CHAPTER 1 INTERNATIONAL ENERGY AND MINERALS ARBITRATION: THE BASIC PRINCIPLES

• Jurisdiction: United States

International Energy and Minerals Arbitration
(Sep 2013)
CHAPTER 1
INTERNATIONAL ENERGY AND MINERALS ARBITRATION: THE BASIC PRINCIPLES
David W. Rivkin
Partner, Debevoise & Plimpton LLP
New York, New York, USA/London, UK

DAVID W. RIVKIN, a litigation partner in Debevoise & Plimpton LLP's New York and London offices, has broad experience in the areas of international litigation and arbitration. He has handled international arbitrations throughout the world and before virtually every major arbitration institution. Subjects of these arbitrations have included long-term energy concessions, investment treaties, joint venture agreements, insurance coverage, construction contracts, distribution agreements and intellectual property, among others. Mr. Rivkin also represents companies in transnational litigation in the U.S., including the enforcement of arbitral awards and arbitration agreements. Mr. Rivkin is consistently ranked as one of the top international dispute resolution practitioners in the world. He is identified as one of the top 11 international arbitration practitioners worldwide in Chambers Global (2013), which recognizes his "big following and incredible profile." Chambers Latin America (2013) states: "He is one of the best arbitrators in the international community." Other Chambers publications note he is "wonderful as counsel and wonderful as arbitrator" and is well regarded for producing "high-quality work that is fair and balanced."

International Energy and Minerals Arbitration: The Basics

David W. Rivkin

Debevoise & Plimpton LLP

Rocky Mountain Mineral Law Foundation

Toronto, Ontario, Canada

September 16, 2013

SUMMARY

• Dispute Resolution Options

• Arbitration Institutions

• Challenging and Enforcing Awards

• Arbitration Procedures and Techniques

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DISPUTE RESOLUTION OPTIONS

ADJUDICATORY OPTIONS

• Litigation

— Benefits: Binding; preserves legal rights, including appeal rights; broadest discovery rights; potential summary judgment

— Drawbacks: Slow; expensive; hardens opposing positions; risk of unfavorable forum; jury risk; publicity; broadest discovery rights

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• Arbitration

— Benefits: Binding; superior enforceability internationally; flexible procedures; selection of decision makers; neutral forum; limited discovery; preserves business relationships

— Drawbacks: Sacrifices some legal rights, including appeal rights; limited discovery

Arbitration Options

• Institutional arbitration

— Selection of arbitrator(s) if necessary

— Provides intermediary to arbitrators

— Fees may be higher

• Ad hoc arbitration

— Only if both parties sophisticated

— Need to name appointing authority

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Major Arbitration Institutions

• ICC

• AAA

• LCIA

• ICSID

ICC

• Key Features

— Most familiar to many parties, especially sovereigns

— Substantial administrative involvement

— Terms of Reference process

— Costs based on size of dispute and front-loaded

— Use of National Committees in arbitrator selection process

— 2012 Rules focus on efficiency

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AAA ICDR

• Key Features:

— Rules specify limits of party communication with arbitrators

— List procedure for arbitrator selection

— Summary procedures possible

— Waiver of right to punitive damages in International Rules

LCIA

• Key Features:

— Minimal administrative involvement

— Broader confidentiality provisions

— Simplified arbitrator selection process

— Presumption that costs will follow event

— Rules being revised

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ICSID

• Key Features:

— Created by Washington Convention

— Jurisdiction limited to investment disputes

— Prospect of compliance may be greater because of association with World Bank

— No court process; internal annulment procedures instead

Major Regional Institutions

• Stockholm, Netherlands, Zurich, Geneva

• Singapore, Hong Kong, CIETAC, Kuala Lumpur (UN Centre)

• Brazil

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Ad Hoc Arbitrations

• UNCITRAL

• CPR Institute for Dispute Resolution

UNCITRAL

• Key Features:

— Commonly recognized rules

— Appointing authorities

— Rules being updated now

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CPR Institute for Dispute Resolution

• Key Features:

— CPR involved only if necessary in appointment of or challenges to arbitrators

— More emphasis on time limits

— Punitive damages excluded in international rules

Challenging arbitral awards

• Institutional rules usually provide that the award is immediately final and binding upon the parties

• ICC Rules: "Every award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as any waiver can validly be made."

