TheMidnightClauseMayerBrown午夜条款MayerBrown

1、 mayer, brown, rowe and maw llpthe midnight clause: 10 traps to avoid in drafting arbitration agreementsa webinar june 19, 2007presented by william h. knull, iii and philippa m. caseymayer, brown, rowe & maw llptodays presenterswilliam h. knull, iii is co-chair of mayer, brown, rowe & maw ll

2、ps international arbitration group. he has extensive experience in transnational and domestic disputes involving oil and gas related matters and has frequently served as counsel and lead counsel in arbitrations under the auspices of the aaa/icdr, icc and nasd, and in ad hoc proceedings pursuant to u

3、ncitral rules.william h. knull iii, partner, hphilippa casey is a partner at mayer, brown, rowe & maw llp. her practice is focused on acting for clients in international litigation matters, including disputes arising out of cross-border contracts. she regularly advises on all aspects of litigati

4、on and arbitration practice and procedure, including in relation to the use of evidence in overseas proceedings, confidentiality issues, and the validity of dispute resolution agreements. philippa casey, partner, ltodays discussion ten traps to avoid when drafting international arbitration clauses q

5、&a at the end of the presentation operator assisted press *1 on your touch-tone dial when you are ready to ask a question brief survey after complex negotiations, a deal is finally taking shape with the deadline fast approaching, the junior deal lawyer is told to “add in the usual terms,” includ

6、ing an arbitration clause rationale: not really necessary: we all agree this is a great deal if there is a problem down the road, well fix it thenthe contextthe context (cont.) four years later, a serious dispute breaks out, and everyone looks at the arbitration clause for the first time but with th

7、e dispute in full swing, both sides calculate their procedural advantages, and an agreement to correct problems in the dispute resolution terms is impossiblesome potential results arbitration clause is unenforceable, and you are stuck in your counter-partys home court arbitration is held in a jurisd

8、iction whose courts favor the other side, or are prone to interfere in arbitration, or decline to enforce arbitral awards key parties are not bound to arbitrate the reasonable, cost-effective process you intended can be achieved only through an expensive, time-consuming, patience-thinning, adversari

9、al processone size does not fit all needs arbitration clause should fit the needs of the parties and the deal clause used last time may not work on new deal other sides clause may be dangerous clause promulgated by arbitration institutions may not fit needs however, the bespoke clause is full of tra

10、ps for the unwary without arbitration expertise, traps may not be apparenttrap 1: the missing party clause fails to name all the parties with rights/obligations under the agreement parent the one with the money guarantor not bound to arbitrate based on separate guarantee alone host government only i

11、f all formalities observed subcontractorstrap 1: the missing party (cont.) arbitration is a creature of contract waiver of right to judicial due process not lightly presumed written agreement is a prerequisite under the n.y. convention requirement of individual agreement applies to each juridical en

12、tity, including other members of a “group of companies” or government entities be sure everyone necessary is committedtrap 2: capacity to arbitrate once dispute arises, respondents will use any available argument as defense ability of state-owned entities to commit to arbitrate may be limited by con

13、stitution or statute local legal advice is essential whether entity is permitted to commit to arbitrate what approvals are necessary to make commitment enforceable what evidence is required to establish the existence of enforceable authorization to arbitrate even if law of place of arbitration would

14、 disregard law of home jurisdiction on capacity, ensure compliance to avoid cost of disputetrap 3: the seat of the arbitration problem: you propose neutral governing law (england, n.y.), neutral seat (paris, singapore) they propose own law as governing, seat in their capital midnight compromise: neu

15、tral governing law, seat in their capital result: potential disastertrap 3: the seat of the arbitration (cont.) reason: to the extent it is not governed by the parties agreement or their choice of arbitration rules, arbitral procedure and other important issues will be governed by the law of the off

16、icial seat of the arbitration not necessarily the place where hearings are held the seat must be designated by the agreement the arbitration is within the jurisdiction of the courts at the seat important: lex arbitri is the law of the seat, not the governing law of the contracttrap 3: the seat of th

17、e arbitration (cont.) selection of neutral seat is critical procedural and other issues not governed by rules or agreement are governed by law of the seat must be in a n.y. convention country (140+) hostile courts can interfere with and frustrate arbitration hearings can be held elsewhere by agreeme

18、nt or ruling of arbitrators for convenience, cost stick to established arbitration centers compromise on the official seat can lead to outcome-determinative problemstrap 3: the seat of the arbitration (cont.) problems with the involvement of local courts: many do not respect arbitration agreements a

19、nd awards many interfere in or delay the process some will actively interfere on behalf of local parties avoiding the other sides home courts is one of the principal advantages of arbitration in the international contexttrap 4: failure to optimize bit protection investment treaties protect foreign i

20、nvestors from host-government abuse bits bind governments to arbitrate even in the absence of a specific agreement with the investor protection is available only if an owner in the chain is a national of a state with a treaty with the host country, and claimant has a qualified “investment”trap 4: fa

21、ilure to optimize bit protection (cont.) there are more than 2400 bits, but not every pair of states is covered e.g., u.s. and venezuela have no treaty but venezuela and the netherlands do intermediate subsidiary in chain of ownership can usually bring bit claim unless bit denies benefits to mere “m

22、ail drop” entities can “stack” treaties, with more than one treaty applicable to an investment lesson: have to know host countrys treaties to optimize your protectiontrap 4: failure to optimize bit protection (cont.) activities in host country must constitute an “investment” very broadly defined inc

