Commercial Dispute Resolution - Global Legal Group - London Nov12... · Commercial Dispute...

CONFERENCEREPORT

26-27 November, 2012LONDON

29Commercial Dispute Resolution

JANUARY-FEBRUARY 2013

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SETTLEMENT TRENDSIN LITIGATION

THE FINANCIAL SERVICESLITIGATION LANDSCAPE

WHITE-COLLAR CRIME:WHISTLEBLOWING

E-DISCOVERYAND FORENSICS

INTERNATIONALARBITRATION: ENFORCEMENT

THE SELECTION OFARBITRATORS

MEDIATION TRENDSAND DEVELOPMENTS

NEW THINKING INTHIRD-PARTY FINANCE

C RDCommercial Dispute Resolution

owards the end of last year, CDR held its maiden conference – a comprehensive, two-day event that saw an audience of in-house lawyers, private practitioners and other key industry players converge on the Park Lane Hotel in central London to hear the latest thinking from a collection

of some of the world’s best dispute resolution experts.Interaction was the word we promised our

speakers and audience before the event, and interactive it was, with the sessions prompting intensive questions and observations from the audience, and more importantly perhaps, plenty of spirited debate, both across the floor and between panellists.

Speakers delivered their presentations succinctly, engagingly and informatively, and each one was compact and specific, with up-to-the-minute legal insights. An energised conference was the result, and many delegates and speakers alike left the venue asking us when the next one will be.

The following 16 pages are the highlights of the sessions, and while giving each speaker the full coverage merited by the fascinating subjects they discussed would take an entire magazine, we hope that our coverage gives a flavour of the quality and relevance of the sessions.

Many thanks go to those who made the event a legal and professional success. We look forward to announcing our events for this year soon.

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CDR Conference report30 LITIGATION TRENDS

Ted Greeno Herbert Smith Freehills: “Commercial casessettle for an array of reasons which are unrelated to the parties’coming to understand the issues. These reasons include, to name afew, changes in commercial objectives, changes of personnel, takeovers and the imminence of a trial at which senior managementwill be called to give evidence. It is very rare that commercialparties commence litigation without understanding the issues, asthe authors of the CPR appeared to assume. However, proceduredoes have a part to play in encouraging settlement and anecdotalevidence shows that the adversarial system used in commonlaw jurisdictions promotes settlement more effectively than theinquisitorial system which prevails in civil law jurisdictions. Forexample, for claims issued in the Queen’s Bench and ChanceryDivision in the High Court in London, a rough calculation indicatesthat about 70% of cases settle before judgment. In Spain about 15%of such cases settle; in Germany, 14.5% of cases before the lowercourts settle; and in France it’s about 15-20% for equivalent cases.What is the reason for these differences? Is it because costs arehigher in London litigation? I don’t think that’s the driver; indeeda recent survey of Commercial Court users found that costs areregarded as generally proportionate. Or is it because, with ouradversarial process, the parties have an opportunity to probe eachother’s witnesses, to get documents out of them and to get theircards on the table so that the outcome becomes more predictable?The predictability and thoroughness of the adversarial system I dothink play an important part in the settlement dynamic, as well asexternal commercial drivers I have mentioned.”

Richard Ferris AON: “Too often, the client gets in their own way and in the way of practitioners, when commercial outcomes could be available sooner. Particularly with pre-action protocols if you have a potential data, it needs to be used wisely. But if you don’t have the right structures, it’s going to be wasted and then time and money and finally your share cut. Decisive government structures that create the right interface between litigation and entities make decision making processes drive better. You’ll have a culture in which people fiercely identify litigation risks and escalate them in the right way. You have

a strong risk process around decision making about how disputes will be resolved. Thinking of every potential litigation circumstance gets you a lot quicker to a dispute resolution. It’s controlling outcome when you crystallise risk.”

Verena Charvet Invesco: “Sometimes one is being pushed into settlement simply because senior management does not have the will and wants the case to go away. That’s frustrating for counsel because they believe they should be defending it. The driver [to fight] is commercial consideration. If you are going through traditional litigation, you get information. That’s truly the most important thing in assessing the case. There’s a pragmatic reason for looking at that. From a commercial angle, if you’re going to settle, what’s the commercial impact? You’ve got a risk you have to disclose. You need the ability to manage information coming to you that may be contracted. Sometimes it’s not good for your reputation to be seen to be fighting and conversely reputation is sometimes taking a stance to defend your good name as a company. That can be very painful because even with a good case that you win, you may not get costs in that. You won, but goodness knows at what cost. Getting into a big piece of litigation generally does not reflect well on organisations. It often has large shareholders wanting to know what’s going on and generally leaves a bad taste in everyone’s mouth from a reputational point of view. There’s a blend of consideration here as to what drives settlement. I think it’s working through dispassionately and neutrally. That’s very much the role of in-house counsel.”* Holger Bielesz Wolf Theiss: “A large proportion of settlements in Austria are concluded in the court in the form of the court settlement. Within the last three years, the cases that the commercial courts have had to deal with have increased tremendously. The reason is the aftermath of the financial market crisis. It has simply happened that many issues on securities by both Austrian and foreign companies have seen massive claims by investors who claimed to have suffered damages and initiated lawsuits. The increase from 2008 is roughly 60% in Austria. The courts realised they need to do something in order to reduce the need for judgment and the court’s

With treasured clients becoming increasingly informed about alternative methods of cost effective dispute resolution, experts discuss the future of early settlement in arbitration and litigation

What makes cases settle?Day One, Session One:

CONFERENCEC RDCommercial Dispute Resolution

Sheraton Park Lane Hotel26-27 November, 2012LONDON

workload. What has been established is a pilot scheme is that judges shall propose to parties that they could go to mediation and find an ultimate settlement through this process. This has proved quite effective. Assuming the charges are properly instructed within the framework of this scheme, they’re proposing mediation in the right way. In 90% of the cases that judges propose, the parties accept it. In my experience, you can never be sure that a case cannot be settled. It would be interesting to see what are the incentives and disincentives to a settlement. In my jurisdiction, a disincentive has to be the mind-set of decision makers who are not always professional and many still perceive the consideration of the negotiation process as a sign of weakness.”

