Worldwide: International Arbitration Legal Update, Second Edition

Last Updated: 21 December 2015
Article by Raid Abu-Manneh and Menachem Hasofer

Keywords: international arbitration,

Legal Updates:

ICC LAUNCHES TASK FORCE ON REVISION OF RULES AS APPOINTING AUTHORITY

31 August 2015: The ICC set up a 'Task Force on the Revision of the Rules of ICC as Appointing Authority in UNCITRAL or other Ad Hoc Arbitration Proceedings'. The Task Force's mission will be to determine if amendments to the Rules of ICC as Appointing Authority in UNCITRAL or other Ad Hoc Arbitration Proceedings are useful or necessary, and proceed with these amendments. Alejandro López Ortiz, partner in Mayer Brown's International Arbitration practice in Paris, has been appointed as a member of this Task Force.

NEW PRACTICE GUIDELINES PUBLISHED BY THE CIARB

20 September 2015: The Chartered Institute of Arbitrators' (the "CIArb") Practice and Standards Committee published three updated sets of guidelines on jurisdictional challenges, applications for interim measures and applications for security for costs. Fifteen remaining sets of guidelines are still under review. The three updated guidelines set out best practice for arbitrators responding to procedural issues and common challenges. They are not prescriptive nor do they contain any legal advice.

CONCLUSION OF THE TRANS-PACIFIC PARTNERSHIP (THE "TTP")

4 October 2015: Trade ministers from 12 countries in the Asia-Pacific region concluded the TTP, a regional trade agreement involving 40% of the world economy, that combines trade and investment liberalisation. The 12 parties to the TTP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. The TTP focuses upon rules and disciplines in areas such as government procurement, labour and intellectual property rights. The TTP is designed to enhance market access by removing or reducing tariff and non-tariff trade barriers and it adopts a regional approach by enabling the development of production and supply chains.

QMUL INTERNATIONAL ARBITRATION SURVEY

6 October 2015: The Queen Mary University of London published its sixth annual survey on Improvements and Innovations in International Arbitration. The survey presents quantitative data in relation to international arbitration practices and trends. Key statistics revealed from the survey include the following:

  • 90% of those surveyed prefer arbitration as a dispute resolution mechanism.
  • Survey respondents view the enforceability of awards as arbitration's most valuable characteristic, closely followed by its ability to avoid specific legal systems/ national courts, its flexibility, and the ability it offers parties to select their own arbitrators.
  • Costs were listed among arbitration's worst characteristics, along with the lack of effective sanctions during the process, the lack of insight into the arbitrators' efficiency and the slowness of the process.
  • Survey respondents would welcome more publicly accessible data regarding the average length of a case, as well as the speed of obtaining an award.
  • The five most preferred institutions are the ICC (Paris), LCIA (London), HKIAC (Hong Kong), SIAC (Singapore) and SCC (Stockholm).

To read the full survey, please click here.

ICC TO PUBLISH REASONS FOR ADMINISTRATIVE DECISIONS

8 October 2015: In demonstration of its commitment to improving transparency in international arbitration, the ICC announced its decision to communicate reasons for certain administrative decisions made under the ICC Rules of Arbitration, upon the parties' request. The cost of such communications may be passed on to users through the increase of administrative expenses.

If so requested by the parties, the ICC will now provide the reasons behind its decisions in relation to:

  • Challenges of an arbitrator;
  • Replacement of an arbitrator;
  • Consolidation of arbitration proceedings; and
  • Decisions on the existence of an arbitration agreement.