23、ludes stock ownership, contract rights, mineral concessions, etc. does not include mere commercial transactions (sales of goods or services) bits provides remedy against host government for breach of treaty provisions addition to, not a substitute for, claims against contract counter-party for breac

24、h of contracttrap 5: ambiguity in naming institution and rules examples: international chamber of commerce of hong kong court of international arbitration, london chamber of commerce, paris association of american arbitratorstrap 5: ambiguity in naming institution and rules (cont.) arbitration insti

25、tutions administer proceedings appoint arbitrators if parties cant agree or one party refuses to cooperate provide rules for arbitration negotiate arbitrators feestrap 5: ambiguity in naming institution and rules (cont.) results of ambiguity in designation: arbitration clause may fail altogether aut

26、hority to appoint arbitrators may be determined by local courts confusion as to arbitral rules may default to local statute extensive, expensive litigation in arbitration and potentially the courts on what was agreed totrap 5: ambiguity in naming institution and rules (cont.) defective designation m

27、ay negate meeting of the minds on arbitration altogether or change the agreement from what you thought it was best practice: use the clause suggested by the institution to avoid any possibility of confusion, and always check the description of the institution to ensure accuracy trap 6: ambiguity in

28、choice of forum or scope of agreement choice of forum: litigation or arbitration litigation and arbitration scope of agreement: arbitration of some, but not all, claimstrap 6: ambiguity in choice of forum or scope of agreement (cont.) permissive clause: contract provides that in the event of a dispu

29、te, parties “may” submit the matter to arbitration unless arbitration is unambiguously identified as the exclusive forum, clause leaves open to either party the option of seeking relief in the courts risk of parallel proceedings, race to judgmenttrap 6: ambiguity in choice of forum or scope of agree

30、ment (cont.) agreement to arbitration and broad submission to jurisdiction of particular court results in race to judgment expensive litigation over forum potentially parallel proceedings in arbitration and in court leverage for financially stronger party with weaker position to force settlement on

31、the othertrap 6: ambiguity in choice of forum or scope of agreement (cont.) ambiguity on scope of agreement to arbitrate ensures protracted, expensive fight on what is arbitrable may include fight on whether scope is to be determined by arbitrators or courts in most cases, broad clause to submit all

32、 disputes to arbitration is preferable to avoid any possible ambiguity special case: general arbitration clause, purchase price adjustment before experttrap 6: ambiguity in choice of forum or scope of agreement (cont.) broad form agreement“all disputes, controversies and claims arising out of, relat

33、ing to or in connection with this contract, including, without limitation, any question regarding its existence, validity, interpretation, performance, termination or breach, shall be referred to and finally resolved by arbitration in accordance with .”trap 6: ambiguity in choice of forum or scope o

34、f agreement (cont.) best practice: use express, exclusive agreement to arbitrate all disputes; remove unnecessary references to court jurisdiction; ensure there are no mutually incompatible clauses or clauses which lead to uncertainty in the performance of the agreement; avoid complexity where possi

35、ble.trap 7: inconsistent or ambiguous governing law clauses floating law clauses sonatrach v. ferrell the parties to two agreements which were inter-related had provided that japanese or english law would govern the resolution of the dispute depending on the identity of the parties involved held: su

36、ch a provision could not be enforced: parties had to be able to know under which law they were performing the contract at the relevant time contrast floating jurisdiction clauses perfectly acceptable under english lawtrap 7: inconsistent or ambiguous governing law clauses (cont.) in federal systems

37、(e.g., u.s., canada, switzerland), both federal and state/provincial/cantonal law may apply at a particular seat distinction can make an important difference scope of law may be different content of law may be different choice will be honored, so choice should be informed and unambiguously expressed

38、trap 8: indeterminate time periods problem: contract provides that, “in the spirit of cooperation,” parties must attempt to negotiate a resolution in good faith before resorting to arbitration if no agreement can be reached through negotiation, parties must submit to good faith mediation only if agr

39、eement is still not reached may a party initiate arbitration question: when can arbitration begin?trap 8: indeterminate time periods (cont.) solution: provide for crisp beginning and ending dates for each stage notice in writing of claim x days after notice to negotiate if no agreement after x days

40、from delivery of notice, mediate during subsequent y days if no agreement within y days, either party may initiate arbitrationtrap 9: over-specification problem: anticipating technical disputes, parties designate specific engineers specializing in the products technology actual dispute relates to qu

41、estions involving contract formation and interpretation, turning on legal implications of conflicting testimony of percipient witnesses by the time the dispute arises, designated engineers have moved, retired or passed awaytrap 9: over-specification (cont.) except for essential terms (scope, seat, a

42、ppointing authority, language, governing law), leave flexibility to structure proceedings to fit the need when the claim arises in addition to arbitrators qualifications, best to wait on, e.g., procedures (discovery, witness statements and testimony, etc.) until nature of dispute is knowntrap 10: as

43、suming confidentiality problem: since confidentiality is one of the main advantages attributed to arbitration, contract makes no separate provision, relying on reputation and tradition but: most arbitration rules and national arbitration statutes provide for only limited confidentiality, leaving room for disclosure solution: if confidentiality is important, provide for it specifically in the agreement and recognize that it may be ephemeral if either party files for or against enforcement in court (though note th