M.I.A.S. begins new decade with Gerold Herrmann’s thoughts on the “GLOBALIZATION OF ARBITRATION.”

January 20th, 2010

“I used once the noun ‘globalization,’ and it twice happened that native English speakers asked me, ‘Gerold, are you sure this word exists in the English language?’”*

On Wednesday of last week, The Miami International Arbitration Society had the privilege of hosting Gerold Herrmann, current President of the International Council for Commercial Arbitration (the ICCA), for his reflections on the “Globalization of Arbitration in Modern Times.”

There are few better individuals with which to consider the global development of commercial arbitration – Herrmann has played an indispensible role in the process. Formerly the secretary of UNCITRAL and President of the London Court of International Arbitration, Herrmann has had a hand in the sculpting (or his voice in the promotion) of many of the essential legal instruments of the international commercial arbitration regime.

To properly survey the “globalization of arbitration,” Herrmann suggested, the analysis should proceed by focusing on three principle vectors of international commercial arbitration’s progression: proliferation; harmonization; and, internationalization.

Beginning with the “proliferation of arbitration,” Herrmann reminded the audience that the spread of arbitration, as we currently define it, is a “relatively recent phenomenon. “ He cited his own closing remarks at the ICCA Montreal Congress in 2006 where he celebrated the demiurgic work of Pieter Sanders by presenting him with the first ICCA lifetime achievement award. The fact that he (Herrmann), in 2006, could present the “father” of commercial arbitration such an award is evidence of the youth of the field and the recency of its spread. “This man really personifies the development of international commercial arbitration,” he asserted.**

Hermann then pointed beyond the U.S., U.K. and Europe to emphasize commercial arbitration’s proliferation. The Hong Kong International Arbitration Center, he said, hosted 54 arbitrations in 1990. In 2005: 281. Similarly, CIETAC (China International Economic and Trade Arbitration Commission) hosted 238 arbitrations in 1999. By 2005: 991. Likewise, the recent 2006 ICCA congress in Montreal and upcoming May 2010 conference in Rio de Jineiro, Herrmann noted, are a product of the ICCA recognition of a growing use of commercial arbitration in Canada and South America. (See this link for information on the Rio conference: http://www.iccario2010.org/ ).

Moving to the “harmonization of arbitration,” Herrmann took note that, in order to globalize, arbitration procedure has had to harmonize with diverse legal and cultural traditions.  He recalled his time working as the Director of the International Entry Course for the Chartered Institute of Arbitrators.  CIArb, Herrmann explained, was originally offering courses in London only.  By spearheading an International Entry Course, Herrmann could choose the country where classes would be offered (and did so on the basis of their receptivity to the UNCITRAL model rules).  As such, he was positioned to promote the acceptance of the UNCITRAL rules while concomitantly witnessing obstacles to harmonization.

In addition to the frequently cited differences between civil and common jurisdictions (e.g. contingency fees, oral vs. written presentation of evidence), and the constitutional objections to “contracting away a party’s access to the courts,” there were other consequential legal hurdles in the West.  Herrmann cited a court decision in Hamburg holding that arbitrators could not also be lawyers.  Further, for a period in the U.K., Herrmann explained, judges were not permitted to charge or accept payment for arbitrating.

There were idiosyncratic aspects of politics, history and religion that made harmonization interesting, too.  In Mexico, political serendipity opened the doors to acceptance of new rules: the just-elected political party had promised a modernized commercial code – the “commercial” in international commercial arbitration was stressed. In Switzerland, domestic commercial arbitration was Canton Law – so there, the “international” in international commercial arbitration was stressed.  In Thailand and Egypt, the institutions of arbitration had to be independent (reliably “out from under” the political influence of the ruling regime) to receive UNCITRAL’s imprimatur.  When Iranian officials (post-Islamic Revolution) approached Herrmann about a new arbitration law that they hoped would make Tehran a regional arbitration center – he was surprised to find that they weren’t concerned by the rules on Riba (interest).  The Iranian parliament, they told him, passes laws frequently obliging the payment of interest.

