A Practitioner’s View Of The London Court Of International Arbitration

Tuesday, December 18, 2012 - 18:06

Editor: Please tell our readers about Weil Gotshal’s dispute resolution practice in London. How long has dispute resolution been a part of the firm’s practice?

Blanch: Dispute resolution has been a part of Weil Gotshal’s practice ever since Weil Gotshal first started practicing law, and a part of the London office’s practice since we have had a London office. In London we have three partners, Matthew Shankland, who specializes in litigation, and Jamie Maples and me, who specialize in international arbitration, although all three of us do some litigation and some arbitration. We have 13 associates, including legal executives, and we undertake all types of commercial disputes but with particular focus on cross-border disputes and disputes relating to financial services, energy, mining and infrastructure, heavy industry, telecommunications and pharmaceutical. Our arbitration practice undertakes both international commercial arbitration as well as investment treaty and –  what is relatively unusual for a London-based disputes team – we undertake our own advocacy in arbitrations. 

Editor: What advantages does the London Court of International Arbitration (LCIA) offer those seeking dispute resolution?

Blanch: The LCIA is one of the pre-eminent arbitration institutions globally, along with others like the International Chamber of Commerce (ICC), the International Centre for Dispute Resolution (ICDR), the Swiss Chambers, Stockholm and some of the Asian forums, such as the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Commission (HKIAC). 

The LCIA particularly distinguishes itself for two key reasons: (1) the way it charges parties, and (2) the role played by the secretariat. For example, institutions like the ICC charge on an ad valorem basis, i.e., a percentage charge of the amount in dispute, whereas the LCIA charges on an hourly basis – the arbitrators are remunerated on the basis of the time spent. The second major distinguishing feature between the LCIA and many other institutions such as the ICC is that the LCIA has a less hands-on secretariat, and hence is less bureaucratic. The arbitration awards aren’t scrutinized, unlike the process whereby the ICC ensures that all tribunal awards are scrutinized by the ICC secretariat and cannot be issued until they have been approved. With the LCIA the tribunal itself finalizes its award and it is not reviewed by the secretariat before being published to the parties, so there is more freedom for the tribunal to move matters along.

People sometimes express concern that the LCIA must be Anglo-centric because it has the word “London” in its title, but it is not. For example, 80 percent of the parties who come before it are not English. The majority of the court’s members are non-English – of the 35 people on the court, no more than six are allowed to be English. So it is truly global with the arbitrations themselves taking place all over the world. The LCIA has set up branches in India, Dubai and just recently in Mauritius. It’s a truly international arbitral institution, like the ICC.

Editor: The Arbitration Act of 1996 brought welcome flexibility into the LCIA’s proceedings. Do you expect that some of the pending amendments will further modernize and more clearly define the tribunal’s procedures?

Blanch: I believe that the amendments will more clearly bring arbitration procedure and practice into line with the way that clients’ businesses expect their disputes to be resolved and to reflect the way in which parties do business. For example, contracts are much more complicated today; frequently there are now suites of contracts, whereas formerly there was just one contract governing a transaction; more players are involved; the contracts have different governing laws, which have to be tied together; and there are generally cross-border issues involved. My belief is that the Arbitration Act amendments will provide mechanisms for allowing modern disputes to be heard in a modern way. However, I would be concerned if the proposed amendments were more proscriptive as to procedure or more clearly define the tribunal’s procedures. This is because one of the joys of arbitration and one of the reasons it is so popular is that there is not a rigid procedure for the tribunal to follow, unlike court rules which are generally very detailed, often with several volumes of rules. In arbitration there are usually about 20 pages of rules, at most. This gives flexibility to the tribunal to determine a procedure that is tailor-made to each dispute. One of the benefits of arbitration to the user is its flexibility. In summary, I believe the Arbitration Act will update the way arbitration can be done to reflect the way business now works but will not be restrictive in terms of process.

Editor: There has been some criticism of the way law secretaries have been used in arbitrations. Their use seems to be more common in Europe than in the U.S. What is your opinion of their usefulness?

Blanch: This is a very relevant question. There is a genuine benefit in having a fourth person assisting the tribunal but only provided their role is limited to acting as a law clerk assisting the arbitration tribunal. The concern is that the clerk or the secretary has been interpreted as “a fourth arbitrator” or even worse as “the chairman of the tribunal.” So you hear stories, some, but only some of which I believe are true, of the secretary to the tribunal having written the first draft of the award. There is an advantage to secretaries drafting the formal parts of the award, namely detailing the parties, the procedural history and orders and the dates of hearings, as well as carrying out research, to ensure the costs of the arbitration are minimised. It gives the junior lawyers experience, which means ultimately they will be better arbitrators themselves because they have had that experience. By saving time, it saves the parties costs, leaving the tribunal to do the real work, which is to work out the answer to the issues and to prepare the award. There is a view shared by many of us arbitrators that it is only when you draft the award that you come to a final decision on the merits as it is only then that you are able really to start working out in your own mind whether your initial view is correct. Therefore if you take away the role of drafting the award, you’re taking away an important part of the decision process. There is definitely a role for a secretary to the tribunal who helps educate the next group of arbitrators coming along, keeps the costs of the arbitration down and can be very valuable to the tribunal, but the duties need to be kept to that!

Editor: What has been the track record to date of LCIA’s arbitral tribunal in India? Has it made a difference in the way Indian courts view arbitral tribunals?

