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 4
April 2017
 
 
 
 
Recent Cases and Awards (16)
 
 
Inversora Ingentis S.A. v. Petrominera Chubut S.E. s. Recurso de Queja (OEX), Court of Appeals in Commercial Matters of the Federal District, Chamber E, 14533/2016, 02 September 2016
 
The Court of Appeal decision provides uncertainty to contractual obligation, where a party arbitrarily decides to stop payments for any reason other than the obligations it incur. In fact the judges from Chamber E choose some of the arguments raised by the claimant to allow the annulment, while disregarding others.
 
Author(s): Federico Godoy, Beretta Godoy
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Argentina
 
Argentina Full text Full text as PDF
 
 
 
 
 
Irmãos Parasmo S.A. Indústria Mecânica v. Zara Sartório Parasmo, Eloísa Sartório Parasmo, Mônica Sartório Parasmo and Rogério Sartório Parasmo, Court of Justice of the State of São Paulo, Agravo de Instrumento Nº 2031444-61.2016.8.26.0000, 14 December 2016
 
The 2nd Commercial Chamber of the São Paulo Court State upheld judgment that suspended the effects of an Extraordinary Shareholders Meeting that inserted an arbitration agreement in the Claimant’s Bylaws. 
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
Pothole Killers LLC v. Eco Tech Engenharia Ltda, Superior Court of Justice of Brazil, Special Appeal, Sentença Estrangeira Contestada (SEC) Nº 12.493-US (2014/0218464-0), 15 February 2017
 
The Brazilian Superior Court of Justice ruled that it did not fall within its jurisdiction to reexamine the granting of an interim measure by an Arbitral Tribunal, for it would result in an overcoming of the Arbitral Tribunal’s own jurisdiction, especially because there was no proof of the partiality of the Arbitral Tribunal, alleged by the Respondent.   
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
Workers of Al-Nasr for Steam Boilers and Pressure Vessels Manufacturing Company v. the Prime Minister, the Minister of Investment, the Holding Company for Chemical Industries, the Holding Company for Metallurgic Industries, Al-Kholoud for Tourism and Real Estate Development SAE, and others, Council of State of Egypt, Administrative Court of Cairo, Judgment no. 40510 JY 65, 21 September 2011
 
In 1994, as part of the nationwide privatization program implemented by President Mubarak (the “Privatization Program”), the assets of Al-Nasr for Steam Boilers and Pressure Vessels Manufacturing Company (“Al-Nasr”) were sold to an American Company, Babcock & Wilcox International (“B&W”). The sale was approved by Decree and a Sale and Purchase of Assets Agreement was signed between B&W as purchaser and Al-Nasr Company and the Holding Company for Engineering Industries, as sellers, on September 27, 1994 (the “Sale Purchase Agreement” or “SPA”).

Shortly after the Egyptian Revolution, transactions undertaken under the former Mubarak Regime, especially those relating to the Privatization Program, came under political and public scrutiny.

The Decree approving the sale of assets of Al-Nasr was challenged before the Court. The Court annulled the Share Purchase Agreement and all subsequent transactions.

The Court ruled that the Decree was issued and the Sale Purchase Agreement concluded in violation of the Tender Law (Law no. 89 of 1998) and that the transaction entailed numerous breaches, including undervaluation of the purchase price and breach of the provisions of the Share Purchase Agreement. The Court also found that the transaction was tainted by significant corruption and fraud.

The Court annulled the arbitration clause contained in the Sale Purchase Agreement stating that, since it is an administrative contract under Egyptian law, the arbitration clause requires the prior approval of the competent minister, pursuant to Law No. 9/1997. Hence, the Court concluded that the arbitration clause is null and void.

In 1994, as part of the nationwide privatization program implemented by President Mubarak (the “Privatization Program”), the assets of Al-Nasr for Steam Boilers and Pressure Vessels Manufacturing Company (“Al-Nasr”) were sold to an American Company, Babcock & Wilcox International (“B&W”). The sale was approved by Decree and a Sale and Purchase of Assets Agreement was signed between B&W as purchaser and Al-Nasr Company and the Holding Company for Engineering Industries, as sellers, on September 27, 1994 (the “Sale Purchase Agreement” or “SPA”).

