Jay G. Safer-Locke Lord LLP. I. The Recognition and Enforcement of Foreign Arbitral Awards Under the New York Convention in the United States

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1 HOT TOPICS YOU SHOULD KNOW ABOUT IN INTERNATIONAL ARBITRATION AND INTERNATIONAL LITIGATION, WHAT S NEW IN INTERNATIONAL ARBITRATION IN THE COURTS IN THE UNITED STATES, THE NEW YORK CONVENTION, AND THE ARGENTINE BOND CASE Jay G. Safer-Locke Lord LLP I. The Recognition and Enforcement of Foreign Arbitral Awards Under the New York Convention in the United States 1. What is the New York Convention. 2. What is the purpose of the New York Convention. 3. What are the provisions of the New York Convention. 4. What is the policy of U.S. courts toward arbitration and the New York Convention. 5. What is the relationship of the New York Convention to the Federal Arbitration Act (FAA). 6. What do U.S. courts consider their role to be in determining whether to confirm and enforce an arbitral award and can U.S. courts set aside a foreign award. 7. What standard of review do U.S. courts apply to an award. 8. What special issues and possible problems need to be considered in seeking to enforce an arbitral award in U.S. courts and can you deal with them by language in the arbitration agreement.

2 9. What are the defenses in the New York Convention and the FAA applicable to an award sought to be enforced in the United States under the New York Convention. 10. How are the defenses and the other provisions set forth in the New York Convention construed by U.S. courts. 11. How do U.S. courts construe the defenses of forum non conveniens, manifest disregard of the law, lack of fundamental fairness, and that the award is totally irrational in cases involving the New York Convention. 12. How do U.S. courts treat U.S. enforcement proceedings where the losing party has commenced an action in their own country to overturn the award, or where there is an appeal in the foreign courts involving the arbitration award, including a stay of the U.S. proceeding. 13. A review of important decisions by U.S. courts concerning the New York Convention. 14. What are the recent decisions of U.S. Courts concerning the New York Convention. II. What is New in New York Concerning International Arbitration A. The New York International Arbitration Center (NYIAC) 1. What is NYIAC. 2. What is its purpose and goal. 2

3 3. When did it open and where is it located. 4. How does it operate and what does it provide to its users. 5. How do you obtain more information on NYIAC. 6. NYIAC s website: B. What is new in international arbitration in the Commercial Division of the New York State Courts 1. The Task Force on New York Law in International Matters. 2. Chief Judge of the State of New York Jonathan Lippman s Task Force Report on Commercial Litigation in the 21 st Century. 3. The permanent Commercial Division Advisory Council to advise Chief Judge Jonathan Lippman on all matters involving and surrounding the Commercial Division of the Supreme Court of the State of New York. 4. New Rules and Orders concerning International Arbitration in the New York State Commercial Division. 5. Orders on International Arbitration issued by New York State Commercial Division Justice Charles Ramos. III. The Argentine Bond case in New York Federal Courts NML Capital Ltd. v. The Republic of Argentine. IV. Provisional Remedies and Injunctions in Aid of Arbitration 3

4 1. Section 1782 of Title 28 of the U.S. Code (28 U.S.C. 1782). Assistance to foreign and international tribunals and to litigants before such tribunals. 2. New York Civil Law and Practice Rules (CPLR) Section 7502(c). Provisional Remedies. V. Other Hot Topics 4

5 HOT TOPICS IN INTERNATIONAL ARBITRATION AND INTERNATIONAL LITIGATION - NYSBA International Section Seasonal Meeting 2004 Vienna, Austria Program 15 Friday, October, 17 Pedro Sousa Uva * ARBITRATION IN PORTUGAL PORTUGAL AS A POTENTIAL SEAT OF ARBITRATION FOR INTERNATIONAL DISPUTES WHY? OUTLINE A. Arbitration in Portugal is hot but not new Arbitration has been used as a dispute resolution mechanism for many decades; the first (and former) Portuguese Law on voluntary arbitration dates from 1986; Portugal has friendly and modern legislation in arbitration and litigation; It is easy (and not expensive) to hold arbitrations in Portugal: Foreign lawyers and arbitrators may rely on a favorable legal system and conduct arbitral proceedings solely in English (or any other language); There is solid experience and a clear investment in arbitration by a large arbitral community; Lists of arbitrators of the major arbitral center in Portugal include several foreign authorities in international arbitrations notably Brazilian and Spanish arbitrators.. B. Portugal is an arbitration friendly country Law: Modern Arbitration Law on Voluntary Arbitration - Law No. 63/2011 of 14 December In line with UNCITRAL Model Law but tailored to the needs and uniqueness of the Portuguese legal system; 1

