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Contemporary Issues in International Arbitration and Mediation:
The Fordham Papers 2015
The titles published in this series are listed at brill.com/ciam
 Contemporary Issues
in International Arbitration
and Mediation

The Fordham Papers 2015

Edited by

Arthur W. Rovine

LEIDEN | BOSTON
The Library of Congress Cataloging-in-Publication Data is available online at http://catalog.loc.gov
LC record available at http://lccn.loc.gov/2009247017

Typeface for the Latin, Greek, and Cyrillic scripts: “Brill”. See and download: brill.com/brill-typeface.

isbn 978-90-04-33454-0 (hardback)

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Copyright 2017 by Koninklijke Brill nv, Leiden, The Netherlands.

Koninklijke Brill nv incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi and
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This book is printed on acid-free paper and produced in a sustainable manner.

Contents

Keynote Address

Outlook for the Continued Vitality, or Lack Thereof, of Investor-state

Arbitration 1
Stephen M. Schwebel

Part 1
Innovations in International Arbitration

1 Merit Appeals in International Arbitration: Undermining Arbitration

or Facilitating True Party Autonomy 9
Justice Barry Leon and Cenobar Parker

2 Are Emergency Awards Enforceable in the United States? A Guide for

the Perplexed 31
William G. Bassler

3 Soft Law and Transnational Standards in Arbitration: The Challenge of

Res Judicata 52
William W. Park

4 Precedential Value of International Arbitral Awards 72

Josefa Sicard-Mirabal, Esq.

part 2
Investor-State Arbitration

5 Motions to Dismiss in International Treaty Arbitrations 89

Edward G. Kehoe

6 ex aequo et bono: Dispelling Misconceptions—A Viable Choice for

Governments and for Foreign Investors 95
Klaus Reichert sc

7 The Role of Damages Calculations in the Legitimacy of International

Investment Arbitration 108
Catherine Amirfar
vi Contents

8 Should icsid have or not have a New Appellate Process, Including a

Standing Body to Hear Annulment Applications? 119
Nicholas Fletcher qc

9 Crafting Appropriate Dispute Settlement: The Politics of

International Investment Disputes 134
Susan D. Franck

part 3
The Confluence of eu Law and International Arbitration—Both
Commercial and Investor-State

10 Overview of Recent EU-Related Developments in Commercial and

Investor-State Arbitration 153
John Gaffney

11 Investor-State Arbitration—The European Union as Amicus

Curiae? 163
Fidelma Macken sc

12 Application of eu Law in Investment Treaty Arbitration 179

Kaj Hobér Prof. Dr.

part 4
Corporate Issues

13 Material Adverse Change Clauses: Some Practical Thoughts 203

Wolfgang Peter

14 International Arbitration of Patent Claims 214

Thomas H. Lee

15 Corporate Interest and the Right to Regulate in Investor-State

Arbitration 226
Vera Korzun

Index 241
 Keynote Address

Outlook for the Continued Vitality, or Lack Thereof,

of Investor-State Arbitration

Stephen M. Schwebel

It may be recalled that the Covenant of the League of Nations and the Stat-
ute of the Permanent Court of International Justice were separate treaty
instruments. A state could be a member of the League while not being party
to the Court’s statute, and a state could be party to the Court’s statute without
being a member of the League—quite different from the u.n. arrangement,
where a party to the u.n. Charter automatically is party to the statute of the
Court, which is an appendix to the Charter.
In the mid-1930s President Roosevelt called on the United States Senate to
give its advice and consent to the United States’ adherence to the statute of the
Permanent Court of International Justice. That elicited widespread public and
political support. But the powerful press of William Randolph Hearst took the
lead in mounting an incendiary campaign of isolationist misinformation. The
result was that while a majority of the Senate favored adhering to the Court’s
statute, the required two-thirds’ majority was not achieved. That was a serious
setback to international adjudication and international responsibility.
In recent years, investor-state arbitration, one of the most progressive devel-
opments in international law and relations in the history of international law,
has been under attack, not from the reactionary right but from a mélange of
academics, some eminent,1 by labor union spokesmen, by others antagonistic

1 In April 2015, for example, a group of law professors, judges and a leading economist sent a
letter to United States Congressional leaders in which they urged Congress to oppose inves-
tor-State dispute settlement (isds) provisions in proposed trade deals. Prof. Laurence Tribe,
the Carl M. Loeb University Professor of Constitutional Law at Harvard, Judith Resnik, Arthur
Liman professor of law at Yale Law School, Cruz Reynoso, professor of law emeritus at the
University of California, Davis School of Law and a former associate justice of the Califor-
nia Supreme Court; H. Lee Sarokin, former United States circuit judge of the United States
Court of Appeals for the Third Circuit and Joseph E. Stiglitz university professor, Columbia
University signed the letter. A copy of the letter is available on-line at <http://www.afj.org/
wp-content/uploads/2015/05/5-Luminaries-Oppose-ISDS-Letter.pdf >, last visited on 30 De-
cember 2015.

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004334557_002

2 Schwebel

to globalization, such as the greens,2 by often well-meaning critics, which

does not mean that they are right. In my view they are largely and profoundly
wrong. But their clamor has had remarkable resonance, as Nic Fletcher and
Klaus Reichert have said so well this morning, so much so that taxi drivers in
Germany reputedly inform their passengers that they are opposed to investor-
state arbitration. Why in Germany, the fount of investor-state arbitration?3
Apparently, at least in part, because the German government decided to
abandon nuclear power after the nuclear disaster in Japan, provoking an ar-
bitration case against it by Vattenfall, a Swedish nuclear enterprise owned by
the Swedish government. I am not informed about that case,4 but my impres-
sion is that Vattenfall does not seek to interdict Germany’s sovereign choice to
abandon its nuclear power but rather seeks damages for breach of contract.
And why not? Insofar as Vattenfall seeks damages in German courts, as it has,
German public opinion reportedly finds that bearable. But insofar as it seeks
damages through investor-state arbitration, that is objectionable.
I am reminded of the volte face of the United States in nafta, the interpre-
tation of the North American Free Trade Agreement after the United States
discovered that it, too, could be sued.5

2 See e.g., “Green Party: ttip trade deal is a corporate power grab, that must be stopped” dated
11 July 2015, available at https://www.greenparty.org.uk/news/2014/07/11/green-party-ttip-
trade-deal-is-a-corporate-power-grab,-that-must-be-stopped/.last visited on 30 December
2015.
3 As described in Antonia R. Parra’s History of icsid, in the chapter on the Origins of the icsid
Convention. See Draft Convention on Investments Abroad, April 1959, 9 Journal of Public
Law 115 (1960) (Abs-Shawcross Draft Convention). As described in A.R. Parra, The History of
icsid, Oxford University Press, 2012, pp. 13–14. In addition, Germany’s Bilateral Investment
Treaty (bit) with Pakistan of 1959, modeled on the provisions of the Abs-Shawcross Draft is
the first recorded bit. As described in A.R. Parra, supra, p. 20.
4 See Luke Peterson, Germany’s Economic Ministry Floats A Fleshed-Out Vision of What a
Permanent Investment Tribunal Might Look Like, ia Reporter 5 May 2015, available at http://
www.iareporter.com/articles/european-commission-favors-more-judicialization-of-isds-in
-near-term-a-multilateral-court-in-the-longer-term/ last visited 30 December 2015.
5 nafta Article 1131(2) provides that “[a]n interpretation of the [nafta] Commission of a
provision of this Agreement shall be binding on a Tribunal established under this Section.”
The nafta Free Trade Commission on 31 July 2001 issued a note of interpretation concern-
ing, inter alia, the minimum standards of treatment under Article 1105 of nafta. See also,
Stephen M. Schwebel, The United States 2004 Model Bilateral Investment Treaty: An Exercise
in the Regressive Development of International Law, in G. Aksen et al., (eds.), Global Reflec-
tions on International Law, Commerce and Dispute Resolution—Liber Amicorum in honour
of Robert Briner 815 (2005).
Outlook for the Continued Vitality of ISDS 3

An upshot of the manufactured uproar in Europe is that the eu now pro-

poses to replace investor-state arbitration with an international investment
tribunal and an appeals recourse of that tribunal, which would be composed
of judges designated by states and only states. It so proposes in the context of
negotiations with the United States for a transatlantic trade and investment
partnership, the so-called ttpi, but it looks to the eventual displacement of
investor-state arbitration altogether by an international investment court.
The pertinent press release of the European Commission, a “fact sheet” dated
16 September 20156 advances this in terms that appear to be designed to knock
down the straw men that critics of investor-state arbitration have constructed.
It breathlessly begins, “An article on the right to regulate This is new.” The fact
sheet continues, “It”—that is, the eu’s proposal—“clearly states that the right
to regulate for public policies is fully preserved and clarifies that investment
protection shall not be interpreted as a commitment from governments not to
change the legal framework, including in a manner that may negatively affect
the investors’ expectations of profits.”
But it may be asked, what bilateral or multilateral investment treaty ques-
tions the government right to regulate? What awards of investor-state arbitral
tribunals have done so? What arbitral tribunal has simply ruled in favor of the
investors’ expectations of profits?
The press release then goes on to propose an investment court system. “This
is new. This is a fundamental change compared to the old isds system, which
operates on an ad hoc basis with arbitrators chosen by the disputing parties.
The elements proposed for the operation of an investment tribunal are an ef-
fective way to insulate judges from any real or perceived risk of bias.” The infer-
ence of the passage I have just read is that the system of arbitrators chosen by
the parties found in bilateral investment treaties was not insulated from any
real or perceived risk of bias.
Yet the parties to cases before the new investment court will be investors
and states. The tribunal will be composed of judges “publicly appointed” only
by states. The fact sheet recounts that the proposed treaty provision on the

