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» New appointments to the LCIA Court

» Supreme Court of Canada renders judgment in Dell Case

» Provisional measures and duty of impartiality

(Alexis Mourre)

» Ex parte applications for interim and conservatory measures

(Christopher Style QC)

» News Archive

NEWS

New appointments to the LCIA Court

The LCIA is delighted and honoured to welcome the following new members of the LCIA Court.

Dr Hassan Ali Radhi

Hassan Ali Radhi is a lawyer of 30 years' standing and the senior partner of the Bahrain law firm, Hassan Radhi & Associates, which represents leading local and international clients in banking and finance; insurance and industrial companies; and educational and social organisations. He has handled domestic and international commercial arbitrations, both as counsel and as an arbitrator.

Hassan is a member of the Institute of World Business Councils, the International Chamber of Commerce, the ICC Commission on Arbitration, now the LCIA Court, and the International Bar Association (IBA). He represents the IBA's Bahrain Chapter and is the former co-chairman of the IBA Arab Regional Forum. He is also a former member of the ICC International Court of Arbitration and ex-President of the Bahrain Bar Society.

Hassan received his LLB from the University of Mohammed V Rabat, Morocco and his PhD in Law from the University of London.

James Castello

James Castello is Senior Counsel in the Paris office of LeBoeuf, Lamb, Greene & MacRae, where his practice focuses on international commercial arbitration. Previously, he spent five years as a member of the International Arbitration Group at Freshfields Bruckhaus Deringer, based in that firm’s Vienna office. James has advised and represented clients in a variety of institutional and ad hoc arbitrations. He has also served, since 2001, as a member of the US delegation to UNCITRAL’s Arbitration Working Group.

In 1995, following several years at Shearman & Sterling, James left private practice for nearly six years to serve in senior legal positions in the Clinton Administration. His positions included Deputy Counsel to the President, at the White House, and Associate Deputy Attorney General in the Justice Department, where his portfolio encompassed such international issues as immigration and human rights.

Before entering private practice, James was law clerk to Justice William J Brennan, Jr, on the US Supreme Court, to Judge Abner Mikva on the US Court of Appeals for the District of Columbia Circuit, and to Judge Howard Holtzmann, on the Iran-US Claims Tribunal at The Hague. He obtained his juris doctor degree – along with a master’s degree in economics – from the University of California, Berkeley, and received his BA in history from Yale University.

Andrew Clarke

Andrew graduated from Cambridge University and became a member of the English Bar in 1982. He has been with the ExxonMobil group of companies for the last 20 years and, although he is an English national, has spent most of that time living and working in other countries including Indonesia, Singapore, Turkey, Qatar and the United States.

Andrew is currently based in the UK where he manages the in-house legal group advising ExxonMobil on its Gas and Power marketing operations in Europe. Apart from his involvement with arbitrations for ExxonMobil, Andrew is also a Vice President of the LCIA European Users' Council and Vice Chairman of the new Corporate Counsel International Arbitration Group.

Hamid Gharavi

Hamid Gharavi is a Paris based Partner at Salans, where he practises international arbitration and public international law. He is a member of the Paris and New York Bars. Hamid has served as arbitrator or counsel in a large number of ad hoc and institutional, commercial, private or public international law arbitrations, under civil, common and Islamic law. He holds a PhD from the University of Paris II Panthéon-Assas, as well as graduate degrees from New York University School of Law and the University of Paris I Panthéon-Sorbonne.

Hamid is the author of The International Effectiveness of the Annulment of Arbitral Awards, published by Kluwer, as well as a large number of articles. He has been appointed to the ICC Commission by Iran, to the ICSID Panel of Arbitrators and Conciliators by the Kingdom of Cambodia, and as Honorary Consul by the Republic of Seychelles. Hamid is fluent in French, English and Farsi.

Gilberto Giusti

Gilberto Giusti has a bachelor’s degree in Law from the University of São Paulo Law School. He has been a partner of the law firm Pinheiro Neto Advogados since 1993 and is responsible for one of the firm’s groups in the litigation and arbitration sector. In recent years, Gilberto has been dedicated to arbitration and has actively participated, as attorney and arbitrator, in arbitrations in Brazil and abroad, having been appointed in both capacities in many domestic and international arbitrations.

Gilberto recently chaired the British Chamber of Commerce and Industry in Brazil, and the Council of European Chambers of Commerce in São Paulo and participated in the creation of its Mediation and Arbitration Centre. He is a Vice President of the Arbitration Committee of the International Bar Association. Languages include Portuguese (of course), English, Spanish and French.