6 Arbitrability: Wide scope of arbitrable disputes; Specific regimes for matters other than commercial or investment disputes (e.g. tax arbitration); Party to most relevant international Conventions and Treaties (e.g. NY Convention since 1995; Member of the ICSID Convention since 1984; Party to 45 BITS); Pro-arbitration Courts: Experience of Portuguese State Courts in (i) deciding on challenge of arbitral awards proceedings; (ii) resorting and applying the International Bar Association (IBA) guidelines, notably on conflict of interests in international arbitration; (iii) declining a review on the merits of arbitral awards; (iv) assisting arbitral tribunals by means of interim relief (new Civil Procedure Code). Experienced arbitration center (Arbitration Center of the Portuguese Chamber of Commerce and Industry & its 2014 rules: e.g.: emergency arbitrator; code of ethics and reference to International Bar Association s (IBA) guidelines on conflicts of interest in international arbitration). C. Portugal as a strategic platform for resolving disputes amongst Portuguese Speaking Countries: Arbitration in Africa Language & Law: a common element for cooperation with African Countries, notably Angola, Mozambique and Cape Verde; Portugal as a neutral forum for international disputes; Enforcement of arbitral awards in African countries. Caveat: Angola and Cape Verde are not parties to the NY Convention. D. Conclusion * 2

7 HOT TOPICS IN INTERNATIONAL ARBITRATION AND INTERNATIONAL LITIGATION NYSBA International Section Seasonal Meeting 2014 Vienna, Austria Program 15 Friday, October 17 th *** Donato Silvano Lorusso *** INTERNATIONAL ARBITRATION IN ITALY OUTLINE 1. Ad hoc and institutional arbitration in Italy a. The sources of arbitration regulation in Italy: the Italian Code of Civil Procedure and the International Conventions ratified by Italy b. Types of arbitration proceedings in Italy: ad hoc vs. administered; clausola compromissoria vs. compromesso; arbitrato rituale vs. arbitrato irrituale c. The Italian regulation of International Arbitration: the 2006 reform and the disappearance of the classical distinction between domestic and international arbitration d. Main features and general principles of ad hoc arbitration: the mandatory and non-mandatory rules set forth by Section VIII of the Italian Civil Code of Procedure e. Main features and general principles of administered arbitration: the mandatory requirements to be met by the arbitration agreement 2. The Milan Chamber of Arbitration a. Introduction on the Institution: birth and growth of the Milan Chamber of Arbitration b. The activity of the Chamber: analysis of the statistics on arbitration in Italy and the prominent role of the MCA c. International Arbitration figures: the numbers and activities of the Chamber in the field of international arbitration d. The reasons for the success of the Institution: the Chamber wide net of national and international partnerships and its highly appreciated Rules of Procedures

8 3. Case Study a. Introduction on the subject of the case study b. The activity of Milan Chamber of Arbitration explained throughout the analysis of a practical case

9 Memorandum FROM: Dr. Elisabeth Metzler DATE: September 09, 2014 TO: NYSBA Panel Dispute Resolution RE: Hot Topics in International Arbitration and International Litigation W:\131\EM\Outline NYSBA_9 September 2014.Docx OUTLINE: Recent Austrian developments in Arbitration 1. Important new features of Austrian Arbitration Law (SchiedsRÄG 2013) a. Supreme Court only instance for setting-aside proceedings b. Competent state courts for assistance and intervention in general 2. Important new features of the Vienna Rules 2013 a. Confirmation of the nomination of arbitrators b. Multi-party proceedings, joinder of third parties, consolidation c. Tools to expedite the proceedings d. System of registration fee and costs e. No emergency arbitrator 3. Important recent aspects of arbitration-related court practice in Austria a. Recognition and enforcement of foreign arbitral awards b. Other select issues

10 [DRAFT 27 AUG 14] Hot Topics in International Arbitration NYSBA International Section Seasonal Meeting International Enforcement of Arbitral Awards Annulled at their Seat A Global Overview with Emphasis on the US and French Positions Clifford J Hendel I. Introduction Arbitral awards are not frequently annulled. And annulled arbitral awards are not frequently the subject of enforcement actions in other jurisdictions. But when they are, a veritable Pandora s box of doctrinal considerations and jurisprudential conceptions is opened. Thus, one of the hottest (and in my view, most fun) issues in international arbitration today involves the consequences of a national court judgment annulling an arbitral award issued in that state: That is, (1) must courts in foreign states recognize either the judgment annulling the award or, on the contrary, the annulled award? and (2) can a foreign court recognize either the judgment or the award consistent with its obligations under the New York Convention and national law? The answers to these questions are very far from uniform today, creating both risks and opportunities to counsel and clients. My presentation this morning will provide a quick global overview of the situation. I will focus particularly on the two jurisdictions with the clearest (but diverging) approaches to the issue -- the U.S. and France -- preceding that discussion with a mention of what could be considered the traditional or common sense view of the matter and concluding with a mention of where a handful of other jurisdictions appear to be crystallizing on the issue. II. Starting Point To the uninitiated, this topic will probably sound like nonsense. After all, even Prof. Pieter Sanders, a founding father of the New York Convention, declared more than 50 years ago that an award which is annulled in its seat no longer exists and thus cannot be the subject of enforcement. Which is another way of saying that 50 years ago, this was not a hot topic at all. But today it is. Why is that? Why has the traditional common sense view been upended? Principally, in my view, due on the one hand to the very text of the New York Convention and to creative advocacy and judicious case law based on that text and on the other, due to an outlier, a principled, conceptual position on the issue which essentially turns the traditional view on its head. 1

