Belgium

In summary

This article analyses the current status of the international arbitration field in Belgium, and identifies the most recent evolutions as well as the trends of Belgian courts in international arbitration-related matters.

Discussion points

• Review of CEPANI Rules
• The legitimate role of administrative secretaries
• Setting-aside proceedings in Belgium
• Recognition and enforcement of awards in Belgium
• Investor–state arbitration

Referenced in this article

• 2013 Arbitration Act
• CEPANI 2020 Rules
• 2021 ICC Arbitration Rules
• 1958 NY Convention
• Brussels Tribunal of First Instance, Emek İnşaat Şti and WTE Wassertechnik v European Commission, 17 June 2021
• Brussels Tribunal of First Instance, M Dawood Rawat v The Republic of Mauritius, 30 June 2020
• Brussels Tribunal of First Instance, Poland v Manchester Securities Corp., 18 February 2022
• Court of Cassation, 10 February 2022, C.20.0247.N, ECLI:BE:CASS:2022: ARR.20220210.1N.1
• DP World PLC v Kingdom of Belgium, ICSID Case No. ARB/17/21
• CJEU, Republic of Moldova v Komstroy, 2 September 2021

Introduction

International arbitration proceedings seated in Belgium are governed by the Arbitration Act of 24 June 2013 (the 2013 Arbitration Act or the Act)^[1] that entered into force on 1 September 2013.^[2] The 2013 Arbitration Act is incorporated in Part VI of the Belgian Judicial Code (BJC) (articles 1676 to 1722 BJC).

The 2013 Arbitration Act has modernised the Belgian legislation on arbitration and is very much influenced by the 2006 UNCITRAL Model Law, from which it transposed important improvements, including on issues of validity of the arbitration agreements and interim measures.

Although the Act includes provisions typical of modern legislation on international arbitration also inspired by the UNCITRAL Model Law (such as article 1682 recognising the principle of competence-competence), a few key distinctions are worth mentioning.

First, as regards its scope, the Act is not limited to commercial arbitration and is applicable to all types of arbitration, including investor–state arbitration. Also, no distinction is made between domestic and international arbitration, unless the parties agree otherwise, and subject to mandatory provisions.^[3]

Second, when comparing it with the legislation of other jurisdictions, the Act includes provisions that appear specific to the Belgian context. An example of this originality is found at article 1709(3) of the BJC, which provides that where a third party wishes to join proceedings, or is called to join, the arbitral tribunal’s decision to allow proceedings in respect of this third party requires unanimity of the arbitrators. Majority decisions are, therefore, not accepted in these circumstances.

Two other provisions of the Act are worth mentioning. First, concerning the award, beyond the traditional formal and substantive requirements,^[4] article 1713(3) BJC provides that if there is more than one arbitrator and one of them does not sign, the award may still be valid ‘provided that the reason for the omission [of the signature of the others] is mentioned’. Second, with regard to confidentiality, arbitration proceedings are not confidential by default under Belgian law, and confidentiality needs to be expressly agreed upon between the parties (directly or by reference to the rules of an arbitral institution).

Belgium is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards but has declared to apply the Convention subject to reciprocity. Belgium is also a signatory to the European Convention on International Commercial Arbitration of 21 April 1961 and the ICSID Convention of 18 March 1965. In principle, these treaties take precedence over Part VI of the BJC (Belgian arbitration law), except where the treaties provide otherwise (article 1721(3) BJC).

Recent institutional developments

In 2020, the main arbitral institution in Belgium, CEPANI, amended its arbitration rules twice (CEPANI Rules 2020). The first amendment came into force on 1 January 2020. The second amendment, which came into force on 1 July 2020, aimed at addressing the impact of the covid-19 pandemic on arbitration proceedings.^[5]

