In R & S v. Defendants , the High Court Held where an Arbitration Agreement Allows an Appeal from the Arbitrator's Award to the Courts on a Point of Law, the Parties are not Required to Ask the Permission of the Court to Appeal (15 April 2008)

Royal & Sun Alliance Insurance plc ("R&S") contracted with BAE Systems Insurance (Isle of Man) Limited ("BAE Insurance") to act as one of the reinsurers of BAE Insurance, the insurer for the BAE group of companies. All of the BAE group's reinsurers entered into a Reinsurers Common Terms Agreement and a Dispute Resolution Agreement (the "DRA"), which included an arbitration agreement, with BAE Insurance. A dispute arose between the parties in relation to an application by BAE Insurance for payment by R&S of a claim, under the reinsurance contract, for a sum of $91.416 million. This dispute was referred to arbitration. The arbitrators rejected R&S's objections to the application and, in their award, held that the full sum, with interest, was payable by R&S. The question before the Court was whether R&S required leave to appeal the arbitrator's award on a point of law, or whether the requirement for leave to appeal had been waived by the parties under the DRA.

The Court began by exploring the statutory requirements for appealing an arbitrator's award on a point of law. S69(2) Arbitration Act 1996 (the "Act") provides that an appeal against an arbitrator's award on a point of law shall not be brought to Court except, "with the agreement of all parties" (s69(2)(a)), or with "the leave of the court" (s69(2)(b)). Article 26 of the LCIA Rules, the procedural rules set out in the DRA as governing any dispute between the parties, states that "the parties waive irrevocably their right to any form of appeal insofar as such waiver may be validly made". The DRA incorporated the LCIA Rules, subject to certain provisions, which included the express statement that "any party to the Dispute may appeal to the court on a question of law arising out of an award made in the arbitral proceedings".

All parties agreed that the matter before the Court was one of construction of the above provisions, i.e. to decide whether the provisions of the DRA permitting an appeal would prevail over the LCIA provision waiving the right of appeal. Mr Justice Walker first looked to the ordinary meaning of s.69(2)(a) of the Act and decided that it was clear that there was no need for leave to appeal to be sought from the courts if all parties to the arbitration agreement had agreed that an appeal on a point of law could be brought. He rejected the arguments advanced by BAE Insurance. The words in the DRA were to be given their ordinary meaning. The ordinary meaning of the relevant clause of the DRA was that the parties to the arbitration agreement had expressly agreed that an appeal on a point of law could be made to the Courts, and that this provision prevailed over the LCIA provision waiving the right of appeal. It was not necessary for there to be a specific agreement to dispense, in terms, with the requirement of leave. The Court thus concluded that leave to appeal the award on a point of law was not required. Parties: Royal & Sun Alliance Insurance v. BAE Systems, Systems 2001 Asset Trust Funding Ltd & BAE Systems Insurance (Isle of Man) Ltd, case no: 2007 Folio 1374, High Court, QBD, Commercial Court, England.

Tsavliris Salvage Limited ("Tsavliris") was contracted by the vessel's owners on the Lloyd's Open Form of Salvage Agreement to salvage a ship carrying wheat to Iraq. At the time of salvage, the wheat had been sold by the cargo owners to the Grain Board of Iraq ("GBI"). After the salvage services had been concluded, Tsavliris required payment of the salvage costs and approached the cargo owners for their contribution. Tsavliris attempted to contact GBI, and then to arrest the cargo, both unsuccessfully. Tsavliris then commenced arbitration against GBI pursuant to the provisions of an arbitration agreement contained within the salvage agreement between Tsavliris and the ship-owners, who were acting as agents for GBI at the time of salvage. The arbitrator held that since the cargo was the property of GBI (and not of the Republic of Iraq), GBI was liable for the cargo's proportion of the salvage costs. The Ministry of Trade of the Republic of Iraq ("MOT") and GBI applied to the court challenging the award on the following grounds: (i) that the arbitrator had no jurisdiction as GBI was not a party to the arbitration agreement; and (ii) that GBI was a part of MOT and thus immune from proceedings under the State Immunity Act 1978 (the "Act"). Tsavliris applied to the Court to enforce the award and for a freezing injunction against GBI.

The Court first examined whether the cargo owner was bound by the salvage agreement entered into by the ship owners. The Court noted that Article 6.2 of the International Convention on Salvage 1989, as enacted by s.224, Schedule II Merchant Shipping Act 1995 sets out that the owner of a vessel has authority to conclude a salvage agreement on behalf of the cargo owner. The salvage agreement in this case included an arbitration agreement and thus the Court held that, following the principles of agency, the cargo owner was bound by the arbitration agreement with Tsavliris. The Court then looked into whether GBI or MOT could be deemed the owners of the cargo, and agreed with the arbitrator, on the facts, that GBI was the owner. The Court made this decision by reference to the supply contract, the bill of lading and the purchase and shipping documents that were exhibited. It was thus held that GBI was a party to the arbitration agreement, and that the arbitrator did have jurisdiction.