Herrmann closed with a brief treatment of the final component of globalization: “internationalization of the proceeding.”  “Nationality,” he asserted, “is becoming less important in choosing an arbitrator.”  To illustrate, Herrmann cited his colleague Jan Paulsson (also in attendance), who maintains more than one citizenship.   Herrmann raised this point, along with several anecdotes, to emphasize that parties increasingly exhibit preference for certain qualities in an arbitrator (merit and acumen among them) over national or regional commonality.

*Gerold Herrmann’s remarks before the M.I.A.S. referencing reactions to his assertion in the 1980’s that UNCITRAL’s Convention on the International Sale of Goods (CISG) took the regional efforts of The Hague uniform laws and “globalized them.”

**The 6 page Montreal closing speech, citing some of Sanders’ accomplishments (like drafting aspects of the most important convention for the cross-border enforcement of arbitration awards in use throughout the world today: the 1958 NY Convention) is retrievable on the ICCA website, here: http://www.arbitration-icca.org/media/0/12287499183780/speech_herrmann_on_sanders_montreal_2006.pdf

Covered by: John Philip Sonner

Argument Heard December 9, 2009 in Stolt-Nielsen S.A. v. Animalfeeds International Corp.

December 9th, 2009

The transcript of the argument can be found at the following link to the offical website of the United States Supreme Court:

http://www.supremecourtus.gov/oral_arguments/argument_transcripts/08-1198.pdf

The dispute concerns the arbitrator’s authority to determine in the face of silence in the arbitration agreement whether it can conduct a class arbitration.  The appellate opinion was issued by the Second Circuit, and the arbitration fell under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, even though not discussed in those terms during the oral argument.  The Supreme Court is considering, inter alia, whether an arbitrator exceeds its powers if it does require class arbitration under those circumstances.  The underlying dispute arises out of a maritime contract and the Second Circuit found that the decision of the arbitrators did not constitute Second Circuit’s appreciation of manifest disregard of the law after the Hall Street decision.

More information on the case can be found at the SCOTUS Wiki blog at the following link:

http://www.scotuswiki.com

Costa Rica awaits new international arbitration laws

December 1st, 2009

by John Philip Sonner

If the article linked just below (the December 16th interview in La Nacion) is a hint, Costa Rican esteem for arbitration as a mechanism for international dispute resolution is high.   Now, in the arena of international commercial arbitration, this interest has come to a head.  A legislative initiative to revamp the 12-year-old international commercial arbitration rules requires only the signature of President Óscar Arias Sánchez to become law – a move the Costa Rican press seems to expect (see links to ElFinanciero and LaRepublica below). Importantly, the new rules would be more closely aligned with the UNCITRAL model laws and would allow for the appointment of foreign arbitrators. As a result, we may see this Central American nation host an increasing number of international commercial arbitrations.

For these last moments, Costa Rica’s law entitled “Ley Sobre Resolución Alterna de Conflictos y Promoción de la Paz Social” disincentivizes using Costa Rica as a situs for international commercial arbitration. Section II of the law, Composición del Tribunal Arbitral, Article 25, provides that the party appointed arbitrators must always be attorneys and have, as a minimum, five years of membership with the Costa Rican Bar. “…los arbitros deberan ser siempre abogados y tener como minimo cinco anos de incorporados al colegio de abogados.” The law may be found here: http://www.asamblea.go.cr/ley/ley7000.htm, listed as number 7727.

Of course, this can be compared with the UNCITRAL model law (which the Costa Rican proyecto de ley (bill) more closely resembles) or other IberoAmerican domestic enactments of the UNCITRAL model law which have no such requirement that appointments be from the local bar. Specifically, one can compare Chile’s law: Leg num, 19,971, Capitulo III, Articulo 11, which sets out that appointed arbitrators may be of any nationality. This can be found through the American Chamber of Commerce Website in Chile here: http://www.amchamchile.cl/node/1107).

This significance of this is well captured by articles in both ElFinanciero and LaRepublica, which emphasize that Costa Rica houses excellent infrastructure to support a cottage industry of international arbitration – however, domestic centers of arbitration have been hamstrung by the limits on appointment. (see http://www.elfinancierocr.com/ef_archivo/2009/noviembre/01/negocios2138078.html, or http://www.larepublica.net/app/cms/www/index.php?pk_articulo=30575).

