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Conference Report: Vienna Arbitration Days 2011 by Markus Schifferl


On 4 and 5 March 2011, the Vienna Arbitration Days, the leading arbitration conference in Austria, took place for the fourth time. Over 240 arbitration practitioners from more than 25 countries followed the call of the organizers, the Austrian Arbitration Association ArbAut, the editors of the Austrian Yearbook on International Arbitration and the Young Austrian Arbitration Practitioners YAAP, and came to Vienna.

The President of ArbAut Wolfgang Hahnkamper warmly welcomed the participants on behalf of the organizers. By making reference to an 18th century Austrian military leader whose picture decorated this year’s appearance of the Vienna Arbitration Days, Mr Hahnkamper illustrated the importance of arbitration as a peaceful means to resolve disputes and emphasized Vienna’s leading role as a place of arbitration in Central and Eastern Europe.

Three panels, each comprising a moderator and four speakers, focused on current hot topics in arbitration, namely (i) Arbitration goes Brussels, (ii) Witness and Expert Evidence in Arbitration: Efficiency vs Ethics and (iii) Arbitration Rules on the Move. This year’s keynote speech was held by Stanimir A Alexandrov on Recent Trends in Arbitration in the CEE Region. Following the success of previous years, the closing speech was again reserved for a representative of the users’ side of arbitration, this year for the general counsel of General Electric France, Jean-Claude Najar, who spoke on arbitrators’ and arbitral institutions’ immunity from liability.

As is by now good and established tradition, the Vienna Arbitration Days are embedded in social events, giving the participants the opportunity for either the continuation of the day’s discussion or for more relaxed conversation: Friday evening, the 2011 edition of the Austrian Yearbook on International Arbitration was presented at the author’s dinner in Palais Todesco. On Saturday, numerous conference participants attended the Ball of the Legal Profession in the breathtaking surroundings of the Vienna Imperial Palace, thus becoming part of and contributing to the European 19th century ball tradition, strongly alive in Vienna also in modern times.

Arbitration goes Brussels (First Panel)

As panel chair Christoph Liebscher of Wolf Theiss, Vienna, introduced the subject to the audience by listing interfaces, but also non-interfaces, between arbitration and European Law. Among others, Mr Liebscher referred to the relation between arbitral tribunals and the European Court of Justice, the arbitrability of European competition law, the Brussels I and Rome Regulations and arbitration in the context of EU merger control.

Karen Vandekerckhove of the European Commission, Brussels, started her presentation by outlining the parts referring to arbitration of a 2009 Commission Report on the application of the Brussels I Regulation and its accompanying Green Paper. While arbitration falls outside the scope of the Brussels I Regulation, the interface between the Regulation and arbitration still raises certain difficulties, such as: parallel court and arbitration proceedings in case the validity of the arbitration clause is upheld by the arbitral tribunal but not by a court; no uniform allocation of jurisdiction in proceedings ancillary to or supportive of arbitration proceedings; uncertainty as to the recognition and enforcement of judgments rendered by the courts in disregard of an arbitration clause; uncertainty as to the recognition and enforcement of judgments on the validity of an arbitration clause or on the setting aside of an arbitral award. Therefore, the European Commission launched a broad consultation on possible ways to improve the operation of the Brussels I Regulation inter alia on the issue whether the interface between the Regulation and arbitration should be improved. The outcome of this consultation process was a proposal of the European Commission, dated 14 December 2010, to amend the Brussels I Regulation in order to prevent forum shopping in the challenging of an arbitration agreement before courts and thereby effectively undermine the arbitration agreement and create a situation of inefficient parallel court proceedings. To this end, the European Commission proposes to oblige a court seized of a dispute to stay proceedings if its jurisdiction is contested on the basis of an arbitration agreement and an arbitral tribunal has been seized of the case or court proceedings relating to the arbitration proceedings have been commenced in the member state of the seat of arbitration. Such regulation would enhance the effectiveness of arbitration agreements in Europe, prevent parallel court and arbitration proceedings and eliminate the incentive for abusive litigation tactics.