• The law of the seat will still allow an action to set aside award, despite this waiver, as certain statutory provisions and safeguards are of mandatory application

• Through challenging the award, the national court can be asked to vary the award, send it back to the tribunal for reconsideration or order that the award should be set aside in whole or in part

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Grounds for challenge

• Each country has its own concept of what level of control it wishes to exert over the arbitral process.

• Generally speaking

— The grounds for challenge are more limited in international cases than they are for purely domestic arbitrations

— Review is usually limited to procedural and jurisdictional matters

— The right to challenge on the basis of procedural irregularities cannot be waived (except in Switzerland, for non-Swiss parties)

— Parties cannot by contract confer on the reviewing court greater powers of review than those specified in the arbitration law

• Time limits vary greatly; check the national law

Recognition and enforcement of arbitral awards

• The majority of awards are complied with voluntarily

• Where this does not happen, the winning party will wish to use the powers of the state to compel performance and attach assets

• Options - locate assets, forum shop to find state in which enforcement likely to be quickest/most effective then enforce under NYC/AA

• New York Convention states are required to give effect to and enforce arbitral awards made in another contracting state. The only grounds for resisting enforcement of a foreign arbitral award are those set out in the Convention (see below)

• The grounds set out in the Convention are construed narrowly

• The burden of proof rests with the resisting party

• There is no review of the merits of the case

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New York Convention

Grounds for resisting enforcement under the NYC

— Incapacity, invalid arbitration agreement

— Lack of due process

— Jurisdictional issues

— Award not binding, set aside at seat

— Arbitrability (law of country of enforcement)

— Public policy (e.g. enforcing an illegal contract)

ARBITRATION TECHNIQUES

• Flexibility

• Arbitration Rules

• Phasing of Arbitration

• Place of Hearings

• Evidence

• Discovery

• Town Elder approach

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"We would like to request a change of venue to an entirely different legal system."

"Same old same old. How about your?"

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Flexibility

• Blend of common and civil law procedures

• Opportunity to select most advantageous procedures for client or case

• Almost no limit on procedures available

• Lawyers should be flexible and should structure each stage of proceeding to maximum advantage

• Opportunities begin with drafting of arbitration clause

Arbitration Rules

• Rules provide only broad structure:

— Pleadings (Statement of Claim/Defense)

— Methods for composing tribunal/dealing with challenges

— Fair and equal opportunity to be heard

— Award

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Phasing of Arbitration

• Bifurcation

• Further subdivision of case

— Arbitration may consider one issue at a time (e.g., AAA International Rules)

— Put strong issues before arbitrators first

Increased Arbitrator Control

• Only relevant evidence

• 1997-98 rules give greater control

• AAA International Rule 16.3: "The tribunal may in its discretion direct the order of proof, bifurcate proceedings, exclude cumulative or irrelevant testimony or other evidence. . ."

• English Arbitration Act 1996: duty of arbitrators to conduct proceedings in most efficient manner possible

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Summary Adjudication

• Remainder of AAA International Rule 16.3: ". . . and direct the parties to focus their presentation on issues the decisions of which could dispose of all or part of that case."

• IBA Rules, Article 2.3: "The Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be appropriate, any issues that the Arbitral Tribunal may regard as relevant to the case and material to its outcome; and/or for which a preliminary determination may be appropriate."

• Potential grounds: limitations, release, estoppel, among others

"Don't think of them as terrorist states. Think of them as terrorist markets."

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Place of Hearings

• Hearings may be held in different locations, not all at seat of arbitration

• Advantages to different locations:

— Opportunity to present stronger evidence first

— Cost savings

— Opportunity to inspect physical evidence

Evidence: Written or Oral

• Common law: reliance on oral evidence

• Civil law: reliance on written evidence

• May chose either method (or blending) depending on case

• IBA Rules of Evidence provide some guidance

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Presentation of Evidence

• Written direct testimony

• Confrontation testimony

• Meeting of experts

• Control of evidence

• Control of timing ("chess clock" arbitration)

Discovery

• Generally limited discovery

• IBA Rules of Evidence provide generally accepted standards

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"Fetebing is for losers."

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IBA Rules: Requests to Produce

Article 3.3: A Request to Produce shall contain:

(a)(i) a description of a requested document sufficient to identify it, or (ii) a

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