It cannot be denied that there are many perks and benefits that quarreling parties can collectively gain in choosing to resolve their transnational legal disputes through international arbitration proceedings as opposed to domestic-court-based proceedings. Among others, some of the more significant advantages that can come with such parties selecting international arbitral tribunals instead of national courts for dispute resolution purposes include wholly neutral venues, shorter proceedings, cheaper legal costs, confidentiality and, of course, "party autonomy" (which, as I defined in my previous blog post, is the notion that such parties are entirely free to agree on the procedure to be followed by the international arbitral tribunal in conducting the applicable proceedings).
Most importantly of all, it is because of these very same comparative conveniences that international arbitration in general has become such a widely-adopted and formally-institutionalized means of interstate dispute resolution, one which is universally regarded to be highly reliable and which continues to readily grow in popularity worldwide.
Nevertheless, in spite of the relative pluses of international arbitration mentioned above that have so effectively served to foster its widespread and ever-increasing demand among foreign parties, it also entails a much less desirable trait that, if left unchecked, may very well jeopardize not only its global acclaim, but also its legitimacy as a dependable method of dispute resolution: That is, the increasing utilization of seemingly unprofessional, unethical and unscrupulous tactics by counsel purely to gain competitive edges over opposing counsel in the context of international arbitration.
Having since acquired the label of so-called "guerilla tactics" over the past several years within the overall international arbitration community, such unprincipled methods have comprised a wide variety of behavior that has ranged from marginally-underhanded activity to what could even be deemed to be outright criminal conduct under most legal systems.
Indeed, as Santiago Cueto, an esteemed practitioner of international arbitration who is based in Miami, FL, states in his December 2013 blog post "Guerilla Tactics in International Arbitration: The New Normal in 2014?" on his official Cueto Law Group, PL Blog (found here: http://internationalarbitrators.com/guerilla-tactics-in-international-arbitration-the-new-normal-in-2014/), a handful of "guerilla tactics" that he himself has personally observed during the course of his practice of international arbitration over the years include the following: "Intimidating an arbitrator to go home rather than attend deliberations; changing counsel mid-proceedings to create a conflict [of interest]; wiretapping opposing counsel's conference rooms, withholding damaging documents that were ordered to be disclosed; raising multiple challenges to a single arbitral tribunal; raising excessive frivolous objections to 'run the clock' at an evidentiary hearing; sifting through an adversary's trash; threatening a witness with physical harm to dissuade him from testifying; absurdly excessive document disclosure requests; hiring private detectives to follow and observe arbitrators; and pulling a fire alarm to prevent a hearing form going forward." It is of course even more disheartening to know that the foregoing list is by no means an exhaustive one.
Outrageous real-world examples of such "guerilla tactics" aside though, one of the main reasons as to why such objectively-shady conduct has been able to gradually take root and so frequently occur within the realm of international arbitration is largely due to the fact that, as of right now, there still exist no concrete, enforceable systems of universally-applied ethics rules among the various institutions of international arbitration (such as the London Court of International Arbitration, the ICC Court of International Arbitration, the Permanent Court of Arbitration, etc.) dotted throughout the globe.
That is not to say, however, that at least some of these institutions of international arbitration are not presently trying to tackle this ethics-based issue head on in some capacity. For example, the International Bar Association recently issued its IBA Guidelines on Party Representation in International Arbitration in 2013 (found here: http://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx#partyrep); as such, these guidelines were inspired by the principle that the representatives of parties should act with honesty and integrity and, in addition, should refrain from engaging in behavior designed to produce any unnecessary delay or expense, including methods having the purpose of obstructing the arbitral proceedings. Much more recently, in February of 2014, the London Court of International Arbitration, per the circulation of a final draft of its revised arbitration rules, unveiled a set of new draft guidelines concerning the ethical conduct of counsel; in particular, the London Court of International Arbitration's final draft includes a new guideline-based requirement on each party to ensure that its representatives comply with the IBA Guidelines on Party Representation in International Arbitration, as well as a new mechanism through which complaints in relation to alleged breaches of those guidelines may be resolved (an intriguing article that goes into much greater detail on this topic and that also has a link to the full text of the final draft in question can be found here: http://www.out-law.com/en/articles/2014/february/lcia-proposes-guidelines-for-arbitration-parties-legal-representatives-as-part-of-revised-rules1/).