Jane Player King & Spalding: “In 2008, Lord Falconerpredicted a tsunami of litigation in the wake of thefinancial crisis. However, the cost and time it takes tobring matters to a hearing, whether that’s arbitrationor litigation, continues to drive clients to look for otheralternatives. Clients will say that the business would preferto have an earlier settlement for less than full recoverythan have a dispute hanging over their heads for twoyears or longer. In relation to future trends, clients willcontinue to value early settlement. For that reason, partiesare increasingly willing to invest early in the analysis ofthe dispute. The costs involved to achieve a thoroughinvestigation into the case at an early stage encourageslong-term savings of both time and cost. On a commerciallevel, the cost-benefit analysis as to whether it is worthpursuing a case has ramifications beyond the law in termsof disruption to the business and harm to corporatereputations. Early case assessment allows for a moreinformed decision as to whether parties are better offsettling early or the issues at stake justify pursuing thedispute further but then clients and their lawyers do sowith their eyes open as to the consequences. The agreedstrategy is part of an informed decision taken after acombination of commercial and legal risk analysis. Theseearly case assessments are the way forward and firms thatare not already doing them will be forced to do so by their“dispute wise” clients or risk losing key relationships.”

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Richard Ferris of AON on the benefits of fighting litigation tooth and nail: “Fighting tooth and nail is great when you have to, and if you’re going to engage in a litigation process you’ve got to be firm and decisive and portray a strong front to your opponent. If the answer was unqualified, you wouldn’t be doing it properly because you wouldn’t be assessing all risk and fighting everything. You dig your heels in from the word go. That’s fine if you’re always dealing with a small group of potential litigants but if you’ve a large client base, or an international one, these reputations are only built in the legal community who may or may not have a clear idea of what your stance is. It’s valuable to be firm but if too often; it’s an excuse not to make a hard decision.”

Verena Charvet of Invesco Perpetual on striking the balance: “At the end of the day, you do have to be firm and not be seen as a pushover. Certainly, in the UK environment, you will have to reach a conclusion and being unreasonable won’t get you where you need to be. You need to be willing to stand up for what you believe is right as an organisation and as an individual but equally if you have got it wrong, you need to be able to recognise that. It’s a difficult balance.”*

Commercial Dispute Resolution31JANUARY-FEBRUARY 2013

Q&A highlights

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Speakers

Ted GreenoHerbert Smith Freehills (Chair)

Jane PlayerKing & Spalding

Holger BieleszWolf Theiss

Richard FerrisAON

Verena CharvetInvesco Perpetual

*Verena Charvet’s remarks in this article reflect her personalviews and are not representative of any view or legal position ofInvesco Perpetual or any other member of the Invesco Group.

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CDR Conference report32 LITIGATION TRENDS

Marc Weinstein Hughes Hubbard and Reed: “The SEC and Department of Justice have recently come out with their long-awaited guidance on the application and enforcement of the FCPA. It is unprecedented in volume – over 80 pages of text – although it doesn’t clarify quite a few things that have been questioned in the past – for instance, what is a foreign official? Obviously the bribery statute is based on bribes offered to or paid to foreign officials, and that gets very confusing when you get to state-owned entities around the world in industries like telecommunications, energy and healthcare. When is the state-owned entity a foreign official? For example, if there is a minority share owned by a foreign government, can that be considered a foreign official?

The guidance also gives six examples of past cases where they declined to bring a case under the FCPA where they supposedly could have. Each of the six anonymous examples share several common features – the entity found the issue around the globe, the entity investigated it thoroughly, they co-operated with the Department of Justice and the SEC and voluntarily disclosed the information. They took action such as terminating the offending employees then terminating relationships around the globe with offending business partners, and took action to enhance their compliance programmes. It’s no surprise that the DoJ would cite such examples because they are trying to promote co-operation and self-disclosure, but they have not provided any

examples where there are other reasons for declining to prosecute, such as lack of evidence or jurisdictional questions.”

Matthew Thompson Ogier: “Directors should be aware of their ongoing duties, and if you are a financial institution, make sure your directors are properly qualified – the word governance was used this morning. Choose your boards with care, exercise your duties, as you will, as directors, be judged by the required level of skill that a court is always looking for.”

Gabor Bardosi Wolf Theiss: “It is my belief that litigators should be involved in the drafting of loan and security agreements, to ensure that the findings and experiences of their reviews of these judgments and litigations are properly addressed in the text. The choice of forum is very important here, from the perspectives of independence, impartiality, and the professional knowledge and expertise of the court or the arbitration institute, as well as other factors such as confidentiality, costs and time. When deciding between state courts or arbitration institutes, we have to think about the jurisdiction, or which institute, the seat of arbitration, i.e. which country’s domestic laws should cover a future dispute. Other factors need to be considered in terms of the choice of forum – there is a growing appetite for preliminary measures to freeze the assets and bank accounts of debtors, so we need to accommodate those demands when

structuring the agreement and deciding the forum of dispute resolution.”

Aamir Khan Lloyds TSB: “Instead of settling litigation to avoid potentially dangerous precedents, banks have instead been facing into these issues, which is a change in litigation strategy across the board. So when an issue arose, the banks treated it like a test case and whether there was an adverse decision or not, the banks were now willing to take these cases on. The example of PPI litigation demonstrates how the banking industry fought back having learnt the lessons from the bank charges litigation cases.

