Global developments brought to you monthly by the ITA Board of Reporters
General Editor: Roger Alford
Managing Editors: Crina Baltag & Monique Sasson
Volume XIX - Issue 2
February 2021
 
 
 
 
Recent Cases and Awards (17)
 
 
Luiz Henrique de Souza Faria v. Alper Consultoria e Corretora de Seguros S/A, Court of Justice of the State of São Paulo, Apelação Cível nº 1056400-47.2019.8.26.0100, 11 August 2020
 
São Paulo’s State Court annulled an arbitral award rendered by an Arbitral Tribunal whose chairman would have failed to comply with its duty of disclosure. The fact that the chairman failed to disclose that he had been appointed by one of the parties to act as an arbitrator in another arbitral proceeding, with a supposed similar merit discussion, was considered as ground for the annulment of the award.
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
Transbarge Navegacion S.A. v. Serviço de Navegação da Bacia do Prata S/A, Superior Court of Justice of Brazil, Recurso Especial nº 1.894.715/MS, 17 November 2020
 
The Brazilian Superior Court of Justice decided that a party that waived arbitration in previous occasions cannot rely upon the arbitration clause in other case involving the same agreement.
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
E.P. S/A v. C.A. S/A, Superior Court of Justice of Brazil, Apelação Cível nº 1076161-35.2017.8.26.0100, 11 August 2020
 
The São Paulo’s Court of Justice maintained the ruling of not annulling an arbitral award. The Appellant sought the annulment of the award alleging the partiality of one of the arbitrators, since the Appellee had been represented in court by the law firm of the spouse of one of the arbitrators whilst the arbitral proceedings had already been initiated
 
Author(s): Joao Bosco Lee, Lee, Taube, Gabardo Sociedade de Advogados
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Brazil
 
Brazil Full text Full text as PDF
 
 
 
 
 
BGH – I ZR 245/19, Federal Court of Justice of Germany, I ZR 245/19, 26 November 2020
 
The United Nations Convention on Contracts for the International Sale of Goods (“CISG”) may apply to the question of whether the parties effectively concluded an arbitration agreement where the formal requirements of Art. II (2) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“NYC”) have not been met.  In such cases recourse can be made to national substantive law (including the CISG) and conflict-of-law rules, by way of the most-favored-nation principle under Art. VII (1) NYC.  The formal validity of an arbitration agreement, on the other hand, even in a contract subject to the CISG, is governed by more specific provisions in the NYC or Sec. 1031 of the German Code of Civil Procedure (Zivilprozessordnung, or “ZPO”).  In the context of a conflict-of-law analysis, Art. V (1) (a) NYC determines the law applicable to the formation and validity of an arbitration agreement.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
OLG Frankfurt am Main – 26 Sch 14/20, Higher Regional Court of Frankfurt am Main, 26 Sch 14/20, 26 November 2020
 
A third-party intervention pursuant to Sec. 66 (1) of the German Code of Civil Procedure (Zivilprozessordnung, or “ZPO”) is admissible in a setting-aside proceeding against an arbitral award if the intervenor demonstrates a legitimate interest in the prevailing of one party over the other in this proceeding.  The court seized in the setting-aside proceeding is limited in its power of judicial review by the prohibition of révision au fond with regard to questions concerning the assessment of evidence.  Errors in the assessment of evidence by the arbitral tribunal do not, in principle, constitute a breach of the ordre public which would justify the setting-aside of an award.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
BayObLG – 1 Sch 90/20, Highest Regional Court of Bavaria, 1 Sch 90/20, 29 October 2020
 
If the more recognition-friendly requirements of national law, taken into account pursuant to Art. VII (1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “NYC”), are fulfilled, neither the submission of the arbitration agreement nor of a certified translation thereof is necessary.  It is permissible for the court to specify a foreign arbitral award in such a way that it can have the same effects as a corresponding German title.  A penalty interest clause, which requires payment of a daily interest of 0.1% of the value of goods in case of default, does not violate public policy.
 
Author(s): Richard H. Kreindler, Cleary Gottlieb Steen & Hamilton LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Germany
 
Germany Full text Full text as PDF
 
 
 
 
 
X. v. Y. [2021] HKCFI 147, High Court of Hong Kong, Court of First Instance, Construction and Arbitration Proceedings No. 62 of 2018, 19 January 2021
 
In a rare move, the Hong Kong Court of First Instance has refused to enforce an arbitral award, rejecting an appeal from its earlier decision to set aside the enforcement order. 