INDIA TAKES TWO PRO-ARBITRATION STEPS: NEW ARBITATION ORDINANCE ADOPTED AND NEW DRAFT MODEL BIT RELEASED

23 October 2015: The Indian Arbitration and Conciliation (Amendment) Ordinance (the "Ordinance") entered into force, though it still requires parliamentary approval. The Ordinance amends the Indian Arbitration and Conciliation Act 1996 and reinforces the Indian government's commitment to improve business conditions in India. Key changes implemented by the Ordinance include the amendment to the definition of 'court' so that matters concerning international arbitration can only be referred to high courts; the introduction of the possibility to obtain interim relief and the collection of evidence by Indian Courts in arbitrations seated outside of India; and a limitation on the length of arbitral proceedings and on the length of challenges to awards dealt with by the court.

India has also made a move towards finalising the Indian Model Bilateral Investment Treaty (the model "BIT") that has been underway for some months. The Law Commission of India (the "LCI") released a new draft of the Model BIT which now includes wording aiming to reassure foreign investors that laws will not be suddenly changed. Likewise, it proposes the inclusion of a 'fair and equitable treatment' provision which would protect foreign investors from violation of due process and harassment by the Indian State, and of a 'most favoured nation' provision.

To read the full text of the Draft BIT, click here.

LCIA RELEASES INFORMATION ON COSTS AND DURATION DATA

3 November 2015: In another attempt to improve transparency and enable users to make informed decisions about arbitration institutions, the LCIA published information on the average cost and duration of an LCIA arbitration. The LCIA data provides an insight into the costs and duration of actual cases administered under LCIA Rules between January 2013 and June 2015. The average duration of an LCIA arbitration is 16 months. The mean cost of an LCIA arbitration is US$ 192,000; the median cost is US$ 99,000.

EU COMMISSION PRESENTS PROPOSAL FOR NEW DISPUTE RESOLUTION MECHANISM: THE INVESTMENT COURT SYSTEM

12 November 2015: The EU Commission formally presented the US with its proposal for a new dispute resolution mechanism, the Investment Court System, to be used in the Transatlantic Trade and Investment Partnership (the "TTIP"), which is currently under negotiation, rather than the traditional Investor-State Dispute Settlement ("ISDS") mechanism. The dispute resolution mechanism to be included in the TTIP has been the source of great global debate. On the one hand, national governments and MEPs have opposed the inclusion of an ISDS mechanism, arguing that a permanent investment court would be a more effective, neutral and transparent means of resolving disputes than arbitration. Likewise, critics argue that an ISDS mechanism would allow business to sue governments whenever new laws reduce their profits. On the other hand, arbitration practitioners and academics have argued that an ISDS mechanism, which has been tried and tested and which provides for an effective flexible process, should be included, rather than the proposed investment court which its critics argue has been motivated by the desire for political appeasement.

DIFC-LCIA ARBITRATION CENTRE RELAUNCHED

18 November 2015: The LCIA announced the relaunch of the DIFC-LCIA Arbitration Centre in Dubai. As part of the relaunch, the Arbitration Centre moved its offices to the iconic DIFC Gate Building. The relaunch and relocation of the Arbitration Centre concludes the restructuring of the Centre following the passage of Dubai Law No. 7 of 2014, which amended certain provisions of Dubai Law No. 9 of 2004 which, in turn, created the Dubai International Financial Centre (the "DIFC"), including its judicial authority. The new law establishes the Dispute Resolution Authority and makes a clear distinction between the DIFC courts and the Arbitration Centre.

HKIAC OPENS OFFICE IN MAINLAND CHINA

20 November 2015: The Hong Kong International Arbitration Centre (the "HKIAC") announced the opening of a representative office in the China (Shanghai) Pilot Free Trade Zone, which signified the first time an offshore arbitration institution had set up a formal presence in mainland China.

According to the HKIAC, its Shanghai office will closely cooperate with local arbitration commissions to promote international arbitration best practice, render professional training to Chinese arbitrators and practitioners and facilitate the development of arbitration related laws and regulations. If necessary, its Shanghai office will also provide services to support arbitral hearings in the mainland and provide other appropriate services permitted under Chinese law. However, the HKIAC's Shanghai office will not, at this stage, provide case administration services. Parties should seek legal advice before requesting the HKIAC to administer arbitral proceedings seated in the mainland.