Having said that, it therefore appears that at least a few international-arbitration-affiliated organizations and institutions such as the International Bar Association and London Court of International Arbitration in particular are certainly taking active steps towards curtailing the use of "guerilla tactics" in international arbitration to some meaningful degree.
At the end of the day however, the sets of guidelines regarding the conduct of counsel in international arbitration discussed above are only just that: guidelines. Consequently, unless the parties to a given international arbitral proceeding jointly agree to adopt these guidelines or unless the relevant arbitral tribunal unilaterally chooses to apply these guidelines (provided that such an arbitral tribunal has made a prior determination that it actually has the authority to do so of course), then these guidelines would not have any legal effect or degree of enforceability with respect to the conduct of the representatives of the parties involved; that is, guidelines such as these, unlike rules, would not automatically be applied to relevant arbitral proceedings.
With that in mind, I am strongly of the opinion that the various institutions of international arbitration should seriously consider drafting and systematically implementing new counsel-conduct-based rules (which by their very nature would necessarily have to be regarded and adhered to by representatives of parties in international arbitration, no matter what) that largely incorporate the type of language found within currently-existing guidelines such as those proffered by the International Bar Association and the London Court of International Arbitration. In doing so, the chances of "guerilla tactics" being allowed to occur in the first place would be significantly reduced; in turn, this would not only greatly mitigate the resulting costs and delays stemming from such unethical practices in general, but would also serve to further enhance and solidify the already-considerable appeal of international arbitration as a legitimate, reliable, respectable and preferable method of effectively resolving transnational legal disputes.
Nevertheless, due to the nonexistence of rules concerning the ethical conduct of counsel within the international arbitral realm as it currently exists, "guerilla tactics" are going to remain an unfortunate aspect of international arbitration for the foreseeable future, and I can only hope that such unprincipled methods do not become more commonplace.
As to whether or not we will eventually witness the widespread blossoming and proliferation of such institutional rules farther down the road, however, we will just have to wait and see.
Wednesday, March 19, 2014
Wednesday, January 15, 2014
ALBERT MEDINA: TRIBUNAL POWER VS. PARTY AUTONOMY: THE STATUS OF COUNSEL IN INTERNATIONAL ARBITRATION PROCEEDINGS
When it comes to the independent powers of international arbitral tribunals in structuring and directing arbitral proceedings pursuant to the majority of the international arbitral Conventions and Guidelines that currently exist, there can be no doubt in anyone's mind as to the relatively high degrees of managerial autonomy and legal unilateralism that such tribunals can legitimately wield.
For instance, in stark contrast to the more-limited powers typically vested in judges from most domestic legal systems, the ICSID Convention declares that arbitral tribunals in international investment disputes "are to be the judges of their own competence." As another example, the ICSID Convention even states that if the parties to the arbitral proceedings fail to agree on the rules of procedure that are to apply in those proceedings, then the rules of procedure to be used will be those rules that the arbitral tribunal independently chooses to apply on its own. While these provisions specifically pertain to the ICSID Convention, similar provisions can be found in different variations within most other Conventions, Rules and Guidelines on international arbitration in other arbitral contexts such as commercial arbitration or the enforcement of arbitral awards.