6 European Commission—Fact Sheet, Reading Guide dated 16 September 2015, available at

http://europa.eu/rapid/press-release_MEMO-15-5652_en.htm,. On 16 September 2015, the
European Commission issued a press release as well as the text of its proposal for a new
investment court system for the Transatlantic Trade and Investment Partnership (ttip). The
press release is available at http://europa.eu/rapid/press-release_IP-15-5651_en.htm. On 12
November 2015, the European Commission transmitted its proposed text to the United States
for further negotiations of ttip. That text is available here: http://trade.ec.europa.eu/doclib/
docs/2015/november/tradoc_153955.pdf, last visited 30 December 2015.
4 Schwebel

right to regulate is “a direct instruction to the judges which the appeal tribunal
will ensure is properly respected.”
It specifies that “the members of the appeal tribunal will ensure that there
could be no doubt as to the legal correctness of the decisions of tribunals.”
There would be “government control of interpretation,” presumably of inter-
pretation of the treaty in the vein of nafta’s precedent.
The question arises, if there is a risk, real or perceived, of bias of ad hoc
arbitral tribunals, as the eu Commission appears to insinuate, is there not a
risk, real or perceived, of bias in favor of states and against investors in the eu
Commission’s proposals? If the fact of appointment by a party of an arbitra-
tor is taken to import bias, real or perceived, is not appointment of arbitrators
solely by states a formula for establishment of a court biased against investors?
I do not believe that it is the intention of the eu to entrench such bias in
the courts proposed by the eu Commission. But if it is to be presumed that
an arbitrator appointed by an investor is biased in favor of the investor, a pre-
sumption that the record of investor-state arbitration does not sustain, is there
reason to presume that judges appointed only by states will not be biased in
favor of states?
The truth is that no judge and no arbitrator can be totally objective. We are
all prisoners of our own experience. But it is also true that courts of states es-
sentially governed by the rule of law largely, not entirely but largely, achieve
sufficient objectivity—and that is true as well of international courts and
international arbitral tribunals, and it is true of arbitral tribunals dealing with
investor-state disputes.
For my part I find Susan Franck’s statistics instructive. I don’t think the fun-
damental setup of investor-state arbitration is asymmetrical. Just as the u.s.
Court of Claims is a forum for claims against the United States, or human rights
courts are claims of individuals against states, so investor/State tribunals are
for claims against states. That is their fundamental structure. So arbitration
in bilateral investment treaties enables the investor to bring a case against the
state which otherwise has a plentitude of levers to pull in asserting its author-
ity over the foreign investor.
All that said, I don’t think there is any fundamental objection in principle
to governments agreeing to establish an international investment court and an
international investment court of appeals. Even if the proposals of the Europe-
an Commission, as they are worded and particularly described in its fact sheet,
seem to be designed to appease the uninformed critics of investor-state arbi-
tration; even if they have snide remarks, as they do, that the European Com-
mission favors the rule of law but not the rule of lawyers, nevertheless, I think
their proposals merit every consideration. And they have positive elements,
Outlook for the Continued Vitality of ISDS 5

among them affirming guarantees of no expropriation without compensation,

though the extent of compensation is undefined in the eu fact sheet. The eu
Commission’s scheme also provides for a general guarantee of fair and equi-
table treatment and physical security; that is, fair and equitable treatment and
physical security of foreign investment. And it contains a commitment that
“governments will respect their own written and legally binding contractual
obligations towards an investor.” That is a quotation from the fact sheet.
These are reassuring provisions, indicating that however much the eu Com-
mission endeavors to appease the critics of investor-state arbitration, it does
not propose to embrace the extremities of the discredited so-called new inter-
national economic order that disfigured u.n. resolutions of the 1970s.
Now, whether in fact the parties to the projected ttpi will agree to replace
investor-state arbitration with investment courts remains to be seen. It is no-
table that the European Union and Canada have concluded, but not yet rati-
fied, an investment treaty that provides for investor-state arbitration relatively
recently, within the last year or so.
It is also striking that the negotiators of the Trans-Pacific Trade Agreement
reportedly have agreed to include provision for investor-state arbitration,
though with carve-outs.
The European Union, estimable as it is—and in all, it is estimable, and any-
one who has the least sense of the history of the last few hundred years will
recognize what a great achievement the European Union is—nevertheless, the
European Union has its own hang-ups and peculiarities. Its enactment in re-
spect of genetically modified seeds was simply anti-scientific While the Euro-
pean Union is in a commendable lead in matters of climate control, in matters
of seeds, the eu’s position is akin to that of the deniers of climate change, too
many of whom pollute the Congress of the United States.
The current approach of the eu to investor-state arbitration may be seen on
balance, in my view, as questionable, not only with respect to investor-state ar-
bitration at large but in the singularities of its attempts to neuter investor-state
treaties between members of the European Union based on the dubious but
factually questionable proposition that the levels of adjudication are the same
throughout the Union. It is understandable that the European Commission
takes that position, but it doesn’t happen to correspond with the facts.
It is also unclear whether the international community as a whole—north,
south, east, west—is prepared to agree not only on investment courts but on
the legal principles to be applied by those courts. The history of United Nations
negotiations and resolutions on permanent sovereignty over natural resources,
the new international economic order, and the Charter of Economic Rights
and Duties of States, as well as the aborted history of the oecd in respect of a
6 Schwebel

multilateral agreement on international investments, suggests that agreement

will not be easily achieved, or achieved at all.
For some three or four decades, the heated yet sterile debates in the u.n.
on these issues appear to have been dropped into the dustbin of history, to
be replaced by the refreshing and realistic terms of bilateral investment trea-
ties. The critics of bilateral investment treaties and the effort of the eu Com-
mission to appease their misguided criticism will have much to answer for if
bilateral investment treaties are put aside in favor of regressive international
confrontation.
 Part 1
Innovations in International Arbitration

∵
 chapter 1

Merit Appeals in International Arbitration:

Undermining Arbitration or Facilitating
True Party Autonomy
Justice Barry Leon and Cenobar Parker

As a party driven process, over the years international arbitration has evolved
to meet the changing needs and demands of its users. In recent years, emer-
gency arbitrator provisions, fast-track options and specialized tribunals are but
some of the examples of how the international arbitration community, and ar-
bitral institutions in particular, have sought to adapt to the needs and demands
of the international business community or segments of it.
One recent and somewhat controversial innovation has been the introduc-
tion of arbitration appeal rules that provide for appeals of arbitral awards on
their merits, meaning a review for errors of law, errors of fact and/or errors of
mixed fact and law, to a second arbitral tribunal (“merit appeals”).
On November 1, 2013, the American Arbitration Association/International
Centre for Dispute Resolution (“aaa/icdr”) introduced Optional Appellate
Arbitration Rules (“aaa/icdr Appeal Rules”). The aaa/icdr Appeal Rules pro-
vide a process for merit appeals, by agreement of the parties. While not the first
institution to introduce rules for merit appeals, the aaa/icdr in some ways re-
ignited a broader debate in the international arbitration community, not just
about the benefits of merit appeals but about whether they are fundamentally
inconsistent with international arbitration as a dispute resolution process.
The proponents of merit appeals highlight the desirability of correcting an
arbitration award that is based on a material error, whether by error in law
and/or a misapprehension of the facts. Given the significant interests often
at stake in international commercial disputes, parties often choose between,
on the one hand, the risk of a flawed arbitration decision for which they may
not have a remedy and, on the other hand, what may be thought of as the
less attractive process of court litigation (whether because of considerations
of enforcement, time and cost, privacy and confidentiality, choice of and ex-
perience of adjudicators, or otherwise), but which offers avenues of appeal to
correct errors. Merit appeals of arbitration awards are a direct answer to this
sometimes unpalatable choice.
However, with finality being one of the traditional basic underlying prin-
ciples of arbitration, many in the international arbitration community world
argue that merit appeals “just ain’t international arbitration”.

