International Arbitration 2021

Global Overview – International Arbitration 2021

It has now been 15 months since the World Health Organization declared the COVID-19 virus outbreak a pandemic. While last year's Introduction was written against the backdrop of an evolving pandemic landscape rife with uncertainty, the dust now seems to have (at least somewhat) settled. Vaccination drives are slowly gathering pace and, in some parts of the world, aspects of life pre-pandemic no longer seem like a distant memory. Yet, it would be foolishly optimistic to proclaim that the end is either here or near. With case numbers rising, even in jurisdictions with aggressive vaccination statistics, many of the changes that have become part of daily life are likely to remain the norm for the foreseeable future. This is no different in the arbitration landscape.

The Impact of COVID-19

Some measure of remote working, filings, hearings and conferences will continue to reflect reality through to the end of 2021 and perhaps well into 2022. Each of these are measures that the arbitration community almost seamlessly transitioned to within the early months of the pandemic. Indeed, it is a testament to versatility that practitioners and arbitrators alike were able to rapidly evolve from expressing concerns over the efficacy of remote proceedings, to fully embracing it, and now suggesting a more permanent shift towards remote proceedings in a post-pandemic world.

As outlined below, these developments have been paralleled by judicial pronouncements and qualitative research on the legality of remote hearings. In addition, change in the arbitral landscape has also continued apace beyond the shadow of COVID-19, both in the fields of commercial and investment arbitration. Each will be addressed in turn.

Revisions to arbitral rules

In the realm of commercial arbitration, several institutions concluded the revision of their arbitration rules, while others appear primed to publish their updated rules in late 2021. New rules that came into force in January 2021 include the ICC Rules, which included changes to articles dealing with multiparty arbitration, party representation, disclosure of external funding, and the power of the ICC Court to appoint arbitrators. Tracking the 2020 LCIA Rules, the DIFC-LCIA Rules have also been amended to include provisions on the early determination of claims and defences, consolidation, and the digitalisation of proceedings.

In June 2021, the new Swiss Rules entered into force, with amendments dealing with remote hearings, cybersecurity, and paperless filings. The release of the rules also coincided with the inauguration of the Swiss Arbitration Centre, a joint venture between the Swiss Arbitration Association and Chambers of Commerce and Industry of Basel, Berne, Geneva, Lausanne, Lucerne, Lugano, Neuchatel and Zurich.

Looking ahead, P.R.I.M.E. Finance, a specialised Hague-based arbitral institution for banking and financial disputes, announced the end of a public consultation on its P.R.I.M.E. Finance Arbitration Rules. The final version of those rules is expected to be available in late 2021. SIAC’s rule revision process, which commenced last year, is also set to conclude by the third quarter of 2021.

Legislative amendments

Countries have continued to update their arbitration laws through legislative amendments.

India

In March 2021, the Indian Parliament passed amendments to the Arbitration and Conciliation Act, making this the third time the Act has been revised since 2015. Where an award in an India-seated arbitration is being challenged, the latest amendments permit the Indian Courts to grant an unconditional stay on enforcement without requiring that security for the award be posted. The stay is subject to the court being prima facie satisfied that the arbitration agreement, the contract on which the award is based, or the award itself, was induced or affected by fraud or corruption.

The amendments also remove the somewhat restrictive qualification requirements for arbitrators that had been introduced in a previous revision of the Act, which effectively precluded foreign qualified persons from servicing as arbitrators in Indian-seated cases. The qualifications, experience, and norms for accreditation of arbitrators will now be established by a separate regulation that is yet to be released.

Singapore

In October 2020, the Singapore Parliament passed a bill to amend the International Arbitration Act. These amendments, which were introduced after a public consultation process was conducted by the Singapore Ministry of Law, touch on two issues:

• default procedures in the appointment of arbitrators in multi-party disputes; and
• the power of tribunals and the Singapore courts to enforce confidentiality obligations.

It is also likely that the Act may see further revisions in the short term. As part of the consultation process, the Ministry of Law also considered other amendments, including provisions that permit parties to agree:

• to appeals on points of law to the Singapore courts;
• to limit or waive the grounds to set aside awards under the Singapore Act; and
• that the tribunal render preliminary rulings on jurisdiction. Should these amendments be adopted, they will further enhance party autonomy in arbitral proceedings.

Other jurisdictions

Some countries are also in the process of considering new changes to their arbitration laws. In September 2020, a draft bill was submitted to the Minister of Justice to modernise the arbitration provisions in the Luxembourg Code of Civil Procedure. The amendments are inspired by French arbitration law and the UNCITRAL Model Law on International Commercial Arbitration and seek to streamline arbitration proceedings, including by clarifying the applicability of the competence-competence principle and creating a specialist judge with jurisdiction over arbitration related court proceedings during the pendency of an arbitration. The bill proposes a unified set of rules that would apply to both domestic and international arbitration. Morocco is also considering amendments to its arbitration laws.

Caseload of arbitral institutions

Despite the challenges of the COVID-19 pandemic, new arbitration cases continued to commence unabated. A number of arbitral institutions recorded high numbers of new case filings. SIAC recorded 1,080 new case filings, a record for the institution. Other institutions also recorded sizable numbers with 444 new cases for the LCIA, 318 for HKIAC, and 946 for the ICC. Each of these institutions also continue to dominate the 2021 Queen Mary University of London and White & Case International Arbitration Survey, a recurring feature of the arbitration landscape that the industry has now grown to see as a periodic barometer of its progress. In this year’s roundup, the most preferred arbitral institution was the ICC, followed by the SIAC, HKIAC and LCIA. For the first time, the coveted spot of the most preferred arbitral seat was jointly awarded to London and Singapore, with Hong Kong, Paris following suit. The survey reflects the growing prominence of arbitral seats in Asia.

The development of arbitral jurisprudence

National apex courts delivered several judgments that had a meaningful impact on the development of arbitral jurisprudence. Perhaps the most prominent of these that captivated the attention of the arbitration community were rendered by the UK Supreme Court.

Halliburton v Chubb (England and Wales)

The year 2020 drew to a close with the much-awaited decision in Halliburton v Chubb. In a lengthy judgment that canvassed the state of English law, the Court made a number of useful findings on arbitrator bias and repeat appointments, including that repeat appointments are not per se precluded and their propriety will depend on the facts of each case and the customs and practice of the relevant sector of arbitration.

Enka İnşaat ve Sanayi AŞ v OOO Insurance Company Chubb (England and Wales)

The Halliburton judgment was followed in quick succession by another notable case: Enka İnşaat ve Sanayi AŞ v OOO Insurance Company Chubb on the law applicable to arbitration agreements. Finally settling a vexed question (at least under English law), the court held that the law applicable to the arbitration agreement would be that expressly or impliedly chosen by the parties, and in the absence of such choice, the law “most closely connected” with the arbitration agreement. The court also clarified that the implied choice would be the law governing the contract, absent contrary indications. The issue has arisen once again, and will be discussed in the appeal in Kabab-I SAL v Kout Food Group. While it remains to be seen how courts in other jurisdictions resolve this question, given the role English courts have historically played in the development of arbitral jurisprudence, the decision in Enka v Chubb is likely to be closely analyzed by other apex courts.

Case No 4A_124/2020 (Switzerland)

Elsewhere in continental Europe, apex courts in Switzerland and Austria also rendered important decisions. In Switzerland, the Swiss Federal Supreme Court in Case No 4A_124/2020 touched on the extension of arbitration agreements to non-signatories. The Court held that simply listing a non-signatory in the contract as the provider of some services does not suffice to bind a non-signatory to the arbitration agreement. This ruling somewhat deviates from the well-established practice of the Federal Supreme Court that the extension of the arbitration agreement to third parties should not be made subject to excessively strict requirements.

Docket No 18 ONc 3/20s (Austria)

In Austria, and in step with the need of the hour in the COVID-19 pandemic, the Supreme Court delivered a landmark decision under Docket No 18 ONc 3/20s on the use of videoconferences. The Court held that videoconferences are often used in arbitration proceedings and that a Tribunal is not precluded from utilising the tool simply because a party objects and any decision to do so over the objection of a party does not violate Article 6 of the European Convention on Human Rights. Article 6 embodies the right to justice and effective legal protection, which can be protected through virtual hearings that give parties an opportunity to be heard. The decision sparked avid debate within the arbitration community on the right to a physical hearing. It was precisely that question which the ICCA Taskforce took on its project titled “Does a Right to a Physical Hearing Exist in International Arbitration” (discussed below).

PASL Wind Solutions Private Limited v GE Power Conversion India Private Limited (India)

Further east in India, the Supreme Court’s judgement in PASL Wind Solutions Private Limited v GE Power Conversion India Private Limited provided much clarity on the use of foreign seats in disputes between Indian parties. Resolving a split amongst lower courts, the Court found that there was no prohibition on such use of foreign seats and it would not, in principle, violate Indian public policy. The decision is a welcome endorsement of party autonomy, which in the words of the Court, the “decks have now been cleared to give effect to.”

Remote hearings and the right to physical hearings

As mentioned above, the ICCA, in collaboration with practitioners Giacomo Rojas Elgueta, James Hosking, and Yasmine Lahlou, launched the research project titled “Does a Right to a Physical Hearing Exist in International Arbitration” on 4 September 2020. The project consists of 77 national reports of countries that are party to the New York Convention. The conclusion was unanimous: there is no explicit right to a physical hearing in any of the surveyed jurisdictions. It may, however, be possible to infer such a right under Ecuadorian law on the basis of principles of civil procedure law and constitutional guarantees. In other jurisdictions, like Benin, Norway and Tunisia, the possibility of such an inferred right remains uncertain.

"Green arbitration" initiatives

Given the well-documented carbon footprint that international arbitration carries, the past year has seen a remarkable and positive increase in support for “green arbitration” initiatives. This movement has no doubt been propelled by the realisation of the COVID-19 pandemic that arbitration can (in most cases) be successfully managed virtually, whether it be remote hearing, filings or conferences. While the 2021 Queen Mary Survey suggests that the environment is not a crucial reason for parties opting for remote hearings, it will be interesting to see whether that rationale gains more ground as conversations around environmental preservation continue to gather steam.

Investment Arbitration

Turning more specifically to investment arbitration, the past year has also seen a number of notable developments in that sphere, with five of the more prominent ones noted below.

Investor-State dispute settlement

There has been marked progress in the discussions on investor-State dispute settlement (ISDS) reform that have been taking place for a number of years in UNCITRAL’s Working Group III. At the meeting in February 2021, draft provisions for an appellate mechanism were consolidated, which addresses issues such as the scope and standard of review of the appellate mechanism, grounds for appeal, the effect of an appeal, and timelines for appellate procedure. In relation to this, the Secretariats of UNCITRAL and ICSID produced their jointly prepared Draft Code of Conduct for Adjudicators in ISDS. The Code addresses a range of issues including duties and responsibilities of adjudicators, independence and impartiality, conflicts of interest and disclosure obligations, limits on multiple roles (or double-hatting), availability, confidentiality and fees.

Human rights and sustainable development

Recently concluded investment treaties continue to show a marked emphasis on human rights and sustainable development issues. Four new investment agreements signed in 2020 make express reference to human rights and/or the environment: the Japan-Morocco BIT, the Fiji-US TIFA, the Regional Comprehensive Economic Partnership, and the Hungary-Kyrgyzstan BIT. The UK now appears to have adopted a policy of referring to human rights and environmental issues in its investment agreements, which is apparent from the agreements it signed last year, including the Ukraine-UK Political, Free Trade and Strategic Partnership Agreement, the Côte d'Ivoire-UK Steppingstone Economic Partnership Agreement (EPA), Japan-UK Comprehensive EPA, Kenya-UK EPA, and the Joint Interpretative Instrument on the Agreement on Trade Continuity between the UK and Canada. The UN has also set up a working group to provide practical guidance to States in negotiating investment agreements that are compatible with human rights and the UN Guiding Principles on Business and Human Rights.

Brexit

With the Brexit transition period coming to an end, the EU and UK signed the Trade and Cooperation Agreement (TCA) on 24 December 2020. Perhaps a harbinger of more restrictive treaties to follow, the TCA has excluded some commonly seen substantive standards of protection on fair and equitable treatment and expropriation. Instead, in a manner reminiscent of the WTO agreements, the TCA contains more limited clauses on market access, national treatment, and most-favoured nation treatment. The more restrictive approach also permeates the provisions on dispute settlement: there is no ISDS mechanism in the TCA that instead only recognises State-to-State arbitration. The balance struck by the TCA is perhaps unsurprising when one considers the profile of the Contracting States that somewhat lessens the impetus for more robust investor protections.

Project finance as a protected investment

In a landmark ICSID decision, the Tribunal in Portigon AG v Kingdom of Spain (ICSID Case No ARB/17/15) held that project finance qualified as an investment protected under the ICSID Convention and the Energy Charter Treaty. The decision has opened the door for direct claims by project finance lenders, which may well increase claims faced by States given the number of foreign investment driven deals that are funded by project finance arrangements, notably in the infrastructure space.

Investor protections and State rights

While investment arbitration as a whole continues to recalibrate to find the optimal balance between investor protections and State rights, the commencement of new claims appears inevitable. A number events across sectors and geographies appear poised to trigger fresh arbitrations. Measures adopted by a number of States in response to COVID-19 have already prompting investors to threaten claims, including Chile’s measures affecting a concession at the Santiago International Airport, Peru’s suspension of toll fees, and an increase in sovereign debt defaults. Energy sector reforms in countries such as Mexico, France and Ukraine could also percolate to investment claims.

Technology companies

The increased and concerted efforts by States to regulate and, in some cases, crack down on technology companies is another area that is ripe for dispute. These include the measures by Australia against Google and Facebook on revenue sharing arrangements with local media companies, the ban on Twitter in Nigeria and the ban on Chinese apps in India following border clashes between those two States in mid-2020. These measures are founded on varied concerns of market-dominance, national security and public interest, although some measures are more facially legitimate than others.