The ‘Twilight issues’ series: Possible way outs for the arbitral tribunal in addressing the issues of Privilege and Availability of interim relief

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In pursuance with forthcoming event of the Singapore International Arbitration Centre (SIAC) on “Twilight Issues” In International Arbitration Maxwell Chambers, Singapore scheduled on 18th May, 2018, I would like to shed some light on some of these issues by way of this blog. In the above SIAC’s post, Twilight issues are defined as “non-merit issues that commonly arise in arbitral proceedings for which tribunals and counsel find little or no guidance in the arbitration agreement, the institutional rules, or the lex arbitri. In addressing Twilight Issues, arbitral tribunals and counsel may resort to, among other things, the application of national law (including law of the contract, law applied by the Courts of the place of arbitration, law of the place of probable enforcement, law of the country with the closest connection) or an international standard or no particular norm at all.”

There is no right without remedy (ubi jus ibiremedium) that adage applies no less in International Commercial Arbitration (ICA) than elsewhere but what if the law of state from which such right accrues, does not recognizes such right or even worse if it terms such right as illegal or against its public policy. In the world of ICA, remedies such as compensation, specific performance of contract, punitive damages etc., are the rights that an award creditor has earned but such rights are often curtailed when he tries to get fruits of such rights in executing forum (lex executionis) which have different/separate or no functional equivalent of such right at the place of arbitraiton (lex arbitri) or in the governing law decided in the underlying contract between the parties (lex contractus) or at the place where the obligations were performed (lex loci solutionis). This post explores the differences and conflicts amongst different laws of the world when it comes to remedies in ICA and attempts to provide ‘amicable’ conflict of law rules to address such issues.

Availability of interim relief

Awards or orders passed by the arbitral tribunal for safeguarding one or all parties in an arbitration dispute from any type of damages till the final decision is pending are known as interim or provisional or temporary measures.[1] Thus, such awards have the following features –

  • Immediate and temporary
  • Issued for the protection of assets
  • Issued during the pendency of ultimate decision

The tribunal’s power to grant interim measures must be established lex contractus or in its absence, under lex arbitri. But their enforcement is blocked if such interim measures are unknown at the place of enforcement (lex executionis) due to public policy or due to non-recognition by the law of the enforcing state.[2]

In order to trace out the solution for the conflict issue under the interim measures, one must first decide which is the appropriate forum to grant such measures and what are the extents of its powers. Interim measures are either issued by arbitral tribunal or by the national Courts. The tribunal derives its powers to provide interim measures through the procedural rules of arbitration which are usually agreed by the parties in the arbitration agreements. As per Yeslirimak[3], power to issue interim measures is a sub-set of wider power to conduct proceedings granted to the arbitrator. On the other hand the national Courts are empowered under the national arbitration laws i.e. the law governing the arbitration agreement, to provide interim measures. Sometimes, this power is also recognized in the procedural rules of arbitration. In the words of Ikemefuna Stephen Nwoye[4], such powers of the Court are “supportive or facilitative” to the overall process of arbitration.

The conflict under this remedy arises when the lex arbitri (procedural law) is not the same as the lex contractus (substantive law). Second, conflict may arise in a situation where certain interim measures which are available under lex arbitri or lex contractus but they are not recognized under lex executionis and/or lex loci solutionis. It is a normal practice in ICA that an interim award passed by tribunal as per lex arbitri or lex contractus gets rejected in lex executionis due to public policy consideration of that country.

Possible Solution for Interim Measures

Transnational Principles of Law – As per Klaus Peter Berger, they are defined as follows –

“The TransLex-Principles are a systematic online-collection of principles and rules of transnational commercial law. They are being used by counsel and arbitrators in international arbitrations as well as contract drafters, academics and participants of moot court competitions in international arbitration across the globe.”[5]

The author would be in accord with Ikemefuna Stephen Nwoye[6] in justifying the above-mentioned principles because of the following reasons –

  • Being a private set-up, ICA should not be fettered by the national laws.
  • Most often parties consciously choose a third independent state as a seat of arbitration.
  • Such choice can be purely because of the convenience factors and should in no way be taken as acceptance of national laws of place of arbitration.