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004334557_003

10 Leon and Parker

This paper challenges this position, suggesting that arbitration is, first and
foremost, a party driven process. The cornerstone of arbitration is party au-
tonomy. If parties—the true users of international arbitration—want merit
appeals, does it not behoove providers to offer merit appeals?
This is not to say that merit appeals are desirable in many situations—
parties desiring efficiently achieved finality certainly should think twice about
agreeing to merit appeals—but ultimately it is the parties, not the service
providers, who should make the assessment. Where parties consider that the
risk reduction or other advantages of having a merit appeal makes sense, why
should the providers of arbitration services deny that to them?
In challenging the no-merit appeals perspective, this paper canvasses the
limited means otherwise available to review an arbitration award and data
that suggests that a material segment of the international business commu-
nity may shy away from arbitration due to the limitations on merit appeals. It
then reviews the current landscape of optional merit appeals procedures and
identifies important criteria to consider in crafting the most appropriate merit
appeals processes for the particular situation. The paper concludes that the
cornerstone of arbitration—party autonomy—should prevail, leaving it to the
parties to craft arbitration procedures that they consider best suits their needs.
To support party autonomy, arbitral institutions should provide institutional
rules for optional merit appeals, or at the very least make their rules compat-
ible with the parties’ choice of merit appeals. If parties agree to merit appeals,
there is no principled basis to deny them.

i Statute Based Judicial Review and Institutional Restrictions

on Merit Appeals

The question for many parties, whether before entering into an arbitration
agreement, or after an award has been rendered, is what to do if there are
grounds to believe that the arbitral tribunal misinterpreted the law and/or
misapprehended the facts.
While domestic arbitration statutes often provide parties with an option to
agree to—or opt out of—an appeal of the arbitration award to the courts on
questions of law,1 in international arbitration there is usually no ability to re-
view the merits of an arbitration award.
If a party disagrees with the outcome of an arbitration award, it is gener-
ally restricted to an application to set aside the award or it may oppose, on

1 See for example, the Ontario Arbitration Act, 1991, so 1991 c 17, section 45.
Merit Appeals in International Arbitration 11

comparable limited grounds, the successful party’s application for recognition

and enforcement of the arbitral award.
While in some instances parties have sought to expand the grounds of judi-
cial review of international arbitration awards, they have largely failed.
Lastly, given that a significant number of international arbitrations are
administered through arbitral institutions, the institutional rules themselves
pose a significant barrier to merit appeals: in agreeing to an administered or
institutional arbitration, parties often waive any recourse to an appeal of the
arbitration award, to the extent an appeal might otherwise be available.

A Statute Based Judicial Review

Most jurisdictions limit the grounds upon which an arbitration award may be set
aside on judicial review to correspond with the following six grounds in the Mod-
el Law on International Commercial Arbitration of the United Nations Commis-
sion on International Trade Law (uncitral) (“Model Law”), Article 34:2

1. invalidity of the arbitration agreement;

2. lack of notice to a party or its inability to present its case;
3. an award on matters outside the scope of the arbitration agreement;
4. irregularity in the composition of the arbitral tribunal;
5. non-arbitrability of the subject matter; and
6. violation of public policy.

The Model Law has been adopted (with or without modifications) in some 100
jurisdictions. Article 34 of the Model Law provides that in respect of arbitra-
tion awards, the exclusive recourse to a court in respect of an arbitration award
is an application to set aside the award on the stated six bases.3

2 For example, the French Code of Civil Procedure provides in article 1518 that an international
arbitration award may only be challenged through an application to set aside. Similarly, in
the United States, The Federal Arbitration Act, 9 usc § 1, which applies to international arbi-
tration awards, limits judicial intervention to the grounds set out in sections 10 and 11, which
include the partiality of the arbitrator, the adjudication of matters outside the scope of the
arbitration agreement, and procedural misconduct that prejudices the rights of any party.
3 Article 34. Application for setting aside as exclusive recourse against arbitral award
(1) Recourse to a court against an arbitral award may be made only by an application for set-
ting aside in accordance with paragraphs (2) and (3) of this article.
(2) An arbitral award may be set aside by the court specified in article 6 only if:
(a) the party making the application furnishes proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some inca-
pacity; or the said agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law of this State, or
12 Leon and Parker

These grounds largely correspond to the exceptions to recognition and en-

forcement of arbitration awards set out in Article v of the New York Conven-
tion on the Recognition and Enforcement of Foreign Arbitral Awards.4

(ii) the party making the application was not given proper notice of the appointment
of an arbitrator or of the arbitral proceedings or was otherwise unable to present
his case, or
(iii) the award deals with a dispute not contemplated by or not falling within the terms
of the submission to arbitration, or contains decisions on matters beyond the
scope of the submission to arbitration, provided that, if the decisions on matters
submitted to arbitration can be separated from those not so submitted, only that
part of the award which contains decisions on matters not submitted to arbitra-
tion may be set aside, or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in ac-
cordance with the agreement of the parties, unless such agreement was in conflict
with a provision of this Law from which the parties cannot derogate, or, failing
such agreement, was not in accordance with this Law; or
(b) the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under
the law of this State, or
(ii) the award is in conflict with the public policy of this State.
(3) An application for setting aside may not be made after three months have elapsed from
the date on which the party making that application had received the award or, if a re-
quest had been made under article 33, from the date on which that request had been
disposed of by the arbitral tribunal.
(4) The court, when asked to set aside an award, may, where appropriate and so requested
by a party, suspend the setting aside proceedings for a period of time determined by it in
order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to
take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for
setting aside.
4 Article v
1. Recognition and enforcement of the award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the competent authority where
the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article ii were, under the law applicable to
them, under some incapacity, or the said agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon, under the law of the
country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the ap-
pointment of the arbitrator or of the arbitration proceedings or was otherwise unable
to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration, or it contains decisions on matters beyond the scope
of the submission to arbitration, provided that, if the decisions on matters submitted
Merit Appeals in International Arbitration 13

Some jurisdictions provide for a limited exception to the general rule that
a court will not consider the merits of an arbitration award by allowing par-
ties, where the arbitration is seated in the jurisdiction, to appeal an arbitra-
tion award on a question of law. Notably, section 69 of the English Arbitration
Act 1996 provides that, subject to the parties’ agreement, an award may be ap-
pealed on a question of law. This appeal right is subject to (absent agreement
of the parties) leave of the court on the following grounds:

1. the determination of the question will substantially affect the rights of

one or more of the parties;
2. the question is one that the tribunal was asked to determine;
3. on the basis of the tribunal’s findings of fact, the decision on the question
is obviously wrong, or the question is one of general public importance
and the decision of the tribunal is at least open to serious doubt; and
4. it is just and proper for the court to determining the question notwith-
standing the parties’ agreement to arbitrate.5

The limited grounds of appeal on questions of law in some jurisdictions are

therefore the only meaningful means of recourse to a court on the merits of an
international arbitration award.6

to arbitration can be separated from those not so submitted, that part of the award
which contains decisions on matters submitted to arbitration may be recognized and
enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in
­accordance with the agreement of the parties, or, failing such agreement, was not in ac-
cordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding, on the parties, or has been set aside or sus-
pended by a competent authority of the country in which, or under the law of which,
that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under
the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of
that country.
5 The uk is not the only jurisdiction with an exception for appeals on questions of law. See
also the New Zealand Arbitration Act, 1996 which is discussed in more detail below and which
contains a similar provision to section 69 of the English Arbitration Act, 1996.
6 Interestingly, a recent debate has commenced in England concerning the appropriate scope
of section 69 of the Arbitration Act, 1996 and merit appeals to the judiciary, more generally.
The debate was initiated by Lord Thomas, Lord Chief Justice of England and Wales, in his
14 Leon and Parker

These statutory limits on judicial review of arbitral awards pose a problem

for parties seeking an appeal of an arbitration award based on errors for two
reasons:

1. to the extent institutional rules do not preclude such a review, or where

the parties have not adopted institutional rules, the parties’ agreement
is unlikely to be sufficient to confer the judiciary with appellate jurisdic-
tion, absent statutory authority; and
2. as already alluded to, generally speaking arbitral institutions require par-
ties to waive any limited rights they may otherwise have had for a merit
appeal.