Shortly after the Egyptian Revolution, transactions undertaken under the former Mubarak Regime, especially those relating to the Privatization Program, came under political and public scrutiny.

The Decree approving the sale of assets of Al-Nasr was challenged before the Court. The Court annulled the Share Purchase Agreement and all subsequent transactions.

The Court ruled that the Decree was issued and the Sale Purchase Agreement concluded in violation of the Tender Law (Law no. 89 of 1998) and that the transaction entailed numerous breaches, including undervaluation of the purchase price and breach of the provisions of the Share Purchase Agreement. The Court also found that the transaction was tainted by significant corruption and fraud.

The Court annulled the arbitration clause contained in the Sale Purchase Agreement stating that, since it is an administrative contract under Egyptian law, the arbitration clause requires the prior approval of the competent minister, pursuant to Law No. 9/1997. Hence, the Court concluded that the arbitration clause is null and void.
 
Author(s): Karim Abou Youssef, Youssef & Partners
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Egypt
 
Egypt Full text Full text as PDF
 
 
 
 
 
Parties Not Indicated, Court of Cassation of Egypt, Judgment No. 3669 J. Y. 68, 15 December 2010
 
Pursuant to Article 45 of the Egyptian Arbitration law, concerning the extension of the time limit for rendering final awards, the parties may agree to extend such time limit at any time during the arbitral proceedings. Such agreement can take any form and may or may not be made before the arbitral tribunal. The Parties are also free to agree on the duration of the extension.

In the circumstances, the parties’ agreement to extend the deadline for rendering the final award, until the expert completes its mission and the Tribunal renders the final award, which the parties had expressed before the appointed expert, is deemed valid.
 
Author(s): Karim Abou Youssef, Youssef & Partners
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Egypt
 
Egypt Full text Full text as PDF
 
 
 
 
 
Société Fosmax v. Société TCM FR et autres, Council of State of France, ECLI:FR:CEASS:2016:388806.20161109, 09 November 2016
 
On 9 November 2016, in a milestone decision, the French Conseil d’Etat specified the criteria applicable to its review of international arbitral awards in relation to the disputes over public contracts. Although the Conseil d'Etat endorsed a limited review approach, some uncertainty remains as to the scope of its intervention.
 
Author(s): Nataliya Barysheva, CastaldiPartners; Valentine Chessa, CastaldiPartners
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: France; France
 
France Full text Full text as PDF
 
 
 
 
 
VG Berlin – 2 K 434.15, Administrative Court of Berlin, 2 K 434.15, 03 November 2016
 
The Administrative Court of Berlin affirmed a decision of the German Federal Ministry of Economics and Energy (the “Ministry”) not to grant the Claimant, who sought disclosure of “environmental information,” access to confidential records of a pending ICSID arbitration proceeding, since this may be detrimental to Germany’s international relations. In its reasoning, the Court deferred to the primacy of international law regarding investment arbitration and to the German state’s discretion in determining whether disclosure of environmental information would have a negative impact on international relations.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
OLG München – 34 Sch 20/16, Higher Regional Court of Munich, 34 Sch 20/16, 09 January 2017
 
In arbitration proceedings seated in Germany, the parties enjoy essentially the same due process protections as in German domestic court proceedings.  However, the arbitration rules of the German Institution of Arbitration (the “DIS Rules”) do not provide for any farther‑reaching obligations of the arbitral tribunal regarding due process beyond the legal protection granted by Article 103 para. 1 of the German Constitution (Grundgesetz or “GG”). With this ruling, the Higher Regional Court of Munich confirms preceding case law regarding questions of due process in arbitration.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
OLG Frankfurt am Main – 26 Sch 6/16, Higher Regional Court of Frankfurt am Main, 26 Sch 6/16, 02 February 2017
 