Kap-You (Kevin) Kim

Kevin Kim is the founder and head of Bae, Kim & Lee’s International Arbitration & Litigation Practice Group. He is also a senior advisor and arbitrator of the Korea Commercial Arbitration Board; Vice President of the Korean Council for International Arbitration; and Vice Chair of the International Arbitration Committee of ICC Korea.

Kevin has acted as counsel or as an arbitrator in over 100 commercial arbitral proceedings in Asia, Europe and the US, under the rules of all major international arbitral institutions including, among others, the ICC, KCAB, LCIA, SIAC, JCAA and UNCITRAL, in particular, in the fields of construction, distributorship and post M&A, intellectual property and information technology.

He received his legal education at Seoul National University Law School and at Harvard Law School. Kevin is an adjunct professor of law at Seoul National University Law School and the Judicial Training and Research Institute in Seoul and is the author of a number of articles and publications on litigation and international arbitration practice.

He is a member of the Korean and Seoul Bar Associations and New York Bar Association and, in addition to his native tongue, speaks English and Japanese.

V V Veeder QC

Johnny Veeder was previously appointed to the LCIA Court in 1989, where, until 2003, he also served as a Vice President. He was appointed to the LCIA Board of Directors also in 1989, and served as Chairman of the Board from January 1999 until December 2002.

He has practised at the English Bar since 1972, specialising in commercial law and international trade, including foreign investment, banking, financial services, commodity transactions, competition law, entertainment law, insurance, reinsurance, international commercial arbitration, international trade and transport, labour law, oil and gas, maritime law, sports law - as advocate before the English courts in London and overseas in Hong Kong, Bermuda and Luxembourg; as advocate or arbitrator in arbitration proceedings principally in London, The Hague, Paris, Brussels, Switzerland, Stockholm, Singapore, Hong Kong and the USA (ICC, LCIA, SCC, ICSID, NAFTA, UNCITRAL, BIT, ad hoc etc); and is Chairman of the Independent Inquiry into Capital Market Activities of the London Borough of Hammersmith and Fulham.

Supreme Court of Canada renders judgment in Dell Case

On July 13, 2007, the Supreme Court of Canada rendered its much-anticipated decision in Dell Computer Corp. v. Union des consommateurs,1 an appeal in which the LCIA participated as an intervener (see the January 2007 issue of this newsletter).

The case concerned an attempt by Dell, an online retailer, to object to a class action commenced in Québec by relying on a NAF (National Arbitration Forum) arbitration clause inserted in the terms and conditions posted on Dell’s website. Dell argued that the customer who had initiated the class action was bound by an enforceable arbitration agreement that only allowed him to bring an individual claim before an arbitral tribunal. Dell had lost before the Québec Court of Appeal on the issue of consent: because Dell’s site only brings to the attention of its customers, at the moment orders are placed, a hyperlink pointing to terms and conditions to be found on a separate page, rather than the full text of these terms and conditions, the Court of Appeal had held that the arbitration clause was an external clause which, under the law of Quebec, is enforceable only if it is expressly brought to the attention of the consumer.

The Supreme Court reversed and held that Dell’s arbitration clause was enforceable. The Court dismissed the class action and referred the consumer’s claim to arbitration. Three of the Court’s nine judges dissented, and would have allowed class proceedings to proceed before the Superior Court of Québec.

The Supreme Court’s decision confirms that the strong pro-arbitration stance adopted in its earlier decisions in Desputeaux v. Éditions Chouette (1987) inc.² and GreCon Dimter inc. v. J.R. Normand inc.³ is not limited to the commercial sphere. Unanimously, the Court held that arbitration is a legitimate means of dispute resolution even in such sensitive areas as consumer matters, where there usually is a disparity in the parties’ respective bargaining power. Significantly, the divergence of views between the majority and the dissenting judges does not turn on the legitimacy of arbitration. Rather, the disagreement focuses on the effect of a somewhat nebulous provision of the Civil Code of Québec (Article 3149) regarding the jurisdiction of Québec courts over consumer and employment disputes, and the appropriate approach to be adopted when interpreting the Civil Code.