There have been other developments since the financial crisis of 2008, such as the greater use of the internet by consumers and the increase in consumer forums. Effectively any pro-consumer court decision is put online, and any strategic decision made by a bank to settle a case is on the internet within hours. Effectively, there is no longer any place for banks to hide and litigation is done in a very public forum – even details of private settlements find their way onto the internet.

After the financial crisis unravelled there greater scrutiny on the FSA and other regulators, as they were in effect being accused of an alleged “light touch approach” towards the regulation of the banks. Political and media pressure subsequently increased to get the banking industry under control, and this has led to a change in senior management at the FSA, and greater

In a globalised business environment, general counsel increasingly face unprecedented regulatory and enforcement challenges in the wake of the global financial crisis - and new risks mean new strategies

Financial litigationDay One, Session Two:



empowerment at the Bank of England as well as structural changes in the FSA with the splitting of prudential and conduct supervision.” Frank Thompson K&L Gates: “Directors effectively have personal liability in respect of most criminal fines, other than perhaps those involving strict liability offences and regulatory penalties. Directors also cannot be covered at all for their own fraud or dishonesty. Both insurance and an indemnity provide cover for third party claims, costs and liabilities, and also costs in relation to regulatory proceedings. Where a D&O policy has an advantage over indemnity is, that under a D&O policy, you can also get cover for the costs of criminal proceedings, whether those proceedings are lost at the end of the day.

Also, costs related to claims by the company, and subject to any insured versus insured exclusion, the D&O policy will also cover liability from the director to the company. But indemnity has an advantage over insurance in that it is not normally subject to any financial cap, in contrast to the limit under a D&O policy, and it’s very rare that an indemnity will have exclusions, again in contrast to the position under a D&O policy.”

Greg Lascelles SJ Berwin: “There is a focus on the board and its understanding of the company’s risks, on senior executives to increase their involvement in risk oversight, and on who’s involved with the chief risk department or office’s role in avoiding surprises and manoeuvring organisations through challenges.

A 2010 KPMG article suggested that instead of analysing known risks, chief risk officers are increasingly asking what they’ve missed, what lies beneath and what are the “unknown unknowns.” What this does is shift the focus of the risk management team from disaster prevention to trying to identify hidden risks as well as challenge existing assumptions.”

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Speakers

Marc WeinsteinHughes Hubbard and Reed

Gabor BardosiWolf Theiss

Matthew ThompsonOgier (chair)

Frank ThompsonK&L Gates

Aamir KhanLloyds TSB

Justin McClellandWinston & Strawn

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Greg LascellesSJ Berwin

CDR Conference report34 WHITE-COLLAR CRIME

Jonathan Middup Ernst & Young: “When we speak to whistleblowers, one of their key concerns is their anonymity. For example, people fear using whistleblower lines because they believe that the repercussions will come back on them in some way. How, they ask, are they going to be protected from those in the business or other powerful individuals they might be whistleblowing on, who might wish to do them harm?”

Robert Wardle DLA Piper: “There are two types of recipient who want to hear the whistle sounding, as it were. There’s the internal one within the company, and that’s the best place for it to occur. But very often it’s external – it might be to an auditor or a regulatory body. The FSA is the UK is the obvious example, but there’s the SFO and, very significantly, the SEC in the States. HMRC encourages whistleblowing from a very low level to

a very high level: they make payments as small as GBP 50, while Office for Fair Trading whistleblowers can receive up to GBP 100,000, depending on the circumstances. Those payments rather fade into comparison when you look at the Dodd Frank Act, under which up to 30% of the recovered proceeds of crime can be paid out. Bradley Birkenfeld recently got USD 104 million. On the whole I would think that it was worthwhile for 40 months’ imprisonment, but there it is.

So what’s the motivation for people to blow the whistle, and not to use the internal reporting lines? The first is of course revenge – and don’t mistake how powerful that can be as a motive. Self interest is another very powerful factor; the money is a classic one. It might also mean you are going to get out of trouble yourself; you might have a prison sentenced reduced, or avoid prison altogether. And surprisingly to someone as cynical as me, who’s been in

the business for 30 years, there are some people who actually want to do the right thing. And sometimes it’s a combination of all of those; people’s motivations can be very mixed.”

Tom Spencer GlaxoSmithKline: “GSK has a whistleblowing policy that’s coming out at the beginning of 2013, and is designed to encourage a so-called “speak up” culture. Of course, that is easier said than done; this policy is a global one and applies to every single employee and contractors as well. It applies to everyone except those whomake their concerns in bad faith and,as Robert said, retaliation is a big partof whistleblowing. Of the 4,000-oddtip-offs that have been made to the FSAthis year, about 20% were effectivelyretaliation claims. But, by the sametoken, 80% are in good faith, andour policy is designed to protectthose people.

The driver for this policy has been

With whistleblowing landscapes developing apace on both sides of the pond, experts examine the new challenges arising from informants potentially receiving large cash rewards



WhistleblowingDay One, Session Three:

Speakers:

Jonathan MiddupErnst & Young (chair)

Robert WardleDLA Piper (former head of the UK Serious Fraud Office)

Tom SpencerGlaxoSmithKline

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Robert Wardle on the credibility of paid whistleblowers: “I think there’s a huge difficulty in paying people to come forward. I can see why it’s done: it is there to encourage people to break what is otherwise an obligation of confidentiality. The problem is that where there is any reward, it makes it extremely difficult using that person as a witness, especially in criminal litigation. The first thing they’re going to be asked in cross-examination is: how much have you been paid? And it goes from there. There’s something that sticks in my throat about paying people large sums to give evidence, and that’s where I’d draw the line.”

