RSS Feed



In this post, MARIJA SOBAT, questions the principle of ‘pay-your-own-way’ applied to allocation of costs in summary proceedings under ICSID Rules.

Rule 41 (5) came to life with the 2006 amendments to the ICSID Arbitration Rules. It is beyond the scope of this post to delve in great detail into the Rule itself. It suffices here to say that the provision was introduced to allow a party to raise an objection in limine litis that a claim is “manifestly without legal merit” and to ask a tribunal to summarily dismiss such patently frivolous claim by a reasoned award. The rationale behind this Rule was, among other things, to shorten duration of the proceedings and reduce the costs where a party is bringing a patently frivolous claim. It is interesting to see how ICSID tribunals, which confirmed frivolity of the claim, had decided on allocation of costs (Trans-Global v Jordan, Global Trading v Ukraine, RSM Production v Grenada) and what impact these decisions may have on the future application of the Rule. In this post I will explain how the proper allocation of costs in summary proceedings could influence on reducing the number of manifestly frivolous claims brought before the ICSID tribunals.

According to Article 61 (2) of the ICSID Convention and Rule 28 of the ICSID Arbitration Rules, in the absence of the parties’ prior agreement, ICSID tribunals have discretion to decide about allocation of costs of the proceedings between parties. In the vast majority of cases, the ICSID tribunals followed “pay-your-own-way” approach. The exception to the rule, ie, allocation of the costs to the loser of the proceedings, occurred in those cases where the tribunals established that a claim was manifestly without legal merit or observed bad faith from a party. Read the rest of this entry

Making a Favourable National Law on Arbitration: How Difficult can it be?

In this post, PANAGIOTIS CHALKIAS reflects on some elements that have considerable influence on success of an arbitration legislation; and why courts shall always play a defining role.

This post ponders over a rather basic question that everyone involved in international commercial arbitration must find intriguing. This question concerns not only governments and legislators but also judges, lawyers, in-house counsels and broadly all dispute resolution practitioners. The purpose of this post is not to provide an exhaustive list of factors pertaining to the enactment and application of a national arbitration statute. I intend to highlight what I think are the three essential elements to take into consideration.

An easy and quick answer to my question would be that the adoption of the UNCITRAL Model Law on International Commercial Arbitration suffices (as of 2011, 66 countries have endorsed this Model Law in their legislation). However, one should ask if this suggested pattern for law-makers is enough to show a favourable preference towards arbitration. Read the rest of this entry

Indian Supreme Court to Reconsider Bhatia International

In this post, SUMIT RAI reports on the recent reference to a five-member bench of the Indian Supreme Court to reconsider the ratio in Bhatia International and Satyam Computers; skeptically adding that a solution to the impasse may not be reached anytime soon.

A three-member bench of the Indian Supreme Court, chaired by the Chief Justice, has referred the Bhatia International ratio for reconsideration to a five-member constitutional bench on 1st November 2011. The Supreme Court has also invited anyone interested in being heard on the issue to file an intervention. The matter is to be placed before the five-member bench on 10th January 2012.

The reference was made in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. In early 2008, Justice Katju (now retired) while sitting in a division bench had expressed his reservation on the correctness of the Bhatia ratio and the apex court’s decision in Satyam Computers following that ratio. He had particularly expressed doubts over the interpretation given to section 2(2) of the Indian Arbitration Act (1996). Following this, the case was placed before a three-member bench, which has now referred it to a five-member bench. Read the rest of this entry

Stolt-Nielsen: Who Exceeded Powers – Court or the Tribunal?

In this post, MARIJA SOBAT revisits the United States Supreme Court’s rationale in Stolt Nielsen and questions whether it had the authority to conduct the extensive review of the award, as it did.

In Stolt-Nielsen the United States Supreme Court granted a certiorari to decide whether imposing class arbitration on parties whose arbitration clause is silent on that issue is consistent with the Federal Arbitration Act (FAA). A brief background to the facts of the case can be found here and here. The Tribunal’s decision that the arbitration clause allowed for class arbitration was vacated by the District Court under the ground of “manifest disregard” of the law. The Court of Appeals overruled District Court’s decision and the Supreme Court granted a certiorari concluding that the question presented before the Court is ripe for review.

The Court found that the arbitration panel exceeded its powers by imposing its own policy instead of “identifying and applying a rule of decision derived from the FAA or either maritime or New York law.” The Court observed, “Rather than inquiring whether the FAA, maritime law, or New York law contains a “default rule” under which an arbitration clause is construed as allowing class arbitration in the absence of express consent, the panel proceeded as if it had the authority of a common-law court to develop what it viewed as the best rule to be applied in such situation.” Read the rest of this entry