Arbitration & Litigation Tutorial. Assistant Professor Monika Prusinowska Winter term 2014/2015

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1 Arbitration & Litigation Tutorial Assistant Professor Monika Prusinowska Winter term 2014/2015

2 Drafting Arbitration Clause

3 Why is arbitration clause called sometimes the midnight clause? What does the term severability of arbitration clause mean? What are the essential elements of arbitration clause? What are the common mistakes made when drafting arbitration clauses? ( Parties want money not a piece of paper ), selection of applicable law agency law example What is the meaning of the seat of arbitration?

4 In any arbitration there is a need to draw a distinction between the law applicable to the substantive dispute, the law of the seat and the law applicable to the arbitration clause itself. The seat of arbitration is the jurisdiction where the international arbitration has its home. It provides the national arbitration legislation applicable to arbitration for some procedural issues, involvement of courts, ANNULEMENT of award mechanisms etc. Jurisdiction of the seat is not necessary the same as the governing law of the contract. Parties decide the seat if not usually tribunal specifies.

5 More:

6 Essential elements of an arbitration clause Agreement to arbitrate Scope of disputes submitted to arbitration Institutional arbitration rules Arbitration seat Arbitrators number, qualification and selection Language of arbitration Choice-of-law clause

7 Sample clauses "Any dispute, controversy, difference or claim arising out of or relating to this contract, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted. *The law of this arbitration clause shall be... (Hong Kong law). The seat of arbitration shall be...(hong Kong). **The number of arbitrators shall be... (one or three). The arbitration proceedings shall be conducted in...(language). *Optional. This provision should be included particularly where the law of the substantive contract and the law of the seat are different. The law of the arbitration clause potentially governs matters including the formation, existence, scope, validity, legality, interpretation, termination, effects and enforceability of the arbitration clause and identities of the parties to the arbitration clause. It does not replace the law governing the substantive contract. **Optional

8 "Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [City and/or Country]. The language to be used in the arbitral proceedings shall be [ ]. The governing law of the contract shall be the substantive law of [ ]."

9 Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission (CIETAC) for arbitration which shall be conducted in accordance with the CIETAC's arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.

10 The parties may also stipulate the following matters in the arbitration clause: the place of arbitration and/or hearing; the language of arbitration; the number of arbitrators; the nationality of arbitrators; the method of selection of arbitrators; the applicable law of the contract; and/or the application of general procedure or summary procedure.

11 What are the problems with the following clauses/fragments of clauses? Any dispute of whatever nature arising out of or in any way relating to the Agreement or to its construction or fulfillments may be referred to arbitration.

12 Parties shall appoint a Chinese speaking Arbitrator with a French law degree and a familiarity with Mid-East construction contracts.

13 Disputes shall be submitted to arbitration according to the Rules of Conciliation and Arbitration of the ICC; disputes which may be resolved by conciliation shall be submitted first to conciliation.

14 All disputes arising out of the bankruptcy proceedings connected to the Magnum JV will be resolved by the CIETAC Arbitration Commission in accordance with CIETAC 2015 Rules. The law applicable to the substance of the dispute will be US and Chinese law.

15 CASE: Company A is a big steel producer from China, Company B is a big car manufacturer from France. Companies A and B conclude the contract of purchase of 200 metric tons of steel. As for the dispute resolution method, arbitration was chosen. Being divided into 2 groups of lawyers, on behalf of Companies A and B, negotiate the arbitration clause to be put into the purchase contract. What are the essential elements you need to take into consideration? Negotiate and draft the arbitration clause for this contract.

17 Selected issues related to arbitration in China

18 In their arbitration clause, parties C (Spanish) and D (Chinese) did not specify the language of arbitration? What do you think the language of the proceeding will be if the case is to be brought before the CIETAC Arbitration Court? What is the difference between foreign arbitration/arbitral award and foreign-related arbitration/arbitral award under Chinese law? What is the importance of the distinction?

19 An international arbitration, is an arbitration that is governed by a mediator that is based outside of the People s Republic of China A foreign-related arbitration is an arbitration that involves foreign elements, but the mediator for the arbitration is within PRC territory. The foreign elements in these kinds of arbitrations entail: (i) one or both parties being citizens of another country, stateless individuals, or foreign entities; (ii) the subject matter of the dispute is located outside of China; or (iii) the facts establishing, altering, or terminating the parties relationship occurs outside of the PRC. A domestic arbitration is an arbitration that has no foreign related elements, and the arbitration panel is within PRC territory.

20 Company E - the Spanish buyer won the arbitration against Company F Chinese seller The case was arbitrated by the Shenzhen Arbitration Commission Company E went to the national court for the enforcement of the award However, Company F objected the enforcement before the national court claiming that the arbitral award has never been successfully delivered to Company F

21 What kind of case is this? Is it a foreign case and thus foreign award under Chinese law? What is the law applicable for the recognition and enforcement of this award? On what grounds can the national court review the award? Potentially, can it look into the merits of the case? Can it correct the award? What will happen if the national court does not want to enforce the award and supports the request of the Chinese company?

22 China arbitration few important issues Select a reliable institution (BAC, CIETAC (subbranches!), SAIC) Plan the use of language - if you do not specify a language other than Chinese, most probably it will be in Chinese Think about having a foreign arbitrator in a panel No ad hoc arbitration in China For domestic disputes arbitrating in China

23 ADR methods

24 What kind of ADR mechanisms do you know? What are the motivations to use ADR? What are the benefits and drawbacks of ADR as compared to litigation? What are the advantages and disadvantages of particular methods? What are the differences between arbitration and mediation? What is the binding power of the decisions made within specific ADR methods?

26 Arbitration (+ Final-Offer Arbitration) Neutral evaluation Mediation/ Conciliation/ Negotiation Expert Determination Mini-trials

27 CASE: See the various dispute scenarios below and think about the most efficient way of solving particular disputes. What does the selection of particular ADR method depend on?

28 Dispute between the tenant and landlord over the flat rented (leaking water machine pipe destroyed the parquet). Dispute over the efficiency of two technical solutions proposed for the machine produced by the JV company (two parties to the JV have various views on what technical solution will be the most efficient for improving the quality of airbag gluing in a newly produced car). Dispute between the member of the residual community over the use of funds collected for the construction of the playground. Dispute over IP law rights related to the technology transfer agreement. Dispute within the JV company involving the trade secrets. Dispute between the brothers over inheritance of the family jewelry.

Arbitration & Litigation Tutorial. Assistant Professor Monika Prusinowska Winter term 2015/2016

Arbitration & Litigation Tutorial Assistant Professor Monika Prusinowska Winter term 2015/2016 Drafting Arbitration Clause Why is arbitration clause called sometimes the midnight clause? What does the