The composition of a contractually agreed-upon “contract advisory council”, which is meant to function as an arbitral tribunal pursuant to Sec. 1025 et seq. German Code of Civil Procedure (Zivilprozessordnung, "ZPO"), does not fulfill the impartiality requirements if the contractually designated arbitrators, or even one of them, at the same time, is a party or a legal representative of a party to the arbitration. Pursuant to the prohibition to act as one’s own judge, the respective arbitrator is thus subject to a conflict of interests, which is why he or she may not rule on the case.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
Arbitration Application No. 2 of 2016 for leave to appeal against an arbitration award on grounds of legal error in terms of Rules 69 and 70 of the Scottish Arbitration Rules [2017] CSOH 23, Court of Session, Outer House, Arbitration Application No. 2 of 2016, 09 December 2016
 
This was a Scottish Arbitration Opinion by Lord Doherty, decided on 9 December 2016 and published on 14 February 2017.

Lord Doherty refused leave to appeal against three parts of an award by an arbitrator as the condition in the Scottish Arbitration Rules r.70(3)(b), as set out in the Arbitration (Scotland) Act 2010 Sch.1, had not been met. It was decided that the arbitrator's decision appeared to be correct, and the proposed appeal did not raise any point of general importance.
 
Author(s): David Scott, Maclay Murray & Spens LLP
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Scotland
 
Scotland Full text Full text as PDF
 
 
 
 
 
BLY v. BLZ & Another [2017] SGHC 59, Supreme Court of Singapore, High Court, Originating Summons No 291 of 2017 (Summons No 1197 of 2017), 27 March 2017
 
A party to an arbitration may apply to the Singapore High Court to review a jurisdictional ruling of the arbitral tribunal under section 10(3) of the International Arbitration Act (Chapter 143A) (the “IAA”) or Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (as incorporated by section 3(1) of the IAA). Whichever route is chosen, section 10(9)(a) of the IAA provides that “the application shall not operate as a stay of the arbitral proceedings or of execution of any award or order made in the arbitral proceedings unless the High Court orders otherwise”. The question that follows is when will the High Court order a stay of arbitral proceedings. This was answered comprehensively by the High Court in BLY v BLZ and another [2017] SGHC 59 (“BLY v BLZ”), which seized the opportunity to clarify the principles to be applied by the courts when considering whether or not to order a stay of proceedings.
 
Author(s): Michael Hwang, Michael Hwang Chambers LLC
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Singapore
 
Singapore Full text Full text as PDF
 
 
 
 
 
K.V.C. Rice Intertrade Co Ltd v. Asian Mineral Resources Pte Ltd and another suit [2017] SGHC 32, Supreme Court of Singapore, High Court, Suit No 539 of 2016 (Registrar’s Appeal No 295 of 2016), Suit No 541 of 2016 (Registrar’s Appeal No 296 of 2016), 23 February 2017
 
Article 11(3) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), as incorporated into Singapore law by section 3(1) of the International Arbitration Act (Chapter 143A) (the “IAA”), provides in context that the President of the Court of Arbitration of the Singapore International Arbitration Centre (the “SIAC President”) shall appoint the arbitrator if the parties fail to agree on the procedure for appointment. However, the catch is that Article 11(3) only applies if the place of arbitration is in Singapore (Article 1(2) of the Model Law). This raises the important issue of what happens when an arbitration agreement fails to specify the procedure of appointing arbitrators and the place of arbitration. Can the SIAC President or the Singapore courts appoint an arbitrator in such a case? If not, does this render the arbitration agreement incapable of being performed, so as to disentitle a party to an arbitration agreement to a stay of court proceedings in favour of arbitration? These questions were tackled by the High Court in K.V.C Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another suit [2017] SGHC 32 (“Asian Mineral Resources”). 
 