The most important features of the novel rules are the following. First, article 33 now specifically provides for a scrutiny of the draft award that the arbitral tribunal shall submit to CEPANI’s Secretariat. The scrutiny ‘may, without affecting the arbitral tribunal’s liberty of decision, suggest modifications as to the form of the award’. This amendment is a welcomed change, and is likely to ensure a better quality of arbitral awards, following in the footsteps of the ICC practice. Second, article 36(7) of the CEPANI Rules 2020 provides that, where the arbitral tribunal did not rule on all parties’ claims in its final award, and after consultation with the parties, the arbitral tribunal may (on its own motion or at the request of one of the parties) render an additional award on those claims. Third, the wording of the CEPANI Rules 2020 has changed and refers to ‘emergency arbitrator’ to define proceedings for urgent interim and conservatory measures ‘which cannot await the constitution of the arbitral tribunal’ (article 27). This adaptation allows the parties to draw on the – already quite extensive – practice of ICC arbitral tribunals on the admissibility and jurisdiction over emergency arbitration proceedings. Fourth, to enhance the efficiency of the proceedings, especially in (post) covid-19 times, the new Rules provide for the possibility to hold hearings physically, but also ‘by videoconference, teleconference, [or] any other appropriate means of communication or by a combination of the foregoing methods’ (article 25(3)). Fifth, subject to any agreement otherwise between the parties, all correspondence exchanged by the parties, the arbitrators and CEPANI can be done in electronic format. CEPANI also uses a secure online platform (BOX) for the exchange of correspondence, submissions, exhibits and procedural decisions, which helps centralise all the relevant documents of the case for the benefit of all stakeholders.

Setting aside of arbitral awards

The 2013 Arbitration Act provides for grounds for setting aside arbitral awards similar to the grounds for non-recognition of awards listed in the 1958 New York Convention. Among those grounds, three may be raised by a court on its own motion: non-arbitrability, violation of public policy and fraud.

The Act also provides that: (1) a party cannot seek to set aside a decision or partial award on jurisdiction, and such an award can only be contested together with the award on the merits (article 1690(4)); and (2) only arbitral awards rendered in proceedings seated in Belgium may be set aside (or annulled) by the Belgian courts (article 1717 BJC). An interesting provision is incorporated in article 1718 BJC, which is one of the few provisions of the Act differentiating between domestic and international arbitration. Indeed, only where none of the parties are Belgian nationals, article 1718 BJC allows the parties to exclude the possibility for setting aside of the award. If the parties agree to such waiver, they will not have any possibility for recourse against the award.

Finally, article 1716 BJC provides for the possibility that parties include, in their arbitration agreements, an appeal mechanism before another arbitral tribunal. This option is rare in international arbitration-related legislation and has not attracted users’ interest to date.

Emek İnşaat Şti and WTE Wassertechnik v European Commission

In a case in which a Cypriot company and a German company opposed the European Commission, the Brussels First Instance Tribunal rejected the companies’ application to set aside an ICC award in favour of the European Commission.^[6] In that case, the companies claimed, inter alia, that the role of the administrative secretary nominated by the arbitral tribunal and agreed upon by the parties exceeded its legitimate scope. In particular, the companies argued that the administrative secretary had written a list of questions to be asked to the parties during the hearing as well as sections of the award, including those incorporating the arbitral tribunal’s decisions and reasoning.

The Brussels Court rejected those arguments and found that the tribunal had not delegated its decision-making power and that the tribunal secretary had not performed tasks beyond what the parties had agreed by referring to the ICC Note to the Parties and the Arbitral Tribunals (the ICC Note).^[7] The Court proceeded to a very detailed analysis and interpretation of the provisions of the ICC Note governing the issue of the role of administrative secretaries in ICC arbitration proceedings. The Court concluded that, pursuant to the Note, an administrative secretary in ICC proceedings can carry out a series of activities, including the drafting of factual sections of the arbitral tribunal’s decisions or awards provided that the decision reflects the reasoning of the arbitral tribunal, which remains the ultimate decision-making authority. This decision is of particular interest because it is one of only a few ruling specifically on the role of administrative secretaries, which has become a topical issue in the international arbitration field. The Cypriot and German companies have filed an appeal before the Court of Cassation.^[8]

Dawood Rawat v The Republic of Mauritius

Another interesting case relates to setting-aside proceedings opposing Mr Dawood Rawat to the Republic of Mauritius. Mr Rawat (French-Mauritian) brought a claim against the Republic of Mauritius before a PCA/UNCITRAL arbitral tribunal on the basis of the France–Mauritius bilateral investment treaty. In particular, Mr Rawal’s claim in the arbitration amounted to US$1 billion for several alleged breaches to the treaty’s investment protection standards committed by the Republic of Mauritius. The arbitral tribunal rendered an award on 6 April 2018 rejecting its jurisdiction on the matter, mainly because of Mr Rawal’s double nationality.^[9] In brief, the arbitral tribunal decided that the treaty in question did not protect those investors with the nationality of both state signatories.