11 [DRAFT 27 AUG 14] This radical position is the one developed by French case law and doctrine; the incremental position is the one best exemplified by the U.S. position. Let s take a look first at the U.S. view on the issue. III. The U.S. View A series of relatively recent U.S. federal court decisions (including recent Second Circuit and Southern District of New York decisions) on the issue take as a starting point the language of the New York Convention. Specifically, Article V (1), which provides that the courts of a Contracting State may decline to recognize an award upon proof that one of the provision s specified exceptions -- including (in sub-clause (e)) annulment at the seat applies. Note that the operative word is may (not must ): the New York Convention permits, but does not require, non-recognition in the case of annulment 1. How have U.S. courts dealt with the issue? In short, as they almost invariably do -- on an incremental, case-by-case basis. Chromalloy Gas Turbine Corp. v. Arab Republic of Egypt, 939 F. Supp. 907 (D.D.C. 1996) The leading case is the 1996 decision of the federal district court for the District at Columbia in Chromalloy. The D.C. court s refusal to recognize an Egyptian judicial decision annulling an arbitral award was focused narrowly on the specific ground for the Egyptian annulment decision and the parties arbitration agreement. Specifically, the court reasoned that the Egyptian annulment decision violated fundamental U.S. public policy (against substantive review of arbitral awards) and the parties specific arbitration agreement (waiving any such review), and thus concluded that recognition of the award (albeit annulled) should not be refused. Baker Marine Ltd. v. Chevron Ltd, 191 F. 3d 194 (2d Cir. 1999) The Second Circuit followed the Chromalloy reasoning in a 1999 decision involving an annulled Nigerian award, but concluded on the facts that non-recognition was appropriate. That is, the Court agreed that the New York Convention permits (but does not require) nonrecognition of annulled awards but held that the party seeking recognition and enforcement in this case had shown no adequate reason for refusing to recognize the Nigerian court s annulment decision. While the Baker Marine court did not detail its reasoning with particular clarity, it appears to have relied on the facts that the parties had not waived (unlike the situation in 1 The text provides: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes proof that... [t]he award... has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Article V (2) (b) provides that: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that... [t]he recognition or enforcement could be contrary to the public policy of that country. 2

12 [DRAFT 27 AUG 14] Chromalloy) their rights to appeal from the arbitral award and that the annulment decision did not reflect favoritism towards the award-debtor and was based on procedural grounds widely recognized as a proper basis for annulment. TermoRio S.A. v. Electranta SP, 487 F. 3d 928 (D.C. Cir. 2007) In a 2007 decision, the D.C. Circuit Court of Appeals denied recognition to an award issued in Colombia against a Colombian state entity which had been annulled by a Colombian court on the ground that the parties arbitration agreement violated Colombia law by providing for ICC arbitration rather that for arbitration under Colombian procedural rules. In its decision, the D.C. Circuit declared that a principal precept of the New York Convention was that an arbitration award does not exist to be enforced in other Contracting States if it has been lawfully set aside by a competent authority in the State in which the award was made, observing further that the Convention does not endorse a regime in which secondary States (in determining whether to enforce an award) routinely second-guess the judgment of a court in a primary State [which] has lawfully acted pursuant to competent authority to set aside an arbitration award made in its country. Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. (COMMISA) v. Pemex Exploración y Producción, 10 Civ. 206 (S.D. N.Y. Aug 27, 2013) The most recent U.S. cases on the issue were handed down by the Southern District of New York. In August 2013, a Mexican award holding the Mexican State oil company PEMEX liable for nearly $400 million in damages was recognized by the Southern District under the Panama Conventional (the Inter-American Convention on International Commercial Arbitration -- essentially equivalent to the New York Convention for all relevant purposes) notwithstanding having been annulled by a Mexican court. The COMMISA court noting that Baker Marine did not define the scope of a court s discretion under Article V of the New York Convention to refuse to recognize an annulled award, relied on the standard applied by the TermoRio court, and declared that the scope of discretion was narrow: only if the annulment is repugnant to fundamental notions of what is decent and just in the United States... [or if it] violated any basic notions of justice in which we subscribe may the annulled award be recognized. Under the facts (which were rather egregious -- PEMEX in fact had been rebuffed in its efforts to annul the award by the first three Mexican court that it approached), the Court found sufficient repugnancy as to merit recognition of the award. Specifically, the case involved retroactive application of a Mexican law not in place at the time of the arbitration agreement which rendered the dispute not only non-arbitrable but indeed without any remedy at all (since the administrative remedy s statute of limitations had expired). The Court found these considerations sufficiently violative of basic notions of justice and sufficiently repugnant to fundamental notions of what is decent and just in the U.S. as to warrant recognition of the annulled award. 3

