November 1, 2015

Arbitration at the Crossroads: Middle East, Africa and Asia

Clyde & Co was proud to be one of the sponsors of the recent inter-Pacific Bar Association (IPBA) Arbitration Conference in Dubai.

We were proud to be one of the sponsors of the recent Inter-Pacific Bar Association (IPBA) Regional Conference titled "Arbitration at the Crossroads: Middle East, Africa and Asia". Held in Dubai on 25 October, the conference was co-chaired by Alec Emmerson (Clyde & Co) and Richard Briggs (Hadef & Partners) and featured author and former Indian Ambassador to Saudi Arabia, UAE and Oman, Talmiz Ahmed, as the keynote speaker.  Attendees were treated to four highly informative sessions, which we have covered in detail for you below.

First Session: "The Seat of the Arbitration: The Most Important Choice in International Arbitration"

Panellist Georges Affaki (Affaki Societe d'avocat, Paris) noted that the title of this first session was not posed as a rhetorical question, but as a statement of fact.  The other panellists were in agreement, as they discussed the importance of the choice of seat in an arbitration. ‎ Richard Briggs (Hadef & Partners, Dubai) moderated the session, with the other panellists including Francis Xavier (Rajah & Tann, Singapore), Elizabeth Karanja (John Miles & Co, Nairobi) and Ali Al Aidarous (Ali Al Aidarous International Legal Practice, Dubai).

Francis Xavier set out the seven key factors to consider when deciding the appropriate seat of an arbitration:

  1. Non-legal considerations such as costs and convenience - how accessible are the local courts of the seat if parties need to use them?
  2. What is the effect of the applicable national legislation of the seat?
  3. What is the procedural law of seat– for example, who has rights of audience, do any limitations and privilege provisions apply?
  4. The law of the seat is likely to govern the arbitration agreement itself.
  5. What is the philosophy of the national court of the seat - are the courts arbitration friendly, will they award interim relief or grant a stay‎?
  6. The primary remedy of the losing party is to apply to the court of the seat to annul the award. Only the court of the seat can annul the award (other jurisdictions can choose not to enforce).
  7. Is the country of the seat a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? If not there may be issues with enforcing an award globally.

‎Elizabeth Karanja discussed choosing an African nation as a seat and developments in Africa. The treatment of arbitrations by African courts has been a mixed tale, but there is positive development, with Kenya and Ghana having undergone judicial reform and a purge of corruption. There are also international arbitration centres emerging in Africa. However, there are still further steps to take as only about 32 of 54 African countries are signatories to the New York Convention.

From a UAE perspective, Ali Al Aidarous discussed the importance of where an award is physically issued and the impact this has on enforcement in UAE courts. ‎Where an award is issued in the UAE, it will be treated as a local arbitration award and the applicable rules with regard to enforcement of local awards will apply. Where an award is issued outside the UAE, then it will be treated as a foreign award and subject to enforcement through the New York Convention. No mention was made of the separate and important UAE jurisdiction of DIFC, but it was touched on later in the day.

Georges Affaki rounded off the panel presentations by giving a global perspective of the importance the seat played in arbitrations. He shared various anecdotes of obscure requirements that arbitrators have to follow to achieve a valid and enforceable award depending on the country of the seat of the arbitration. He also shared his views on the challenges faced in determining the seat of an arbitration which include: pre-fixed seats, cyber arbitrations and economic sanctions.

Second Session: "Regionalisation and Culture in International Arbitration: Is All Arbitration local?"

"All politics is local", Thomas O'Neill, former US Congressman.

This quote was the inspiration for the title of the second session. Moderated by David Kim (Shin & Kim (Seoul), and delivered by Ali Al Hashimi (Global Advocates & Legal Consultants, Dubai), Mohammadreza Shakeri (Parsdatik Law Firm, Tehran), Dhruv Wahi (Kochar & Co, New Delhi) and Jil Adhab (Ginestie Magellan Paley Vincent, Paris), the session aimed to explore the extent to which international arbitration is influenced by local and personal tradition and background.

Mr Al Hashimi commenced the session with a brief history of arbitration in the UAE. Indeed, as far back as the pre-Islamic and early post-Islamic period, the concept of a third party 'hakam' existed to solve inter and intra-tribal disputes. Mr Shakeri identified with the 'hakam', which also exists in Iranian history, and clarified that his role would have been closer to the modern understanding of mediator rather than arbitrator.

According to Mr Al Hashimi, all the different aspects of arbitration are, in one way or another, "local" to the parties or the arbitration. Some of these aspects are the governing law, of both the contract and the arbitration, the seat of the arbitration and the preferred procedure for gathering evidence. Arguably, all of these are to be decided by the parties or the arbitrator, who are usually influenced by the legal system of their respective backgrounds.

At the stage of enforcement, arbitration can become significantly localised, especially in Iran and India, as explained by Mr Shakeri and Mr Wahi respectively. In Iran, the focus of arbitrators is on fairness, rather than a strict interpretation of the law, because awards will not be enforced by the local courts in Iran if the decision does not comply with Iranian public culture and procedural principles. In India, the focus is on local Court procedure, which the Court often considers in enforcement proceedings, even subconsciously. This contrasts with the French view of awards being transnational.

Thus, the question posed by Mr Al Hashimi as food for thought was: if all aspects of arbitration are decided by falling back on local know-how, what makes arbitration international?