The decision highlights that the courts may be slow to apply the “one-stop-shop” presumption in commercial dealings involving different – and potentially competing – jurisdiction clauses. In such situations, the courts may revert to the “closest connection” test, out of respect for commercial realities and party autonomy. 

The decision also reminds parties and arbitrators alike of the importance of due process. The Court reiterated that, in deciding whether to exercise its discretion not to enforce an award, it must consider standards of due process under Hong Kong law. Interference with due process, if sufficiently serious or egregious, may render an arbitral award unenforceable.
 
Author(s): Briana Young, Herbert Smith Freehills
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Hong Kong
 
Hong Kong Full text Full text as PDF
 
 
 
 
 
Lau Lan Ying v. Top Hill Company and another [2021] HKCFI 290, High Court of Hong Kong, Court of First Instance, Personal Injuries Action No. 6 of 2020, 04 February 2021
 
The Hong Kong Court of First Instance stays third party proceedings commenced by an insured against an insurer, on the basis that the parties are bound by the arbitration clause contained in the insurance policy. Despite the outcome being that the main action and the third party proceedings will ultimately be pursued in different forums, by upholding the parties’ contractual agreement to arbitrate, the Court reinforces its pro-arbitration credentials and the principle of party autonomy.
 
Author(s): Briana Young, Herbert Smith Freehills
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Hong Kong
 
Hong Kong Full text Full text as PDF
 
 
 
 
 
Instar Logistics LLC v. Nabors Drilling International Limited, Supreme Court of the Russian Federation, А40-149566/2019, 12 October 2020
 
The Supreme Court of the Russian Federation confirmed the decisions of lower instance courts, holding that the U.S. restrictive measures introduced against one of the parties to the contract with an ICC arbitration clause can render it inoperative and result in the unilateral amendment of the arbitration clause. As a result, the court allowed to amend the arbitration clause and to subject the disputes to the jurisdiction of Russian courts. Given that both party could not reasonably anticipate the imposition of the U.S. restrictive measures, and that the affected party suffered damages as a result of the improper performance of the contract by the other party, the amendment of the arbitration clause would be the only possible remedy to restore the legal interests of the parties, in courts’ opinion.
 
Author(s): Elena S. Burova, Ivanyan and Partners
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Russian Federation
 
Russian Federation Full text Full text as PDF
 
 
 
 
 
BGer – 4A_418/2019, Federal Supreme Court of Switzerland, 1st Civil Law Chamber, 4A_418/2019, 18 May 2020
 
The Swiss Federal Supreme Court (the “Supreme Court”) refused to vacate an arbitral award declining jurisdiction rendered under the UNCITRAL (United Nations Commission on International Trade Law) rules, thus reaffirming its longstanding case-law that annulment proceedings do not allow for a review of the arbitral tribunal’s interpretation of an arbitration agreement, to the extent that such interpretation relies on the tribunal’s assessment of the evidence and its factual determinations.
 
Author(s): Georg von Segesser, von Segesser Law Offices
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Switzerland
 
Switzerland Full text Full text as PDF
 
 
 
 
 
A. v. Hellenic National Council for Combating Doping (ESKAN), Federal Supreme Court of Switzerland, 1st Civil Law Chamber, 4A_618/2019, 17 September 2020
 
The Swiss Federal Supreme Court (the “Supreme Court”) dismissed an application to set aside a Court of Arbitration for Sports (“CAS”) award declining jurisdiction based on an investigation of facts conducted proprio motu by the sole arbitrator in a case where the respondent had failed to participate. The case reinforces the Supreme Court’s standing jurisprudence both on the tribunal’s competence to examine its jurisdiction in default proceedings and on the high threshold applicable where a violation of procedural public policy is alleged.
 
Author(s): Georg von Segesser, von Segesser Law Offices
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Switzerland
 
Switzerland Full text Full text as PDF
 
 
 
 
 
BGer – 4A_124/2020, Federal Supreme Court of Switzerland, 1st Civil Law Chamber, 4A_124/2020, 13 November 2020
 
The Swiss Federal Supreme Court (the “Supreme Court”) granted an application to set aside an International Chamber of Commerce (“ICC”) partial final award on jurisdiction on the ground that the arbitral tribunal had improperly upheld its jurisdiction over a non-signatory based on certain actions perceived as an expression of implied consent.
 