Nevertheless, these international arbitral regimes are all still lacking with respect to a whole host of still-unsettled but largely-important subject areas concerning the comparative powers of the tribunal, the parties and counsel for the parties with respect to the designing and managing of arbitral proceedings. With that in mind, one particular topic that the majority of existing arbitration Rules and Guidelines glaringly fail to enumerate any measures for concerns the removal of counsel when the integrity of the arbitral process is jeopardized (ie: when there are circumstances that would warrant the removal of counsel such as when a conflict of interest is created near the beginning of the arbitral proceedings with the deliberate intent to "derail" the applicable proceedings).
This of course presents us with a significant, unresolved issue: If the various international arbitral Rules and Guidelines eventually go on to expressly adopt such provisions, just who in the applicable proceedings should be able to wield this power, and on what basis?
Given the incredibly broad powers that already inhere within international arbitral tribunals in relation to the parties and counsel with regard to the construction and direction of the relevant proceedings, it would seem that the most logical choice, at a glance, would be the tribunals rather than the parties or their respective counsel.
At the same time however, the notion of expressly granting arbitral tribunals such a significant and exclusive degree of power to remove counsel when the process is jeopardized must necessarily be balanced against the right of the parties involved to their own choice of counsel; after all, the concept of "party autonomy" (which is the idea that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings) is one of the most defining foundational principles contained within the overall international arbitral system currently in place. That being said, the greater right between the parties' right to choice of counsel and the parties' right to a fair and efficient process would certainly not be as clear-cut as one would think it might appear when the parties to an international arbitral proceeding or their counsel seek to abuse the process and derail the arbitration proceedings.
Taking all of this into account, and speaking generally, I'm of the opinion that perhaps the soundest solution as to who should hypothetically be imbued with the power to remove counsel when the integrity of the process is jeopardized would be a joint one, whereby the parties to the proceedings and the prevailing arbitral tribunal collectively work together in pursuing an efficient course of action. To me, allowing both the parties and the corresponding tribunal to procedurally work in tandem and to in effect share this power in some reasonable, fairly-balanced fashion would be much more in line with the central tenets and principles of our current international arbitral regime overall than granting this power either exclusively to the parties or exclusively to the tribunal. That is, such an ideal sharing of power, I feel, would serve to effectively balance the significant, fundamental need for "party autonomy" with the equally-important, fundamental right of the parties to a fair and efficient international arbitral process in this particular context.
However, in light of all of the competing legal and policy-based interests mentioned above (together with the many intricacies that comprise the complex relationships between each of them), I think it is also safe to say that the process of coming up with such an ideal and reasonably-effective power-sharing provision, as well as the actual power-sharing provision in and of itself, would be incredibly complicated and fairly cumbersome.
Even still, if and until the currently-existing international arbitration regimes ever explicitly add such measures to their respective provisions, we still have yet to know just how any such provisions would actually be interpreted and carried out during relevant arbitral proceedings in spite of whatever legal text might ultimately be used.
That, however, is another can of worms.
*For those of you who would like to view other opinions on this matter, a detailed summary of an intriguing debate on this very same topic that was held at the ADR in Asia Conference in October of 2013 can be found here: http://www.conventuslaw.com/adr-in-asia-conference-debate-every-arbitral-tribunal-should-have-the-power-to-remove-counsel-when-the-integrity-of-the-process-is-jeopardized/#
For instance, in stark contrast to the more-limited powers typically vested in judges from most domestic legal systems, the ICSID Convention declares that arbitral tribunals in international investment disputes "are to be the judges of their own competence." As another example, the ICSID Convention even states that if the parties to the arbitral proceedings fail to agree on the rules of procedure that are to apply in those proceedings, then the rules of procedure to be used will be those rules that the arbitral tribunal independently chooses to apply on its own. While these provisions specifically pertain to the ICSID Convention, similar provisions can be found in different variations within most other Conventions, Rules and Guidelines on international arbitration in other arbitral contexts such as commercial arbitration or the enforcement of arbitral awards.
