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HomeInternational Arbitration Newsletter | Q3 2022

International Arbitration Newsletter | Q3 2022

This edition of the international arbitration newsletter is a collection of the top three case updates on commercial and investment arbitration from Q3 of 2022, which is comprised of a Swedish ruling on remote hearings, a significant case from the French Supreme Court on governing law, and a German ruling on ICSID claims. This edition also includes a summary of Copenhagen Arbitration Day 2022, which was attended by arbitration practitioners from across Europe.
15 November 2022

Swedish Court of Appeal rules Swedish Arbitration Act is technology neutral

On 30 June 2022, the Svea Court of Appeal issued a ruling in the case ICA Sveriage AB v. Bergsala SDA AB, clarifying whether a tribunal’s decision to hold a virtual hearing absent both parties’ agreement is permitted under the Swedish Arbitration Act (“SAA”). The Court found that the right to an oral hearing under the SAA is teknikneutral (“technology neutral”), meaning that the possibility for remote hearings is not excluded nor contrary to the SAA.

The underlying dispute arose because an arbitral tribunal decided to hold a remote hearing despite objections from the respondent. The respondent challenged the final award, claiming that the award should be declared invalid or be set aside. In the challenge proceedings, it was argued that the use of technology did not guarantee the parties’ right to equal treatment, and that party autonomy had been disregarded as the tribunal’s decision to hold remote hearings put the claimant in the arbitration in a favorable position.

The Court of Appeal relied on the preparatory works of the SAA. It determined that Section 24 is based on the right to a fair trial, encoded in the Swedish Code of Judicial Procedure and the European Convention on Human Rights. Furthermore, the Court of Appeal found that if not otherwise agreed by the parties, it falls within the mandate of an arbitral tribunal to decide if participants in a hearing shall participate remotely. Consequently, the Court of Appeal found no reason to declare the award invalid.

The Court of Appeal also stressed that arbitral tribunals should determine if a remote hearing is appropriate on a case-by-case basis. This determination must be made by considering the right of the parties to adequately present their case, the impartiality, and whether the technical elements enable adequate communication.

To read the Swedish Arbitration Portal’s article, please click here

French Supreme Court rules on law governing the arbitration agreement

In a cross-channel Supreme Court saga regarding the law governing an arbitration agreement, the French Supreme Court found that an arbitration agreement can be separated from the contract it is found in, in accordance with the principle of separability, and therefore the arbitration agreement and the contract can be subject to different law. This decision comes after the UK Supreme Court decided not to enforce the same agreement last year, because it found the arbitration agreement was subject to the law of the contract rather than the law of the seat selected in the arbitration agreement.

The parties to the dispute were Kabab-Ji SAL, a restaurant company, which entered into a franchise development agreement with Al Homaizi Foodstuff, which following reorganization became Kout. The franchise agreement was governed by English law and referred disputes to ICC arbitration seated in Paris.

When a dispute arose, Kabab-Ji initiated an ICC arbitration against Kout alone. Kout alleged that it was not party to the franchise development agreement nor the arbitration agreement, but nonetheless participated in the proceedings whilst under protest. The arbitral tribunal found that under French law, Kout was party to the arbitration agreement contained in the franchise agreement, and that it was liable for damages under English law. An award in favour of Kabab-Ji was rendered in 2017.

Once the award was rendered, Kabab-Ji sought enforcement before the English Commercial Court. However, the English Commercial Court disagreed with the arbitral tribunal, and found that English law governed the arbitration agreement. It reasoned that since the arbitration agreement was encompassed by an English-law governed contract, English law also applied to the arbitration agreement.

Meanwhile, Kout sought to annul the award at the Paris Court of Appeal, maintaining it was not part of the franchise and arbitration agreements. However, the Paris Court of Appeal found that French law governed the arbitration agreement, and according to French law, Kout was party to the agreement.

In 2021, the UK Supreme Court refused to enforce the award, supporting the Commercial Court’s view that English law governed the arbitration agreement, despite the Paris seat. It also found that under English law, Kout was not a party to the arbitration agreement.

On 28 September 2022, in the most recent decision related to this case, the French Supreme Court affirmed that French law applies to the arbitration agreement, as it is separable from the contract itself. Thus, regardless of whether English law governs the contract in dispute, since the arbitration was seated in Paris, French law applies.

This string of decisions from the English and French courts illustrate the contrasting interpretations of the law applicable to the arbitration agreement. Moreover, this is not the first disagreement on this matter between the courts. This case echoes the Dallah case, where the UK Supreme Court refused enforcement of a Paris-seated award due to disagreement on whether the respondent was party to the arbitration agreement. Parties should therefore as far as possible, and if advisable, be explicit in their arbitration agreements on the law governing both the contract and the arbitration agreement.

To read the French Supreme Court’s decision, please click here
To read the UK Supreme Court’s decision, please click here
To read the Global Arbitration Review’s article, please click here

ICSID claims declared inadmissible by German court

On 1 September 2022, the Higher Regional Court of Cologne in Germany declared two ICSID claims against the Netherlands inadmissible, and contrary to EU law, in accordance with the recent European Court of Justice decisions Achmea, Komstroy, PL Holdings and Micula.

