Jurisdiction in International Arbitration

International arbitration is, by its very nature, multi-jurisdictional. The international element could come from the parties being located in different jurisdictions, or perhaps having elected to refer disputes to a forum connected to a jurisdiction common to one, all or none of them. There are many factors that play into this decision. For example, one party may want ‘home court’ advantage, or be concerned as to the limit of remedies available in the jurisdiction where the underlying work is taking place. Another party may be more familiar with dispute resolution within a specific jurisdiction, or have easier access to resources if a dispute is determined in a certain place. The overlay to this is the governing law agreed between the parties – it is not unusual for an arbitration tribunal in one jurisdiction to determine a claim governed by the laws of another jurisdiction. The governing law and jurisdiction can be entirely unrelated to the location of the subject matter of the contract.

To read the full text of this post by Duane Morris attorney Chris Recker, please visit the Duane Morris International Arbitration Blog.

June 20, 2022June 20, 2022 by Oliver Kent

All small claims are equal, but some small claims are more equal than others

By Oliver Kent and Sam Laycock

Disgruntled holidaymakers who have suffered delay at the hands of their airlines are among the potential claimants who may soon find that the familiar phrase, “I’ll see you in court”, doesn’t quite have the same impact it used to. Enter: the ‘Small Claims Paper Determination Pilot’ (“the Pilot”). Introduced under the 143rd Practice Direction Update as PD 51Z¹, this update applies to proceedings issued after 1 June 2022 and allows the Courts to determine the outcomes of matters allocated to the small claims track without a hearing (i.e. on paper) and ultimately, without reference to the parties concerned.²
Continue reading “All small claims are equal, but some small claims are more equal than others”

January 17, 2022November 8, 2022 by Vijay K. Bange

Revenge of the Energy Charter Treaty!

The ongoing fall out from the Achmea Decision

At the end of last year we wrote an article about the impact and uncertainty caused by the Achmea case on investor state dispute settlement provisions contained in intra-EU Bilateral Investment Treaties. We wrote about the likelihood of further cases that would either give clarity or create further uncertainty. The saga continues.

In the Achmea case the Court of Justice of the European Union (ECJ) held that Article 8 of the Netherlands – Slovakia bilateral investment treaty, which allowed for the resolution of disputes by way of arbitration, was incompatible with EU law. The rationale for the decision was that a tribunal may have to interpret or apply EU law and where a question of law arose, unlike a Member State court, that question of law could not be referred to the ECJ. In other words, intra-EU bilateral investment treaty arbitration provisions, as reasoned by the ECJ, deprived the EU courts of jurisdiction in respect of the interpretation of EU law.

We raised the prospect that the ramifications from the decision were potentially far reaching and were not, it seemed, confined to the BIT between Netherlands and Slovakia.

We reasoned that the possible conclusion for intra-EU investment treaty arbitrations, it seems, is that tribunals may have to begin to accept the inevitable, which is to say that they may no longer have jurisdiction to deal with disputes arising from claims under intra-EU investment treaties. Even if the tribunal concludes that it has jurisdiction to hear a dispute, following the Raiffeisen Bank case it is likely that there will be a real risk that the arbitration will either be dismissed by a domestic court of a member state of the EU, or possibly that any potential award is likely to be unenforceable within the EU, albeit that questions remain regarding enforceability of awards in jurisdictions outside the EU in say, the US or the UK.

However, less obvious is the impact of the Achmea case on multinational or multilateral investment treaties which may involve signatories from various EU member states as well as countries outside of the EU. For example, can an investor from an EU member state commence an arbitration against another EU member state pursuant to the dispute resolution provisions of multinational investment treaty simply because that treaty has signatories that include countries from jurisdictions outside of the EU.

This particular issue has been playing out over the past few years in the context of the Energy Charter Treaty (ECT) and in two particular cases.

Background

The Rockhopper Case

In 2015 the Italian Parliament re-introduced a ban on oil and gas exploration within 12 miles of the Italian coastline. The ban had previously been introduced in 2010 but revoked in 2012.

In 2017, Rockhopper Exploration Plc (based in the United Kingdom), along with its Italian subsidiary, filed a claim for compensation alleging violations of the investor protection provisions of the Energy Charter Treaty. The case is Rockhopper Italia SpA, Rockhopper Mediterranean Ltd. and Rockhopper Exploration Plc v. Italian Republic in the International Centre for Settlement of Investment Disputes (Rockhopper).

The claim concerned interests of the Rockhopper Corporation in the Ombrina Mare oil rig, for which it was hoping to obtain a production concession from the Italian Government prior to the introduction of the ban. The company is claiming compensation both for funds spent and for anticipated profits, which may run to USD $200-300 million.