Nevertheless, these international arbitral regimes are all still lacking with respect to a whole host of still-unsettled but largely-important subject areas concerning the comparative powers of the tribunal, the parties and counsel for the parties with respect to the designing and managing of arbitral proceedings. With that in mind, one particular topic that the majority of existing arbitration Rules and Guidelines glaringly fail to enumerate any measures for concerns the removal of counsel when the integrity of the arbitral process is jeopardized (ie: when there are circumstances that would warrant the removal of counsel such as when a conflict of interest is created near the beginning of the arbitral proceedings with the deliberate intent to "derail" the applicable proceedings).
This of course presents us with a significant, unresolved issue: If the various international arbitral Rules and Guidelines eventually go on to expressly adopt such provisions, just who in the applicable proceedings should be able to wield this power, and on what basis?
Given the incredibly broad powers that already inhere within international arbitral tribunals in relation to the parties and counsel with regard to the construction and direction of the relevant proceedings, it would seem that the most logical choice, at a glance, would be the tribunals rather than the parties or their respective counsel.
At the same time however, the notion of expressly granting arbitral tribunals such a significant and exclusive degree of power to remove counsel when the process is jeopardized must necessarily be balanced against the right of the parties involved to their own choice of counsel; after all, the concept of "party autonomy" (which is the idea that the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings) is one of the most defining foundational principles contained within the overall international arbitral system currently in place. That being said, the greater right between the parties' right to choice of counsel and the parties' right to a fair and efficient process would certainly not be as clear-cut as one would think it might appear when the parties to an international arbitral proceeding or their counsel seek to abuse the process and derail the arbitration proceedings.
Taking all of this into account, and speaking generally, I'm of the opinion that perhaps the soundest solution as to who should hypothetically be imbued with the power to remove counsel when the integrity of the process is jeopardized would be a joint one, whereby the parties to the proceedings and the prevailing arbitral tribunal collectively work together in pursuing an efficient course of action. To me, allowing both the parties and the corresponding tribunal to procedurally work in tandem and to in effect share this power in some reasonable, fairly-balanced fashion would be much more in line with the central tenets and principles of our current international arbitral regime overall than granting this power either exclusively to the parties or exclusively to the tribunal. That is, such an ideal sharing of power, I feel, would serve to effectively balance the significant, fundamental need for "party autonomy" with the equally-important, fundamental right of the parties to a fair and efficient international arbitral process in this particular context.
However, in light of all of the competing legal and policy-based interests mentioned above (together with the many intricacies that comprise the complex relationships between each of them), I think it is also safe to say that the process of coming up with such an ideal and reasonably-effective power-sharing provision, as well as the actual power-sharing provision in and of itself, would be incredibly complicated and fairly cumbersome.
Even still, if and until the currently-existing international arbitration regimes ever explicitly add such measures to their respective provisions, we still have yet to know just how any such provisions would actually be interpreted and carried out during relevant arbitral proceedings in spite of whatever legal text might ultimately be used.
That, however, is another can of worms.
*For those of you who would like to view other opinions on this matter, a detailed summary of an intriguing debate on this very same topic that was held at the ADR in Asia Conference in October of 2013 can be found here: http://www.conventuslaw.com/adr-in-asia-conference-debate-every-arbitral-tribunal-should-have-the-power-to-remove-counsel-when-the-integrity-of-the-process-is-jeopardized/#
Wednesday, December 11, 2013
ALBERT MEDINA: USA VS. ARGENTINA: REINSTATING AN INTERNATIONAL ARBITRAL AWARD, SCOTUS-STYLE
There's an intriguing legal development concerning international arbitral awards that recently took root in the US Supreme Court, whereby SCOTUS and Argentina are (at least initially) at odds with one another. Specifically, the Supreme Court heard oral arguments (on Monday December 2, 2013) with regard to weighing British company BG Group PLC's ("BG") bid to reinstate a $185.3 million international arbitral award against Argentina that a US appeals court had previously thrown out.
