Ethiopia—the 165th Member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 

On 24 August 2020, the Federal Democratic Republic of Ethiopia declared its accession to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), making it the 165th member of the New York Convention after Tonga. In accordance with Paragraph 2 of Article 12 of the New York Convention, the Convention shall enter into force for Ethiopia on November 22, 2020.

Ethiopia acceded to the New York Convention with reciprocity reservations and commercial reservations, namely that it recognized and enforced only arbitral awards made in the territory of another State party, while applying the New York Convention only to disputes arising out of legal relations that were considered commercial under Ethiopian law.

London Court of International Arbitration (LCIA) Publishes London International Arbitration Association Arbitration Rules 2020

On August 11, 2020, the London Court of International Arbitration ("LCIA") issued the Arbitration Rules of the London Court of International Arbitration 2020, effective as of October 1, 2020. With the revision, the arbitration procedures of the LCIA have been more streamlined and clarified, and the LCIA's arbitration procedures are more in line with the international arbitration needs under the new situation. 

Major amendments to the LCIA Arbitration Rules include the following: the arbitral tribunal has greater power to expedite the arbitral process; the arbitral tribunal has the power to make early dismissal decisions; the arbitral tribunal must strive to make decisions within three months; and the hearing is conducted electronically; the arbitral tribunal shall have greater power to order consolidated or concurrent arbitration; the LCIA shall be obliged to comply with provisions relating to sanctions for bribery, corruption, financing of terrorism, fraud, tax evasion, etc.; and maximum hourly rates to arbitrators shall be increased from £450 to £500.

Final Version of the International Arbitration Law Reform was Approved by the Swiss Parliament

In 2017, the Swiss Government released a draft bill aiming at a reform of the Swiss international arbitration legislation. On 9 August 2020, after several rounds of discussions and amendments in the two Swiss parliamentarian Chambers, the final version of the international arbitration law reform was approved.

The past debate in the Swiss Parliament was characterized by several major questions, of which one is whether submissions in English language should be allowed in setting aside proceedings before the Federal Supreme Court. The draft bill was initially presented by the Government in 2018 provided for the possibility to file submissions in English language in setting aside proceedings before the Swiss Federal Supreme Court. The decision of the court, however, should be rendered in the official languages (German, French or Italian). The final version formally allows the parties to submit materials in English, improving the convenience of the parties to participate in arbitration.

The No. 1 Intermediate People's Court of Shanghai Municipality: The clause  of "SIAC Shanghai Arbitration" shall take effect for the first time 

Relevant Provisions:

Article 16 of the Arbitration Law of the People's Republic of China provides, “An arbitration agreement shall include arbitral clauses stipulated in the contract and other written agreements which request arbitration to be made prior to or following the occurrence of a dispute.

An arbitration agreement shall include the following:

(1) the expression of an application for arbitration;

(2) items for arbitration;

(3) the chosen arbitration commission.”

Article 12 of the Interpretation of the Supreme People's Court on Certain Issues relating to Application of the Arbitration Law of the People's Republic of China provides, “Where a party applies to the people's court to determine the validity of an arbitration agreement, the case shall come under the jurisdiction of the intermediate people's court at the location of the arbitration agency as provided for in the arbitration agreement; where the arbitration agreement fails to describe an arbitration agency clearly, the case shall come under the jurisdiction of the intermediate people's court at the location where the arbitration agreement was concluded, or the place of residence of the respondent.   

Where a party applies for the determination of validity of a foreign-related arbitration agreement, the case shall come under the jurisdiction of the intermediate people's court at the location of the arbitration agency as provided for in the arbitration agreement, or the location where the arbitration agreement was concluded, or the place of residence of the applicant or respondent.”

Article 16 of the Interpretation of the Supreme People's Court on Certain Issues relating to Application of the Arbitration Law of the People's Republic of China provides, “The applicable law for the determination of validity of a foreign-related arbitration agreement shall be the applicable law as agreed upon by the parties; where the parties have not agreed upon an applicable law but have agreed upon the place of arbitration, the law of that place shall apply to the arbitration; where the parties have agreed upon neither the applicable law nor the place of arbitration or where they fail to clearly agree upon the place of arbitration, the law of the place where the court is located shall apply.”

