October 2021
1. Farewell to Martin Hunter
October saw the passing of Martin Hunter, esteemed arbitration practitioner and academic. Mr Hunter joined Freshfields Bruckhaus Deringer (then Freshfields) in the 1960s, helping develop the firm’s arbitration practice after working on Aminoil v Kuwait, and continuing to work on a range of seminal cases, both whilst at Freshfields and following his retirement from the firm in 1994. In the 1970s, he advised on the previous version of the English Arbitration Act, and together with Freshfields colleague Alan Redfern wrote the first few editions on what remains one of the most important arbitration guides today. Martin was known for his kindness and generosity, with Jan Paulsson stating that he had an “endless openness to fellow travellers, irrespective of their status or origin”. Our condolences go out to his friends and family.
2. France faces second ICSID claim ever
Russian companies Severgroup and KN-Holdings recently commenced a USD 4.6 billion claim against France, which wishes to halt a gold mining project over environmental concerns. The Russian companies indirectly own joint venture rights over a gold deposit in French Guiana, South America. When the joint venture asked for permission to dig a mine amounting to approximately the size of 32 football stadiums, the French government rejected its request. Various activists and local populations have alleged that the excavation could lead to pollution. The Russian companies challenged France’s rejection at lower instance courts and won on both occasions. The case is now pending in front of the French Supreme Administrative Court. The UK company through which the Russian companies own the joint venture, Nordgold, might bring separate proceedings against France, making it the third treaty claim France has ever faced.
3. The UK Supreme Court provides further clarification in relation to governing law
In the space of just over a year, the UK Supreme Court has handed down a third judgment on core features of arbitration. Last year saw Enka v Chubb and Haliburton v Chubb provide welcome clarification on the law governing arbitration agreements and arbitrators’ duty of disclosure, respectively. In Kabab-Ji v Kout Food Group the court expanded on the former case, holding that an arbitration agreement was governed by English law, the substantive law of the contract, despite the arbitration being seated in France.
This decision, which was rendered in an enforcement context, follows a long line of cases determining whether, in the absence of explicit agreement or rules or laws to the contrary, the law of the seat or the substantive law of the underlying contract should govern the arbitration agreement. In Enka v Chubb, the Supreme Court held that where the parties had selected a law to govern the underlying agreement, it would generally also be taken to apply to the arbitration agreement. Ultimately, however, the law selected as applicable to the arbitration agreement would be the one with which it is “most closely connected”, which requires a case-by-case analysis of circumstances and the parties’ intentions. In Enka v Chubb, the Supreme Court ultimately decided that it was the law of the seat that governed the arbitration agreement, notably as the law of the underlying contract was not explicitly specified. Whilst two different outcomes were reached, the reasoning in Kabab-Ji v Kout Food Group entirely confirms Enka v Chubb, notably in the context of an enforcement application.
Finally, an under-discussed element of the case is that the Supreme Court’s application of English law to the arbitration agreement rendered the agreement invalid and the award unenforceable. This is notable as English Courts* rarely refuse to enforce arbitral awards.
*The Supreme Court is technically an English, Welsh, Northern Irish, and Scottish court!
4. Dubai and London fail to see eye-to-eye
The LCIA and DIFC’s joint venture is no more. Following Dubai’s decision to abolish the DIFC, it was announced that the LCIA’s plans to offer arbitration in the DIFC under DIFC-LCIA rules would not be realised. The LCIA has stated that these changes came “as a surprise". It was expecting the JV to be renewed and "was not consulted or given notice".
The DIFC recently issued a statement on combining the DIFC Arbitration Institute or DAI with the Dubai-based Emirates Maritime Arbitration Centre to form a "unified entity...called the Dubai International Arbitration Centre" or DIAC. It is not clear to what extent this was an initiative by the UAE or the institutions themselves.
What will happen to cases referred to DIFC-LCIA arbitration is unclear. The DIAC has stated that all cases after 20 September 2021 will, in the absence of an agreement otherwise, be administered by DIAC in accordance with DIAC rules. Conversely, the LCIA notes that the relevant decree provides for a "transition period of six months" (i.e., well into 2022) before DIAC steps in to administer DIFC-LCIA arbitrations.
The LCIA has stated that it will remind parties that they can agree to refer future disputes to the LCIA. It is therefore unlikely to silently accept the ‘default provision’ that cases would otherwise go to the DIAC.
It seems inevitable that political and economic factors have played a role in the DIFC / UAE’s decision, though the details are not clear at the moment.
5. Achmea developments continue
Since 2018, Achmea has been making headlines across the arbitration world, and with good reason. In 2021, this focus on Achmea shows no signs of slowing down. Very recently, the ECJ ruled that EU member states are not permitted to enter into ad hoc agreements identical to arbitration agreements in intra-EU BITs, thereby circumventing the impact of Achmea. Where they do so, EU member states must challenge such agreements, and national courts must set aside awards rendered on this basis.