This dispute (BG Group v. Argentina, U.S. Supreme Court, No. 12-138) concerns whether BG should recover the money on the grounds that a decision by the Argentine government in 2002 to freeze gas prices had actually breached a 1993 treaty between Britain and Argentina. Argentina is arguing that BG should have sued in Argentina's courts first. In response however, BG, a natural gas exploration and distribution company, states that it did not wish to take that route because Argentina had restricted access to its courts and sought to punish investors (such as BG) that filed lawsuits.
To provide a bit of background, the 1993 United Kingdom-Argentina treaty was designed to encourage investment by foreign companies such as UK-based BG. Argentina imposed the freeze on gas prices shortly after it announced a sovereign debt default of roughly $100 billion in 2001. BG challenged the freeze, saying it reduced the value of its roughly 45% stake in Argentina's Metrogas SA; BG sold its stake in Metrogas earlier this year to YPF SA and Integra Gas Distribution, LLC. Following these developments, the International Chamber of Commerce International Court of Arbitration, based in Washington, D.C., held in 2007 that since Argentina had by emergency decree restricted access to its courts, it would create an "absurd and unreasonable result" to read the treaty literally and require BG to go through the courts first. Subsequently, a federal district court judge in Washington upheld the award in a 2011 decision. Nevertheless, a federal appeals court ruled for Argentina a year later, saying that BG should have first tried to sue in Argentina and then wait 18 months for a ruling, as required by the treaty, before resorting to arbitration.
As for the present Supreme Court case, however, things aren't looking as promising for Argentina. In opposition to the previous federal appeals court ruling, a majority of Justices already expressed skepticism about Argentina's position during the December 2nd oral arguments. Justice Kennedy bluntly told Argentina's attorney that "[his] whole argument gives [him] intellectual whiplash." On top of that, Justice Samuel Alito questioned the value of BG filing a lawsuit in Argentina when it knew that the matter would eventually go to arbitration anyway. As far as common sense is concerned, I share the same opinions as those of Justices Kennedy and Alito.
In the context of the international arbitral realm, however, I personally find Argentina's stance in this case to be untenable if not unconscionable. The notion that a country shouldn't force foreign parties to sue in their courts first, while at the same time punishing those foreign parties for suing in their courts first, seems obvious enough in any sense. But more importantly, the present international arbitration regime favors fair, uniform and reasonably-burden-free access to international arbitration, especially in those countries that are signatories of applicable international treaties.
That said, Argentina's argument, as well as the relevant Argentine law that it so vehemently defends, both appear to fly in the face of this very fundamental principal of our current system of international arbitration. A country more-or-less arbitrarily forcing foreign investors to first file suit in that country's courts, and to then wait 18 months for a court ruling, prior to being able to gain access to already-available methods of international arbitration doesn't at all sync well with the underlying principles and goals found within our present international-arbitral legal system. Protectionist laws and policies such as those of Argentina in this regard are the very same types of domestic laws and policies that the international-arbitral domain strives to see mitigated if not extinguished. For the sake of fostering and maintaining a dependable, effective and legitimate system of international arbitration, I can only hope that other countries don't follow in Argentina's footsteps in the years to come.
Regardless of who ends up winning this arbitral-award-based dispute though, it will be interesting to see what ripple effects, if any, the US Supreme Court's decision will have on the current international arbitration regime. If Argentina loses, then perhaps more countries will loosen up limits on original international-arbitral jurisdiction out of fear of suffering the same fate as Argentina in similar arbitral-award disputes down the line. Conversely, if Argentina wins, then perhaps more countries will be emboldened to enforce protectionist policies that favor hegemonies of their respective domestic legal systems over international-arbitral venues of dispute resolution. As such, I think it's safe to say that the manner in which and degree to which the international community reacts will reflect the US Supreme Court's global influence in this regard, but only time will tell.
Personal opinions and reflections aside, a ruling for the current case is due by the end of June.
