Category Archives: Litigation Mediation & Arbitration

Mediation – Practical Guidelines, Part 1: Basic principles and preparing for the mediation hearing

Mediation is a subject of much discussion, spurred by the legislative initiative at the EU level (Directive 08/52/EC) and the transposition thereof by national laws. There are now also a number of different ways to obtain training as a mediator.

But has mediation also made significant gains in terms of its importance in practice, outside the fields of law where it is traditionally employed (such as family law)? There is reason for doubt.

Why has mediation evidently not yet achieved the prominence in practice that it should be accorded in the interests of all concerned?

Successful mediation is not based on complex academic theory. Instead, it requires three things above all:

  • logistical preparations for the mediation that are appropriate to the case, including appropriate preparation of the subject matter of the conflict;
  • the specific craft of the mediator in conducting the discussion and leading the procedure; and, most important of all,
  • an experienced figure who has the qualities required of a mediator: integrity, natural authority, engagement, determination, and creativity.

I.  Methodology: strictness versus variety

Article 3 of Directive 08/52/EC places the term “mediation” in quotation marks and defines it as any kind of voluntary attempt to resolve a dispute, “however named or referred to.” It is already apparent from this that there cannot be a strict methodology for mediation, but rather that the manner in which the attempt to reach a resolution is made is subject to the autonomy of the interested parties. Still, certain mediation principles have taken hold in doctrine and practice (especially the “Harvard concept”), so in simplified terms, the mediation process can be broken down into the following rough phases:

  • Preparing for the mediation, including setting down rules of procedure, logistics, etc.
  • “Opening” the mediation hearing, with an introduction to the basic principles and features of the mediation procedure, the facts of the matter, and the status of the dispute; under some circumstances, an informal meeting may be held ahead of time.
  • Jointly working out all subjects in dispute from a factual and legal standpoint and otherwise.
  • Jointly working out and identifying the actual underlying interests and needs of the parties to the conflict and their relative importance and significance to the respective parties.
  • Jointly working out, in creative form, all theoretically conceivable approaches that might be taken to achieve a resolution, initially without evaluating or assessing them at the same time.
  • Jointly working out all theoretically conceivable scenarios in which an amicable resolution is not reached, initially without evaluating or assessing them.
  • Evaluating and comparing all of the identified scenarios in which an amicable resolution is not reached on the one hand and all possible approaches for reaching an amicable resolution on the other.
  • Working toward realistic models of achieving an amicable resolution.

This methodological approach is just one of many, and it affords as much leeway as desired for specific emphases appropriate to the individual case. In principle, mediation can be used to address any kind of difference of opinion; only non-waivable law (i.e. questions of status) sets boundaries for whether a conflict can undergo mediation.

This paper cannot possibly address all of the challenges that can arise during mediation, nor is it intended to do so. Instead, it will focus on a few important aspects.

II. The “who, where, how” of a mediation hearing

Mediation’s eventual success or failure is determined to a large extent early on, during the planning and conceptualization of the mediation procedure.

Who is the most important point for the mediation procedure—that is, determining the size and composition of the parties’ representation. What are the crucial criteria when it comes to the question of who should participate as the parties’ representatives?

  • Under no circumstances should there be too many people involved. The most reasonable number is between one and five per side. The delegations should be at least roughly the same size.
  • There must be sufficient knowledge of the matter represented on all sides in the delegation, or this knowledge must be available to the delegation on short notice.
  • There must be persons with adequate decision-making authority at the table. The level of the hierarchy above the one where the case is being handled and, if at all possible, decision makers from outside the legal department should also be represented. The main decision makers should be able to view each other as equals in terms of the corporate hierarchy, so they can talk to each other as equals as well.

Only if these conditions are met does the mediation have optimum prospects of success. A certain amount of distance from the matter itself and not having had too much prior involvement greatly enhance the parties’ objectivity in assessing their own prospects and risks. On the other hand, it is also necessary to ensure that the representatives are familiar with all matters and aspects that are favorable to their party and can bring them into the proceedings so that they do not agree to a solution that unreasonably disadvantages their party for lack of awareness of these points.

It should be pointed out that decision makers from outside legal departments often display a more pragmatic, more realistic view, basing their assessment on whether a potential approach to achieve a solution seems appropriate and reasonable on the whole rather than following a particular—and chiefly legal—analysis.

Each party should have as many representatives in the mediation procedure as necessary, but as few as possible, as the development of a relationship of mutual trust between those who are conducting the negotiations for the opposing sides (and, of course, between the parties’ representatives and the mediator) is critically important to the success of mediation. Without a certain level of mutual trust, it is much more difficult to talk about ways to bring the parties’ positions together or bring up possible scenarios to resolve the matter. This means that the mediator must keep these circumstances—along with interpersonal compatibility—in mind early on in the process, during the considerations regarding the determination of the parties’ representatives. It is easier to foster and build trust between a modest number of representatives of the parties than if there is a large delegation on each side. And it is not uncommon—in fact, it is quite typical—for final talks between just two or three persons to be necessary in order to overcome the last obstacles to achieving an agreement.

The mediator also needs to take great care with the aspects of where and how early on, reviewing where, in what physical setting, and on what schedule the mediation is to take place. Depending on the nature and subject matter of the dispute, a wide range of different concepts may be appropriate and promising in this regard. These outward circumstances must be appropriate to the complexity of the matter, the economic or other importance of the case, and the persons involved. Only if the critical persons on all sides view these conditions as being appropriate and comfortable is it possible to create a discussion atmosphere that permits and even fosters the building of trust between the relevant decision makers in a relatively short time—and without that, the prospects of successful mediation are poor.

Not every conflict justifies spending several days in negotiations in an exclusive, isolated location—but for complex, highly important conflicts, this kind of setting often gives rise to the best prospects of success. In other cases, the prospects of success may be greatest if it is possible to bring the final decision makers on both sides together in person, even if only for three hours at an airport hotel.

No two cases are alike. And yet, one common thread is that the participants should already perceive even the general framework of the mediation as representing more than just the logistical details of a business meeting. Deciding that one is willing to engage in a cooperative mediation procedure marks the first step toward achieving an amicable agreement; this is exactly where the mediator needs to meet the parties to the conflict and then bring them along by creating the framework for constructive talks in a spirit of mutual trust.

It is definitely possible, especially in large organizations and in the case of large-scale procedures, that not all of the parties’ representatives will feel that pursuing mediation is the right approach. They may interpret a push to achieve an amicable resolution as criticism of their management of the conflict so far, or, in the case of large-scale matters, they may even see an agreement as jeopardizing the main thing they have been working on (possibly for years), their “raison d’être,” or even their economic livelihood. This makes it all the more important for the mediator to strive to keep up the momentum formed by the decision to attempt mediation and try to bring all delegation members fully on board for the procedure.

In principle, therefore, mediation starts with a positive initial situation. Immediately launching directly into the process of working on the issues without allowing the persons involved to get a feel for one another beforehand should be avoided. If at all possible, the parties’ representatives should get to know one another first, without direct reference to the conflict. In this way, initial personal impressions are formed during discussion of general topics, not later on, during the discussion of the conflict, which is naturally contentious. Ideally, even the very first round of discussion of the facts of the matter will be less contentious on both sides if this is done, with a greater sense of partnership. Throughout the mediation hearing, one of the mediator’s key tasks is to remind all of the parties’ representatives to communicate in line with the cooperative principle behind mediation while putting a stop to any emerging signs of aggressive communication behavior in order to avoid jeopardizing the mutual trust that has been built—or to be able to establish that trust in the first place.

Setting down the details of who, where, and how in a mediation agreement may be a good idea, but it is not critically important. Rather it is important that a shared understanding on these points does exist or, even better, for them to be left up to the mediator.

Part 2 of these guidelines will address preparing for the conflict before the mediation hearing and the specifics of conducting the hearing as such.

Resolution lags – better access to justice for ordinary individuals

In an era of technology, instant communication and on-demand services, the courts continue to uphold wigs and titles from the 18th century. They provide a powerful contrast to the modern day world, but in doing so demonstrate a justice system that has failed in its entirety to modernise itself.

Let us take simple greetings as an example – we communicate through Facebook and Twitter, and use “Hi” as an introduction in the majority of conversations. The way we speak is shifting towards efficiency, informality and plain language, and if institutions want to better facilitate conversations with the people they serve, they too need to adopt this style.

Why then do the courts insist on the precise use of titles, so arcane they belong in a Dickens novel – My Lord, My Lady, Honourable court, Your Honour and so on – and respond with typed skeleton arguments and pretentious oral submissions? The communication standards set by the courts are so lofty, they create an almost impenetrable language barrier forcing most people to seek assistance in order to make any sense of them.

It’s high time the courts played catch up and started thinking about how the service they are providing could be more accessible, simple and efficient. And embracing new technologies could play a big part within that transformation.