Around June 2019, Italy invited the tribunal to recuse itself on the basis that it lacked jurisdiction following the Achmea decision, which barred in intra-EU arbitration emanating from bilateral investment treaties. The tribunal rejected Italy’s position on the basis that the Achmea decision had no application to the ECT (in other words it was limited to the specific circumstances of that case) which is a multinational or multilateral investment treaty that includes nations outside of the EU. The tribunal concluded that in any event, the dispute involved Italy’s alleged breaches of the ECT and the application of public international law. EU law, the tribunal reasoned, had no application to the present dispute.

Moldova

Fast forward two years to September 2021, and the issue of the Achmea case and the ECT resurfaced in the case of Moldova v Komstroy LLC (Moldova) which was referred to the ECJ. Initially the case was about the interpretation of the term “investment” under the ECT. However, several member states urged the ECJ to also rule on the issue as to whether the arbitration provisions in the ECT are compatible with EU law.

Unsurprisingly the ECJ ruled that the ECT’s arbitration provisions fall foul of EU law to the extent that the dispute involves an investor from an EU member state suing an EU member state. The ECJ relied once again on the rationale of the Achmea case i.e. that such tribunals deprived the EU courts of jurisdiction in respect of the interpretation of EU law.

Rockhopper 2.0

Following the ECJ’s decision in the Moldova case, towards the end of 2021, Italy urged the tribunal in the Rockhopper case to reconsider its previous 2019 decision (as above) and recuse itself for lack of jurisdiction.

The tribunal once again rejected Italy’s position although the reasons for the decision are not yet available. One suspects that the tribunal may have continued to rely upon the fact that the dispute does not involve the application of EU law and that the ECT, which forms part of public international law, cannot simply be ignored by Italy.

Comment

The ECJ’s position is problematic and to some extent devoid from reality.

For example, one of the main issues with the ECJ’s conclusion in Moldova is the creation of a two tier system in respect of the ECT. Where the dispute involves an EU member state and the investor is from outside the EU, that investor can rely upon the full benefit of the arbitration provisions in the ECT whereas an investor from within the EU cannot (according to the analysis of the ECJ). No such two tier system has been expressly provided for in the ECT.

Secondly, treaties such as the ECT amount to something that is akin to an international contract. The signatories are required to perform their obligations in accordance with the rules of such treaties and the arbitration provisions provide a mechanism for investors to enforce their rights. A dispute of this nature involves the application of international law and the terms of the ECT.

At present it appears that arbitral tribunals appointed pursuant to the ECT seem to agree and will for the time being reject any arguments, based upon the Achmea case, regarding their jurisdiction as evidenced by Rockhopper.

While that may give some degree of the comfort to investors, questions remain about the enforceability of the awards. It is no good for an investor taking the time and no doubt significant expense in concluding an arbitration under the ECT only to find that the award will not be enforced. Based upon the position adopted by the ECJ in Achmea and the German Supreme Court in Raiffeisen Bank it seems inevitable that an investor will not be able to enforce the award within a member state of the EU.

However, it remains to be seen how jurisdictions outside of the EU will react, most notably the US. If a tribunal has concluded that it has jurisdiction under a multinational treaty like the ECT and an award is issued, on what basis should jurisdictions outside of the EU concern itself with decisions of the ECJ, like Achmea, when enforcing awards. International treaties such as the ICSID and the New York Convention suggest that decisions of the ECJ should have little baring and the award should be enforced. This remains an open ended issue and only time will tell how jurisdictions outside of the EU will react to the enforcement of awards.

Looking at the Achmea decision in the context of the global energy crisis, the cost of fuel and other energy prices for industry and the public has been in the news over many months. The effect of these fluctuations in energy prices may have contributed to the super-inflation in prices impacting various sectors including construction. It’s not surprising that there will inevitably be disputes or referrals to arbitration concerning energy tariff agreements and the like. The importance of the ECT is ever more relevant for global trade deals in this sector. Preserving the ability of parties to rely on ECT to resolve disputes is an international trade issue, and any decision that effects the ECT may have serious ramifications for EU trade. For reasons of international trade relations there may also be good policy reasons for distinguishing international trade agreements, such as the ECT, from intra- EU treaties.

The Achmea decision continues to cause uncertainty. At this stage it seems a step too far that the decision can impact upon multilateral treaties such as the ECT by removing the jurisdiction of tribunals in intra-EU disputes. In the author’s view that is to be applauded, parties who have agreed to submit disputes to arbitration should not be able to unilaterally retract that agreement. Nonetheless this is unlikely to be the end of the saga, and it will be interesting to see how this issue continues to unravel.

Vijay K. Bange (Partner)

Matthew Friedlander (Senior Associate)

January 13, 2022April 6, 2023 by Vijay K. Bange

Using Technology in Arbitration: Necessity or Choice?

By Vijay Bange and Tanya Chadha

The global pandemic continues to challenge us, with various measures ranging from further lockdowns to restrictions on in-person meetings. The judicial machinery, including that in the arbitration world, has continued to function throughout the pandemic notwithstanding the difficulties of embracing innovative processes and new technology.

