International Arbitration Legal and Case Developments: Europe

February 2024

The International Bar Association's Arbitration Committee has released new guidelines on Conflicts of Interest in International Arbitration ("IBA Guidelines"), which set out expected standards for maintaining the impartiality and independence of arbitrators as well as for disclosure. Key changes have been made in respect of the "General Standards" ("GS") and the "Traffic Light System".

Key changes to the GS

• Impartiality: The Guidance to GS 1 has been amended to clarify that the arbitrator's obligation of independence and impartiality ends once the final award is rendered.
• Disclosure: If an arbitrator considers that he/she should make a disclosure but is prevented from doing so by rules of professional secrecy or other rules of practice or conduct, new GS 3(e) provides that the arbitrator shall not accept the appointment, or, if already appointed, shall resign.
• Parties' Presumption and Waiver: GS(4) includes a presumption that a party has learned of a fact/circumstance that could constitute a potential conflict which a reasonable investigation at the outset/during proceedings would have disclosed and waived any defense based on that fact/circumstance if not raised within 30 days.
• Relationships: New GS 6 has been updated to clarify that: (i) an arbitrator is deemed to bear the identity not just of their law firm but also their employer; and (ii) any legal entity or natural person over which a party has a controlling influence may be considered to bear the identity of that party. Parties also have a duty to inform tribunals of persons/entities over which they have controlling influence.

Key changes to the Traffic Light System

The major changes relate to the Orange list, which now lists additional instances which may give rise to doubts about an arbitrator's impartiality and, hence, require disclosure. These include matters in respect of experts, mock trials, arbitrators' use of social media, arbitrators' service as counsel for parties in certain circumstances and co-arbitrator situations.

February 1, 2024

Germany is set to update its arbitration law following the publication of a draft bill on February 1, 2024, marking the first major reform in 25 years and bringing it in line with international updates. As part of this reform, the legislator is continuously introducing amendments to the draft law.

Key changes include:

• a relaxation of the formal requirements for arbitration agreements;
• tribunals’ new discretion to order remote hearings without the consent of the parties;
• arbitration-related court proceedings may now be conducted in English;
• the enforcement of interim measures issued by foreign courts; and
• the introduction of a formal remedy for reopening proceedings in exceptional cases, such as fraud or criminal conduct by an arbitrator.

Among the new changes introduced in the draft law is the provision on dissenting opinions. According to Section 1054(1) of the Draft Code, arbitrators may issue dissenting opinions on the award or its reasons, unless otherwise agreed by the parties. These opinions are separate from the award and must be written and signed by the arbitrator.

The admissibility of dissenting opinions in German arbitration has been a controversial issue. It should now be clarified that dissenting opinions may be submitted in arbitration proceedings with multi arbitrators. This clarification will ensure that awards containing dissenting opinions comply with procedural norms.

The inclusion of dissenting opinions allows arbitrators who disagree with the majority to share their views with the parties. This can improve the quality of arbitral dispute resolution by providing reasons for minority views that are not reflected in the final award.

March 2024

Following the recent opening of Paris Arbitration Centre by Delos, the ICC International Court of Arbitration has unveiled plans for its new hearing centre in Paris, set to open in autumn 2024. Located on Rue Legendre in the 17th arrondissement, the centre will be conveniently accessible from major Paris law firms, the Cité judiciaire, and major train stations and airports. Spanning a single level, it will feature two sets of hearing and breakout rooms, with the option to extend to a third for overflow. Designed to cater to in-person, hybrid, and virtual hearings, the state-of-the-art premises prioritize efficiency, technology, confidentiality, accessibility, and comfort.

Developed by Groupe Galia, the property will also house a five-star boutique hotel, restaurant, café, fitness center, roof terraces, and office spaces. Alexander G. Fessas, Secretary General of the ICC International Court of Arbitration, expressed excitement about the upcoming launch. The announcement coincided with the commencement of Paris Arbitration Week, where ICC Court president Claudia Salomon revealed details about the new hearing center.

Notwithstanding other recently available hearing space in Paris (e.g., Delos's new hearing centre) this initiative seeks to offer additional hearing space in Paris, promising a significant upgrade in facilities and services for arbitration and ADR proceedings and ensuring the city's position as a key hub for international arbitration.

March 1, 2024

The NAI recently issued revised arbitration rules (the "2024 Arbitration Rules"). The 2024 Arbitration Rules have been in force since 1 March 2024 and aim to simplify dispute resolution, stop unfair tactics, promote the appointment of diverse arbitrators, and make the process easier to understand for those less experienced in arbitration.

New tools for faster dispute resolution

The 2024 Arbitration Rules introduce an expedited procedure for claims under EUR 1,000,000, with a single round of submissions and virtual hearings, ensuring a faster resolution within six months. They also allow for early determination of unfounded disputes within 30 days upon request.

Preventing guerrilla tactics

To combat disruptive tactics, the NAI Challenge Chamber can dismiss unmeritorious challenges, and tribunals take into account the parties' conduct when allocating costs, thereby discouraging delaying tactics.

Promoting diversity among arbitrators

The NAI promotes diversity by making direct appointments when parties fail to nominate arbitrators and by considering diversity in nominations and appointments.

Improving accessibility for first-time users

The 2024 Arbitration Rules clarify existing procedures, codify established practices, and ensure comprehensibility in the arbitration process, benefiting both first-time arbitrators and users.

Filling the Gaps

New provisions address previously unaddressed areas, such as multi-contract arbitrations and disclosure of third-party funding, improving the resolution of complex disputes and ensuring transparency.

In summary, the 2024 Arbitration Rules reflect the NAI's commitment to advancing arbitration practices, fostering inclusivity, and ensuring a fair and efficient resolution process.

March 15, 2024

The German legal system uses third-party notices in State court proceedings to avoid conflicting judgments or statute of limitations issues. These notices are particularly useful in cases involving claims against third parties for warranty or indemnity, such as in supply chain or subcontractor relationships. While the German Code of Civil Procedure ("ZPO") governs third-party notices in State courts, the inclusion of third parties in arbitration proceedings requires unanimous consent, which poses a challenge.

To address this, the German Arbitration Institute ("DIS") has introduced Supplementary Rules for Third-Party Notices ("DIS-TPNR"), effective from March 15, 2024. These rules streamline the process, similar to the requirements of the ZPO, and provide a standardized procedure for third-party notices. They clarify the admissibility, procedure and objections to third-party notices and are aligned with the principles of the ZPO.

DIS-TPNR allow parties to involve third parties in arbitration proceedings, ensure their consent and facilitate intervention to influence the selection of arbitrators. Objections to the validity of third-party notices must be raised within 21 days and their effects, including the suspension of limitation periods, are recognized.

These rules provide a more legally secure option than other arbitration rules, such as the Munich Rules, through their alignment with the ZPO and the provision of model clauses. In addition, the DIS-TPNR are binding in both German and English, potentially simplifying agreements for international parties.

However, their relevance in international contexts remains uncertain as the involvement of third parties differs internationally from the ZPO model.

April 2, 2024

The Register of Damage Caused by the Aggression of the Russian Federation against Ukraine ("Ukraine Register of Damage") opened for the submission of claims in April 2024.

The Ukraine Register of Damage was established within the framework of the Council of Europe in May 2023. It aims to provide a structured framework for recording compensation claims for damages, losses, and injuries inflicted by the invasion of Ukraine by the Russian Federation ("Russia"). It began operation with one category – damage or destruction of residential property. Other categories will be launched in due course.

Pursuant to Art 2.5 of the Register Statute, its functions are "intended to constitute the first component of a future international compensation mechanism to be established by a separate international instrument in co-operation with Ukraine". The Register's role does not extend to assessing the validity or value of claims, nor does it authorize any payments. Rather, its primary function is to document these claims and underlying evidence for potential future action. By submitting claims, claimants contribute to a comprehensive record that may be used to support international legal actions and facilitate compensation efforts.

May 24, 2024

The UK Government’s decision to call a general election on July 4^th led to Parliament being prorogued on May 24^th and a number of bills receiving Royal Assent during the wash-up period (at the end of May 2024). Unfortunately for the international arbitration community, the Arbitration Bill – seeking to amend the Arbitration Act 1996 (the "Act") – was not one of them.

While the Arbitration Bill had been amended by the Special Public Bill Committee and was set to undergo a new Report Stage in the House of Lords in mid-June, it is understood that because it hadn’t advanced far enough through the Parliamentary process, it was not eligible to be pushed through on an expedited basis during wash-up.

This development is a setback given that this was set to be the first reform of the Act since its enactment over 25 years ago, designed to modernize the arbitration legal framework and ensure that London remains a world-leading seat for international arbitration. Proposed reforms included (i) a new “default” rule that, absent express party agreement otherwise, the arbitration agreement would be governed by the law of the seat (the "Default Rule"); (ii) codification of an arbitrator’s duty of disclosure; and (iii) a new power of summary disposal, amongst other important changes.

During the process of parliamentary scrutiny, further issues surfaced relating to (i) the applicability of the Default Rule to non-ICSID Convention investor state arbitration agreements and (ii) corruption. Accordingly, the failure to enact the Arbitration Bill may present a useful opportunity for these issues to be more fully explored in order to ensure that the future arbitration legislation is as comprehensive as possible, fully fit for purpose, and ultimately enhances the standing of London as an arbitral seat.

The new government’s legislative priorities are unknown at this stage so, while it may be helpful that the Arbitration Bill was not particularly contentious at a political level, whether (and precisely when) another bill capturing the reforms outlined in the Arbitration Bill will be introduced is hard to gauge at the time of writing (May 30, 2024).

May 24, 2024

UK Prime Minister Rishi Sunak’s surprise general election scheduled for July 4^th has also scuppered another key disputes-related piece of legislation. The Litigation Funding Agreements (Enforceability) Bill 2024 (the "Bill"), seeking to reverse the effect of the controversial Supreme Court decision in R (on the application of PACCAR Inc and others) v. Competition Appeal Tribunal and others [2023] UKSC 28 ("PACCAR"), did not make it onto the list of bills that were passed in the pre-election ‘wash-up’ period.

The Bill was scheduled to go to the Report Stage in the House of Lords in early June and will now not become law. It will be down to the new Parliament to decide if a similar bill should be introduced in the future.

In PACCAR, the Supreme Court held that third-party litigation funding agreements, ("LFAs") which include a provision for the funder to receive a percentage of any damages successfully recovered, were damages-based agreements ("DBAs"). Consequently, such LFAs would be unenforceable, unless strict regulatory requirements were met. The Bill sought to expressly exclude LFAs from the definition of DBAs, rendering LFAs enforceable once again, and sought to apply retroactively (which would have protected existing LFAs from being challenged as DBAs).

The Bill’s failure to pass has significant implications for the litigation funding market and for access to justice more generally, with stakeholders now having to adapt to the ongoing uncertainty and evolving case law on enforceability of LFAs. Litigation will continue in relation to the types of LFAs which constitute DBAs; the upcoming Court of Appeal decisions relating to Competition Appeal Tribunal decisions concluding that LFAs based on a multiple of funding are not DBAs may therefore be of keen interest.

Litigation funders have told the Law Society Gazette that the next government must “recognize the urgency” of legislating to address the damaging effects of the PACCAR ruling.

December 12, 2023

The German Federal Court of Justice (Bundesgerichtshof – "BGH") has partially enforced an arbitral award won by Deutsche Telekom against India in the case Deutsche Telekom v. India, PCA Case No. 2014-10. The BGH upheld the decision of the Berlin Court of Appeals that there were no grounds under the New York Convention for refusing to recognize and enforce the arbitral award at issue.

The underlying dispute concerned a satellite lease agreement between the Indian State-owned entity Antrix and Devas Multimedia, a subsidiary of the German telecommunications company Deutsche Telekom. After the State-owned company terminated the contract, Deutsche Telekom initiated arbitral proceedings against India before the Permanent Court of Arbitration under the 1995 Germany-India BIT.

Deutsche Telekom won the award in 2020 and later sought to enforce it in Germany before the Berlin Court of Appeals. India opposed enforcement alleging that Devas had been incorporated for fraudulent purposes and that the enforcement of the award would go against EU law. According to India, the Achmea decision should apply by way of analogy to extra-EU BIT arbitrations.

The Berlin Court of Appeal rejected India's arguments and declared the award enforceable in Germany for the partial amount of USD 10 million plus interest. India appealed the decision to the BGH, which confirmed the Berlin Court of Appeal’s decision and held that the Achmea ruling is not transferable to bilateral investment treaties between Member States of the European Union and third countries.

February 8, 2024

The English Commercial Court's decision in H1 and another v. W and others [2024] EWHC 382 to remove a sole arbitrator for apparent bias under section 24(1) of the Arbitration Act 1996 (the "Act") is a rare example of a successful challenge associated with arbitrator partiality.

