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US: Four significant developments in arbitration case law

In this article, we discuss four significant arbitration-related case law developments in the US in the last year, which concern (1) the increased availability of US-style discovery in international arbitration under 28 U.S.C. § 1782; (2) whether non-signatories to an arbitration agreement can compel arbitration on the basis of equitable estoppel; (3) the availability of class-wide arbitration when the arbitration agreement is ambiguous; and (4) the ongoing use of the US District Court for the District of Columbia as a default venue for enforcement of ICSID awards .

Case law developments under 28 U.S.C. § 1782

Section 1782 is a US federal statute that permits any party or other interested person involved in proceedings taking place before a foreign or international tribunal, or the tribunal itself, to make a request to a federal district court for an order compelling discovery from a person or entity that resides or is found in the district in which the court sits. [1] Section 1782 actions have proved to be a powerful and increasingly popular tool for litigants involved in foreign proceedings, including more recently non-US arbitration proceedings. There have been two recent developments of note involving this statute. 

Extraterritorial discovery is permitted under Section 1782

In In re Del Valle Ruiz , [2] the US Court of Appeals for the Second Circuit, departed from earlier jurisprudence [3] and held that petitioners could, at least in theory, utilize a Section 1782 action to obtain documents held outside the US, so long as the entity from which the documents were sought had sufficient links to the forum state so as to satisfy the requirements of constitutional due process. The Second Circuit’s reasoning was largely the result of a textual reading of the statute and a determination that the language did not create a per se bar on extraterritorial application . In particular, the court reasoned that Congress intended the scope of discovery under Section 1782 to be similar to scope of discovery available in an ordinary domestic lawsuit, where discovery, conducted in accordance with the Federal Rules of Civil Procedure, permits extraterritorial discovery so long as the evidence sought is within the subpoenaed party's “possession, custody, or control.”

The Second Circuit did caution, however, that an order compelling production of documents was not a foregone conclusion and that courts were still obligated to consider a number of factors in determining whether to actually exercise their discretion, [4] including whether the location of the documents would render compliance overly burdensome.

Nevertheless, in at least admitting the possibility, the Second Circuit seemingly removed what had to date been one of the most significant constraints to the breadth of Section 1782.

Section 1782 can be used in aid of private international arbitration in some circuits

Historically, the Second and Fifth Circuits have limited the application of Section 1782 to "state-sponsored" arbitration, on the basis that a "foreign or international tribunal" does not include a privately constituted international arbitration tribunal. A number of recent federal appellate cases have reinvigorated the debate, increasing the probability that the Supreme Court will shortly weigh in to resolve the issue . On the one hand, the Fourth and Sixth Circuits have recently held that discovery may be ordered in aid of private foreign and international arbitral proceedings. By contrast, the Seventh Circuit recently sided with the Second and Fifth Circuits in holding that Section 1782 does not apply to private arbitral tribunals, while the Second Circuit had an opportunity to revisit the issue in light of Intel and confirm its previous position. The Third and Ninth Circuits [5] will shortly address the issue .

In Abdul Latif Jameel Transp. Co. v. FedEx Corp , [6] the Sixth Circuit held that the private DIFC-LCIA arbitration panel qualified as a "foreign or international tribunal." In reaching its conclusion, the Tribunal emphasized that the “text, context, and structure” of the statute “provide no reason to doubt that the word ‘tribunal’ includes private commercial arbitral panels.”

Just six months later, i n Servotronics, Inc. v. The Boeing Company , [7] the Fourth Circuit joined the Sixth Circuit’s interpretation of the statute, though it differed slightly in the analysis used to reach its conclusion. The court emphasized that while the drafters had initially considered limiting the availability of this assistance to judicial proceedings, ultimately Congress selected broader language, which, in the Circuit Court’s view, signalled an intent to offer assistance not just in connection with foreign court proceedings, but also in administrative, quasi-judicial, and arbitral proceedings. The Fourth Circuit further declined to view arbitration as simply a “private agreement” between parties as argued by Boeing. Rather, given the various ways in which US and UK law sanction, regulate, and oversee arbitration, the Fourth Circuit reasoned arbitration is a product of “government-conferred authority.”

The Fourth Circuit also addressed concerns that its decision would otherwise eradicate the very benefits of arbitration for which contract parties negotiate. The court clarified that Section 1782 is not designed to authorize full-blown US style discovery. Rather, the Fourth Circuit reasoned that Section 1782 permits a US district court to serve as a substitute for the foreign tribunal by taking testimony and statements for use in the foreign proceeding (but not, as would be normal in US-style discovery, to permit the parties to collect evidence that might or might not be admissible). In any event, the court stated that any undue burdens that might result should and could be managed by the district court with the discretion conferred to it under Section 1782.

By contrast, in its recent decision of In re: Application and Petition of Hanwei Guo, [8] the Second Circuit hued closely to its prior precedents to decline a request for discovery assistance in connection with a commercial arbitration. The court’s analysis rested on its view that its prior decision in NBC v. Bear Stearns [9] remained binding based on the “longstanding principal” that “a three judge panel is bound by a prior panel’s decision until it is overruled by either this Court sitting en banc or by the Supreme Court.”

Further, in Servotronics Inc. v. Rolls-Royce PLC , [10] a parallel case to that considered by the Fourth Circuit, the Seventh Circuit sided with the Second Circuit (and older Fifth Circuit precedent) in holding that Section 1782 does not authorize district courts to compel discovery for use in private foreign arbitrations. In so doing, the court also engaged in a textual interpretation of the statute, but found that (1) the ordinary meaning of the term “tribunal” does not unambiguously resolve whether private arbitral panels should be included, and (2) the context of the statutory scheme in which the revisions to Section 1782 took place, which included revisions to statutes addressing service-of-process assistance and letters rogatory - both matters of comity between governments - suggests that the phrase “foreign or international tribunal” refers to state-sponsored tribunals only. Finally, because the Federal Arbitration Act (FAA) only permits the arbitration panel, and not the parties, to obtain discovery assistance in domestic arbitrations, the court found a separate policy rationale for denying such requests under Section 1782 on the basis that doing so avoids a conflict between the FAA and Section 1782, if the latter were to apply to private foreign arbitrations.

The ability of non-signatories to compel arbitration

On June 1, 2020, the US Supreme Court issued its opinion in GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA LLC (No. 18-1048), holding that a non-signatory to an arbitration agreement may compel arbitration under the New York Convention based on the domestically available doctrine of equitable estoppel. [11] This opinion resolved a circuit split on the question: t he First and Fourth Circuits had held that non-signatories may compel a signatory to arbitrate via the doctrine of equitable estoppel, while the Ninth and Eleventh Circuits had declined to apply the doctrine under the New York Convention. [12]

GE Energy involved a contract to construct steel mills in Alabama, with an arbitration clause providing for arbitration in Germany under the ICC Rules. Fives subcontracted with GE Energy to supply motors to the mills, which later failed.  After GE Energy removed the case to federal court, the district court granted GE Energy’s motion to compel arbitration against Outokumpu under the Outokumpu-Fives contract, even though GE Energy had never signed the agreement. On appeal, the Eleventh Circuit reversed the decision to compel arbitration, finding that GE Energy could not require Outokumpu to arbitrate when GE Energy had not signed the underlying contract. [13] The Eleventh Circuit reasoned that equitable estoppel was not available under the New York Convention because the Convention required the arbitration agreement to be “signed by the parties before the Court or their privities.” [14]

The Supreme Court, in an opinion authored by Justice Clarence Thomas, reversed the lower courts’ decision.  The Court reasoned that Chapter 1 of the FAA does “not alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them).” [15] In interpreting the Convention, the Court first looked to the text.  In its view, nothing in the text of the Convention directly addresses whether non-signatories may enforce arbitration agreements under domestically available doctrines such as equitable estoppel. Similarly, the court reasoned that neither the text of the Convention nor the drafting history reflects an intent to preclude the application of domestic laws that are more generous and which would enhance the enforceability of arbitration agreements. 

In a concurring opinion, Justice Sonia Sotomayor noted her agreement with the principle that the Convention does not categorically prohibit the application of domestic doctrines in enforcement, yet she cautioned that the application of domestic doctrines must be rooted in the principle of consent to arbitrate. Lower courts applying domestic non-signatory doctrines to enforce arbitration agreements must “strictly adhere” to “the foundational FAA principle that arbitration is a matter of consent.” In Justice Sotomayor’s view, the “basic precept” that arbitration is a matter of consent, not coercion, constrains any domestic doctrines that might apply to proceedings under the Convention.

Class arbitrations

In April 2019, in Lamps Plus, Inc. v Varela , [16] the US Supreme Court considered whether a court can order class-wide arbitration when an arbitration agreement is ambiguous on the topic.

The dispute arose out of an employment contract. The agreement contained certain provisions that might be interpreted to contemplate individual arbitration, while others appeared to contemplate a possible “class” or collective arbitration. 

The US Supreme Court held, by a 5-4 vote, that an arbitration agreement that is ambiguous as to the availability of class arbitration does not provide sufficient consent in order to submit a dispute to class arbitration under the FAA. In so doing, the court recognized that class arbitration is fundamentally different from the individualized arbitration protected by the FAA. Accordingly, the US Supreme Court reversed the Ninth Circuit’s decision and in so doing, rejected the application by the Ninth Circuit of California’s contract-interpretation doctrine that construes ambiguities against the drafter, on the basis that such doctrine was effectively preempted by the federal FAA. 

Enforceability of intra-EU awards at US District Court for the District of Columbia

Several actions have been filed in the US District Court for the District of Columbia (DDC) to enforce ICSID awards rendered against Spain, and new enforcement actions are likely to be filed as other ICSID arbitrations relating to regulatory changes in the Spanish renewable energy regime conclude. Since the ruling in Achmea [17] by the Court of Justice of the European Union, however, the enforcement of many intra-EU awards has been practically impossible in Europe. A ruling on these pending cases against Spain will likely be the first cases to determine whether the DDC will enforce an arbitral award resulting from intra-EU awards.

