Tag Archive for: arbitration

The problematic exclusivity of the UPC on provisional measures in relation with PMAC arbitrations

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Guest post by Danilo Ruggero Di Bella (Bottega Di Bella)

This post delves into the issues stemming from the exclusive jurisdiction of the Unified Patent Court (UPC) on interim relief in relation with the judicial support of the arbitrations administered by the Patent Mediation and Arbitration Centre (PMAC).

Risks of divesting State courts of competence on interim measures 

On one hand, article 32(1)(c) UPC Agreement (UPCA) provides for the exclusive jurisdiction of the UPC to issue provisional measures in disputes concerning classical European patents and European patents with unitary effect. Under article 62 UPCA and Rules 206 and 211 of the UPC Rules of Procedure (UPC RoP), the UPC may grant interim injunctions against an alleged infringer or against an intermediary whose services are used by the alleged infringer, intended to prevent any imminent infringement, to prohibit the continuation of the alleged infringement under the threat of recurring penalties, or to make such continuation subject to the lodging of guarantees intended to ensure the compensation of the patent holder. The UPC may also order the provisional seizure or delivery up of the products suspected of infringing a patent so as to prevent their entry into, or movement, within the channels of commerce. Further, the UPC may order a precautionary seizure of the movable and immovable property of the defendant (such its bank accounts), if an applicant demonstrates circumstances likely to endanger the recovery of damages, as well as an interim award of costs. Additionally, under article 60 UPCA, the UPC may order provisional measures to preserve evidence in respect of the alleged infringement and to inspect premises.

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“The Law(s) of the Arbitration Agreement” by Professor Ron Brand

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A recent study by the Law Commission of England and Wales has resulted in proposed amendments to the Arbitration Act 1996 that include a default rule that an arbitration agreement will be governed by the law of England and Wales if the arbitration is seated in that territory. Given the importance of London as an arbitration center, this has implications for many international commercial contracts.

In his new article, Professor Ron Brand from the University of Pittsburgh School of Law challenges the premise behind the proposed amendment that there is a single “law of the arbitration agreement.” Instead, he demonstrates that there are multiple laws applicable to an arbitration agreement. He explains this multiplicity of applicable laws by considering the possible grounds for challenge of jurisdiction of an arbitral tribunal based on the arbitration agreement. Such an analysis demonstrates that very different laws may apply to questions of the existence, formal validity, substantive validity, scope, and exclusivity of an arbitration agreement. He reviews these issues in the broader context of choice of forum clauses generally, including both arbitration and choice of court agreements, and then considers a hypothetical international commercial transaction in which questions might arise about the first four of these five jurisdictional questions – demonstrating both the problems with the idea of a single “law of the arbitration agreement,” as well as the practical impact and importance of well-drafted choice of forum agreements, including provisions on choice of law. Although prompted by the proposed change in English law, this discussion has implications for the law in every jurisdiction regarding agreements to arbitrate, indicating that both transaction planners and dispute resolution lawyers need to be cognizant of the laws applicable to arbitration and choice of court agreements.

The article is available here.

Call for Papers: Unveiling Arbitration’s (New) Identity in a Changing World

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We are pleased to announce an online symposium on Unveiling Arbitration’s (New) Identity in a Changing World, scheduled for May 9, 2025. This symposium aims to explore the evolving identity of arbitration in the face of rapid technological and societal shifts.

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PAX Moot Half-Day Conference Blog Post Series by the Aberdeen Centre for Private International Law & Transnational Governance

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The Centre for Private International Law at the University of Aberdeen published its newest blog post series in early August. This series is based on the keynote speeches and panel discussions from the 2024 PAX Moot Half Day Conference, held on 26 April 2024 in Ljubljana. The insightful event was co-organised by the Centre for Private International Law of the University of Aberdeen, the Faculty of Law of the University of Ljubljana, and the PAX Moot Project, co-funded by the European Commission.

The conference, titled ‘Private International Law in Dispute Resolution,’ brought together leading experts to explore the evolving landscape of private international law and its role in resolving cross-border disputes. Throughout the series, the speakers reflected on their key themes and the discussions that emerged from the event, providing practical insights that can be applied in real-world scenarios.