B Expanding the Scope of Judicial Review

Attempts by parties to expand judicial review of arbitration awards is, in
and of itself, evidence that some parties desire an error correcting review in

speech at the Bailli Lectures in March 2016, suggesting that in narrowing judicial powers of
intervention in the English Arbitration Act since its 1979 version, English lawmakers and the
judiciary made a mistake. Lord Thomas stated that restricting judicial oversight on questions
of law and resolving legal disputes behind the closed doors of private arbitration hinders
the development of the common law, “‘retard[s] public understanding of the law and public
debate over its application’ and means issues are not exposed on which legislation is needed.
Individuals are hindered from accessing the law to gain legal certainty and thus from fully
understanding their rights and obligations so they can plan their affairs”. Lord Thomas would
provide the courts with more flexibility in permitting appeals, which he suggests would lead
the way to more judicial consideration of questions of public importance. Lord Saville and
Sir Bernard Eder, both English judges turned arbitrators, responded in writing to Lord Thom-
as. According to Saville and Eder, expanding the scope of judicial intervention in section 69
of the Arbitration Act, 1996 would be inconsistent with the judicial intervention in arbitration
proceedings allowed in most jurisdictions around the world. As a result, more interventionist
English courts could deter parties from resolving their disputes in England using the London
Court of International Arbitration. Moreover, it is considered unfair to require parties to an
arbitration to bear the burden, in the form of additional time and cost, of promoting the
development of English common law. Lastly, and most importantly, Sir Eder pointed out that
parties to an arbitration have exercised a choice to resolve their dispute outside the scope
of judicial scrutiny, and such exercise of party autonomy ought to be supported. See: Alison
Ross, “Arbitration hinders development of common law—Lord Chief Justice of England and
Wales”, Global Arbitration Review, March 31, 2016, and Alison Ross, “Judges-turned-arbitrators
resist expansion of right to appeal awards”, Global Arbitration Review, April 29, 2016. See also
the response to Lord Thomas’ speech from J William Rowley, qc, “London Arbitration Under
Attack” Global Arbitration Review, May 16, 2016. As with the choice to exclude judicial inter-
vention on the merits of an award, parties ought to be entitled to choose arbitration appeals.
Merit Appeals in International Arbitration 15

arbitration.7 There are two notable instances where parties have attempted—
but failed—to expand the statutory scope of judicial review.
The 2008 United States Supreme Court decision in Hall Street Associates,
llc v Mattel, Inc. (“Hall Street”)8 held that the grounds for vacatur set out in the
Federal Arbitration Act are exhaustive and cannot be expanded by agreement
of the parties to include a merit appeal.
The parties in Hall Street executed an arbitration agreement which
contained the following provision for judicial review of the arbitration award:

…the court shall vacate, modify or correct any [arbitration] award: (i)
where the arbitrator’s findings of facts are not supported by substantial
evidence, (ii) where the arbitrator’s conclusions of law are erroneous.9

The majority of the Supreme Court, considering the plain language of sec-
tion 9 of the Federal Arbitration Act, held that it requires that a court “‘must’
confirm an arbitration award ‘unless’ it is vacated, modified, or corrected ‘as
prescribed’ in sections 10 and 11.”10 The Court relied on what it considered the
policy underlying the Federal Arbitration Act, and specifically, the desire to put
arbitration proceedings on equal ground with other contracts by limiting judi-
cial interference.
The Supreme Court rejected the argument that the parties could expand
the grounds of review set out in sections 10 and 11 of the Federal Arbitration Act
by agreeing to have the Federal Court review an arbitration award for general
legal errors on the ground of “manifest disregard” for the law, and it rejected
the argument that the parties’ agreement to expand the grounds for judicial
review is consistent with the purpose of the Federal Arbitration Act, namely to
enforce agreements to which parties entered.11
The Court expressed a concern that if the limited grounds of judicial review
were expanded, the doors to full legal and evidentiary appeals would swing
wide open rendering the actual arbitration “merely a prelude to a more cum-
bersome and time-consuming judicial review process.”12

7 William H. Knull, iii and Noah D. Rubins, Betting the Farm on International Arbitration:
Is it Time to Offer an Appeal Option? 11 The American Review of International Arbitration
4, p 531 (2000) (“Knull and Rubins”) at page 534.
8 128 S Ct 1396 (2008).
9 Hall Street, pages 1400–1401.
10 Hall Street, pages 1405.
11 Hall Street, page 1404.
12 Hall Street, page 1405.
16 Leon and Parker

Of particular interest is that while Hall Street closed the door on merit ap-
peals to courts under the Federal Arbitration Act, the Court did not say that sec-
tions 9–11 of the Federal Arbitration Act “exclude more searching review based
on authority outside the statute…”13 Presumably, therefore, nothing in the Fed-
eral Arbitration Act prevents parties from agreeing to private merit appeals,
though interesting questions arise as to what powers the appeal tribunal has in
respect of the initial arbitration award (i.e. to confirm, vary, remit, or overturn
the underlying arbitration award), and of what consequences the exercise of
those powers has for the recognition and enforcement of the underlying arbi-
tration award.
Another example of the judiciary’s hesitation to expand its powers of judi-
cial review of arbitration awards is found in the New Zealand Supreme Court’s
decision in Carr v Gallaway Cook Allan (“Carr”).14 The parties in Carr executed
an arbitration agreement which provided that each side had a right of appeal
to the High Court on any question of law or fact. The applicable statute, the
Arbitration Act 1996,15 which applies to both domestic and international ar-
bitrations, includes in section 5 of Schedule 2 an optional appeal to the High
Court on questions of law. There is no statutory authority for any appeal in
respect of questions of fact. By the time the case reached the Supreme Court, it
was agreed that the parties were unable to expand the scope of the Arbitration
Act 1996 to include appeals of questions of fact. The issue before the Supreme
Court was whether such invalid agreement rendered the whole arbitration
agreement invalid, which the Court held that it did.
While Carr did not involve an international arbitration, the same provision
at issue in the Arbitration Act 1996 allows parties to an international arbitra-
tion to agree to an appeal on a question of law if the arbitration was or would
have been in New Zealand.16 Where the international arbitration does not take
place in New Zealand, parties are limited to the traditional grounds for refus-
ing recognition and enforcement.17 Given the Court’s rejection of the parties’
agreement, it is unlikely that parties to an international arbitration would be
able to expand the scope of judicial review under the Arbitration Act 1996. As
in Hall Street, Carr highlights the unwillingness of some courts, even where
the parties agree, to permit judicial review of arbitration awards beyond the
explicit grounds of judicial review set out by statute.

13 Hall Street, page 1406.

14 [2014] nzsc 75.
15 Arbitration Act, 1996 (nz).
16 Arbitration Act 1996, section 6.
17 Arbitration Act 1996, articles 35 and 36 of Schedule i.
Merit Appeals in International Arbitration 17

By contrast, there is one decision of the Ontario Superior Court of Justice (a

court of first instance) that leaves open the question of whether parties could
expand the court’s powers of review under Ontario’s International Commercial
Arbitration Act (“icaa”),18 which adopts the Model Law. In Noble China v Lei
(“Noble China”),19 the parties agreed to resolve their dispute by arbitration, and
included in the terms of arbitration a provision that “[n]o matter which is to
be arbitrated is to be the subject matter of any court proceeding other than a
proceeding to enforce the arbitration award.”
Before the court was the arbitration award and supplemental arbitration
award in favor of Noble China. Noble China brought an application for en-
forcement of the arbitration award pursuant to Article 35 of the Model Law,
while Lei brought an application under Article 34 of the Model Law, to have
the award set aside.
In dismissing Lei’s application, the Court found that Lei had “clearly and
unambiguously” agreed “the only proceeding which would not be resolved by
arbitration would be a proceeding to enforce the award”.20 Of importance to
the Court was the sophistication of the parties and their exercise of autonomy,
not only in choosing to arbitrate their dispute, but in choosing to apply the
icaa (and therefore the Model Law), which gives the parties the freedom to
determine their own rules of procedure.
The Court noted that the icaa does not prevent parties from contracting
out of the right to set aside an award under Article 34 of the Model Law. Had
the legislature intended to do so, the Court noted that it would have done so,
as it did in Ontario’s domestic Arbitration Act, 1991,21 which prohibits parties
from explicitly or implicitly contracting out of the judicial application to set
aside an arbitration award on grounds largely analogous to Article 34 of the
Model Law.22
The Court concluded that, unlike certain other provisions of the Model Law,
Article 34 is not a mandatory provision. It held that the philosophy and struc-
ture of the Model Law is that “[t]he parties make their own agreements, so
long as they do not derogate from its mandatory provisions [and] Article 34
is not such a provision.”23 The Court highlighted that Article 34 uses permis-
sive language, for example, providing that an “arbitral award may be set aside”

18 rso 1990, c I9.

19 (1998), 42 or (3d) 69 (onsc).
20 Noble China, page 15.
21 so 1991, c 17.
22 See Sections 3 (Contracting Out) and 46 (Setting Aside) of the Arbitration Act, 1991.
23 Noble China, page 93.
18 Leon and Parker

and it rejected the argument that Article 34 must be read in conjunction with
the mandatory requirements in Article 18—Equal Treatment of the Law—and
Article 19—Determination of the Rules of Procedure.24 Rather, the Court con-
cluded that the parties may agree to restrict the review of the arbitration award
so long as in so doing they do not agree to anything that is contrary to a manda-
tory provision, which it found they did not in this case.
While this decision did not expand the traditional grounds of judicial review
of an arbitration award, it upheld the parties’ agreement to narrow or restrict
these grounds which one may surmise suggests that had the parties agreed to
expand them, a similar conclusion may have been reached. However, what this
case did not address is how parties could confer jurisdiction on the court in the
absence of statutory authority. (In Canada, the provincial and territorial supe-
rior courts are courts of first instance with inherent jurisdiction, but not all
first instance courts in Canada or elsewhere have inherent jurisdiction). It is of
note that a 2004 decision by the Ontario Court of Appeal in Brent v Brent, held
that absent statutory authority parties could not confer jurisdiction on that
court.25 While the Court of Appeal is a statutory court in Ontario, given the
legislative schemes for judicial intervention set out in the Arbitration Act, 1991
and the icaa, it is unlikely that parties could confer jurisdiction not provided
for in those legislative acts, even in respect of a court of inherent jurisdiction.
Despite the decision in Noble China, which dealt with limiting rather than
expanding rights of review by courts, given that parties in Ontario likely do
not have the authority to confer jurisdiction on courts to hear merit appeals
of arbitration awards, it seems unlikely that courts in Ontario will hear merit
appeals absent statutory authority.