Author(s): Michael Hwang, Michael Hwang Chambers LLC
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Singapore
 
Singapore Full text Full text as PDF
 
 
 
 
 
L Capital Jones Ltd and another v. Maniach Pte Ltd [2017] SGCA 3, Supreme Court of Singapore, Court of Appeal, Civil Appeal No 175 of 2015, 09 January 2017
 
In the earlier case of Tomolugen Holdings Ltd v Silica Investors Ltd [2016] 1 SLR 373 (“Tomolugen”), the Court of Appeal held that minority oppression claims under section 216 of the Companies Act (Chapter 50) were generally arbitrable. In the present case of L Capital Jones Ltd and another v Maniach Pte Ltd [2017] SGCA 3 (“L Capital Jones”), the respondent sought to argue that the particular minority oppression claim in this case was not arbitrable because the claim involved an allegation of abuse of judicial process, a matter which ought to be adjudicated upon by the courts, not arbitral tribunals. The Court of Appeal answered the respondent on the narrow basis that the allegation of abuse of judicial process was not a necessary component of the minority oppression claim which the arbitral tribunal had to determine, making it irrelevant to the question of arbitrarbility. Still, L Capital Jones is significant in that it clarifies that Tomolugen does not stand for the blanket proposition that all minority oppression claims are arbitrable; a particular minority oppression claim can still be non-arbitrable if there are other features of the claim whose determination by an arbitral tribunal would be contrary to public policy.

L Capital Jones also considered whether the appellants had taken a step in the proceedings, and whether the particular dispute fell within the scope of the arbitration clause found in the shareholder agreement. The Court determined both issues by applying established principles of case law.
 
Author(s): Michael Hwang, Michael Hwang Chambers LLC
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Singapore
 
Singapore Full text Full text as PDF
 
 
 
 
 
BGer – 4A_478/2016, Federal Supreme Court of Switzerland, 1st Civil Law Chamber, 4A_478/2016, 07 February 2017
 
The Swiss Federal Supreme Court (hereinafter the "Supreme Court") declined an appeal against an award in an ICC arbitration with seat in Zurich. The appeal aimed at having the decision set aside due to a violation of the right to be heard and a violation of substantial Swiss public policy ("ordre public").

The right to be heard does not entail an obligation for the arbitral tribunal to explicitly treat every argument brought forward by a party. It does however protect a party from a 'surprising' application of the law, i.e. the application of principles or rules that neither party has advanced or could have expected to be applied by the arbitral tribunal.

The recognition of a party's obligations under a guarantee for a certain outcome that is independent of a specific contractual obligation does not contradict the substantial Swiss ordre public.
 
Author(s): Georg von Segesser, von Segesser Law Offices
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Switzerland
 
Switzerland Full text Full text as PDF
 
 
 
 
 
BGer – 4A_405/2016, Federal Supreme Court of Switzerland, 1st Civil Law Chamber, 4A_405/2016, 02 March 2017
 
The Swiss Federal Supreme Court (hereinafter the "Supreme Court") declined to set aside an arbitral award in proceedings where the sole arbitrator spontaneously extended the deadline for submission of the full statement of claim by a day without asking Claimant to justify his delay or giving Respondent an opportunity to comment on the extension. The Supreme Court found that this constitutes neither a denial of the right to be heard, nor a violation of the principle of equal treatment. Nor does the departure from procedural rules that are agreed upon by the parties and binding for the arbitrator constitute a violation of fundamental procedural principles that would amount to a violation of Swiss public policy ("ordre public").

While the Supreme Court's decision is justified in view of its limited scope of review with regard to international arbitration awards, it does raise some concerns as its circumstances potentially jeopardize the award's enforcement under the New York Convention.
 
Author(s): Georg von Segesser, von Segesser Law Offices
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Switzerland
 
Switzerland Full text Full text as PDF
 
 
 
 
 
Banyan Tree Corporate Pte Ltd v. Meydan Group LLC and Meydan City Corporation, Court of First Instance of Dubai, Case No. 1619/2016, 15 February 2017
 
This case involved an application to the Dubai Court of First Instance (in the United Arab Emirates) to invalidate Dubai International Financial Centre (“DIFC”) Court judgements which recognised a DIAC arbitral award.
 