ICC COMMISSION REPORT: DECISIONS ON COSTS IN INTERNATIONAL ARBITRATION

1 December 2015: The ICC released its latest Commission Report in Paris, which addresses the allocation of costs, by arbitral tribunals, in international arbitration. The Report highlights the arbitral tribunal's discretion to allocate costs and identifies the fact that costs decisions can be a beneficial tool in a case. Notably, the Report finds that party costs (including lawyers' fees and expenses, expenses related to witness and expert evidence, and other costs incurred by the parties for the arbitration) make up 83% on average of the overall costs of arbitration proceedings. Arbitrators' fees and case administration generally accounts for around 15% and 2% of the overall costs, respectively.

IRAQ SIGNS AND RATIFIES THE ICSID CONVENTION

17 December 2015: The ICSID Convention entered into force in the Republic of Iraq, in accordance with Article 68(2) thereof. The Republic of Iraq ratified the convention on 19 November 2015, just one month after its amendment to the Iraq Investment Law No. 13 of 2006. These developments are very encouraging for foreign investors considering doing business in the region.

Case Law:

AWARD NOT SET ASIDE BY THE ENGLISH COURTS DESPITE DELAY IN ITS PUBLICATION

15 July 2015: In B.V. Scheepswerf Damen Gorinchem v The Marine Institute [2015] EWHC 1810 (Comm), the English High Court looked at whether an arbitration award could be set aside due to a 12-month delay by the sole arbitrator in rendering it. The Claimant sought to set aside the LMAA award under section 68 of the Arbitration Act 1996, arguing that the delay in the award's publication amounted to a serious irregularity. The judge held that while the delay could indeed amount to a serious irregularity, it could not do so in and of itself – the applicant must also have suffered serious injustice as a result. The Court accordingly dismissed the application. The Court did however suggest that in cases of delay such as this, awards may be exposed to greater scrutiny.

SECOND CIRCUIT CLARIFIES THAT DISTRICT COURT SHOULD STAY - AND NOT DISMISS - A COURT ACTION PENDING ARBITRATION

28 July 2015: In Katz v. Cellco Partnership, Case No. 14-138, the United States Court of Appeals, Second Circuit (the "Second Circuit") clarified that, after compelling arbitration, a district court should stay a court action pending the arbitration, rather than dismiss the action, so that the decision cannot be immediately appealed. The lower court, the United States District Court for the Southern District of New York (the "District Court"), had found that the plaintiff's claims were subject to arbitration and granted the defendant's motion to compel arbitration. It then denied the defendant's request to stay the court proceeding rather than dismiss it. Upon the court's dismissal of the action, the District Court's decision became immediately appealable as the final decision in the action. The plaintiff appealed. The Second Circuit held that the Federal Arbitration Act 1925 (the "FAA"), 9 U.S.C. s. 1 et seq. requires a mandatory stay of an action when all of the claims involved are referred to arbitration and a party requests a stay. The Second Circuit concluded that the "FAA's text, structure, and underlying policy command" a stay. It reasoned that (1) the FAA's plain language requires that a court "shall ... stay" the action pending arbitration, (2) the FAA's structure permits immediate appeal only of orders hostile to arbitration and bars appeal of orders favorable to arbitration, and (3) a mandatory stay is consistent with the FAA's policy to move parties into arbitration as "quickly and easily as possible". Under this decision, an order compelling arbitration in the Second Circuit should not be immediately appealable.