The DDC has been the default choice for actions against foreign states. Pending enforcement cases in the DDC against Spain include Eiser Infrastructure Ltd. v. Kingdom of Spain , [18] in which the DDC recently lifted its stay, and denied Spain’s motions to dismiss and strike, in light of the annulment committee’s decision to annul the award; Infrastructure Servs. Luxembourg S.à.r.l. v. Kingdom of Spain , [19] which was stayed pending Spain’s annulment application; Masdar Solar & Wind Cooperatief U.A. v. Kingdom of Spain , [20] in which the DDC recently rejected Masdar’s motion to lift DDC’s stay, after the ad hoc committee denied Spain’s request for a continuation of stay of enforcement; 9Ren Holding S.à.r.l. v. Kingdom of Spain , [21] awaiting outcome of annulment proceeding with ICSID initiated by Spain; NextEra Energy Global Holdings B.V. v. Kingdom of Spain , [22] stayed in connection with Spain’s annulment application; RREEF Infrastructure v. Kingdom of Spain , [23] in which Spain filed motions to dismiss and stay the proceeding in light of its annulment application; and Watkins Holdings S.à.r.l. and others v. Kingdom of Spain . [24]

The DDC’s first judgment and decision upon the enforceability of ICSID awards resulting from intra-EU disputes may have a major effect on parties’ choice of the DDC as a default venue for enforcement against foreign sovereigns. This first ruling could further impact the strategies of EU member states and those seeking enforcement against them and impact the US enforcement regime as it relates to intra-EU awards.  

Read this article in Spanish.

[1]   28 U.S.C. § 1782.

[2]    939 F.3d 520 (2d Cir. 2019).

[3]    See In re Sarrio , 119 F.3d 143, 147 (2d Cir. 1997); Purolite Corp. v. Hitachi America, Ltd. , 2017 WL 1906905 (S.D.N.Y May 9, 2017); In re Application of Gorsoan Ltd. and Gazprombank OJSC , 2014 WL 7232262, slip op. at 10 (S.D.N.Y. Dec. 10 2014); In re Fuhr , 2014 WL 11460502 (S.D.N.Y. Aug. 6, 2014); In re Godfrey, 526 F.Supp.2d 417, 423–24 (S.D.N.Y.2007) (“ The bulk of authority in this Circuit, with which this Court agrees, holds that, for purposes of  § 1782(a) , a witness cannot be compelled to produce documents located outside of the United States. ”). Notably, however, the Eleventh Circuit had held in, Sergeeva v. Tripleton Intl. Ltd. , that Section 1782 reaches documents located in foreign countries.

[4]    In the Intel Corp. v. Advanced Micro Devices, Inc , the Supreme Court held that aside from satisfying itself that the statutory requirements are satisfied, the court must undertake a secondary four-step analysis to determine whether it should exercise its discretion. The four discretionary factors the district courts Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) consider are:

• Whether the person from whom discovery is sought is not a participant in the foreign proceeding and is therefore outside the foreign tribunal's jurisdictional reach.
• The nature of the foreign tribunal and its receptivity to judicial assistance by U.S. federal courts.
• Whether the request conceals an attempt to circumvent foreign evidence-gathering rules.
• Whether the request is unduly intrusive or burdensome.

[5]    EWE Gasspeicher GMBH v. Halliburton Co. , No. 20-1830 (3d Cir.) (briefing in progress); Storag Etzel GMBH v. Baker Hughes Co. , No. 20-1833 (3d Cir.) (briefing in progress); HRC-Hainan Holding Co. v. Hu , No. 20-15371 (9th Cir.) (oral argument scheduled for Sept. 14, 2020).

[6]    Abdul Latif Jameel Transp. Co. v. FedEx Corp , 939 F.3d 710 (6th Cir. 2019).

[7]    Servotronics, Inc. v. The Boeing Company; Rolls-Royce Plc , No. 18-2454 (4th Cir. 2020).

[8]   In re: Application and Petition of Hanwei Guo , Case No. 19-781 (2d Cir. 2020).

[9]    National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc ., 165 F.3d 184 (2d Cir. 1999).

[10]    Servotronics Inc. v. Rolls-Royce PLC , Case No. 19-1847 (7th Cir. 2020).

[11]    GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC , 590 U.S. __ (2020), available at https://www.supremecourt.gov/opinions/19pdf/18-1048_8ok0.pdf.

[12]   GE Energy’s petition for writ of certiorari is available at https://www.supremecourt.gov/DocketPDF/18/18-1048/87501/20190207155434317_GE%20Energy%20v.%20Outokumpu%20-%20Cert%20Petition.pdf. 

[13]    Outokumpu Stainless USA, LLC v. Coverteam SAS , 902 F.3d 1316, 1326-27 (11th Cir. 2018).

[14]    Id .

[15]    GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC , 590 U.S. __, slip op. at 3-4 (2020).

[16]    Lamps Plus, Inc. v Varela , 139 S.Ct. 1407 (2019).

[17]   Case C-284/16, Slowakische Republik v. Achmea BV, 2018 E.C.R. 158. The CJEU ruled that the arbitration clause in Article 8 of the 1991 Netherlands-Slovakia BIT had an adverse effect on the autonomy of EU law and was incompatible with key principles of EU law.

[18]    No. 1:18-cv-1686 (DDC filed July 28, 2017).

[19]    No. 1:18cv-1753 (DDC filed July 27, 2018).

[20]    No. 1:18-cv-2254 (DDC filed Sept. 28, 2018).

[21]    No. 1:19-cv-1871 (DDC filed June 25, 2019).

[22]    No. 1:19-cv-1618 (DDC filed June 3, 2019).

[23]    No. 1:19-cv-3783 (DDC filed Dec. 19, 2019).

[24]    No. 1:20-cv-1081 (DDC filed Apr. 24, 2020).

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Case studies in international arbitration

Our investment in education extends to training for practicing lawyers and judges. We applied a tailored approach for lawyers in The Republic of The Gambia in collaboration with the International Senior Lawyers Project (ISLP).

Participants worked on case studies, drafted arbitration clauses and considered claims, arguments and procedural issues applicable to the types of cases they will be seeing.

Following a regime change in The Gambia in 2017, the Ministry of Justice (MoJ) faced an increase in international claims and arbitrations involving international investment agreements made with the previous government. Additional capacity was required to manage the increase, and the MoJ decided it needed to enhance the skills of its lawyers.

Together with ISLP and the MoJ, New York partner Damien Nyer, New York associate Sven-Michael Volkmer and Paris associate Tolu Obamuroh put together a highly interactive week-long course and delivered it to 30 lawyers from the MoJ. Participants worked on case studies, drafted arbitration clauses and considered claims, arguments and procedural issues applicable to the types of cases they will be seeing.

“The attendees were highly experienced and talented lawyers so we wanted to give them an opportunity to explore and expand on their existing skill set, rather than lecture them in a vacuum,” commented Damien. “It was immensely gratifying to take part in something that was so well received and so relevant.”

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Arbitration

Definition of arbitration, what is arbitration, mandatory arbitration.

In some cases, mandatory arbitration may be ordered by the court. In mandatory arbitration, a single arbitrator usually hears the case. If arbitration is voluntary, the parties may agree to a single arbitrator, or choose a panel of arbitrators. The arbitrator in a voluntary case is chosen, or agreed upon, by the parties. If the parties cannot come to an agreement, the court may assign an arbitrator.

How to Find Arbitration Services

Examples of cases settled in arbitration, midwest airlines flight attendants contract dispute.

Following the 2009 Republic Airways Holdings purchase of Midwest Airlines, more than 400 Midwest Airlines flight attendants complained of a contract violation, as hundreds founds themselves laid off in favor of non-Midwest employees paid as much as 70 percent less. As it turned out, the Midwest flight attendants’ union contract contained specific provisions protecting their jobs in the event the airline was purchased by another company. As these provisions had been violated, the Association of Flight Attendants (AFA) filed a grievance accusing Republic Airways of violating their contract.

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The arbitration process.

Testimony is heard by the parties and their respective witnesses, with cross examination allowed. Additional evidence, in the form of testimonials, documents, or other items may be submitted, and expert witnesses may testify. After all testimony has been heard, and all evidence submitted, the attorneys make closing arguments. After the hearing, the arbitrator, or arbitration panel, considers all of the evidence and makes a decision, notifying the parties, usually in 30-90 days.

The Difference Between Arbitration and Mediation

Arbitration clause, binding arbitration, arbitration award.

An arbitration award is the award of damages to a party in the arbitrator’s decision. In the arbitrator’s decision, the result is referred to as an “award,” even if the original claimant was unsuccessful, and no money is to be paid to either party. Roughly equivalent to a judgment in a court trial, an arbitration award may provide a range of relief. Examples of remedies that may be awarded by an arbitrator include:

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ICC Case Information

Increasing the information available to parties, the business community at large and academia is key in ensuring that arbitration remains a trusted tool to facilitate trade. This directory provides key information on ICC arbitration cases without compromising expectations of confidentiality. 

Information provided in ICC cases registered as of   1 January 2016 : (i) the names of the arbitrators, (ii) their nationality, (iii) their role within a tribunal, (iv) the method of their appointment, and (v) whether the arbitration is pending or closed.  

Additional information provided in ICC cases registered as of 1 January 2020* : (vi) the sector of industry involved and (vii) counsel representing the parties in the case.  

This information will be published after the Terms of Reference have been transmitted to, or approved by, the Court and will be updated in the event of a change in the arbitral tribunal’s composition or party representation. For cases administered in accordance with the Expedited Procedural Provisions, information will be published after the Case Management Conference has taken place. This information will remain on the ICC website after the closure of the arbitration unless the concerned individual requests its erasure in accordance with applicable data protection regulations.  

Case ID: the referenced case ID is generated for publication purposes only and does not reflect the confidential ICC case number.  

Appointment method: arbitrators may have been appointed by the Court either directly or upon the proposal of an ICC National Committee; upon nomination by Claimant(s), Respondent(s), the parties or the co-arbitrators; or by an appointing authority.  

* The publication of additional fields is applicable for cases registered as of 1 January 2020 (initially foreseen as of 1 July 2019 as indicated ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration). Click  here  to consult section III.C of the ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration pursuant to the ICC Rules. 

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WIPO Arbitration Case Examples

Set out below are examples of arbitrations conducted under the WIPO Rules. These examples have been prepared while respecting the confidentiality of WIPO proceedings.

Patent Arbitrations

Two European pharmaceutical companies entered a joint development agreement and a patent license option agreement to develop a cancer treatment. Subsequently, disputes arose between the parties regarding the determination of royalties payable in a lump sum to the licensor, the sharing of sub-license revenues and the ownership status of some patents filed by one of the parties in its name, on a product created jointly by both parties. Parties eventually entered an MoU to settle the first contractual dispute and agreed to submit the issue concerning the sub-license revenues and the assignment of rights relating to the disputed patents to WIPO Arbitration.

Parties jointly agreed to limit the scope of issues for the tribunal’s determination to two main areas, namely the financial elements of the contract, and the patent co-ownership status of some patents. During the arbitration proceedings, the three-member tribunal, including patent experts, also ruled on several procedural aspects, such as the admissibility of expert witness reports and scope of discovery. The arbitral tribunal issued a final award on the royalties and patent ownership status of the patents in dispute.