The reform would be just one of several steps Costa Rica has recently taken to reposition itself within the global trade and commerce landscape.  Over the past 10 years Costa Rica courted the location of a growing number of manufacturing plants from U.S. medical device and microprocessor companies (Intel, Baxter, Boston Scientific).  Of even greater immediacy, Costa Rica is currently negotiating a free trade agreement with the People’s Republic of China (Costa Rica switched its diplomatic recognition from Taiwan to the China in 2007).  While currently in their 5th round of negotiations, negotiators suggest an agreement will be finalized by the 6th round in February (see http://www.reuters.com/article/idUKN1252127920091112).  This is important because, as a CAFTA signatory, Costa Rica has incredibly attractive potential as a final assembly hub for certain Chinese products. As a result of the CAFTA and a China-Costa Rica Free Trade Agreement, the incidence of commercial transactions between China and Costa Rica as well as Costa Rica and other CAFTA nations should be on the rise.

Interview with Rodrigo Oreamuno

November 19th, 2009

In the November 16, 2009, issue of La Nación, Rodrigo Oreamuno (Facio & Cañas law firm), gave a short interview on the importance and future of international arbitration.  A link to the interview follows:

http://www.nacion.com/ln_ee/2009/noviembre/15/aldea2159766.html

Lloyd’s Appointments to New Open Forum Arbitration Panel

November 19th, 2009

The Insurance Journal reported today that Lloyd’s has announced new appointments to its Open Forum Arbitration Panel.  The Panel decides cases involving maritime salvage claims and has been in existence since the late 1800’s.  A link to the Insurance Journal article is provided below:  http://www.insurancejournal.com/news/international/2009/11/18/105399.htm

Florida Bar Vis Pre-Moot – Call for Arbitrators

November 19th, 2009

On February 26 and 27, 2009, the University of Miami School of Law will host the Florida Bar International Law Section’s Annunal Vis Pre-Moot.  If you are interested in being considered as an arbitrator, you should contact Mariela Malfeld, with Atkinson & Brownell (305 376-8840) or by e-mail at mmalfeld@atkinsonbrownell.com.  You should provide as much information as possible regarding your qualifications and experience in the area of international arbitration.  The student rounds of argument will take place only on Saturday, February 27, 2009.

The Bahamas – Proposed Arbitration Legislation Debated

November 18th, 2009

The Bahamas Weekly contains the Notes of Mr. Fred Michell (former Foreign Minister of the Bahamas) for Debate on the Arbitration Bill, dated November 16, 2009.  The link to the article is :  http://www.thebahamasweekly.com/publish/bahamian-politics/Mitchell_On_Arbitration_Bill8475.shtml

Collateral Estoppel of an International Arbitral Award in the Civil Law Tradition of the Colombian Legal System

November 4th, 2009

by Paula Arias

The world nowadays is more connected than it was in the past. People every day get into several relationships from different places in the world. People more often than before create obligation and rights for the law to protect. Meaning that the legal barriers and limits need to be softened to protect the people, who are the last and most important interest of the governments and States.
Read the rest of this entry »

Another Blow to Consumer Arbitration

August 14th, 2009

After the NAF agreed to stop accepting some arbitrations, the American Arbitration Association followed suit. Now it appears one of their customers, Bank of America is pulling out altogether: Read the rest of this entry »

Things Don’t Look Good for the NAF

July 23rd, 2009

Recently, I noticed the Minnesota Attorney General had filed a lawsuit against the National Arbitration Forum (NAF) and others.  Knowing how lawsuits can sometimes drag along, this came as something of a surprise:

“Two major arbitration firms are backing away from the business of resolving disputes between customers and their credit-card and cellphone companies, throwing into disarray a controversial system that prevents unhappy consumers from filing lawsuits.

The American Arbitration Association said Tuesday it will stop participating in consumer-debt-collection disputes until new guidelines are established. Its decision came two days after another big group, the National Arbitration Forum, said it would stop accepting new cases as of Friday.”

It appears the Minnesota AG accused the NAF of not being sufficiently neutral, and the NAF took some drastic measures.  A nice little chart helps illustrate the alleged scheme.

The timing of this settlement may be especially interesting.  The Arbitration Fairness Act hasn’t moved much recently, which makes sense in light of all the other concerns in Congress.  But if this story makes it into the traditional media, it may provide the impetus to push the Act and other similar statutes across the country.

Quinn Smith