Focus on Arbitration Session 2: How to keep your arbitration from going off the rails, when faced with a reluctant opponent Richard Smith – Partner, Litigation Angeline Welsh – Senior Associate, Litigation 4 November 2010 Season Two 2010 Seminar Schedule Thursday 4 November 12.30-1.30pm Bishops Square Focus on Arbitration Session 2: How to keep your arbitration from going off the rails, when faced with a reluctant opponent Richard Smith - Partner, Angeline Welsh - Senior Associate Monday 8 November Good Harvest or scorched earth? 12.30-1.30pm Bishops Square Emma Slessenger - PSL Counsel Wednesday 10 November Climate Change and Carbon in M&A Transactions 12.30-1.30pm Bishops Square José Cofre - Senior Associate Wednesday 17 November Regulatory Update 2: Market Update on Recent Regulatory Issues 9-10am Bishops Square Speakers from the Financial Services Regulatory Practice Thursday 18 November Financing Infrastructure Assets 9-10am Bishops Square Conrad Andersen - Partner, David Lee – Partner Wednesday 24 November Asset Finance Portfolio Transfers 12.30-1.30pm Bishops Square Tim Elliott - Counsel, Harry Upcott - Partner Friday 26 November Construction of Commercial Contracts 12.30-1.30pm Bishops Square Richard Hooley - Professor, King’s College London Tuesday 30 November Lehman Brothers Update 12.30-1.30pm Bishops Square Paul Cluley - Partner, Jennifer Marshall - Partner Thursday 2 December Investing in Russian Strategic and Politically Sensitive Sectors: Demystifying the Legal and Regulatory Puzzle 9-10am Bishops Square Tuesday 7 December 9-10am Bishops Square Anton Konnov - Partner, Vladimir Zenin - Senior Associate Regulatory Update Series: No.3 Market Update on Recent Regulatory Issues Speakers from the Financial Services Regulatory Practice Thursday 9 December Developing a Nuclear Power Plant 9-10am Bishops Square Gareth Price - Partner Friday 10 December Focus on Directors’ Duties 12.30-1.30pm Bishops Square Alice Englehart - Senior Associate, Joanna Page - Partner Thursday 16 December Sovereign Immunity Waiver Clauses: When are they necessary and do they work? 9-10am Bishops Square Karen Birch - Senior PSL, Sarah Garvey - PSL Counsel, Jason Rix - Senior PSL Allen & Overy LLP One Bishops Square, London E1 6AD, United Kingdom Tel +44 (0)20 3088 0000 Fax +44 (0)20 3088 0088. If you would like to attend one or more of our seminars, please visit www.aoseminars.com where you can register. If you have any queries or require further information please email [email protected] Focus on Arbitration Session 2: How to keep your arbitration from going off the rails, when faced with a reluctant opponent (12.30pm – 1.30pm) Richard Smith Angeline Welsh Summary It's all very well having a well drafted arbitration agreement, but what happens if a party refuses to honour it? This session focuses on the key strategic considerations when faced with a reluctant party to an arbitration, who worse still, attempts to derail the arbitral process. In particular, this session will look at what tools are available to get things back on track and asks: What can the tribunal itself do? How useful are the courts? How can you best protect the arbitral award for enforcement? © Allen & Overy LLP 2010 Speaker Biography Richard Smith is a partner in the International Arbitration group of Allen & Overy. In addition to his commercial arbitration caseload, Richard specialises in arbitration related proceedings in the English Courts, including preventing the breach of arbitration agreements. Richard has led some of the most important legal actions in this area, including representing the successful parties in Weissfisch v Julius, A v B, C v D and AES UstKamenogorsk v UK Ust-Kamenogorsk JSC. Richard Smith Partner – Litigation Contact Tel +44 (0)20 3088 3734 [email protected] Angeline is a senior associate in the International Arbitration group in Allen & Overy’s London office. Angeline has particular experience in advising on applications for urgent interim relief in support of arbitration before arbitral tribunals and the English Commercial Court. Her practice includes disputes arising under both commercial contracts and investment treaties, and she has acted as counsel in arbitrations, conducted under the LCIA, ICC and UNCITRAL rules. Angeline Welsh Senior Associate – Litigation Contact Tel +44 (0)20 3088 4093 [email protected] © Allen & Overy LLP 2010 Notes How to keep your arbitration from going off the rails Richard Smith & Angeline Welsh 4 November 2010 © Allen & Overy LLP 2010 1 Introductions Richard Smith Angeline Welsh Partner London 020 3088 3734 [email protected] Senior Associate London 020 3088 4093 [email protected] © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 2 Notes Remind me – why arbitration? – Neutral Forum – Favourable enforcement regime © Allen & Overy LLP 2010 3 When things go off the rails… – – – – – – Ignoring the arbitration Challenging the arbitrators Commencing rival litigation proceedings Taking steps to interfere Challenge to the award Resisting enforcement of awards © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 4 Notes 1. Ignoring the arbitration – The Tribunal can proceed regardless e.g. Article 15.8 of the LCIA Rules, Article 6.3 of the ICC Rules, Article 28.2 of the UNCITRAL Rules – Still possible for the recalcitrant party to challenge the award or resist enforcement – High risk strategy © Allen & Overy LLP 2010 2. 