Jonathan Middup on the typical motivations of whistleblowers: “I don’t see money as a motivation for peoplecoming forward in the corporate world. Our experience is thatpeople do it for all sorts of reasons: revenge, politics, or, most often,to do the right thing. For that reason, I’m not in favour of corporatewhistleblowers being paid. I think there are plenty of incentives forthem to come forward without that.”

Tom Spencer gives an in-house view on paying whistleblowers: “There is now a completely different attitude

towards whistleblowers, because of the grossly disproportionate rewards they can receive. From a corporate point of view it feels like a sell-out. In some cases, no behaviour in a company is changed, so it looks like those individuals are taking advantage of Dodd Frank or taking a cut of the pie. In that sense, I’m not in favour of rewards.”

Jonathan Middup on the need for businesses to develop effective whistleblower policies: “A lot of businesses are still at the stage of treating whistleblowers with some suspicion, and actually the suspicion/evaluation stage is critical, because they don’t know which way to go: is it malicious, or is there substance to it? That’s one of the real challenges.”

Robert Wardle on the increasing number of corporate whistleblowers: “It’s interesting that boutique law firms are now being set up to advise whistleblowers exactly how to put their case, and the factors to use to maximise the amount they are likely to get. So, if there’s one warning I’d like you to take away from today, it’s the fact that businesses are increasingly at risk because of this burgeoning industry.”


Q&A highlights

GSK’s experience in the US, wherewhistleblowing has been a ‘problem’longer there than anywhere else. When I joined the company ten years ago, a lady had blown the whistle in relation to some alleged product defects. It was, it’s fair to say, treated incredibly badly; it was how not to treat a whistleblower.

The last thing you want if you don’thave any safeguards in place is for thewhistleblower to go externally tothe media, or the regulatory body,because then you’ve completely lostcontrol. So you’ve got to provideabsolute safeguards to employeesand make them feel comfortable incoming forward.”

Tom SpencerGlaxoSmithKline

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CDR Conference report36 LITIGATION SERVICES

Trevor Horwitz Ernst & Young: “E-discovery is like sailing in the middle ages. We have charts that tell us what we think e-discovery is all about. At the edge, there are places we don’t know enough about, that say ‘here be dragons’. We can chart that, come up with fantastic ideas, and then something changes in the landscape – the phenomenon of social media communications, we have not had to consider before now – and it seems we are back in unchartered waters.”

Simon Price Recommind: “It is very hard to budget [e-discovery] costs; in certain industries, it is highly likely that one will come across issues that may result in disputes and investigations. The challenge is ‘how much should you spend on a problem if you don’t know how big it is?’”

Simon Price Recommind: [on the comparison between US and UK e-discovery] “Things are changing in the UK. For example in the financial services industry, the requirements to respond to requests for information are likely to increase in the next few years.”

Trevor Horwitz Ernst & Young: [on why it matters] “The elephant in the room is the legal and regulatory drivers. Without litigation, without regulatory proceedings, without compliance and investigations,

this would just be an information management issue.”

Tyrone Edward Ernst & Young: [on what is driving e-discovery] “We are seeing increased internal investigations, breach of compliance and regulatory inquires. And, while electronic information is seen as the life blood of companies, they typically lack the appropriate information governance framework and will require the experience of skilled e-discovery experts.”

Tyrone Edward Ernst & Young: “Technology is a great thing, although it is not the only thing which is needed to drive a successful outcome to an e-discovery exercise. People, process, and technology, driven by a competent understanding of the clients’ requirements is key to managing a successful outcome.”

Simon Price Recommind: [as an example of machine learning] “Predictive coding has been used in over 1,000 matters and many hundreds of terabytes of client data. It has been officially endorsed by a US Federal court, and all the major US regulators use it, as do over one-third of the AmLaw 100 law firms.

Several UK law firms, including one of our largest clients, are already using predictive coding on client matters, especially early case assessment

These multifaceted, complex and interrelated subjects are becoming ever more critical to companies seeking to maximise their litigation preparedness. In this session, leading specialists give insights into the latest trends and developments

E-discovery & complianceDay One, Session Four:



and for quality control.[on how predictive coding works]

Lawyers will take a subset of data corpus and put it through the review process. The lawyers may then respond to any issues raised over the period of time searched and give their assessment as to how responsive that data is. This helps to generate statistics, which in turn, produces benchmarks to base the review process on. This is useful as a control set of data when managing a huge set of information.

[on how predictive coding works] They can then use conceptual search tools to create a seed set (example documents) which will enable the system to interrogate the documents to be searched. It does this by asking it to search for documents for a given issue. These documents, when found, can then be passed to the review team to assess the computer’s suggested results. Following approximately 10-15 iterations, that process has usually been exhausted as a procedure, as each set of results are validated, and other search tools can be used.

Technology is not there to replace the lawyers, but to help them with that process. Predictive coding helps bring material to the forefront which may assist a case; it can be useful in searching for documents that are legally professionally privileged, for example, which can help in preserving reputation [in not accidentally

disclosing privileged material].It is very easy to defend predictive

coding, as it is a court-endorsed process; it requires input from lawyers, as case experts. The predictive coding process suggests items that it considers as relevant, but it does not make lawyers obsolete, as they are a pivotal part of the process.”

Tyrone Edward Ernst & Young: “Technology has evolved and will continue to evolve within the legal market. While the application of keywords was seen as the norm, we have also seen the introduction of concept clustering and we are now in the era of predictive coding also known as computer assisted review or technology assisted review. And in my opinion, those who are able to use this technology on suitable cases, supported by the appropriate approach, will be able to pass on the cost and time saving to their clients.