The HMRC’s Digital Strategy outlined in 2013 is a great example of what can be achieved through such systems, as the government gradually looks to leave paperwork behind and become digital by default. When initially launched it was believed that the HMRC could save around £160m – £220m in telephone and post costs a year if an additional 29 million transactions were moved online.

So what can the legal profession do? For starters, making full use of video-conferencing or other tech services could enable judges to become far more accessible, as well as significantly reduce the time necessary to resolve a case and improve the relationship between the courts and disputing parties, increasing trust in and, ultimately, the efficiency of the courts.

In fact, if physical attendance at court were the exception as opposed to the rule, not only would this help people with busy schedules to better manage their time and presence at proceedings, but would also allow those with disabilities to play a full part in the judicial process. It’s worth bearing in mind that hosting proceedings in the courts comes with a hefty fee under the present system.

If electronic document management were to become obligatory, this too would better enable the storage and retrieval of documents, and simplify the disclosure of documents, while increasing security for sensitive cases.

But this is just the tip of the iceberg – while simplifying communication with the courts would be beneficial to all, technology used in conjunction with well thought out procedural modernisation could have a dramatic impact on the entire industry.

What if we were to do away with pleadings altogether and replace them with short written statements, delivered in plain English, outlining a person’s position? Should archaic Latin phrases not be consigned to the history books in favour of language that everyone can understand? In due course, people could even produce their pleadings on their iPads or PDAs and send them on to the court or other relevant parties.

In more and more cases, we could also encourage disputing parties to explore less formal online platforms to resolve their differences privately, ensuring that resources are used effectively for complex disputes while enabling smaller claims to be addressed quickly.

Ultimately, it all comes down to practicality – delaying and extending disputes in the name of bureaucracy only serves to distress and frustrate, so why not take advantage of the technology that now exists to simplify processes? The courts must assume a position where they make the effort to adjust to fit people’s needs and not the other way around, the first step towards this being relaxing the way they communicate.

Society has drastically evolved in recent years, yet the court process has seen insufficient development since 1816. There’s really no excuse or justification so let us listen to reason and bring our legal system up to date.

The Bahamas – Protecting the Confidentiality of Trusts

Section 83 of the Trustee Act is an enactment unique to the Bahamian jurisdiction which attempts to codify the rights and obligations of trustees in relation to disclosure. The disclosure of trust information by trustees has been the subject of judicial debate for centuries; and as trusts have developed so too has the jurisprudence on the rights of beneficiaries and third parties to trust information and documentation. Recently, the trust has come under intense scrutiny from regulators and tax agencies alike, so the clarity Section 83 provides not only assists the appointed trustee and designated beneficiaries, but provides comfort to settlors who wish to keep their wishes private and desire to shield his/her trustee from unwanted interference.

Subsections (1) and (2) simply require the trustee to take reasonable steps to inform a beneficiary with a vested interest under the trust of its existence and general nature of their interest or in the event there is no beneficiary with a vested interest, a person who is capable of enforcing the trust and the general nature of the interest entitling him/her to enforce. This formalizes the long settled duty of a trustee to notify the objects of the trust of its existence, first discussed in Lloyd v Attwood (1859) 3 De G. & J. 614 at 649. The subsections clearly limit the notification to the existence of the trust and the general nature of that interest, which settles any doubt as to the scope of the duty to notify.

However, the trustee may escape the aforesaid duty of notification in the event it deems, in its absolute discretion, that such notification would not be in the best interest of the beneficiary(s). Obviously the exercise of this discretion would need to be exercised properly and in accordance with the fiduciary obligation the trustee owes the beneficiaries under the settlement.

Subsection (3) expressly prohibits disclosure of the existence of the trust to (a) any beneficiaries who are interested only contingently; (b) any persons who are only objects of discretionary powers; or (c) any other persons who are not entitled to vested interests under the trust. This does not prohibit disclosure to the class of persons aforesaid if it is necessary or convenient in connection with distributions or in the interest of the trust as a whole. The trustee retains the absolute discretion to disclose the existence of the trust in subsection (4); but the decision to make such disclosures should be made thoughtfully.

Subsection (5) deals specifically with the disclosure of the trust instrument, financial statements of the trust and all financial statements of companies wholly owned by the trustees of the trust. This is helpful as there has been both judicial and academic discussion as to the scope of the term ‘trust documents’. With the burgeoning use of trusts for increasingly diverse purposes, so too has the type of documents attributed to trusts and their management.

The disclosure of trust documentation to beneficiaries often causes trustees angst, as they must balance their duty to protect the confidentiality of trust information against the interests of the beneficiary and their desire to be informed. While beneficiaries who hold a vested interest in the trust are entitled to trust documents, all other persons are specifically excluded from access unless the trustee deems disclosure necessary for the proper administration of the trust and is for the trusts overall benefit. In the event a trustee wishes to disclose documentation, it must consider any request from a beneficiary which has requested confidentiality and determine if confidentiality is in the best interest of other beneficiaries.

Notwithstanding the trustee’s ability to disclose trust documents to vested beneficiaries, subsection (8) prohibits the production of (i) any document revealing the wishes of the settlor; (ii) documents relating to the exercise of any discretion of the trustee; or (iii) any documents disclosing deliberations or reasons for the exercise of the trustee’s discretion. This prohibition extends to any process of discovery or inspection within litigation. One can understand Parliament’s sacrosanct treatment of a trustee’s exercise of its discretion but the provision severely limits the ability of a beneficiary trying to sustain a claim against a trustee for the wrongful exercise of a its discretion.

Section 83 clarifies the common law principle established in In re Londonberry’s Trusts: Peat v. Walsh [1965] Ch. 918 which recognizes a beneficiaries’ entitlement to access trust documents, save for information or documents evidencing the deliberations of trustees when exercising his/her discretionary powers. The Act sets clear parameters as to the scope of the disclosures, the class of persons entitled to disclosure and the type of documents which are accessible.

While the trust instrument can always prescribe additional entitlements of disclosure upon a beneficiary(s), the enactment of Section 83 displays a Parliamentary intention to protect trustees from unwarranted disclosures, preserve the sanctity of the trustee’s discretion and to afford privacy to the settlor’s wishes. Although the Trustee Act was enacted in 1998, section 83 has remained largely untested in the Bahamian Courts. There are no published Bahamian cases which consider the ambit of section 83.

Recently, the English High Court considered the extent of Section 83 in the case of Dawson Damer & Others v. Taylor Wessing [2015] EWHC 2366 (Ch). Here, the beneficiaries of a Bahamian trust sought the disclosure of legal advice provided to the trustee by its English solicitors. Judge Behrens found that the Bahamian Trustee Act differed from the English common law rules and the beneficiaries were not entitled to information that the Trustee was not required to disclose under Section 83. He concluded:

“I have great difficulty in following the concept that the principles of disclosure in relation to trustees and beneficiaries can in some way be separated from legal professional privilege…If and in so far as the exception in paragraph 10 of Schedule 7 is restricted to the English law of disclosure and if and in so far as the documents discoverable under English law are more extensive than those under Bahamian law it does not seem to me a proper use of the 1998 Act to enable the Claimants to obtain documents that they could not obtain in the Bahamian proceedings.”

Judge Behrens’ decision is currently under appeal in England, but his affirmation of the protection afforded to trustees under section 83 and his comparison to the English common law position is noteworthy.

Historically principles of disclosure by trustees were established by the common law. The clarification provided by Section 83 is sure to be challenged in the near future but there is little doubt that its enactment provides the settlor and trustee with a higher level of confidentiality and protection. Its exclusivity to the Bahamian jurisdiction continues to provide the Bahamas with an advantage over other jurisdictions as to the level of protection afforded to trustees of Bahamian trusts.

Waste-to-Energy in Vietnam

The treatment of municipal solid waste (“MSW”) is difficult for local authorities.  Thanks to the development of new technologies, however, MSW is becoming a serious source of renewable energy.  Vietnam began to shape its regulations and policies to develop solid waste power plants (“SWPP”) in 2012. Several investment incentives and favorable policies have now been issued to attract the private sector.  This Article discusses regulations on SWPPs and power purchase agreements (“PPA”).

Legislation and PPAs.

The policies and regulations are mainly set out in Decision 31/2014/QD-TTg of the Prime Minister dated May 5, 2014 (“Decision 31”), Circular 32/2015/TT-BCT of the Ministry of Industry and Trade (“MOIT”) dated October 8, 2015 (“Circular 32”) and Decree 118/2015/ND-CP of the Government dated November 12, 2015 (“Decree 181”). According to Decision 31, the Group of Vietnam Electricity (briefly called EVN)–a state-owned corporation–is responsible to purchase the entire output of electricity generated from SWPPs. This policy assures investors that output can be sold. The sales, however, must be made according to a statutory PPA template set out in Circular 32. Although Circular 32 allows the contracting parties to change the template in order to reflect their agreement, the main contents must be consistent with the template.

Price factors.

