June 17, 2013

Introduction to International Arbitration

Elodie Dulac
Leyou Tameru


Addis Ababa, June 17, 2013
June 17, 2013

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I. Foreign Investment in Ethiopia
Top 10 FDI sources in Ethiopia 2011/2012
Sources: Ethiopian Business Review
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II. What Is International Arbitration?










Illustration: contract between an Ethiopian company and a Chinese company for oil
exploration.
Chinese courts: not appealing to Ethiopian party for several reasons:
Unfamiliarity with proceedings
Need to retain a Chinese lawyer
Inability to speak the language
Need for Ethiopian witnesses to testify with a Chinese interpreter
Need to attend hearings in China over several years
Perception that Chinese courts may favor the Chinese party
Ethiopian courts are unappealing to the Chinese party for the same
reasons.
Solution? Choose international arbitration, in English, in a neutral venue, e.g. Dubai,
Geneva, Paris to create a neutral level playing field for the parties.
Leading survey on corporate choices in international arbitration (by PwC/Queen
Mary College, University of London): international arbitration is by far the preferred
dispute resolution mechanism for international disputes, across industries.



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International arbitration is a process by which the parties agree to the
binding resolution of their disputes by arbitrators, who are selected by the
parties, either directly or indirectly via a mechanism chosen by the parties.
Key features:

II. What Is International Arbitration? Key Features
Arbitration is always the product of agreement between the
disputing parties = consent is the cornerstone of arbitration (different
from court litigation which need not be chosen by the parties
together). If consent = arbitration instead of court litigation;

Dispute is resolved by non-governmental decision-makers chosen by
the parties, arbitrators (different from court where parties dont
select their judge);

Resolution is binding (different from non-binding processes such as
mediation).
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II. What Is Not International Arbitration










International v. Domestic Arbitration
Mediation/Conciliation: no binding decision
Expert Determination: binding resolution of specialised, usually
technical categories of disputes by an expert (accountant, engineer,
etc.) selected by the parties
Forum Selection/Choice-of-Court Agreements
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I. What is International Arbitration?
Arbitration Clauses Are Essential










Disputes between parties from different countries.

Importance of managing the risk.

Disputes resolutions clauses: from midnight clauses to 8 oclock in the
morning clauses.
Value of a contract may ultimately reside in how any dispute arising out of it
will be resolved. If no certainty as to contract provisions will be enforced, it
can effectively be the same as having no contract at all!

Not all business will have leverage to insist on dispute resolution in their
own backyard under their own countrys laws.

International arbitration is a way of mitigating the risk of dispute resolution
away from home.

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III. What is International Arbitration? Legal
Framework in a Nutshell










1958 New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards
National arbitration legislation
UNCITRAL Model Law on International Commercial Arbitration Adopted by
UNCITRAL in 1985 and revised in 2006
Over 60 countries have adopted some version of the Model Law,
including Malaysia, Singapore, Hong Kong, Japan, Germany, and
Canada
Provides comprehensive legislative treatment of international
arbitral process, including:
Validity and enforceability of arbitration agreements
Judicial non-interference in arbitral process
Provisional measures
Setting aside or vacating awards
Recognition and enforcement of awards
Arbitral institutions and their rules
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III. What is International Arbitration? Ethiopian
Legal Framework










Shemegelena in traditional context
Arbitration in Ethiopia is governed by two national laws:
Civil Code
Article 3325 to 3346 (enforcement of agreements to arbitrate)
Civil Procedure Code
Provides rules on procedural aspects of arbitration
The Codes do not distinguish between domestic and international
arbitration except for the enforcement of foreign arbitral awards

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Why arbitrate international disputes rather than go to courts? International
Arbitration is preferred to court litigation generally because:









IV. Why Arbitrate?

Neutrality

Expertise of decision-maker, the arbitrators

Enforceability of Awards

Flexibility of procedure

Confidentiality

Cost savings?

Time savings?

See the 2013 PwC/Queen Mary College, University of London on corporate
choices in international arbitration.

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Neutrality: Advantage to International Arbitration

International Arbitration Court litigation
Parties are free to determine place (seat) of arbitration
anywhere in the world = a neutral forum.
Avoid unfamiliar and sometimes inefficient/ biased courts
of the counterpartys country.
Arbitral seat denotes the legal site of the arbitration for
limited supervisory role of national courts and certain
procedural aspects (e.g. enforcing arbitration
agreement and determining forum for annulment
actions).
Parties should select a seat in a country that has ratified
the New York Convention and has favourable national
arbitration legislation.
Parties spend little time at the place of arbitration over
the course of an arbitration.
Hearings are typically held at the seat but need not be.
The selected seat of an arbitration does not
dramatically increase the cost of an arbitration.
Courts of a neutral country likely to be unfamiliar and may
not have jurisdiction, so rarely a viable option.

Courts of one party: unlikely to be acceptable to other
party as unfamiliar, and sometimes suspicions of
inefficiency or bias towards local party.

Practical difficulties: language; attending hearings in a
foreign which may take place over long period of time.