Following litigation in several jurisdictions regarding an alleged infringement of European and US patents protecting medical devices, a European company, and an US-based medical device company entered a settlement agreement, which included a WIPO Arbitration clause.

Given the high value of the disputed patents, the parties amended the standard WIPO Arbitration clause that provided for infringement claims relating to the US patents to be heard by a sole US arbitrator and those relating to European patents to be heard by a sole European arbitrator. The clause further provided that the awards issued by the European and US arbitrators could be subject to review through an appellate panel of three arbitrators.

A year after signing the settlement agreement, the European company commenced WIPO Arbitration proceedings, claiming infringement of its US and European patents. The parties agreed to appoint an arbitrator specializing in US patent law, the other specializing in European patent law, from a list of candidates proposed by the Center, to make separate determinations on infringement claims relating to the disputed US and European patents. In addition, the parties agreed to set out the procedural steps, including the use of the WIPO Electronic Case Facility, the timetable of the proceedings, the scope of discovery, a protective order, and the preliminary claim construction of the US and European patents, and a hearing schedule. Both arbitrators issued their awards within eighteen months following their appointment. The parties agreed not to use the appeal procedure.

An Asian inventor held several US and European patents over components used in sports goods. The Claimant entered into an exclusive license agreement over the patents with a US manufacturer. The license agreement provided for the use of WIPO Expedited Arbitration to resolve disputes regarding possible infringement of the patents.

A dispute arose between the parties regarding the payment of royalties under their license agreement. As a result, the inventor filed a Request for Arbitration and Statement of Claim with the Center requesting a declaration that his patents had been infringed. The parties did not agree on the identity of the sole arbitrator for this case. As a consequence, and in order to cover the full spectrum of patents at stake, the Center appointed as sole arbitrator an English patent lawyer with very substantial experience in US patent law.

Following several evidentiary motions, motions for the protection of business secrets and for the examination of samples of the products, the arbitrator held a hearing in California for the examination of witnesses. In the final award the arbitrator addressed issues of infringement of the asserted patents and whether those patents had been anticipated.

A French biotech company, holder of several process patents for the extraction and purification of a compound with medical uses, entered into a license and development agreement with a large pharmaceutical company. The pharmaceutical company had considerable expertise in the medical application of the substance related to the patents held by the biotech company. The parties included in their contract a clause stating that all disputes arising out of their agreement would be resolved by a sole arbitrator under the WIPO Arbitration Rules.

Several years after the signing of the agreement, the biotech company terminated the contract, alleging that the pharmaceutical company had deliberately delayed the development of the biotech compound. The biotech company filed a request for arbitration claiming substantial damages.

The Center proposed a number of candidates with considerable expertise of biotech/pharma disputes, one of whom was chosen by the parties. Having received the parties’ written submissions, the arbitrator held a three-day hearing in Geneva (Switzerland) for the examination of witnesses. This not only served for the presentation of evidence but also allowed the parties to re-establish a dialogue. In the course of the hearing, the arbitrator began to think that the biotech company was not entitled to terminate the contract and that it would be in the interest of the parties to continue to cooperate towards the development of the biotech compound.

On the last day of the hearing, the parties accepted the arbitrator’s suggestion that they should hold a private meeting. As a result of that meeting, the parties agreed to settle their dispute and continued to cooperate towards the development and commercialization of the biotech compound.

A European inventor holding patents in Australia, Canada, Europe and the United States licensed patent rights and know-how to an Asian company. The license contained a WIPO arbitration clause providing for a three-member tribunal.

The parties disagreed on who should pay the renewal fees of the patents. Eventually the Asian company terminated the license whereupon the European inventor filed a request for arbitration, claiming damages and requesting a declaration that he was free to use the patents.

The three arbitrators appointed possessed substantial IP expertise and the necessary language skills allowing them to consider evidence in different languages.

Following a series of evidentiary exchanges, the tribunal rendered an award 14 months after commencement of the arbitration. Finding that the Asian company had not been entitled to terminate the contract as it did, the tribunal ordered it to pay damages and to return to the inventor the prototypes, plans and documents that had been communicated in the context of the license.

Following litigation in several jurisdictions regarding the alleged infringement of European and US patents protecting medical devices, a European company and an American company signed a settlement agreement including a WIPO arbitration clause.

Given the importance of the patents in dispute for the parties, they amended the standard WIPO arbitration clause as follows: the clause provided that infringement claims of US patents should be heard by a sole US arbitrator, and those relating to European patents by a sole European arbitrator. The clause further provided, that the awards issued by the European and US arbitrator could be subject to review through an appeal panel of three arbitrators.

A year after the signing of the settlement agreement, the European company commenced WIPO arbitration proceedings, claiming infringement of its US and European patents. From a list of candidates submitted by the Center, the parties agreed on a patent law specialist from the US and a patent law specialist from Europe to consider the allegations of infringement of the US patents and the European patents respectively. The parties agreed on a procedural order setting out the procedural steps, including the use of the WIPO Electronic Case Facility, the timetable for the proceedings, the scope of discovery, a protective order, the preliminary claim construction of the US and European patents, and a hearing schedule.

The US arbitrator and the EU arbitrator issued their awards within eighteen months following their appointment. The parties agreed not to use the appeal procedure.

Following litigation in several jurisdictions, two American companies agreed to submit to WIPO Arbitration a dispute related to the alleged infringement of a European patent concerning consumer goods. The submission agreement provided that the national patent law of a particular European country would apply and that the patent litigation timelines of that country should be followed. The three member tribunal was asked to decide whether the manufacture and sale of certain products infringed the patent.

The submission agreement, and compliance with the procedural timetable in the subsequent arbitration process, reflected the parties’ mutual interest to resolve the dispute in a time- and cost-efficient manner. The parties accepted the Center’s recommendation to appoint three arbitrators with substantial expertise in arbitration and in the relevant national patent law. Further to the exchange of written submissions, the arbitral tribunal held a one-day hearing in Geneva for further statements and for the examination of expert witnesses. In accordance with the time schedule agreed by the parties, the final award was rendered within five months of the commencement of the arbitration.

Trademark Arbitrations

Two European pharmaceutical companies concluded a trademark license and supply agreement for a medical product. As agreed by the parties, the licensee authorized an affiliate company to commercialize the medical product as a sub-licensee. The license and supply agreement included a clause stating that all disputes arising from the agreement would be resolved under the WIPO Expedited Arbitration Rules.

After some time, the parties tried to renegotiate the license and supply agreement terms. However, when these negotiations failed, the licensor terminated the agreement. Meanwhile, the sub-licensee (the affiliate company) commenced trademark registration proceedings for a medical product having similar functions as the product forming the subject matter of the initial license and supply agreement. The trademark was granted, and both the licensee and the sub-licensee proceeded to use it to commercialize their medical products. Subsequently, the licensor commenced WIPO Expedited Arbitration proceedings, claiming infringement of its trademark.

The WIPO Center proposed several candidates as sole arbitrator. These candidates had considerable expertise in pharmaceutical disputes and one of them was chosen by the parties. Further to a preparatory conference and receipt of the parties’ written submissions, the arbitrator held a one-day hearing in Geneva, Switzerland and rendered a final award eight months from the date of commencement of the arbitration.

A European company had registered a trademark for luxury goods in different countries. An Asian manufacturer started to sell fashion products under a similar registered trademark. The Asian company filed a court case and administrative cancellation proceedings in two European countries alleging non-use by the European company of its trademark. After the court case went to appeal, the parties settled their dispute by concluding a trademark coexistence agreement which included a WIPO expedited arbitration clause. When the European company used its trademark in a trade fair, the Asian company initiated WIPO expedited arbitration proceedings claiming infringement of the coexistence agreement.

Following consultations between the parties and the Center, a European trademark specialist was appointed as sole arbitrator. After two rounds of pleadings, the arbitrator conducted a one-day hearing in Munich (Germany) and issued an award six months after the commencement of the proceedings. Finding partial infringement of the coexistence agreement, the arbitrator granted the primary remedy claimed and ordered the European company to refrain from such infringing behavior.

A US company (licensee) entered into a technology licensing agreement with a German company (licensor) to manufacture, use and sell the licensed products. The license contained a WIPO Arbitration clause and provided that the national law of a particular European country would apply.

Several years after the signing of the license, the German company terminated the contract, alleging breach of a territorial scope of the license, trademark infringement as well as breach of trade secrets provisions by the licensee, and filed a request for arbitration. Following consultations between the parties and the Center, the three-member tribunal was appointed. During the proceedings, the Claimant raised an objection to the jurisdiction of the tribunal with reference to Respondent’s counterclaims. This matter was decided by the tribunal in an interim award. Further to the exchanges of written submission, the tribunal held a three-day hearing in Geneva and rendered a final award ordering the Respondent to refrain from using the disputed trademarks and awarding the Claimant compensation and damages.

A North-American software developer had registered a trademark for communication software in the United States and Canada. A manufacturer of computer hardware based elsewhere registered an almost identical mark for computer hardware in a number of Asian countries. Both parties had been engaged in legal proceedings in various jurisdictions concerning the registration and use of their marks. Each party had effectively prevented the other from registering or using its mark in the jurisdictions in which it holds prior rights. In order to facilitate the use and registration of their respective marks worldwide, the parties entered into a coexistence agreement which contains a WIPO arbitration clause. When the North-American company tried to register its trademark in a particular Asian country, the application was refused because of a risk of confusion with the prior mark held by the other party. The North-American company requested that the other party undertake any efforts to enable it to register its mark in that Asian country and, when the other party refused, initiated arbitration proceedings.

Following proposals made by the Center, the parties appointed a leading IP lawyer as sole arbitrator. In an interim award the sole arbitrator gave effect to the consensual solution suggested by the parties, which provided for the granting by the hardware manufacturer of a license on appropriate terms to the North-American company, including an obligation to provide periodic reports to the other party.

Copyright Arbitrations

Film producers from Mexico, Portugal and Spain entered into a film co-production agreement for an animated film. The agreement provided that any dispute will be resolved under the WIPO Expedited Arbitration Rules by a sole arbitrator in accordance with Mexican law.

One year after the conclusion of the agreement, company from Mexico unilaterally terminated the agreement claiming contractual breach. Parties from Portugal and Spain filled a request and for WIPO Expedited Arbitration alleging wrongful termination of the co-production agreement by the Respondent. Following consultations between the parties and the Center a sole arbitrator was appointed from the list of candidates submitted by the Center. Given the very technical nature of the dispute, a tribunal-appointed expert was requested to assess the quality of the materials used in the production of the animated film. After a two-day hearing conducted fully online using videoconferencing system, the sole arbitrator issued an award establishing the legality of the unilateral termination of the co-production agreement.