The price, of course, is a fundamental factor for the investor to make its investment decision. The price of electricity can vary widely, depending on the method of power generation.  For example, the current price of electricity generated from direct combustion of solid waste is US$10.05 cents per kWh. By contrast, the current price of electricity that power plants using gas generated from gasification can charge is only US$7.28 cents per kWh. These prices exclude VAT. Interestingly, prices can be adjusted by reference to the VND-US$ exchange rate.  Recognition of exchange rate variation is a large assurance for foreign investors as it mitigates losses or risks resulting from devaluation of the Vietnamese dong during the project life.  In addition to the price of electricity billable to EVN, a power plant that qualifies for financial benefits under the Clean Development Mechanism (“CDM”) pursuant to the Kyoto Protocol of which Vietnam is a signatory, has yet another source of income.

Term of PPA.

The term of the PPA is 20 years commencing from the date on which the commercial operation begins. Oddly, it is uncertain whether the PPA can be renewed after its expiry.  A large-scale SWPP will often require a substantial amount of capital. The question whether the price is sufficient to recover the investment capital and to earn reasonable profits within a 20-year period requires careful consideration and assessment.  The investor should seek the MOIT’s consent to extend the term of the PPA if there are any concerns and questions relating to the payback period. Agreement on extension of the term should be incorporated into the PPA.

The seller (power plant) may decide to participate in the competitive market for the generation of electricity. In such case, the seller must send a 120-day notice to EVN, and the PPA will be terminated after the 120-day period. If so, the seller and EVN will then need to enter into other contractual arrangements under which the price of electricity will be determined on a competitive basis (not based on a fixed price).

A PPA can also be terminated following a force majeure event if the condition lasts for more than one year.  Thus, the concept of a “force majeure event” should be well-defined.

Settlement of disputes. 

A dispute must first be addressed through amicable negotiation. If the contracting parties fail to reach an agreement, the dispute can be referred to the Electricity Regulatory Authority (“ERA”) or to a body agreed by the contracting parties. The PPA relates to EVN, a state-owned corporation under the MOIT’s administration.  The ERA is also a state body controlled and managed by the MOIT.  In case of a dispute, the ERA’s independence may be compromised.  It may be impractical for the contracting parties to choose an independent body at the time of a dispute.  The choice of independent arbitration at the outset seems to be more practical.

Governing law.

The PPA is governed by Vietnamese law. Although Vietnamese law provides certain protections and guarantees, these statutory protections may be seen to be insufficient if the PPA relates to foreign investors.  It is common that foreign investors will seek other contractual protections. These contractual protections can be incorporated into the PPA in order to ensure that their interests are protected. As the PPA involves state-related entities, a private owner of an SWPP should consider and incorporate the following matters into the PPA: (i) waiver of sovereign immunity; (ii) protection against changes in the law; (iii) investment incentives; (iv) government’s guarantee; (v) government’s force majeure events; (vi) subsequent increases of price (if possible); (vii) optional renewal of PPA after its expiry (if desirable); (viii) settlement of disputes through an independent body.

Investment incentives.

SWPPs are classified as “especially preferential projects” and so are entitled to several important incentives: exemption and reduction of land rental and land levies, favorable state loans and tax incentives (eg, import duty exemption for, say, machinery imported to create the project’s fixed assets). Import duty exemptions can also apply to materials, raw materials and semi-finished products that are unavailable in Vietnam and that must be imported. Preferential corporate income tax rates, corporate income tax reduction and tax holidays can also apply. These investment incentives can be obtained and documented during the licensing process.

Licensing process.

The municipal or provincial People’s Committees (“PC”) are authorized to issue investment registration certificates and other operational licenses to WSPPs.  Before issuing licenses, the PC will often consult with other ministries (mainly the MOIT, the Ministry of Natural Resources and Environment and the Ministry of Science and Technology).  Among other conditions, a solid waste power project must be included in the national master plan. If a potential project is not included in the national master plan, the investor must seek the MOIT’s consent.  The MOIT is authorized to evaluate solid waste power projects. The statutory duration for the MOIT to evaluate a project is 30 business days.  The MOIT may engage independent and professional consultants to evaluate a SWPP.  The owner of an approved SWPP can commence construction of its plant only after it has obtained a construction permit. This requirement applies to most power projects, and not just to SWPPs.

*****

Currently, household waste, commercial and industrial and hospital wastes are collected and transported by non-profit entities owned by the state or by commercial companies. The current treatment of solid waste is mostly to recycle it or to discharge it into open garbage dumps. However, the volume of solid waste has increased in both big cities and industrial zones. As a result, garbage dumps have become overloaded and the current practice has become inappropriate. There are serious environmental issues to consider (eg, negative impact on underground or surface water, spread of disease, unsustainable usage of land, etc.). The situation requires local authorities to find alternative solutions in order to mange and treat waste.  Although the development of SWPPs is more expensive in comparison with other methods, there are positive factors: treatment of waste is faster, it does not require a substantial amount of land, and the operating costs are not significant. More importantly, waste can be managed and treated on a sustainable basis and environmental issues can be managed. The Government is seeking technical and financial assistance and aid from government and non-government organizations. In parallel, the Government also encourages the private sector to develop SWPPs. Another option is the development of small scale SWPPs. This seems to be practical and realistic. For the investor, a small scale plant does not require a large amount of investment capital. For the Government, it will help Vietnam to learn important technologies and to gain valuable experience.

Lost In Translation: Countries separated by a common – or different – language. International litigation at the sharp end.

“Oh to be in England” – Robert Browning:
Home thoughts, from abroad (1845)

For more than 20 years, I have been privileged to act for banks, other financial institutions, corporate monoliths, filmmakers, musicians, and even pension schemes.  Amongst those clients I have found some of the cleverest, interesting and talented individuals I have ever met.

In addition to that, however, I have always felt a particular affinity for what one might term the “sexy stuff” – international civil fraud. Cases where the clients are every bit as clever, talented and interesting as one finds in the other parts of my practice, but where different, additional challenges lie.

It was not so terribly long ago that I obtained a search and seize order here, a back to back like order in New South Wales, together with simultaneous temporary restraining orders in Virginia and California.  All that over a royal public holiday weekend.  Now that is litigation.

In this sphere, therefore, I have acted in most of the leading arenas in the universe of dispute resolution, from Russia, throughout Europe, into South and North Africa, The Americas and the Middle East.

Having done so, I am a hawkish advocate of this country being the very best jurisdiction for any litigant, properly advised, looking to maximise his potential as a winner (or, minimise the extent to which he might “lose”) in any commercial courtroom fight. Courts here have tools at their disposal that no other jurisdiction can come close to – the worldwide freezing injunction an obvious example.  It has some of the best advocates in the world, and some of the best judges.  It has a procedure which – when compared internationally – works efficiently; and whilst litigation always feels more expensive than it should be, it remains less so here than many other jurisdictions.  It is, for example, cheaper than the arbitration option. It does, however, have its own intricacies, peccadillos and nuances.

Clients who come here (perhaps even more so, if they are brought here) usually have pre-conceived views as to how litigation should work, and how it should be run.  Their views will no doubt have been honed by their own previous experiences at home, whether actual or anecdotal.  Such views will be firmly, and perfectly properly, held.  This will need to be addressed and be corrected.

Accordingly, in order for the client to be in a position to properly take advantage of the treats which can be laid upon their table here, there is one absolutely vital requirement: he must understand that litigating in the UK requires a specific type of touch and feel; a particular approach.

In short, there must be a total understanding and acceptance that litigating here is different, and that to navigate those differences successfully requires the right lawyer.

That, needless to say is the not so meta–subject of this article.

To begin, some anecdotes and some observations.

“Most of what follows is true”  – William Goldman:
Butch Cassidy and the Sundance Kid (1969)

I should stress at the outset that particular views of the “English way” versus others’ “home” courts are not restricted only to certain foreign jurisdictions and individuals. For example, it is invariably necessary to explain to US lawyers why it is that polite letters often play better here than nakedly aggressive communications.

In addition, it is sometimes useful to show why it is that the split profession here is actually akin to the concept of specialist trial lawyers in the US.

That said, the following are not really US-centric.

I cut my teeth as a junior lawyer on an alleged fraud concerning oil in the Gulf and significant sums of money which appeared to have gone missing. I learnt at the knee of a practitioner for whom I have very significant respect.  Needless to say, the matter kicked off with the client on the wrong end of a worldwide freezer.  Imagine trying to explain the effect of such an order to a multi-millionaire oil baron – a person whose financial arrangements are, of necessity, complex.  The issue of restricting the use of assets is one thing; of more concern (and this is very often the case) is the need to disclose assets.

The client, likely as not, will be resistant to producing documents which it will – quite properly – consider confidential. He will be upset, but perhaps more than that, angry and indignant. He may well be used to being surrounded by individuals who only give him good news. He will, however, be fully engaged, and you will have his undivided attention. Therefore, right from the get go, there is the need for the lawyer to assert his authority, and the opportunity for him to do so.