IV. Why Arbitrate? Neutrality
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Specialised and Neutral Decision-Makers: Advantage to International
Arbitration
International Arbitration Court litigation
Parties appoint their co-arbitrator and
choose the method of appointment of the
chair of the arbitral tribunal.
Ability to select decision-makers with
specific legal, commercial or technical
expertise most suitable to given case.
Specialisation of arbitrators = one of the
most frequently cited advantages of
arbitration.
Requirement that arbitrators be
independent and impartial.
Parties do not choose which judges will
hear the case. Judge/bench is selected by
the court.
Judges usually will not have the level of
specialisation of arbitrators. Judges are
likely to hear all types of civil disputes.

IV. Why Arbitrate? Specialised and Neutral
Decision-Makers
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Flexibility of Procedure: Advantage to International Arbitration

Arbitration Court litigation
Do not apply procedural rules of a national legal
system.
Arbitration rules are usually not very detailed (see
ICC Rules and UNCITRAL Rules).
Parties and tribunal are largely free to determine
the procedure best suited for a given case based
on parties preference and amount in dispute.
Only limits: due process and equality of the
parties.
Not formalistic (eg service through private
means; no need for notarisation etc.).
Parties are free to choose language and their
counsel
No similar freedom of parties and court to
determine procedure. Rules of Civil Procedure
that are:


Requirements to proceed in local language and
with local counsel.
Service of process abroad creates considerable
potential for complications and delays.
Can be an advantage in multi-party cases.


IV. Why Arbitrate? Flexibility of Procedure
Designed to apply in all types of cases;
Applied uniformly by the courts.
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Right of Appeal / Finality of the Award or Judgment: Advantage of
International Arbitration
International Arbitration Court litigation
Award is a binding decision. Presumption of finality.
There is no right of appeal as there is in court litigation.
Generally limited possibilities to have the award
annulled/set aside:




Depending on national laws:


Most countries have:

IV. Why Arbitrate? Right of Appeal / Finality of the
Award or Judgment
Before courts of place of arbitration;
Leading places of arbitration: very limited grounds
to annul/set aside an award / no full appeal or
review of the substance of the award;
If not a leading place of arbitration: check the
national arbitration law to identify recourse against
the award.
Award immediately enforceable pending set aside
action;
No automatic stay of enforcement of award pending
action to set aside
At least one jurisdiction of full appeal (complete
review of facts + law)
Plus tier of jurisdiction for review of law only.
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Enforceability of the Award or Judgment Wherever in the World Where
Debtor Has Assets: The Key Advantage to International Arbitration

International Arbitration Court litigation
New York Convention 1958: No equivalent to New York Convention:

IV. Why Arbitrate? Enforceability of the Award or
Judgment
Worldwide convention: 149 member states
Ethiopia not party to New York Convention but
Ethiopian parties can seek enforcement of an arbitral
award issued in a country that has ratified the New York
Convention in that country or any other country that
has ratified it
Presumptive obligation to recognise foreign arbitral
awards
Subject to limited exceptions: lack of jurisdiction, denial
of procedural fairness, non-compliance with arbitral
procedures, non-arbitrability and public policy. No
review on the merits.
New York Convention makes it easier to enforce an
award
No worldwide convention on recognition and
enforcement of judgments equivalent to New York
Convention;
Some bilateral or regional (European Union)
conventions/regulations but very partial geographical
coverage (eg the US are not party to any convention
on the recognition and enforcement of foreign
judgement);
Recognition and enforcement of foreign judgments
will depend on national laws of enforcement state and
whether a treaty exist between that state and the
state of origin of the judgment: very challenging to
enforce foreign judgment in practice, at least without
re-litigation of the merits.

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Confidentiality: Advantage to International Arbitration

Arbitration
Court litigation
Private process = proceedings and award are
not accessible to the public.
However, do not overestimate:





Best protection: through specific language
on confidentiality in arbitration agreement.
Proceedings and judgments are typically a
matter of public record.

IV. Why Arbitrate? Confidentiality
No particular legal protection of confidentiality;
Sanctions for breach of confidentiality are
unclear if they are not contractually defined
Confidentiality can be compromised if a party
applies to court for interim relief, annulment or
recognition and enforce of an award.
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Arbitration Court litigation
Fees and expenses of arbitrators are paid by the parties.
But rarely a decisive consideration for parties, which are
willing to pay to have an efficient dispute resolution
mechanism
Unlikely to be cheaper than proceedings in first instance,
but no costly appeal.
Major factor: usually looser pays, i.e. loosing party is
ordered to reimburse costs of the arbitration to the
winning party.
Time: generally longer than court litigation in first
instance, but no full appeal before courts, i.e. one-short
process.
Expedited procedures available under certain arbitration
rules (see, e.g. SIAC Rules and Swiss Rules).
Time and cost saving measures available to parties and
tribunal, as part of the flexible/tailor-made procedure.
Salary of judges is not paid by the parties.
Cost and time of several layers of appeal, including at
least one layer of full appeal on the facts of the law.
In many countries, only limited recovery of costs, no
looser pays principle.

IV. Why Arbitrate? Time & Costs

Contact Information

Elodie Dulac
King & Spalding LLP
9 Raffles Place, Level 31
Republic Plaza
Singapore 048619
Tel.: +65.6303.6004 / +65.8499.7283
Email: edulac@kslaw.com


Leyou Tameru
Tel.: +251911737251
Email: leyou.tameru@gmail.com