Alexandre Vagenheim of Castaldi Mourre & Partners, Paris, took a critical position against the 2009 Commission Report and its accompanying Green Paper. He pointed out that the Arbitration Committee of the International Bar Association presented a position paper to the European Commission, wherein it sought to demonstrate that under the Brussels I Regulation no significant problems occurred with regard to arbitration that would justify the deletion of the Regulation’s arbitration exclusion. However, also Mr Vagenheim acknowledged that the current situation as regards the coordination of arbitration and member states court proceedings is not entirely satisfactory and, therefore, welcomed the new 2010 proposal of the European Commission as being pragmatic in its approach and limited in its scope. At the heart of this proposal lies a newly added Art 29.4, which sets out: “Where the agreed or designated seat of an arbitration is in a Member State, the courts of another Member State whose jurisdiction is contested on the basis of an arbitration agreement shall stay proceedings once the courts of the Member State where the seat of the arbitration is located or the arbitral tribunal have been seised of proceedings to determine, as their main object or as an incidental question, the existence, validity or effects of that arbitration agreement. […] Where the existence, validity or effects of the arbitration agreement are established, the court seised shall decline jurisdiction.”

Sophie Nappert of 3 Verulam Buildings, London, acknowledged that while the Brussels I and Rome Regulations, by excluding arbitration from their respective scopes of applicability, and EU Law’s endorsement of the fundamental principle of freedom of contract, which also extends to arbitration agreements, pave the way for an arbitration friendly EU regime, other EU law does not necessarily follow that path. Particular worries are: (i) First and foremost, EU consumer protection law, which does not permit unfair terms in consumer contracts: The European Court of Justice has held that arbitration clauses in consumer contracts are regarded as potentially unfair and, if so, constitute a violation of EU public policy and may be vacated. (ii) More surprisingly, also EU directives establishing a general framework for equal treatment in employment and occupation, which implement the principle of equal treatment in the area of employment, covering disability, religion or belief, sexual orientation, age, race and ethnic origin, might have an impact on arbitration. Ms Nappert informed the audience that in the pending English case Nurdin Jivraj v Sadruddin Hashwani, an arbitration clause was ruled as being discriminatory by the English Court of Appeal, as it set out certain prerequisites for the arbitrators with regard to their religion (More precisely, the arbitration agreement stipulated that arbitrators were to be "respected members of the Ismaili community and holders of high office within the community"). The Court of Appeal held that under the European framework arbitrators are to be considered employees, so that any discrimination with regard to religion is not permitted. Should the now invoked European Court of Justice also come to the conclusion that the mandate of an arbitrator constitutes an employment contract to which the equal treatment framework should apply, even standard arbitration clauses stipulating that the arbitrators must not have the nationality of one of the arbitration parties might come under closer scrutiny. (iii) Last but not least, EU law related arbitration questions may arise under the Energy Charty Treaty, to which the European Union – besides its member states – has acceded. Ms Nappert concluded that questions relating to the future of arbitration within the framework of the European Union cannot be limited to the review of the Brussels I Regulation and other instruments but that the time has come to proactively establish a coherent arbitration framework on the European level.

Georg Kodek, judge at the Austrian Supreme Court, Vienna, spoke on preliminary injunctions. He emphasized the West Tankers case where the European Court of Justice, notwithstanding the arbitration exclusion under the Brussels I Regulation, applied the Regulation to anti-suit injunctions granted to give effect to arbitration agreements. Once the Brussels I Regulation was found to apply, it followed that the European Court of Justice would not allow anti-suit injunctions as they are contrary to the general principle that every court seized itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it. Thus, Mr Kodek concluded that in the context of the Brussels I Regulation there is no longer any room for anti-suit injunctions. However, under the sub-heading “the anti-suit injunction is dead, long live the anti-suit injunction” Mr Kodek considered domestic cases, non EU-cases, “curative admissibility” (i.e. anti-suit injunctions against anti-suit injunctions) and anti-suit injunctions rendered by arbitral tribunals as possible remaining fields of application. Mr Kodek also stressed that West Tankers did not deal with other preliminary injunctions, such as Mareva injunctions (freezing orders), temporary restraining orders, injunctions for the obtaining of evidence and Anton Pillar orders, whereby one litigant is granted access to the opponent’s premises; in contrast to anti suit injunctions such other preliminary injunctions may, therefore, still have a bright future under the European sky.

Witness and Expert Evidence in Arbitration: Efficiency vs Ethics (Second Panel)

The panel chair Christian Dorda of Dorda Brugger Jordis, Vienna, introduced the subject by highlighting possible frictions between efficiency, on one hand, and the application of high ethical standards, on the other hand. Furthermore, on an international level it is not clear which ethical standards should apply: should one go for the lowest common standard or for the highest?