The first post brings you Professor Ronald Brand’s opening keynote speech on drafting choice of court and arbitration agreements, exploring private international law points from a transaction planning perspective.

The second post, Business and Human Rights Litigation and Private International Law, highlights findings shared by panellists on sustainability and private international law, and human-rights-related torts in the private international law of the European Union.

The third post, The Law Applicable to the Arbitration Agreement, will deliver on the legal complexities and considerations in determining the applicable law for arbitration agreements, especially in light of the latest amendments to the 1996 English Arbitration Act.

Finally, the fourth post provides a new perspective on the impact of globalisation on private international law, arguing that the so-called neutrality of private international law is becoming a fiction embedded in a very specific liberal and Eurocentric worldview.

Cut, Paste, and Overruled! SICC Voids Retired Indian Judge’s Award for Arbitrator I?m?Partiality

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Written by Tarasha Gupta and Akshath Indusekhar, Jindal Global Law School, OP Jindal Global University, Sonipat, India

Recently, the Singapore International Commercial Court (“SICC”) in DJO v. DJP & Others set aside an award authored by retired Indian judges that it deemed to have copied and pasted portions of another arbitral award. The SICC reasoned its decision on the basis that the copy and pasting reflected the arbitrators’ partiality and their being influenced by arguments extraneous to the arbitration at hand. This article unravels the rationale for the SICC’s judgement in this peculiar case and explores its implications on international commercial arbitration for seat courts across jurisdictions worldwide.

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Tesseract: Don’t Over-React! The High Court of Australia, Proportionate Liability, Arbitration, and Private International Law

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By Dr Benjamin Hayward
Associate Professor, Department of Business Law and Taxation, Monash Business School
X: @LawGuyPI, @MonashITICL

On 7 August 2024, the High Court of Australia handed down its long-awaited decision in Tesseract International Pty Ltd v Pascale Construction Pty Ltd [2024] HCA 24. The dispute arose out of a domestic commercial arbitration seated in South Australia, where the Commercial Arbitration Act 2011 (SA) is the relevant lex arbitri. That Act is a domestically focused adaptation of the UNCITRAL Model Law on International Commercial Arbitration (with its 2006 amendments).

The respondent to the arbitration sought to rely upon proportionate liability legislation found in the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) and in the Competition and Consumer Act 2010 (Cth). The High Court was asked to determine whether those proportionate liability regimes could be applied in the arbitration. A very practical difficulty arose here, reflected in Steward J noting (in dissent) that the High Court was ‘faced with an invidious choice’: see [228]. Were the proportionate liability laws not to apply in the arbitration, the respondent might find themselves liable for 100% of the applicant’s loss, when they would not be liable to that same extent in court proceedings applying the same body of South Australian law. But were the proportionate liability laws to apply, the applicant might find themselves able to recover only a portion of their loss in the arbitration, and might then have to then pursue court proceedings against another third party wrongdoer to recover the rest: given that joinder is not possible in arbitration without consent. Read more

A note on “The BBC Nile” in the High Court of Australia – foreign arbitration agreement and choice of law clause and Article 3(8) of the Amended Hague Rules in Australia

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By Poomintr Sooksripaisarnkit

Lecturer in Maritime Law, Australian Maritime College, University of Tasmania

Introduction

On 14th February 2024, the High Court of Australia handed down its judgment in Carmichael Rail Network Pty Ltd v BBC Chartering Carriers GmbH & Co KG [2024] HCA 4. The case has ramifications on whether a foreign arbitration clause (in this case, the London arbitration clause) would be null and void under the scheme of the Carriage of Goods by Sea Act 1991 (Cth) which makes effective an amended version of the International Convention on the Unification of Certain Rules of Law relating to Bills of Lading, Brussels, 25 August 1924 (the “Hague Rules”). The argument focused on the potential effect of Article 3(8) of the Amended Hague Rules, which, like the original version, provides:

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Which Law Governs Subject Matter Arbitrability in International Commercial Disputes?