C Institutional Rules
The majority of arbitral institutional rules are a further obstacle for parties
seeking merit appeals. While party autonomy permits parties to deviate from

24 Noble China, pages 91–93. Article 18. Equal treatment of parties

The parties shall be treated with equality and each party shall be given a full opportunity
of presenting his case.
Article 19. Determination of rules of procedure
(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to
be followed by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law,
conduct the arbitration in such manner as it considers appropriate. The power con-
ferred upon the arbitral tribunal includes the power to determine the admissibility,
relevance, materiality and weight of any evidence.
25 (2004), 69 or (3d) 737 (onca).
Merit Appeals in International Arbitration 19

most provisions,26 in adopting most institutional rules, the default rules pro-
vide that parties agree that every award is final and binding such that they
waive any available right of appeal or review on the merits of an arbitration
award.
For example, the Arbitration Rules of the London Court of International
Arbitration state in Article 26.8 that “… the parties also waive irrevocably their
right to any form of appeal, review or recourse to any state court or other legal
authority, insofar as such waiver shall not be prohibited under any applicable
law.” Article 34(6) of the Arbitration Rules of the International Chamber of
Commerce states that “[b]y submitting the dispute to arbitration under the
[icc] Rules, the parties undertake to carry out any award without delay and
shall be deemed to have waived their right to any form of recourse insofar as
such waiver can validly be made.”27

ii Institutional Responses to Interest in Merit Appeals

Optional merit appeals rules are not a new development. In fact, the Inter-
national Institution for Conflict Prevention & Resolution (“cpr”) adopted its
Arbitration Appeal Rules (“cpr Rules”) in 1999 and amended them in 2007.
However, it seems that the adoption of the aaa/icdr Appeal Rules reig-
nited the debate about merit appeals. This may be tied, in part, to the fact that
the aaa/icdr is the first international arbitration institution to adopt optional
international merit appeals—the cpr rules are limited to appeals of arbitra-
tions conducted in the United States.28
In addition to the cpr Rules and the aaa/icdr Rules, at least two other
arbitral institutions have adopted merit appeal procedures

26 Irene M. Ten Cate, International Arbitration and the Ends of Appellate Review, 44 Inter-
national Law and Politics 1109 (2012) (“Ten Cate”) at page 1117.
27 Other examples include Rule 28.9 of the 2013 Arbitration Rules of the Singapore Interna-
tional Arbitration Centre, which provides that in agreeing to arbitration under the Rules,
the parties “irrevocably waive their rights to any form of appeal, review or recourse to any
state court or other judicial authority insofar as such waiver may be validly made and the
parties further agree that an award shall be final and binding on the parties from the date
it is made.” Rule 34.2 of the Administered Arbitration Rules of the Hong Kong Internation-
al Arbitration Centre provides that “[t]he parties and any such person shall be deemed to
have waived their rights to any form of recourse or defence in respect of enforcement and
execution of any award, in so far as such waiver can validly be made.”
28 Rule 1.1.
20 Leon and Parker

1. jams Optional Arbitration Appeal Procedure (“jams Rules”), adopted in

2003; and
2. European Court of Arbitration’s Arbitration Rules of the European Court of
Arbitration (“eca Rules”), as of January 1, 2011.

It is of note that while both the cpr Rules and the aaa/icdr Rules are avail-
able to parties whether or not the underlying arbitration was conducted pur-
suant to the institution’s arbitration rules, the jams Rules and the eca Rules
apply in respect of arbitration awards rendered pursuant to their respective
institutional arbitration rules.29
Lastly, in the Spring of 2015, Arbitration Place, an international arbitration
hearing centre in Toronto, released its Arbitration Appeal and Review Rules.
While Arbitration Place is not an arbitral institution, these rules are lightly ad-
ministered and provide for both private reviews of arbitral awards on Model
Law grounds of review alone, or merit appeals on errors of law, fact or mixed
fact and law.
As all of these merit appeal rules illustrate, there are many dimensions to
the possible structure of merit appeals procedures. Each choice can either re-
duce or enhance the alleged benefits of a merit appeal.
Among the issues—and the choices that merit appeals rule drafters need to
consider—are the following 15 considerations:

1 Should Merit Appeals be an Option in Institutional Rules, with the

Default Position being No Appeal?
This consideration speaks to whether institutions wish to encourage merit ap-
peals, or simply support parties that request it. With one exception, all of the
merit appeals rules apply by agreement of the parties either before or after the
original award is rendered. The eca Rules are unique in that unless otherwise
agreed by the parties, all arbitrations conducted pursuant to the eca Rules
have available merit appeals, unless contrary to an applicable mandatory law
or expressly excluded by agreement of the parties.30
In support of party autonomy, arbitral institutions may wish to consider
making their rules compatible with the parties’ choice of merit appeals.

2 Should there be Restrictions on When Merit Appeals Can be Taken or

Should there be Disincentives to Pursuing Merit Appeals?
As noted above, one of the suggestions in the commentary to the cpr Rules is
to have the parties agree to a monetary threshold before merit appeals rights

29 Rule B(i) of jams Rules and Rule 28.2 of the eca Rules.
30 Rules 1.4 and 28.1.
Merit Appeals in International Arbitration 21

becomes available or to preclude merit appeals where a three-member tribu-

nal has unanimously rendered the award.
Another disincentive, which has been incorporated into most of the merit
appeals rules, may be the requirement that the appellant ­deposit in escrow all
or part of the amount awarded in the underlying arbitration and/or pay the
fees from the arbitration. For example, the jams Rules require all of the fees
for the underlying arbitration to be paid in full before the appeal will be sched-
uled.31 Similarly, the aaa/icdr Rules require that the aaa’s fees and costs from
the underlying arbitration be paid in full before the appeal is initiated.32 The
eca Rules provide that an appeal will only be admissible if the appellant pays
or provides a guarantee payable on demand in the amount equal to the princi-
pal sum with interest and costs that may have been awarded against it by the
award under appeal.33

3 How Much Can the Parties Tailor Merit Appeals Rules to their
Specific Needs?
The aaa/icdr Rules, the jams Rules and the eca Rules are silent on this issue.
The commentary to the cpr Rules suggests that parties can supplement their
rules by, among other things, stipulating a monetary threshold for appeals and
limiting appeals to underlying awards that are not determined unanimously by
panels of three tribunal members.34 One of the innovations in the Arbitration
Place Rules is that they explicitly limit the modification or exclusion of specific
rules, including the scope of application of the rules.35 As each dispute will
vary significantly, with the exception of those rules that pertain to minimum
fairness or equal treatment between the parties, the parties ought to be able to
tailor the appeal rules in order to craft whatever the parties consider to be the
most appropriate appeal process for their needs.

4 Will the Merit Appeals Cover Legal, Factual and/or Mixed Legal and
Factual Errors?
The scope of permitted merit appeals is probably one of the more controver-
sial aspects of merit appeals as it directly opposes the notion of finality. Nei-
ther the aaa/icdr Rules nor the cpr Rules expressly provide for any appeal
of an error of mixed fact and law. Both sets of rules are limited to appeals on

31 Rule B(vi).
32 Rule A-12.
33 Rule 28.3.
34 See “Party Modifications” in the cpr Rules commentary.
35 Rule 2(d).
22 Leon and Parker

errors of fact or errors of law.36 The Arbitration Place Rules are unique in that
they explicitly provide for a right of appeal in respect of an “erro[r] of mixed
fact and law which [is] clearly unreasonable…”37
Additionally, the Arbitration Place Rules and the cpr Rules are the only
rules that provide for reviews by way of an arbitral process for applications
seeking to set aside an arbitration award. While the Arbitration Place Rules
refer to an application on “any ground upon which an arbitral award may be set
aside under the law of the seat of the arbitration”, the cpr Rules explicitly refer
to the grounds set out in section 10 of the Federal Arbitration Act.38
Lastly, the jams Rules allow appeals on the same standard of review “that
the first-level appellate court in the jurisdiction would apply to an appeal from
the trial court decision”,39 while the eca Rules provide for a full rehearing on
the merits.40

