA), a non-profit entity. As well as supporting 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% 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. It added 25 new names to its panel of “recognised experts” in January 2017. They include Manuel Conthe, a former chairman of Spain’s Securities and Exchange commission; Matthew Gearing QC of Allen & Overy; and Loukas Mistelis, a GAR editorial board member and director of the School of International Arbitration at Queen Mary University of London. They join an illustrious mix of former banking lawyers (including Jeffrey Golden), in-house types (such as Georges Affaki) and retired judges (such as Sir Bernard Rix).

What are the rules like?

They’re already on their second edition. Revised rules were published in February 2016; the first rules were launched in 2012 (when the Centre won a GAR award).

What changes did they bring in?

The update clarified when time starts to run following the service of arbitration.

There were some concerns before the new edition about the ability to appoint “off list” and to appoint an arbitrator of the same nationalities as the parties (which wasn’t allowed in the first set). The revision addressed both points. 

Is PRIME Finance good?

It can be. prime Finance was runner-up in 2016’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.