D.C. CIRCUIT CASE AFFIRMED US$96 MILLION ARBITRATION AWARD IN FAVOUR OF CHEVRON AND AGAINST ECUADOR

4 August 2015: In Chevron Corp. v. The Republic of Ecuador, Case No. 13-7103, the United States Court of Appeals, District of Columbia Circuit (the "Appeals Court"), upheld the decision of the United States District Court for the District of Columbia (the "District Court") confirming a US$ 96 million international arbitration award in favor of Chevron and against the Republic of Ecuador. The dispute stemmed from a contract Chevron and Ecuador entered into that allowed Chevron to develop Ecuadorian oil fields in exchange for providing below-market-price oil to the Ecuadorian government for domestic use. Chevron initiated the arbitration against Ecuador in 2006, claiming that Ecuador was in violation of the Bilateral Investment Treaty between the United States and Ecuador (the "BIT"). The Tribunal ruled against Ecuador and awarded Chevron US$ 96 million. Ecuador challenged the Tribunal's decision through the Dutch Court system and lost. In 2012, Chevron petitioned the District Court to confirm the award under the New York Convention. The District Court confirmed the award and its decision was based, in part, on the BIT's definition of "investment," which includes "a claim to money or a claim to performance having economic value, and associated with an investment". The Appeals Court affirmed the District Court's decision, holding that: (1) the action fell within the scope of the Foreign Sovereign Immunities Act's arbitration exception; (2) Chevron's lawsuits against Ecuador constituted "investments," under the BIT because "Chevron's breach of contract lawsuits indisputably were associated with its pre-BIT investment activities, and the lawsuits indisputably existed when the BIT entered into force"; (3) the issue of whether the dispute between the parties fell within the BIT's scope was for the arbitral tribunal to decide; and (4) enforcement of the arbitration award did not contravene United States public policy.

ENGLISH HIGH COURT ADJOURNED APPLICATION TO ENFORCE ECT AWARD WHILST ANNULMENT PROCEEDINGS ARE PENDING IN SWEDEN

17 September 2015: In Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding Ltd v Republic of Kazakhstan [2015] EWHC 2542 (Comm), the English High Court adjourned an application by the claimants to enforce an Energy Charter Treaty award, rendered by a tribunal seated in Sweden, against the Government of the Republic of Kazakhstan. The Court held that it would be in the interests of the efficient administration of justice to hear the enforcement application after the determination of the pending challenge to the award which was currently ongoing before the Svea Court of Appeal. The Court also refused to order Kazakhstan to pay security for the amount of the award, on the basis that the challenge to the award in the Swedish proceedings had a "real chance of success". Most noteably, the adjournment was not ordered pursuant to an application by Kazakhstan but on the Court's own motion.

This case provides a rare example of the court exercising discretionary case management powers upon its own motion. It suggests that the English courts will take a practical approach to enforcement proceedings where awards are subject to challenge abroad. However, the Court's reasoning shows that the outcome of such cases will be determined by the specific facts in issue. Likewise, this case demonstrates the considerable degree of deference given by the English Courts to the courts of the seat, in this case the Svea Court of Appeal, in relation to an application to set aside an award.

SWISS SUPREME COURT STATES JURISDICTIONAL OBJECTIONS MUST BE RAISED AT THE OUTSET OF PROCEEDINGS IF LATER RELIED ON AS GROUND FOR SET-ASIDE

28 September 2015: In case no. 4A_172/2015, the Swiss Supreme Court rejected an application to set aside an arbitral award due to the fact that the applicant, who contested the jurisdictional of the tribunal, had not raised any jurisdictional objection during the arbitration proceedings themselves. The Swiss Court held that, accordingly, the applicant was deemed to have accepted the jurisdiction of the tribunal and could not belatedly rely on such argument as a ground for set-aside. The arbitration had taken place pursuant to the ICC Rules and had been seated in Switzerland, whose legislation prescribes that any plea for lack of jurisdiction in an arbitration must be raised before any defence on the merits. This case serves as a reminder to counsel that in Switzerland – and many other countries – jurisdictional objections must be raised during the course of the arbitral proceedings if used to later challenge the award that is rendered.