This will require a level of trust to already have been established.  There are a number of ways in which this can be done. In essence, however, they boil down to: first, demonstrate that you are an expert in the area; secondly, convince him that being open and honest with the court will make the court happier than not being (particularly in circumstances when any claimant will inevitably end up finding any assets accidently “overlooked”); thirdly, explain that is possible to limit the damage if one controls disclosure rather than having to be reactive by being seen to have had documents dragged out of you. It is therefore advantageous to provide the appropriate amount of disclosure to the other side promptly and voluntarily – although, where possible, in a context most positive for the client; and, finally, lay out the various ways in which you intend to turn around the tanks currently parked on the lawn, and then chase them over the bluff. One needs always to be able to produce a positive message.

Back to my junior lawyer case. Having been upfront from the beginning, the client had cause only a couple of months later to smile, as we made successive, successful, specific disclosure applications against the other side, resulting in the poor associate in charge of documents for the claimant having to spend weeks in offices in the gulf – a location which the associate ignorantly referred to as “a car park” – only to have to travel back there shortly after he next returned to London, due to another order sending him in search of further documents.

As I note, foreign jurisdictions often export their own pre-conceptions of the justice provided by their home courts when litigating here. The strength of feeling in this regard should never be underestimated.

Working in Eastern Europe on an arbitration sited in middle Europe, but involving parties in England and Cyprus, I was warned that any attempt to enforce a proposed freezing injunction granted by the English Court would likely run into problems in the particular eastern European country in issue. When I enquired as to why this might be so in a “convention country”, I was informed that there was a crisis brewing within the judiciary there – which culminated in the court of appeal being accused of taking bribes.

On more than one occasion, I have been challenged on my advice that a hearing, once lost, can usually only be appealed to a higher court. The client explained that, at home, if the wrong decision was given, a party merely went to the court next door, and kept on going until they found a judge who got it right.

Acting for an oligarch based in a part of the ex – USSR, one of my partners once took a telephone call at 3am in the morning from the client. He had been mulling over what he perceived to have been a less than convincing performance by his silk in court the previous day.  Having pondered long and hard, the client could think of only one realistic explanation: his counsel had been bribed to throw the fight.

The response to this – a genuinely held view – is to explain gently why it is that members of the English bar are too English to behave in such a way. Stress also that this does not necessarily mean that English lawyers are any “better”, merely different; and that the lack of judicial corruption here has the advantage of the system being able to give litigants more certainty.

A standard reaction, of course, from foreign lawyers (never mind lay clients), on receipt of a worldwide freezing order which purports to bite in a number of jurisdictions beyond England and Wales, is to demand to know the basis upon which the English court asserts jurisdiction over a defendant not domiciled here, and how on earth the English court can seek to impose to freeze assets located outside its territorial jurisdiction. Explaining that the Court asserts its jurisdiction over the individual defendant, making it their problem to make sure that the assets do not move, on pain of contempt sanctions is not the easiest of tasks.

These questions, and the upset which underlie them, are all, of course, rational – and there are usually good, and definitive answers. It is at this stage that the experienced lawyer will understand the need more than anything for sensitivity and empathy. There are some occasions when there is no alternative but to fall on one’s sword and acknowledge that Britain retains certain elements of her imperialist past and views of the world.

There are many more direct, though perhaps unorthodox, ways in which the lawyer can demonstrate the extent of his willingness to put his body on the line for his clients. I for one have been hauled off a private jet at the far end of a deserted African airport after a flight curfew had come down, and required to spend longer than I would have wished alone in an isolated hut with members of the local security services.

I have received mysterious calls warning me that my assigned seat number is known and that I will be tracked through an airport and instructions would be given to customs officials – that, on a dispute involving a sovereign state (not the UK).

There was also the time when I and my partner and counsel were tear gassed inside a court – again, not in the UK.

I have had my telephone bugged and, with counsel, been electronically monitored in an international airport in Eastern Europe.

I survived all of these little challenges, and, on each occasion, my bond with the client was strengthened yet further.

“Lawyers are seldom loved but often needed” – Robert B McKay:
What Lawyers Really Do (1971)

What can we take from all this?

First, it is perhaps the most important distinction of the English Court that, more than any other jurisdiction, it takes a fully rounded world view. This must be a positive, and should be seen as such.

Next, understand as a lawyer that the ways of the English courts, and what they offer, are not universal.

Thirdly, this will inevitably need to be explained to the client – who will have their own expectations of how things should work; and whose expectations are almost inevitably incorrect.

Fourth, explaining this to the client is not a one shot deal – the process will be one of almost constant education, certainly at the outset.

Fifth, dealing with corporate entities is one things. Dealing with certain individuals can be quite another. Billionaires are not used to be told “no”. Being able to say that to them requires trust, firmness, and self-belief.

Some of those aspects which set the English court apart will be a function of it being empowered (or empowering itself) with a range of relief options not available elsewhere. Depending on which side the client is on, this will either be received as very good news, or as bad.  To the client, it will be binary, and, if the latter, come up with an answer.

Finally, there will be cultural differences.  Do not under estimate the importance of them.

Whilst, these issues are exacerbated when acting for foreign parties, and for individuals in particular, the job still comes to this: the client is entitled to service, service, service. It is not enough merely to diagnose problems, you have to explain what you are going to do to address them – and do it. After all, as litigators, we are about providing solutions. Whatever the geographical niceties, and the nature of the individual client.

Off the blocks, on a mobility scooter: Opt-out class actions launch in the UK

Since a new opt-out class action regime was introduced last year under the Consumer Rights Act 2015 (CRA), practitioners have been waiting patiently to see when the first claim would be brought. The first claim has now been launched on behalf of a putative class of pensioners and other UK-based buyers of mobility scooters. It has the potential to reveal the true impact of this new form of collective redress for purchasers both within and outside the UK. It may also reveal the likely shape of such claims, their practical scope and limitations.

A new era

Under the regime introduced by the CRA, it is no longer necessary to bring a collective action on behalf of a group of claimants who have actively “opted-in” to a claim. Instead, in competition cases, a representative action may be brought before the Competition Appeal Tribunal (CAT) on behalf of a class of claimants on an “opt-out” basis.  This means that all members of the class domiciled in the UK are represented, unless they actively choose to opt-out. Claimants domiciled outside of the UK may also choose to opt-in to the action.

In 2014, a mobility scooter manufacturer, Pride Mobility Products, was found guilty of breaching competition rules by the Office of Fair Trading (OFT). Pride Mobility had sought to achieve unlawful resale price maintenance, having privately prohibited online retailers from advertising scooters for sale below their recommended retail price. The National Pensioners Convention (NPC), a pensioners’ welfare association, has now launched a class competition claim valued at up to £7.7 million on behalf of potentially overcharged customers.

Funding and risk management

The new claim sheds light on how such class actions are likely to be funded. In the US, claims are typically brought on a percentage contingency fee basis (e.g., 30 percent of the class’s damages recovery). However, the comparable fee model in the UK (Damages Based Agreements) is expressly disallowed in these types of action meaning that American-style contingency fees are prohibited in UK collective actions. Instead, the NPC’s class action has been brought using a mix of a conditional fee agreement (providing for a fee uplift to the lawyers in the event of a successful outcome) and after-the-event insurance (to protect against the representative’s potential adverse costs exposure).

Such complex fee structures are often assembled with the backing of third party litigation funders, who will provide funding for legal fees and after-the-event insurance, in return for a portion of any damages recovered. An important step will be for the CAT to review the proposed fee structure and decide whether the sums payable to the representative’s lawyers and any third party funders are proportionate. Both potential claimants and defendants (as well as funders), will be watching this case closely for indications of what the Tribunal will consider acceptable for future claims.

Since the class claim is based on the OFT’s infringement decision, the CAT will accept that the defendant is liable for the infringement in question, with the issues in the case likely to turn on questions of causation and quantum. So, while the claimants’ solicitors, insurers and any funders involved will have assumed a degree of commercial risk in bringing this claim, it is a calculated one.

The empathy that this particular claimant class is likely to induce, and the publicity the claim will attract, is also unlikely to have escaped those who are driving it and who have an interest in showcasing this new type of action.

Differences with the US regime

This first action is extremely modest by comparison to the class action claims brought in US antitrust cases. There, the pro-claimant costs rules (attorney’s fees are recoverable by statute on top of the damages award), joint and several liability of each defendant for the entirety of the damages exposure, the lack of contribution, and the availability of trial by jury and treble damages (three times actual damages), all tip the risk/reward analysis heavily in favour of bringing such claims.

Nevertheless, although the NPC’s scooter action is a modest first step, it is one that tests the boundaries of the UK regime and could well blaze a trail for more ambitious, higher value claims in the future.