As regards the second claim of immunity by MOT and GBI the Court examined three issues. Firstly the Court analysed whether GBI was a separate entity from MOT and consequently not a beneficiary of state immunity. The Court concluded that GBI was, in fact, a separate entity, inter alia because of its separate management structure, its financial and administrative independence, its existence as a separate legal entity and its separate identity. Second, the Court considered whether in the event that GBI was not deemed a separate entity and was connected with MOT, s9(1) of the Act would act to prevent a claim for immunity as GBI/MOT had agreed in writing to submit any dispute to arbitration. The Court concluded that s9(1) of the Act did prevent each of GBI and MOT claiming immunity because of the existence of an agreement to arbitrate. Finally, the character of the acts of GBI was examined by the Court to determine whether these had the character of State acts as required for immunity under the Act. The Court decided that the acts in question, the purchase and transport of grain, were not governmental acts but acts that any private citizen could perform. For all these reasons, the Court thus held that GBI was not entitled to challenge the award on the basis of state immunity. The Court held that each of the challenges against the arbitral award should be rejected and that Tsavliris was entitled to enforce the original arbitration award against GBI. Finally, the judge granted the freezing order that Tsavliris sought, freezing the assets of GBI because of the very real risk of GBI assets being dissipated. Parties: Tsavliris Salvage & Ministry of Trade of the Republic of Iraq v. Grain Board of Iraq, case no: 2006 - 1387 and 2007 - 919, High Court, QBD, Commercial Court, England.

In Société SNF vs. Cytec, the Cour de cassation Held that a Criminal Proceeding does not Prevent a Parallel Civil Proceeding Concerning an Award Annulment. The Court also Held that an Award can Solely be Settled for Breach of Public Order if the Breach is Clear, Effective and Concrete (4 June 2008)

The case stems from a supply contract signed between SNF and Cytec in 1993. SNF terminated the contract and Cytec commenced an arbitral proceeding in Brussels.

On 5 November 2002 a first award was issued which held that the 1993 agreement was null and void under article 81 of the European treaty (unfair competition); SNF and CYTEC were both held responsible. On 8 July, 2004, a second award ordered SNF to pay monetary damages to CYTEC.

On 15 September 2004, both awards were granted recognition in France. SNF appealed and further sought a suspension of the appeal proceeding arguing that under Article 4 of the "code de procédure pénale", a civil procedure had to be suspended until the outcome of a parallel criminal proceeding. It further submitted that the award could not be enforced because of a breach of French international public order.

SNF's appeal was denied, and thus SNF appealed to the Cour de cassation. The court de cassation approved the Cour d'appel 's decision. It found that a request to settle could only be stayed on the ground of Article 4 both if the alleged offence has a direct link with the reason for the award's annulment and if the criminal decision to come may have an impact on the decision to annul.

Regarding public order, the Cour de cassation held that courts solely control that the outcome of the award is compatible with public order and that the scope of their control is limited to verify that the alleged violation is clear, effective and concrete. The Cour de cassation further observed that the Cour d'appel had verified that the arbitral tribunal had applied European competition law; that clear, effective and concrete violation was established, and that SNF had been allowed to claim damages. Moreover, the Court held that assessment of damages by the tribunal could not be controlled by the court of appeal pursuant to the rules applicable to a request for settlement of an award. The appeal against the court's decision is therefore denied. Parties: SNF v. Cytec, case no: 680, Cour de cassation, France.

ICSID

In Rompetrol Group v. Romania , ICSID Tribunal Finds it has Jurisdiction to Decide a Dispute Submitted to it Pursuant to the Netherlands-Romania BIT, and Joins Romania's Admissibility Objection to the Merits (10 April 2008)

Rompetrol S.A., a Romanian state-owned oil company, was privatized in 1993. In 1998 Dinu Patriciu, a Romanian citizen, purchased a controlling stake in the company. Via a series of changes in ownership of shares from 2000 onwards, by December 2005, when the Request for Arbitration was filed, Claimant The Rompetrol Group N.V. ("TRG"), incorporated in The Netherlands, owned a majority shareholding in Rompetrol S.A. and was itself wholly owned by a Swiss company that in turn was 80 per cent owned by Dinu Patriciu. In 2000, TRG acquired a controlling stake in a privatized Romanian company which owns and operates one of Romania's largest oil refineries. The privatized company is the subject of an ongoing investigation by the General Prosecutor's Office in Romania. TRG claimed that the investigation constituted discriminatory and arbitrary treatment of the privatized company, in violation of the Netherlands-Romania BIT ("BIT"). Romania asserted that the Tribunal lacked jurisdiction, on the basis that despite meeting the 'formal requirements' of the ICSID Convention and the BIT, TRG's ownership, management, control and funding meant that it was not qualified as a foreign investor and could not invoke ICSID jurisdiction. Romania also raised other preliminary objections relating to admissibility.