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Written by Kamakshi Puri[1]

Arbitrability is a manifestation of public policy of a state. Each state under its national laws is empowered to restrict or limit the matters that can be referred to and resolved by arbitration. There is no international consensus on the matters that are arbitrable. Arbitrability is therefore one of the issues where contractual and jurisdictional natures of international commercial arbitration meet head on.

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Comparative Analysis of Doctrine of Separability between China and the UK

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Written by Jidong Lin, Wuhan University Institute of International Law

  1. Background

Separability is a world-recognized doctrine in commercial arbitration. It means that an arbitration clause is presumed to be a separate and autonomous agreement, reflecting contractual commitments that are independent and distinct from its underlying contract.[1] Such a doctrine is embraced and acknowledged by numerous jurisdictions and arbitral institutions in the world.[2]

However, there are different views on the consequences of separability. One of the most critical divergences is the application of separability in the contract formation issue. Some national courts and arbitral tribunals held that in relatively limited cases, the circumstances giving rise to the non-existence of the underlying contract have also resulted in the non-existence of the associated arbitration agreement, which is criticized as an inadequacy of the doctrine of separability.[3] On the contrary, other courts hold the doctrine of separability applicable in such a situation, where the non-existence of the underlying contract would not affect the existence and validity of the arbitration agreement. This divergence would directly affect the interest of commercial parties since it is decisive for the existence of the arbitration agreement, which is the basis of arbitration.

Two contrary judgements were recently issued by two jurisdictions. The Chinese Supreme People’s Court (hereinafter “SPC”) issued the Thirty-Sixth Set of Guiding Cases, consisting of six guiding cases concerning arbitration. In Guiding Case No. 196 Yun Yu v. Zhong Yun Cheng, the SPC explains the Chinese version of separability should apply when the formation of the underlying contract is in dispute.[4] Although the SPC’s Guiding Cases are not binding, they have an important persuasive effect and Chinese courts of the lower hierarchy are responsible for quoting or referring to the Guiding Cases when they hear similar cases. On the other hand, the English Court of Appeal also issued a judgement relating to separability, holding this doctrine not applicable in the contractual formation issue.[5]

 

  1. Chinese judgment

The Chinese case concerns a share transfer transaction between Yun Yu Limited. (hereinafter “YY”) and Shenzhen Zhong Yuan Cheng Commercial Investment Holding Co. Limited. (hereinafter “ZYC”). On 9th May 2017, YY sent the Property Transaction Agreement (hereinafter “PTA”) and the Settlement of Debts Agreement (hereinafter “SDA”) to ZYC. The PTA was based on the Beijing Stock Exchange (hereinafter “BSE”) model agreement. PTA and SDA included a dispute resolution clause in which the parties agreed that the governing law should be Chinese law and the dispute should be submitted to Beijing Arbitration Commission. On 10th May 2017, ZYC returned the PTA and SDA to YY with some revisions, including a modification on the dispute resolution clause, which changed the arbitration institution to the Shenzhen Court of International Arbitration. On 11st May 2017, YY commented on the revised version of the PTA and SDA but kept the dispute resolution clause untouched. In the accompanying email, YY stated, “Contracts confirmed by both parties would be submitted to Beijing Stock Exchange and our internal approval process. We would sign contracts only if we got approval from BSE and our parent company.” On the same day, ZYC returned the PTA and SDA with its stamp to YY. On 27th October 2017, YY announced to ZYC that the negotiation was terminated. On 4th April 2018, ZYC commenced arbitration based on the dispute resolution clause in PTA and SDA.