Next steps

The CRA is designed to encourage informal resolution of representative actions. So, despite the fanfare with which the claim was brought, it is possible that the action could prompt informal, off-the-record ‘without prejudice’ discussions, with no further formal steps taken. Instead, a collective settlement (which itself would have to be mandated by the CAT) could be reached (in the United States, virtually all antitrust class actions are settled or dismissed at an early stage).

The next phase of the proceedings will be for the representative to apply to the CAT for a Collective Proceedings Order, which will permit it to bring the class action. Amongst other things, this would determine the scope of the class of claimants, an issue which could well be hotly contested.

Practitioners and consumer groups alike will therefore be watching closely as this new field opens out before them.

Cofely v Bingham and Anor

The judgment published on 17 February 2016, Cofely Limited v Bingham and Another [2016] EWHC 240 (Comm), considers the situation where circumstances might exist to give rise to justifiable doubts as to the impartiality of an Arbitrator. The Claimant sought an order for the removal of Anthony Bingham, a very well known and respected Arbitrator, from an ongoing Arbitration.

The Claimant did not allege actual bias.

The Claimant is a construction company. The 2nd Defendant, JR Knowles, is a well-known and respected claims consultant.

Disputes arose between the Claimant and the 2nd Defendant from a Success Fee Agreement dated 26 October 2011. That agreement contained an Arbitration Clause. On 21 January 2013 JR Knowles, having given Notice of Arbitration to the Claimant, sought the appointment of an Arbitrator from the Chartered Institute of Arbitrators. The Notice stated that the 2nd Defendant considered it was preferable that the Arbitrator had both Quantity Surveying and Delay Analysis experience and specifically identified Anthony Bingham as the likely Arbitrator.

Those representing the Claimant informed the Chartered Institute of Arbitrators that while concurring that it agreed that the Arbitrator should have legal experience, it did not consider that experience as a Quantity Surveyor or in Construction Delay was necessary. It proposed the appointment of a member of Keating Chambers. The Chartered Institute appointed Mr Bingham.

Thereafter, various procedural matters were dealt with in the Arbitration and on 21 August a Partial Award in favour of JR Knowles was issued. That award was not challenged.

Thereafter, various exchanges of correspondence between the parties and also between the parties and Mr Bingham took place. On 18 February 2015, matters took a different turn.

The Claimant wrote to JR Knowles seeking information in relation to its dealings with the Arbitrator in the light of the decision of Mr Justice Ramsay in Eurocom Ltd v Siemens PLC [2014] EWHC 3710 (TCC).

In that case, Eurocom applied, by summary judgment, to enforce a decision of the Adjudicator, Mr Anthony Bingham. The application was dismissed and the Court found, that as it had determined that the Adjudicator had no jurisdiction by reasonable fraudulent misrepresentation allegedly made by JR Knowles in applying for the appointment of Mr Bingham on behalf of Eurocom, Siemens had real prospects of success in defending the application for enforcement of the Adjudicator’s determination.

The alleged misrepresentation made on behalf of JR Knowles to the Royal Institution of Chartered Surveyors was made when seeking the appointment of an adjudicator and related to the application form. On the application form, the agent of JR Knowles stated that numerous other named candidates had a conflict of interest and were therefore unable to act. Mr Justice Ramsay, in his judgment, stated that there was a “very strong case that Mr Giles (of JR Knowles) deliberately or recklessly answered the question as to whether there were conflicts of interest so as to exclude adjudicators who he did not want to be appointed”.

Subsequently, the Court considered that this was a general practice of Mr Giles.

The letter described earlier, 18th of February 2015, stated that it had concerns arising out of that Eurocom judgment. The letter then asked 6 questions seeking information concerning the nature and extent of the relationship between JR Knowles and the Arbitrator.

On 27 February 2015, JR Knowles responded to the Claimant’s letter answering 5 of the questions. On 11 March 2015, Stephenson Harwood, on behalf of the Claimant, raised further questions as a result of the responses provided by JR Knowles.

On the same day for the first time Stephenson Harwood wrote to the Arbitrator seeking related information and setting out a series of specific questions:
How many times in the last 3 years have you acted as adjudicator or Arbitrator in disputes where Knowles represented, or was itself, the claimant/referring party?
Please would you break your answer in 1 down so as to clarify how many of the above relate to:

  • appointments first made in the last 3 years; and
  • appointments made more than 3 years ago in respect of matters which are ongoing or have been decided in the last 3 years.

How many times have you made an award or decision in favour of the claimant/referring party (either in whole or in part) in the adjudications and Arbitrations referred to above?

What proportion of your professional income as a barrister/ adjudicator/ Arbitrator was accounted for from the referrals covered by requests 1 and 2 above for each of the 3 years in question?

What proportion of your professional income as a barrister/ adjudicator/ Arbitrator was accounted for from the referrals covered by request 3 above for each of the 3 years in question?

What, if anything, have you done during this Arbitration to satisfy yourself that there is no information that you should disclose to Cofely which could reasonably be interpreted (on an objective basis) as undermining your apparent impartiality?”

On 17 March, Stephenson Harwood sent a further communication to the Arbitrator seeking answers to the questions asked so that the Claimant might feel reassured about its position in the Arbitration.

On 19 March, the Arbitrator responded that he had been appointed as an Adjudicator/Arbitrator 137 times in the last 3 years. The Arbitrator asked Stephenson Harwood what they alleged was wrong in the light of this answer combined with the answers given by JR Knowles in the letter of 27 February.

On 23 March, Stephenson Harwood asked the Arbitrator to confirm that he had received 25 appointments from JR Knowles in the previous 3 years and further that he, the Arbitrator, was willing to answer questions as to what proportion of his income had arisen from these appointments.

Further exchange of correspondence took place between the parties. As a result, the Arbitrator determined that a hearing would take place on 17 April 2015 at the offices of JR Knowles.

The Claimant alleged that at the hearing the approach of the Arbitrator was aggressive towards it, and further the Claimant considered that the Arbitrator showed impatience when questions were asked relating to facts potentially relevant to the apparent impartiality of the Arbitrator.

On 30 April 2015, Anthony Bingham issued an Arbitrator’s Ruling which decided that the Tribunal, his own position, was properly constituted and that there was no conflict of interest as far as he was concerned.

Further correspondence relating to the concerns of the Claimant was exchanged between the parties. On 5 June 2015, JR Knowles asked the Arbitrator to provide specific total figures as to his income derived over the previous 3 years and the amount of fees he had earned as a result of appointments from JR Knowles.

The Arbitrator replied on the same day that he had earned £1,146,939 and £284,593.75 (from JR Knowles).

On 3 July 2015, JR Knowles responded to Stephenson Harwood stating that JR Knowles had in the application forms excluded other candidates on the basis of being conflicted on 16 occasions, when as a result Anthony Bingham had been appointed without Mr Bingham being named specifically in the application form.

On 8 July, Stephenson Harwood requested the Arbitrator to recuse himself. The Arbitrator had not responded to that request at the time of the hearing.

The Court considered the requirements of Section 24 (1) (a) of the Arbitration Act 1996.

“A party to arbitral proceedings may (on notice to the other parties, to the Arbitrator concerned and any other Arbitrator) apply to the court to remove an Arbitrator on any of the following grounds-

that circumstances exist that give rise to justifiable doubts as to his impartiality;”

The Court reviewed the main authorities relating to that Section of the Act. The judgment further stated:

  1. “The fact that an Arbitrator is regularly appointed or nominated by the same party/legal representative may be relevant to the issue of apparent bias, particularly if it raises questions of material financial dependence – see A v B [2011] 2 Lloyds Rep 591 per Flaux J at [62]; Fileturn Ltd v Royal Garden Hotel [2010] TCC 1736, [2010] BLR per Edwards-Stuart J at [20(7)].
  1. The tribunal’s explanations as to his/her knowledge or appreciation of the relevant circumstances are also a factor which the fair minded observer may need to consider when reaching a view as to apparent bias – see, for example, In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 and Woods Hardwick Ltd v Chiltern Air Conditioning Ltd [2001] BLR 23. In this regard Cofely relies in particular on Paice v Harding [2015] EWHC 661, [2015] BLR 345, per Coulson J at [46]-[51] in which it was held that the explanations given by the adjudicator made apparent bias more rather than less likely having regard in particular to the “aggressive” and “unapologetic” terms in which they were expressed which suggested that he had concluded that something had gone wrong and that “attack was the best form of defence”.”

It is these judgments that appear to be particularly relevant to the facts in this case.

There are concerns within the arbitral community that Specialist Arbitrators who are appointed regularly by certain parties and whose conduct may be impeccable may however be at risk as a result of the trend of these judgments. However, this comment is not necessarily applicable to the facts in this particular case.

The judgment noted that Anthony Bingham did not answer the following question, which was set out in the form supplied by the Charted Institute of Arbitrators on his acceptance of the nomination:

“If you are aware of any involvement, however remote, but in particular any involvement you or your firm has (or has had in the last 5 years) with either party to the dispute, please disclose.”

