Global developments brought to you monthly by the ITA Board of Reporters
General Editor: Roger Alford
Managing Editors: Elina Mereminskaya & Monique Sasson
Volume XV - Issue 5
June 2017
 
 
 
 
Recent Developments (1)
 
 
Ecuador denounces sixteen BITs because of their "unconstitutionality", thereby terminating them
 
Through a series of executive decrees, Ecuador has on May 16, 2017 denounced the BITs (Promotion and Reciprocal Protection of Investments Treaties) between the Republic of Ecuador and sixteen other States. Through these denouncements, Ecuador has terminated the aforementioned agreements. Click here for more information on the BITs affected and on the background for these measures.
 
Author(s): Javier Robalino Orellana, Ferrere Abogados
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Ecuador
 
Ecuador Full text
 
 
 
 
 
Recent Cases and Awards (19)
 
 
Jose Wianey Adami v. The State of Brazil and Petróleo Brasileiro S/A Petrobrás, Regional Federal Court of the 4th Region, Apelação Nº 500984610.2015.4.04.7201/SC, 15 December 2016
 
The 4th Brazilian Federal Regional Court ruled that shareholders are subject to arbitration agreements contained within their company’s bylaws and that this does not amount to a breach of the constitutional principle of non-obviation of jurisdiction.
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
Polytec Overseas Limited and another v. Grand Dragon International Holdings Co Ltd and others [2017] HKCFI 604, High Court of Hong Kong, Court of First Instance, Action No. 2776 of 2016, 22 March 2017
 
In Polytec Overseas Ltd and another v. Grand Dragon International Holdings Co Ltd and others [2017] HKCFI 604, the Hong Kong Court of First Instance upheld the defendant's application under s. 20 of the Arbitration Ordinance to stay court proceedings issued by the plaintiffs in favour of arbitration.

Notwithstanding that the relevant contracts between the parties appeared to contain incompatible dispute resolution provisions, the Court confirmed the existence of a valid and operative arbitration clause binding on the plaintiffs and defendants and prima facie encompassing the substantive claims advanced.
 
Author(s): Briana Young, Herbert Smith Freehills
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Hong Kong
 
Hong Kong Full text Full text as PDF
 
 
 
 
 
Mr. Franck Charles Arif v. Republic of Moldova (Award), ICSID Case No. ARB/11/23, 04 August 2013
 
In Arif v. Moldova, the Tribunal upheld its jurisdiction over the claimant’s claims, and held that Moldova had breached its obligation to provide fair and equitable treatment by reneging upon the claimant’s legitimate expectations when it canceled the claimant’s lease agreement and evicted it from an airport duty free store. The Tribunal ordered Moldova to provide either restitution or compensation for the airport store, at the claimant’s election, as well as wasted costs to be determined based on the option selected.
 
Author(s): Dietmar W. Prager, Debevoise & Plimpton LLP; Samantha J. Rowe, Debevoise & Plimpton LLP; Jennifer Lim, Debevoise & Plimpton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: ICSID; United States of America; United States of America
 
International Centre for Settlement of Investment Disputes Full text Full text as PDF
 
 
 
 
 
Lao Holdings N.V. v. The Lao People’s Democratic Republic (Decision on Jurisdiction), ICSID Case No. ARB(AF)/12/6, 21 February 2014
 
The Tribunal in Lao Holdings v. Laos found that it had jurisdiction ratione temporis over the parties’ dispute regarding the application of the New Lao Tax Code to its investment.
 
Author(s): Dietmar W. Prager, Debevoise & Plimpton LLP; Samantha J. Rowe, Debevoise & Plimpton LLP; Alexandra Von Wobeser, Debevoise & Plimpton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: ICSID; United States of America; ICSID
 
International Centre for Settlement of Investment Disputes Full text Full text as PDF
 
 
 
 
 
Poštová banka, a.s. and Istrokapital SE v. The Hellenic Republic (Award), ICSID Case No. ARB/13/8, 09 April 2015
 
In Poštová banka v. Greece, the Tribunal found that it lacked jurisdiction ratione materiae because: (i) the Greek sovereign bonds purchased by Poštová banka (“Poštová”) did not qualify as a protected “investment” under the Slovakia-Greece BIT; and (ii) Istrokapital’s indirect relationship to the Greek government bonds through its shareholding in Poštová did not qualify as a protected “investment” under the Cyprus-Greece BIT.
 