Author(s): John Gaffney, Al Tamimi & Company
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: United Arab Emirates
 
United Arab Emirates Full text Full text as PDF
 
 
 
 
 
Legislation (2)
 
 
Opinions on Providing Judicial Protection for the Construction of Pilot Free Trade Zones
 
The Supreme People’s Court of China (“SPC”) issued the “Opinions on Providing Judicial Protection for the Construction of Pilot Free Trade Zones” on 30 December 2016. This "Opinions" has created a stir in China's international arbitration community. The Opinions covers an array of matters relating to legal measures to expedite the development of Free Trade Zones (“FTZs”). The great interest from the arbitration community stems almost entirely from the remarks made in Article 9. In three brief paragraphs, the SPC seems to have shifted the landscape for China-based arbitrations:

1. The Opinions has in fact adopted a broaden scrutiny of "foreign elements test" in arbitration between companies registered in the FTZs;

2. The Opinions has indirectly allowed for ad hoc arbitration between companies registered in the FTZs.

Article 9 of the SPC's Opinions relating to Free Trade Zones will influence Chinese arbitration even beyond the next few years. The Opinions certainly provides for favorable arbitration treatment for enterprises within the Free Trade Zones. That treatment will favor WFOEs (Wholly Owned Foreign Enterprise) in particular and FIEs (Foreign Invested Enterprise) generally. Foreign enterprises and foreign arbitral institutions will find much to welcome within the brief three paragraphs of the Opinions.
 
Author(s): Arthur X. Dong, AnJie Law Firm
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: China
 
China Full text
 
 
 
 
 
Singapore Civil Law (Amendment) Act 2017
 
The Civil Law (Amendment) Act 2017 was passed by the Singapore parliament on 10 January 2017 and assented to by the President on 3 February 2017 to permit third-party funding for proceedings relating to international arbitration. The Act came into force on 1 March 2017.

The Civil Law (Amendment) Act 2017 abolishes the common law tort of maintenance and champerty and permits a third-party funder to provide funds to a party in prescribed dispute resolution proceedings for the purpose of funding that party’s costs. Presently, “prescribed dispute resolution proceedings” is narrowly defined to refer to international arbitration proceedings and related court and mediation proceedings (see Regulation 3 of the Civil Law (Third-Party Funding) Regulations 2017).

The allowance of third-party funding is subject to the condition that the third-party funder satisfies the qualifications set by the Minister. Currently, the Minister has set the criteria that the third‑party funder (a) must carry on the principal business (in Singapore or elsewhere) of the funding of the costs of proceedings to which the third‑party funder is not a party; and (b) must have a paid‑up share capital of at least $5 million (or the equivalent amount in foreign currency) or at least $5 million (or the equivalent amount in foreign currency) in managed assets (see Regulation 4 of the Civil Law (Third-Party Funding) Regulations 2017).

From the perspective of commercial parties, the introduction of the option of third-party funding is a welcome development, as it enables a party to pursue a legal claim which it could not previously finance due to limited resources. The primary beneficiaries are likely to be small to medium-sized companies.

Third-party funding is an increasingly prevalent feature in international dispute resolution. The enactment of the Civil Law (Amendment) Act 2017 reflects Singapore’s determination to draw lessons from best current international practice and stay responsive to business. With the steady growth of arbitrations seated in Singapore, the Act signifies Singapore’s drive to cement itself as a leading centre for dispute resolution. Singapore has doubled its efforts to enhance its dispute resolution services over the last two years. For example, Singapore has created the Singapore International Commercial Court, refreshed the Rules of the Singapore International Arbitration Centre (“SIAC”), published the first edition of the SIAC Investment Arbitration Rules and legislated the Mediation Act which establishes the enforceability of mediation agreements.
 
Author(s): Michael Hwang, Michael Hwang Chambers LLC
 
Source: A contribution by the ITA Board of ReportersDate: 30 Apr 2017
 
Reporter for: Singapore
 
Singapore Full text
 
 
 
 
 
Upcoming Events (1)
 
 
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: 30 Apr 2017
 
United States of America Full text
 
 
 
 
 
 
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