5 What is the Standard of Review? What is the Test

for a Reversible Error?
The aaa/icdr Rules allow an appeal tribunal to intervene in respect of “an
error of law that is material and prejudicial” or “determinations of fact that are
clearly erroneous”.41 Similarly, the cpr Rules indicate that a reversible error is
a “material and prejudicial error of law”, “factual findings clearly unsupported
by the record” or the establishment of a ground in section 10 of the Federal
Arbitration Act.42
The Arbitration Place Rules provide for the appeal of errors of law that are
material to the award, factual determinations, or errors of mixed fact and law
that are clearly unreasonable and material to the award.43
As already noted, the Arbitration Place Rules, similar to the cpr Rules,
entitle a party to request to set aside any arbitration award on “any ground
upon which an arbitral award may be set aside under the law of the seat of
arbitration.”44 The jams Rules apply “the standard of review that the first level

36 A-10 and 8.2.

37 Rule 7(a)(iii).
38 See Arbitration Place Rule 7(b) and cpr Rule 8.2(b).
39 Rule D.
40 Rule 28.4.
41 Rule A-10.
42 Rule 8.2.
43 Rule 7(a).
44 Rule 7(b).
Merit Appeals in International Arbitration 23

appellate court in the jurisdiction would apply”,45 and most broadly, the eca
Rules provide for a full rehearing on the merits.46

6 Does there Need to be a Transcript of the Oral Evidence for Merit

Appeals Involving Issues of Fact?
In common law court systems, usually the transcribed oral evidence is crucial
to the appeal procedure where evidentiary-based errors are alleged. Without
a transcript of the oral evidence, it would be almost impossible to evaluate
the merits of the underlying award in such cases. The Arbitration Place Rules
are the only rules which provide that merit appeals based on oral evidence
presented in the underlying arbitration will only be heard where the evidence
was recorded and transcribed.47 The other sets of rules deal with the record
more generally, but do not address the issue of oral evidence. For example, the
jams Rules and cpr Rules require the complete record accepted by the origi-
nal tribunal,48 while the aaa/icdr Rules as well as Arbitration Place Rules are
more flexible, requiring the filing of “relevant” portions of the evidence.49

7 Will there be an Oral Appeal Hearing?

The procedure to be used to present merit appeals is an important consider-
ation for the parties, and can have a significant impact on the costs of the ap-
peal process. The increased cost associated with merit appeals is one of their
most significant drawbacks. For this reason, it seems that most of the merit
appeals rules default to a written appeal process, unless otherwise requested
by the parties or the appeal tribunal deems oral argument necessary.50
The Arbitration Place Rules are an exception in that they require an oral
hearing “absent an agreement by the parties or a determination of the tribunal
after affording the parties’ an opportunity to make submissions.”51

8 Will there be Limits on Written Submissions?

Parties may use limits on appeal submissions to control the costs of merit ap-
peals. The aaa/icdr Rules and the jams Rules limit parties to a maximum

45 Rule D.
46 Rule 28.4.
47 Rule 7(c).
48 See jams Rule B(iii) and cpr Rule 1.3(b).
49 See aaa/icdr Rule A-16 and Arbitration Place Rule 18(b).
50 See aaa/icdr Rule A-15, jams rule B(v), and cpr rule 7.4.
51 Rule 12.
24 Leon and Parker

number of pages in written submissions.52 The Arbitration Place Rules leave it

to the appeal tribunal to set the parameters for written submissions.53

9 Will New Evidence be Admitted, and if so, in What Circumstances?

The appeal tribunal’s ability to accept new evidence significantly increases its
scope of authority on the appeal and also has the potential to increase costs
significantly. Instead of sitting in review of the underlying award, the ability to
consider new evidence tips toward the appeal tribunal hearing the arbitration
de novo. Each of the merit appeals rules deal with this slightly differently.
The aaa/icdr Rules allow the appeal tribunal to extend the time within
which it is to render its award by requesting additional information not ini-
tially submitted.54
The jams Rules allow for consideration of evidence not considered as part
of the hearing leading to underlying award where it is the non-acceptance of
evidence by the original tribunal that is a ground of appeal, or where the ap-
peal tribunal “determines that there is good cause to re-open the record”.55
The cpr Rules provide that the appeal tribunal may “request the parties to
supplement” the appeal record as it deems appropriate.56
The Arbitration Place Rules require the submission of any new evidence to
be with leave of the appeal tribunal.

10 What Should be the Cost Consequences of Different Merit

Appeals Outcomes?
Cost consequences can have an important role to play in disincentivizing pro-
ceedings that have limited merit. Most of the merit appeals rules make some
provision for the appeal costs.
The cpr Rules mandate that the appellant shall pay the costs of the appeal
if it is unsuccessful.57 The aaa/icdr Rules provide that in the event the appel-
lant is unsuccessful, it may be assessed the appeal costs.58 Lastly, the Arbitra-
tion Place Rules simply provide the appeal tribunal with the authority to make
an award of costs.59

52 See jams Rule B(iv) and aaa/icdr Rule A-17.

53 Arbitration Place Rule A-19.
54 Rule A-19(a)(3).
55 Rule B(iii).
56 Rule B(iii).
57 Rule 12.
58 Rule A-11.
59 Rule 21.
Merit Appeals in International Arbitration 25

11 How Will the Appeal Tribunal be Chosen?

Most of the merit appeals rules provide that, absent agreement by the parties,
the administering institution will appoint the appeal tribunal members.60
The eca Rules and the cpr Rules restrict the parties’ ability to choose the
appeal tribunal. The former does not allow for any involvement by the parties
in appointing the appeal tribunal,61 while the cpr Rules mandate that cpr
submit to the parties a list of not less than seven potential appeal arbitrator
candidates, pre-screed for conflicts and availability.62
One commentator has suggested that there is a benefit to restricting party
input in the selection of arbitrators for merit appeals tribunals because there is
a view that a party-appointed tribunal is at odds with the purpose of error cor-
rection, since party-appointed arbitrators may be more open to creative solu-
tions for dispute resolution over the rigorous application of legal standards.63

12 Will the Appeal Tribunal Consist of a Sole Arbitrator or

Three Arbitrators? How and When Will the Size of the Appeal
Tribunal be Decided?
Due to the nature and purpose of merit appeals, most merit appeals rules de-
fault to the appointment of three-member tribunals. The eca Rules are the
only rules that mandate a three-member appeal tribunal.64 Given the added
costs of using three-member tribunals at both stages of the dispute resolution
process, there is a solid argument for parties who anticipate the necessity of
an appeal to use a sole arbitrator at first instance. Some commentators argue
that parties who agree to the availability of merits appeals in their arbitration
agreement should opt for a sole arbitrator in the underlying arbitration and a
panel of three arbitrators for the merit appeals because the increase in num-
ber of adjudicators “is a critical condition for the effectiveness of review for
error.”65 Moreover, in the event no appeal is commenced, using a sole arbitra-
tor at first instance will be more cost-effective than a three-member tribunal
for the underlying arbitration. As noted in the commentary to the cpr Rules,
it is the inability to appeal arbitration awards that often leads parties to opt for
costlier three-member tribunals at first instance.66

60 See jams Rule A; aaa/icdr Rule A-5 and Arbitration Place Rule 8.
61 Rule 28.5.
62 Rule 4.2.
63 Ten Cate, supra note 25 at pages 1143–1154.
64 Rule 28.5.
65 Ten Cate, supra note 25 at page 1157.
66 See under the heading “Rationale” in the Commentary following the cpr Rules.
26 Leon and Parker

13 Will Specific Qualifications be Specified for the Merit Appeals

Arbitrators?
The cpr Rules are the only merit appeals rules that specify that members of
an appeal tribunal will consist entirely of former federal judges.67 This is not
surprising given the ability of parties to use the appeal tribunal to decide ap-
plications under section 10 of the Federal Arbitration Act. Parties will want to
consider whether experience hearing appeals is an asset for prospective merit
appeals tribunal members. Parties should also consider many of the factors
they would consider in selecting any arbitral tribunal based on the context of
their particular dispute.