Author(s): Jennifer Lim, Debevoise & Plimpton LLP; Dietmar W. Prager, Debevoise & Plimpton LLP; Samantha J. Rowe, Debevoise & Plimpton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: United States of America; ICSID; United States of America
 
International Centre for Settlement of Investment Disputes Full text Full text as PDF
 
 
 
 
 
Company X v. Company Y, District Court of Tokyo, 2013 (Wa) 4919, 13 July 2016
 
Tokyo District Court dismissed Respondent’s claim for objection against execution of arbitral award authorized by the court due to the reason that there was no arbitration agreement and the reasons which arose prior to the rendition of the arbitral award.
 
Author(s): Takiko Kadono, Nagashima, Ohno & Tsunematsu; Hisaya Kimura, Nagashima, Ohno & Tsunematsu; Koki Yanagisawa, Nagashima, Ohno & Tsunematsu
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Japan; Japan; Japan
 
Japan Full text Full text as PDF
 
 
 
 
 
Rigas namu pārvaldnieks v. Undisclosed Respondent, District Court of Vidzeme, Riga, C30331515, 01 November 2016
 
The court of general jurisdiction has competence to hear the dispute, if the agreed arbitration institution is liquidated and, in addition, if the arbitration clause is also asymmetric.
 
Author(s): Inga Kacevska, Law Office of Inga Kačevska
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Latvia
 
Latvia Full text Full text as PDF
 
 
 
 
 
The Jamal Pharmacy Case, Court of Appeals of Mount Lebanon Governorate, Case No. 35/2016, 25 February 2016
 
This judgment reminds that it is possible for an arbitrator to induce the limits of his mission from the facts when his mission is not clearly determined in the arbitration agreement. In addition, even in absolute arbitrations where the arbitrator is exempted from the application of the rules of law and the principles of ordinary trial and can judge in equity, he does not have the right to rely on grounds without inviting the parties to comment thereon, except for the grounds that are considered included implicitly in their claims and defenses. Moreover, the arbitrator has the right to use what he considers to be convincing from the parties’ claims, to make his decision in accordance with the principles of justice and equity. Furthermore, if the arbitrator does not include the claims, the facts, the reasons and the grounds in the relevant paragraph of the arbitral award, that does not affect its validity, as long as the arbitrator has raised and discussed them and they are encompassed in the scope of the arbitration agreement. Finally, the difference between the date of the meeting of the parties with the arbitrator and the date of the signature of the arbitral award is not a reason for its invalidation, for it could not have changed the result. 

 
 
Author(s): Jalal El Ahdab, Association d'avocats Ginestié Paley-Vincent et Associés
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Lebanon
 
Lebanon Full text Full text as PDF
 
 
 
 
 
X v. Y, Court of Appeals of Beirut Governorate, Case No. 244/2016, 24 February 2016
 
This judgment confirms that the composition of an arbitral tribunal is not irregular if one of its members has withdrawn therefrom. In fact, if all the hearings ended prior to that withdrawal, the latter does not affect the regularity of the composition of the tribunal. In addition, the judgment affirms that if one of the arbitrators objected on the decision of the two other arbitrators, this means that a deliberation did take place and that no violation of public policy had occurred. Moreover, this judgment states that if the chairman did his own investigation of the dispute, this does not mean he has exceeded his mission. Furthermore, if a book related to the dispute was not submitted for discussion, this would not be a violation of the right of defense if the tribunal did not rely on this book to take its decision. Finally, the judgment confirms that the disregard of a party's claim is not a ground for annulment.
 
Author(s): Jalal El Ahdab, Association d'avocats Ginestié Paley-Vincent et Associés
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Lebanon
 
Lebanon Full text Full text as PDF
 
 
 
 
 
Lawson and Lawson v. Gawith [2017] NZHC 40, High Court of New Zealand, CIV-2016-435-3, 27 January 2017
 
Many lease agreements in New Zealand contain an arbitration clause. Sections 261 to 264 of the Property Law Act 2007 allow lessees to apply to the Court for relief if a lessor refuses to allow the exercise of a right of renewal due to a breach of a condition or a notice provision. The application must be made within three months. In this case, the High Court determined that an application for relief cannot be made to the Court where the parties have provided for arbitration. Instead, the application must be made to an arbitrator, although in the present case the lessee was out of time to do so.
 