Jennifer Kirby of Kirby, Paris, a boutique practice specialized in international arbitration, held an evocative presentation titled “Witness Preparation: Memory and Storytelling”. She described, also on a very personal level, psychological aspects of memory and how memory can be selective and incomplete. Despite the unreliability of memory and correspondingly of witness testimony, Ms Kirby stressed the importance and advocated the use of witnesses in international arbitration: not everything is written down and may be proven from documents; the psychological effect on witnesses to be able to tell their story can hardly be overestimated; and lastly, also arbitrators – as everyone else – are influenced by good and credible storytelling, which may bring to life an otherwise pale case. Ms Kirby also emphasized the significance of witness preparation, the purpose of which lies in bringing out the relevant parts of the witness’s recollection and testing it against the facts of the case. This helps the witness to understand and to focus on the case a hand, thereby increasing the efficiency of the proceedings. As to Ms Kirby’s personal experience with faulty memory in a crises situation, the audience was relieved to hear a happy end.

Jakob Ragnwaldh of Mannheimer Swartling, Stockholm, gave a concise overview on issues relating to efficiency in the use of experts in international arbitration. Mr Ragnwaldh emphasized, among others, the importance of the following: choosing sufficiently qualified experts; investigating whether an expert is available for the proceedings, as specialists tend to be overbooked; proper and specific instructions to the experts; establishing a procedural framework for the experts (e.g. form, content and timing of expert evidence, site visits, examining of experts at the hearing); format of expert reports and exhibits; access to documents and information by the experts; budget; coordination among experts; rules as to the submission of expert reports, such as timing (together with written submissions on facts and law, or thereafter); scope of expert reports; possibility of page limits; sufficient preparation of hearings, as good housekeeping prevents chaos; expert conferencing.

Tatyana V Slipachuk of Vasil Kisil & Partners, Kiev, spoke on ethical duties of experts. In her opinion, the main duty of experts is to help the arbitral tribunal to draft the award. For this reason, a high standard of professionalism and ethical duty should be expected of the expert. Ms Slipachuk emphasized the differences in culture and explained that from an Ukrainian perspective, where experts are still rarely used, party appointed experts are a priori seen as hired guns. Therefore, as regards CEE countries, tribunal appointed experts seem to be the norm, also in arbitration. Ms Slipachuk also gave an overview of different rules that establish ethical standards for experts, such as the Code of Ethics of the American Society of Civil Engineers, the Protocol for the Use of Party Appointed Expert Witnesses in International Arbitration of the Chartered Institute of Arbitrators and, last but not least, the IBA Rules for the Taking of Evidence in International Arbitration. At the end of her presentation, Ms Slipachuk raised the interesting question whether also legal counsel to the parties are under an ethical responsibility to safeguard the ethical standards of the experts, e.g. by abstaining from guerrilla tactics such as the undue exertion of influence.

Franz X Stirnimann of Lalive, Geneva, titled his presentation: “Counsel Ethics in Arbitration – Practical Problems and Solutions.” Mr Stirnimann emphasized that even though legal practice has internationalized, ethical standards for lawyers are still deeply grounded in local bar rules. Therefore, in international arbitration – far from being a zone devoid of local standards – a whole “tropical forest full of differing ethical canons” has to be taken into consideration. Mr Stirnimann identified three hot topics: (i) What should apply: the highest or lowest common standard? (ii) Should arbitrators be the judge over counsel’s ethical conduct? (iii) Should there be a code of transnational ethical standards in international arbitration? As to the first topic, Mr Stirnimann concluded that everything is very complex as different legal systems have diverging – sometimes very diverging – standards of ethical conduct that cannot easily be reconciled. In particular this applies to the fields of witness preparation and coaching (from detailed witness preparation as practiced in the US to the prohibition for counsel to have any pre-hearing contact with witnesses), Anglo-Saxon “privilege” vs European “professional secrecy” and presenting legal arguments and evidence (zealous advocacy US style, on one extreme, vs UK Bar Rules, obligating counsel to also state the contrary legal position, on the other extreme). As to the second topic, Mr Stirnimann concluded that there is legal uncertainty whether international tribunals have the power to disqualify counsel. At the end of the day, the tools of an arbitral tribunal to police ethical conduct – at least for the time being – solely lie in its power to conduct the proceedings. As to the third topic, Mr Stirnimann pointed out that the International Bar Association has established a task force on counsel ethic, which has already issued a draft code. Mr Stirnimann came to the following conclusions: good counsel who wants to succeed in the still close-knit market of international arbitration will conduct himself properly; a good arbitrator will reward proper conduct and protect the integrity of arbitration; a transnational code of counsel ethics in arbitration does no harm and will be a useful guideline for arbitrators on how they should deal with counsel; the rest is common sense, equity, and justice.