We have also seen increased demand for the review of audio recordings. And while governance has catered for fixed communication lines, the November 2011 adjustments to the MIFID rules require mobile communication recordings to be retained for a minimum of six months, therefore giving rise to a new source of evidence which was previously ignored.”

Trevor Horwitz Ernst & Young: “Firms are developing new tools, like

consolidated data analysis, in which traditionally unstructured ESI data sources such as email and word processor documents, are no longer reviewed and analysed separately to structured data such as journal transactions and share prices.

Previously, technology solutions have either supported structured or unstructured data, but not both. The problem with this approach is that it hinders the investigator in being able to assess all relevant evidence simultaneously – that is to see the big picture.

[on consolidated data analysis] It changes the way in which we cut to the chase as to who knew, what, when. It changes the way we help our clients and our investigators. It’s one of the most exciting developments in e-discovery right now, in breaking down the artificial distinction between structured and unstructured data. We are predicting a massive uptake in this ability to bring data together.

[on the prospect of possibly abolishing discovery altogether] There’s no easy answer to this. No matter what changes come, those changes come at a cost. Someone has to help guide those changes...I think there is a move away from looking at the costs of e-disclosure to how we can manage the costs of information. A consequence of better management of information...will reduce e-discovery costs.”

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Speakers

Trevor HorwitzErnst & Young

Simon PriceRecommind

Tyrone EdwardErnst & Young

Speakers

Ian MeredithK&L Gates (chair)

Philippe CavalierosWinston & Strawn

Jurriaan BraatOmni Bridgeway

Jayne BenthamSimmons & Simmons

David KavanaghSkadden

CDR Conference report38 INTERNATIONAL ARBITRATION

Andrew Lenny Arthur Cox: “Grounds on which the recognition of awards can be challenged include: the incapacity of a party, lack of notice of the appointment of an arbitrator or of the proceedings, the dispute or the award is outside of or goes beyond the submission to arbitration, or the award is against public policy. In essence, just because you’ve a piece of paper – i.e. the award – in your hands, doesn’t mean that you’re necessarily going to get recognition. So it’s important to advise clients that there may be a process to go through before you get there.”

David Kavanagh Skadden: “The Curious Case of Benjamin Button is a story of a man who lives his life backwards. This is an appropriate metaphor for the approach that lawyers and clients should have for enforcement. It’s important in what we do to always start at the end of the process. That should drive the strategy and the business process of the clients in litigation. Look at enforcement through the American perspective – to see how case law has developed in New York in recent years and taken the lead in what some have called a ‘clearing house’ both in enforcement and the important aspect of gaining information about where your judgment debtor may have his assets.”

Jurriaan Braat Omni Bridgeway: “The ICSID convention provides that member states should treat an ICSID award as a local judgment.

Most jurisdictions require ex parte applications for recognition of an ICSID award, which will allow the claimant to receive the recognition of the award pretty quickly. Interestingly, Germany may not be compliant with the ICSID Convention because it does not recognise an ICSID award as though it were a national judgment. German law seems to require that one follows a procedure that resembles the New York Convention recognition proceedings. Subsequently, the German court requires the applicant to pay court fees equal to a percentage of the award, subject to a maximum of EUR 190,000. Italy and Turkey have similar systems where one pays court fees equal to a percentage of the claim amount. Greece is also noncompliant but for another reason. Before a claimant initiates proceedings against another state before the Greek courts, it will need approval from the ministry of justice, who in turn seeks approval from the ministry of foreign affairs. Greece does not seem to give these consents, although I understand that such consent was given in a case against Libya. My conclusion is therefore that there’s still some work to do for Germany, Italy, Turkey and Greece to comply with the ICSID Convention.”

Jayne Bentham Simmons & Simmons: “The New York Convention has long since been lauded as one of the most successful conventions of its time. Kofi Annan said on the 40th anniversary

International arbitration experts discuss the merits of the New York Convention and new possibilities in tackling enforcement


Arbitration: EnforcementDay Two, Session One:

Andrew LennyArthur Cox

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Philippe Cavalieros on the need for award to look professional: “Looking professional has two meanings: for the local courts to be satisfied that proper due process was carried out during the procedure with an award that is sound and motivated, and in order to facilitate the translation thereof into the local language of the place of enforcement. If an award is clear, the grounds for setting aside or refusing enforcement should be minimised.”

Ian Meredith on the optimal drafting of awards: “I was always told the award was written for the loser: I think there’s a lot of truth in that both in terms of the ability to convince the party (assuming it is not one of those “arbitration terrorists” who will refuse to abide by the award whatever the outcome). If the losing party can be shown that the award results from due process, it’s more likely that party is going to abide by the award. Secondly, it’s to address any formalities required at the place of enforcement so that the court will enforce it. The old UNCITRAL notes on organising arbitral proceedings are still valid. Paragraph 19 of the notes encourages parties to make the tribunal aware of issues in terms of formalities or considerations that might be relevant to enforcement. I think there is a duty on the successful party to ensure the tribunal are aware of those kinds of considerations so they can be sure that they reflect them in the award.”

David Kavanagh on the need to consider enforcement at the drafting phase: “I’m not a fan of complicated arbitration

clauses. My motto is one page good; two pages bad. Invariably the cost-benefit analysis is completely outweighed. The correct approach is always to go for institutional rules like ICC or LCIA and any deficiencies in those rules completely outweigh the risk of delays in enforcement. The only thing you should be thinking about is litigating in your own language if you can help it and if it’s worth billions, you will probably want to make sure its three arbitrators rather than one. But keep it simple. I think a lot of the complications with the asymmetric clauses is the misunderstanding of the need to involve domestic courts.