Author(s): Stephen Hunter, Gilbert Walker
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: New Zealand
 
New Zealand Full text Full text as PDF
 
 
 
 
 
Windstream Energy LLC v. Canada (Award), PCA Case No. 2013-22, 27 September 2016
 
In NAFTA Chapter 11 proceedings conducted under the UNCITRAL Arbitration Rules (2010) and administered by the Permanent Court of Arbitration (PCA), a tribunal held that the claimant established a breach of NAFTA Article 1105 (minimum standard of treatment), but not NAFTA Articles 1110 (expropriation), 1102 (national treatment), or 1103 (MFN treatment).  Given the early stage of the investment project, the tribunal declined to award damages based on a discounted cash flow (DCF) model, but instead awarded roughly CAD 25 million based on a comparable transactions model.  With respect to fees and costs, the tribunal ordered the parties to split the fees and costs of the arbitrators and the PCA, and ordered Canada to reimburse 50% of the claimant’s costs of legal representation.
 
Author(s): Charles H. Brower, II, Wayne State University Law School
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: NAFTA
 
North American Free Trade Agreement Full text Full text as PDF
 
 
 
 
 
S. B.V. v. Ł. M. and Z. M., Supreme Court of Poland, V CSK 66/16, 27 October 2016
 
The decision of the Supreme Court of 27 October 2016, docket no. V CSK 66/16 is a rare example of a court stepping in to protect a weaker party to a B2B contractual relationship, by way of declaring an arbitration clause invalid due to being grossly unfair to the weaker business party. While such an approach is seen in disputes concerning consumers, it is quite exceptional in a setting where business entities appear on both sides.

It goes without saying that contractual provisions, including dispute resolution clauses, are often drafted in favor of the stronger party. This, however, should not per se attest to their invalidity. Such a conclusion could only be reached upon a thorough case by case analysis whether the dispute resolution mechanism (or in general any other provision) provided in a contract indeed unfairly disturbed the contractual balance of the parties. The decision of the Supreme Court should thus not be read as establishing a general rule of a ‘pro-weaker’ business party interpretation of arbitration clauses in Poland. The fact that the same arbitration clause in other franchise contracts concluded by the same Dutch franchiser with its European franchisees was considered invalid as being grossly unfair by the German courts, might have played a role in the Supreme Court reaching its conclusion. It should not go unnoticed that the court in fact decided the case by applying foreign Lichtenstein law.
 
Author(s): Wojciech Sadowski, K&L Gates LLP; Ewelina Wetrys, K&L Gates LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Poland; Poland
 
Poland Full text Full text as PDF
 
 
 
 
 
Vrancea Public Hospital v. Health Insurance House, High Court of Cassation and Justice of Romania, 318/2016, 11 February 2016
 
The dispute resolution clauses providing for the right of one party to choose, in its own discretion, to arbitrate before a designated arbitral institution or to litigate before the courts, were seen, traditionally under Romanian law, as null and void, on reason of unclear character of the agreement to arbitrate.

The recent decision of the Romanian High Court of Cassation and Justice might represent a first step in validating the alternative arbitral clauses in Romanian arbitral law. Thus, while the High Court still considers these alternative clauses as "deficient", they are not a complete ban to arbitration or a reason to set aside an arbitral award passed in consideration thereof, rather these clauses must be applied and interpreted by reference to their object and party intention, allowing arbitration when there was a subsequent implicit agreement to arbitrate.
 
Author(s): Viorel Nicolae Dinu, Bondoc & Asociatii
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Romania
 
Romania Full text Full text as PDF
 
 
 
 
 
Isotope Technologies Dresed GmbH v. Medkonsult LLC, Supreme Court of the Russian Federation, Ruling No. 305-KG16-19843, Case No. A40-42294/2016, 08 February 2017
 
The Supreme Court agreed with the lower courts that the fact that the tribunal only ruled on the law applicable to the merits of the case in the final award does not amount to the breach of the equal treatment of the parties or the violation of public policy.
 
Author(s): Andrey Panov, Norton Rose Fulbright LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Russian Federation
 
Russian Federation Full text Full text as PDF
 
 
 
 
 
TEHNOPARK-Tsentr LLC v. SISTEMA LLC, Federal Commercial [Arbitrazh] Court of the Moscow Circuit, Case No. A40-122210/16, 28 February 2017
 
The courts concluded that the awards, in which the operative part does not correspond to reasoning is unenforceable.
 