Following a two-year negotiation of a license agreement, a US company and European CMOs decided to submit their dispute to WIPO Arbitration. The submission agreement provided that the national law of a particular European country would apply. The three-member tribunal was requested to decide the terms of the proposed license, including the royalty rate.

The submission agreement, and the procedural timetable proposed by the parties, reflected the parties’ mutual interest to resolve the dispute in a time- and cost-efficient manner. Eight months after the appointment of the tribunal, the parties requested the suspension of the proceedings to facilitate direct settlement negotiations during which the parties decided to settle all matters that were subject to the arbitration. The order for termination was issued by the tribunal within 11 months of the commencement of the arbitration.

A TV distribution company requested arbitration in a dispute against an international sports federation based on the WIPO Arbitration Rules pursuant to a broadcast rights distribution agreement. The agreement related to the exclusive broadcast distribution of sports competitions to television audiences in Asia and the Pacific regions. The dispute resolution clause provided that the dispute be decided by a sole arbitrator, the place of arbitration be Geneva, Switzerland, and the law applicable to the substance of the dispute be Swiss law. The TV distribution company claimed damages for breach of contract.

Following consultations between the parties and the Center, the Center appointed a sole arbitrator experienced in media and sport issues. The sole arbitrator considered documentary evidence, held a hearing for the examination of witnesses, and rendered a final award rejecting the claims within a year of the commencement of the arbitration.

IT Arbitrations

A software developer based in the United States and a European company concluded an on-line license agreement permitting use of the European company's security software for internet distribution of the developer's software. The license agreement contained an arbitration clause providing that all disputes should be resolved under the WIPO Expedited Arbitration Rules. Several years after the conclusion of the agreement the software developer submitted a request for Expedited Arbitration to the WIPO Center. He alleged that the European company's security application had not prevented third parties from unauthorized access to his software and claimed substantial damages for breach of contract.

The parties chose one of the candidates proposed by the WIPO Center as sole arbitrator. Because of the geographical distance between them and in order to avoid cost expenditure for travel, the parties agreed to hold the hearing through a videoconference, including witness examinations. Following post-hearing submissions, the arbitrator rendered a final award.

A US company providing data processing software and services and an Asian bank concluded an agreement regarding the provision of account processing services. The parties agreed that the US company was to be the exclusive service provider for certain of the bank’s affiliates in North America and Europe. The agreement stated that any dispute arising out of or in connection with the agreement would be resolved under the WIPO Expedited Arbitration Rules and that the sole arbitrator will be selected from a panel of persons having experience of information technology.

Four years after the conclusion of their agreement, the US company alleged that the bank had violated the agreement by using processing services offered by third parties in the countries covered by the agreement. When the parties failed to settle the dispute, the US service provider commenced WIPO expedited arbitration proceedings claiming infringement of the agreement and substantial consequential damages.

The parties agreed upon a sole arbitrator who held a two-day hearing in New York City. Three months after the request for expedited arbitration, the arbitrator rendered a final award finding partial infringement of the agreement and granting damages to the US service provider.

A European airline entered into an agreement with a US software company concerning the development of a worldwide platform for the management of ticket sales. This was followed by a professional services agreement, which contained a more detailed description of the project as well as the support services to be delivered by the software company. The latter agreement included a WIPO mediation followed by WIPO expedited arbitration clause.

The airline paid several million USD for the application. Some years later, the airline terminated the agreement. In response, the software company asserted that, with the termination, the airline’s rights in the application had lapsed and requested the software to be returned. The airline was of the position that it was entitled to retain the software application and initiated mediation. The result of the mediation was a new license between the parties.

Following the termination of the mediation, the publishing house initiated expedited arbitration proceedings. The Center appointed a practicing judge as sole arbitrator who had been agreed by the parties. The arbitrator conducted a one-day hearing in Hamburg (Germany), in the course of which the parties expressed their desire to settle their case, asking the arbitrator to prepare a settlement proposal. The parties accepted the arbitrator’s proposal and requested the arbitrator to issue a consent award. In addition to confirming the terms of the settlement, the consent award made reference to a press release to be published by the parties announcing the settlement of their dispute.

An Asian company and a European software developer negotiated to form a joint venture company and entered into a license agreement to provide a mobile payment service in a number of Asian countries. Prior to the joint venture’s formation, a dispute arose between them concerning performance of the license agreement. The Asian company submitted a request for arbitration under the WIPO Arbitration Rules on the basis of the license agreement, and also obtained an interim order freezing the European developer’s bank account from a court based in the European developer’s domicile (Article 46(d) of the WIPO Arbitration Rules).

In the WIPO arbitration, the European developer requested the arbitrator to issue an interim award ordering the Asian company to discharge the freezing order, to refrain from initiating any further action in court without prior consent of the arbitrator and to provide a bank guarantee in order to secure payment of the European developer’s counterclaim. The arbitrator, while declining to undertake action in direct relation to the court case, ordered the Asian company to provide a bank guarantee in favor of the European developer. The Asian company provided the bank guarantee as ordered.

At the suggestion of the arbitrator and with the consent of the parties, having reviewed the further pleadings in the case, the arbitrator convened a conciliation conference in Geneva (Switzerland), at which he communicated to the parties his provisional conclusions on the matter referred to arbitration. No written record was provided to the parties of the views so communicated. Although the parties did not immediately settle the case, they were able to do so after further discussions in the weeks that followed. The European developer agreed to pay a certain amount and to return the bank guarantee to the Asian company, which in turn agreed to transfer relevant intellectual property rights to the developer.

A company that provides wireless communication services and a company that sells, installs and maintains telecom infrastructures concluded an agreement for the purchase of infrastructure equipment for wireless communication networks. Both companies were based in the United States. The purchase agreement provided that any dispute arising out of or in connection with the agreement would be resolved under the WIPO Arbitration Rules.

The seller delivered the equipment which was used by the purchaser despite alleged performance shortfalls. Several years after the delivery of the system, the purchaser filed a request for arbitration including, inter alia, claims for breach of contract and damages. The parties chose to appoint as sole arbitrator one of several candidates proposed by the WIPO Center: a lawyer with considerable experience with telecom infrastructure disputes. The sole arbitrator considered substantial documentary evidence, held a three-day hearing in California for the cross-examination of witnesses, and rendered a final award rejecting the claims.

Other Commercial Arbitrations

Companies from Austria and Turkey entered into a distribution agreement to import and market a certain agricultural product in the territory of Turkey. Furthermore, the agreement provided the parties would resolve any disputes arising out of the agreement under the WIPO Expedited Arbitration Rules as per Swiss law.

Two years after the conclusion of the agreement, the company from Austria filed a request for Expedited Arbitration seeking damages and declaratory relief for an alleged breach of the distribution agreement by the Turkish company. Following consultations between the parties and the WIPO Center, a sole arbitrator based in Geneva was appointed from the list of candidates submitted by the Center. The sole arbitrator considered documentary evidence and rendered a final award within seven months after the commencement of the arbitration.

A producer of artistic performances entered into an agreement with an insurance company to finance arbitration proceedings. The finance agreement includes a WIPO expedited arbitration clause. The producer brought arbitration proceedings against an Asian entity in Singapore. The producer claimed the costs of the Singapore arbitration under its finance agreement. Faced with the financing company’s apparent refusal to make such payment, the producer filed WIPO expedited arbitration proceedings indicating that, as a result of the deadline imposed by the arbitral tribunal in Singapore, it required that a final award be issued within six weeks after the commencement of the WIPO expedited arbitration. Following consultations with the parties, the WIPO Center appointed a sole arbitrator. After a one-day hearing in Frankfurt (Germany), the sole arbitrator issued a timely arbitral award within five weeks.

Companies from France and Portugal entered into two sales agent agreements relating to photovoltaic projects in the territory of France. The agreements provided that any dispute will be resolved under the WIPO Arbitration Rules in accordance with the laws of France.

Three and a half years after the conclusion of the first agreement, a dispute arose regarding the payment for services provided under the agreements, and was submitted to WIPO Arbitration. Following consultations between the parties and the Center, a sole arbitrator based in Paris was appointed from the list of candidates submitted by the Center. The sole arbitrator held a one-day hearing in Paris and rendered a final award within 12 months after the commencement of the arbitration.

A European art gallery concluded an exclusive cooperation agreement with a European artist in order to promote the artist in the international market. The agreement contained a WIPO arbitration clause providing for a three-member tribunal. Three years after the signing of the agreement, the parties’ relationship began to deteriorate and the artist sent a notice terminating the agreement. At that point, the art gallery initiated WIPO arbitration proceedings.

Following consultations between the parties and the Center, the Center appointed three arbitrators experienced in art law issues.

After studying the parties’ pleadings, the tribunal considered that there was potential for settlement. With the agreement of the parties, the tribunal issued a preliminary case assessment encouraging the parties to resume settlement negotiations which the parties had attempted at an earlier stage. The parties reached a settlement and asked the tribunal to render a consent award, incorporating the parties’ settlement agreement. The terms of the settlement included the termination of the cooperation agreement and the provision of a number of works by the artist to the gallery in final settlement.

Contact Information

WIPO Arbitration and Mediation Center (Geneva) 34, chemin des Colombettes 1211 Geneva 20 Switzerland T +4122 338 8247 F +4122 740 370

WIPO Arbitration and Mediation Center (Singapore) Maxwell Chambers Suites 28 Maxwell Road #02-14 Singapore 069120 T +65 6225 2129 F +65 6225 3568

For additional information [email protected]

September 02, 2020 Feature

Recent cases involving arbitration of aviation disputes, by roy goldberg.

guvendemir/E+ via Getty Images Plus

Ensure that the underlying agreement contains a properly drafted and enforceable arbitration clause and that legal arguments for enforcement are not waived.

It often makes solid business sense for aviation entities to enter into arbitration agreements as part of the core business contract, given the international (cross-border) nature of the aviation industry, the complexity of disputes involving aircraft, and the time commitment, expense, and onerous “discovery” associated with federal and state court litigation in the United States. Depending on the complexity of the transaction and ultimately the amount in dispute, the arbitration panel may consist of either one or three panelists. The American Arbitration Association (AAA) is a popular choice for the maintenance of the case and selection of the panel, and New York state law is often the choice of law.

However, as recently litigated cases demonstrate, the existence of an arbitration clause does not mean that there will be no federal or state law litigation, with regard to both whether an arbitration can occur and whether the award will be enforced. Aviation companies that are interested in utilizing the arbitration option are well-advised to ensure that (1) the underlying agreement contains a properly drafted and enforceable arbitration clause and (2) legal arguments for enforcement of the arbitration clause are not waived. The cases discussed below highlight the types of arguments that are used (often, but not always, unsuccessfully) to try to avoid operation of an arbitration clause.