The Court addressed most of the issues on which the LCIA made submissions, and on every occasion the majority adopted the position advocated by LCIA. Specifically, the Court:

- emphasized the importance of considering the international context, including the New York Convention and the Model Law, when interpreting the provisions of the Civil Code of Québec and Code of Civil Procedure dealing with arbitration;4

- held that Article II(3) of the New York Convention does not expressly specify whether a judge seized of a referral application should perform a full or merely a prima facie review of the arbitration agreement’s effectiveness;5

- noted that the doctrine of the negative effect of the kompetenz-kompetenz principle (calling for prima facie review rather than full review) seems more consistent with the Model Law’s structure and legislative history;6

- agreed that arbitration is not inherently inappropriate or unfair to resolve consumer disputes, and therefore rejected the notion that the protection of consumers requires a total ban on consumer arbitration;

- accepted the argument that arbitration clauses are not inimical to the procedural right to proceed by class action.7

Many other aspects of the Court’s decision are noteworthy:

- while analyzing the effect of Article 3149 of the Civil Code of Québec, the majority discussed the question of the fundamental nature of arbitration, and sided with those who conceive of arbitration as a truly transnational legal institution which is not legally dependent on, or connected to, a domestic legal order;8

- the Court held that a court seized of a referral application normally should not perform a full review of the arbitration agreement’s effectiveness, although it has a discretionary power to do so in appropriate circumstances, such as where the disagreement between the parties raises a pure question of law as opposed to a question of fact or a mixed question of fact and law.9

- the Court found that the arbitration clause in the terms and conditions on Dell’s website was part of the contract concluded by the consumer, despite the fact that only a hyperlink pointing to those terms and conditions, rather than the full text thereof, was brought to the consumer’s attention when he placed his order;10

- the Court held that in Québec, there is no public order prohibition on arbitrating consumer disputes, which means that courts should only refuse to give effect to arbitration clauses found in consumer contracts where there is clear legislative intent to that effect.

- in what may be the most surprising aspect of its decision, the Court held unanimously that absent a clear legislative provision to the contrary, the right to proceed by way of a class action is not a public order right and can thus be waived, including through a pre-dispute arbitration clause.12

In some respects, the impact in Québec of several aspects of the Court’s decision will be limited because the Consumer Protection Act was amended on December 14, 2006, so as to prohibit arbitration clauses and no-class action stipulations in consumer contracts.13 The Court was aware of this recent legislative amendment, but it held unanimously that it had no retroactive effect and was thus of no relevance to the case.

The LCIA’s intervention was undoubtedly helpful to the Court. Not only does the decision contain a specific reference to the LCIA’s factum — which is significant given that the Supreme Court of Canada tends not to acknowledge the contribution of interveners — but the structure of the decision reveals that, in many respects, the Court framed and analyzed the issues as the LCIA had proposed in its written and oral submissions.

The LCIA was represented by Pierre Bienvenu and Azim Hussain of Ogilvy Renault LLP, and Professor Frédéric Bachand of McGill University’s Faculty of Law. The LCIA’s factums and that of the other parties and interveners are available on Professor Bachand’s website: www.mcgill.ca/arbitration

Provisional measures and duty of impartiality

Alexis Mourre¹

We all agree that arbitrators have to be independent and impartial, not only at the beginning of the arbitration, but also during the proceedings and until the award. The issue I want to address today is the following: to what extent are provisional measures compatible with such duty of impartiality ?

Let me give you a practical example: three years ago, I participated as co-arbitrator to an ICC arbitration in Paris, which subject matter was the renewal of certain long-term co-operation agreements. The contracts had reached their expiry date, and there was a dispute as to whether they had been validly renewed. The issue was whether a termination letter, which had been sent beforethe term, but which had been received afterwards, was effective to terminate the contract.

The Claimant party asked a provisional measure ordering Respondent to perform the contract until the final award, arguing that termination would create an irreversible situation that damages would not adequately compensate.

The Arbitral Tribunal granted the relief sought on the basis of a prima-facie analysis showing that the contract had apparently been renewed.

At that point, the Respondent challenged all three arbitrators, submitting that such decision amounted to a pre-judgement of the merits, and therefore to a violation of the arbitrators’ duty of impartiality. The challenge was rejected, but we do not know why since, as you may know, ICC challenge decisions are not reasoned.

The legal basis for the challenge was Article 6 §1 of the European Convention on Human Rights, as construed by the French Cour de Cassation in the Norsk Hydro decision, dated 6 November 1998.

The Norsk Hydro case was the following: a dispute had arisen before the Court of Appeal of Amiens between two parties in respect to a sales contract. The seller had resorted to the French procedural rules providing for the so-called référé-provision, which is a device allowing a party to seek an order for the provisional payment of an amount when there appears prima facie to be no serious objection to the debt. The order is provisional and has no res judicata on the merits.

The same party subsequently entered into litigation in the merits before the same Court of Appeal of Amiens, and the same judge who had previously decided on the provisional payment was now part of the Court hearing the merits. The judgement in the merits was challenged for lack of impartiality of the judge having been present when the provisional measure had been decided. The argument was that the decision on the provisional measure was equivalent to a pre-judgement of the merits.

