Time, Costs, Lessons from the Persero arbitration

Justice delayed is justice denied. The Persero Cases are three cases fought out in Singapore between 2011 and 2015 that relate to the enforcement of arbitral awards from construction contracts. They are a series of fascinating battles between two Indonesian parties (PT Perusahaan Gas Negara (Persero) TBK, an Indonesian company, and CRW Joint Operation, an Indonesian joint operation (a jv that doesn’t involve the setting up of a new legal entity) to a FIDIC construction contract with the amount in dispute ranging between 13 and 18 million dollars. The cases are complex and bring up numerous important points that merit mention as separate blog posts. This particular post highlights the potential implications of time and costs in arbitration, if done badly.

Timeline

Consider the timeline:

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Judicial Intervention in Arbitration in India

[Editorial Note: Since this post was published, the outlook for arbitration in India has brightened. A revised version of this post will be published in due course]

Recently, on 10 May, 2013, the Supreme Court of India decided a case (ANTRIX CORP. LTD. Vs. DEVAS MULTIMEDIA P. LTD.) that appears to have bolstered the viability of international commercial arbitration in India (there have been other similar recent decisions in the last few years.)

The facts were:

Antrix, an Indian government owned entity and Devas Multimedia entered into a contract which contained an arbitration clause that said that in the event of a dispute, the parties will arbitrate their dispute using either the UNCITRAL or the ICC Rules (bad drafting.)

When Devas referred a contractual dispute to the ICC, Antrix, the government entity, possibly attempting to delay proceedings, attempted to constute a separate tribunal under the UNCITRAL rules after not replying to the ICC efforts at constituting a tribunal, thereby creating a dispute as to the identity fo the arbitrators. Then they asserted that the governing law of the agreement and the arbitration was Indian law (quoting Dicey, no less) and that under section 11 of the Arbitration and Conciliation Act, 1996 (the “Act”) if the parties do not agree on the choice of arbitrators or do not follow the agreed upon procedure then one party could petition the Chief Justice of the Supreme Court of India to supervise the process.

The reasoning was very suspect. Antrix maintained that the choice of rules should have been made after the constitution of the tribunal and that the unilateral reference to an ICC tribunal (as opposed to the UNCITRAL tribunal) violated the arbitration agreement. This line of reasoning is strange, since it is unclear exactly how one is to constitute a tribunal if one does not choose the institutional rules under which it is to be constituted. A chicken and egg situation.

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Bases on which to challenge an award under the Arbitration Act

Introduction

This blog post sets out some of the bases on which a party can challenge the enforcement of an arbitral award in England.

In England, The Arbitration Act, 1996 (the “Act“) provides a number of bases on which awards may be challenged, including section 67 (substantive jurisdiction, i.e. whether an arbitration agreement was in place underpinning the tribunal’s actions), section 68 (“serious irregularity”, i.e. where a tribunal “has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected”[1]) section 33 (general duties to be impartiality and expeditiousness), and points of law in section 69.

However, in Lesotho Highlands, the House of Lords made it clear that errors of law and adjudication are not generally grounds for setting aside awards,[2] i.e. a court will generally not be willing to overturn an award on the basis of the merits of the case.

Interim Arbitral Awards

I was faced with counsel on the other side that agreed to our choice of NY law in a contract but objected to our arbitration clause in the following manner:

“We have a policy against using arbitration, since it is expensive and doesn’t provide for injunctive relief.”

This response shocked me because this was experienced legal counsel from a very large company saying this.

Their opinion on cost irritated me because the arbitration clause we had proposed referred to an institution which would appoint one arbitrator and use simplified procedural rules for small disputes (some institutions will even have documents-only procedures as a default to keep costs low and procedures as short lived as possible. For example, the IEAC (www.expeditedadr.com )

But the whole notion that injunctive relief is not available under arbitration got me thinking.

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What does “null and void, inoperative and incapable of being performed” mean?

The phrase “null and void, inoperative and incapable of being performed” (the “Phrase”) is contained in Article II.3 of the Convention On The Recognition and enforcement of Foreign Arbitral Awards a.k.a the New York Convention (“Convention.”)

If two parties, A & B, A located in Albania, and B located in Burkina Faso have an arbitration agreement in places (most often because of an arbitration clause in an commercial agreement between them) and a dispute arises between them, party A may start legal proceedings  in a national court in Albania where it feels it has “home-court advantage” At that point, the B may approach the court in Albania showing evidence of the arbitration agreement and seek a stay on the legal proceedings so as to allow arbitration to proceed.  

Brevity in Arbitration Clauses

Every time I review the arbitration clauses in our template agreements, I wonder about the most succint, least ambiguous, way in which I can draft the arbitration clause.

The standard arbitration clause provided by the AAA is 50 words.

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Ken Adams’s revision (from his blog at http://www.adamsdrafting.com/my-version-of-the-aaa-standard-arbitration-clause/)

As the exclusive means of resolving through adversarial dispute resolution any disputes arising out of this agreement or [describe the subject matter of the contract], a party may demand that any such dispute be resolved by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and each party hereby consents to any such disputes being so resolved. Judgment on the award rendered in any such arbitration may be entered in any court having jurisdiction.

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