The Court concluded that evidence of unilateral communications with JR Knowles and a review of the general conduct of the referral did not provide any basis for concluding that there was a real possibility of bias, whether considered individually or together with the other grounds relied upon.

The Court found that various matters set out in the applications by the Claimant raised concerns of apparent bias. These concerns included:

  • the relationship between the Arbitrator and JR Knowles;
  • the evidence that while JR Knowles did not appoint an Arbitrator/ Adjudicator directly, it was able to influence and did influence such appointments both positively and negatively;
  • the existence of the appointment blacklist by JR Knowles was also a matter of significance; this blacklist was important for any Adjudicator/ Arbitrator whose appointments and income were materially dependent upon JR Knowles;
  • while noting that only 3 of the 25 cases (where Anthony Bingham was appointed) involved JR Knowles as a party, those facts in themselves would be sufficient to trigger disclosure in the general circumstances of the nomination forms and under the Orange list guidance;
  • the aggressive response by the Arbitrator to the questions raised by Stephenson Harwood heightened concerns as the relationship;
  • the fact that neither party sought a ruling as to apparent bias could be seen when the ruling was issued to be evidence of pressure being placed upon the parties by the Arbitrator to pre-empt any request that he recuse himself;
  • that evidence that the Arbitrator descended into the arena was exhibited by the tone of the cross-examination of the representative of the Claimant by Mr Bingham during the hearing as to impartiality;

The Court therefore found that there was sufficient force in the grounds raised by the Claimant to raise a real possibility of apparent bias on the part of the Arbitrator.

The Court found that there was nothing untoward about the Partial Award or the conduct of the Arbitration up until March 2015.

The Court ordered that the grounds for the removal of the Arbitrator were made out.

As stated earlier, this case raises many concerns for Arbitrators both domestically and internationally who are appointed regularly by parties. Possibly the key points for such Arbitrators to note is the need for regular and continuous disclosure and immediate response to questions relating to relationships. Openness to the parties in relation to any matter which might make one or both of the parties feel uncomfortable is vital.

 

The mediation of trust and estate disputes

Will and trust disputes take many forms. A person may bring a claim that a will was invalid, and should therefore not be admitted to probate. For example, the testator may have lacked mental capacity at the time the will was executed, or the will may not have been properly witnessed, or the circumstances in which the will was prepared may be so suspicious that the court should not allow it to be admitted to probate.[1] A person who has been left out of a will may bring a claim for reasonable financial provision under the Inheritance (provision for family and dependants) Act 1975. Problems can arise with a will even after probate. A beneficiary may complain that the trustees have not properly considered him or her when exercising their discretion. Or the claim may be that the trustees or a third party have caused the estate or trust loss through bad management or investment.

Mediation is a very useful and effective way to resolve such disputes, whether or not litigation has been started. This article sets out the matters to consider when preparing for a mediation of such a dispute.

Selection of the mediator

Many parties choose a solicitor or barrister with professional experience of will and trust disputes as a mediator. Others say that a good mediator does not need to be a trust lawyer to mediate a trust or will dispute. Because trust and will cases have many technical issues, I always recommend choosing a trust lawyer as the mediator.

Arrangements for the day

Most commercial cases can be resolved in a day or less. Trust and will cases are no exception. The only problem is the drafting of the settlement when the parties have reached agreement in principle. This drafting frequently takes over an hour, sometimes two hours, and starting drafting the settlement agreement at 7 pm or even later, when everyone is thinking of going home, is no joy.

Who should be at the mediation

If proceedings have been issued all parties need to be represented at the mediation, but if there are a number of defendants one solicitor or barrister may be able to represent several parties without an insurmountable conflict of interest occurring. The mediation runs best if there are only two or three main protagonists, but all parties need to be present or represented or agree to be bound by the outcome. In a will case you do not need every legatee to be at the mediation. It is usually sufficient in addition to the claimant to have the residuary beneficiaries and the trustees, executors or personal representatives. However if some of the beneficiaries or potential beneficiaries are minors or perhaps not even born you will need to make sure that they are represented even if they have not yet been formally made a party to the proceedings. Parties to a mediation sometimes think they should bring their full professional team to the mediation: their solicitors, counsel and experts. Having solicitors and counsel present may help the parties and the mediator better to understand the merits of the dispute, but there is really no need to have experts as well. If they are to give evidence at the trial experts need to prepare a written report of their opinion on the matter about which they were instructed. If expert reports have been prepared they may be useful for the mediator, but no-one is going to give evidence orally at the mediation.

Authority to settle

As with any mediation it is essential that the people present at the mediation are in a position to sign a deal without needing to get authority from another person. In some cases a person may authorised up to a known financial limit. That is fine so long as the limit does not need to be exceeded. If it may need to be exceeded, perhaps late in the day, contact by phone may need to be made as a matter of urgency.

Tax advice

Saving tax should always be high on the agenda when dealing with trust and will disputes. A particular settlement can frequently be effected in more than one way, and the parties will need tax advice as to the most tax-efficient way to proceed. It probably is not necessary for an accountant to be present at the mediation, but one should be available on the phone up until the evening. Inheritance Tax can often be saved by a variation of a will within two years of the testator’s death or by the settlement of a claim under the Inheritance (Provision for family and dependants) Act 1975.[2]

The documents for the mediator

Typically in a disputed will case the documentation to be supplied will include the disputed will, eceased’s last will, the deceased’s previous will, the solicitors’ will file, extracts from the parties’ correspondence, the Deceased’s medical records and any expert medical reports obtained for the parties. If proceedings have been issued, include also the statements of case and the main witness statements. An up-to-date valuation of the estate or trust fund is vital, so the parties and the mediator know how much is in dispute. It is helpful for the mediator to know whether any settlement offers have been made before the mediation. All parties should be ready to tell the mediator how much their legal costs amount to, and how much more will be spent if the action goes to a trial.

Position statements

In all commercial mediations, not just trust and will disputes, it is very helpful if all parties set out in writing the position they hold at the start of the mediation. These are usually prepared by the parties’ lawyers. There is nothing to be gained from a position statement which merely reiterates the points made in a party’s statement of case. That merely heightens any bad feelings between the parties. What is helpful is to indicate that the party hopes the mediation will achieve a settlement, perhaps how the party hopes that will be achieved, and possibly what form of settlement the party considers may be realistic.

The form of the settlement

If proceedings have been issued they must be ended. The usual way is for the parties to agree a form of court order known as a Tomlin order to be made by the court by consent. Or it may be appropriate for a will to be proved in solemn form. In cases where I have been the mediator I usually leave the drafting of the settlement to the parties’ counsel to finalise, though if the parties do not have counsel I have sometimes drafted the necessary documents myself.

Costs

Any settlement should deal with the legal costs that the parties have incurred. In some cases it may be appropriate for all parties’ costs to be paid out of the residuary estate. However in most cases settled at a mediation I have found that each party bears their own costs, usually out of their share of the estate. That way all parties leave with their head held high, and nobody has lost face.

[1] Wintle v Nye [1959] 1 All ER 552, [1959] 1 WLR 284.

[2] Inheritance Tax Act 1984 sections 142 and 146.

Maritime Arbitration in Norway

1 Introduction

The use of arbitration clauses in commercial contracts seems to have had a steady growth in Norway during the last twenty years, not at least within the offshore and maritime industry. Various surveys indicates that at least 50% of larger co-operations in Norway prefer arbitration, and the number is most likely significantly higher within the offshore and maritime sectors. In accordance with international trends, Norwegian arbitration (and litigation) clauses are in addition increasingly combined with various kinds of ADR clauses, typically some sort of mediation.

There are obviously various reasons for the increased use of arbitration at the sacrifice of ordinary court proceedings. Within the offshore and maritime industry in Norway, one important factor is that Norwegian standard contracts prescribe arbitration as the dispute resolution method. The offshore construction standard contracts “Norwegian Total Contract”, “Norwegian Subsea Contract” and “Norwegian Fabrication Contract” all contains arbitration clauses, while their predecessors up until 2000 prescribed dispute resolution by ordinary court proceedings. Correspondingly the standard Norwegian shipbuilding contract 2000 prescribes arbitration, and the same goes for numerous individual prepared contracts within this field. Within offshore construction the contract provisions, including the arbitration clause, are typically used “back to back” in the contract chain, and it is thus not unusual to find arbitration proceedings in Norway under Norwegian law between non-Norwegian contractors and subcontractors.

The basic legal framework for arbitration in Norway is provided in the Arbitration Act (2004). The Norwegian Arbitration Act is based on the UNCITRAL model law and is listed as adopted by UNCITRAL. The act provides common regulation for all types of arbitration, without distinguishing e.g. between domestic and international arbitration, or between different types of commercial areas. In general, the Arbitration Act facilitates for a flexible process as the provisions to a large extent is non-mandatory – broadly speaking in line with the model law. The flexibility applies for the timing of agreement regarding the arbitration process as well; the parties are basically free to agree on the process both in the arbitration clause itself and as the process goes along.