Keynote Speech: Recent Trends in Arbitration in the CEE Region

Stanimir A Alexandrov of Sidley Austin, Washington DC, observes two major arbitration trends in the CEE region: Firstly, the strong growth in the number of arbitration proceedings relating to CEE countries, making the region – apart from China – the fastest growing market for arbitration worldwide: This should come as good news for arbitration lawyers located in Vienna. In particular, investor-state arbitrations have multiplied. This is not always due to the stereotypical Western investor, starting arbitration proceedings against a CEE country, but is mainly based on the particular business model of quite a number of CEE entities which establish Western subsidiaries with the purpose to channel their investments over these subsidiaries back into their home market and thereby profit from the investment protection granted by the applicable BIT. Secondly, the growing sophistication of arbitration users in CEE countries: While in the 1990s, pathological arbitration clauses were regularly found in contracts involving CEE parties, this has changed dramatically. At present, CEE parties regularly consult lawyers before including arbitration clauses into contracts, thus greatly enhancing the quality of these clauses. Furthermore, the conduct of CEE parties in arbitration proceedings has become more professional. While in the 1990s, going to arbitration was perceived as an outright declaration of war, in the present, initiating arbitration proceedings is regularly considered to be part of an overall strategy of “carrot and stick”. This seems to be the main reason, why the amicable settlement of disputes has become more and more common, despite – or maybe even because of – ongoing arbitration proceedings. Furthermore, the CEE parties’ understanding of arbitration has deepened and so has the willingness to appoint truly independent and impartial arbitrators, as it is now well understood that appointing an arbitrator too close to oneself might backfire in the form of an unfavorable 2:1 majority ruling by the arbitral tribunal.

Arbitration Rules on the Move (Third Panel)

The panel chair Benedikt Spiegelfeld of CHSH, Vienna, opened the last round of presentations by pointing out that quite a number of established arbitration institutions have either recently revised or are in the process of revising their respective arbitration rules. Mr Spiegelfeld mentioned, in particular, the ICC Rules, currently in the final stages of their revision, and the new 2010 UNCITRAL Arbitration Rules.

Corinne Montineri of UNCITRAL, Vienna, provided an overview over the new 2010 UNCITRAL Arbitration Rules and their drafting history. She emphasized, that even though the 1976 UNCITRAL Arbitration Rules were recognized as a very successful instrument, a revision became necessary in order to conform to and better incorporate current trends and practices in international arbitration. For this reason, in 2006 UNCITRAL decided to initiate a revision process of the 1976 UNCITRAL Arbitration Rules. As outcome of this process, on 15 August 2010 the new 2010 UNCITRAL Arbitration Rules came into force. Key amendments are: (i) the removal of the requirement that an arbitration agreement must be in writing; (ii) the introduction of a response to the notice of arbitration in order to better structure the initial phase of the arbitration and to also cater for multiparty arbitration; (iii) rules on the appointment of arbitrators in multiparty arbitrations; (iv) rules on joinder of multiple parties; (v) the introduction of a provisional timetable to enhance the efficiency of arbitration; (vi) more detailed provisions on interim measures; (vii) the introduction of a new review mechanism as to the costs of arbitration as fixed by the arbitrators. Ms Montineri also pointed out that while UNCITRAL contemplated to incorporate specific rules related to investment arbitration into the 2010 UNCITRAL Arbitration Rules, UNCITRAL ultimately took a decision against such incorporation. However, UNCITRAL is well aware of the importance of ensuring transparency in investor-state dispute resolution which it will consider in the future, probably by means of a legal annex to the UNCITRAL Arbitration Rules.