13 [DRAFT 27 AUG 14] Thai-Lao Lignite (Thailand) Co., Ltd & Hongsa Lignite (LAO PDR) Co. Ltd v. Government of the Lao People s Democratic Republic (S.D.N.Y., Feb 6, 2014) In the most recent Southern District case, decided in February of this year, the Court summarized the case law represented as establishing a high standard before an annulled award can be recognized, and noted that such standard is infrequently met and should be reserved for only clear-cut cases. On the facts, the Court concluded that nothing in Malaysian proceedings or judgment (which was based on the universally recognized ground that the arbitrators had exceeded their jurisdiction, and in which the parties had chosen Malaysia as a neutral third country seat) could fairly be said to violate basic notions of justice. Thus, in the absence of the extraordinary circumstances envisioned by TermoRio and found to have been present in COMMISA, the annulment judgment was given effect and the annulled award was not recognized and enforced. The Current State of Play in the U.S. The current position of the U.S. courts on the issue of enforcement of awards annulled at the seat has been characterized as timid and conservative (L. Radicati,: The Fate of Awards Annulled at the Seat in Light of Thai-Lao Lignite, Absent a clear showing that the annulment decision (or the procedure under which it was rendered) was violative of basic notions of justice, i.e. in practice, absent truly egregious circumstances, comity considerations will carry the day under current U.S. case law, and the annulment decision will likely be respected and the annulled award will likely not be. IV. The French View French courts have held, for nearly three decades now, that international arbitral awards which have been annulled in the arbitral seat may be recognized in France. And this, not only in the case of what might be considered egregious violations of basic justice (as in the essentially comity-based U.S. position constructed case-by-case in the application and interpretation of Article V of the New York Convention) but -- since Article VII of the New York Convention does not deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon -- in any case in which the more liberal recognition standards of Article 1520 (formerly 1502) of the French Code of Civil Procedure do not preclude recognition. 2 2 Article 1525 of the French Code of Civil Procedure provides, in essence, that recognition and enforcement in France of foreign arbitral awards can only be refused in the circumstances set out in Article 1520 (former Article 1502), which do not include -- contrary to Article V of the New York Convention the situation in which the award has been annulled. This distinction reflects the especially pro-arbitration orientation of the French legislation, as well perhaps as the somewhat dated text of the New York Convention, negotiated and agreed as a multilateral treaty in 1958 and not touched since 4

14 [DRAFT 27 AUG 14]. Thus, in the 1984 decision in the Norsolar case, the Cour de Cassation reversed a lower court decision applying Article V of the New York Convention to deny recognition to an arbitral award that had been annulled in its seat. The 1997 Hilmarton case similarly based its decision on the fact that the annulment in Switzerland of an award issued in Geneva does not constitute a ground under then - Article 1502 for the non-recognition and enforcement of the award in France. The Cour de Cassation famously stated that [T]he award rendered in Switzerland is an international award which is not integrated in the legal system of that state, so that it remains in existence even if set aside and its recognition in France is not contrary to international public policy. Finally, in the 2007 Putrabali case, the Cour the Cassation repeated that an international arbitral award is not integrated in the state legal order and its recognition and enforcement must be examined under the rules applicable where recognition and enforcement is sought, and in the case of France (pursuant to Article VII of the New York Convention), the liberal recognition rules of former Article 1502 of the Civil Procedure Code do not include annulment in the seat as a basis for refusal of recognition and enforcement in order to confirm or deny their recognition and enforcement. The French view on the issue -- that an international award is not linked to the legal order of the state of the seat, but rather is part of an international arbitral order unconnected to any state -- has been lampooned by some observers (Albert Jan Van den Berg has called it an eccentric theory based on an academic invention and one which is shared by hardly any other country ( Should the Setting Aside of the Arbitral Award be Abolished?, ICSID Review (2014)). On the other hand, the French position has been exalted by others. Francisco González de Cossio (in Ejecución de Laudos Anulados : Hacia Una Mejor Aproximación Analítica, pending publication) observes that the U.S. comity-based approach of deference towards decisions annulling awards at the seat inevitably generates friction between the two jurisdictions, and lauds the French approach as more sophisticated, realistic and functional, since in it no one passes judgment on anyone else but only reviews awards (annulled or not) under the applicable rules of one s own local law. V. Other Jurisdictions Few jurisdictions have had the same number of opportunities to position themselves on the issue as have the U.S. and France. 5