Author(s): Andrey Panov, Norton Rose Fulbright LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Russian Federation
 
Russian Federation Full text Full text as PDF
 
 
 
 
 
Common Legal Property LLC v. Tehno-Art LLC, Federal Commercial [Arbitrazh] Court of the Moscow Circuit, Case No. A40-219464/16, 14 March 2017
 
The court concluded that the dispute between two Russian parties can be resolved by arbitration administered by a foreign arbitral institution.
 
Author(s): Andrey Panov, Norton Rose Fulbright LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Russian Federation
 
Russian Federation Full text Full text as PDF
 
 
 
 
 
X v. Y, Court of Cassation of Turkey, 11th Civil Law Chamber, 2017/1251, 02 March 2017
 
Requests for the correction of court judgments cannot be made against judgments concerning arbitration.
 
Author(s): Ismail Esin, Esin Attorney Partnership; Stephan Wilske, Gleiss Lutz
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Turkey; Turkey
 
Turkey Full text Full text as PDF
 
 
 
 
 
SES Astra AB v. Ukrkosmos, Supreme Court of Ukraine, 757/3481/14-ц (Proceedings No. 6-22317св15), 22 March 2017
 
The Supreme Court of Ukraine confirms that written amendment of the arbitration agreement, regarding the number of arbitrators, is not a ground for refusal of recognition of the arbitral award based on Article V(1)(d) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards made in New York in 1958 (the "New York Convention").
 
Author(s): Yaroslav Petrov, Asters; Anna Tkachova, Asters
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Ukraine; Ukraine
 
Ukraine Full text Full text as PDF
 
 
 
 
 
Sharma Fabricators and Erectors (P) Ltd v. Lumiganor SA, Court of Appeals in Civil Matters of the Sixth Circuit in Montevideo, 2706/2016, 12 December 2016
 
A Court, reversing a prior decision, ruled that arbitration should proceed and disregarded a petition by defendant for a foreing claimant to post a bond to to secure a favorable potential award on counterclaim.   
 
Author(s): Sandra González, Ferrere Attorneys
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Uruguay
 
Uruguay Full text Full text as PDF
 
 
 
 
 
Legislation (1)
 
 
Statute on the General Counsel to the Republic of Poland
 
On 1 January 2017, the new statute on the General Counsel to the Republic of Poland of 15 December 2016 (Official Journal 2016, item 2261; hereinafter the “Statute”) entered into force save for a few provisions, with two significant novelties for arbitration that will come into force only on 1 July 2017.

Firstly, pursuant to Article 26 of the Statute, the Court of Arbitration at the office of the General Counsel of the Republic of Poland will be launched on 1 July 2017. As a completely new and unique institution on the Polish market the Court will have jurisdiction to decide disputes that arise between state-owned legal persons other than the State Treasury, legal persons with participation of the State Treasury or state-owned legal persons. For such a dispute to be submitted before the Court, a specific request will be required, and the consent of the opposing party, or the existence of arbitration clause. The Court of Arbitration at the office of the General Counsel will also be competent to mediate a dispute or to use any other amicable settlement of the dispute if so requested by the given parties. Interestingly, while the amount of the fee for the Court to conduct the proceedings will in general depend on the value of the subject matter of the case, it has been statutory limited to the maximum amount of PLN 100,000.00 (approx. EUR 25,000.00). The latter amount corresponds to the maximum court fee currently prescribed for state court proceedings and presents a significant commercial incentive for entities eligible for arbitrating in the Court to choose this arbitration venue over other established arbitration centers.

The rules of the Court are yet to be issued by the President of the General Counsel by way of an order, but the Statute already stipulates that the Court’s services will be provided by the office of the General Counsel.

Although the Statute does not oblige the given entities to conclude arbitration clauses opting for the Court of Arbitration at the office of the General Counsel of the Republic of Poland, it is to be expected that state-owned legal entities may experience various forms of pressure to use this forum, in particular as an alternative to other arbitration fora. The low cap on the total amount of arbitration fees will undoubtedly be a strong motivator, and even a bargaining chip in negotiations with third parties. From the perspective of purely private parties, however, the perspective of using a state-owned arbitration court handled by the same agency that is established by statute to serve as the state’s legal counsel, would be understandably highly problematic.