The overall consensus seemed to be that arbitration is, more often than not, local, but Mr Adhab offered some hope by outlining his views of the two possible futures for international arbitration that move away from local habit: regionalisation and 'glocalisation'. Mr Adhab is sure that 'glocalisation' is the future of international arbitration, meaning that there will be an application of local customs at a global level, or, put another way, "an Uber of arbitration" that uses global competencies in a local setting.

Third Session: "Managing Complex and Multi-party Arbitration: How Best to Herd Cats"

The third session was delivered by Juliet Blanch (Weil Gotshal & Manges LLP, London), Adrian Cole (King & Spalding, Dubai & Abu Dhabi) and Andrew Hong (Hyundai Heavy Industries Co, Seoul). The session was moderated by Robert Rhoda (RPC, Hong Kong).

Each speaker provided an experienced insight as to what, in their opinion, were important considerations when involved in complex and multi-party arbitrations.

Ms Blanch provided her opinion from the perspective of an arbitrator (as she is regularly appointed as an arbitrator under the ICC, LCIA and SCC rules). Given the flexibility offered by arbitration, Ms Blanch considers that in order to ensure the smooth running of an arbitration, the choice of the Tribunal (particularly the Chair) is extremely important, as the approach adopted by each Tribunal in progressing an arbitration are different. Some Tribunals adhere to a strict timeline without giving much consideration to the respective parties' ability to follow the timeline whereas other Tribunals are more willing to be guided by the parties. Ms Blanch also believes that the procedural conference should be held as soon as possible and should be used as an opportunity to narrow issues between the parties and to ensure that all the parties involved are in agreement as to how the arbitration will be taken forward, for example, what legal ethics are to apply and how discovery is to take place. Once this is all agreed, the parties should abide by their agreement.

Mr Cole delivered his views based upon his experience of working on arbitrations in the Middle East, with particular focus on the UAE. Mr Cole explained that the two key institutional rules adopted in the UAE are DIFC-LCIA and DIAC and that the DIAC rules specifically deal with the constitution of the Tribunal in multi-party arbitrations (Article 19 of the DIAC Rules 2007), as do the DIFC-LCIA Rules (Article 8). He concluded that the use of arbitration is developing in the region and that the UAE is supportive of arbitration as a form of dispute resolution. However, as transactions in the region can often be complex, the work of an arbitrator is more complicated. When there are likely to be multi-party arbitrations in the event of dispute, parties should provide for the procedure carefully in the arbitration agreement.

Mr Hong gave an overview of the considerations of in-house counsel from a strategic perspective when working on back-to-back arbitrations concerning construction projects involving "up-stream", "middle ground" and "down-stream" contractors. He opined that a "middle ground" contractor's aim is to consolidate the two sets proceedings but that the "up-stream" and "down-stream" contractors have little or no incentive to do so. From Mr Hong's experience, obtaining a consolidation is often not realistic but can be used as a delaying tactic. Overall, he believes that it is of fundamental importance to choose the correct battle ground and to focus on who the real enemy is when dealing with multi-party arbitrations.

Fourth Session:  "Arbitrator or Counsel: Time to Choose One Role or Another"

The final session was a lively debate moderated by our very own Alec Emmerson, who admitted that he was biased – primarily because notwithstanding his seniority, he continues to act both as counsel and arbitrator. There was an esteemed panel of debaters, namely Sir David Steel (Justice of the DIFC Courts), Omar Aljazy (Aljazy & Co, Amman), Dr Mohammed Abdul Wahab (Zulficar & Partners Co, Cairo) and Segun Osuntokun (Berwin Leighton Paisner, London).

The debate was carried out under Chatham House rules, so it is not possible to report on which speakers said what. However, the audience was generally rather partisan (like the moderator) in opposing the motion.

It is clear that many of those attending, not only like the variety of acting both as arbitrator and as counsel ("variety being the spice of life"), but consider that sitting as an arbitrator assists and benefits party-appointed counsel in doing their job better. If you sit as an arbitrator, when acting as counsel, you know what an arbitrator likes from counsel, and what tactics are more likely to annoy and frustrate.

There was a distinction drawn between judges and arbitrators, and eight criteria were identified to distinguish between the two, including security of tenure and security of remuneration as well as immunity from suit, all of which judges enjoy but arbitrators do not. It was argued that if arbitrators are "moonlighting for other roles", they may be tempted to show a degree of partiality to one party in the hope that they will get further instructions as counsel in other cases. However, it was argued that this cuts both ways. Those that act only as arbitrators may also show partiality to get further arbitral appointments!

Naturally, a prime cause of concern where individuals are acting as arbitrators and as counsel is conflicts of interest. Impartiality and independence are fundamental traits that all parties expect and require from their arbitrators. However, the processes for clearing conflicts are well established and deal with these issues, and the recent IBA Guidelines on Conflicts of Interest in International Arbitration were referenced by one of the debaters. It was noted that being an arbitrator and counsel to the same party (although in different cases) or even having given legal or expert advice to a party on its dispute appears in the Waivable Red List under these guidelines and could be waived.

After the debaters had finished their submissions, there were many contributions from the floor. The majority agreed that arbitrators should also be able to act as counsel, and there were advantages and benefits for those that carried out both roles. Arbitral appointments should not just be the preserve of the "old boys network of ex-judges"; allowing younger lawyers to act occasionally as arbitrators would nurture the next generation of arbitrators. Following the conclusion of the debate, a vote was carried out roundly rejecting the motion (though those proposing the motion increased the numbers of their supporters).

It was agreed that it was the correct result.