Various commentators have taken issue with this decision. The case concerned the breach of an agreement by Poland, leading the ECJ to recommend that the Claimant, Luxembourg’s PL Holdings, resort to Polish courts. The SCC tribunal which previously decided the case, however, held that Poland specifically denied the Claimant access to the Polish courts, and further, that the EU itself had held that the Polish judiciary is not independent. On 7 October 2021, the Polish Constitutional Court even ruled that “the primacy of EU law and the principle of effective legal protection are unconstitutional and therefore not binding on the Polish courts.” In essence, therefore, there is no guarantee that Polish courts will uphold the principles of EU law that Achmea and PL Holdings seek to protect. As has been pointed out, this decision, together with September 2021’s Komstroy judgment make it very difficult to argue for Achmea’s limited applicability, among others by tribunal members seeking to uphold their jurisdiction.
6. Canada-US claim(s) over pipeline possible
At the beginning of October, Canada formally invoked a dispute resolution provision in a 1977 agreement between the two nations over Michigan’s effort to shut down a controversial cross-border pipeline due to environmental concerns. Canada claims that the 1977 agreement prohibits the US from interfering with the Line 5 pipeline, which is over 1,000 km long and transports over 500,000 barrels of oil per day, unless there are specific justifications. The States will now attempt to resolve the dispute through negotiations, and if unsuccessful, will start appointing arbitrators to a three-member tribunal. This case highlights a recent trend of issues arising, or projects being halted, over environmental concerns. What is so interesting, however, is the fact that the dispute is between the US and Canada. Given President Biden’s controversial decision earlier in 2021 to revoke a permit for the USD 8 billion Keystone XL pipeline, the manner in which this case plays out could have enormous consequences.
7. The 45th President trumped in AAA dispute
Former Trump aide Omarosa Manigault Newman prevailed in AAA proceedings initiated by the former President in response to her “tell-all” book allegedly breaching an NDA between them. The arbitrator deciding the dispute held the NDA to be “vague and unenforceable”, and overly restrictive in its terms.
Ms Manigualt Newman, frequently simply referred to as Omarosa, was a former contestant on the Apprentice who later joined Trump’s White House as a director of communications for the Office of Public Liaison. She was fired in 2018 by chief of staff John Kelly, who cited “money and integrity issues” (yes - we are also curious as to what this means).
In her book, Unhinged: An Insider's Account of the Trump White House, Omarosa called Trump ”a racist, a bigot, and misogynist”, also accusing him of less serious but arguably more comical actions such as attempting to move a tanning bed into his private quarters in the White House, or to pledge his inauguration oath on his book, The Art of the Deal, rather than the Bible.
The arbitrator found that these accusations and statements were “for the most part simply expressions of unflattering opinions,” rather than “confidential information or disclosed sensitive campaign secrets.”
8. Russian court gives cause for concern
In a preliminary ruling, the Russian Supreme Court expressed the view that Russian parties should face fewer hurdles when obtaining a domestic injunction restraining arbitrations against them abroad. The Russian parties in question are mainly those subject to international sanctions. In these instances, the Court held, Russian entities would not have to prove that the foreign proceedings would impede their access to justice if allowed to continue, as any Russian company facing sanctions abroad is per se not guaranteed a fair and impartial trial.
Russian parties subject to sanctions could in future, therefore, obtain anti-arbitration injunctions merely due to sanctions being in place. If this decision is confirmed by the Supreme Court in its merits review, sanctioned Russian entities could avoid arbitration a lot more easily.
Such injunctions will not be enforceable in certain jurisdictions where the arbitrations take place, meaning that the proceedings would continue. However, if the non-Russian party loses, it may have trouble enforcing any award in Russia. For these reasons, there may be a shift towards selecting locations and institutions not affected by the anti-Russian sanctions - all depending on the Russian Supreme Court’s final decision.
9. Binance proceedings develop
Back in August 2021, we wrote about the highly unusual proceedings against cryptocurrency exchange Binance, the largest cryptocurrency exchange in the world by trading volume (European investor v Binance (ICC claim)). In essence, the proceedings are norm-bending for three reasons: 1. The (potential) amount of individual claimants, 2. Binance’s “statelessness”, and 3. Issues with causation.
It has now emerged that a wealthy European individual is the main driving force behind the claim, which is directed at more than 45 entities globally in some or other way connected to Binance. Simultaneously, a class-action procedure is being launched against Binance under the auspices of HKIAC, to which thousands of users have signed up. Liti Capital has been funding the case, which was recently hyped up by an anonymous ‘crypto influencer’ on Twitter, causing many more to sign up.
To add to its woes, Binance is currently being investigated by the US Department of Justice and Internal Revenue Service over alleged money laundering and tax offences.
This will be a highly interesting case on which we will continue to report.