This dispute (BG Group v. Argentina, U.S. Supreme Court, No. 12-138) concerns whether BG should recover the money on the grounds that a decision by the Argentine government in 2002 to freeze gas prices had actually breached a 1993 treaty between Britain and Argentina. Argentina is arguing that BG should have sued in Argentina's courts first. In response however, BG, a natural gas exploration and distribution company, states that it did not wish to take that route because Argentina had restricted access to its courts and sought to punish investors (such as BG) that filed lawsuits.
To provide a bit of background, the 1993 United Kingdom-Argentina treaty was designed to encourage investment by foreign companies such as UK-based BG. Argentina imposed the freeze on gas prices shortly after it announced a sovereign debt default of roughly $100 billion in 2001. BG challenged the freeze, saying it reduced the value of its roughly 45% stake in Argentina's Metrogas SA; BG sold its stake in Metrogas earlier this year to YPF SA and Integra Gas Distribution, LLC. Following these developments, the International Chamber of Commerce International Court of Arbitration, based in Washington, D.C., held in 2007 that since Argentina had by emergency decree restricted access to its courts, it would create an "absurd and unreasonable result" to read the treaty literally and require BG to go through the courts first. Subsequently, a federal district court judge in Washington upheld the award in a 2011 decision. Nevertheless, a federal appeals court ruled for Argentina a year later, saying that BG should have first tried to sue in Argentina and then wait 18 months for a ruling, as required by the treaty, before resorting to arbitration.
As for the present Supreme Court case, however, things aren't looking as promising for Argentina. In opposition to the previous federal appeals court ruling, a majority of Justices already expressed skepticism about Argentina's position during the December 2nd oral arguments. Justice Kennedy bluntly told Argentina's attorney that "[his] whole argument gives [him] intellectual whiplash." On top of that, Justice Samuel Alito questioned the value of BG filing a lawsuit in Argentina when it knew that the matter would eventually go to arbitration anyway. As far as common sense is concerned, I share the same opinions as those of Justices Kennedy and Alito.
In the context of the international arbitral realm, however, I personally find Argentina's stance in this case to be untenable if not unconscionable. The notion that a country shouldn't force foreign parties to sue in their courts first, while at the same time punishing those foreign parties for suing in their courts first, seems obvious enough in any sense. But more importantly, the present international arbitration regime favors fair, uniform and reasonably-burden-free access to international arbitration, especially in those countries that are signatories of applicable international treaties.
That said, Argentina's argument, as well as the relevant Argentine law that it so vehemently defends, both appear to fly in the face of this very fundamental principal of our current system of international arbitration. A country more-or-less arbitrarily forcing foreign investors to first file suit in that country's courts, and to then wait 18 months for a court ruling, prior to being able to gain access to already-available methods of international arbitration doesn't at all sync well with the underlying principles and goals found within our present international-arbitral legal system. Protectionist laws and policies such as those of Argentina in this regard are the very same types of domestic laws and policies that the international-arbitral domain strives to see mitigated if not extinguished. For the sake of fostering and maintaining a dependable, effective and legitimate system of international arbitration, I can only hope that other countries don't follow in Argentina's footsteps in the years to come.
Regardless of who ends up winning this arbitral-award-based dispute though, it will be interesting to see what ripple effects, if any, the US Supreme Court's decision will have on the current international arbitration regime. If Argentina loses, then perhaps more countries will loosen up limits on original international-arbitral jurisdiction out of fear of suffering the same fate as Argentina in similar arbitral-award disputes down the line. Conversely, if Argentina wins, then perhaps more countries will be emboldened to enforce protectionist policies that favor hegemonies of their respective domestic legal systems over international-arbitral venues of dispute resolution. As such, I think it's safe to say that the manner in which and degree to which the international community reacts will reflect the US Supreme Court's global influence in this regard, but only time will tell.
Personal opinions and reflections aside, a ruling for the current case is due by the end of June.
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