The dispute arose after an insurer rejected a claim by a film company in relation to an accident which arose during filming in Sweden. At the procedural conference, the sole arbitrator stipulated that he did not need to hear from expert witnesses, the reason being that he already knew the insured's experts "extremely well" and deemed them to be "exceptional people in their fields." This was in contrast to the insurer's expert, who he did not know. The arbitrator then singled out one of the insured's experts, stating that the expert was "one of the top Norwegian producers and what he says is what I will believe."

Accordingly, the insurer sought an order from the court, pursuant to section 24(1) of the Act for the sole arbitrator to be removed on the grounds of a lack of impartiality.

The judge held that although an arbitrator could still be impartial when dealing with witnesses they knew professionally, certain remarks made by the arbitrator would lead a fair-minded and informed observer to conclude that there was a real possibility that the arbitrator was biased (as per the test in Halliburton [2021] AC 1083). The arbitrator had accepted the insured's expert testimony and disregarded the insurer's expert testimony, without hearing the evidence, and was therefore pre-judging the merits of the dispute.

February 20, 2024

In Siba Plast v. Libya, the Paris Court of Appeal has rejected Siba Plast's appeal (which was based on Libya's arbitration award challenge being untimely) and permitted Libya to contest the enforcement of a €279 million contract-based award. This ruling follows a previous order allowing Libya's appeal against the award's enforcement.

The dispute stems from contracts signed in June 2012 between Italian company Giacorosa and Libya's transitional government. These contracts, later transferred to Tunisian company Siba Plast, led to arbitration proceedings in which Siba Plast was awarded €279 million due to Libya's alleged breach of contract. The arbitration tribunal rendered its decision on November 28, 2014, in favor of Siba Plast, and the French court granted enforcement of the arbitral award in March 2017.

The decision is significant for several reasons:

1. Procedural Adherence: The court emphasized procedural adherence, allowing Libya's challenge to proceed despite objections from Siba Plast regarding the timeliness and procedural validity of the appeal; and
2. Formal vs. Substantial Issues: The court distinguished between formal and substantial issues, ruling that formal mistakes could only invalidate procedural acts if the objecting party suffered prejudice (vices) and raised objections promptly. This clarifies the legal framework for challenging enforcement actions.

Overall, the decision provides clarity on procedural matters in international arbitration enforcement, reaffirming France's reputation as a pro-arbitration jurisdiction while ensuring fairness in the enforcement process.

March 2024

The pharmaceutical company AstraZeneca has filed an application with the Bavarian Supreme Court to set aside an award regarding a post-M&A arbitration.

In 2020, the sellers of the cancer diagnostics start-up Definiens filed an arbitration with the German Arbitration Institute against AstraZeneca claiming that they were owed approximately USD 140 million in earn-outs under the Share Purchase Agreement they signed in 2014. The arbitral tribunal issued a final award in favour of the sellers in December 2023, finding that AstraZeneca was liable to pay USD 46.43 million.

In March 2024, AstraZeneca filed an application with the Bavarian Supreme Court to set aside the award. There is no report of a decision on this application at the time of writing (May 2024).

March 8, 2024

In Czech Republic v. Diag Human SE [2024] EWHC 503 (Comm), the Czech Republic challenged an award in favour of Diag Human on various grounds relating to the fact that the tribunal lacked "substantive jurisdiction" (section 67, Arbitration Act 1996 ("AA")) and that there had been a serious irregularity, which had caused it substantial injustice (section 68, AA). In response, the company sought to rely on section 73 of the AA, namely, that a party may lose the right to object where it fails to raise an objection which it later seeks to rely on.

The High Court of England and Wales dismissed a number of the challenges; however, it did uphold one of the section 68 challenges on the basis that the tribunal had failed to determine whether the award of damages should be reduced to reflect an assignment by Diag of 30% of the value of its claim to its former lawyer.

In reaching its conclusion on the various challenges brought, the court provided useful guidance on a number of points:

1. Challenges: Where a party seeks to raise an objection in respect of jurisdiction, it must have previously raised and maintained such an objection in the sense that a tribunal ought reasonably to have understood the exact nature of the challenge and what it was being asked to decide on.
2. Objection: A bare putting to proof of jurisdiction before the tribunal does not give free reign to any jurisdictional challenge. A party must make a positive assertion, with non-admissions or reservations not being sufficient. However, the issue of whether a positive assertion is made is a matter of substance, not drafting style.
3. Drafting: Where investment treaty arbitrations are seated in England and Wales, parties should keep in mind, when preparing arbitral filings, issues which might later arise under sections 67, 68 and 73 of the AA. This is with the aim of easing the burden on arbitral tribunals.