HONG KONG LAW REFORM COMMISSION RELEASES CONSULTATION PAPER ON THIRD PARTY FUNDING IN ARBITRATION

19 October 2015: The Hong Kong Law Reform Commission published a Consultation Paper proposing the introduction of third party funding for arbitrations in Hong Kong. The Paper examines third party funding, in particular, on third party funding methods in other jurisdictions, Hong Kong's current legal position on third party funding and the potential benefits and drawbacks of introducing third party funding in Hong Kong arbitrations.

The key recommendations of the Consultation Paper are that:

  • The Arbitration Ordinance should be amended so as to permit third party funding for arbitration taking place in Hong Kong under Hong Kong Law; and
  • Clear ethical and financial standards should be developed for third party funders providing funding to parties to arbitrations taking place in Hong Kong.

FEDERAL COURT OF AUSTRALIA ALLOWS FREEZING OF ASSETS DESPITE ONGOING SET-ASIDE PROCEEDINGS AT THE SEAT

2 November 2015: In Ye v Zeng and others [2015] FCA 1192, the prevailing party to a Chinese-seated arbitration attempted to enforce an arbitral award in Australia, while set-aside proceedings were ongoing in China. The arbitration had taken place before the Xiamen Arbitration Commission. The Australian Federal Court ordered the freezing of assets in Australia up to the value of the amount of the arbitral award and for mortgages to be granted over the same so that, upon the completion of the set-aside proceedings, enforcement could proceed if the setaside application was unsuccessful. The court held that, should such security not be provided, judgement would be entered in the amount of the award. This case demonstrates the willingness of the Australian courts to act to preserve assets in order to ensure the effective enforceability of an arbitral award, notwithstanding set-aside litigation in the national courts of the seat of the arbitration.

EXCESSIVE DELAY IN SET-ASIDE PROCEEDINGS AT SEAT ALLOWS ENGLISH COURT OF APPEAL TO PERMIT ENFORCEMENT OF NYC AWARD

16 November 2015: The English Court of Appeal upheld an application by Hong Kong company IPCO to enforce an arbitration award against the Nigerian National Petroleum Corporation (the "NNPC"), despite ongoing set-aside proceedings against the award in Nigeria, the seat of the arbitration. In this unusual case, IPCO had obtained an award against the NNPC in 2004 and had been trying to enforce it since 2005. However, in light of the NNPC's initiation of set-aside proceedings in Nigeria, the English courts had previously refrained from granting its enforcement in England, pending the outcome of those proceedings. In 2008, the English Court had allowed a partial enforcement of the award (which had granted damages totalling US$ 150 million plus interest to IPCO), following "catastrophic" delays in the Nigerian proceedings. In 2014, IPCO again attempted to obtain full enforcement in England, but the English courts again refused, issuing an order adjourning the enforcement action until the Nigerian proceedings had been finalised. However, in a change of events in November 2015, the High Court overturned that order and, on 16 November 2015, the Court of Appeal held that the enforcement could proceed, as any other result would "make a mockery" of the New York Convention given that the Nigerian proceedings could take a further 30 years to conclude. The Court of Appeal did not reach its decision without hesitation, but it does show that, in certain circumstances, the English courts may allow enforcement even when a set-aside action is ongoing, if the circumstances so require.

Mayer Brown Key Events:

THIRD ANNUAL ITA-IEL-ICC JOINT CONFERENCE ON INTERNATIONAL ENERGY ARBITRATION – 14-15 JANUARY 2016 – HOUSTON:

Soledad G. O'Donnell, associate in Mayer Brown's International Arbitration practice in Houston, will be speaking on a panel at the third Annual ITA-IEL-ICC Joint Conference on International Arbitration, discussing ethics and the IBA Guidelines on Party Representation. This session will address topics such as the potential conflict issues that may arise in the practice of international arbitration and how practitioners have responded to the IBA Guidelines since their adoption.

