Arbitration of Employment Disputes Lars Holo Helene Amsinck Raquel Florez Escobar Peter Frost Paul...

Arbitration of Employment Disputes

Lars HoloHelene AmsinckRaquel Florez EscobarPeter FrostPaul Goulding QC

What does arbitration of employment disputes involve?

Paul Goulding QCBlackstone Chambers

www.blackstonechambers.com

http://www.blackstonechambers.com/

What does arbitration of employment disputes involve?

• What do we mean by arbitration of employment disputes?

• The growth of employment arbitrations• The main issues in employment

arbitrations

What do we mean by arbitration of employment disputes?

• Means of employment dispute resolution– Mediation– Litigation– Arbitration– Early neutral evaluation– Expert determination


• The nature of arbitration:– Agreement of the parties– Before impartial tribunal– Private– Binding between parties– Enforced by states

• Fundamentals: fairness, flexibility, finality


• Framework for an arbitration: institutional or ad hoc

• Institutional arbitration:– eg London Court of International Arbitration (

www.lcia.org) – Administration, rules, fee

• Ad hoc arbitration:– Appoint arbitrator– Procedure: agreement/arbitrator’s discretion

http://www.lcia.org/

The growth of employment arbitrations

• The recent growth in employment arbitrations in the UK

• Explanations for this growth:– US influence– Dissatisfaction with employment litigation– Increased awareness of arbitration and its

advantages

The main issues inemployment arbitrations

• The arbitration agreement.• The law of the arbitration.• Challenge to, and enforcement of,

arbitration awards.


• Arbitration agreement:“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration.The number of arbitrators shall be [1/3]The seat of the arbitration shall be [London]The language shall be [English]”• Present or future disputes


• The law of the arbitration: neither Brussels I Recast (jurisdiction) nor Rome (applicable law) Regulation applies to arbitration.

• 3 relevant laws in an arbitration:– The law of the seat of the arbitration

(Arbitration Act 1996 in UK)– The law of the arbitration agreement– The law of the substantive dispute


• Challenge to, and enforcement of, arbitration awards: limited grounds– tribunal exceeds its jurisdiction– serious procedural irregularity causing

substantial injustice– error of law (often excluded by agreement)

• Enforcement:– New York Convention

Why choose arbitration?

Peter FrostHerbert Smith

WHY CHOOSE ARBITRATION?FACTORS TO CONSIDER (1)

Because of local law restrictions many employment arbitrations will need to be by express consent of

the parties after the dispute has arisen

Confidentiality – can provide real benefits to employees as well as employers

Influencing the choice of decision-maker (but check their diary!)

Speed of decision-making/finality/multiple proceedings

WHY CHOOSE ARBITRATION?FACTORS TO CONSIDER (2)

Choosing the “rules of combat”• costs• evidence gathering

Is arbitration suitable for particular types of employment

dispute?

Note the importance of local law considerations

Where?

Raquel Flórez EscobarFreshfields Bruckhaus Deringer

Where?

• A multijurisdictional approach• Employment DR – challenges– Uncertainty and unpredictability– Timing issues

• Would arbitration be a way to overcome those issues?

• A look at Europe, America and Asia

Is arbitration on employment DR allowed/ used?


Region Country Allowed UsedAmerica USA

Mexico Brazil Colombia

Employment arbitration in the Nordic countries – and a case…

Helene AmsinckKromann Reumert

Employment arbitration in Denmark

• Arbitration agreements in individual employment agreements are enforceable– Agreement must be clear – qualified acceptance– Restrictive interpretation (“any dispute regarding this contract” vs. “any

dispute arising out of the employment relationship”)– In case of dispute regarding interpretation (as opposed to application)

of mandatory law: higher risk that arbitration agreement will be set aside

– Quite common in cases involving managing directors and executives. Higher degree of enforceability in these cases

– Expensive and not necessarily that fast, among other things due to preliminary disputes over procedural matters

• Industrial arbitration in case of employment under CBA– Not only interpretation of CBA, but also mandatory law

Employment arbitration in Norway

• Arbitration agreements are not enforceable in disputes regarding mandatory statutory rights– e.g. termination, transfers of undertakings, hiring in and out,

working hours, paid holiday, part time, fixed term etc.

• Arbitration agreements are enforceable in disputes regarding contractual rights– e.g. restrictive covenants on competition and solicitation, salary,

long-term and short-term incentives etc.

• Managing directors who have agreed to arbitration will be bound by the arbitration agreement

A recent case from Denmark

• Summary dismissal of X, who was the COO of a Danish parent company and the General Manager of its Chinese subsidiary

• X had not paid his income tax in China, and the Chinese subsidiary was liable for the tax, in total approx. USD 1 million, which our client wanted to reclaim from X

• Arbitration clause in Danish Service Agreement:– “Any dispute between the Company and the COO arising out of or

in connection with the employment relationship established by this Agreement shall be finally settled, if the Parties cannot reach agreement through negotiations, by arbitration with binding and enforceable effect in accordance with the below rules”

– Ad hoc arbitration under Danish law, – Award to be passed as soon as possible and no later than three

months after appointment of the arbitration tribunal

Challenges …

• X did not appoint his arbitrator, and the City Court was reluctant to assist – first appeal to the High Court…

• X argued that sufficient negotiations had not taken place, and the City Court accepted this argument – second appeal to the High Court

• X objected to the arbitrators suggested by the Court• More than 12 months later, the arbitration case could

begin• X claimed that the case should be dismissed (dispute not

covered by arbitration clause, claim contrary to public policy)

Case won … new challenges

• The award was passed nearly two years after the date of the company’s application for arbitration

• The arbitrators found that the dispute was covered by the arbitration agreement

• The company was awarded approx. USD 1 million + USD 50,000 to cover costs. In addition, X was to pay the costs to the arbitrators, USD 45,000 – but so far the costs have been paid by the company

• Enforcement in China under the New York Convention => new challenges (translation, procedure, costs)

• Lessons learned?

The future foremployment arbitrations

• Increasing use of arbitration, especially in cross-border employment disputes.

• A specialist Institute for Employment Arbitration?

• Rules for Employment Arbitration?• An EELA Arbitration Forum?

Arbitration of Employment Disputes Lars Holo Helene Amsinck Raquel Florez Escobar Peter Frost Paul...

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