Young ICCA Skills Training Workshop: State as Client and Opponent in Investment Arbitration

Date:

29 October 2014

City:

Prague

Post Event Report

by Tim Rauschning [1]

On October 29, 2014, around 30 young practitioners from various jurisdictions gathered at the Prague offices of PricewaterhouseCoopers for a Young ICCA workshop on the topic “State as Client and Opponent in Investment Arbitration”, co-organized by Young ICSID.

The workshop featured a highly distinguished faculty, including the Secretary-General of ICSID, Meg Kinnear, and the well-known arbitrator Mark Kantor (Washington D.C., USA). The interactive set-up of the workshop sparked numerous interesting discussions between panelists and participants. The audience also included many young government lawyers since the workshop was linked to the 4th Investment Treaty Conference on the following day, which was organized by the Czech Ministry of Finance and PricewaterhouseCoopers and specifically addressed issues relevant for respondent states in investment arbitrations.

Prior to the beginning of the actual workshop, the participants had a first opportunity to get to know each other, network, and discuss matters of international arbitration at a lunch reception. Afterwards, Maria Lokajová of Squire Patton Boggs, moderator of the workshop, and Young ICCA Co-Chair, welcomed the participants and introduced the speakers.

The workshop was kicked-off by Vit Makarius (Independent Counsel – Vienna, Austria), Gerold Zeiler (Partner at zeiler.partners – Vienna, Austria) and Mark Kantor with valuable advice on the introductory topic “Getting Off on the Right Foot: Preliminary Issues in Investment Arbitration”. Vit Makarius and Gerold Zeiler shared important considerations when making the initial assessment of a claim. After thoroughly establishing all relevant facts and identifying the applicable law, in particular applicable treaties, they recommended to think early about securing potential witnesses and other evidence as well as to assess the suitability of prospective arbitrators. Establishing rules for clear and uniform external communication was identified as another important aspect. This was considered particularly relevant when working on the respondent side of a case because of the need to coordinate the various departments and ministries generally involved in this type of disputes. Special emphasis was also placed on financial planning which might even require ensuring appropriate apportionment of funds in the state budget. Speakers referred to a study by Matthew Hodgson of Allen & Overy, according to which legal costs for each party in an investment arbitration amount on average to USD 4.5 million. The discussion then turned to the possibilities to reduce costs. Gerold Zeiler pointed out that the challenge in this regard was to reduce costs without increasing errors. He identified hearing bundles as one of the elements that could be done away with without increasing errors, arguing that a well-prepared counsel or arbitrator will have no need for it. This proposition was, however, not shared by all participants. In the discussion on costs, Mark Kantor also pointed out that the “loser pays” principle has found support as a mandatory rule in the Comprehensive Economic and Trade Agreement between Canada and the EU (CETA) as well as in the EU-Singapore Free Trade Agreement (FTA). The possibility of a decision on costs pursuant to the “loser pays” principle, which has also been relied on by tribunals, should be taken into account by parties and counsel as part of their financial planning.

In the second part of the first session, Mark Kantor addressed the “Case Management” in investment arbitration and focused, in particular, on confidentiality. The early and very brief international investment agreements (IIA) did not (and many still do not) address this issue. This silence is often interpreted in favor of confidentiality. With the publication of cases registered under the ICSID Convention, the existence of specific investment disputes became public knowledge and, over time, an increasing number of arbitrations conducted under this framework became public. In the NAFTA context, the parties agreed to a much broader transparency which extended, inter alia, to legal briefs of the parties. The recently adopted UNCITRAL Transparency Rules may now increase transparency in further investment arbitrations. Mark Kantor considered CETA to be the latest development in this series of events which not only incorporates the UNCITRAL Transparency Rules but also expands their scope and makes them mandatory. He opined that the EU might not yet have a settled position on transparency since the EU-Singapore FTA, while containing similar rules, is not equally far-reaching in terms of its scope. With regard to the exceptions to transparency in the UNCITRAL Transparency Rules, he discussed, inter alia, the US Freedom of Information Act as a domestic law in terms of Article 7(2)(c) of the UNCITRAL Transparency Rules which could, where applicable, restrict transparency in investment disputes against the US.

