Administrative Council approves amendment of ICSID rules and other developments
6 min read
From jurisdictional issues across a variety of industries through to investment treaty protections and remedies, Arbitration Update brings you the latest news, outcomes and updates in the world of international arbitration and dispute resolution.
ICSID: Administrative Council approves amendment of ICSID rules
International Center for Settlement of Investment Disputes (ICSID) member states have approved comprehensive amendments to the ICSID Arbitration Rules. Aimed at reducing the time and costs associated with resolving disputes and providing greater transparency, the new Rules include:
- new procedural rules for fact-finding;
- a new obligation for parties to disclose third party funding arrangements;
- mandatory timeframes for rendering orders and awards in arbitration and conciliation;
- new expedited arbitration rules;
- new jurisdiction arrangements to allow Regional Economic Integration Organizations access to ICSID arbitration and conciliation;
- increased public access to ICSID orders and awards; and
- an ongoing obligation to disclose third party funding arrangements.
A link to the new rules is here.
A link to register to attend a free online information session on the amended rules, hosted by ICSID in conjunction with the Africa Arbitration Academy, on 7 July 2022 at 8pm AEST, is here.
Amended rules into effect on 1 July 2022
Singapore: Legislative amendments allow for CFAs in arbitral proceedings under SIAC rules
Under amendments to the Singaporean Legal Profession Actlawyers and registered foreign lawyers may now enter into conditional fee agreements (CFAs) with their clients, including in relation to arbitral proceedings conducted under the SIAC rules. Previously, these fee structures had been banned in Singapore.
CFAs can provide for whole or part of legal fees and costs to be payable upon specific conditions being satisfied. For example, a CFA could stipulate what constitutes success of the client’s claim or defense, or provide for uplift fees in particular circumstances. Under the amendments, specific information about the CFA must be stated in writing and agreed to by the client, in order for it to be valid and binding. Further, CFAs cannot provide for remuneration or costs to be payable as a percentage or proportion of damages awarded to the client.
A link to the Amending Act is here.
A link to the Bill’s Second Reading Speech is here.
Operative provisions commenced 4 May 2022
Australia: NSW Supreme Court confirms that arbitration agreements are not ‘inoperative’ where parties have not completed preliminary steps in a tiered dispute resolution clause
The contractor for the WestConnex Link Tunnels project has successfully stayed proceedings in the NSW Supreme Court under section 8 of the Commercial Arbitration Act 2010 (NSW) (the CAA). The underlying dispute arose under back-to-back contracts containing a multi-stage dispute resolution mechanism.
The dispute related to whether communications from the plaintiff to the contractor constituted directions to implement a solution to a contamination claim on the project. The plaintiff commenced court proceedings seeking to injunct the contractor from referring the dispute to expert determination. The contractor applied for a stay of proceedings under s8 of the CAA.
The court stayed the proceedings and confirmed that the parties’ failure to complete the preliminary steps in a tiered DR clause does not render the arbitration agreement ‘inoperative’ for the purpose of s8 of the CAA. Such an interpretation prevents parties from bypassing their contractual bargain to arbitrate by commencing proceedings before all preliminary steps have been completed.
April 29, 2022
Australia: Agriculture giant unsuccessful in application to maintain freezing orders against Australian businesses
The Federal Court has rejected Viterra BV’s bid to extend temporary freezing orders against agricultural businesses CS Agriculture and CSTT Australia.
In 2021, an arbitral tribunal under the auspices of the International Cotton Association Ltd published an award in Viterra’s favor of some A $ 18.7 million against Shandong Ruyi, a textiles corporation incorporated in China. It has an indirect interest in CS Agriculture and CSTT Australia through a wholly-owned Singaporean subsidiary.
Viterra is awaiting a ruling by a Singaporean court that it hopes will permit enforcement of the arbitral award against the Singaporean entity. However, it had simultaneously pursued the Federal Court application against the indirect, Australian-incorporated subsidiaries of the award debtor, Ruyi.
Justice Stewart, in rejecting the application, said that:
- A freezing order is an extraordinary remedy that requires a high degree of caution. It is rare to grant one against third parties (like CS Agriculture and CSTT Australia) in which the debtor (Ruyi) does not have a beneficial entitlement.
- The order would be onerous.
- There is nothing to suggest that Ruyi would cause the Singaporean subsidiary to dispose of its assets to defeat the arbitral award (in circumstances where there is still a forthcoming judgment from the Singaporean courts).
11 March 2022
Singapore: Court of Appeal allows non-party to enforce award made in favor of dissolved company
In what was described by the Singaporean Court of Appeal as a ‘The situation of a true misnomer‘, the court has held that a non-party can enforce an arbitral award made in favor of a dissolved company, where that non-party merged with the dissolved company.
In 2007, Keppel FELS Ltd (a Singaporean entity, also known as KFELS) commenced arbitration against Hydralift AS (a Norwegian entity). Unknown to KFELS at the time, Hydralift had merged three years ago, with another Norwegian entity, NOV AS. The arbitration was commenced regarding a contract between KFELS and Hydralift, entered into 1999, in relation to the design and supply of a turret bearing system. NOV AS had not informed KFELS about the merger, and instead defended the arbitration in Hydralift’s name, including making counterclaims against
KFELS. In September 2019, an arbitral tribunal found in Hydralift’s favor and ordered the applicant, KFELS, to pay US $ 2.8 million in damages and costs. NOV AS sought permission from the Singaporean courts to enforce the arbitral award against KFELS. KFELS resisted enforcement, arguing that since the award was made in favor of Hydralift (an entity that ceased to exist in 2004), it was not enforceable.
The Singaporean High Court agreed with KFELS, prohibiting NOV AS from being able to enforce the award against it. However, the Court of Appeal overturned the High Court’s decision. It found that, among other things:
- Hydralift’s personality survived the merger in 2004, and that NOV AS ‘is for all intents and purposes, the same legal entity as Hydralift‘.
- Singaporean courts have the power to enforce an arbitral ward in favor of a non-party when there is a ‘misnomer‘situation. Even though NOV AS’s decision to conceal the merger was’inexplicable and unsatisfactory‘, prohibiting NOV AS from enforcing the award would place’undue emphasis on form even when it is obvious what the substance of the award entails‘.
March 29, 2022
US: When can use a website bind a consumer to arbitration?
A US court has rejected an argument that website users had agreed to be bound to an arbitration clause by accessing a website. The website contains a notice that in using it, the user agreed to the website’s terms and conditions, which contained a mandatory arbitration clause. The notice was a ‘browsewrap’ agreement. Browsewrap agreements are notices commonly found in banners or in hyperlinks, which do not require the user to click to agree (or that prohibit access to the website unless the user gives their agreement). In contrast, ‘clickwrap’ agreements usually require a user to click to sign or accept particular terms.
When a dispute arose between users of the website (the plaintiffs) and the website operator (the defendants), proceedings were commenced by the plaintiffs in a US District Court. However, the defendants moved to compel arbitration based on the plaintiffs’ use of the website and the browsewrap notice present on the webpage. The US Court of Appeals affirmed the District Court’s order denying the defendants’ motion to compel arbitration, finding that the parties never formed a valid arbitration agreement, as the plaintiffs did not unambiguously disclose their assent to the terms and conditions when navigating the website.
April 5, 2022