In January 2021, Vijay Bange wrote an article examining the challenges of using technology in formal dispute resolution proceedings. Whilst technology has of course been used in international arbitration and high court litigation (particularly in the Technology & Construction Court) for quite some time, that use has been somewhat limited with parties, their legal counsel, and the tribunal often preferring in-person hearings and hard copy papers. 2021 however saw a dramatic rise in the use of technology in dispute resolution proceedings. This was almost certainly borne out of necessity as a result of the COVID-19 pandemic, rather than necessarily by choice or organic progression. If disputes were to continue to be resolved, parties had no option but to get to grips with remote hearings, electronic bundles and virtual breakout rooms. Whilst some inevitably faced technological and logistical stumbling blocks, the move to virtual hearings and electronic working proved largely successful with many disputes being resolved expeditiously along the way. In fact, the move towards technology was so successful that many people are now opting to use technology out of choice and not simply out of necessity. Continue reading “Using Technology in Arbitration: Necessity or Choice?”

April 14, 2021April 14, 2021 by Steve Nichol

Multiplex v Bathgate: Legal Riddles and Unsolvable Problems

Mr Justice Fraser’s decision in Multiplex Construction Europe Ltd v Bathgate Realisation Civil Engineering Ltd and Others is one of the more curious decisions you will ever read.

Not that I would particularly encourage anyone to read it. The case necessitated some pretty comprehensive and in-depth legal analysis that means the judgment runs to some 206, fairly dense, paragraphs, and an Appendix; I would challenge even the most avid consumer of legal treatises to read the whole thing in one sitting without their eyes glazing over at some point. Helpfully, my colleague Vijay Bange has already produced a very useful summary of the decision and its legal implications here.

However, the density and depth of the judgment does not mean it is without interest; far from it. In fact I suspect this case will prove to be one of the more fascinating legal tangles the Courts will be asked to unravel this year. This article looks at some of the more curious aspects of this dispute, away from the key aspects of the case. Continue reading “Multiplex v Bathgate: Legal Riddles and Unsolvable Problems”

April 13, 2021 by Duane Morris London

The Digital Age Still Needs Infrastructure

I am an unashamedly massive fan of the Back to the Future film franchise. Yes, even the sequels.

One of my favourite lines from the franchise is spoken at the end of the first film and the beginning of the second. Doc, Marty and Jennifer are about to travel to the distant future (2015, to be precise). When Marty points out there might not be enough road to get up to 88 mph, Doc flips down his brushed aluminium shades and intones: “Roads? Where we’re going we don’t need roads.” And the DeLorean flies off to the future thanks to an early 21^st century hover conversion.

Brings a smile to my face every time

Continue reading “The Digital Age Still Needs Infrastructure”

April 13, 2021 by Duane Morris London

Luck of the Law: Lessons to be Learned from Green v Petfre

They say that the house always wins, but as the recent case of Andrew Green -v- Petfre (Gibraltar) Limited t/a Betfred illustrates, even the house can get caught out sometimes.

When lucky punter Andrew Green won over £1.7m following a 5 ½ hour stint on Betfred’s ‘Frankie Dettori’s Magic Seven Blackjack’ game in January 2018, he was dismayed to find out a few days later that the company was refusing to pay out, claiming that there was a glitch in the game, and that the house rules stated that, in those circumstances, Betfred were not required to pay. Mr Green sued, and the matter eventually ended up in Court. Following a hearing on 15 October 2020, Mrs Justice Foster DBE granted Mr Green summary judgment and awarded him his winnings.

Continue reading “Luck of the Law: Lessons to be Learned from Green v Petfre”

March 10, 2021November 8, 2022 by Steve Nichol

GSEL v Sudlows: Adjudication enforcement, natural justice and challenging a decision

Introduction

Adjudication can be a frustrating experience, particularly for those who have been faced with a decision of the adjudicator that is quite obviously (to you) wrong, but nonetheless enforceable.

This situation arises because it has long been accepted that, in adjudication, “the need to have the “right” answer has been subordinated to the need to have an answer quickly…” per Chadwick LJ in Carillion v Devonport Royal Dockyard [2005] EWCA 1358.

The Court’s stance on this issue is born from the original intent of the statutory scheme, which was to provide a means for contractors and subcontractors to address cash-flow problems caused by illegitimate delays or refusals to pay. In order to achieve that, adjudication decisions have to bear the weight of authority, otherwise every adjudication decision would immediately be challenged by the losing party.

The Courts also take into account the fact that the adjudicator is tasked with deciding often very complex and detailed disputes in a very short period of time. Errors in decision-making from time to time are therefore inevitable, but the Courts have determined that that shouldn’t be allowed to undermine the process.

Continue reading “GSEL v Sudlows: Adjudication enforcement, natural justice and challenging a decision”