15 [DRAFT 27 AUG 14] Surely, the French position is at the extreme, but there are clear indications that certain civil law jurisdictions (Belgium, Holland and Austria, to name a few), may be inclined to follow the French lead 3. Other jurisdictions may follow the U.S. position of comity on a case-by-case basis. And still others may follow the outdated and, frankly unsustainable view, that an annulled award ceases to exist and thus can never be recognized and enforced, either à la americaine (where only a lawfully annulled award, as interpreted in accordance with the cases discussed earlier, ceases to exist and will to be recognized and enforced), or à la française (where the annulment is simply irrelevant in the recognition and enforcement proceeding and the award never ceases to exist, but rather circulates freely in international commerce irrespective of its possible annulment). VI. Takeaway The essential take away? That this is an evolving and contentious issue with potentially huge consequences for clients. Counsel who succeeds in annulling an adverse arbitral award at the seat should not presume that the client is home free. If the client has assets in the U.S., and the annulment decision or process could be argued to be violative of basic justice, the client is exposed to at least some risk. And if the client has French assets, the risk is much greater. On the other hand, counsel who succeeds in obtaining an award for a client should keep in mind that -- just as some jurisdictions are less likely to annul that others -- there are jurisdictions much more open to recognition and enforcement of annulled awards than others. A modicum of intelligent forum-shopping is critical: if an annulment action is in process or likely in the jurisdiction of the seat, and especially if it is not entirely spurious, counsel interested in having the award enforced abroad may want to go straight to a French school jurisdiction (assuming assets are available in that jurisdiction) and start the process of recognition and enforcement without even waiting for the result of the annulment action. Materials New York Convention 3 See E. Gaillard s Legal Theory of International Arbitration (2010) for a brief summary of the international position by one of the leading advocates of the French position. 6

16 [DRAFT 27 AUG 14] Chromalloy Baker-Marine TermoRio COMMISA Thai-Lao Lignite Norsolar Hilmarton Putrabail Articles 1520 and 1525 of the French Code of Civil Procedure 7

17 HOT TOPICS IN INTERNATIONAL ARBITRATION AND INTERNATIONAL LITIGATION NYSBA International Section Seasonal Meeting 2014 Vienna, Austria Program 15 Friday, October 17 th Reform of the Brussels Regulation JOSEPH M KOSKY OUTLINERevisions to the Brussels Regulation This presentation will summarise some of the key revisions to the Brussels Regulation on jurisdiction and enforcement of judgments in relation to civil proceedings in the EU and will consider the impact these changes may have on parties litigating before the courts of Member States.. The new Brussels Regulation, EU Regulation 1215/2012, will be applied by the Courts of Member States as from 10 January It replaces the current Brussels Regulation, EU Regulation 44 / Summary of the Major Changes: (a) revision of the lis pendens provisions (which govern the position where there is already a dispute being litigated elsewhere) where there is a jurisdiction or choice of court for resolution of disputes clause in a contract which are aimed at addressing the problem of the tactical blocking manoeuvre termed the "Italian Torpedo"; (b) revision of the rules relating to agreements as to jurisdiction/chopice of court; (c) implementation of new rules relating to non EU States, matters and Defendants, including new provisions introducing a limited lis pendens rule relating thereto; (d) introduction of new wording relating to the exclusion of arbitration from the scope of the new Regulation; (e) the abolition of the requirement to obtain a court order in the court of the enforcing State before being able to enforce a judgment of another Member State; and

18 changes in relation to the recognition and enforcement of judgments given in one Member State in other Member States. 2. Scope of the New Regulation and Excluded Matters The new Regulation applies to all civil and commercial matters but not matters relating to revenue, customs or administrative matters or the liability of States for acts and omissions in the exercise of state authority [see Article 1(1)]. Other matters excluded from the ambit of the new Regulation as set out in Article 1(2) are: (a) the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, or out of a relationship deemed by the law applicable to such relationship to have comparable effects to marriage; (b) bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings; (c) social security (d) arbitration; (e) maintenance obligations arising from a family relationship, parentage, marriage or affinity; (f) wills and succession, including maintenance obligations arising by reason of death. The bankruptcy exclusion contained in Article 1(2)(b) (which excludes "proceedings relating to the winding up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings") has been the subject of some debate, particularly as to whether disputes relating to companies in administration are within or outside scope of the current Brussels Regulation The new Regulation provides no further guidance and thus the position in this regard remains unclear. The new Regulation does not clarify the extent of the exclusion as to arbitration in Article 1(2)(d) but revises and expands the scope of the exclusion in Article (1)(2)(a) regarding the status or legal capacity of natural persons and property rights arising out of a matrimonial relationships; this exclusion now includes property rights arising out of

19 "relationships deemed by the law applicable to such relationship to have comparable effects to marriage". The new Regulation also now expressly excludes "maintenance obligations arising from a family relationship, parentage, marriage or affinity" [see Article 1(2)(e)] and wills and succession, including maintenance obligations arising by reason of death [see Article 1(2)(f)]. 3. The major Changes Brought about by the New Regulation (a) Changes in the lis pendens rule The new Regulation addresses the issue of the "Italian torpedo". Article 27 of the current Regulation states that, where a court is "second seised" of proceedings between the same parties and involving the same cause of action as proceedings already brought before another Member State court, then the court second seised must stay the proceedings before it until the court first seised has decided the issue of whether it has jurisdiction to determine the dispute. This provision currently applies even where a party brings proceedings in another court in contravention of a valid contractual jurisdiction/choice of court clause and does so purely to gain a tactical advantage. Such an "Italian torpedo" normally involves issuing proceedings in a jurisdiction where the judicial process is very slow as a blocking manoeuvre/delaying tactic. In some jurisdictions, the issue of jurisdiction, may not be determined preliminarily but as part of any final judgment.. Recital 22 to the new Regulation provides as follows: "it is necessary to provide for an exception to the general lis pendens rule in order to deal satisfactorily with the situation where a court not designated in an exclusive choiceof-court agreement has been seised of proceedings and the designated court is seised subsequently of proceedings involving the same cause of action and between the same parties. In such a case, the court first seised should be required to stay its proceedings as soon as the designated court has been seised and until such time as the latter court declares that it has no jurisdiction under the exclusive choice-of-court agreement. This is intended to ensure that, in such a situation, the designated court has the authority to decide on the validity of the agreement and on the extent to which the agreement applies to any dispute pending before it. The designated court should be able to proceed irrespective of whether the non-designated court has already decided on the stay of proceedings."