Jayne Bentham on civil versus common law enforcement procedures: “The delay in a civil law process and – no disrespect to any civil law lawyers in the room – can come as a real surprise to common law lawyers who are used to the process running very smoothly and quickly in the English courts but if you’re faced with a system where it seems you can put in endless rounds of submissions, it can take you two years to even get to the first hearing. I think that can come as quite a shock to people.”

Jurriaan Braat on enforcement and recovery involving Russian parties: “There are ways to find assets when it comes to Russian parties, be it inside or outside Russia. I think there’s potential for evolution but again, the issue of the interpretation of what public order is and entails is key. This leaves too much room for interpretation unfortunately.”


of the convention, it was a landmark instrument with many virtues. The Convention was aimed at facilitating international trade and commerce, and it provided a framework which sought to streamline and harmonise the approach to recognition and enforcement of awards across signatory states. But can the Convention still be described as having many virtues or have the last 50 years seen an erosion in its power? There are undoubtedly issues that arise on the wording of the Convention (for example, what might be included in the somewhat nebulous public policy exception); and the practical reality of enforcement can often differ from the theory, particularly in jurisdictions where the judiciary or arbitration laws are in their infancy. But the real advantage of the Convention that hasn’t been eroded through time but has in fact gained momentum is the sheer geographical reach. International arbitration often involves parties with assets held in multiple jurisdictions and the Convention gives you the best prospect of enforcing awards in those circumstances. That’s something that can’t be achieved on an equivalent scale with a court judgment.”

Philippe Cavalieros Winston & Strawn: “What can be done as a pre-emptive measure to make sure an award is enforceable? Jean de la Fontaine in his fable Council Held by the Rats described how the rats should be warned when the cat would come down to the nest and unanimously agreed on a bell round the neck of the cat. When it came to enforcing the decision, obviously that was much harder (Is it some doubtful point to scan/The Court with counsellors abound/Is it to execute some plan/There’s not a person to be found). With this in mind, what can be done upfront? Some international arbitration rules have tackled the issue, such as the ICC Rules, article 41.

To go one step further, what matters ultimately is looking at arbitration as a whole and the object of which is to produce an award that is enforceable at law. It is submitted that this does not depend only on the arbitral tribunal or the body administering the procedure but rather on all players involved. The arbitral tribunal must ensure due process and produce an award tailored to the particulars of each case (e.g. defaulting respondent) and that must look professional. Institutions should appoint suitable arbitrators, control the procedure and communicate and spread arbitral knowledge. Counsel should elaborate upfront an enforcement strategy from the day the case is taken on having regard to both economic and legal considerations. Although this can be hard when representing a client, counsel should also adopt a collaborative approach in the procedure so as to avoid as much as possible any guerrilla tactics which might weaken the whole procedure. n

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Fulbrook Capital Management

Q&A highlights

Speakers

Nick PeacockHerbert Smith Freehills (chair)

Juliet BlanchWeil, Gotshal & Manges

Christian KonradKonrad & Partners

Steven FinizioWilmerHale

Jakob RagnwaldhMannheimer Swartling

CDR Conference report40 THE APPOINTMENT OF ARBITRATORS

Nick Peacock Herbert Smith Freehills: “It’s very difficult to overstate the importance of your choice ofarbitrator, because the tribunal and the process are onlyas good as the people you put on it. This is the point atwhich the parties have control so you need to use thatchoice wisely.

Indeed, we choose international arbitration because itgives us the opportunity to select a panel in whom all parties can have confidence – either because it’s a single panel which has been agreed or chosen by an institution in whom we have confidence, or because the panel includes someone we have chosen, and who we hope will understand our position and perhaps also be receptive to our submissions.”

Daniel Hochstrasser Baer & Karrer: “Theopportunity to appoint an arbitrator is a privilege because,as Nick says, it allows you to influence the compositionof the decision-making body, which normally is notpossible with a state court. So what are the qualities to befound in good arbitrators? First and foremost, impartialityand independence are indispensable: you simply do notdo your client a favour if you don’t appoint someonewho is impartial and independent, because the negativeconsequences if that later becomes an issue canbe enormous.

If you don’t find candidates who meet the relevantcriteria regarding language, qualification, experience,reputation, efficiency and commitment, then you shouldn’tselect them as your client’s arbitrator. It’s as simple asthat; you won’t be doing your client a favour by havingan underqualified arbitrator; he or she will not be able toinfluence the decision.”

Unilateral appointment of arbitrators may go to the heart of arbitration,

but has the time come to rethink the system in favour of an institution-

driven selection process?


The selection of arbitrators

Day Two, Session Two:

Daniel HochstrasserBaer & Karrer

www.cdr-news.com



Juliet Blanch Weil Gotshal: “Nearly 65% of graduate traineesin England are now female, 20% of partners are female, and 11%of partners in the top arbitration groups are female. But what ishappening in the law firms is not happening in arbitral tribunals:women are appointed in between only 4% and 6% of cases.

Does it matter, though? After all, we are a service industry, meaning it only becomes an issue if we prejudice the service our clients are getting. However, we have all witnessed the growth in conflicts, so you naturally need a bigger pool of arbitrators. We also need mentors, so the next generation of women can see there’s a future for them in this area of law.

Although naturally a generalisation, women are better judges of character – fundamental if your case rests on the credibility of a witness – and are more prepared to admit if they don’t understand an issue being addressed. This is key if you want to be sure the tribunal understands complex issues being addressed. If you are faced with such a case, although I’m not saying that appointing a woman to the tribunal will guarantee success, you do need to think about the gender balance of your tribunal just as you would consider whether to appoint a civil lawyer or common lawyer, or whether to appoint a strict black letter lawyer versus one who will look at the equities. The fact is that you’re doing your clients a disservice if you don’t, and we as the lawyers, whether in-house or private practice, need to be looking at this.”