2 Features of Maritime Arbitration in Norway

Maritime and Offshore Arbitrations in Norway has traditionally been conducted as ad hoc arbitrations, and not via any institutional arbitration. The Arbitration Institute of the Oslo Chamber of Commerce has not been successful in attracting maritime and offshore arbitration, as the parties to such arbitrations usually will find ad hoc arbitration more convenient and effective compared to institutional arbitration. In order to succeed with appointment of arbitrators under an ad hoc arbitration, there is a need for some pragmatism from both parties in order to secure a smooth and efficient process. In cases where this has not been achievable, the parties must resort to traditional court litigation instead.

Arbitrators are usually selected among academics, Supreme Court judges and prominent lawyers within the field of maritime law. Notably the professors at the Nordic Institute for Maritime Law in Oslo have been frequently appointed as ad hoc arbitrators, and secured an efficient and trustworthy process resulting in arbitration awards that have been published from time to time. In recent times we have also more frequently seen that foreign arbitrators are appointed under Norwegian ad hoc arbitrations. It is up to the parties to agree on the language of the arbitration, and in more and more cases this is determined to be English instead of Norwegian. In fact, in the maritime and offshore sectors in Norway, English is more frequently used among professionals than Norwegian, as these businesses are global and terminology used is mainly in English.

The ad hoc arbitrations in Norway are usually conducted efficiently, and the normal time from a notification of arbitration to a final and binding arbitration award is in the range between 6-12 months, depending of course on the extent and complexity of the dispute. The arbitrators will usually demand security for their fees, and order the losing party to pay their fee in most cases. If the dispute has been difficult to determine, the arbitrators may decide that each party shall bear 50% of the arbitrators’ remuneration. With regards to cost awards, these are usually rendered at the same time with the award on the merits, and in the same document, not constituting a separate award. The general rule in Norwegian arbitration is that the winning party may recover its legal costs from the losing party. But the arbitrators are also vested with the discretion to determine a different allocation of legal costs, and as with the arbitrators’ fee, it may from time to time be seen that the arbitrators determine that the parties have to bear their own legal costs without any recovery from the other side.

3 Evidence

Norway is part of the civil law tradition. One deflection of this tradition is that the Arbitration act provides only a few requirements, and limitations, with respect to the taking of evidence. The basic principle is that each party is free to provide such evidence as it finds necessary and desirable, both with respect to documents, witnesses and expert witnesses. The only explicit limitation pursuant to the act is that the tribunal is entitled to reject evidence which obviously is irrelevant or unreasonable disproportional. On the other hand, the act does neither establish any obligation on the parties to provide evidence, and contrary to e.g. the Norwegian Civil Procedure Act, a party is under no obligation to submit unfavourable evidence or evidence requested by the other party. There is, however, an opening for the tribunal to seek assistance from the ordinary courts in the taking of evidence, e.g. witness statements or document disclosure.

Even though the (few) provisions regarding taking of evidence are rather slack and based on the parties own interest in submitting evidence, the practical experience in Norwegian arbitration is, not at least with disputes between professionals within the offshore and maritime sector, that the relevant material is submitted and that the tribunal has an adequate factual basis for its judgment. A contributing factor to this is, of course, that neither party wants to end up with a tribunal under an impression that relevant evidence has been retained from the proceedings.

The provisions regarding taking of evidence are mainly non-mandatory, and the parties are free to agree the procedure they find suitable. In some cases, e.g. in international arbitration or “mega cases” (typically offshore construction), it might be useful for the parties to agree on more tighter and detailed rules of evidence, e.g. with respect to the use of written statements made for the purpose of the arbitration. Alternatively, it might be suitable to agree on following a set of standard rules, e.g. the Norwegian Civil Procedure Act or the rules on the taking of evidence in international commercial arbitration (International Bar Association).

The use of expert witnesses and expert reports is of course regularly vital in arbitrations within the offshore and maritime industry. These sectors are both heavily represented in Norway, and expert witnesses, e.g. with respect to technical issues, engineering, industry standards and industry practice within these fields is both easy available and considered first-class.

4 Arbitration vs ADR

Other forms of alternative dispute resolution (ADR) are somewhat frequent in maritime matters, notably mediation. In many cases this agreed between the parties subsequent to initiating arbitration, and in some cases this is also stipulated in the contract as a condition that must be satisfied before initiating arbitration. Expert opinions on value assessments, claims adjustments etc are usually not binding and final (unless the contract expressly state so), however it is a tendency that the parties rarely dispute such opinions. An expert opinion will anyway have significant weight in a subsequent arbitration (or court hearing), which is why this opinion are usually accepted by the parties.

One should note that Norwegian case law indicates that some ADR mechanisms may in fact be regarded as arbitration. In particular, this applies to various binding and final expert decisions where the expert interpret and apply contract requirements on the facts of the case, in order to reach a binding decision. The Norwegian Supreme Courts has for example considered valuation of real estate according to criteria in an agreement as arbitration. Similarly, binding expert decisions regarding e.g. whether performance requirements in a ship building contract are met or whether a milestone in an offshore fabrication contract is fulfilled, may be regarded as arbitration decisions – depending on the drafting of the contract clauses.

5 Interim Measures

In line with the UNCITRAL model law Art. 17, an arbitration tribunal under the Norwegian Arbitration Act has the power to grant claims for interim measures pursuant to the Norwegian Arbitration Act. Like many other states, Norway has however not implemented the 2006 revision of the model law. Orders for interim measures by the tribunal are not enforceable under Norwegian law, but the parties may approach the ordinary courts with claims for arrest or injunction in parallel with the arbitration proceedings – provided of course that Norwegian courts have jurisdiction in the matter.

Cultural Misunderstandings and Why They Continue to Matter in International Arbitration

In this article, we outline why, despite the rise of an increasingly uniform “arbitration culture”, with an ever expanding body of soft law, cultural misunderstandings (resulting from different backgrounds among stakeholders – arbitrators, counsel, party representatives, witnesses) continue to play a material role in many international arbitrations. We then offer a number of examples of misunderstandings from anecdotes told by friends, together with some relevant take-aways.

As cross-border trade has increased so too has the use of international commercial arbitration clauses. This, in turn, has given rise to standards of international best practice, often built around popular guidelines on issues such as document production, conflict of interest and counsel conduct. The guidelines issued by the International Bar Association and the Chartered Institute of Arbitrators are particularly influential in this regard, but there are numerous others.

Regardless of their country and culture of origin, practitioners – both party representatives and arbitrators – increasingly form a cohesive “arbitration community” of lawyers familiar with international best practice, and therefore approach arbitration proceedings with very similar expectations as to what is and is not good conduct.

This is not always the case, however. As renowned arbitrator Michael Hwang has pointed out, there are still many parties and lawyers who do not fit into the global mould, and who will, accordingly, not conform to expected modes of behaviour. [1]

On one hand, Hwang identifies what he terms Arbitration Guerillas respondents that are familiar with international standards of practice, but who take the tactical decision to disrupt proceedings as they are convinced of a negative outcome, e.g. by disputing the jurisdiction of the tribunal at every turn, or by circumventing it in going to the local courts.

On the other hand, Hwang identifies parties and their representatives that are either wholly new to arbitration (what he calls Arbitration Neophytes) or have very little experience, which moreover is oftentimes negative (Arbitration Atheists, Arbitration Agnostics and Arbitration Wannabes). Such stakeholders will frequently cause disruption by not following international best practice, either because they are unfamiliar with best practice or because they genuinely object to arbitration or some of its aspects as a dispute resolution tool.

In our experience, the latter phenomenon is by far the most prevalent and important in practice. Dealing with Arbitration Neophytes, in particular, can be a tricky issue. Their behaviour is not tactical (and can, accordingly, not be countered by tactical measures) but is rather due to lack of familiarity with the arbitral process. For parties (and occasionally arbitrators) who are ‘neophytes’, the problem with arbitration tends to be a cultural question more than anything else. They will have certain ingrained expectations arising out of the culture (and particularly legal culture) in which they are at home, extending to issues such as the credibility of witnesses, approaches to document production, communications with the tribunal etc. They expect that international arbitration conforms to those expectations. This can give rise to cultural misunderstandings which – even though this may not be at all intended – can disrupt or even derail arbitration proceedings if not responded to carefully and sensitively.

With these general observations in mind, we outline below a few specific examples of such cultural misunderstandings. The list is very much non-exhaustive.

The fact that the examples are heavily tilted towards cultural misunderstandings between developed “Western” economies and other jurisdictions, and between Civil-law and Common-law ones, is purely owing to the fact that these happen to have been the real-life examples under discussion.