20 In various judgments of the European Court of Justice, it has been decided that the making of an anti-suit injunctions to prevent a party from pursuing proceedings before a court which court was not the selected forum specified in any contractual jurisdiction/choice of court clause is contrary to the Brussels Regulation [see Gasser GmbH v MISAT srl (Case C-116/02) [2003] ECR I and Turner v Grovit (Case C- 159/02) [2004] ECR I-3565 by way of example]. These tactics often have the effect of preventing progress of a claim in the court designated in the jurisdiction/choice of court clause for a very long time (months of even years). This may delay the ultimate resolution of the dispute and incur wasted costs. Under the new Regulation, however priority is to be given to the court specified in any contractual jurisdiction/choice of court clause. The provisions relating to the lis pendens rule are set out in Articles 29 to 34 of the new Regulation. They empower the contractually selected forum for any dispute to decide the issue of whether any action commenced should progress even in the event that it is not the court that is first seised of the dispute. In particular, Article 31(2) of the new Regulation requires any other court to stay any proceedings issued before it until such time as the court seised on the basis of an contractual jurisdiction clause declares that it has no jurisdiction under that agreement. However, it is necessary to start proceedings in the contractually selected forum so as to obtain a stay of any proceedings commenced in another court [Article 31(2)]. Further, there is no requirement for the courts of Member States to stay any proceedings if the contractual jurisdiction clause confers non-exclusive jurisdiction on the court of another Member State rather that exclusive jurisdiction or if the contractual jurisdiction/choice of court clause confers exclusive jurisdiction on the courts of a non- Member State. In the case of claims relating to a number of subject matters which might fall within different several heads of the exclusive jurisdiction rules contained in Article 24 of the new Regulation (which is the same as Article 22 of the existing Regulation), Article 31(1) states "where actions come within the exclusive jurisdiction of several courts, any court other than the court first seised shall decline jurisdiction in favour of that court". There is also an exception made for the provisions in Article 31 in relation to specified insurance, consumer and employee matters. (b) Jurisdiction/Choice of Court Clauses

21 The applicable rules, which are now located within Article 25 of the new Regulation, have been reformulated. Article 25(5) states that contractual agreements conferring jurisdiction on a particular court "shall be treated as an agreement independent of the other terms of the contract". The new Regulation also provides that the validity of such agreements is not susceptible to t be challenge solely on the ground that the contract itself is invalid. Further, the new Regulation broadens the scope of contractual agreements as to jurisdiction/choice of court that fall within its ambit; there is now no longer a requirement (such as contained in Article 23 of the current Regulation) that such at least one party to such agreements must be domiciled in a Member State. This will obviate the need for any investigation into the domicile of the parties which can be a complicated, time consuming and expensive issue. As mentioned above, if the courts of a non-member State are conferred jurisdiction by any contractual term, such a clause falls outside the new Regulation [see Article 25].The new Regulation does not extend to cover jurisdiction/choice of law agreements in favour of the courts of non-member States. Thus, where contractual term include such an exclusive jurisdiction/choice of court clause and, in breach thereof, a party issues proceedings in the court of a Member State in accordance with the jurisdiction provisions of the new Regulation (perhaps on the basis of the Defendant s domicile in that State), there is no express provision contained in the new Regulation, pursuant to which, the courts of that Member State may decline to exercise jurisdiction. thus there appears to be a significant gap in the jurisdictional framework and in certain circumstances, the courts of Member States may find themselves in the rather unattractive position of being obliged to turn a blind eye to breaches of contractually agreed terms as to jurisdiction/choice of court. Article 25 states that "unless the agreement is null and void as to its substantive validity under the law of that Member State". This would seem to provide that the laws of the Member State court which is conferred with jurisdiction by any contractually agreed term shall determine questions of substantive validity of such a clause, even if those laws are not the governing law of the contractual agreement. The new Regulation does not address the issue of whether one-way jurisdiction/choice of court clauses are permissible and valid. Such clauses are very common and confer power on one party to a contract to select jurisdiction and sue in the courts of its choice. The French Supreme Court has ruled that such clauses are invalid [see X v Rothschild (French Supreme Court, First Civil Chamber, 26 September 2012, No )]. (c) Rules as to Special Jurisdiction