Arbitration Agreements and Judicial Review of Awards

The key predicate for a requirement to arbitrate a dispute is the existence of and language in an arbitration clause in the underlying agreement. Although some parties voluntarily agree to send their dispute to arbitration, most parties agree in their contract—prior to any dispute—to settle disputes through binding arbitration.

When reviewing an arbitration award, there is a strong presumption that the award is enforceable. 1 The Federal Arbitration Act (FAA) allows for very limited judicial review to confirm, vacate, or modify arbitration awards. 2 An award may be vacated upon one of four enumerated grounds in the FAA:

(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 3

Generally speaking, the four statutory grounds for vacatur may not be supplemented by contractual provisions. Accordingly, when parties agree to resolve disputes through arbitration, without the court’s intervention, the courts will enforce the bargains implicit in such agreements by enforcing arbitration awards absent a reason to doubt the authority or integrity of the arbitral forum.

However, some courts have vacated arbitration awards upon a finding of “manifest disregard” by the arbitrators in their treatment of the underlying law—a standard that allows a court to vacate an award upon determining that there is absolutely no support at all in the record justifying the arbitrators’ determinations. Although “manifest disregard of the law” is not set forth in the FAA, some federal courts have recognized it as an additional basis for vacatur. In Hall Street Associates, LLC v. Mattel, Inc. , the U.S. Supreme Court cast doubt on whether a party can continue to dispute an arbitration award on such nonstatutory grounds. 4 A split among the circuit courts of appeal has emerged in the wake of the Hall Street decision. In particular, the Second, Fourth, and Ninth Circuits have found that the manifest disregard doctrine continues to exist as a “judicial gloss” under 9 U.S.C. § 10(a)(4) because arbitrators who render a decision in violation therewith have “exceeded their powers” under that provision of the FAA. 5 On the other hand, the Fifth, Eighth, and Eleventh Circuits have concluded that, in the aftermath of Hall Street , the manifest disregard standard no longer survives because it is not enumerated in the FAA. 6

Arbitrators overstep their limits, and subject the award to judicial vacatur under § 10(a)(4), if the arbitrators decide an issue not submitted, grant relief in a form that cannot be rationally derived from the parties’ agreement and submissions, or issue an award that is so completely irrational that it lacks support altogether. In essence, the arbitrator’s goal is to interpret and enforce the contract. As long as the arbitrator makes a good faith effort, serious errors of law or fact will not subject the award to vacatur. Only when the panelist “strays from interpretation and application of the agreement and effectively ‘dispense[s] his own brand of industrial justice’” does the award become unenforceable. 7

Despite the strict standard delineated above, there are myriad examples of disgruntled litigants claiming that an arbitration provision or award should not be enforced. The following cases are just some of the most recent examples.

Gulfstream Aerospace

In Gulfstream Aerospace Corp. v. OCELTIP Aviation 1 Pty Ltd , a party seeking to avoid the consequences of a million-dollar arbitration award raised several procedural obstacles to enforcement of the award, but none succeeded. 8 The case arose when Gulfstream filed an arbitration demand against a buyer of its G550 jet aircraft after the buyer failed to make a payment when due and subsequently failed to cure the breach of its payment obligation. A three-member arbitration panel found for Gulfstream and awarded it $1,096,160.32, comprised of (1) $1 million for the unpaid portion of the $8 million liquidated damages amount specified in the sales agreement, (2) $94,467 as attorney fees and costs, and (3) $1,693.32 as hearing expenses.

After the buyer filed an action in a Georgia state superior court to vacate the award, Gulfstream removed the case to a federal district court in Georgia and requested that the court confirm the arbitration award against the buyer. In February 2020, the district court issued its decision to enforce the arbitration award upon its conclusion that the buyer failed to show that the arbitral tribunal manifestly disregarded the law, as would provide for vacatur of the arbitration award under the Georgia Arbitration Code (GAC).

The buyer argued that the case needed to be remanded to state court because the sales agreement specified that Georgia arbitration law applied, and therefore Georgia superior courts had exclusive jurisdiction to consider the buyer’s request for vacation of the award. The district court denied the remand request, holding that it had subject matter jurisdiction over the buyer’s application to vacate the award. The court ruled that the sales agreement fell within the scope of the FAA because the buyer was an Australian entity. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) is implemented and enforced by chapter 2 of the FAA, which applies to international arbitral proceedings in which “one of the parties to the arbitration is domiciled or has its principal place of business outside of the United States.” 9

The buyer also contended that the sales agreement contained a choice of law provision selecting Georgia law and that the provision therefore incorporated the GAC into the agreement. As a result, the buyer contended, the superior court for the county where the arbitration occurred had exclusive jurisdiction to enforce or vacate the award. In rejecting this argument, the district court observed that section 4.3.1. of the sales agreement provided as follows:

Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the [AAA] in accordance with the provisions of its Commercial Arbitration Rules, including as appropriate its Procedures for Large, Complex Commercial Disputes or its International Dispute Resolution Procedures, and judgment on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. 10

The court explained that “federal circuits have routinely held that parties may agree to state law rules for arbitration even if such rules are inconsistent with those set forth in the FAA, but . . . the parties must clearly evince their intent to be bound by such rules .” 11 “[T]he strong default presumption is that the FAA, not state law, supplies the rules for arbitration” 12 —and the buyer failed to overcome this presumption.

The court also ruled that “the parties’ choice of law provision [did] not express the parties’ intent to depart from the FAA’s standard of vacatur” and instead apply state law, which allowed for vacatur if the buyer showed that the award was in manifest disregard of the applicable law. 13 The court distinguished a prior case where the agreement specified that “[a]ny dispute which may arise from the interpretation, execution or termination of this agreement or from the breach thereof . . . shall be submitted to arbitration . . . according to the provisions of the Florida International Arbitration Act and in compliance with the rules of the [AAA].” 14 There, “the parties specifically stated that the Florida International Arbitration Act was to apply. The parties did not so specify in the Sales Agreement here.” 15

Even after construing the sales agreement as a whole, the court was not convinced that its reference to Georgia law was a clear intent to apply the GAC.

First, the provision delineating the rules for the arbitration, Section 4.3.1. of the Sales Agreement, stated that the arbitration was to be administered by the AAA and that the judgment could be entered by “any court having jurisdiction.” The choice of law provision, while nested under the arbitration heading, [was] contained in another section in which the parties chose Georgia law to govern and disclaimed the application of the U.N. Convention on Contracts for the International Sale of Goods (“UNCISG”). Section 4.3.3’s specific exclusion of the UNCISG in the same sentence as the selection of Georgia law to govern “without reference to rules regarding conflicts of law” counsels against a finding that this choice of law clause is more than “a substitute for ordinary conflict-of-laws analysis” and was intended to displace the FAA in lieu of the GAC. The parties expressly disclaimed application of the UNCISG and could have disclaimed the FAA if the GAC was intended to apply. 16

The court further held that, even if the GAC governed vacatur of the award, the buyer’s arguments for vacating the award under state law failed because in none of the five instances cited by the buyer did the arbitrator manifestly disregard the applicable law. 17

Dynamic International

The case of Dynamic International Airways, LLC v. Air India Ltd. arose out of the annual Islamic pilgrimage (hajj) to Mecca, Saudi Arabia, in 2013 and 2014. 18 Dynamic, which operated a fleet of aircraft on behalf of tour and cargo operators, entered into a contract with Air India to provide air transportation between India and Saudi Arabia to approximately 40,000 pilgrims for the hajj in those two years. Dynamic asserted that it flew the passengers but was denied payment of nearly $9 million by Air India for the transportation. Dynamic tacked on a claim for $84 million because of promises made by Air India regarding 2015 and 2016 events.

The agreements for 2013 and 2014 contained a “Settlement of Disputes” clause designating an “Authority determined by the [Indian] Ministry of Civil Aviation” as the arbitration authority. 19 However, Dynamic filed suit in federal district court in New York City; Air India followed with a letter to the court seeking permission to file a motion to compel arbitration or to dismiss the Dynamic case for forum non conveniens.

Attempting to be clever, Dynamic asserted that the Air India letter to the court represented Air India’s consent for the dispute to be tried in New York. The court did not accept this tactic. Instead, it ruled (not surprisingly) that the parties’ underlying agreement had specified arbitration to occur in India. In ruling that the letter to the court did not create a new binding agreement to arbitrate the case in New York, the court reasoned that because “the parties did not agree on any material terms of the arbitration, the December 16 Letter is not an enforceable arbitration agreement.” 20 At most, the letter was only an “agreement to agree” on the terms of arbitration, and such agreements to agree are not independently enforceable. Fatally, the letter did not reflect “at least three terms critical to any arbitration: the location, forum and rules of the arbitration. Instead of agreeing to those terms upfront, the Letter contemplates that the parties would negotiate those terms in the future.” 21 In effect, Dynamic’s argument lacked the fuel to power it.

Once the New York court tossed the Dynamic argument asserting that a new arbitration agreement had been reached, there was little else for the court to do but direct the parties to proceed to arbitration in India. The motion to compel arbitration filed by Air India was granted.

One lesson of the Air India case, however, is to be careful in submitting letters to the court. The New York federal courts favor letters over formal motion practice. But counsel and parties should be on notice that sharp opposing counsel will try to use the language of the letter to gain an advantage.

Advanced Air Management

Advanced Air Management, Inc. v. Gulfstream Aerospace Corp. 22 presents a good example of a case where an aviation entity challenged an arbitration clause by asserting that it was in the fine print and thus would be “unconscionable” to enforce. The party had some success with this argument, convincing a California state trial court that jet manufacturer Gulfstream had overreached in securing the arbitration provision.

The case involved a contract under which Gulfstream was required to maintain and repair an aircraft for Advanced Air Management. Gulfstream waited until the time of the repair job to insert the arbitration clause in the work authorization agreement terms and conditions, which differed from the language initially provided to Advanced. The terms and conditions included the following language:

ARBITRATION. Any controversy or claim arising out of either this Agreement or Customer’s service visit to Gulfstream shall be governed by the laws of the State of Georgia, without regard for rules concerning conflicts of law, and settled by one (1) arbitrator (except, if the claim is in excess of $2 Million, then by three (3) neutral arbitrators) under the Commercial Arbitration Rules of the [AAA] in the City where the work hereunder was performed. 23

After the maintenance and repair procedures, Advanced experienced a problem with the gearbox oil drain plugs. Advanced filed a complaint against Gulfstream, alleging that the arbitration clause and certain other provisions of the work authorization agreement purporting to limit Gulfstream’s liability were procedurally and substantively unconscionable. Advanced also alleged that Gulfstream was negligent in performing the maintenance and repair work. Gulfstream responded by moving to compel arbitration.