A tribunal relying on documentary evidence to the exclusion of witness testimony

A number of years ago, a friend was involved in an arbitration brought by a respondent from a Western Common-law jurisdiction against a respondent from a Civil-law jurisdiction. The arbitral tribunal was entirely made up of lawyers from the respondent’s country and neighbouring countries. The country in question is characterised by a corporate culture where a number of very large enterprises play an important role not only economically, but in politics and society as a whole, and in the lives of employees who work there.

The parties placed heavy reliance on the evidence of fact witnesses who were, in all cases, in the employment of the party on whose behalf they gave evidence. The claimant, in particular submitted comprehensive witness evidence, amounting to a very significant investment of time and underpinning a compelling narrative of the claimant’s position.

The respondent submitted scarcely any evidence. In their award, the arbitrators chose – without much explanation – to discount the witness and expert evidence in its entirety and instead to rely on its own reading of the contemporaneous documents.

We can, of course, only speculate about the rationale behind the tribunal’s thinking. The most compelling explanation we have, however, and one which is corroborated by other such instances we have come across and heard about, is that the arbitrators, steeped in a culture where corporate loyalty is far more important than it would be in the West, instinctively mistrust evidence given by witnesses on behalf of their employer.

An expert witness faltering under cross-examination

Another anecdote concerned an arbitration that revolved heavily around a particular unsettled question of law of a certain jurisdiction. The question was the subject of a long-running academic debate in the jurisdiction in question.

One of the parties engaged a pre-eminent academic expert on the relevant area of law. The expert submitted a written report in which he unequivocally stated one clear answer to the question at hand. Yet at the hearing he failed to offer the same unequivocal endorsement of his answer. In particular, he declined, when pressed, to maintain that what he had written on the issue should be regarded as right and the diametrically opposed thesis of some other scholars should therefore be regarded as wrong. The tribunal did not follow the expert’s views and the party that had engaged the expert lost its case as a direct result.

The expert subsequently indicated that it was simply not done, in their culture, to talk of oneself as being absolutely in the right.

This highlights, in our view, that there tends, not infrequently, to be a difference between written expert reports and statements made in oral hearings, all the more so when experts at the hearing encounter fellow specialists from the same (often quite narrow) field.

Fact witnesses under cross-examination

Friends have told of a large number of cross-examinations gone wrong. The problem is rarely that a witness changes its mind, or contradicts itself, or has gaps in his or her memory. Instead, by far the most prevalent problem in cross-examination is that the witness feels intimidated by the questioning, becomes flustered, is looking for a way to end the ordeal, perhaps even feels the urge to agree with the questioner. It is significantly more likely that this sort of thing happens where the witness is from a legal culture that does not know cross-examination.

Cross-examination is very much a Common-law procedural tool. In Civil-law jurisdictions, it is primarily the Court that questions the witnesses. Party representatives may only ask supplementary questions once the Court is satisfied that it has made all the enquiries it needs to make. Importantly, training in examination technique does not tend to be part of legal training in most Civil-law jurisdictions.

Of course, the clash between an experienced Common-law interrogator and a timid witness from a Civil-law country can go both ways. One friend recalls a charming and soft-spoken witness interrogated rather harshly by an archetypical counsel raised in the Common-law tradition. The witness complained, quite rightly, about the counsel’s discourteous treatment. The tribunal – made up, as it happens, of a mix of Common and Civil lawyers – was not amused.

Coaching witnesses

There is no prohibition against coaching witnesses in international arbitration doctrine as such.[2] Doing so is, however, strictly taboo as a matter of professional conduct in a number of national legal systems. English lawyers are, for instance, prohibited from coaching any witness about the specifics of the case at hand, though they can, and do, provide witnesses with more generalised training to familiarise them with what to expect at the hearing, most especially cross-examination. This is not, however, a Common-law vs Civil-law thing. For example, witness preparation is accepted and routinely practised throughout the United States.

This can lead to misunderstandings on a number of levels. It is not uncommon for a panel made up of English lawyers to instinctively assign less credibility to a witness who has obviously been coached, despite the fact that in that witnesses’ own legal culture such coaching is de rigeur, and so the witness was not aware of doing anything wrong. It is similarly not unheard of for a witness from, say, England to be reluctant to undergo coaching, even though he or she would be entitled to do so before appearing before, say, a US forum.

Document production

Document production is one of those areas where most progress has been made in recent years in terms of developing a uniform set of guidelines (and expectations). The IBA Rules on the Taking of Evidence in International Arbitration, in particular, have been invaluable in this regard. They govern or guide a substantial proportion of arbitration disclosure today. Under these rules (which in reality operate more as guidelines) a party is – to simplify things slightly – entitled to all non-privileged documents relevant to the case and material to its outcome that the other party possesses, provided it can make sufficiently narrow requests that demonstrate the relevance and materiality of such documents.

Gone are the days when the stereotypical American party on one side of the dispute would make sweeping demands for “discovery” that essentially boiled down to access to all the opponent’s documentation, only for such demands to be angrily resisted by the equally stereotypical Continental European party on the other side, which would categorically refuse to hand over any documents other than those it relied on.

Yet even within the universe of the IBA Rules, parties and arbitrators from different backgrounds tend to have widely diverging approaches to what it means for a document to be relevant and material, or to be privileged. Friends have, for instance, seen arbitral tribunals rule that none but the most direct attorney-client communications are privileged. Conversely, tribunals that have made such sweeping rulings on document requests under the IBA Rules that they are closer to US-style discovery than the more moderate process envisaged by the Rules.

The reasoning of arbitral awards

Much, perhaps too much, has been made of the stereotypical divide between the Civil and Common law systems. One point where, in our experience, this stereotype is perhaps more true than elsewhere is in the writing of judgments and awards. Civil-law judgments tend to be very brief by comparison to the more lengthy and mellifluous decisions of Common-law judges. Not infrequently, this writing culture has an impact on arbitral awards, especially if those judges go on to sit as arbitrators post-retirement (a frequent occurrence). Practitioners have told of parties with a Common-law background utterly dismayed by what they perceived to be a lack of coherence in the reasoning in the awards of tribunals made up solely of Civil lawyers.

Conclusions

One main common thread that goes through the above examples is that all the international arbitrations in question were conducted by high-calibre arbitration professionals on all sides (i.e. parties and tribunal), and yet these issues were not foreseen by anyone. Such cultural misunderstandings, in other words, are often the proverbial elephant in the room that can unexpectedly derail, or at least impede, the progress of an arbitration.

There are some simple recommendations that may, it is hoped, be helpful to practitioners seeking to minimise the impact of such understandings:

  • Be mindful of culture: Take some time, at the start of a case, to consider the background of all participants, in particular in terms of their “home” legal culture, and how it may shape their expectations regarding the proceedings ahead.
  • Involve your clients: Your clients are unlikely to be lawyers, let alone international arbitration professionals. They are far less likely than you to be mindful of the implications posed by the cultural background of their opponents and the tribunal. Take some time to explain the issue to them.
  • Make culture a factor in choosing your tribunal: Assume you represent a client coming from one legal tradition against an opponent from a very different culture and tradition. Even if the contract in question purely concerns the law of the opponent’s country, all the facts and assets are located in the opponent’s country, and the parties have agreed for the proceedings to be conducted in that country’s official language rather than in English – a rare occurrence, to be sure, but it does happen – it may not be a good idea to agree to appoint a tribunal made up exclusively of “local” lawyers. Their expectations may be so far removed from your client’s expectations that it makes shepherding the case to a good outcome unfeasibly difficult.
  • Make culture a factor in choosing counsel or co-counsel: It is vital to ensure that any team of party representatives is able to “read” the tribunal to the maximum extent possible. Ideally, this should include at least one team member with a solid understanding of each tribunal member’s cultural background.

“Reading” a tribunal is of course an art rather than a science, and can take many forms. Not the least important aspect of it is being able to understand the tribunal members’ body language.

It is, of course, also advisable to consider this particular aspect (body language and the ability to interpret it) when selecting the tribunal (discussed above) and preparing witnesses for the hearing (discussed below).

  • Ensure your witnesses are properly prepared (in accordance with appropriate ethical and legal strictures): English lawyers cannot engage in outright witness coaching in relation to the case at hand. But they can ensure that witnesses – including expert witnesses – know what to expect in cross-examination and are not afraid of it.
  • Consider expert conferencing: The situation described above where an expert may be uneasy maintaining his or her position at the oral hearing, can often be avoided (or at least partially alleviated) by using conferencing instead of, or perhaps in addition to, the traditional cross-examination process. This tool is not, alas, available for fact witnesses.

[1] Michael Hwang, Why is There Still Resistance to International Arbitration in Asia? Lunchtime address at the International Arbitration Club, Autumn 2007. Available here: http://www.arbitration-icca.org/media/4/92275989554120/media012232972346990why_is_there_still_resistance_to_arbitration_in_asia.pdf

[2] See Nigel Blackaby et al, Redfern and Hunter on International Arbitration, Oxford: Oxford University Press, 2015 (6th ed.) at 6.123-6.124