Christian Konrad Konrad & Partners: “Like the increase in the number of arbitrations filed in the last twenty years, the number of challenges to arbitral appoints has also risen sharply since the mid-1990s: from the low teens to almost 60, a four-fold increase. However, the number of challenges accepted has been steady – only a couple each year. So the fears of unjust removal are slightly exaggerated.”

Steven Finizio WilmerHale: “We are facing a situation nowwhere some leading arbitrators such as Jan Paulsson are starting to question the unilateral appointment of arbitrators. And the question is: even though the right to select your arbitrator is seen as vital, and in practice parties insist on selecting their own arbitrators, does that make it right? When someone like Paulsson says the process creates a moral hazard, it is incumbent on us to ask why he might think that.

So is there another approach to selecting arbitrators that reallyworks? The approach that Paulsson and likeminded people areproposing is ideally to go to a neutral appointment process whereinstitutions appoint all the arbitrators. But even if we accept thatthere is a danger in unilateral appointments, do we believe thatinstitutions are capable of appointing arbitrators in all cases, letalone doing it well? My personal view is that this approach isnot just a move away from one of the key reasons parties choosearbitration, but a move away from the basic building blocks ofarbitration, consent and party autonomy, and a move towardsomething that is not arbitration at all.”

Jakob Ragnwaldh Mannheimer Swartling: “Having served on the board of the Stockholm Chamber of Commerce for three years, I can tell you that there is no more important task for the board than to appoint arbitrators in a particular case. Most appointments we make are for a chairman or a sole arbitrator, which should come as no surprise to any of you here.

We do from time to time appoint an arbitrator on behalf of a respondent, and it also happens – about five to 10 times a year – that we are asked to appoint the entire tribunal, which is sometimes by agreement of the parties and sometimes a function of the multi-party provisions in the SCC Rules. But in principle there is no will on the part of the SCC to appoint the entire tribunal as a matter of course.” n

CDR Conference report42 INTERNATIONAL ARBITRATION

Jane Player King & Spalding: “It has been a really interesting last ten years…[mediation] used to be the answer for the domestic disputes or smaller disputes, but now we are seeing serious global players considering mediation as a real alternative, or as a concurrent strategy for their dispute resolution.”

Jane Player King & Spalding: “In my opinion, mediation is always a cost-effective option. Based on a large number of mediations that I have done as counsel advising clients, and as a rough budget, a mediation costs approximately 10% of the likely litigation or arbitration fees, should the matter proceed to trial or hearing. The client can control the costs more easily in a mediation. It is cost effective even if you don’t settle it. The costs expended are not wasted, even if settlement is not achieved, as they represent preparation required anyway for the case. Indeed, some future costs could be saved as issues are often narrowed in the course of the mediation. Some 80% of mediations do produce a settlement, and of the 20% that don’t, roughly 80% of those settle within three months. Indeed, my experience has shown me that the process is extremely valuable for commercial clients as costs are saved, the creative options available for settlement terms are much wider than in litigation or arbitration, and little is lost in trying it and much can be gained.”

Charles Flint QC Blackstone Chambers: “I am very keen to make the point that facilitative mediation should not be seen as a soft option. The mediator has to work hard and so do the parties, to make sure, certainly in a litigation context, (which isn’t the totality of mediation), to properly assess the risks in their own case. I don’t see the mediator as a passive shuttler between parties, carrying increasingly unconvincing messages [between them]. The intelligent reframing and refocusing on the real issues in a well conducted mediation…adds value and gets under the skin of the dispute. It is very different from the caricature of the soft and fluffy process we were brought up with 10 or 15 years ago. You can be tough on risk

assessment without presuming to tell parties, (if you are rash enough), how a judge will decide the case.”

Rosemary Jackson QC Keating Chambers: [on whether mediation can be a sign of weakness] “I’m not sure people have completely left behind the idea that starting a negotiation is a sign of weakness; I do think some people still feel it would be a sign of weakness to propose mediation, and some perceive it as a sign of weakness if the other side propose mediation, and sometimes, it is a sign of weakness. Sometimes it is a sign of desperation from a party with a very weak claim that would fail in court or arbitration.”

Rosemary Jackson QC Keating Chambers: [on compulsion and mediation] “You can build [mediation] into your contract, through a clause, just as many people will build in an arbitration clause, and increasingly they are building in mediation clauses, whether as a simple mediation clause, or part of an escalation clause with a number of steps in it. Sometimes a mandatory mediation provision is incorporated, sometimes discretionary. Having the clause in the contract means no-one has to be the first person to suggest mediation...it may also mean you have a less aggressive contract procedure, and fewer disputes as a result...but if it’s a mandatory clause it’s got to be watertight and it’s got to be enforceable.”

Rosemary Jackson QC Keating Chambers: [on the need of having a full view of the facts in the case] “Not always. Sometimes you can make a commercial decision; sometimes it is more important to settle a dispute amicably to protect a future trading relationship than to spend time and money to assess the merits of the claim...you might be ‘friendly enemies’ with no desire to litigate but a need to resolve an issue...sometimes you can make a decision without knowing too much about the case...a commercial decision can often be taken in an early mediation to do a deal, say, to avoid the money going into the lawyers’ hands.”



Mediation: when it’s right, and how it’s done

Day Two, Session Three:

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Speakers

Lorraine BrennanJAMS International (chair)

Charles Flint QCBlackstone Chambers

Rosemary Jackson QCKeating Chambers

www.cdr-news.com

Jane Player King & Spalding: [on compulsion in mediation] “I don’t much mind how people come to mediation, and I am not too fearful if they are cynical at the outset, because most times, if is conducted properly and the parties are behaving properly, and having a full and frank discussion by the end of it, even if they don’t settle, because they getting something out of it and appreciate the process.”

