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Summary Week 6 – The Intricacies of Arbitral Proceedings
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Contains: Week 6 tutorial notes, Q&A session notes, readings summaries
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CHAPTER 6 – The Intricacies of Arbitral ProceedingsLarger arbitrations are almost exclusively conducted by a group of practitioners focusing on international
arbitration only, before tribunals composed of highly experienced arbitrators. Arbitration has become
highly specialized legal practice, requiring a specific skillset that is hard to obtain outside of the arbitral
world. After all, those specializing in arbitration on either side of the table are not likely to be willing to
share their valuable knowhow with others, at least not free of charge. Consequently, the topic of 'conduct of
arbitral proceedings' in textbooks is generally limited to a discussion of all sorts of technicalities which may
be important in practice, but do not constitute the essence of the matter.
In weeks five and six, students will develop their understanding of arbitration as dispute resolution
mechanism by acting as counsel to a client in arbitration proceedings. At the end of week four, the students
will be divided into groups – two groups in each seminar will be acting for Claimant, and two groups for
Respondent. The groups acting for Claimant and Respondent respectively, will be provided with the case
materials on the basis of which they are to best promote their client's interests in the arbitration. How do
you think the arbitration should be conducted to best help your client?
Reading materials
- M. Moses, The principles and practice of international commercial arbitration (3 nd ed.) Cambridge
2017, Ch. 4, 5, 6, and 7, digitally available via UM library.
- Blackaby, Partasides, Redfern & Hunter, Redfern & Hunter on International Commercial Arbitration,
6th ed. (student version), OUP: Oxford (2015), Chapters 4, 5, and 6, digitally available via UM library.
- Gary B. Born, International Arbitration: Law and Practice (2 nd ed.), The Hague: Kluwer Law
International (2015), digitally available via UM library.
On each theme additional (more in-depth) literature is abundantly available in via UM Library.
Please consult with the librarians should you have any questions. Should that not answer your
questions, feel free to contact prof. Van Zelst at bas.vanzelst@maastrichtuniversity.nl.
TUTORIAL:
Dear all,
Having discussed the basic framework for arbitration in week 5, in week 6 we
will focus on bringing our expertise into practice. More particularly, we will be
discussing the procedural order in an arbitration between Gerarld Naber's
company Sunshine Inc. and Van der Lande Industries B.V. (VDLI), on the case
presented in week 1.
In order to prepare for the discussion, please consider the following:
1) What procedural order is in the interest of your client? Is the
desired procedural order different when you're acting for either
Sunshine or VDLI respectively?
-first question to ask is what is the interest of my client?
,-Sunshine as our client: VDLI’s CEO has recommended Naber (Sunshine) to have code rewritten
and to engage Logico (Dutch subsidiary of US listed company). After some time, project moved
slowly bc sunshine failed to approve Use Cases code and did not pay upfront payment of
870000 euros. Later, there were unsatisfactory results and quality of the software, but Sushine
also dod not pay fees of 3.4 million euros. Naber felt unfairly treated by Logico and VDLI (and
especially de Wit) and wants action against them. Against VDLI for misinforming him (claim for
damages). But VDLI was acquired by Toyota which took VDLI’s debt.
Procedural order in interest: arbitration
How much money is at stake?
What did Sunshine do to Logico-3.4 million-is that value of the case? Sunshine will claim
damages against VDLI, there are other amounts at stake
What type of damages-damages for misinformation and results of those
misinformation? Nabers idea was about engaging Logico-software written in other
language, Sunshine was left with not written software in other language and he debt
and is now after damages
Idea was to set up software in cooperation with VDLI and sell off the product worldwide-
parties saw some future in that proposal
Profits were supposed to be higher like 20-30 millions of that project
Client is owed money and he doesn’t know how much he is owed-he thinks he is not
well treated and needs compensation
Sunshine envisioned like 30 mill in profit and want to claim that from VDLI
Do we have arbitration clause here? SIAC rules, yes there is arbitration agreement-
Singapore arbitration chamber-place of arbitration is Singapore-what happens if we file
request to arbitration? what will happen to case of client?
How do you commence and arbitration? -you file a request to SIAC in this case and then
SIAC will sent notification to VDLI and VDLI will be invited to file response, short answer,
SIAC will also do (what is its business model?) is to send an invoice and if the amount at
stake is high, invoice will be higher, if you claim 30 mill invoice by SIAC will charge
80,000 dollars (example)
If Sunshine files request at SIAC-first will be given invoice for administration fees,
lawyers needs to be paid too, as well as arbitrators, secretaries, administrators,
tribunal…
If you file 30 million claim number of arbitrators will be higher, for huge amounts whole
tribunal can be involved-more arbitrators-more costly
To bring those costs down we can bring down number of arbitrators by agreeing on that
with other party, but will VDLI agree? Not really, they know you are short on money and
they have a lot of money-we need to find a way around that
What can we do to lower the cost? Claim only a part of the whole claim, maybe only half
a 3.4 mill due to Logico. If you claim only 3 mill administration fees and everything else
will be lower but then you don’t have a claim for your profit
What about claiming declaratory relief-confirmation by arbitral tribunal that VDLI is
liable to you (this is not bifurcation!)-here you have in your hand possibility to raise
liability; this is not a bad idea!