The French Supreme Court upheld the argument, and held that a judge who decided on a provisional measure based on a prima facie assessment of the debt’s existence lacked impartiality to subsequently rule on the merits.

If we apply the same reasoning to arbitration, the question which arises is the following: in what circumstances can an arbitrator decide provisional measures without pre-judging the merits and losing its impartiality?

I would like, in this respect, to make two general observations and one suggestion.

The first general observation is that the Norsk Hydro reasoning cannot be applied to arbitration, because it is based on a functional distinction between the judge having jurisdiction on provisional measures and the judge of the merits. In arbitration, by definition, the arbitrator will have to decide both.

The second general observation is that not all provisional and interim measures will raise an issue as to the arbitrator’s impartiality. Four possible situations can arise:

The first possible situation is that of evidentiary orders. Evidentiary orders will generally raise no real problem of impartiality, because their scope is limited to the admission of documents and testimonies, and they do not touch upon the merits.

A problem of impartiality could still arise, however, when an arbitrator decides to reject evidence on the basis that it is irrelevant. But I submit that what we have here is substantially a matter of properly reasoning the order.

The second situation is when the Arbitral Tribunal takes a decision which is final, albeit temporary. Example: a party to an ICC arbitration who has not paid the advance on costs is ordered to reimburse the other party who had to pay it in full. Other example: in a FIDIC contract, the contractor should perform the works during the arbitration.

Here, there might be a discussion as to whether such decisions should be rendered in the form of an award or an order. But as long as these are final, there cannot be objections as to a possible pre-judgment of the merits.

The third situation is that of provisional measures based on the risk of irreparable harm. The topical example is freezing orders, or orders not to call a bank guarantee for a certain period of time.

Such measures may be taken on the basis that the parties are bound by a general obligation not to aggravate the dispute, or on the basis of a principle according to which the status quo should be maintained during the arbitration. As long as they are taken in opportunity, and do not imply any pre-judgment of the merits, I do not think that they raise any issue of impartiality of the arbitrators.

So, the only situation in which there might be a real risk of challenge for the arbitrators is when they have reasoned their decision on the basis of a prima facie assessment of the substantial rights of the parties. This is the typical situation of the French référé-Provision, like in the Norsk Hydro case.

The question is then: is an arbitrator, after having said in an order that a party is prima facie entitled to exercise a certain right, still able to decide the same issue on the merits?

Will he not find himself, in a way, psychologically bound by his decision? What will happen if he ultimately finds that he was wrong in his prima facie decision? Will he not be tempted to cover up by confirming his decision? Will he not fear that his liability will be at stake if he overturns his provisional order?

Here I think that we should make a distinction.

The first situation is when the tribunal was authorized to make a prima facie determination, either by the parties or by the law.

A good example of such consent is when the parties referred to the LCIA rules. Article 25.1 (c) of the LCIA rules provides : “The Arbitral Tribunal shall have the power, unless otherwise agreed by the parties in writing, on the application of any party : (…) (c) to order on a provisional basis, subject to final determination in an award, any relief which the Arbitral Tribunal would have power to grant in an award, including a provisional order for the payment of money or the disposition of property as between any parties”.

The lex arbitri might also contain a provision such as the new Article 17.A of the UNICITRAL Model Law: “The parties requesting an interim measure under article 17, paragraph 2 (a), (b) and (c) shall satisfy the arbitral tribunal that: (…) (b) There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination.”

But what if there is no such consent or legal provision?

Then it is fair to say that arbitrators should be very prudent in ordering the requested relief. Still, I do not think that the arbitrators’ powers to grant provisional measures on the basis of a prima facie assessment of the parties’ substantial rights should be ruled out on a general basis.

On one side, you may have provisional measures which are exclusively based on an assessment of the apparent existence of the substantial right of a party. That is the case of the French référé-Provision. These decisions are in my view hardly compatible with the arbitrators’ duty of impartiality.

On the other side, you have provisional measures which are necessary to prevent an irreparable harm or to ensure that the status quo is maintained, but which also require some sort of a prima facie analysis of the parties’ substantial rights and obligations. An order to perform a contract until a final decision is made regarding its valid termination falls into that category.

In such a case, the arbitrator should carefully balance the reasons why the measure is really necessary on a provisional basis with the risk of a challenge. Still, I submit that there is no reason to consider that an arbitrator would lack the imperium to take such an order on an opportunity basis, if they are suitable and appropriate to avoid irreparable consequences.