Advanced argued that the arbitration clause was procedurally unconscionable because Gulfstream provided it to Advanced for the first time three months after Advanced signed the proposal incorporating the work authorization agreement’s terms and conditions. Advanced argued that it had no opportunity to negotiate the terms of the agreement and was not aware of the arbitration clause in the dense text in small type on the preprinted form. Gulfstream argued that it was up to the arbitrator and not the court to decide if the arbitration provision was unconscionable. The trial court found that the parties’ contract was unconscionable. On appeal, Gulfstream argued that “the parties agreed to delegate to an arbitrator the authority to decide disputes concerning the enforceability of the arbitration agreement, and Advanced never specifically challenged the validity of that delegation, so the trial court was required to order arbitration and allow the arbitrator to decide whether the arbitration agreement was enforceable.” 24 The appeals court agreed with Gulfstream.

In reversing, the court of appeals highlighted that the work authorization agreement stated that any controversy or claim arising out of the form or the service visit to Gulfstream would be resolved by AAA arbitration and its Commercial Arbitration Rules. Rule R-7(a) of those rules stated that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” 25 Thus, the rule explicitly provided that the arbitrator would decide questions of arbitrability. “By expressly incorporating the AAA Commercial Arbitration Rules into the arbitration agreement, the parties clearly and unmistakably agreed to have the arbitrator decide questions of arbitrability.” 26 The court thus concluded:

Because the parties clearly and unmistakably agreed to have an arbitrator decide questions of arbitrability, the trial court was required to enforce the delegation unless Advanced challenged the delegation specifically. . . . Advanced did not argue that the agreement to have arbitrability decided by the arbitrator was substantively unconscionable, so Advanced did not specifically challenge the delegation. 27

Eagle Aviation

The party challenging an arbitration award in Eagle Aviation Technologies, LLC v. Carson Helicopters, Inc. 28 fared no better. Carson is an aviation company located in Pennsylvania. In addition to selling composite tail rotor blades and refurbishing Sikorsky S-61 helicopters for commercial use, it hoped to create a new secondary market for aging H-60 Blackhawk helicopters through its redesigned rotor blades. Carson contracted with Eagle, a research and development company in Hampton, Virginia, to complete the design and manufacture of Carson’s H-60 composite rotor blade. Eagle also did work on the tail rotor blades for Carson’s Sikorsky S-61 helicopters.

Under the service contract’s statement of work, Eagle was to provide the “design, analysis, test, and manufacturing of [an] Advanced Composite Blackhawk Main Rotor Blade.” 29 The statement of work provided that a detailed work breakdown structure and project plan would be developed as the program progressed. The service contract indicated that the statement of work could be amended, revised, or extended by mutual agreement of the parties and further gave Carson the right to make changes within the general scope of the agreement so long as Carson provided Eagle written notice of the change. Eagle was to complete the work on a “time and material” basis. The agreement committed the parties to binding arbitration in the event of a dispute, with the arbitrator’s decision to be considered “final.” The agreement did not refer to any work that Eagle performed on Carson’s Sikorsky S-61 project.

Disputes arose between the parties over whether Eagle was performing under the contract. Carson claimed that Eagle was overbilling for unperformed work, mishandling recruitment efforts, and not making a good faith effort to complete its research. Carson filed a demand for arbitration with the AAA, alleging claims for breach of contract and tort. The demand included 14 examples of Eagle’s fraudulent billing and overbilling practices, as well as issues regarding Eagle’s work on the Sikorsky S-61 tail rotor blades project. Eagle filed a motion requesting that the arbitrator dismiss the demand because Carson failed to prove that there was a contract. Following oral argument, the arbitrator granted Eagle’s motion to dismiss in part. He found that the “gist of the action doctrine” barred Carson’s tort claims but that a valid contract existed and that the breach of contract claim should be arbitrated. 30

After a four-day hearing, the arbitrator found in favor of Carson and awarded it $510,000 plus costs. The arbitrator found that the parties had mutually agreed to expand the scope of the agreement to include the work on the Sikorsky S-61 tail rotor blades project, that Eagle had engaged in the practice of overbilling in connection with Carson projects, and that Eagle had breached the terms of the agreement. The arbitrator rejected Eagle’s counterclaims because they were first raised in its post-hearing brief.

Eagle filed a petition with a federal district court in Philadelphia to vacate the arbitration award, asserting that the arbitrator exceeded the scope of his power under the arbitration clause by addressing the testing and production of the Sikorsky S-61 composite tail rotor blades, an autoclave purchase, recruiter fees payment, and adjustment of costs paid. Eagle contended that the award should be vacated under FAA § 10(a)(4) because the arbitrator exceeded his authority by basing the award “on matters over which it lacked jurisdiction.” 31 Carson countered that both parties amended, revised, and extended their contract to encompass such work.

The court decided not to disturb the award because of its position that an arbitrator does not exceed the scope of its power so long as the arbitrator makes a “good faith attempt” and interpretation based on principles of contract law. According to the court, “the Arbitrator first looked to the plain language of the Agreement to determine the scope of the Agreement’s provisions” and found language that supported his conclusion that changes to the scope of the contract could be made, including the addition of the Sikorsky S-61 tail rotor blades project. 32 The court further ruled that the arbitrator also did not exceed the scope of his power regarding the adjustment of amounts paid because he looked to the agreement, which provided that “each payment previously made shall be subject to adjustment as a result of such audit.” 33 Ultimately, the arbitrator did not abuse his power because he used the plain language of the agreement and the actions of the parties and gave consistent meaning to multiple provisions.

Air Center Helicopters

In Air Center Helicopters, Inc. v. Starlite Investments Ireland Ltd. , the court refused to vacate an arbitration interim order in favor of Starlite. 34 The dispute arose out of a federal contract to provide helicopters to the U.S. Defense Department. In addition to serious penalties under the contract, failure to provide the helicopters could result in harm to armed forces. For this reason, it was important that the arbitrator have the ability to issue an interim order while the arbitration was pending.

Air Center Helicopters Inc. (ACHI) manufactured helicopters in Fort Worth, Texas. Approximately 90 percent of its business was government contracts, and it had contracted with the Defense Department for over 30 years. ACHI employees worked on classified projects and required high-level security clearances and Federal Aviation Administration certifications. Starlite had much less experience in contracting with the U.S. government but previously worked as a subcontractor for Erickson Helicopters before Erickson went bankrupt. Because of security restrictions and its lack of experience, Starlite struggled to contract with the U.S. government and sought to subcontract instead.

Starlite proposed to have ACHI replace Erickson as a subcontractor with Fluor Corporation, the prime contractor with the U.S. Army, with Starlite acting as a subcontractor to ACHI. ACHI submitted a proposal to Fluor seeking to handle helicopter work supporting U.S. military operations in Afghanistan. The proposal listed Starlite as a subcontractor to ACHI. Fluor awarded the contract to ACHI, and ACHI entered into a series of contracts with Starlite, including a lease agreement for each of the four aircraft required under the Fluor contract, three operational and maintenance lease agreements, an aircraft lease, and eight side letters. The Fluor contract required that the helicopters be 20 years old or less. At the time, Starlite was providing helicopters that were 40 years old and Fluor temporarily waived the age requirement. Unfortunately, Fluor decided to rescind the waiver, such that ACHI needed to provide newer (20 years old or less) helicopters.

Starlite filed a demand for arbitration, alleging breach of contract, anticipatory breach of contract, and other claims, as well as an application for emergency relief and interim relief. After a hearing, the arbitrator issued an interim order, which concluded that Starlite had demonstrated a probable right to relief and ordered specific performance, namely preservation of the status quo. ACHI responded by filing a motion to vacate and a preliminary injunction motion. ACHI argued that the arbitrator “(1) imperfectly executed his powers by entering an indefinite order; (2) exceeded his powers by manifestly disregarding settled law in relying on an implied-in-fact contract theory; and (3) exceeded his powers by granting relief to a non-party.” 35

The court found for Starlite, reasoning that the arbitrator did not act contrary to express contractual provisions. Rather, the order aligned with the parties’ agreements. The court did not read the interim order as requiring ACHI to deliver any helicopter pursuant to the parties’ existing agreements. Instead, the interim order required ACHI to pay Starlite upon its performance . The court observed that ACHI might choose to deliver compliant aircraft to Fluor to preserve its relationship with Fluor, but the interim order did not require it. “If Starlite provides the compliant aircraft, . . . the Interim Order requires that ACHI pay Starlite. If Starlite fails to deliver the compliant aircraft in the time provided, then that is not performance rendered , and the Interim Order does not require ACHI to pay Starlite. 36

The court further found that the interim order did not determine the rights or obligations of a third party but rather only those of ACHI regarding its relationship with Starlite. ACHI failed to meet its “high burden to show that the arbitrator imperfectly executed or exceeded his powers in the Interim Order.” 37

Spirit Airlines

Finally, in Spirit Airlines, Inc. v. Maizes , members of the Spirit Airlines $9 Fare Club alleged that Spirit had violated the club agreement because the members paid the $59.95 yearly membership fee but allegedly did not receive the promised benefits and rights of membership. 38 The members filed an arbitration demand, which included a request that the arbitrators treat the proceeding as a class action.