, What can harm a large company-reputation loss, let’s go public, just to get them to
negotiating table
What if we have VDLI bank account frozen-we apply to court in NL bc VDLI is habitual
residence in NL, and ask local court for freezing order of bank accounts of VDLI
What about if we have de Wit to give testimony-preliminary witness hearing- or hearing
of VDLI; she recommended Logico; she is not going to want to testify that she
recommended wrongly, she has control of VDLI’s actions as she is CEO
If you run out of cash what do you do? You borrow cash or ask someone else to invest-
so Sunshine can do the same? Can someone invest in Sunshine’s claim? Which parties
have business model based on that idea? Litigation founders, that can improve
Sunshine’s position- downside to that: they will have to pay for all the fees, and they
want sth back for that, usually 20-30 percent of amount of claim if successful
If you bifurcate arbitration proceedings but still go through the process but here you
have possibility to claim that other party is liable
Appointment of arbitrators-we appoint someone that has expertise in the field of
software; but nature of the claim we are bringing is against VDLI for misinforming; so, do
we need technician for that? No, but what if we need one what would other party do?
Probably appoint the same. Important to see what the case is about? is it legal issue or
technical? Do you need lawyers or professionals to handle the case? Then expert is
deciding on the dispute-think first what kind of issue is-technical or legal?
Parties can waive rights-art 6 ECHR-partial and independent tribunal and in arbitration
you can waive those rights
It is weird that you can appoint someone that can rule in your favour-how does that fit
with principle of justice? Issue of impartiality and independence-but is it really an issue
of impartiality in arbitration? Is such chosen arbitrator really partial and non-
independent or is it just someone that has views in favour of your position. Impartiality
and non independence is really about establishing on the basis of neutral party test
whether someone is really conflicted and cannot reasonably settle the case
Due process issue and fundamental rights issue
So we have arbitral tribunal-3 people sitting-now you want to agree on procedural
order-start with cross examination of de Wit regarding her statement in newspaper and
experience with Logico; how does that drive your arbitrator choice? you can choose US
arbitrator that has more likely to attach importance to oral presentations; how are you
going to evidence that claim? You need to start thinking about that in early process
(about cross examination)
other issues in procedural order? What about timing? Do you want it to be long or short
arbitration? Short, for Sunshine, it has no money, cannot afford long process, it needs to
pay 3.4 mill to 3rd party, they need cash fast; what can you do to achieve fast
proceeding? Possibility to receive arbitration award within certain time frame, request
tribunal to render award within 1 or 2 years for example, but also bifurcate (meaning
that you can first get award on concept of misinformation hoping VDLI will settle and
pay for that)-good idea! If you are advising VDLI and confronted with award on a liability
for your client in the quantum phase where you quantify damages you will likely lose
and if you lose you will have to pay certain amount and also pay costs of arbitration and
, those costs are substantial when it comes to quantum phase bc in that phase parties
engage experts and they are expensive people and if you lose on that you will also need
to pay for another party-this bring incentive for VDLI to settle at that point to have
lower losses
If parties agree arbitral tribunal will usually agree on quantum phase, they are open to
idea of bifurcation in that phase
Would it be good idea to ambush VDLI bc you started preparing claim 6 months ago-is
that reasonable? No, it goes against due process, they need enough time to prepare
defence; award that is rendered in contravention of due process, it is likely to be set
aside in award phase (also problem for you as a claimant)
Exam-45min-question-this has happened in arbitration what would you advise to your
client? In order to know the answer, you will have to have idea of what the law or
applicable arbitration rules say on that issue-so whether to challenge arbitrator or not is
sth that is dependent on what the law says in that respect
Questions of common sense-point is that you never delve with type of thinking that we
never discussed
Boring questions on what law applies on the basis of this and this convention or which is
the competent court in this case, please explain-you go through the steps-Rammeloo
part
-----------------------------
-VDLI as client: VDLI and Sunshine have letter of intent to make their best efforts to cooperate
and jointly develop a fully automated baggage handling system on the basis of Sunshine’s
software and VDLIs hardware. VDLI suggested Logico to Sunshine, as she worked with Logico
before (but stated in the newspaper later that she was unsatisfied with Logico’s services). VDLI
was acquired by Toyota
Procedural order in interest:
2) Assume that the UNCITRAL Model Law applies.
- Separability
o The arbitration clause is a different contract from the main contract itself
o Article 16 UNCITRAL Model Law: invalidity of the contract does not entail
invalidity of the arbitration clause
-The Model Law was designed to be implemented by national legislatures, with the objective
of harmonizing the treatment of international commercial arbitration in different countries.
-The Law consists of 36 articles, which deal comprehensively with the international arbitral
process.
-Among other things, the law contains:
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