Finally, there is one particular kind of provisional measures which should in my view always – unless in exceptional circumstances – be avoided in arbitration: and that is the ex parte order of the kind which is now unfortunately provided by the revised Article 17 of the Model law. Why? Because it will be almost impossible for a party to maintain its trust in the impartiality of an arbitrator who had ex parte contacts with the other party, and who discussed the case without the other litigant even being aware of it.

Let us not forget that arbitration is, above all, a matter of trust and transparency!

Ex parte applications for interim and conservatory measures

In the context of the proposed amendments to Article 17 of the UNCITRAL Model Law, there has been much debate about the desirability of arbitral tribunals entertaining applications for directions made on the application of one party without notice to the other.² One view is that it is always better for such applications to be made to a Court of competent jurisdiction. Courts are often able to hear such applications expeditiously. Orders for interim and conservatory measures can raise delicate issues, for example, in relation to third party rights, and in England case law has worked out reasonably clear principles governing the availability of such relief. Court decisions are binding on third parties and sanctions are available in case of breach. For arbitral tribunals to make decisions ex parte, so the argument runs, is to offend the principle of equal treatment of all parties. Any expression of view at an early stage threatens party confidence in the integrity of the arbitral process and invites a challenge that the arbitral procedure was not in accordance with the agreement of the parties.

The purpose of this note is to explore the existing position in relation to arbitrations with a London seat under LCIA Rules. There are three main questions. First, what sort of measures are available? Second, should a direction be made ex parte? Third, what principles should govern the Tribunal’s exercise of its discretion?

First, section 38(1) of the 1996 Act (General powers exercisable by the Tribunal) provides that parties are free to agree on the powers that are exercisable. Article 25.1 (Interim and Conservatory Measures) lists a number:

(a) to order a Respondent to provide security for the amount in dispute;

(b) to order the preservation, storage, sale or other disposal of any property relating to the subject matter of the arbitration; and

(c) to order on a provisional basis any relief which the Tribunal would have power to grant in an award, including a provisional order for the payment of money or disposition of property.

In addition, Article 25.2 gives the Tribunal power to order a claiming party to provide security for the other party’s legal costs.

One issue that has arisen in the past concerns relief such as freezing injunctions or search orders. It is clear from Article 25.3 that parties can seek such orders from a Court. But does the Tribunal have jurisdiction? This is an open question in English law.³

There are two arguments in favour of a Tribunal having such jurisdiction. First, section 39(1) of the 1996 Act (Power to make provisional awards) gives the Tribunal power “to order on a provisional basis any relief which it would have power to grant in a final award” and section 48(5) (Remedies) states that the Tribunal has the same power as the Court “to order a party to do or refrain from doing anything”. It is suggested that these provisions do not confer power to make such orders. Section 48(5) is confined to final awards and to substantive remedies on the merits and such orders are not orders made in a final award. The second argument is based on section 38(1) of the 1996 Act. If the parties have agreed to the Tribunal having such power, that will be an end of the matter. The question is whether the language of Article 25.1(c) is sufficiently broad. It issuggested that it is not. Even though it speaks of “power to grant in an award” rather than “a final award”, as does section 39(1), it is clear that the relief in question is “subject to final determination in an award”.

An LCIA Tribunal in London which is asked for a freezing injunction, for example, may well conclude that whether it has power or not, by this route or any other, the better course will generally be to apply instead to a Court where no jurisdictional issues will arise.

Second, can the Tribunal entertain an application for interim and conservatory measures on the application of one party without notice to the other? The question is whether such a direction would infringe the general duty of the Tribunal in Section 33 of the 1996 Act to “act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case”. Interestingly, the July 1995 draft of the Arbitration Bill dealt with the point expressly. Clause 34 (3)(j) gave a Tribunal express power “to proceed ex parte if the interests of justice so require”. That provision did not find its way into Section 34 of the Act. Absent an express power, is one to be implied? There is no published decision on the question, but it is suggested that, where on the facts the Tribunal concludes that there is no unfairness, there is no reason to limit the Tribunal’s powers.

Third, how should the Tribunal exercise its discretion? Article 14.2 affords the Tribunal “the widest discretion to discharge its duties allowed” under applicable law. A Tribunal is likely to attach some weight to the arguments for abstinence set out at the start of this note. It may require to be persuaded by the applicant that the interests of justice demand that the direction be granted by the Tribunal, rather than by a Court. That will be a rare case.

If the Tribunal decides to make no order on the application, should it notify the Respondent to the application? In some circumstances immediate notification may be neither necessary nor fair to the Applicant. If the object of the exercise is to freeze assets to obtain security for a claim, the Tribunal may wish to send a copy of the papers recording the application and its disposal to the Respondent, but to allow a grace period within which the Applicant may if it chooses first make the same application to a Court.