14 What Remedies are Open to the Merit Appeals Tribunal?

Common remedies provided for merit appeals tribunals are to affirm, modify
or reverse the underlying award.68 A more controversial question is whether
the merit appeals tribunal ought to have the authority to order a new arbitra-
tion hearing or remit the award back to the original tribunal with directions.
In addition to the cost of remanding the matter back for a third opportunity
to be adjudicated, practical issues may arise where the original tribunal is no
longer available.
The Arbitration Place Rules are the only merit appeals rules that allow the
merit appeals tribunal to remand the arbitration back to the original tribunal,
but this may only be done where the original tribunal is available and willing
and the merit appeals tribunal “considers it appropriate and efficient.”69

15 How Will the Merit Appeals Tribunal’s Award be Implemented?

There is a need to consider whether the merit appeals award is subject to
court review in the ordinary way, and how the underlying award and merits
appeals award will be subject to recognition and enforcement. In jurisdictions
in which court review can be curtailed, should the appeal rules curtail or limit
the review of merit appeals awards by requiring the parties to waive it?
Most merit appeals rules provide that upon appeal, the underlying award is
no longer considered final for the purposes of any court proceeding, whether

67 Rule 1.2.
68 cpr Rule 8.3 allows the merit appeals tribunal to approve, modify or set aside an award.
aaa/icdr Rule A-19 allows the merit appeals tribunal to adopt the underlying arbitration
award or substitute its own. jams Rule D allows the merit appeals tribunal to “affirm,
reverse or modify” the underlying award.
69 Rule 20.
Merit Appeals in International Arbitration 27

seeking to have it set aside or seeking to have it recognized and enforced.70 But
what happens, particularly to applications seeking recognition and enforce-
ment, in situations in which the underlying award is upheld or varied in part?
Is it both awards that are being recognized and enforced?
The eca Rules do not directly address the impact of merit appeals on the
underlying awards but state that when a party disputes the first instance award,
“[i]t may be in the interest of the parties to provide that any other possible at-
tacks, available at the time of the issue of the first instance award or after it, be
preserved.”71

iii Merit Appeals are a Live Issue in International Arbitration

There is limited data available on the impact of the lack of merit appeals in in-
ternational commercial arbitration. In preparing for this paper, we contacted
the aaa/icdr, the cpr, and jams for information concerning the use of their
merit appeals procedures.
As of November 2015, the cpr Appeal Procedures were initiated three times,
all by first time users of the cpr Appeal Procedures and mid to large sized
companies. In one instance the parties modified the cpr Rules to provide for
a single arbitrator. The financial impact of the disputes ranged from between
$1-10 million, to over $24 million.
In the last five years, jams has conducted 24 appeals, not all of which
were necessarily conducted pursuant to jams’ Optional Arbitration Appeal
Procedure—some were pursuant to an appellate procedure written into the
parties’ arbitration agreement. Lastly, the aaa/icdr could not confirm any
specific data, but reported that a few cases may have invoked the Optional
Appellate Arbitration Rules.
At minimum, these anecdotes, in addition to some broader survey studies
discussed below, appear to confirm that there is a material part of the inter-
national arbitration community which identify a lack of a merit appeal in in-
ternational arbitration as an impediment to the choice of arbitration as the
method of dispute resolution.
The 2011 Cornell-Pepperdine/Straus Institute—cpr Survey (“Cornell-
Pepperdine Survey”), which canvassed predominantly general counsel in
Fortune 1000 companies, suggested that companies view the lack of appeal
mechanisms in arbitration as a deterrent to choosing arbitration: over one-half

70 aaa/icdr Rule A-2(a); jams Rules C; cpr Rule 2.4; Arbitration Place Rule 3.
71 Rule 23.14.
28 Leon and Parker

of respondents indicated that they did not choose arbitration because awards
are difficult to appeal.72
More recently, the White & Case / Queen Mary University of London Inter-
national Arbitration Survey, “Improvements and Innovations in International
Arbitration”, published in October 2015 (“White & Case Survey”), canvassed
corporate counsel (8% of respondents), arbitration counsel, arbitrators and
arbitration academics. The study found that the lack of appeals is an issue in
international arbitration among a material number of the 763 respondents.
Seventeen percent of those responding indicated that the lack of merit ap-
peals is one of the “three worst characteristics of international arbitration” and
only 18% of respondents stated that finality is one of the “three most valuable
characteristics of international arbitration.”73
Although at first blush it may seem that in four years views have changed
drastically, considerable weight must be given to the demographic of respon-
dents in each study. The Cornell-Pepperdine Survey, as noted above, focused
predominantly on general counsel in Fortune 1000 companies, while the
White & Case Survey focused on arbitration practitioners and academics, with
a smaller contingent of corporate counsel participants. The overall results of
the White & Case survey do not necessarily reflect the extent of the views of
corporate counsel, and indeed may point to a material divergence in views be-
tween corporate counsel and arbitration practitioners on the importance of
arbitration appeals.
Focusing only on corporate counsel respondents to the White & Case Sur-
vey, there is a greater concern over the lack of merit appeals in international
arbitration than in the overall survey results. For example, 23% of corporate
counsel thought there should be merit appeals mechanisms in internation-
al commercial arbitration. Moreover, in contrast to the overall results which
ranked the lack of appeal mechanisms as the seventh worst characteristic of
international arbitration, among corporate counsel it was the third most fre-
quently cited worst characteristic of international arbitration.74

72 Thomas Stipanowich and J. Ryan Lamare, Living with “adr”: Evolving Perceptions and
Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations,
19 Harvard Negotiation Law Review 1 (2014) at page 51.
73 2015 International Arbitration Survey: Improvements and Innovations in International
Arbitration prepared by White & Case llp and Queen Mary University of London, School
of International Arbitration (available online at: http://www.whitecase.com/sites/white-
case/files/files/download/publications/qmul-international-arbitration-survey-2015_0.
pdf) at page 7.
74 White & Case Survey, page 8.
Merit Appeals in International Arbitration 29

While opinions certainly may vary, the data seems clear that there is sig-
nificant interest among users in having merit appeals available in international
arbitration and it appears quite likely that providing merit appeals options will
help to increase the choice of arbitration as a dispute resolution process.
One of the interesting questions answered in the White & Case Survey
concerned the structure of merit appeals mechanisms. Fifty-two percent of
respondents indicated that merit appeals should be within the system of inter-
national arbitration, meaning by appeal arbitration.75

iv Conclusion

Finality is only the end of any debate concerning merit appeals in arbitration
if two basic assumptions are true:

(1) arbitrators never make material mistakes; and

(2) the interests at stake in the arbitration are small enough that the risk of
error is outweighed by the desire for a quick and efficient dispute resolu-
tion process.76

Of course, it is not difficult to imagine a dispute where neither of these as-

sumptions hold true.
Moreover, whether merit appeals are good or bad in theory, in practice it
appears that a substantial body of users want merit appeals options to reduce
the risks of bad, or even worse, “off-the-wall” outcomes.
This appears to be the case despite all of the concerns that users also express
about the time and cost of international arbitration, and of dispute resolution
generally.
What is not known—although the studies may have produced enough data
to get at it—is the profile of the user-respondents who responded to survey
questions in support of appeals—or for that matter, against appeals. For exam-
ple, it would be useful to know how those individuals and companies favoring
arbitration appeals break down on various dimensions including:

• experience / sophistication with arbitration;

• size of company;
• industry; and
• geography.

75 White & Case Survey, page 9.

76 Knull and Rubins, supra note 7 at page 532–533.
30 Leon and Parker

If there is user demand for merit appeals, there is a compelling case to be made
that international arbitration should offer appeal options or at least make their
default rules compatible with parties being able to choose merit appeals. This
would be consistent with the segmentation of the market for international ar-
bitration and dispute resolution more generally. If there is a segment of the dis-
pute resolution market that wants merit appeals in international arbitration—
and it seems clear that there is—it behooves providers to offer various appeal
options to those who are interested, just as arbitration is seeing a growth in
regional options, fast-track options, industry specialized options, and so forth.
Offering merit appeals options does not mean that endeavors should not
continue to raise awareness among users and potential users about the ben-
efits of faster, less expensive options to attain a final outcome. These include
making more informed arbitrator appointments or by using three-member
rather than one-member tribunals instead of providing for merit appeals.
The desire among users for merit appeals in international arbitration at the
very least deserves the attention of the major institutions and others poised to
offer the most responsive and flexible merit appeals procedures that enable
parties to make informed decisions on whether to adopt a merit appeals op-
tions, and if so, on what bases.
 chapter 2

Are Emergency Awards Enforceable in the United

States? A Guide for the Perplexed

William G. Bassler*

In the United States, the arbitral community is accustomed to having arbitra-

tors issue interim orders, interim awards and partial final awards. However, an
emergency measure of protection ordered by an emergency arbitrator before
the panel has even been formed is a relatively new concept. In response to a
real or perceived need, the major arbitral institutions over the past ten years
have amended their rules to allow a party to obtain urgent temporary relief
before the tribunal is constituted.1 In addition, surveys and reports from the
institutional providers indicate that parties are seeking emergency measures
in an increasing number of cases.2

* The Honorable William G. Bassler, FCIArb, is a retired u.s. District Court Judge of New
­Jersey. He is actively mediating and arbitrating as well as teaching Arbitration as an adjunct
­professor at Fordham University School of Law. He is a member of ali’s Consultative Group
on the Restatement Third, The u.s. Law of International Commercial Arbitration. Judge
Bassler was assisted in writing this article by Leah Kristina Charlesworth. Ms. Charlesworth
is a j.d. Candidate (2016) at Fordham University School of Law.
1 Institutions early adopting provisions for emergency relief were: the International Center for
Dispute Resolution (icdr) in 2006 updated in 2014; the Singapore International Arbitration
Centre (siac) in 2010 updated in 2013; the Stockholm Chamber of Commerce (scc) in 2010;
and the Netherlands Arbitration Institute (nai) in 2010. Institutions that later adopted emer-
gency arbitrator provisions in their rules include: the Swiss Chambers Arbitration (Swiss
Chambers) in 2012; the American Arbitration Association (aaa) in 2013; the International
Institute for Conflict Prevention & Resolution (cpr) in 2013; the Hong Kong International
Centre (hkic) in 2013; the London Court of International Arbitration (lcia) in 2014; jams
in 2014; and China International Economic and Trade Arbitration Commission Arbitration
Rules (cietac) in 2015.
2 The following numbers show the number of applications received as of March 2015 for each
arbitral institution, in comparison to when the institution adopted emergency arbitrator
provisions.
icdr—2006; 49 applications received; 24 cases applicant was successful in obtaining
full or partial emergency measures; applicant was unsuccessful in 14; 8 cases settled; 2
withdrawn
scc—2010; 13 applications received;
icc—2012; 15 applications received; 4 granted; 4 denied; 4 terminated by agreement;