Author(s): Georg von Segesser, von Segesser Law Offices
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Switzerland
 
Switzerland Full text Full text as PDF
 
 
 
 
 
X. v. Y., Court of Cassation of Dubai, Appeal No. 153 for 2020 (Commercial Challenge), 08 March 2020
 
This case involved a dismissal of the Claimant’s claim before the Dubai courts because of the existence of an arbitration clause. The Claimant – a limited liability company – initiated court proceedings and argued that the arbitration clause was void on the basis of an alleged lack of authority. The Court of Cassation rejected the Claimant’s argument, and confirmed that a manager of a limited liability company has the authority to agree to arbitration, unless the company’s memorandum of association restricts his authority by excluding the right to agree to arbitration. The Dubai Court of Cassation upheld the lower court’s decision to dismiss the Claimant’s claim because of the existence of the arbitration clause.
 
Author(s): John Gaffney, Al Tamimi & Company
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: United Arab Emirates
 
United Arab Emirates Full text Full text as PDF
 
 
 
 
 
LLC SPC Stileks v. The Republic of Moldova, United States Court of Appeals, District of Columbia Circuit, 19-7106 & 19-7142, 15 January 2021
 
A Ukrainian energy provider sought to confirm a foreign arbitral award rendered against Moldova concerning a decade-long payment dispute.  The D.C. Circuit confirmed the $58 million arbitral award and the award of pre-judgment interest despite pending set aside proceedings.

The D.C. Circuit also found that the arbitral award was rendered pursuant to the Energy Charter Treaty and thus fell within the arbitration exception to the Foreign Sovereign Immunities Act; the court did not have authority to decide the arbitrability issue because the parties had assigned it to the arbitral tribunal; the district court acted within its discretion in lifting the stay; and the district court abused its discretion when it converted the award from Moldovan lei to U.S. dollars.
 
Author(s): Daniela Bravo, King & Spalding LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: United States of America
 
United States of America Full text Full text as PDF
 
 
 
 
 
Servotronics, Inc. v. Rolls-Royce PLC and The Boeing Company, United States Court of Appeals, Seventh Circuit, 19-1847, 22 September 2020
 
The U.S. Court of Appeals for the Seventh Circuit (“7th Circuit”) agreed with the U.S. Court of Appeals for the Second and Fifth Circuits in holding that 28 U.S.C. § 1782(a) (“Section 1782(a)”) does not permit U.S. district courts to provide discovery assistance (i.e., to order a person or entity to give testimony or produce documents) for use in private foreign arbitrations.

Based on the statutory context, the 7th Circuit held that it “becomes far less plausible” to construe a private foreign commercial arbitration as being included in the phrase “a proceeding in a foreign or international tribunal” within the meaning of Section 1782(a). The 7th Circuit considered that a broader interpretation of “foreign or international tribunal” would create a “serious conflict” with the Federal Arbitration Act, 9 U.S.C. §§ 1-15 (“FAA”) because the discovery available under Section 1782(a) permits not just foreign tribunals but also litigants and other “interested persons” to obtain discovery orders, whereas the FAA only permits a domestic arbitral tribunal (and not the parties themselves) to do so.  The 7th Circuit also held that the only U.S. Supreme Court case addressing Section 1782(a), Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), was concerned with whether a foreign government agency with quasi-judicial powers was a “foreign tribunal” under Section 1782(a).  The 7th Circuit therefore considered that Intel did not hold that a private foreign or international tribunal was included within Section 1782(a).
 
Author(s): Hanna Azkiya, King & Spalding LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: United States of America
 
United States of America Full text Full text as PDF
 
 
 
 
 
Tarek A. Fouad v. The State of Qatar, United States Court of Appeals, Ninth Circuit, No. 20-55531, 16 February 2021
 
On February 16, 2021, the U.S. Court of Appeals for the Ninth Circuit rejected a shareholder derivative action brought by a minority shareholder on behalf of a consulting service company against the State of Qatar and the Qatar Armed Forces (collectively, the “Qatar Defendants”) (and nominally against the consulting service company, real party in interest).  The dispute arose out of the Qatar Defendants’ alleged failure to pay dues owed under a defence consultancy services agreement, and the Qatar Defendants’ subsequent agreement to settle the dispute with the two other shareholders of the consulting service company, which plaintiff alleged was procured by fraud.  The consultancy agreement provided that any disputes arising from the arrangement would be arbitrated under the rules of the International Chamber of Commerce International Court of Arbitration (“ICC”) in London, England (or any other venue parties agreed on), and the settlement agreement designated the courts of Qatar as the proper forum for the resolution of disputes.  After two unsuccessful attempts to bring the dispute to the ICC (due to non-payment of fees and voluntary withdrawal), the plaintiff, a resident of California, brought a suit in the U.S. District Court for the Central District of California.  The Qatar Defendants filed motions to dismiss, arguing immunity from suit and improper forum.  The plaintiff opposed the motions to dismiss, and filed a motion to stay case and compel arbitration.  The district court denied the plaintiff’s motion to stay the case and compel arbitration, and granted Qatar Defendants’ motion to dismiss on the basis of improper venue.