WEBINAR SERIES – 11 FEBRUARY 2016 - GLOBAL:

Mayer Brown's International Arbitration practice will be hosting its fourth webinar on 11 February 2016. Michael P. Lennon Jr., partner in Mayer Brown's International Arbitration practice in Houston, and Mark Stefanini, partner in Mayer Brown's International Arbitration practice in London, will be discussing international arbitration topics that affect the energy industry.

67TH ANNUAL OIL & GAS LAW CONFERENCE – 18-19 FEBRUARY 2016 – HOUSTON

Michael P. Lennon, Jr., partner in Mayer Brown's International Arbitration practice in Houston, will be co-chairing the 67th Annual Oil & Gas Law Conference. The Conference will include sessions on cyber security in the oil and gas industry, counterparty bankruptcy risk in a law price commodity environment and seismic activity and unconventional oil and gas activity.

VII CONFERENCE "REGARDS CROISÉS" – 18 FEBRUARY 2016 - PARIS

Alejandro López Ortiz, partner in Mayer Brown's International Arbitration practice in Paris, will be speaking on a panel at the VII Conference "Regards Croisés", organised by the Club Español del Arbitraje and the Comité Français de l'Arbitrage to discuss enforcement of foreign awards, specifically on ICSID awards in Spain and France.

ICC MASTERCLASS FOR ARBITRATORS – 22-24 FEBRUARY 2016 – NEW YORK:

The ICC Institute has selected Mayer Brown's New York office to host its Masterclass for Arbitrators on 22-24 February 2016. This advanced level training will provide participants with an opportunity to gain a deeper insight into some of the provisions of the 2012 ICC Rules of Arbitration while learning about the latest developments and best practices related to serving as an international arbitrator. B. Ted Howes, partner and head of Mayer Brown's International Arbitration practice in the United States, will be giving welcome remarks at the conference.

Mayer Brown Publications:

BRAZIL: ARBITRATION LAW RELOADED

August 2015: Brazil: arbitration law reloaded* by Robert Figueiredo, partner in the International Arbitration practice of Tauil & Chequer in association with Mayer Brown based in São Paulo, together with Dr. Mark C. Hilgard and Ana Elisa Bruder, partner and foreign associate in Mayer Brown's International Arbitration practice in Frankfurt, was published in Financier Worldwide. This article discusses the recent amendments made to the Brazilian Arbitration Law and emphasises the positive nature of the changes which allow for the greater transparency in the conduct of arbitral proceedings and which will undoubtedly lead to an increased development of arbitration in Brazil.

To read the full article, click here.

TIPS FOR DISPUTE AVOIDANCE IN THE CURRENT OIL PRICE ENVIRONMENT

9 September 2015: In Tips for Dispute Avoidance in the Current Oil Price Environment, published in Mayer Brown's Global Energy Newsletter, Michael P. Lennon Jr. discusses three steps that could maximise opportunities for dispute avoidance. He argues that if a dispute is not avoided, a party taking these steps should also be in a better position to manage and, hopefully, prevail in an eventual dispute.

FINANCIAL INDUSTRY SLOWLY ACCEPTING ARBITRATION, SAYS LAWYER

30 September 2015: B. Ted Howes, partner and head of Mayer Brown's International Arbitration practice in the United States, is quoted extensively in an article in Thomson Reuters Regulatory Intelligence discussing how banks and financial institutions are becoming more willing to resolve disputes through arbitration and other forms of dispute resolution than courts of law.

To read the full article, click here.

THE SKY IS NOT FALLING: DISPUTE RESOLUTION AND INVESTOR PROTECTION UNDER MEXICO'S SHALLOW OFFSHORE MODEL PRODUCTION SHARING CONTRACT

15 October 2015: Dispute Resolution, Investor Protection Under Mexico's Shallow Offshore Model Production Sharing Contract*, a bylined article in Oil & Gas Financial Journal by Michael P. Lennon Jr., partner in Mayer Brown's International Arbitration practice in Houston, Alejandro López Ortiz, partner in Mayer Brown's International Arbitration practice in Paris, and Soledad O'Donnell, associate in Mayer Brown's International Arbitration practice in Houston, discuss as the key dispute resolution provisions of the 25 August 2015 version of the MPSC for shallow offshore operations. The article also outlines foreign-investor protections afforded by international treaties with Mexico that could be accessible to protect investments under the PSC through investor-state arbitration.