The second novelty has been introduced by Article 12 et al. of the Statute which will also start to operate on 1 July 2017. The provisions in question provides for either obligatory or voluntary representation of the General Counsel of state-owned legal persons other than the State Treasury, legal persons with the participation of the State Treasury or legal persons with the participation of state-owned legal persons.

The Prime Minister of the Republic of Poland is yet to determine, by way of an ordinance, the specific legal entities whose representation will be exercised by the General Counsel of the Republic of Poland. The Statute sets forth that while issuing the ordinance, the Prime Minister should take into account the subject-matter of activity of the entity, the importance of that activity for the interests of the Republic of Poland as well as should ensure the protection of the rights and interests of those entities, the rules of competition law and respect for the rights of minority shareholders.

In civil cases whose value exceed PLN 5,000,000.00 (approx. EUR 1,250,000.00) the representation before the state courts and arbitral tribunal will be obligatory for the state-owned legal persons determined in the Prime Minister’s ordinance, whereas in the case of legal entities with the participation of the State Treasury or legal persons with the participation of state legal persons, their consent will be required. The consent will, however, be of a general nature.

The Statute also stipulates broad competencies for the General Counsel to take over the representation of the given entities in any other civil matters, either new or already pending.

It is expected that the new regulations may completely change the representation of state companies in high-value court or arbitration cases. In general, this representation has so far been executed by external law firms. The fact that approximately 2800 state legal entities and 500 companies exist highlight the impact the new provisions may have. Yet, the Statute still leaves some room for engagement of external counsel, provided that if there is a need to represent a given entity before a court, a tribunal or any other adjudicating body in matters requiring the knowledge of foreign law, international procedures or institutions, the General Counsel may, with the consent of that entity, entrust the entire representation or the performance of certain acts by way of a civil law contract to external counsel. The future will show how often this right will be exercised.
 
Author(s): Wojciech Sadowski, K&L Gates LLP; Ewelina Wetrys, K&L Gates LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Poland; Poland
 
Poland Full text
 
 
 
 
 
Upcoming Events (3)
 
 
Frankfurt: GAR Live 2017 (29 June 2017)
 
On June 29, 2017, the fourth annual GAR Live event in Frankfurt will take place at the Jumeirah Hotel Frankfurt. The event is chaired by Richard Kreindler and Susanne Gropp-Stadler, and supported by Cleary Gottlieb.  It includes three panels, a Fireside Chat over lunch, and closes with an Oxford Union-style debate.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: Germany
 
Germany Full text
 
 
 
 
 
London/Vienna/Zurich: 2017 Summit on Commercial Dispute Resolution in China (19, 21 and 23 June 2017)
 
The Beijing Arbitration Commission (“BAC”) is organizing the “2017 Summit on Commercial Dispute Resolution in China”. The Summit will be held in three major European cities: London, Vienna and Zurich. The Summit will feature leading practitioners from all parts of the world,  who will discuss legal developments in commercial dispute resolution in China. The Summit is aim to promote China’s commerical  arbitration influence worldwide, as well as to increase mutual understanding between Chinese and Western culture. As the largest developing nation and economy, the current and future legal environment in China has come to the attention of the entire world.
 
Author(s): Arthur X. Dong, AnJie Law Firm
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
Reporter for: China
 
United Kingdom, Austria, Switzerland, China Full text
 
 
 
 
 
Plano, TX: 29th Annual ITA Workshop: Challenges to the Legitimacy of International Arbitration (14-16 June 2017)
 
The ITA Workshop, held in Dallas on the third Thursday in June every year since 1989, is widely recognized as the leading conference in the field in the United States. As one participant summarized succinctly, “It is the forum in which legitimate top practitioners gather annually. Thus, the topics are sophisticated, the networking is legitimate, and the social element is valuable.” The Workshop now begins on the preceding Wednesday afternoon, with membership activities continuing into the following Friday.

On Friday morning following the Workshop, members of the ITA Advisory Board, Academic Council, ITAAR Board of Reporters, WAMR Board of Editors, ITAFOR Moderators and Contributors, and the Workshop faculty reassemble for the annual ITA Forum and other membership activities.
 
Author(s): Reporter ITA
 
Source: A contribution by the ITA Board of ReportersDate: 9 Jun 2017
 
United States of America Full text
 
 
 
 
 
 
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