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004334557_004

32 Bassler

As of 6 March 2015, arbitration users filed forty-nine applications for emer-

gency measures pursuant to the procedures of the International Centre for
Dispute Resolution (icdr).3 Since the International Chamber of Commerce
(icc) adopted its emergency procedures in 2012, thirteen applications have
been filed for emergency measures through 2014.4 As of March 2015, forty-two
parties had sought relief under the Singapore International Arbitration Cen-
tre’s (siac) Emergency Measures provisions, which came into force in 2010.5
According to the Stockholm Chamber of Commerce (scc) reports, parties sub-
mitted thirteen applications under its emergency arbitrator procedures from
2010–2014, four of which were lodged in 2014.6
But the emergency arbitrator has a shadow side: the uncertainty of the arbi-
tral community as to just how effective emergency awards are. This misgiving
helps to explain why parties prefer to use relevant domestic courts for emergen-
cy relief.7 What causes most of the uncertainty about emergency arbitration is
whether the emergency arbitrator’s decision will be enforced because it is not
a final award.8 At the international level, the doubt about enforcement under
the New York Convention arises because interim decisions do not dispose­of all

aaa—2013; 15 applications received; 4 decisions made; 3 cases withdrawn; 5 settled;

1 resulted in a final award
hkiac—2013; 2 applications received
jams—2014; 6 applications received; 3 went to a decision; 1 settled
lcia—2014; 0 applications received
See E. Sussman and A. Dosman, Evaluating the Advantages and Drawbacks of Emergency Arbi-
trators, New York Law Journal Special Report on Alternative Dispute Resolution, 3–4 (March
2015).
3 Sarah Vasani, The Emergency Arbitrator – An Effective Option for Urgent Relief, 17 Young Arb.
Rev. 4 (Apr. 2015).
4 icc Statistics, http://www.iccwbo.org/Products-and-Services/Arbitration-and-ADR/Arbitra
tion/Introduction-to-ICC-Arbitration/Statistics/ (last visited Mar. 30, 2016).
5 N. Vivekanada, The siac Emergency Arbitrator Experience, 19 Corporate Dispute Resolution
Magazine (Jan. 2014).
6 Lotta Knapp, Five Years of Emergency Arbitrator Proceedings Under the scc Rules, http://
www.sccinstitute.com/media/62010/vinge-6604011-v1-berlin-_presentation_knapp_150306-2
.pdf.
7 See White & Case, 2015 International Arbitration Survey: Improvements and Innovations
in International Arbitration, (2015) at 22, online: <http://www.arbitration.qmul.ac.uk/
docs/164761.pdf>.
8 See id at 17. Stating that 79% of respondents point to concerns about the enforceability of
emergency arbitrator decisions as one of the most important factors influencing their choice
between seeking emergency relief from an arbitral tribunal versus a domestic court.
Enforceability of Emergency Awards 33

the claims submitted.9 The New York Convention obliges contracting States to
grant recognition and enforcement to foreign arbitral awards.10 However, the
decisions of emergency arbitrators are not always classified as “awards” under
institutional rules, and if the decision takes the form of an order or is not con-
sidered final, it is unlikely that the decision will be enforceable under the New
York Convention.11 A similar uncertainty also arises with respect to emergency
awards under the Federal Arbitration Act (faa).12
The cases on enforcement of interim awards are many, but cases on the en-
forcement of emergency decisions are few. We will evaluate the validity of the
objection that emergency awards are ineffective because they are unenforce-
able by examining judicial opinions in the United States that have held interim
arbitral decisions as final awards in arbitrations under the faa and domestic
arbitrations under the New York Convention. Does the rationale enforcing in-
terim awards apply equally to rulings of an emergency arbitrator? The follow-
ing is a broad analysis keeping in mind the wisdom of the Medieval Jewish
philosopher Maimonedes in the introduction to his Guide for the Perplexed:
“A sensible man should not demand of me, or hope that when we mention a
subject, we shall make a complete exposition of it.”

What is Emergency Relief?

Before exploring the issue of finality as it applies to interim measures by a fully

constituted panel, we will first take a closer look at how various arbitral in-
stitutions implement the concept of emergency relief by a single emergency
arbitrator appointed by the institution as distinguished from interim measures
by the fully constituted panel or tribunal. In the words of Article 29 of the icc
Arbitration Rules, emergency relief refers to “a party that needs urgent interim
or conservatory measures that cannot await the constitution of an arbitral

9 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).

10 Convention on the Recognition and Enforcement of Foreign Arbitral Awards art. 3 and 5
(1958).
11 Guillaume Lemenez & Paul Quigley, The icdr’s Emergency Arbitrator Procedure in Action
Part ii: Enforcing Emergency Arbitrator Decisions, 63 Disp. Res. J. 66, 68–69 (Jan. 2009).
12 Federal Arbitration Act, 9 u.s.c. §§ 1–16 (2012); see also Chinmax Med. Sys. Inc. v. Alere
San Diego, Inc., No. 10CV2467 wqh nls, 2011 wl 2135350, at 5 (s.d.Cal. May 27, 2011) (re-
fusing to vacate order of emergency arbitrator under icdr Rules ordering production of
documents to insure registration renewals on ground that it lacked jurisdiction over non
final decisions).
34 Bassler

tribunal.”13 In the language of the London Court of International Arbitration

Rules (lcia Rules), a party seeking such relief must submit an application that
includes “the specific claim, with reasons, for emergency relief.”14 Similarly,
the International Centre for Dispute Resolution Rules (icdr Rules) Article 6
speaks in terms of allowing a party to “apply for emergency relief.”15 Rule 38 of
the Commercial Arbitration Rules and Mediation Procedures of the American
Arbitration Association (aaa Rules) captures the concept of urgent emergen-
cy relief by saying that “immediate and irreparable loss or damage shall result
in the absence of emergency relief.”16
The only sets of rules to explicitly use the term “emergency” with regard
to the order or award itself are the Stockholm Chamber of Commerce Rules
(scc Rules) and the Hong Kong International Arbitration Centre Adminis-
tered ­Arbitration Rules (hkiac Rules). Specifically, scc Rules Appendix ii
­Emergency Arbitrator, Article 8 refers to an emergency arbitrator’s award or
order as an “emergency decision.”17 The hkiac Rules Article 23.1 defines “emer-
gency relief” as “urgent interim or conservatory relief”18 and in Appendix 4 fur-
ther refers to the emergency arbitrator’s decision as the “emergency decision.”19
Most institutions refer to an emergency arbitrator’s decision as an order
or award. The icdr Rules Article 6 provides that “the emergency arbitrator
shall have the power to order or award any interim or conservancy measures
the emergency arbitrator deems necessary.”20 Article 6(4) clarifies that “any

13 Int’l Chamber of Commerce, Rules of Arbitration art. 29 (2012), available at http://www

.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/icc-rules-of
-arbitration/.
14 London Court of Int’l Arbitration, lcia Rules art. 9.5 (2014), available at http://www.lcia
.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx.
15 Int’l Ctr. For Dispute Resolution, Arbitration Rules art. 6 (2014), available at https://
www.adr.org/cs/groups/international/documents/document/z2uy/mdiw/~edisp/
adrstage2020868.pdf.
16 American Arbitration Association, Commercial Arbitration Rules and Mediation Proce-
dures rule R-38(e) (2013), available at https://www.adr.org/aaa/ShowProperty?nodeId=/
UCM/ADRSTG_004103&revision=latestreleased.
17 Stockholm Chamber of Commerce, scc Arbitration Rules 2010 appendix ii art. 8
(2010), available at http://www.sccinstitute.com/media/40120/arbitrationrules_eng
_webbversion.pdf.
18 Hong Kong Int’l Arbitration Ctr., Administered Arbitration Rules art. 23.1 (2013), available
at http://www.hkiac.org/sites/default/files/ck_filebrowser/PDF/arbitration/2013_hkiac
_rules.pdf.
19 Id. appendix 4, art. 16.
20 Int’l Ctr. For Dispute Resolution, Arbitration Rules art. 6(1)-(2) (2014), available at https://
www.adr.org/cs/groups/international/documents/document/z2uy/mdiw/~edisp/
adrstage2020868.pdf.
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