To read the full article, click here.

ARBITRATION IS THE FUTURE OF DISPUTE RESOLUTION IN LATAM, SAYS LAWYERS

19 November 2015: Gustavo Fernandes, partner in the International Arbitration practice of Tauil & Chequer in association with Mayer Brown based in Rio de Janeiro, Alejandro López Ortiz, partner in Mayer Brown's International practice in Paris, and Soledad O'Donnell, associate in Mayer Brown's International practice in Houston, are quoted in Arbitration is the Future of Dispute Resolution in LatAm, Says Lawyer, which discusses investment and dispute resolution in Latin America.

To read the full article, click here.

DUTIES OF CONFIDENTIALITY OF AN ARBITRATOR FROM THE GERMAN PERSPECTIVE

December 2015: In Duties of Confidentiality of an Arbitrator from the German Perspective Dr. Mark C. Hilgard, partner in Mayer Brown's International Arbitration practice in Frankfurt, discusses the duties of confidentiality of an arbitrator from the German perspective in the Slovenian Arbitration Review (SAR).

*The full article is also available on the Mayer Brown International Arbitration homepage: https://www.mayerbrown.com/experience/International-Arbitration/?section=newspubs

END OF YEAR FEATURE ARTICLE:

A year of legal developments for international arbitration in Latin America

Alejandro López Ortiz and Gustavo Fernandes1

This year has witnessed numerous interesting legal developments in the field of international arbitration in Latin America, although these have been wide-ranging in nature and have not always followed the same path. While some jurisdictions have taken legislative steps to introduce or consolidate pro-arbitration legislation in accordance with internationally accepted standards, others, perhaps influenced by negative experiences in the field of investment arbitration, have issued more restrictive rules in respect of certain matters. This different approach is most clear in the context of arbitration in respect of States or State entities.

Brazil: important amendments in the region's giant Arbitration Law

On 26 May 2015, Brazil amended its 1996 Arbitration Law. Rather than a new law, the reform is a refined text reflecting the pro-arbitration jurisprudence of the courts and practice since 1996. The most noteworthy change is the possibility, now clearly spelled out, for public entities to participate in arbitrations. Later in the year, Brazil adopted its first judicial or extra-judicial mediation law, creating a framework for this amicable dispute resolution technique between private entities, public entities or private entities and the administration. Further, 2015 marked the adoption of a new Code of Civil Procedure in Brazil, which will impact the regulation of mediation and conciliation chambers, the "carta arbitrais" – the means of communication used between the arbitral tribunal and the judiciary, and the confidentiality attributed to arbitration.

Aligned with these legal changes, the courts also keep demonstrating a pro arbitration attitude. A good example of this was the decision of the Superior Tribunal de Justiça, which extended, to arbitral awards, a procedural rule imposing a fine in the case of non-compliance with judicial rulings. A second further example is the decision of a São Paulo court, which extended the scope of an arbitration agreement to non-signatories given that exceptional circumstances existed; namely, the scope was extended to parties that provided a full guarantee and took ownership of the negotiation, but did not sign the arbitration agreement.

Argentina: renewal of the oldest arbitration regime in the region

In August 2015, Argentina's new Civil and Commercial Code entered into force, at last incorporating arbitration provisions inspired by the UNCITRAL Model-Law. Although many of the principles contained in the Model Law were already applied by Argentinean Courts, the passing of the new Code finally brings Argentina in line with other jurisdictions and marks a departure from the old regime, which still required a "submission agreement" in order to be able to activate an arbitration agreement and which proved a frequent source of problems.