On August 7, 2012, the applicant Dacheng Industrial Gases Co., Ltd. and the respondent Praxair (China) Investment Co., Ltd. signed the "Undertaking Agreement", stipulating that the applicant should provide the respondent with a series of liquid and gaseous products, and at the same time agreed disputes arising from the agreement shall be submitted to the Singapore International Arbitration Centre for arbitration in Shanghai in accordance with its arbitration rules. After the two parties had a performance dispute, the claimant filed an arbitration application with the Singapore International Arbitration Centre (SIAC), requesting the arbitration tribunal to determine that the respondent had breached the contract, but the respondent filed a jurisdictional objection to the arbitration tribunal. In July 2017, the arbitration tribunal rejected all the objections of jurisdiction of the respondent and conducted a substantive trial of the case in Shanghai, China. In August 2017, the respondent filed an appeal with the Singapore High Court, requesting the court to confirm that the SIAC tribunal had no jurisdiction over the case, which was rejected by the court. Therefore, the respondent filed an appeal with the Singapore Appeals Court to determine that the arbitration shall be initiated in Singapore instead of Shanghai, which was also rejected by the Singapore Appeals Court. In July 2018, the SIAC arbitration tribunal held a hearing on the issue of substantive legal liability in Shanghai, China, but the respondent filed an application with the SIAC arbitration tribunal to terminate the arbitration procedure on the grounds that the arbitration agreement was invalid. Therefore, the applicant applied to the Shanghai No. 1 Intermediate People's Court to confirm the validity of the arbitration agreement. The core dispute of this case [(2020) Hu 01 Min Te 83] is whether the applicant's application should be accepted.

Court’s View:

The Court held that the arbitration agreement is valid and accepted the application to confirm the validity of the arbitration agreement for the following reasons:

a) This case is a dispute over the validity of a foreign-related arbitration agreement. According to Article 12 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China (hereinafter referred to as the "Interpretation of the Arbitration Law"), the intermediate people's court at the domicile of the respondent has the power to accept a dispute over the confirmation of the validity of a foreign-related arbitration agreement, whether it is confirmed valid or invalid. The two applicants are the parties who applied for confirmation of the validity of the arbitration agreement, rather than as parties of objections to the people’s court, and therefore they are not bound by the subjects and timing of “the party raising objection to the validity of the arbitration agreement” or “prior to the first hearing by the arbitration tribunal” set forth in Article 13.1 of the Interpretation of the Arbitration Law. Therefore, the Shanghai No. 1 Intermediate Court should accept the applicant's application for confirming the validity of the arbitration agreement;

b) Considering that the parties did not expressly agree on the applicable substantive law in the contract, according to Article 16 of the Interpretation of the Supreme People's Court on Certain Issues relating to Application of the Arbitration Law of the People's Republic of China，the dispute law in this case shall be the law of the People's Republic of China;

c) The subject of the contract involved in the case includes a company legal person in South Korea, so it has foreign-related factors. The contract involved in the case agrees to be arbitrated by SIAC, but the seat of arbitration is Shanghai, China. The arbitration agreement clearly stipulates the arbitration matters and the arbitration institution SIAC, and it should be valid.

The Court of Appeal of Paris: An arbitration execution order shall be revoked as it contravenes international public policy

In 2009, ALSTOM(ALO) signed a consulting contract with Alexander Brothers Limited (ABL), providing that ABL shall assist ALO in bidding for the CRH project and submit any dispute arising from the performance of the contract to the ICC International Court of Arbitration, and the dispute settlement shall be governed by the laws of Switzerland. After ALO wins the bid and pays a portion of the commissions, subsequent commissions are suspended due to the project’s criminal investigation (probable corrupt practices). ABL thus commenced arbitration with the ICC International Court of Arbitration in December 2013 under the arbitration clause and requested payment of the remaining commission by ALO and indemnity in accordance with the arbitration clause. The arbitral tribunal made a partial claim in support of ABL. However, the tribunal found no evidence that could point to ABL's involvement in corrupt practices. ALO applied to the Swiss Federal Court to set aside the award, one of the reasons is that the arbitral award encourages corruption, which is a violation of public policy. In November 2016, the Swiss Federal Court held that it could only render its judgment based on the facts ascertained by the arbitral tribunal, and would not conduct substantive review of the case, so it rejected ALO's application and refused to investigate the facts involving corruption. ABL then applied to the French court for enforcement of the arbitral award. In March 2016, the Paris Court of First Instance granted enforcement of the above arbitral award, and ALO applied to the Paris Court of Appeal for non-enforcement. The focus of the case [Paris Court of Appeal, Pôle 1, Chambre 1, No. 16/11182 (28 May 2019)]is "whether the enforcement of the final award will produce an effect of rewarding corruption and whether it violates international public policy".

Court’s View:

The Court revoked the enforcement order and ordered ABL to refund all payments made by ALO for the following reasons:

a) Although neither ALO nor ABL has been subject to criminal prosecution by Chinese prosecutor authorities, some employees of the Ministry of Railways of China involved in the project were sentenced to life imprisonment in 2013 for corruption;

b) ABL has no office space and no staff who meet the legal requirements and it has obtained some information relating to the CRH project by improper means;

c) The commission ALO pays to ABL is a subsidy and incentive for corrupt practices; therefore, enforcement of the award will result in incentives for corrupt practices, which is in violation of public international policy.

This Newsletter is produced by ZLWD International Business Committee and for your reference only.

Editorial Board: Wei LIN  Simon TANG  Philip DUAN  Ellen WANG  Yuming LI  Lingling GUO

Hao LIU  Ning NING

All Information published in this Newsletter is from open source.

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