Spirit reacted by filing a lawsuit in federal court in Florida, seeking a declaration that the arbitration panel was without power to consider class claims. The district court denied Spirit’s motion for preliminary injunction and ruled that it was for the arbitration panel, rather than the court, to decide whether the panel could consider class claims, and the Eleventh Circuit Court of Appeals affirmed. At issue was the language from the parties’ agreement, which stated:

This Agreement and the terms of membership shall be governed and construed in accordance with the laws of the State of Florida without giving effect to the choice of law provisions thereof. Any dispute arising between Members and Spirit will be resolved by submission to arbitration in Broward County, State of Florida in accordance with the rules of the [AAA] then in effect. Notwithstanding the foregoing, nothing in this Agreement is intended or shall be construed to negate or otherwise affect the consumer protection laws of the state in which Members reside. 39

In its ruling, the district court found that “the agreement’s choice of AAA rules incorporated Rule 3 of the Supplementary Rules for Class Actions, which designates the arbitrator to decide whether the arbitration agreement permits class arbitration. Because the AAA rules require the arbitrator to decide this question, the court dismissed the case for lack of jurisdiction.” 40

In affirming, the Eleventh Circuit noted:

Arbitrations routinely generate three categories of dispute. First, there are the merits of the disagreement. Second, there is a dispute about whether the parties agreed to arbitrate their disagreement. Third, parties disagree about who gets to decide whether they agreed to arbitrate their differences. . . . Here, the parties dispute whether the agreement’s choice of AAA arbitration rules amounts to “clear and unmistakable” evidence of the parties’ intent to have an arbitrator decide whether the agreement permits class arbitration. 41

The Eleventh Circuit agreed with the district court’s finding that the parties’ agreement plainly chose AAA rules, including Supplementary Rule 3, emphasizing that this was “clear and unmistakable evidence that the parties chose to have an arbitrator decide whether their agreement provided for class arbitration.” 42

Spirit argued that the court should demand a higher showing for class arbitrability questions than for other questions of arbitrability. The airline contended that the higher burden was needed because “class arbitration dramatically changes what ordinarily goes on in arbitration.” 43 The Eleventh Circuit acknowledged that “Spirit’s argument has some authority. Four circuits have held that adoption of the AAA rules is not clear and unmistakable evidence of the parties’ intent to have an arbitrator decide whether the agreement allows class arbitration.” 44 Yet, while the Eleventh Circuit said that it respected the work of its sister circuits, it opted to read Supreme Court precedent differently.

The Spirit Airlines case shows that the forum may have an impact on how an arbitration agreement is applied. Spirit appears to have sought the benefit of an arbitration requirement versus a court action, but—at least from the viewpoint of the Eleventh Circuit—it did not include language in its membership agreement that per se precluded an arbitrator from deciding that a class action claim could be arbitrated.

Practical Tips for the Strongest Possible Case

The best arbitration case starts with a good arbitration clause that gives the entity the right to seek or demand arbitration before decision makers who will follow the law and understand the industry. Next, it is key to retain the right arbitrator(s). Often, an arbitration clause will specify certain skills that are needed for the panel. This makes arbitration much more valuable than a lay jury for some disputes. However, parties should understand the power that one panelist may have over the other two panelists and ensure that all of the panelists are appropriate for the dispute.

Once the case is before the panel, keep the presentation focused and simplified. If arbitrators think that you are wasting their time, they will find a way to penalize your client. In addition, assume that the panel will learn all of the relevant facts; this is not a situation where (as with juries) the key facts can be excluded from the decision maker. Moreover, it is important to remember that panelists are paid for the work they do. They are there to hear evidence and make a decision on the merits. That is why it is rare for experienced counsel to file a motion for summary judgment with a panel, and even more rare for the panel to grant it.

Cynics say that the word “arbitrary” is the root of “arbitration.” However, with the right panel, an arbitration can be much more efficacious than a jury trial. The key is a good arbitration provision, caution with regard to not waiving arguments, and preparation and execution before the panel.

1 . See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983).

2 . Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 578 (2008).

3 . 9 U.S.C. § 10(a).

4 . 552 U.S. 576.

5 . See Wachovia Sec., LLC v. Brand, 671 F.3d 472, 480 (4th Cir. 2012); Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009); Stolt-Nielsen SA v. AnimalFeeds Int’l Corp., 548 F.3d 85, 95 (2d Cir. 2008), overruled on other grounds , 559 U.S. 662 (2010).

6 . See Med. Shoppe Int’l, Inc. v. Turner Invs., Inc., 614 F.3d 485, 489 (8th Cir. 2010); Frazier v. CitiFinancial Corp., 604 F.3d 1313, 1324 (11th Cir. 2010); Citigroup Glob. Mkts., Inc. v. Bacon, 562 F.3d 349, 355 (5th Cir. 2009).

7 . Stolt-Nielsen , 559 U.S. at 671 (alteration in original).

8 . No. CV416-127, 2020 WL 826352 (S.D. Ga. Feb. 14, 2020).

9 . Indus. Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH, 141 F.3d 1434, 1441 (11th Cir. 1998); see 9 U.S.C. §§ 201 et seq.

10 . Gulfstream Aerospace , 2020 WL 826352, at *3.

11 . Id. at *4 (emphasis added).

13 . Id. at *5.

14 . Id. (quoting Rintin Corp., S.A. v. Domar, Ltd., 476 F.3d 1254, 1256 (11th Cir. 2007)).

16 . Id. (citation omitted).

17 . Id. at *6–8.

18 . No. 15-cv-7054, 2016 WL 3748477 (S.D.N.Y. July 8, 2016).

19 . Id. at *2.

20 . Id. at *6.

22 . No. B265723, 2017 WL 3887428 (Cal. Ct. App. Sept. 6, 2017).

23 . Id. at *1.

25 . Id. at *4.

27 . Id. at *5.

28 . No. 15-5216, 2016 WL 6213044 (E.D. Pa. Oct. 24, 2016).

29 . Id. at *1 (alteration in original).

30 . Id. at *2.

31 . Id. at *4.

32 . Id. at *5.

33 . Id. at *4–5.

34 . No. 4:18-cv-00599-O, 2018 WL 3631782 (N.D. Tex. July 30, 2018).

35 . Id. at *3.

36 . Id. at *4 (citation omitted).

37 . Id. at *6.

38 . 899 F.3d 1230, 1231–32 (11th Cir. 2018).

39 . Id. at 1232.

41 . Id. at 1232–33.

42 . Id. at 1233–34.

43 . Id. at 1234.

44 . Id . (citing Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972–73 (8th Cir. 2017); Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 762–63 (3d Cir. 2016); Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867, 876–77 (4th Cir. 2015); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599–600 (6th Cir. 2013)).

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Roy goldberg, ---------------------------.

Roy Goldberg is a litigation partner in the Washington, D.C., office of Stinson LLP. He focuses much of his practice on the aviation industry and has handled arbitrations in the United States, the United Kingdom, and Spain, with panels appointed under the rules of the American Arbitration Association and the International Chamber of Commerce. He is currently cochair of the ABA Air and Space Law Forum Membership Committee and president of the International Aviation Club.

“International arbitration in investment disputes” case study of Egypt

Review of Economics and Political Science

ISSN : 2631-3561

Article publication date: 12 February 2020

Issue publication date: 11 December 2023

This theme will be addressed through main points: Special Nature of Investment Disputes and its methods of peaceful settlement. International legal framework governing Arbitration in investment disputes: A. Multilateral legal framework. B. Bilateral legal framework/Investment promotion and protection agreementsTypes of arbitration in investment disputes. The Egyptian experience in investment disputes arbitration. The National legal framework. Egypt on the map of investment disputes in the world. A case study. Conclusion: Results related to the legal framework regulating investment disputes in Egypt. Results related to The arbitration cases against Egypt.

Design/methodology/approach

The researcher investigates the subject of international arbitration in investment disputes in the framework of voluntary theory, which is based on the premise that the satisfaction of people who are addressing the international legal norm is the basis of the same rule. In other words, the basis of international law is based on the satisfaction of the State and other international legal persons Both, and then express or implied consent.

Despite the availability of domestic and regional arbitration mechanisms in Egypt represented by a large number of cases.

Research limitations/implications

The theme for the study primarily on Egypt and the international arbitration of investment disputes, through theoretical and practical study of disputes arbitration which Egypt is a party defendant in which to focus on what was issued in which the provisions of the International Center for Settlement of Investment Disputes, in an attempt to find out the reasons for the verdicts image released it, where it came mostly against Egypt, and whether these judgments against them in investment disputes due to reasons related to the legal framework of the arbitration process, or for reasons of bodies of arbitration issued by those provisions, or to the defense, which represents the Egyptian party, or to the circumstances Economic and political (which represents the investment climate).

Originality/value

The proposed solutions to improve the conditions and factors surrounding the arbitration disputes that Egypt is waging against foreign investors, whether they are initially alleged or accused of drafting agreements and contracts, through amending the relevant legislation and laws, selecting arbitration bodies and defense bodies.

• Foreign direct investment
• International arbitration
• Investment disputes

Farag, S.A. (2023), "“International arbitration in investment disputes” case study of Egypt", Review of Economics and Political Science , Vol. 8 No. 6, pp. 427-447. https://doi.org/10.1108/REPS-11-2018-0027

Emerald Publishing Limited

Copyright © 2020, Sabah Ahmd Farag.

Published in Review of Economics and Political Science . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

The study deals with the Egyptian experience in the field of international arbitration in investment disputes as part of a broader regional and international framework which is increasingly being used for international arbitration as a mechanism for settling disputes between the investor and the host country by answering the following main questions: Is the legal framework governing the settlement of investment disputes at various levels a major reason for the increasing number of investment claims filed against Egypt before the International Center for Settlement of Investment Disputes (ICSID) of the World Bank? Does this framework require amendments that would reduce the number of such claims or investors resorting to arbitration as a mechanism? Are there other reasons related to the nature of these actions and the economic activities that fall within them, and the Egyptian side's dealings with those cases in terms of defenses filed and other actions?

Special Nature of Investment Disputes and its methods of peaceful settlement.

multilateral legal framework; and

bilateral legal framework/Investment promotion and protection agreements.

Types of arbitration in investment disputes.

the national legal framework;

Egypt on the map of investment disputes in the world; and

a case study.

results related to the legal framework regulating investment disputes in Egypt; and

results related to the arbitration cases against Egypt.

The research approach

The researcher uses the two approaches, first, legal approach , which was based mainly on regulating international relations within a formal framework. This approach was aimed at re-shaping and regulating international relations according to legal standards and standards. It also means studying and analyzing international treaties and conventions, the subject of international legislation and the topic of international responsibility. Second, Descriptive research , which aimed at casting light on current issues or problems through a process of data collection that enables them to describe the situation more completely than was possible without employing this method, Descriptive studies are closely associated with observational studies, but also Case studies and surveys can also be specified as popular data collection methods used with descriptive studies

Special nature of investment disputes and its methods of peaceful settlement

Investment Disputes (Investor-State disputes) can be defined as the kind of dispute which arises between the two parties of the investment contract, the country hosting the investment and the foreign investor (a national of another state) as a result of a violations made by one of the parties concerning the rights of the other party or breach of the obligations stipulated in the investment contract, for example, prematurely terminating the contract, or making any unilateral action by one of the parties, mainly the state such as expropriation, seizure, confiscation and nationalization, leading to serious damages to the other party. These actions require compensating the harmed party for the damages and loss it incurred on the investor due to those violations. Investment contracts establish some sort of legal relationship between the contracting parties. Some believe that the international character characterizes this relationship, since one of its elements is foreign. The legal relationship is defined as the one that exists between one subject and another, determined by a rule of law ( Salacuse, 2007 ).