March 13, 2023

The Commercial Court of St. Petersburg and the Leningrad Region issued an interim injunction against Uniper in favour of Gazprom Export, prohibiting Uniper from proceeding with the arbitration it filed against Gazprom. The decision further states that if Uniper fails to comply with the injunction, it shall pay a fine of €14.3 billion.

In November 2022, the German companies Uniper Global Commodities and Metha-Methanhandel (together "Uniper") filed an arbitration with the Permanent Court of Arbitration against Gazprom Export seeking damages for the non-delivery of gas by the latter following Russia's invasion of Ukraine. Gazprom subsequently sought to enjoin Uniper's arbitration in the Russian courts. Gazprom's request was based on Russian legislation that allows courts to disapply arbitration agreements in jurisdictions that apply restrictive measures against Russian parties.

The court granted Gazprom's injunction request, taking into account that EU Member States are listed under a Russian Presidential Decree as foreign States and territories deemed to be committing unfriendly actions towards Russia. It ruled that Uniper must stop the arbitration against Gazprom, otherwise it will be ordered to pay €14.3 billion.

Uniper has appealed the decision, but there has been no report of a decision on the appeal at the time of writing (May 2024).

April 4, 2024

Marsha Lazareva was granted permission to attend the upcoming set-aside hearing concerning the 2022 award issued in the case against Kuwait. The award, issued on August 12, 2022 by an UNCITRAL tribunal chaired by David Unterhalter, alongside Gabriel Bottini and Charles Brower, found no jurisdiction under the Kuwait-Russia bilateral investment treaty. Following the tribunal's decision, Marsha Lazareva filed for set-aside in front of the Paris Court of Appeal.

The set-aside hearing, scheduled for June 24, 2024, will see Marsha Lazareva remotely participating as she has taken refuge in the Russian embassy since her release from a Kuwaiti jail in 2019. Judge Schaller justified this decision by referencing the Procedural Protocol for proceedings before the international chamber of the Paris Court of Appeal (Protocole relatif à la procédure devant la chambre international du tribunal de commerce de Paris) and Article 6 of the European Convention on Human Rights, which ensures each person's right to be heard.

Judge Schaller's ruling allows Marsha Lazareva to answer questions posed to her in English during the hearing, with interpretation costs incurred by her. This decision highlights the importance of procedural fairness and ensures Marsha Lazareva's active participation in addressing the alleged violations of her due process rights during the arbitration.

April 23, 2024

In a period where the English courts have been frequently called upon to consider granting anti-suit relief to prevent the issuance or continuance of court proceedings in breach of arbitration agreements (both domestic and foreign), the UK Supreme Court’s ("UKSC") decision in UniCredit Bank GmbH v. RusChemAlliance LLC ("RCA") to dismiss RCA’s appeal was a pivotal one. In its appeal, RCA sought to overturn the final anti-suit injunction ("ASI") granted by the Court of Appeal requiring it to discontinue its Russian proceedings but the UKSC’s dismissal means that the declaratory and injunctive relief remains in place.

As at the time of writing (May 30, 2024), the UKSC has handed down its decision orally but has not published its full judgment so the reasons for its decision are unknown.

This UniCredit decision is one of many ASI decisions issued by the English courts in relation to requests for ASIs by various banks seeking to stop RCAs litigation in Russia. The litigation concerns the banks’ alleged failure to make payment under demand bonds they issued in RCA’s favor. The banks’ position is that such payments are prohibited by EU sanctions. These ASI applications are all therefore made in the context of Russian sanctions.

In UniCredit, the Court of Appeal decided, in February 2024, that the Paris-seated ICC arbitration agreement was governed by English law (the law which also governs the underlying bonds) having applied the default rule in Enka. It also held, inter alia, that England was the proper place to bring the claim as an ASI could not be granted in France, and obtaining an equivalent type of relief within the arbitration would also be problematic because of award-enforceability concerns in Russia, following the 2020 Russian law amendments (granting Russian courts exclusive jurisdiction over disputes involving Russian-sanctioned entities/individuals).

UniCredit suggests the beginning of a trend where English courts are increasingly willing to intervene where the lex fori is less well-equipped to protect the integrity of the arbitration process. Parties with foreign-seated arbitration agreements may therefore be able to rely on English courts to protect their arbitration agreements (although it remains best practice to provide, in the arbitration clause, for English law to govern the arbitration agreement).