2017 proved a boisterous year in the world of arbitration. The Yukos saga continued, with the recipients of the largest arbitration award ever, set aside in 2016 by the Hague District Court (the jurisdiction where the arbitration was seated), dropping enforcement actions in the French and Belgian courts to focus on the Dutch appeal. Headline grabbing proceedings between the defunct subsidiary of French energy group Total and two Russian provinces came to an end as the Total subsidiary defeated the provinces’ US$22.4 billion claim, bringing to an end the eight-year long dispute. The claim became notorious after two of the original arbitrators became entangled in a wide-reaching criminal investigation resulting in significant involvement by the French and Swedish courts. Finally, seismic political shifts, aggressive pushes for reform of investor-state dispute settlement (ISDS) and the introduction of new arbitral institutional rules and arbitration legislation made for a busy year for practitioners.
We summarise the big stories from 2017 and give an early view on what to look forward to in 2018 (spoiler alert: it is pretty much more of the same).
New rules and legislation
Arbitral institutions got off to a running start in 2017, with new or amended rules coming into force at four prominent centres. The arbitral institutes at the International Chamber of Commerce (ICC) and Stockholm Chamber of Commerce (SCC) both adopted expedited procedures while the Singapore International Arbitration Centre (SIAC) and China International Economic and Trade Arbitration Commission (CIETEC) each broke new ground in promulgating rules to govern investment arbitrations. Whether other institutions will follow the lead of their Asian peers remains to be seen.
In response to continuing concerns about transparency, several institutions took steps to lift the lid on arbitrator appointment and bring greater transparency to the process. The SCC revealed its decade old internal guidelines for appointing arbitrators and committed to providing reasons for its decisions on arbitrator challenges, while the ICC began to publish the names of arbitrators serving on tribunals (without reference to the names of the parties, of course).
Legislation modelled on the 2006 Model Law was either adopted or came into force in Hungary, Qatar, Ontario and Fiji while amendments to Hong Kong’s Arbitration Ordinance clarified that intellectual property disputes may be resolved by arbitration. Legislation in New Zealand allowing for arbitration of trust disputes moved its way through Parliament.
Third party funding remained a hot issue in 2017. Singapore adopted legislation to allow funding at the beginning of the year. The law came into effect in March and funders are already lining up for a piece of the action. Not to be outdone, principal Asian rival Hong Kong quickly followed suit by passing its own third party funding law (entry into force is to be determined). These legislative changes were followed by the publication of the long-awaited draft report on third party funding in international arbitration by the ICCA-Queen Mary Taskforce. The final report is due to be published at the ICCA Congress in April 2018.
Finally, amendments to the Russian Arbitration law requiring arbitral institutions to be licensed by the government came into effect in September 2017. This resulted in the number of arbitral institutions in Russia falling overnight from over 1,000 to three. While dozens of applications for registration are apparently pending, none of the major global institutions have applied. Awards made under the auspices of the ICC, SCC and others will thus be deemed ad hoc, raising significant concerns about their enforceability, particularly with regard to corporate disputes which the new law says may only be adjudicated by a registered institution.
Trade, ISDS and the European Union
Perhaps the biggest story of the year was the turmoil of investment arbitration in Europe, largely driven by debate within the European Union.
After eventually managing to secure the passage of the Comprehensive Economic Trade Agreement with Canada (CETA) in 2016 (an effort that looked dire at times as a result of opposition to the treaty’s ISDS provisions), the EU’s competency to negotiate trade agreements was thrust into the limelight in May 2017 when the European Court of Justice (ECJ) delivered its long-awaited opinion on the EU-Singapore Free Trade Agreement; the first time since the Lisbon Treaty that the ECJ has considered the EU’s competence to conclude free trade agreements. The court concluded that the EU did not have exclusive competence over ISDS and that the EU-Singapore Free Trade Agreement therefore required ratification by the EU member states individually.
The EU’s drive for ISDS reform took a step forward in July 2017 with the establishment of a UNCITRAL working group on multilateral reform of ISDS, with a mandate to consider the possibility of establishing a multilateral investment court, among other things. This was followed by the EU formally recommending the opening of negotiations for a convention to establish a European investment court.
In other ISDS news in Europe (we did say it was the story of the year), the EU’s long-standing campaign to abolish intra-EU bilateral investment treaties (BITs) — which it argues are incompatible with its governing treaties — suffered a major setback with the publication of Advocate General Wathelet’s opinion in the long-running dispute between Achmea BV and the Slovak Republic at the ECJ. Surprising many, AG Wathelet sided against the EU and advised the ECJ that intra-EU BITs with ISDS mechanisms are compatible with EU law.
While the EU may be grabbing the headlines, scepticism of ISDS has not been solely the purview of Europe. Halfway across the world, the newly elected Prime Minister Ardern of New Zealand announced that her government would oppose the inclusion of ISDS in all future trade agreements and fight to have ISDS removed from the Trans-Pacific Partnership. We will have to wait for the next draft of the provisions to see whether New Zealand’s efforts have an effect.
Of course, all of this happened in the shadow of the election of Donald Trump in the United States. Shortly after being sworn in, the Trump administration dropped out of negotiations for the Trans-Pacific Partnership and began the renegotiation of NAFTA, which it has pursued with zeal. Despite President Trump’s trade czar having released a new set of negotiating objectives in November 2017, it is unclear whether the United States will push to do away with NAFTA’s ISDS provisions.
Some progress in the drive for equal representation
Finally, 18 months since the launch of the Equal Representation in Arbitration Pledge, some progress appears to have been made. Reflecting the pledge’s commitment that the gender composition of arbitrator appointments be made public, 16 major institutions published statistics showing that women made up nearly 17% of arbitrator appointments in 2016, up from approximately 12% the year before. This reflected significant increases at the ICC, which reported that its proportion of female arbitrators had increased from 10% to 15%, and the London Court of International Arbitration (LCIA), which reported an increase from 16% to 20%. However, some institutions performed less well. For example, the American Arbitration Association’s International Centre for Dispute Resolution (ICDR), remained steady at 16% female appointments year-on-year.
What arbitration practitioners can look forward to in 2018
As we said at the top, the story for 2018 is much of the same. The Dubai International Arbitration Centre (DIAC) has announced that they will release new arbitration rules in 2018. The proposed new rules have not yet been published and no draft has been circulated as of yet, although the broad strokes have been outlined. There is also some indication that the much-maligned Article 257 of the United Arab Emirates (UAE) penal code, which made it a crime for arbitrators to act without impartiality or integrity, will be repealed.
The extenuated ICSID reform process announced in 2016 is likely to gather steam in 2018, with working papers prepared by the ICSID secretariat to help stakeholders evaluate the proposed amendments expected to be published in the early part of the year. Meanwhile, the much anticipated process of English law reform has inched ahead with an announcement by the England and Wales Law Commission that whilst the English Arbitration Act 1996 will not be included in its 13th programme of reform, it recognises that some reform could be desirable to ensure London’s continued status as a top venue for international arbitration. It has identified this as a potential reform project and hopes that, resources permitting, it will be possible to accept this project as a reference from ministers during the course of the programme.
Legislative and rule changes aside, we can expect that the Yukos appeal will continue to generate headlines and that the EU’s drive for investment courts will continue to push on, possibly with the actual opening of negotiations for a treaty or the reporting of the UNCITRAL working group on reform. All in all, 2018 looks to be more a story of continuity than change.