In 2020, the German energy companies RWE and Uniper brought two ICSID cases against the Netherlands in response to a phased ban on the use of coal to generate electricity from 2019, which the government introduced as part of the plan to meet the Paris Agreement targets on climate change.

As a response to the commencement of the ICSID arbitration, the Netherlands applied to the Cologne Court for relief under section 1032-2 of the German Code of Civil Procedure. Section 1032-2 of the German Code of Civil Procedure states that until the arbitral tribunal has been formed, a request may be filed with the court to have it determine the admissibility or inadmissibility of arbitral proceedings.

In the light of the European Court of Justice’s 2018 ruling known as Achmea, the Netherlands argued that the Energy Charter Treaty (“ECT”) did not extend to intra-EU investor-state disputes. This view was confirmed by the 2021 ruling Komstroy. As a result, Juniper withdraw the ECT claim in July 2022, and the ICSID case is currently suspended.

In RWE’s ICSID claim, the tribunal issued a decision in August 2022, where it declined to order the Netherlands to withdraw from the proceedings initiated at the Higher Regional Court of Cologne. However, the tribunal stated, that it “joins the Uniper v Netherlands tribunal in strongly recommending that the Netherlands reconsider whether its pursuit of the German Proceedings remains necessary or appropriate.”

Despite the above, the Court in Cologne found that the ICSID claims brought by RWE and Uniper against the Netherlands were inadmissible as they were incompatible with EU law. Therefore, the Court granted the request brought by the Netherlands and established that section 1032-2 of the German Code of Civil Procedure is applicable to ISCID cases, even when not seated in national jurisdiction.

Read Global Arbitration Review’s article here
Read the ICSID’s decision on provisional measures in RWE AG v the Netherlands here

Copenhagen Arbitration Day 2022

The third Copenhagen Arbitration Day took place on 15 September 2022. The event attracted arbitration practitioners from across Europe, and included interesting panel discussions and networking opportunities throughout the day.

To kick off the day, two lunchtime seminars where held at leading Danish law firms. The seminar topics covered the future of oil & gas disputes, and evidence in international arbitration.

Following the lunch seminars, the main conference was held at the House of Industry. The first speaker of the day, Professor dr.jur. Mads Bryde Andersen of the University of Copenhagen, presented a lecture on “The Accused Arbitrator”. He presented an examination on current trends of arbitrator liability, and how it may affect the arbitration industry as a whole. Mads Bryde Andersen noted the longstanding Danish tradition for arbitration, and presented Nordic legal doctrine on how arbitral tribunals should conduct their services and manage liability. He also touched on the role that arbitration institutions should play in regards to whether arbitrators and secretaries are covered by insurance.

German Attorney Ulrike Gantenberg presented on the best approaches to facilitating settlements in arbitration. Gantenberg finds that arbitrators are particularly well positioned to facilitate settlements because they are familiar with the case material and can identify the best moment for the opportunity to open discussions, due to arbitrations inherent flexibility. However, Gantenberg also noted some challenges to facilitating settlements which include questions of impartiality, economic incentives for counsels and arbitrators, and different expectations of parties coming from different legal traditions.

Moderator Lotte Eskesen, Partner at Gorrissen Federspiel, asked a distinguished panel consisting of Attorney Jacob Christian Jørgensen, dr.jur Amund Bjørnanger Tørum, and Judge of the Eastern High Court of Denmark, Julie Arnth Jørgensen on their perspectives on jura novit curia. The Latin phase, meaning the judge knows the law, is especially relevant in international arbitration as it goes to the very heart of transparency and predictability. Best practices were discussed, as well as the importance and difficulty of striking a balance. It was debated whether an award must be limited to the legal arguments and sources presented by the parties, or if the tribunal could address beyond that scope if necessary. It was also pointed out that should the tribunal discover relevant law that merits consideration, then the parties could be consulted and given an opportunity to comment.

Finally, Michael Ostrove, Vice President of the ICC International Court of Arbitration presented on the biggest challenges facing arbitral institutions in the next decade. He emphasized the recent proliferation of smaller local institutions, and the shifting focus away from international institutions. He attributed this shift to a certain malaise currently experienced with globalization in which many, especially in less economically developed countries, do not necessarily want to rely on European institutions to solve local disputes. In order to stay relevant, he noted the importance of building trust, as well as increasing gender diversity, and embracing technology and transparency. Institutions should continue to be innovative in order to attract a new generation of business leaders and counsel.

Closing remarks were made by President of the Danish Institute of Arbitration, Jeppe Skadhauge, who praised the success of the conference. The day was finished off with drinks and dinner at Scandic Palace Hotel, where Torben Melchior, the former president of the Supreme Court of Denmark gave a toast. Copenhagen Arbitration Day 2022 provided fruitful discussions, a dynamic set of guests and speakers, and surely set the tone for next year’s edition.

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