Bolivia and Ecuador: a step back in respect of State arbitration

2015 also saw the passing of new legislation in Bolivia and Ecuador, evidencing a more restrictive approach to arbitration, mainly in cases involving the State. Bolivia's new arbitration and investment law, passed in June 2015, combines both very positive developments (such as the possibility to request arbitral interim measures) with some less encouraging provisions, such as the limitation of arbitrability – disputes concerning natural resources, public services, administrative contracts (except contracts for the provision of goods or services by companies with no address in Bolivia) and matters affecting "public order" are no longer arbitrable. The law also includes a very innovative investment protection chapter, which aims at creating a domestic investment protection scheme under Bolivian law, both for national and foreign investors. This development seems driven by Bolivia's intention to support an alternative forum and rules to ICSID (from which it withdrew in 2007). However, there are still many doubts as to how this mechanism will work in practice.

Ecuador amended its arbitration law in May 2015 and introduced a new requirement in the proceedings for the enforcement of foreign awards against the State, which impose on the enforcing party the burden of proving that the award is in agreement with the Constitution and the laws of the country.

Mexico and Colombia: mixed signals

As part of its Energy Reform, which allows private investment in the energy sector for the first time in almost 80 years, Mexico passed a new Hydrocarbons Law in August 2014. The Law provides for arbitration as the main method to resolve disputes arising from hydrocarbon contracts, but contains an important exception: the administrative rescission of contracts is excluded from arbitration. The Model Production-Sharing Contract terms, issued in 2015, maintains this exclusion, attributing disputes arising out of this category of contract termination exclusively to Federal Courts.

In 2015 Mexican courts also clarified that arbitrators are not an authority in respect of the Amparo Proceedings, an extraordinary judicial action for the protection of constitutional rights common to many Latin American jurisdictions. This confirms that the only recourse against arbitral awards in Mexico is an annulment action. In this manner, Mexico follows the trends of other jurisdictions such as Peru or Chile, which have restricted the use of Amparo proceedings in respect of arbitral awards.

Despite Colombia's latest developments as an arbitration friendly jurisdiction after the passing in 2012 of a new UNCITRAL Model Law based arbitration law, recent events have cast some shadows upon this view. On the one hand, recent judicial decisions have shown a restrictive approach to the enforcement of foreign awards under the New York Convention; on the other, a Presidential Decree issued in November 2014 requires public servants to justify every time they intend to insert arbitration clauses into public contracts, following a declared attempt to reduce arbitration in respect of State entities.

Peru: deepening the trend of submitting public contracts to arbitration

Since 1997 it has been mandatory in Peru to submit disputes arising from public contracts to arbitration. In 2014, Peru amended its public contracts law to introduce the additional possibility to refer such matters to dispute boards. A Regulation developing this mechanism is expected to be published soon. Peru's initiative follows that of Honduras, which in 2013 issued a Decree providing for the inclusion of mandatory dispute boards in State contracts.

* * * * * * * * * *

International arbitration continues to grow in Latin America. The latest statistics published by the ICC confirm that, in 2014, Latin American parties represented almost 17% of parties to ICC arbitration worldwide, which is confirmatory of a clear trend that has been developing over the last few years. The legal developments discussed in this article contribute, in most cases, to the normalization of the use of arbitration in the region and, while certain jurisdictions still show some signs of reticence, particularly when the State is involved, it is becoming more and more clear that the only realistic dispute resolution option, in international projects and contracts of a certain size, is international arbitration.

Footnote

1. Alejandro López Ortiz is a partner in Mayer Brown's International Arbitration practice in Paris and Gustavo Fernandes is a partner in the International Arbitration practice ofTauil & Chequer in association with Mayer Brown based in Rio de Janeiro.

Originally published 17 December 2015

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Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions