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Choosing the right seat and right institutional rules Vilnius, 22 November 2013 Dr. Philipp Habegger LL.M., LALIVE* Chairman of the Arbitration Court of the Swiss Chambers’ Arbitration Institution * as of 1 January 2014: phabegger@lalive.ch. Importance of the seat of arbitration (I)

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Choosingtherightseatandrightinstitutionalrules

Vilnius, 22 November 2013

Dr. Philipp Habegger LL.M., LALIVE*Chairman ofthe Arbitration Court ofthe Swiss Chambers’ Arbitration Institution

*asof 1 January 2014: phabegger@lalive.ch

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Importanceoftheseatofarbitration (I)
  • a modern arbitrationlawortheadoptionofthe UNCITRAL Model Law (withorwithoutamendments) is not yetsufficienttocreate a favourableregimeforarbitration
  • Check carefullytheextentofwhichthelocalcourtsmayinterfereorareabletosupportthearbitralprocess
  • Check carefullytheregimeforthechallengeofarbitralawards: post-arbitration litigationmaybelengthyandcostlyatmanyplacesofarbitration!
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Importanceoftheseatofarbitration (II)Example: extentofcourtsupportandinterference
  • Challenge ofarbitrators in ad hoc proceedings: howmanyinstancesofcourtreview? Howlong do theproceedingstake? Suspensive effect?
  • Upon decision on challengeof an arbitralinstitution: isthere immediate courtreviewavailable? If so, howmanyinstances? Lengthofproceedings? Suspensive effect?
    • Switzerland: upon challengedecisionbyinstitutioncourtreviewofindependence/impartialityonly in thecontextof a challengeagainst an arbitralaward no potential forcreatingdelay
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Importanceoftheseatofarbitration (III)Setting-asideofarbitralawards/scopeofreview
  • Groundsforsettingasidesimilarto Art. V NYC or Art. 34(2) Model Law?
    • England: breachofagreedprocedure (Art. 68(2)(c) 1996 Act ~ Art. V(1)(d) NYC)
    • Switzerland: violationofrighttobeheardorequaltreatment (Art. 190(2)(d) PILA) orviolationofproceduralpublicpolicy (Art. 190(2)(e) PILA ~ Art. Art. V(1)(d) NYC) narrowerthan NYC
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Importanceoftheseatofarbitration (IV)Setting-asideofarbitralawards/scopeofreview
  • Groundsforsettingasidesimilarto Art. V NYC or Art. 34(2) Model Law? Whatisthe time-limit forrequesttosetaside an award?
    • England: unless excluded by agreement award may be appealed on a question of law if leave is granted by the court (Art. 69 1996 Act) !
    • Switzerland: time-limit forsettingasideapplicationonly 30 days (>< 3 monthspursuantto Art. 34(3) Model Law)
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Importanceoftheseatofarbitration (V)Setting-asideofarbitralawards/scopeofreview
  • Procedure: writtenor oral? Language? Permissibleevidence?
    • England: hearings, oral testimonies, needforbarristers (?!) costs!
    • Switzerland: usuallyoneexchangeofbriefsonly, no oral evidence
    • France, England, Germany, Sweden: oneofficiallanguage
    • Switzerland: French, Italian, German, Rumantsch, plus awards/documentsmaybesubmitted in English withouttheneedfortranslation!
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Importanceoftheseatofarbitration (VI)Setting-asideofarbitralawards/scopeofreview
  • Numberofcourtinstancesavailableforreview
    • England, France, Germany, Sweden: twoinstances settingasideproceedingsmaytakeyears!
    • Switzerland, Austria: setting aside application is directly heard by the country’s highest court (Switzerland: Swiss Federal Supreme Court; Austria: Austrian Supreme Court)
    • Switzerland: duration of setting aside proceedings on average 119 days since receipt of the application!
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Importanceoftheseatofarbitration (VII)Setting-asideofarbitralawards/scopeofreview
  • Costsofsettingasideproceedings:
    • Remember: party representation costs make biggest share of these costs. I.e. the longer and more complex the proceedings the more costly they will be
    • Check court fee schedule for party representation costs which may be compensated and costs of the court
    • In some jurisdictions costs of the court depend on amount in dispute  costs of the court may be extremely high if amount in dispute is high (e.g. Austria despite the one-tier review)
    • Switzerland: costs of the court capped at CHF 200’000.
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Importanceofchoiceofinstitutionalrules (I)

Powers ofinstitution: Limitation ofcourtinterference

Art. 1(4) Swiss Rules

Bysubmittingtheirdisputetoarbitrationunderthese Rules, thepartiesconfer on the Court, tothefullestextentpermittedunderthelawapplicabletothearbitration, all ofthepowersrequiredforthepurposeofsupervisingthearbitralproceedingsotherwisevested in thecompetentjudicialauthority, including … .

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Importance of choice of institutional rules (II)

Powers of institution: time-limits

Art. 2(3) Swiss Rules

Ifthecircumstances so justify, the Court mayextendorshortenany time-limit ithasfixedorhastheauthorityto fix oramend.

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Importance of choice of institutional rules (III)

Powers of institution: constitution of tribunal

Art. 5(3) Swiss Rules [~ Art. 10(3) UNCITRAL Rules]

In theeventofanyfailure in theconstitutionofthearbitraltribunalunderthese Rules, the Court shallhave all powerstoaddress such failureandmay, in particular, revokeanyappointmentmade, appointandreappointanyofthearbitratorsanddesignateoneofthemasthepresidingarbitrator.

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Importance of choice of institutional rules (IV)

Powers of institution: prevent/avoid guerilla-tactics

Article 13(2) Swiss Rules In exceptionalcircumstances, the Court may, after consultingwiththepartiesandanyremainingarbitrators:

(a) Directlyappointthereplacementarbitrator; or

(b) After theclosureoftheproceedings, authorisetheremainingarbitrator(s) toproceedwiththearbitrationandmakeanydecisionoraward.

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Importance of choice of institutional rules (V)

Powers of institution: expedient decisions (example)

Articles 11(1) and (2) Swiss Rules

1. A partyintendingtochallenge an arbitratorshall send a noticeofchallengetotheSecretariatwithin 15 days after thecircumstancesgivingrisetothechallengebecameknowntothatparty.

2. If, within 15 daysfromthedateofthenoticeofchallenge, all oftheparties do not agreetothechallenge, orthechallengedarbitratordoes not withdraw, the Court shalldecide on thechallenge.

Decisionusuallyrendered in lessthanoneweek after submissionto Special Committeeofthe Arbitration Court

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Importance of choice of institutional rules (VI)

Powers of institution: Cost Control

Article 40(1+4) Swiss Rules

1. The awardshallcontain a determinationofthecostsofarbitration. […]

4. Before rendering an award, termination order, […] the arbitral tribunal shall submit to the Secretariat a draft thereof for approval or adjustment by the Court of the determination on costs made pursuant to Articles 38(a) to (c) and (f) and Article 39. Any such approval or adjustment shall be binding upon the arbitral tribunal.

 Court usually takes not more than 3 days, but no other scrutiny of the award (>< ICC)

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Importance of choice of institutional rules (VII)

Efficient procedure: good faith

Article 15(7) Swiss Rules

All participants in thearbitralproceedingsshallact in goodfaith, andmakeeveryefforttocontributetotheefficientconductoftheproceedingsandtoavoidunnecessarycostsanddelays. The partiesundertaketocomplywithanyawardorordermadebythearbitraltribunaloremergencyarbitratorwithoutdelay.

 Appliestopartiesandtribunal!

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Importance of choice of institutional rules (VIII)

Efficient procedure: settlement facilitation

Article 15(8) Swiss Rules

Withtheagreementofeachoftheparties, thearbitraltribunalmaytakestepstofacilitatethesettlementofthedisputebefore it. Any such agreementby a partyshallconstitute a waiverofitsrighttochallenge an arbitrator’simpartialitybased on thearbitrator’sparticipationandknowledgeacquired in takingtheagreedsteps.

 Veryvaluabletool!

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Importance of choice of institutional rules (IX)

Efficient procedure: front-loaded procedure

Article 18(3) Swiss Rules

As a rule, theClaimantshallannextoits Statement of Claim all documentsandotherevidence on whichitrelies.

Article 19(2) (in fine) Swiss Rules

[…]As a rule, theRespondentshallannextoits Statement ofDefence all documentsandotherevidence on whichitrelies.

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Importance of choice of institutional rules (X)

Efficient procedure: closure of proceedings

Article 29(1) Swiss Rules

Whenitissatisfiedthatthepartieshavehad a reasonableopportunitytopresenttheirrespectivecases on matterstobedecided in an award, thearbitraltribunalmaydeclaretheproceedingsclosedwithregardto such matters.

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Importance of choice of institutional rules (XI)

Efficient procedure: interim measures (Art. 26 Swiss Rules)

3. In exceptional circumstances, the arbitral tribunal may rule on a request for interim measures by way of a preliminary order before the request has been communicated to any other party, provided that such communication is made at the latest together with the preliminary order and that the other parties are immediately granted an opportunity to be heard.

4. The arbitraltribunalmayrule on claimsforcompensationforanydamagecausedby an unjustifiedinterimmeasureorpreliminaryorder.

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Importance of choice of institutional rules (XII)

Efficient procedure: Emergency Relief (Art. 43 Swiss Rules)

  • Unlessthepartieshaveagreedotherwise, a partyrequiring urgent interimmeasurespursuanttoArticle 26 beforethearbitraltribunalisconstitutedmaysubmittotheSecretariat an applicationforemergencyreliefproceedings (hereinafter the «Application»).

 Partiesmayopt out byagreement

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Importance of choice of institutional rules (XIII)

Efficient procedure: Emergency Relief (Art. 43 Swiss Rules)

2. As soon as possible after receipt of the Application, the Registration Fee, and the deposit for emergency relief proceedings, the Court shall appoint and transmit the file to a sole emergency arbitrator, unless

(a) there is manifestly no agreement to arbitrate referring to these Rules, or

(b) it appears more appropriate to proceed with the constitution of the arbitral tribunal and refer the Application to it.

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Importance of choice of institutional rules (XIV)

Efficient procedure: Emergency Relief (Art. 43 Swiss Rules)

3. IftheApplicationissubmittedbeforetheNoticeof Arbitration, the Court shallterminatetheemergencyreliefproceedingsiftheNoticeof Arbitration is not submittedwithintendaysfromthereceiptoftheApplication. In exceptionalcircumstances, the Court mayextendthis time-limit.

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Importance of choice of institutional rules (XV)

Efficient procedure: Emergency Relief (Art. 43)

6. The emergencyarbitratormayconducttheemergencyreliefproceedings in such a mannerastheemergencyarbitratorconsidersappropriate, takingintoaccounttheurgencyinherent in such proceedingsandensuringthateachpartyhas a reasonableopportunitytobeheard on theApplication.

  • Byvirtueofthereferenceto Art. 26 Swiss Rules:
    • May grantinterimmeasure in the form of an award (Art. 26(2))
    • May issuepreliminaryorders (Art. 26(3))
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Importance of choice of institutional rules (XVI)

Efficient procedure: Emergency Relief (Art. 43)

8. A decisionoftheemergencyarbitratorshallhavethe same effectsas a decisionpursuanttoArticle 26. […]

10. Any measure granted by the emergency arbitrator ceases to be binding on the parties either upon the termination of the emergency relief proceedings pursuant to Article 43(3), upon the termination of the arbitral proceedings, or upon the rendering of a final award, unless the arbitral tribunal expressly decides otherwise in the final award.

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Importance of choice of institutional rules (XVII)

Efficient procedure: Emergency Relief (Art. 43)

9. The decision on theApplicationshallinclude a determinationofcostsasreferredto in Article 38(g). Beforerenderingthedecision on theApplication, theemergencyarbitratorshallsubmittotheSecretariat a draftthereofforapprovaloradjustmentbythe Court ofthedeterminationofcosts. […] The determinationofcostspursuanttoArticles 38(d) and (e) andtheapportionmentof all costsamongthepartiesshallbedecidedbythearbitraltribunal. Ifnoarbitraltribunalisconstituted, thedeterminationofcostspursuanttoArticles 38(d) and (e) andtheapportionmentof all costsshallbedecidedbytheemergencyarbitratorin a separate award.

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Importance of choice of institutional rules (XVIII)

Efficient procedure: Consolidation

Article 4(1) Swiss Rules

Where a Noticeof Arbitration issubmittedbetweenpartiesalreadyinvolved in otherarbitralproceedingspendingunderthese Rules, the Court maydecide, after consultingwiththepartiesandanyconfirmedarbitrator in all proceedings, thatthenewcaseshallbeconsolidatedwiththependingarbitralproceedings. The Court mayproceed in the same waywhere a Noticeof Arbitration issubmittedbetweenpartiesthatare not identicaltotheparties in thependingarbitralproceedings. Whenrenderingitsdecision, the Court shalltakeintoaccount all relevant circumstances, includingthe links betweenthecasesandtheprogressalreadymade in thependingarbitralproceedings. Wherethe Court decidestoconsolidatethenewcasewiththependingarbitralproceedings, thepartiesto all proceedingsshallbedeemedtohavewaivedtheirrighttodesignate an arbitrator, andthe Court mayrevoketheappointmentandconfirmationofarbitratorsandapplytheprovisionsofSection II (CompositionoftheArbitral Tribunal).

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Importance of choice of institutional rules (XIX)

Efficient procedure: Joinder

Art. 4(2) Swiss Rules

Whereoneormorethirdpersonsrequesttoparticipate in arbitralproceedingsalreadypendingunderthese Rules orwhere a partytopendingarbitralproceedingsunderthese Rules requeststhatoneormorethirdpersonsparticipate in thearbitration, thearbitraltribunalshalldecide on such request, after consultingwith all oftheparties, includingthepersonorpersonstobejoined, takingintoaccount all relevant circumstances.

 Variousformsofparticipationpossible: as additional ClaimantorRespondent, asamicuscuriae, asassistantto a party (>< ICC)

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Importance of choice of institutional rules (XX)

Efficient procedure: Expedited Procedure (Art. 42)

1. Iftheparties so agree, orifArticle42(2)isapplicable, thearbitralproceedingsshallbeconducted in accordancewith an ExpeditedProcedure […]:

(b) After thesubmissionoftheAnswertotheNoticeof Arbitration, thepartiesshall, as a rule, beentitledtosubmit a Statement of Claim, as Statement ofDefence (andcounterclaim) and, whereapplicable, a Statement ofDefence in replytothecounterclaim;

 Opting-in (Art. 42(1)) oramount in disputelessthan CHF 1’000’000 (Art. 42(2))

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Importance of choice of institutional rules (XXI)

Efficient procedure: Expedited Procedure (Art. 42)

1. Iftheparties so agree, orifArticle 42(2) isapplicable, thearbitralproceedingsshallbeconducted in accordancewith an ExpeditedProcedure […]:

(c) After thesubmissionoftheAnswertotheNoticeof Arbitration, thepartiesshall, as a rule, beentitledtosubmit a Statement of Claim, as Statement ofDefence (andcounterclaim) and, whereapplicable, a Statement ofDefence in replytothecounterclaim;

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Importance of choice of institutional rules (XXII)

Efficient procedure: Expedited Procedure (Art. 42)

1. Iftheparties so agree, orifArticle 42(2) isapplicable, thearbitralproceedingsshallbeconducted in accordancewith an ExpeditedProcedure […]:

  • …, thearbitraltribunalshall hold a singlehearingfortheexaminationofthewitnessesand expert witnesses, aswellasfor oral argument;
  • The awardshallbemadewithinsixmonthsfromthedate on whichtheSecretariattransmittedthefiletothearbitraltribunal. […]