On appeal, the plaintiff argued that the district court erroneously dismissed the suit on the basis of improper venue, and erroneously failed to compel arbitration in London.  The Ninth Circuit rejected the plaintiff’s appeal.  First, it found that the plaintiff had failed to factually and legally demonstrate any of the grounds required to invalidate the existing forum selection clause in the settlement agreement.  Second, it found that the plaintiff had waived his argument that the district court erred in failing to compel arbitration in London pursuant to the forum selection clause in the consulting agreement.  The Ninth Circuit noted that the plaintiff had previously asked the district court to compel arbitration in California (by seemingly arguing that Qatar had consented to arbitrate in any signatory jurisdiction since Qatar is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”)).  The Ninth Circuit also noted that the plaintiff did not contest the district court’s order denying his motion to compel arbitration in California in his appellate briefings.  Finally, the Ninth Circuit found that the plaintiff waived the argument that the district court erred in ruling on the arbitrability of the dispute, specifically whether the forum selection clause in the settlement agreement violated the plaintiff’s due process rights.  The plaintiff had not challenged the competence of the district court, and had in fact submitted the question of arbitrability of his claims there.
 
Author(s): Viva Dadwal, King & Spalding LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: United States of America
 
United States of America Full text Full text as PDF
 
 
 
 
 
Georgetown Home Owners Association, Inc. v. Certain Underwriters at Lloyd's, London, United States District Court, Middle District of Louisiana, CV No. 20-102-JWD-SDJ, 02 February 2021
 
The U.S. District Court for the Middle District of Louisiana granted the Defendants’ motion to compel arbitration.  The court found that the arbitration agreement between the parties was governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and was enforceable.
 
Author(s): Erin Collins, King & Spalding LLP
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: United States of America
 
United States of America Full text Full text as PDF
 
 
 
 
 
Legislation (1)
 
 
Russian Law Introduces Criminal Liability for the Bribery of an Arbitrator
 
As of November 2020, Russian Criminal Code (newly introduced Article 200.7) imposes criminal liability for the bribery of an arbitrator. Russian law now envisages criminal penalties both for: (i) bribing an arbitrator, and (ii) an arbitrator illegally receiving money, other property or services for performing certain actions (inactions) in the interests of a certain person.

The punishments may vary depending on the amount of bribery and other relevant circumstances (such as group bribery upon a preliminary collusion).

Those found guilty of bribing an arbitrator may be punished by:

(i)        In case of a significant bribery (which qualifies as exceeding 25 000 RUB) - up to three years’ imprisonment and a fine of up to 10 times the amount of the bribe;

(ii)       In case of a large bribery (which qualifies as exceeding 150 000 RUB) – from three up to seven years’ imprisonment and a fine of up to 30 times the amount of the bribe;

(iii)      In case of a particularly large bribery (which qualifies as exceeding 1 000 000 RUB) - from four up to eight years’ imprisonment and a fine of up to 40 times the amount of the bribe.

The punishment of arbitrators found guilty of accepting a bribe may be:

(i)        In case of a significant bribery - up to five years’ imprisonment and a fine of up to 20 times the amount of the bribe;

(ii)       In case of a large bribery– from five up to nine years’ imprisonment and a fine of up to 40 times the amount of the bribe;

(iii)      In case of a particularly large bribery - from seven up to twelve years’ imprisonment and a fine of up to 50 times the amount of the bribe.

These developments aim at combatting the bad-faith arbitral institutions, which did not receive the government authorization to administer arbitral proceedings in accordance with Russian law, and instead continue their corrupted practices as ad hoc arbitration. Furthermore, this was introduced to comply with Russia’s international obligations relating to its accession to the Council of Europe Criminal Law Convention on Corruption, the additional protocol to the convention and the Group of States against Corruption recommendations for the criminalization of bribery of national and foreign arbitrators.
 
Author(s): Elena S. Burova, Ivanyan and Partners
 
Source: A contribution by the ITA Board of ReportersDate: 24 Feb 2021
 
Reporter for: Russian Federation
 
Russian Federation Full text
 
 
 
 
 
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