Jose Rosell of Hughes Hubbard & Reed, Paris, a member of the ICC arbitration commission, provided an insight view on (likely) major changes to the ICC Rules: The new ICC Rules will include revised provisions on consolidation, multiparty and multicontract arbitration; time limits will be shortened and a more pro-active case management will be introduced; the appointment procedure for arbitrators in BIT cases will most probably be centralized in Paris. Mr Rosell also gave reasons for the 2010/2011 revision of the ICC Rules: First and foremost, established institutions like the ICC increasingly feel the pressure of new institutions, trying to carve out a slice of the arbitration market for themselves, and have to make an effort to stay at least one step ahead. Secondly, certain changes have been identified in the practice of arbitration for the better and for the worse, like e discovery and other methods imported into arbitration from US litigation. The ICC has to react to these changes and adapt its arbitration rules accordingly. Thirdly, time and cost of arbitration are issues of ever increasing importance, which is the reason why the ICC intends to shorten its deadlines and put even more emphasis on arbitrator availability.

Beata Gessel-Kalinowska of Gessel, Warsaw, Vice President of the Lewiatan Arbitration Court, pointed out that the rules of many arbitration institutions were revised in the last two years. Discernible trends were the institution of an emergency arbitrator (SCC Rules), the continuing provision of lists of arbitrators by arbitration institutions located in CEE countries (Vienna Rules, Polish Rules, Romanian Rules), disclosure requirements for arbitrators as regards their availability (ICC Rules, UNCITRAL Rules), the shortening of deadlines (SCC Rules, UNCITRAL Rules), the inclusion of more sophisticated multi-party and multi-contract provisions (Vienna Rules, ICC Rules, Milan Rules) and an even stronger emphasis on party autonomy (Milan Rules). Due to the upcoming Austrian/Polish Twin Conference on International Commercial Arbitration organized by the Lewiatan Court of Arbitration and by the Austrian Arbitration Association ArbAut, that will take place in Warsaw on 17 June 2011, Ms Gessel-Kalinowska also took the opportunity to shortly present the Lewiatan Arbitration Court to the audience. The Lewiatan Arbitration Court was established in Warsaw in 2005; its goal is to guarantee entrepreneurs acting in Poland a fast and professional dispute settlement forum.

Radu-Bogdan Bobei of the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry Romania, Bucharest, provided a comparative analysis of the conduct of arbitral proceedings under the 2010 UNCITRAL Arbitration Rules, the ICC Rules, the Vienna Rules, the Polish Rules and the Romanian Rules. In his introductory remarks, Mr Bobei referred to a stiffer competition between arbitral institutions in the CEE region sparking a genuine race between them to keep the cutting edge, in particular as regards questions of efficiency and time and cost reduction. Mr Bobei pointed out that the provisional timetable arranged by the arbitral tribunal at the beginning of the arbitration has become a common standard, as has the obligation on the parties to present the full evidence already in an early stage. Mr Bobei then proceeded to compare the different arbitration rules as regards specific topics, such as the initiation of the proceedings, interim measures, the conduct of the oral hearings, experts and questions of waiver. Mr Bobei concluded that while the underlying fundamentals of arbitration rules are, in general, similar, on a more detailed level different arbitration rules provide different solutions.

The User’s Perspective: Liable or not Liable?

Jean-Claude Najar, general counsel of General Electric France, focused on arbitral institutions’ and arbitrators’ immunity from liability. Mr Najar pointed out that arbitrators are increasingly confronted with questions of their own liability. This is triggered by the understanding that arbitrators conclude, in the essence, a service contract with the arbitration parties. Therefore, for an unsatisfied and disgruntled arbitration party it is only a small step to try to find blame with the arbitrators. While this may in certain circumstances be justified as regards the failure of arbitrators to conduct the arbitral proceedings in a timely and proper manner – immunity should, after all, not lead to impunity –, it is alarming that arbitrators are increasingly challenged on the contents of their decision. In this regard, Mr Najar points to the danger of unscrupulous parties trying to silence arbitrators unsympathetic to their case by confronting them with million Euro liability claims. Therefore, it is important that legal systems protect the immunity of arbitrators; this is done explicitly in the US, Canada and Hong Kong, where arbitrators are granted judicial immunity. However, the laws of many continental European countries are silent, leaving room for uncertainty. At the end of his presentation, Mr Najar raised the interesting topic of the liability of arbitral institutions vis ?-vis arbitration parties on the basis that there is a contract not only between the arbitrators and the arbitration parties but also between the respective arbitral institution and the arbitration parties.

Source: Conference Report: Vienna Arbitration Days 2011 by Markus Schifferl ( ArbAut Newsletter, 2011 03 22). Markus Schifferl is a junior partner of Torggler Rechtsanw?lte, Vienna. His principal areas of practice include international arbitration and litigation

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