The Tribunal found it had jurisdiction over the dispute, holding that the definition of national status in the BIT was decisive for the purposes of establishing jurisdiction and that TRG qualified as a foreign investor. Noting that Article 25 of the ICSID Convention grants parties significant latitude to define nationality, the Tribunal observed that such latitude must be at its greatest in the context of corporate nationality. The Tribunal refused to follow Professor Weil's dissenting opinion in the Tokios Tokelés case, which suggested that economic reality should trump formal legal structure in determining the nationality of corporate investors. The Tribunal rejected Romania's argument that there is a rule of general international law favoring "real and effective nationality". The Tribunal reasoned that the ICJ's consideration of a natural person's nationality in the context of an international claim in the Nottebohm case raised different questions to those relating to corporate nationality. Moreover, nothing in either the Barcelona Traction case or general international law bars state parties from agreeing to rely on place and law of incorporation as a sufficient criterion of nationality for the purposes of a BIT or any other treaty. Turning to the specific provisions of the BIT, the Tribunal held it was clear that Romania had specifically consented to ICSID jurisdiction over claims brought by Dutch companies, without regard to their incidents of control or source of capital.

The Tribunal also rejected a narrower version of Romania's jurisdictional objection, to the effect that TRG's Dutch nationality should not be "opposable" to Romania for the purpose of establishing the Tribunal's jurisdiction. The Tribunal questioned whether "opposability" had any role to play given TRG founded its claims on rights under a bilateral treaty and would have no nationality for the purposes of the arbitration if its Dutch nationality were non-opposable to Romania. In any case, the Tribunal held, "opposability" was irrelevant to the interpretation of the BIT. Finally, the Tribunal commented that the NAFTA tribunal's remark in the Loewen case that "it is inconceivable that sovereign nations would negotiate treaties to supplement or modify domestic law as it applies to their own residents" was "plainly wrong."

Romania's admissibility objection was premised on its characterization of TRG's claim as in substance a claim for denial of justice, which was inadmissible under the BIT so long as local remedies had not been exhausted. The Tribunal held it was unable to resolve the admissibility objection as a preliminary question, given TRG had not yet elaborated its precise claims in full in a Memorial or other opening formal pleading. The Tribunal therefore joined its decision on admissibility to the merits. The Tribunal reserved for later the allocation of costs on the preliminary phase of the arbitration. Parties: The Rompetrol Group v. The Republic of Romania, ICSID Case No. ARB/06/3.

U.S.A

In ECOSA v. CYCASA, the Court of Appeals Set aside the Arbitral Award Holding that an Arbitrator's Failure to Conduct Physical Inspection of the Premises it has ordered Constituted a Violation of the Parties Constitutional due process Rights and Contravened Public Policy(25 January 2008)

Claimant (Egson Construcciones S.A. - ECOSA) filed an action to set aside an award rendered by a sole arbitrator, designated by the COAATM (the "Colegio Oficial de Aparejadores y Arquitectos Técnicos de Madrid"), on the grounds set forth under article 41.1 (b) and (f) of the Spanish Arbitration Act.

The dispute concerned the works performed under a construction contract. Claimant requested the physical inspection of the premises as part of the evidence adduced to prove its claim. The arbitrator granted Claimant's petition, but in view of Respondent's refusal to allow the inspection reached its decision without having conducted it.

The Madrid Court of Appeals held, in consonance with the Constitutional Court's judgment of April 14, 1986 and the view held by the vast majority of the Courts of Appeals in Spain, that an arbitral award contravenes public policy only when it violates the fundamental rights and civil liberties recognized in Chapter II, Title I of the Spanish Constitution, and in particular article 24 of the Constitution, which enshrines the right to due process. The Court found that the physical inspection of the premises was recognized as crucial for the purposes of adjudicating the dispute by the arbitrator, who admitted it as relevant evidence but failed to carry out said inspection. The Court found therefore, that the arbitrator had failed to guarantee Claimant's right to present its case. The Court added that the arbitrator not only failed to conduct an inspection that he had already admitted and ordered, but also failed to request the assistance of the local courts in the taking of evidence (Article 33 of the Spanish Arbitration Act). Accordingly, the Court ordered the award to be set aside. Parties:Egson Construcciones S.A. (ECOSA) v. Canteras y Construcciones S.A. (CYCASA), case no: 43/2008, Madrid Court of Appeals, Spain.