Mr Rawal applied before the Brussels First Instance Court to annul the award. The Brussels Court handed down its decision on 30 June 2021,^[10] rejecting the application to set aside the award and confirming the arbitral tribunal’s decision that dual nationals are excluded from the scope of the treaty. In particular, the Court agreed with the arbitral tribunal’s reasoning that the provision of the treaty on ‘nationals’ should be interpreted having regard to the full context of the treaty. The Court therefore concluded that the reference to the ICSID Convention in a provision of the Treaty confirmed that the signatories intended to exclude investors with dual nationality. Moreover, the Brussels Court pointed out that this conclusion was also supported by successive initiatives of France and Mauritius to exclude dual nationals from another bilateral Treaty by including an ICSID arbitration clause. Finally, the Brussels Court highlighted the fact that bilateral treaties aim at promoting and increasing economic cooperation between the signatories, and that this goal is doubtfully reached in cases involving dual nationals.

Poland v Manchester Securities Corp

Six months later, in another litigation related to an investment-treaty arbitral award, the Republic of Poland applied for the annullment of such award rendered in favour of the US hedge fund Manchester Securities Corporation. In a judgment of February 2022,^[11] the Brussels Court of First Instance annulled the award on the basis that the award violated public policy. The judgment constitutes a landmark case because it is considered the first-ever investment treaty award annulled in Belgium, and also because of the ground on which the Court annulled the award. Defining the test of denial of justice under international law, the Belgian Court found that the tribunal could not have reasonably considered that the Polish Supreme Court had adopted a manifestly discriminatory attitude towards the investor that would justify Poland’s liability for a denial of justice. The investor has filed an appeal before the Court of Cassation, where the case is currently pending.

Enforcement of arbitral awards

As explained earlier, Belgium is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards but has declared to apply the Convention subject to reciprocity. The grounds for the non-recognition of an award are similar to the grounds for setting aside an award and are listed at article 1721 BJC.

In recent times, Belgian courts have been faced with high-profile enforcement proceedings of arbitral awards in investor–state arbitrations. The latest landmark cases will be highlighted.

Stati and others v Kazakhstan

In a judgment of 16 November 2021, the Court of Appeal of Brussels denied the exequatur of the US$500 million Energy Charter Treaty arbitral award rendered in the high-profile arbitration in which Moldavan investors, the Stati, opposed the Republic of Kazakhstan. The award creditors, who are seeking to enforce the award in Belgium, have sought to rely on the decision of the court of the place of arbitration (Sweden), which had rejected the application to set aside the award. The Court of Appeal ruled that the court of the place of enforcement ‘is not bound by a foreign decision rejecting the annulment of the Award’. Without prejudice to this decision of principle, the Court went on to consider the creditors’ argument that the decision of the place of arbitration was ‘crucial’ in the case at hand because such decision had allegedly considered the same issues and rejected the state’s case that the award had been procured by fraud. The Court rejected this argument on the basis of the ‘specific circumstances of the case’, finding in casu that the court of the seat of arbitration had actually been ‘misled’ by the creditors. Conducting a de novo assessment of the case, the Brussels Court found that the award was procured by fraud, and that the creditors had committed serious fraudulent actions prior to, during and after the arbitration proceedings. The exequatur of the award was therefore denied.