Examples of such laws are –

  • The MAL;
  • International Bar Association Rules on “Taking of Evidence in ICA”;
  • The International Bar Association Guidelines on Party Representation in International Arbitration;
  • The Hague Principles on Ethical Standards for Counsel Appearing before International Courts and Tribunals etc.

Usage of such universally accepted set of laws will harmonize the differences amongst various types of laws under this remedy.

Privilege

In addition to the law governing the dispute and the lex arbitri, further privilege rules need to be considered as possibly applicable to issues of privilege. Depending on the privilege claimed, the law of the jurisdiction where the communication was made, the law of the jurisdiction where the information is located, the law of the judicial forum where enforcement of any order or award will be sought, may be relevant. Further, with regard to lawyer-client privilege, the law of the jurisdiction where the lawyer giving the legal advice is admitted and the law of the jurisdiction where the client receiving the advice is based may play a part in the analysis. Very little guidance is offered by national arbitral laws or rules of arbitral institutions in identifying the relevant rules of law to be applied in the determination of privilege disputes. For example, the UNCITRAL Model law and Arbitration Rules are silent on the question of privilege.

Privilege: Whether Substantive or Procedural?

I agree with Mr. Albert Monichino QC that “there is a lack of consensus as to whether privilege is procedural or substantive in nature. In common law countries privilege tends to be treated as substantive in nature. In contrast, in civilian jurisdictions it tends to be treated as procedural in nature. If procedural, the lex arbitri will typically provide that absent party agreement, it is for the Arbitral Tribunal to determine the procedural and evidentiary matters at its discretion – for example, under Article 19 of the UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’). In contrast, if privilege is substantive in nature, conceptually the Arbitral Tribunal should apply conflict of law rules at the seat of arbitration. The Arbitral Tribunal then determines the applicable rules of law to be applied in resolving the privilege dispute. Notably, there is no dedicated conflict of law rule to determine the applicable law relating to the determination of privilege disputes”.

Possible Solution for Privilege

Here I would like to cite Ms.Ruth Cowley and Yasmin Lilley from their post on “Conflict of privilege rules in international arbitration” wherein they stated as follows: Given the unlikelihood of a prior agreement between the parties on questions of privilege, the development of a fair default rule – such as the ‘most favoured nation’ approach – may be the best solution (according to this approach, the Arbitral Tribunal chooses the law that provides the greatest level of protection (although in some cases it may be difficult to determine which privilege rules are most favourable). There is also some strength to the suggestion that guidance on the approach to privilege should be incorporated into institutional rules so that arbitrators have a reference point on which to base their decisions and parties would not be put to the cost of arguing over the right approach. This could offer parties greater certainty as to what will or will not be privileged at the crucial point before a document is created” I agree with most favoured nation approach is the best way out as if upholds the parties’ intentions with regard to their business arrangements.

The next blog in this series is available at

The ‘Twilight issues’ series: which law governs res judicata issues in arbitration proceedings?

[1]GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION. INTERNATIONAL ARBITRAL AWARDS (2014) (“Gary Born”)

[2]Gregoire Marchac, Interim Measures in International Commercial Arbitration Under the ICC, AAA, LCIA and UNCITRAL Rules, AMERICAN REVIEW OF INTERNATIONAL ARBITRATION, pp.123-138, 128, (Vol 10, no.1, 1999)

[3] Ali Yesilirmak, Provisional Measures In International Commercial Arbitration, (The Hague by Kluwer Law International, International Arbitration Law Library Series Set, 5, 2005) at p.56

[4] Nwoye, Ikemefuna Stephen, Applicable Laws and Standards for Interim Measures in International Arbitration (Social Science Research Network – Working Papers Series. April, 2015). Available at SSRN: https://ssrn.com/abstract=2596747 or http://dx.doi.org/10.2139/ssrn.2596747 ,at p.8 (“Ikemefuna Stephen”)

[5] Klaus Peter Berger, The Lex Mercatoria and the TransLex-Principles, last retrieved from https://www.trans-lex.org/the-lex-mercatoria-and-the-translex-principles_ID8 on 28 February 2017 at 15:26 Hrs

[6] Ikemefuna Stephen Supra note 51 at p.26

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