The second session concerned “Evidentiary Issues in Investment Arbitrations”. Julie Spinelli (Freshfields – Paris, France) and Vit Makarius introduced the topic “Document Disclosure/Discovery” with a presentation focused on exceptions to disclosure and articles 3 and 9 of the IBA Guidelines on the Taking of Evidence. For dealing with the various privilege and confidentiality issues raised, the use of a privilege log was recommended and explained. Where – due to different national rules – the disclosure standards applicable to the parties varied, the highest confidentiality standard should be applied. A lively debate arose over the issue of documents or information in the control of a third party and whether a party can be obliged to obtain such information for example through avenues available to the state under domestic law. The panelists also discussed scenarios where it might be overly burdensome for a party to obtain documents. In this context reference was also made to ADF v USA where it was held to be sufficient for a party if it informed the requesting party exactly where and how the copies of these documents can be obtained.

The session continued with a talk on the “Preparation of Witness Statements and Expert Opinions” by Jiri Urban (PricewaterhouseCoopers – Prague, Czech Republic) and Martin Hrodek (Baker & McKenzie – Prague, Czech Republic). Their presentation sparked a discussion on whether respondent states should present alternative damage calculations even if they denied any liability. It was pointed out that it was sometimes very difficult for respondents to admit that non-exproriatory behavior of a state could entitle a corporate claimant to damages. Ultimately, it was concluded that whether a respondent should put forward its own damage calculations would depend on the facts and circumstances of the particular case. On the issue of credibility of expert opinions, Mark Kantor found it important to stress that the expert also considered information unfavorable to the party who appointed him, disclosed all possible conflicts of interest, and certified to all of the former. Should it turn out later that he did not act in the manner certified, this could negatively impact his credibility.

As a grand finale of the workshop, Meg Kinnear and Mark Kantor presented their insight on “Strategic Questions in Investment Arbitration” which focused on the selection and challenge of arbitrators. Special attention was given to the controversial issue of challenges based on “issue conflict”, i.e. challenges based on the allegation that arbitrators have already taken a position on a relevant question, e.g. in another case or in a publication. This topic is closely related to the problem that parties tend to select arbitrators predominantly from a small pool of highly experienced figures. This of course increases the chances that an arbitrator has already dealt with the same or a similar question in the past. In theory, this problem could be easily resolved by enlarging the pool of arbitrators. In practice, however, it is difficult to convince parties to accept less experienced arbitrators. As to the rules relevant in the context of challenges to arbitrators, Mark Kantor pointed out that the EU-Singapore FTA contained, in its Annex 15-B, a Code of Conduct for Arbitrators and Mediators. Apart from the discussion on challenges, the panelists presented possibilities to accelerate proceedings, such as specifying dates until which certain decisions by the tribunal are expected.

This marked the conclusion of the workshop but not the end of the program for the day. The workshop was followed by the Young ICCA after-workshop “Dinner with an Arbitrator” during which Mark Kantor lively discussed with participants various issues, including different aspects of Investment Arbitration.

On the next day, many participants had the opportunity, through Young ICCA, to participate in the 4th Investment Treaty Arbitration Conference organized by the Czech Ministry of Finance.

The workshop benefitted tremendously from the enthusiasm of panelists and participants to share, in an open-minded manner, their knowledge and experience in the field of investment arbitration. In addition, the workshop also provided ample opportunity for further talks and insights during the more informal parts of the workshop. The combination with the Investment Treaty Arbitration Conference was of considerable added value.

The steering committee of the workshop included Alexandra Maren?áková (Young ICCA member, Germany), Kristína Bartošková (Baker &McKenzie, Prague), Anna Bilanová and David Seidl (Czech Ministry of Finance), Ji?í Urban (PricewaterhouseCoopers, Prague) and Mária Lokajová (Squire Patton Boggs, Prague, Young ICCA co-chair).

Speakers:

Martin Hrodek (Baker & McKenzie – Prague, Czech Republic)
Mark Kantor (Independent Arbitrator – Washington D.C., USA)
Meg Kinnear (ICSID Secretary-General – Washington D.C., USA)
Vit Makarius (Independent Counsel – Vienna, Austria)
Julie Spinelli (Freshfields – Paris, France)
Jiri Urban (PricewaterhouseCoopers – Prague, Czech Republic)
Gerold Zeiler (zeiler.partners – Vienna, Austria)

[1] Tim Rauschning is Associate at Luther Rechtsanwaltsgesellschaft mbH in Hamburg. He advises clients in complex national and international disputes and arbitration proceedings with a particular focus on investment arbitrations. This report merely summarizes opinions voiced during the workshop which do not necessary represent the views of the author, Luther Rechtsanwaltsgesellschaft mbH or its clients.