Diag Human and Stava v Czech Republic

The issue of the weight (or deference) that Belgian courts should give to judgments of foreign courts related to the setting-aside or enforcement of the same awards was also at the centre of the saga between Diag Human and the Czech Republic. In what has been called ‘a rare victory’ for Diag Human in this long-running dispute, the Belgian courts had granted exequatur to the award obtained by Diag Human in 2008.^[12] In February 2022, however, the Belgian Court of Cassation quashed the Court of Appeal judgment,^[13] holding that the award for which enforcement was sought had not become binding on the parties within the meaning of article 5.1(e) of the New York Convention of 1958. The Court of Cassation therefore found that the Court of Appeal had failed to correctly apply article 5.1(e). Ruling, among other things, on the effect of decision at the seat, the Court found that ‘[t]he enforcement judge must take into account as a legal fact the foreign decision . . . which shows whether or not the arbitral award is binding’ but, importantly, the decision at the seat does not have to be ‘recognised in advance or enforced’ in the enforcement jurisdiction. The Court of Cassation’s decision appears to apply the theory of the ‘factual effect’ of foreign judgments: in the framework of article 5(e) of the New York Convention, the judgment from the seat of arbitration is not binding and cannot be recognised as such in the enforcement jurisdiction, but such a decision must be taken into account as a ‘legal fact’, with the consequence that it may be relevant, as appropriate and depending on the circumstances, in the factual assessment of the case.

Other cases

There are at least two other pending cases^[14] before the Belgian courts where foreign investors are seeking to enforce ICSID awards by attaching monies owed to the states by EUROCONTROL, the Brussels-based European Organisation for the Safety of Air Navigation:^[15] Micula v the State of Romania (ICSID Case No. ARB/05/20)^[16] and Becchetti v Albania (ICSID Case No. ARB/15/28)19).^[17]

Investor–state arbitrations involving the Kingdom of Belgium and political initiatives in the field

Belgium is a signatory to the ICSID Convention, as well as to more than 60 bilateral investment treaties (BITs), which it negotiated and concluded together with the Grand Duchy of Luxembourg as the Belgo-Luxembourg Economic Union. Despite not having published an official model BIT, certain tendencies are followed in the treaty negotiations, such as the wish to include clauses protecting the environment and social and human rights. Belgium is also a party to the Energy Charter Treaty (ECT).

Belgium has been involved in only two investor–state arbitrations to date. The first came to an end in 2015 with an award in which the arbitral tribunal ruled in favour of Belgium and declined its jurisdiction.^[18] The second case is currently pending before an ICSID arbitral tribunal and was initiated by the UAE-based port operator DP World.^[19] On 10 April 2021, the arbitral tribunal rendered a decision on jurisdiction and liability in favour of the claimant.^[20]

Belgium has also taken important political initiatives in the field of investor–state disputes. Indeed, as the consequence of the well-known Achmea decision of the European Court of Justice,^[21] Belgium has decided (1) to terminate all the intra-EU BITs to which it is a signatory, and (2) to submit a request to the Court of Justice of the European Union (CJEU) for an opinion on the compatibility of the future modernised ECT’s arbitration provisions with EU law in the context of the application of the ECT to disputes within the European Union.^[22] The application of the current arbitration system in the ECT to disputes involving intra-EU claims was also the subject of other proceedings before the CJEU. On 2 September 2021, the CJEU issued its ruling concluding that, pursuant to EU law, article 26 of the ECT is not applicable to intra-EU disputes.^[23] As a consequence, on 16 June 2022, the ECJ declined Belgium’s request to rule on the compatibility of the proposed amendments to the ECT with EU law, because such question was already answered by the same court in the Komstroy ruling, whereby it was decided that the principle of the autonomy of the EU law required article 26 of the ECT to be not applicable to intra-EU investment disputes.^[24]

Outlook and conclusions

As noted above, several positive factors are converging and play a pivotal role to allow Belgium to increase its already important role in the context of international arbitration. The modernity of the Arbitration Act, the recent review of the CEPANI Arbitration Rules, the familiarity of the judges with the international arbitration-related issues and the selection of Brussels as the place of arbitration by parties, institutions and arbitral tribunals in high-profile disputes show this positive trend. One must also not forget that, in light of the current discussions on investor–state arbitration and the increasingly important role of the EU institutions in these discussions and in shaping the new system, Brussels will most likely become an important hub for the settlement of international investment disputes, before arbitral tribunals seated in Brussels or before the new bodies that will be established in the near future.

Footnotes