Blanch: Like everything in India, the process has been slow, but I believe it has been on an upward track since its inception. In terms of whether it’s made a difference in the way Indian courts view arbitral tribunals, the answer is a very definite yes, although there is still quite a way to go. LCIA India has undertaken a series of seminars to educate Indian lawyers and the Indian judiciary in all of the key cities where international disputes are occurring, explaining what arbitration is and why it’s not a threat to the Indian judiciary, but also to educate the judiciary on how they can support the process notwithstanding that it is not the place of the Indian judiciary to seek to control or to interpose judicial systems into the arbitral process. Since LCIA India’s inception, I believe there is a greater awareness of what arbitration means and what the court's obligations are in respect of the arbitral process. Certainly it is believed that a number of LCIA India arbitration clauses are being written now. Obviously there is a time lag between a contract being written and a dispute arising under that contract. It will be interesting to see how quickly significant disputes come to LCIA India, but certainly the signs are looking positive.

Editor: Please tell us about some of the seminal cases that you have been involved with, particularly the case involving PGNiG v. Gazprom.

Blanch: The most significant case I have worked on in the last 12 months is for a Polish energy company, PGNiG. The reason this case is so seminal is because there has been a very significant development in gas trading and the pricing of gas, and this is now impacting the pricing of gas supplied under long-term gas supply agreements, including gas supplied by Gazprom. These contracts traditionally have been for upwards of 15 or 20 years in length and typically the gas has been priced by reference to the price of oil because at the time these contracts were entered into, there was no independent market for gas. Over the last few years, particularly with the actions of the EU in unbundling the gas sector, hubs have developed at which gas is traded with a sufficient liquidity that it is now possible to price gas independently of oil. A number of gas buyers have been seeking to change the way that the gas has been priced under their long-term gas supply agreements because oil prices are so high. Under most gas long-term supply contracts there is a provision allowing for a change in the pricing of gas if you can show that certain situations have occurred as specified in the contract. Our clients therefore commenced an arbitration against its supplier, Gazprom, arguing that they were entitled to a reduction in the price of the gas supplied. The case was supposed to be heard in January in Stockholm, but we settled it about a month ago. The settlement we reached for our client has saved them approximately three quarters of a billion U.S. dollars per year, over 10 years.

Editor: Are there any appeal procedures from the LCIA’s, ECIA’s or the ICC’s decisions?

Blanch: Any arbitration that takes place in England and Wales is subject to the provisions of the Arbitration Act of 1996, regardless of whether it is an award under the rules of the ICC, the LCIA or an ad hoc arbitration. The right to appeal to the courts is governed by the Arbitration Act. There are various grounds for appeal including: (1) the tribunal doesn’t have substantive jurisdiction so the arbitration clause does not apply to the particular dispute; (2) if there is a serious irregularity in process, such as failure by the tribunal to comply with its general duty of impartiality or exceeding its powers; (3) if the tribunal fails to conduct the proceedings in accordance with the procedures to which the parties have agreed; (4) if the tribunal fails to deal with all the issues that have been put before it; (5) if there is uncertainty or ambiguity as to the effect of the award; (6) if there is fraud or a decision contrary to public policy; (7) if there is failure to comply with the requirements as to the form of the award; (8) if there is an irregularity in the conduct of the proceedings during the award; (9) if the award is wrong in law; however, this only applies if the merits were subject to English law, as issues of non-English law are treated as a question of fact, not of law. Therefore, if the arbitration was subject to a law other than English law, it is not possible to appeal it if you believe the tribunal got the decision wrong in law. 
Any appeal on the basis of English law is made to the High Court, a court of first instance, but it is only possible if the appellant gets permission from the arbitral tribunal or if they can persuade the Court to accept the appeal. Appeals from the High Court to the Court of Appeal can only be made with the permission of the High Court.

Editor: While there is no concept of stare decisis among arbitral tribunals, do you expect the time will come when cases will be codified and form a set of precedents that might be invoked among tribunals?

Blanch: I find this an intriguing question because clients naturally want to know what the merits of their claims are. As you know, you can’t say another tribunal decided X or Y, and therefore this tribunal must follow the same decision or precedent. However, this is because one of the main advantages of arbitration is confidentiality, which precludes a system of precedents. While some parties will allow arbitration awards to be published, not all are published. You cannot have a precedents system where you don’t know what all the cases decide to give rise to those precedents. Further, even if an award is published in a redacted form or there is a case summary, it will not be clear what the underlying facts were giving rise to the decision, and so it will not be possible to determine the basis for the decision and thus any precedential value would be very limited. Further, arbitration is intended to be a much more commercial form of dispute resolution. It is not uncommon for parties to undertake arbitration in the hope that the tribunal will take the equities into account in a way that may not happen in any judicial court. Where there are the beginnings of a precedential system coming into play is in investment treaty arbitrations where arbitrations take place between an investor and a state. The International Centre for Settlement of Investment Disputes in Washington makes all awards public allowing for the development of a system of precedents. Tribunals now will refer to previous investment treaty decisions to justify the decisions that they’re making. So although it’s not a formal system of precedents, there is more of an established informal system of precedents in investment treaty cases that doesn’t exist in commercial arbitration.

Please email the interviewee at juliet.blanch@weil.com with questions about this interview.