22 Some of the major bases for alternative jurisdiction in the new Regulation remain restricted to Defendants domiciled in Member States and have not been expanded. The following alternative jurisdictional grounds have not been extended to cover Defendants who are domiciled in third party states,(a) Article 5(1) (currently Article 7(1)) provides that, in respect of contractual claims, the courts of the State within which the contract is to be performed is the place of performance may have jurisdiction (b) Article 5(3) (currently Article 7(2)),provides that tortious claims (civil wrongs) may be brought in the courts of the State within which the event giving rise to the claim occurred or may occur; and(c) Article 6(1) (currently Article 8(1)), provides that, where a Defendant domiciled in a Member State is one of several Defendants, he/she can be sued in the courts of the State within which any one of them is domiciled, in circumstances where the claims are so closely connected that it is expedient to hear and determine them together so as to avoid the risk of conflicting and irreconcilable judgments being obtained in separate proceedings. Nor have the alternative jurisdictional grounds regarding contractual claims been expanded [current Article 5(1); Article 7(1) of the new Regulation]. Further there is no provision in the new regulation for jurisdiction to be vested in the courts of the State the law of which is the governing law of the contractual agreement. On the other hand, the rules have now been extended to cover Defendants who are domiciled in non-eu States in respect of certain employee, insurance and consumer claims). (d) Rules as to Exclusive Jurisdiction The new Regulation expressly provides that the exclusive jurisdiction rules include claims "regardless of the domicile of the parties". [see Article 24] (e) New Rules Regarding Proceedings Pending in Third States The new Regulation introduces new provisions which confer jurisdiction in the courts of Member States to stay any proceedings before them in order to defer those proceedings to any proceedings pending before the courts of a non-eu State. The courts of Member States may do so after having taken into account all the relevant circumstances, which may include connections between the facts of the case and the parties and the third State concerned, the stage to which the proceedings in the third State have progressed by the time proceedings are initiated in the court of the Member

23 State and whether or not the court of the third State can be expected to give judgment within a reasonable time.[see Recital 24]. Recital 24 to the new Regulation specifically states that the assessment to be made by the courts of Member States in this regard may include consideration of the question whether the court of the third State has exclusive jurisdiction in the particular case, in circumstances where a court of a Member State would have exclusive jurisdiction. This provision seems to encompass the situation where there is an exclusive jurisdiction/choice of court clause conferring jurisdiction on such a State. The requirement is that proceedings must have been initiated first in the third State, not merely be contemplated; thus preliminary letters before action in accordance with any litigation protocol would not suffice. Article 34 of the new Regulation empowers the courts of a Member State seised of an action connected with an action in the courts of a third state, to stay proceedings where the following grounds are found to exist; where it is expedient to hear and determine the related actions together to avoid the risk of irreconcilable judgments resulting from separate proceedings; where it is expected that the courts of the third state will give a judgment capable of recognition and, where applicable, of enforcement in that Member State; where the courts of the Member State are satisfied that a stay is necessary for the proper administration of justice. Article 34(3) of the new Regulation also empowers the courts of Member States to dismiss any proceedings of which they are seised if the proceedings before the third state have reached a conclusion and have produced a judgment which is capable of being recognized and, where applicable, of being enforced in that Member State. On the other hand,, Article 34(2) of the new Regulation empowers the courts of Member States to continue to hear proceedings where there are connected proceedings in a third state where the following grounds are found to exist: where there is no risk of irreconcilable judgments; where the proceedings in the court of the third state have been stayed or discontinued; where the proceedings in the court of the third state are unlikely to be concluded within a reasonable time; and

24 where the continuation of the proceedings in the court of the Member State is required for the proper administration of justice. These provisions go some way toward reducing what was generally regarded as the undesirable impact of the decision of the European Court in Owusu v Jackson [Case C- 281/02) [2005] ECR I-383 and introduce some aspects of the English concept of forum non conveniens into European law. In the Owusu v Jackson case, the European Court of Justice considered a reference to it for a preliminary ruling by the English Court of Appeal, seeking interpretation of Article 2 of the Brussels Convention on Jurisdiction and Enforcement of Judgements in Civil and Commercial Matters ('the Brussels Convention'), now substituted by the current Regulation but the relevant provisions are the same. Article 2 provides that persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State. In its decision, The European Court of Justice limited the scope of the application of the principle of forum non conveniens, to cases which fall outside the scope of the Brussels Convention and ruled that the Court of Appeal may not stay the proceedings on those grounds. (f) The Exclusion of Arbitration The new Regulation maintains the arbitration exclusion from its ambit in Article 1(2)(d). This is further emphasized by Recital 12. Further, Article 73(2) of the new Regulation expressly states that it shall not affect the application of the New York Convention. Recital 12 provides that the new Regulation shall not apply to arbitration and states that "nothing in this Regulation should prevent courts of a Member State, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement, from referring the parties to arbitration, from staying or dismissing the proceedings, or from examining whether the arbitration agreement is null and void, inoperative or incapable of being performed, in accordance with their national law". Thus, in appropriate circumstances, a party may seek an order from the court seised of any proceedings to dismiss those proceedings and directing that the dispute be referred to arbitration. Further, the opposing party may apply to the courts of the seat of any arbitration for an order directing the parties to proceed to arbitration Recital 12 also excludes certain judgments on arbitration agreements from the scope of the new Regulation and states that a ruling given by a court of a Member State as to whether or not an arbitration agreement is null and void, inoperative or incapable of