Switzerland

In X GmbH v. Y Corp ., the Federal Supreme Court Held that an Arbitration Clause Contained in One Contract cannot be Extended to Related Contracts if those Contracts Contained a Different Arbitration Clause (29 February 2008)

On 23 October 2000 X GmbH with seat in Germany and Y Corp. with seat in Russia entered into an exclusive agreement on the delivery of ferro titanium. In addition, the parties concluded another exclusive agreement on 1 January 2004. Both contracts provided for Swiss Law and jurisdiction of the Zurich State courts. Thereafter, between 2002 and 2005, the parties concluded five contracts referred to as "Sukzessivlieferungsvertr?ge" (multiple delivery contracts). Those contracts contained an arbitration clause providing for arbitration before the International Arbitration Commission of the Chamber of Commerce and Industry of the Russian Federation ("Internationale Handels-Schiedskommission bei der Kammer für Handel und Industrie der Russischen F?deration"). On 18 July 2006, the parties agreed on an addendum to the exclusive agreements. The jurisdiction clause was substituted by an arbitration clause providing for arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers of Commerce.

Based on the arbitration clause of the addendum, X GmbH commenced arbitration before the Zurich Chamber of Commerce. It requested that Y Corp. be condemned to pay USD 12,000,000 based on the exclusive agreements, and partly, based on one of the multiple delivery contracts. It also requested the Arbitral Tribunal to hold that Y Corp. had no claims under the multiple delivery contracts of March 2005 and May 2005.

Y Corp. contested the jurisdiction of the Arbitral Tribunal with regard to claims based on the multiple delivery contracts. The Arbitral Tribunal rendered an award stating that it would only address the claims arising out of the exclusive agreements holding that it is not competent to decide on claims based on the multiple delivery contracts.

X GmbH challenged the award before the Swiss Federal Supreme Court by claiming that the Arbitral Tribunal should have declared itself competent with regard to all claims submitted. The Swiss Federal Supreme Court relied on an objective interpretation of the arbitration clause as contained in the addendum to the exclusive agreements. It noted that the arbitration clause did not mention the multiple delivery contracts at all and did not contain any indication that it should also extend to those contracts. If the parties had wanted to replace the arbitration clause as contained in the multiple delivery contracts with the arbitration clause of the addendum, they could have easily stated their intention in the addendum. The fact that the arbitration clause of the addendum refers to all disputes "arising out of or in connection with this contract" does not mean that it applies to disputes resulting from related contracts that contain a different arbitration clause. For this reason, the challenge was rejected. X GmbH v. Y Corp., case no: 4A_452/2007, Swiss Federal Supreme Court, Switzerland.

U.S.A

In Steel Corp. v. Int. Steel , the U.S. District Court Rejected Defendant's Arguments that the Award should be Set aside under the New York Convention Because it had been Nullified by a Default Judgment Entered against Plaintiff by a Philippine Court (6 February 2008)

Plaintiff Steel Corporation of the Philippines ("SCP") petitioned the District Court for the Western District of Pennsylvania to confirm a foreign arbitration award dated June 24, 2004 against International Steel Services, Inc. ("ISSI").

ISSI moved to dismiss the petition primarily on the ground that a Philippine court had set aside the arbitral award and that enforcement would therefore violate Art. V(e) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which provides that "applications for setting aside or suspending an arbitral award may be made only to a competent authority of the country in which, or under the law of which, that award was made." The arbitral clause of the contract between SCP and ISSI stipulated that the "validity, performance and enforcement" of the contract would be governed by Philippine law and that the arbitration would be conducted in Singapore. The arbitrator applied the Singapore International Arbitration Act to the proceedings, but applied Philippine law in construing the contract. ISSI filed a petition in a trial court of the Philippines to vacate the award. On January 4, 2006, SCP was declared in default of the petition by the trial court and ISSI was "allowed to present its evidence ex-parte."

On January 26, 2006, SCP filed a motion to reconsider the default order and on April 18, 2007, the trial court referred the dispute to mediation and stayed all further proceedings of the court pending mediation. The court found as a threshold matter that the Philippine court proceedings could not be construed as a set aside or vacatur of the award. The court held that, in any event, the arbitration clause's statement that the "enforcement" of the contract was governed by Philippine law, without more, did not sufficiently reflect an agreement between the parties that Philippine procedural law should apply to an arbitration to be held in Singapore. The Court reasoned that under the New York Convention, an arbitration clause specifying the place of the arbitration creates a presumption that the procedural law of the situs will apply, and accordingly, the Philippine court had no jurisdiction to vacate an award rendered in Singapore. Parties: Steel Corporation of the Philippines v. International Steel Services, Inc., case no: 06-386, United States District Court for the Western District of Pennsylvania, U.S.A.