Charles Flint QC Blackstone Chambers: [on compulsion in mediation] “It works best when both parties positively embrace the process and are prepared to engage constructively: the risk of mandatory mediation, whether it is under a contract DR clause, or court-appointed mediation, is that one or both parties will not really be in the room, at least not in spirit…mediation works best when you exercise a positive choice to be there. If a judge tells you to be there, particularly if you are a party with strong bargaining position, and can afford to play it long, may gain from playing it long,

there may be a tendency to see the mediation process as another cost drag, and part of the attritional warfare of litigation.”

Jane Player King & Spalding: “The later you leave it before you mediate, the greater that costs are a factor in any settlement. More often than not, the mediation may conclude with both parties agreeing to bear their own costs. If you’ve incurred a serious amount of money in litigation and arbitration, that is a serious thing to give up…sometimes, earlier is better.”

Jane Player King & Spalding: “The closer lawyers are to the business, the more they understand that if they are going to take a piece of litigation to trial, it will pull business leaders away from their day to day job. Parties often consider that the preservation of the relationship with business partners is more important than a short term monetary victory.”


Mediation has grown in popularity outside its traditional home in the US in recent years, yet many

preconceptions persist. Some of mediation’s most experienced proponents dispel myths and help general counsel understand where mediation can fit into their

dispute resolution strategies

Q&A highlights

Jane PlayerKing & Spalding

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CDR Conference report44 THIRD-PARTY FINANCE

Laurent Geelhand Michelin: “Today the trend – at least within Michelin but I think many other companies as well – is to be much more structured and ensure that when someone doesn’t respect contractual obligations, a competitor infringes IP rights, or a supplier overcharges, we systematically ask for compensation. Clearly the question is whether you have to go to court – in cases with a partner or supplier we find a solution, but when things get tougher you have to have people on board who are willing to fund it. I am personally convinced that you need people who are willing to share the risk with you, and of course a lot of questions appear on the table such as who is in charge of the case and who decides to pursue. You also have to make sure that internally you have the right resources – you may have to look for documentation going back to the early nineties, for example – who will do that? These are some of the practical and very important questions that can help you build a strong case.”

Andrew Langhoff Burford: “In what we call plain vanilla funding, there is a clear connection between the underlying claim and the finance it’s receiving – they are fused together, intimately connected. But what happens when we break the two apart? As an example, we recently provided a company with USD 10 million to create a capital project in another country. You may wonder why

a litigation finance company would be interested in funding a capital finance project, and the answer is there is complete separation between the project itself and the underlying asset we were using as collateral. In fact, this piece of litigation was on a completely different continent, and yet the notion was that there was value in that claim, we would unlock it now and give that value to the company for the capital project in return for repayment when that claim was successful in litigation.

My suggestion is that we don’t think of ourselves as funders of cases, but financiers in the context of litigation, and there are any numbers of ways with which we can level the playing field and increase the quality of litigation.”

Grant Hanessian Baker & McKenzie: “There’s little consensus among funders on disclosure of funding in international arbitration. There are some that say disclosure is a good thing – the view there is that where someone is being supported by a funder, this shows underwriters have looked at it and the claim must therefore have merit. There is also money to drive the case forward, which is a general advantage to the claimant and the funder.

Many, however, resist disclosure, and go for strong confidentiality and funding agreements. There are also concerns over conflicts, and there is, I think it’s fair to say, something of a generational issue

when it comes to opinions of funding in international arbitration.”

Neil Purslow Therium: “There is a core litigation funding model emerging in the UK market. This is a non-recursive form of funding where the funder is not buying the case but merely providing the funding – they’re not controlling it. For corporate clients, this is an important aspect – they may see that claim not just as an asset, but also as part of their business, their relationships strategy – they may not want just to sell it or see it as an asset, they may well want to have a funder who respects their business strategy as well as supplying funding.

We’re now seeing increasing numbers of cases being funded, and we’re also seeing funding move relatively slowly from impecunious claimants coming forward to litigate, to the substantial, well-resourced claimant who’s managing their risk and managing their cash flow. This is now being reflected in increased sophistication among funders and the uses of funding, and that’s leading towards the litigation finance model.” Marius Nasta Redress Solutions: “Self-regulation allows greater flexibility to adapt rules for a fast-moving market – this goes without saying. Self-regulation is the best tool if you don’t have contact with consumers, which we don’t at the moment. Some 90% of funded claims

Third-party funders are laying the foundations for the future by considering unresolved issues such as control and champerty, as well as innovations in finance mechanisms and the transformation of previously burdensome litigation portfolios into profit centres

Third-party financeDay Two, Session Four:



in England and Wales are commercial cases involving relatively sophisticated clients who don’t need 20 pages of disclosure. But once the consumer is involved, then I think we may have to go for statutory regulation.”

Selvyn Seidel Fulbrook Management: “There are too many hands-off people in the market. Until now, champerty has scared funders away from taking

a hands-on approach.The fact is that hands-on doesn’t

mean control. It means supporting a claim, making a good claim better, and moving on from a doctrine that has outlived its usefulness. As far as requiring the merits to justify the claim, that’s fine, but does being hands-on detract from the merits of a claim? I want a claim to be good, fundable and I want to make it better. Isn’t that providing more justice? I think so.”

www.cdr-news.com


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Speakers

Laurent GeelhandMichelin

Grant HanessianBaker & McKenzie

Andrew LanghoffBurford (chair)

Marius NastaRedress Solutions

Neil PurslowTherium

Selvyn SeidelFulbrook Management

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