5 Challenging the arbitrators – Challenges can come in various different forms: – Court applications to remove an arbitrator – Applications to Institutions to revoke the appointment of an arbitrator; e.g Article 10.2 and 10.3 of the LCIA Rules – Recent debate on barristers appearing before arbitrators from the same chambers © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 6 Notes 2. Challenging the arbitrators – Solutions: – Select good seat – Do not engage in unilateral discussions with the arbitrator – Beware issues which might give rise to conflicts © Allen & Overy LLP 2010 3. 7 Rival litigation proceedings – Problem: – Litigation on two fronts – Enforcement issues – Solutions: – Application to stay court proceedings – Anti-suit injunction © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 8 Notes Stay of rival proceedings – A stay must be granted or a reference to arbitration made unless the court finds: “that the said agreement is null and void, inoperative or incapable of being performed.” – NYC Art II(3) – Section 9 of the English Arbitration Act – E.g. Premium Nafta v Fili Shipping © Allen & Overy LLP 2010 9 Anti-suit injunctions – – – – – Directed at the party, not foreign court Secondary to stay Importance of the seat No longer available intra-EU E.g. AES UST – Kamenogorsk HHL JSC v UST – Kamengorsk HHP JSC © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 10 Notes 4. Taking steps to interfere – Problem: – Aggressive tactics – the anti-arbitration injunction – Rarely granted in theory – But recent examples from India, Pakistan, Brazil, Ethiopia, Belize, Indonesia © Allen & Overy LLP 2010 4. 11 Taking steps to interfere – Solutions: – Seek to overturn the injunction – Ignore the injunction – Directions from the Tribunal in investor/state cases – Salini v Ethiopia “It is unacceptable for a state party to invoke its own law in an effort to avoid the effect of an arbitration agreement that it has freely entered into. For similar reasons, it is unacceptable for a state party to resort to its own courts for the same purpose.” – Pre-emptive anti-suit injunction © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 12 Notes 5. Challenge to the award – Grounds for challenges vary by jurisdiction but can include: – Lack of substantive jurisdiction – Serious irregularity – Appeal on questions of law – Possible annulment proceedings © Allen & Overy LLP 2010 5. 13 Challenge to the award – Insulating the award from challenge: 1. Consider specific decision from arbitral tribunal on jurisdiction 2. Cross yours is and dot your ts 3. Exclude appeal on the law (which most institutional rules do) 4. Select a good seat © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 14 Notes 6. Resisting enforcement of an award – Very limited grounds under the NYC for refusing to enforce an award. – List is exhaustive and includes: – – – – – Lack of notice/absence of due process Incapacity Lack of substantive jurisdiction Non-arbitrable issues Contrary to public policy © Allen & Overy LLP 2010 6. 15 Resisting enforcement of an award – Steps to insulate award on enforcement include: – ensure proper notice is given of all the proceedings – do not submit a notice/request dealing with narrow issues – arbitrability or mandatory Law points at place of enforcement © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 16 Notes 6. Protecting the assets – Award is only as good as the assets. – Research where assets are up front (consider all NYC countries) – Consider interim measures to preserve assets © Allen & Overy LLP 2010 17 Conclusion – All is not as bad as it first appears… – Minimise risks by choosing a good seat – Beware of issues which might give rise to conflicts – If face rival/aggressive court proceedings, act quickly – Be mindful of issues on enforcement © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 18 Notes Questions? These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP's affiliated undertakings. © Allen & Overy LLP 2010 © Allen & Overy LLP 2010 19 Notes © Allen & Overy LLP 2010 Notes © Allen & Overy LLP 2010 Notes © Allen & Overy LLP 2010 Notes © Allen & Overy LLP 2010 One Bishops Square London E1 6AD United Kingdom Tel +44 (0)20 3088 0000 Fax +44 (0)20 3088 0088 These are seminar notes only. The information within this document does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. In this document ‘Allen & Overy’ means ‘Allen & Overy and/or its affiliated undertakings’. Any reference to a partner means a member, consultant or employee of Allen & Overy LLP. 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