25 being performed should not be subject to the rules as to recognition and enforcement of judgments contained in the new Regulation. This is so regardless of whether or not the court has decided this as a principal ruling or as an prelimnary of ancillary issue... In addition, Recital 12 clarifies matters which are outside the scope of the new Regulation by stating that the new Regulation should not apply to any action or ancillary proceedings relating to, in particular, the establishment of the arbitral tribunal, the powers of arbitrator, the conduct of the arbitration procedure or any other aspects of such a procedure, nor to any action or judgment concerning the annulment, review, appeal, recognition or enforcement of an arbitral award. It also states that where the courts of a Member State exercises jurisdiction under the new Regulation or national law decides that the arbitration agreement is null and void, inoperative or incapable of being performed, this should not preclude that court's judgment on the substance of the matter from being recognised or, as the case may be, enforced, in accordance with the new Regulation and that this should be without prejudice to the competence of the courts of the Member States to decide on recognition and enforcement of arbitral awards under the New York Convention and that The New York Convention takes precedence over the Regulation. The amendments in the new Regulation as to arbitration uphold arbitration the concept of arbitration and reduce the scope for tactical litigation designed to interfere with the processes of arbitration and the proper implementation of arbitration agreements. The undesirable effects of the West Tankers Case appear to have been addressed in the new Regulation. The circumstances of this case concerned proceedings in an EU jurisdiction which were brought in breach of an agreement to refer all disputes to arbitration in England. The background facts are that Erg Petroli SpA ( Erg ) chartered a vessel, from West Tankers Inc ( West Tankers ). The charterparty was governed by English law and contained an agreement to arbitrate, with London as the seat of the arbitration. The vessel collided with a pier (which was owned by Erg) in Syracuse in Italy in Erg claimed on its insurance policy but then commenced an arbitration against West Tankers in London to recover the uninsured portion of its loss. In the meantime, Erg s insurers exercised their subrogation rights against West Tankers and brought a claim against West Tankers in the court of Syracuse to recover the sum paid out by them. West Tankers sought, and obtained, an anti-suit injunction from the English court to prevent the insurers from pursuing the proceedings in Italy, in breach of the arbitration

26 clause, and a declaration that disputes were subject to arbitration. However, a leapfrog appeal by the insurers went to the House of Lords (now the Supreme Court) and was then referred by it on to the European Court of Justice on the issue of whether an antisuit injunction could be granted to restrain proceedings in another EU Member State or whether such an order was precluded by the EU jurisdictional rules set out the current Regulation. The arbitration continued (with the insurers joined to the proceedings as co-claimants) and in May 2008 the tribunal declared West Tankers was not liable to Erg. Other issues that had been referred to the tribunal were adjourned until the European Court of Justice decision was made. This decision stated that an anti-suit injunction was not available. The outcome was that West Tankers had the benefit of an English arbitral award which exonerated them from any liability but nonetheless was embroiled in court proceedings in Italy which could not be stopped. The new Regulation does not, it seems go so far as to empower the courts of a Member States to grant anti-suit injunctions in relation to proceedings in the Courts of another Member State brought in breach of an arbitration agreement; the requirement of mutual trust which has been the basis of the bar to such orders l remains. There is, therefore, scope for issues to continue to arise in respect of the interface between arbitration and the new Regulation. This might arise, where, perhaps, the court of one Member State were to rule that an arbitration clause is ineffective and deliver judgment on the substance of the matter, but the court of another Member State or an arbitral tribunal find differently on the issue of validity. (g) The Lugano Convention The new Regulation does not affect the Lugano Convention" [see Article 73(1)] and Lugano Convention Non-EU States that are signatories to it. Those States are are Switzerland, Iceland and Norway. The Lugano Convention contains similar lis pendens provisions to those in the new Regulation. Thus it appears that the inherent problems in the Lugano Convention, remain because it will still be possible launch an Italiantorpedo against the jurisdiction of a Lugano Convention State. The other Lugano State, Denmark (also an EU State), has now confirmed it will give effect to the new Regulation. (h) The Enforcement of EU Judgments throughout EU Member States

27 Currently, in order to enforce a civil judgment made by the courts of one Member State in another Member State, a judgment creditor is required to obtain a declaration of enforceability from the courts of the enforcing Member State. Depending on the particular enforcing state, this process can take several months. The new Regulation abolishes this procedure and ensures that a judgement of the court of a Member State judgment will be immediately enforceable in another Member State court without any further declaration of enforceability being required. Safeguards have been put in place but it is only in exceptional cases that recognition and enforcement will be refused, such as where a judgment is regarded as being contrary to the public policy of the enforcing state. JOSEPH KOSKY jkosky@lockelord.net 15 SEPTEMBER 2014