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Baltic Arbitration Days-2017: issues discussed

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Riga hosted the 6th DIS Baltic Arbitration Days which discussed arbitration of disputes involving states or state-owned entities, corporate disputes and reflected on the lessons taught by annulment or  unenforceability of major arbitral awards in recent past.

The conference was organised by BNT attorneys-at-law – one of leading international law firms in Central and Eastern Europe – in cooperation with DIS-Baltikum – the Baltic Regional Group of the German Institution of Arbitration, and hosted by BNT partner Theis Klauberg. CIS Arbitration Forum was an information partner of the event.

Already since 2012 BNT attorneys-at-law together with Riga Graduate School of Law organise the annual DIS Baltic Arbitration Days.

Many dispute resolution practitioners, arbitrators, attorneys, academics, students and business executives from numerous countries usually show up at the event. This year the conference has been attended by more than 100 participants from 20 countries and it became a record comparing to all the previous years.

The 2017 event highlighted commercial arbitration involving states or state-owned entities with focus to Iran, Russia, Turkey and Ukraine.

The first day of the conference was chaired by Dr. Galina Zukova from Belot Malan & Associes, Paris, and included presentations of Prof. Boris Karabelnikov from the Moscow school of social and economic sciences and of Prof. Dr. Christian Tams from the University of Glasgow “Commercial Arbitration – the View from Investment Law”.

Prof. Boris Karabelnikov gave notion of corporate disputes, listed those corporate disputes which Russian law declares non-arbitrable and indicated the conditions which Russian law requires for the other corporate disputes to be arbitrated. As per Prof. Karabelnikov’s opinion, since 1 September 2016 Russian legislation imposes a de facto ban on arbitration of corporate disputes involving Russian counter-parties.

Prof. Karabelnikov concluded that prohibitions and limitations concerning arbitration of corporate disputes provided by new Russian legislation do not affect non-Russian arbitration laws and rules which may regulate arbitration of the corresponding corporate disputes outside Russia, although enforcement in Russia of the awards rendered by foreign tribunals in those matters most likely would not be possible.

Prof. Dr. Christian Tams compared the investment and commercial arbitrations, showed them as siblings, in their different and common character as friends and foes; dolphins and sharks; tigers and lions.

The investment arbitration, by its very nature, analyses under the optic of international law measures of a state which usually remain public in nature and may have an impact beyond the parties in dispute. The commercial arbitration, on the other hand, analyses under the optic of domestic law the conduct of a party in the context of a private relationship enshrined in a document that is aptly called by the civil law system “the law of the parties”.

The  second day was chaired by Mr Damian Watkin from McDermott Will & Emery, London, Mr Scott Vesel from Three Crowns, London and by Prof. Dr. Christian Tams.

The speakers included Victor Dumler from Dumler and Partners, St-Petersburg, Russia; Tolga Semiz from Kinstellar, Istanbul, Turkey; Fredrik Ringquist, Mannheimer Swartling, Moscow; Noah Rubins from Freshfields Bruckhaus Deringer LLP, Paris; Jennifer Younan from Shearman & Sterling, Paris and another speakers.

Mr Daniel Greineder from Peter & Partners (Switzerland) delivered a speech on the topic “Res judicata in Setting Aside Proceedings involving State-owned companies – a Swiss perspective” making analysis of the Ukrainian Railways Decision of the Swiss Federal Tribunal and use of res judicata principle at the stage of the judgment recognition.

As per the Swiss Federal Tribunal, res judicata applies internationally, in particular, to the relationship between a Swiss arbitral tribunal and a foreign state court. Hence, if a party seizes an arbitral tribunal sitting in Switzerland with a request identical to that which was the object of an enforceable judgment issued between the same parties outside Swizerland, the arbitral tribunal must hold the request inadmissible.

Mrs Laura Hardin from Alvarez & Marsal, Houston delivered an interesting topic to the audience: “When might what’s done not be done?“ with examples from the Yukos Universal Ltd et al. v. Russia, TESCO v. Guatemala, Burlington Resources vs. Ecuador cases.

In the Yukos Universal Ltd et al. v. Russia case the District Court of The Hague in the Netherlands annulled the PCA multi-billion USD awards in a judgment of 20 April 2016 due to a lack of jurisdiction over the claimant’ s claims because Russia never ratified the Energy Charter Treaty (ECT). The District court agreed that Russia applied the Treaty “to the extent that such provisional application is not inconsistent with its Constitution, laws or regulations”. Such disputes of public law nature as submitted to the arbitral tribunal were non-arbitrable under Russian domestic law. Therefore the tribunal had no jurisdiction to hear the claims against Russia.

Because of the above ruling which annulled the award, the Dutch court did not address other arguments brought by Russia including “that the tribunal’s damages award was based on its own deeply flawed methodology, which had not been advocated by any of the parties and resulted in substantial double counting of the claimant’ s purported losses”.

In the TESCO v. Guatemala case the ICSID Appeal Committee considered claimant’s assertion that the arbitrators disregarded the extensive documentary and expert evidence on “loss of value” and failed to give reasons to their finding on this matter. The Appeal Committee concluded that the tribunal’s finding on the “loss of value” claim failed to meet the standards set out by the ICSID Convention and annulled it on this ground.  In the Burlington Resources v. Ecuador case the arbitrators applied customary international law compensation of “full reparations” instead of the Treaty standard of compensation when determining the damage, thereby disregarding the law applicable to the dispute.

As per Mrs Hardin conclusion, it is necessary to think once, twice, three times before giving the instructions to the lawyers – ultimately, overly aggressive and unreasonable assertions can be harmful if not fatal to the case.

One of Ukrainian speakers, Pavlo Byelousov from AEQUO law firm, gave interesting statistics about the caseload of the ICAC at the Ukrainian Chamber of Commerce and Industry, arbitral awards of ICAC and MAC set aside and rendered in Ukraine within last years, and about court proceedings for setting aside arbitral awards in Ukraine involving state companies. Mr Byelousov acquainted the audience with general grounds for setting aside arbitral awards in Ukraine which mainly consist in procedural violations.

Each of the speakers answered to a lot of questions asked by the audience.

The conference participants, in addition to the discussions, were offered a guided tour of Riga, a seaside dinner in Jurmala, as well as a breathtaking sky view of Riga as a closing event.

Theis Klauberg during the break guided an interesting tour around premises of the Riga Graduate School of Law and office of BNT attorneys-at-law.

Edward Kuznetsov

Marine Legal Bureau

Maritime and aviation law

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