The SPC held that separability means the arbitration agreement could be separate and independent from the main contract in its existence, validity and governing law. To support its opinion, the SPC refers to Article 19 of the People’s Republic of China’s Arbitration Law (hereinafter “Arbitration Law”), which stipulates that: “An arbitration agreement shall exist independently, the amendment, rescission, termination or invalidity of a contract shall not affect the validity of the arbitration agreement.” SPC submits that the expression “(t)he arbitration agreement shall exist independently” is general and thus should cover the issue of the existence of the arbitration agreement. This position is also supported by the SPC’s Interpretation of Several Issues concerning the Application of Arbitration Law (hereinafter “Interpretation of Arbitration Law”), [6]Article 10 of which stipulates: “Insofar as the parties reach an arbitration agreement during the negotiation, the non-existence of the contract would not affect the validity of the arbitration agreement.” Thus, the SPC concluded that the existence of an arbitration clause should be examined separately, independent from the main contract. Courts should apply the general rules of contractual formation, to examine whether there is consent to arbitrate. If the court found the arbitration clause formed and valid, the very existence of the main contract should be determined by arbitration, unless it is “necessary” for the court to determine this matter. The SPC concludes that the PTA and SDA sent by YY on 11st May 2017 constituted an offer to arbitrate. The stamped PTA and SDA sent by ZYC on the same day constituted an acceptance and came into effect when the acceptance reached YY. Thus, there exists an arbitration agreement between the parties. It is the arbitral tribunal that should determine whether the main contract was concluded.

 

  1. English judgment

The English case concerns a proposed voyage charter between DHL Project & Chartering Limited (hereinafter “DHL”) and Gemini Ocean Shipping Co. Limited (hereinafter “Gemini”). The negotiations were carried on through a broker. On 25th August 2020, the broker circulated what was described as the Main Terms Recap. It is common ground that the recap accurately reflected the state of the negotiations thus far. Within the Recap, both parties agreed that the vessel would be inspected by Rightship. This widely used vetting system aims to identify vessels suitable for the carriage of iron ore and coal cargoes. Also, both parties agreed that the dispute should be submitted to arbitration. There was an attached proforma, including a provision that the vessel to be nominated should be acceptable to the charterer. Still, that acceptance in accordance with detailed requirements set out in clause 20.1.4 “shall not be unreasonably withheld”. By 3rd September, however, Rightship approval had not been obtained. DHL advised that “(p)lease arrange for a substitute vessel” and finally, “(w)e hereby release the vessel due to Rightship and not holding her any longer.” In this situation, the attached proforma was not approved by DHL, and there is no “clean” fixture, [7]which means the parties did not reach an agreement. After that, Gemini submitted that there is a binding charter party containing an arbitration clause and commenced arbitration accordingly.

The Court of Appeal made a detailed analysis of separability. Combining analysis of numerous cases, including Harbour v. Kansa, [8]Fiona Trust, [9]BCY v. BCZ[10] and Enka v. Chubb, [11]and analysis of International Commercial Arbitration written by Prof. Gary Born, the Courts of Appeal concluded that separability should not be applied if the formation of the underlying contract is in dispute. Separability applies only when the parties have reached an agreement to refer a dispute to arbitration, which they intend (applying an objective test of intention) to be legally binding. In other words, disputes as to the validity of the underlying contract in which the arbitration agreement is contained do not affect the arbitration agreement unless the ground of invalidity impeaches the arbitration agreement itself. But separability is not applicable when the issue is whether an agreement to a legally binding arbitration agreement has been reached in the first place. In this case, the parties agreed in their negotiations that if a binding contract were concluded as a result of the subject being lifted, that contract would contain an arbitration clause. However, based on the analysis of the negotiation and the commercial practice in the industry, the Court of Appeal concludes that either party was free to walk away from the proposed fixture until the subject was lifted, which it never was. Thus, there was neither a binding arbitration agreement between the parties.

 

  1. Comments

Before discussing the scope of the application of separability, one thing needed to be clarified in advance: Separability does not decide the validity or existence of the arbitration agreement in itself. Separability is a legal presumption based on the practical desirability to get away from a theoretical dilemma. However, separability does not mean the arbitration agreement necessarily exists or is valid. It only means the arbitration agreement is separable from the underlying contract, and it cannot escape the need for consent to arbitrate.[12] Therefore, the existence of the arbitration agreement should not be considered when discussing the scope of application of the arbitration agreement.

The justification of the doctrine of separability should be considered when discussing its scope of application. The justification for the doctrine of separability can be divided into three factors: (a) The commercial parties’ expectations. Parties to arbitration agreements generally “intended to require arbitration of any dispute not otherwise settled, including disputes over the validity of the contract or treaty. (b) Justice and efficiency in commerce. Without the separability doctrine, “it would always be open to a party to an agreement containing an arbitration clause to vitiate its arbitration obligation by the simple expedient of declaring the agreement void.” and (c) Nature of the arbitration agreement.[13] The arbitration agreement is a procedural contract, different from the substantive underlying contract in function. If these justifications still exist in the contract formation issue, the doctrine of separability should be applied.

It is necessary to distinguish the contract formation issue and contract validity issue, especially the substantive validity issue, when discussing the applicability of those justifications. The contract formation issue concerns whether parties have agreed on a contract. The ground to challenge the formation of a contract would be that the parties never agree on something, or the legal condition for the formation is not satisfied. The contract substantive validity issue is where the parties have agreed on a contract, but one party argue that the agreement is invalidated because the true intent is tainted. The grounds to challenge the substantive validity would be that even if the parties have reached an agreement, the agreement is not valid because of duress, fraud, lack of capacity or illegality. The formation and validity issues are two different stages of examining whether the parties have concluded a valid contract. The validity issue would only occur after the formation of the contract. In other words, an agreement can be valid or invalid only if the agreement exists.

It is argued that separability should be applicable to the formation of contract. Firstly, separability satisfies the parties expectation where most commercial parties expect a one-stop solution to their dispute, irrespective of whether it is for breach of contract, invalidity or formation. Furthermore,  the application of separability would achieve justice and efficiency in commerce. Separability is necessary to prevent the party from vitiating the arbitration obligation by simply declaring a contract not concluded. In short, since the justifications still stand in the issue of contract formation, separability should also apply in such an issue.

The English Court of Appeal rejected the application of separability in the formation of contract holding the parties’ challenge to the existence of the main contract would generally constitute a challenge to the arbitration clause. However, the same argument may apply for invalidity of the underlying contract. Since the arbitration agreement is indeed concluded in the same circumstances as the underlying contract the challenging to the validity of the contract may also challenge the validity of the arbitration clause, while separability still applies. On the contrary, the Chinese approach probably is more realistic. The SPC ruled that separability applies where the formation of the underlying contract is disputed. But before referring the dispute to arbitration, the SPC separately considered the formation of the arbitration clause. Only after being satisfied the arbitration clause is prima facie concluded, the court declined jurisdiction and referred the parties to arbitration.

 

[1] Ronan Feehily, Separability in international commercial arbitration; confluence, conflict and the appropriate limitations in the development and application of the doctrine, 34 Arbitration International 355 (2018), p. 356.

[2] See Blackaby Niegel, Constantine Partasides et al., Redfern and Hunter on International Arbitration, Kluwer Law International; Oxford University Press 2015, pp. 104–107.

[3] See Gary B. Born, International Commercial Arbitration (3rd edition), Kluwer Law International 2021, pp. 492-493.

[4] The Guiding Case No. 196: Dispute in Validity of Arbitration Agreement between YunYu Limited and Shenzhen ZhongYuanCheng Commercial Investment Holding Co. Limited.

[5] DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd [2022] EWCA Civ 1555 (24 November 2022)

[6] SPC’s Interpretation of Several Issues concerning the Application of Arbitration Law, Fa Shi?2006?No. 7.

[7] Clean Fixture is a concept in the maritime area. It means the Parties’ confirmation that the contract has been concluded and that there are no further Subjects and/or restrictions to the execution of the agreed Contract. The Fixture is not clean until both parties have waived their subjects/restrictions.

[8] Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701.

[9] Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, [2007] 4 All ER 951.

[10] BCY v BCZ [2016] SGHC 249, [2016] 2 Lloyd’s Rep 583.

[11] Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, [2020] 1 WLR 4117

[12] See McNeill M. S. & Juratowitch B., Agora: Thoughts on Fiona Trust: The Doctrine of Separability and Consent to Arbitrate, 3 Arbitration International 475 (2008).

[13] See Gary B. Born, International Commercial Arbitration (3rd edition), Kluwer Law International 2021, p. 428.