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ALLOCATION OF COSTS IN SUMMARY PROCEEDINGS UNDER R. 41(5), ICSID RULES

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

ARGENTINA v. BG GROUP PLC: THE U.S. COURT OF APPEAL’S (MISTAKEN?) DECISION

In this post, MARIA ATHANASIOU analyzes the US Court of Appeals decision (17.01.2012) which vacated the investment tribunal award in BG Group PLC v. Argentina.

On 17 January 2012, the U.S. Court of Appeals for the District of Columbia Circuit  reversed the orders of the U.S. District Court for the District of Columbia (Republic of Argentina v BG Group PLC, 715 F.Supp.2d 108 (D.D.C.2010); Republic of Argentina v. BG Group PLC, 764 F. Supp. 2d 21 (D.D.C. 2011) at  denying the Republic of Argentina’s motion to vacate and granting BG Group’s cross-motion to confirm, the Final Award rendered against the Republic in the international investment arbitration case of BG Group PLC v The Republic of Argentina, and vacated said Award (Republic of Argentina v. BG Group PLC , D.C. Cir. Jan. 17, 2011).  The Court of Appeals heeded Argentina’s argument that the arbitral Tribunal had exceeded its authority (a ground for annulment under Section 10(a) of the Federal Arbitration Act) by ignoring the terms of the parties’ agreement in the form of the Bilateral Investment Treaty between Argentina and the U.K – holding that the Tribunal had disregarded the conditions set forth in Article 8(2)(a) of the Argentina-U.K. BIT when it dispensed BG Group with the obligation to commence litigation before Argentine courts for 18 months prior to initiating international investment arbitration proceedings. Read the rest of this entry

CHEVRON – TWO DECADES OF LITIGATION: IS IT FINALLY OVER?

In this Guest Post, VERONICA ARROYO from Ecuador reports on the never-ending Chevron-Ecuador battle.

2012 began here in Ecuador with a major jolt for Chevron Texaco. On 3rd January, a court in Sucumbios upheld the ruling against Chevron Texaco, through which it ratified the payment of 18 billion dollars against Chevron for environmental damages caused in Ecuador’s rainforest between 1972 and 1990 when Texaco operated in the forest. Texaco became a subsidiary of Chevron in 2001. Chevron has long claimed that a 1998 agreement between Texaco and Ecuador, after a cleanup of 40 million dollars, absolves it of liability. Chevron has also been ordered to publicly apologize for the incident by 1st March 2012, or else face a judgment for double the sum.

 The oil company appealed the initial judgment on the ground that the process had been marked by corruption. While for the plaintiffs, the amount of compensation was not enough to remedy the damage. A bench of three judges heard both the appeals for almost a year and rejected them. 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

Abaclat v. Argentina: Condition of Prior Domestic Litigation a Mere Admissibility Issue?

In this post, MARIA ATHANASIOU questions the majority decision in Abaclat v. Argentina, which held that a condition for prior domestic litigation is not a jurisdictional issue for an investment arbitration tribunal.

In the recent Decision on Jurisdiction and Admissibility in Abaclat and others v Argentina the majority of the ICSID tribunal affirmed its jurisdiction over claims alleging breach of the Argentina-Italy BIT of approximately 60,000 Italian investors. The tribunal affirmed its jurisdiction despite the undisputed fact that the claimants had not submitted their dispute to Argentine courts for 18 months prior to commencing ICSID arbitration as required by the dispute resolution clause (Article 8 ) of the BIT. In fact the tribunal treated pre-arbitration requirements in international investment arbitration disputes as matters of admissibility as opposed to ones of jurisdiction and as such, placed itself in the minority that views the 18-month domestic litigation requirement as anything but a condition of the host state’s consent to international investment arbitration.

Thus far, ICSID and non-ICSID tribunals have by majority treated prior domestic litigation requirements as matters of jurisdiction. For example Maffezini v Spain (Decision on Jurisdiction); Wintershall v Argentina (Award); Impregilo v Argentina (Award; holding that the 18-month domestic litigation requirement of the Argentina-Italy BIT is “a mandatory – but limited in time – jurisdictional requirement before a right to bring a case to ICSID can be exercised” and that therefore, non-compliance with such requirement leads to lack of jurisdiction). 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

And so it begins…

Blog Arbitration makes a humble beginning today. One may ask – why another blog? Because we felt that despite the presence of many, there was indeed a void to be filled. This blog is committed to the subject of arbitration in the widest sense, from a purely intellectual perspective. The Blog Arbitration team has a simple agenda – to build an online resource for informal intellectual exchange on the subject of arbitration.

We aim at providing a platform for critical discussion on developments in the field of arbitration across the globe. We do not intend to be your source of ‘breaking news’ on arbitration – we humbly acknowledge that role to be beyond our reach. We do, however, promise an interesting and thought-provoking take on recent developments and evergreen controversies in the subject.  We welcome comments and criticism, as it is our belief that debate spurs further debate. We sincerely hope this blog will prove an enjoyable read and that it will urge you to return to these pages to get periodic shots of stimulants on arbitration laws.

We shall have no jurisdictional boundaries. Our endeavor is to cover every aspect of arbitration that is of any academic or practical interest to the global arbitration community.

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