The difficulty and sharpness of the problems raised by investment contracts result from inequality in the legal positions of the parties to these contracts, and the nature of Disputing Parties. These contracts are concluded between two unequal parties: the host country on the one hand, the state, and a national of another state on the other hand, the foreign investor. The state, as a subject of public internal law, enjoys sovereign authorities not enjoyed by the private foreign subject contracting with it, generally considered as subject of private law ( El Hadad, 1996 ).

The object of Investor-State disputes is often related to the sovereignty of the state in terms of the existence of the investment project on its territory, and in terms of the law applicable to the dispute. So the question which arises here is how a sovereign state would be subject to law other than its law on its territory while it has the supreme authority in legislating and enacting of laws and regulations in all matters in relation to everything on its territory ( Kassem, 2015 ).

Investor-State disputes arise between two subjects which differ in their legal status and hence create a plenty of problems, for example the applicable law in case these disputes arise. Moreover, these disputes arise from investments contracts which include clauses with special nature, for example, the stabilization clauses, sacredness of contracts and incorporation of the domestic law in the investment contracts and marginalization of the domestic laws. The inclusion of these clauses in the investment contracts curb or force states to abandon a part of their sovereignty to attract the foreign investor due to the scarcity of resources in these states.

There are variety of instruments for peaceful settlement as well as disputes related to investment, including negotiation, commissions of inquiry, mediation, conciliation and good offices and arbitration.

The methods of peaceful settlement of disputes fall into three categories: diplomatic, adjudicative, and institutional methods. Diplomatic methods involve attempts to settle disputes either by the parties themselves or with the help of other entities. Adjudicative methods involve the settlement of disputes by tribunals, either judicial or arbitral. Institutional methods involve the resort to either the United Nations or regional organizations for settlement of disputes ( Hamza, 2017 ).

Diplomatic methods of dispute settlement.

Negotiation..

Negotiation is a method by which people settle differences. It is a process by which compromise or agreement is reached while avoiding argument and dispute, but International practice of direct negotiation, although vast, has not always been conducive to clearly concluding results, and does not seem to allow for generalizations. Boczek defined Negotiation “[…] is a diplomatic procedure whereby representatives of states engage in discussing matters […] between them […] to clarify and reconcile their divergent positions and resolve the dispute” ( Boczek, 2005b ).

Mediation is clearly a political method of settlement. In mediation a third-party, acceptable to both parties to the dispute, effects communication between the parties and participates actively in the process of negotiation by offering proposals for settlement[ 1 ].Unlike an arbitrator, a mediator has no legal power to force acceptance of his or her decision but relies on persuasion to reach an agreement. Also called conciliation.

Conciliation.

Conciliation is a process of settling a dispute by referring it to a specially constituted organ whose task is to elucidate the facts and suggest proposals for a settlement to the parties concerned, Boczek defined conciliation as:

[…] a diplomatic method of third-party peaceful settlement […], whereby a dispute is referred by the parties, with their consent, to a permanent or ad hoc commission, […] whose task is impartially to examine the dispute and to prepare a report with the suggestion of a concrete proposal. ( Boczek, 2005a )

Adjudicative methods of dispute settlement.

Adjudicative methods of dispute settlement consist of two types of procedures, arbitration and judicial settlement[ 2 ].

Arbitration.

Arbitration is a process used by agreement of the parties to resolve disputes. In arbitration, disputes are resolved, with binding effect, by a person or persons acting in a judicial manner in private, rather than by a national court of law that would have jurisdiction but for the agreement of the parties to exclude it. The decision of the arbitral tribunal is usually called an award.

The submission of a dispute to an unbiased third person designated by the parties to the controversy, who agree in advance to comply with the award a decision to be issued after a hearing at which both parties have an opportunity to be heard.

Arbitration is a well-established and widely used means to end disputes. It is one of several kinds of Alternative Dispute Resolution, which provide parties to a controversy with a choice other than litigation. Unlike litigation, arbitration takes place out of court: the two sides select an impartial third party, known as an arbitrator; agree in advance to comply with the arbitrator's award, and then participate in a hearing at which both sides can present evidence and testimony. The arbitrator's decision is usually final, and courts rarely reexamine it[ 3 ].

Judicial settlement.

Judicial settlement is a settlement of dispute between States by an international tribunal in accordance with the rules of International Law. The international character of the tribunal is in both its organization and its jurisdiction.

International tribunals include permanent tribunals, such as the International Court of Justice (ICJ), the international Tribunal for the law of the Sea (ITLOS), the European court of Justice, the European Court of Human Rights and the Inter-American Court of Human rights, and include ad hoc tribunals, such as the United Nations tribunal in Libya. The ICJ is the most important international tribunal, because of its both prestige and jurisdiction. It is the principal judicial organ of the United Nations[ 4 ].

Advantages and disadvantages of arbitration as methods of peaceful settlement[ 5 ].

Advantages..

Disputes which are taken to arbitration can be resolved faster than Judicial settlement methods like state court, in federal court or International Court.

Arbitrations take quite a bit less time than a lawsuit in district court, they will end up being less expensive than a case that goes to trial.

Specialized decision-makers: judges will often know very little about certain types of cases. This will often make it difficult for the attorney to effectively present the case.

Arbitration will provide more privacy to the parties than litigation. The arbitration dispute itself and the terms of any award frequently remain confidential.

A great benefit of arbitration is that the parties can select their arbitrators, both under the party appointed system and the list system.

Arbitration is a flexible process which permits parties to organize procedures, and schedule hearings and deadlines to meet their objectives and convenience.

Institutional methods of dispute settlement.

Institutional methods of dispute settlement involve the resort to international organizations for settlement of international disputes. These methods have come into existence with the creation of the international organizations. The most eminent organizations, which provide mechanisms for settling dispute between their member States, are the United Nations and the regional organizations, such as the European Union, the Organization of American States, the Arab league and the African Union.

International legal framework governing arbitration in investment disputes

It is therefore not possible to study international arbitration as a mechanism for the settlement of disputes in theory and their application to the Egyptian reality independently of the legal framework governing this mechanism, We found that it is a multi-level framework and can be divided the external legal framework of the arbitration mechanism, which in turn includes two levels, one multilateral, including the international, regional and bilateral levels, we will focus on international multilateral legal framework and bilateral investment agreements.

Multilateral legal framework.

In this section, the focus will be on three agreements that formed the international framework for arbitration as a mechanism and are related in one way or another to the investment disputes against Egypt in different international bodies.

First : Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 New York Convention:The most important milestone in the development of international commercial arbitration was the 1958 New York Convention. It was adopted by the United Nations Conference on International Commercial Arbitration convened by the Economic and Social Council of the United Nations[ 6 ].

The New York Convention applies “to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal”, and the awards may be issued by special arbitrators or by permanent arbitral bodies.

The Convention consists of 16 articles. The main objective of this Convention is as follows: First, to provide common legislative standards on the recognition of arbitration agreements. Second, Recognition and enforcement of foreign arbitral awards. Third: To ensure that there is no distinction between domestic and foreign arbitral awards by not imposing any more stringent conditions than on the recognition of local arbitral awards. These conditions also include the imposition of any fees or charges[ 7 ].

Egypt acceded to the Convention on 9 May 1959 and entered into force on 7 June 1959[ 8 ].

Second , UNCITRAL Rules and Recommendations of the United Nations Conference on International Commercial Arbitration, held in New York from 20 May to 10 June 1958 and subsequent United Nations Commission on Trade Law work adopted.

The UNCITRAL Rules means the United Nations Commission on International Trade Law arbitration rules adopted by General Assembly resolution 31/12/1976.

When it created UNCITRAL in 1966, the General Assembly of the United Nations recognized that “divergencies arising from the laws of different States in matters relating to international trade constitute one of the obstacles to the development of world trade” and expressed the view that, through the Commission, the United Nations could play “a more active role toward reducing or removing legal obstacles to the flow of international trade”[ 9 ].

UNCITRAL Rules have been drafted and drafted in their current form following extensive consultations with arbitral institutions and international commercial arbitration centers. A series of amendments and revisions have been made to these rules since they have been adopted to date. The aim of these amendments is as reflected in the resolution, Of UNCITRAL 2010 stated that the widespread application of these rules, which had been previously adopted under different circumstances, encompassed a wide range of disputes, required a revision of those rules to bring them in line with current international trade practices and to cope with changes that had occurred over three decades to enhance the efficiency of arbitration procedures in those rules ( United Nations, 1994 ).

The revision of those rules in a manner acceptable to the world's nations in all their legal, social and economic systems can contribute greatly to the establishment of harmonious economic relations, as well as the strengthening of the rule of law and the establishment of a harmonized legal framework for the settlement of international trade disputes fairly and efficiently ( United Nations, 2011 ).

Third : Washington Convention for the Settlement of Investment Disputes between States and Citizens of Other States 1965:

This agreement came within the framework of the World Bank's attempt to establish rules regulating arbitration procedures in the light of the difficulties it faced in arbitration as a mechanism for settling disputes. A multilateral agreement was drafted in accordance with the provisions of its articles settling disputes arising between foreign investors and their host countries ( United Nations Commission on International Trade Law, 2013 ). On March 18, 1965 in Washington and entered into force on October 14, 1966. It was signed by more than 160 countries[ 10 ].

The Convention consists of 75 articles divided into ten sections. In its Preamble, the Convention emphasizes the importance of international investment in economic development and the potential for disputes related to this investment between its host countries and investors. This requires the provision of means of conciliation and international arbitration.

Bilateral legal framework/investment promotion and protection agreements.

The Bilateral agreements are a result of the tendency of the countries exporting investments to protect their investments, especially in the newly independent developing countries, which refused to protect them.

The investment agreements signed between Egypt and the rest of the world explicitly stipulate the definition of investment as the material aspect that is protected under the agreement through the investment process carried out by the investor using this investment.

These agreements are expressly defined by those who apply to them or those who benefit from the benefits they include, namely, the foreign investor.

These agreements specify the scope of the application of the Convention and the geographical scope of the application of the Convention.

These agreements also provide for a specific period. This framework shall represent the period of time in which the Convention shall enter into force and the entry into force of the signed Convention shall come into force after certain procedures have been fulfilled and the expiry of the period as provided for in that Convention.

All these bilateral agreements clearly define the mechanisms for settling disputes that may arise from disputes between the parties to the Convention or between the signatory State and investors who hold the nationality of the other signatory State. These agreements provide for friendly means of settlement of such disputes, usually in conciliation, mediation and arbitration, while some of these agreements provide for the principle of amicable settlement of the dispute without limitation.

Types of arbitration in investment disputes

In international business, a party contemplating concluding an arbitration agreement in a contract for the resolution of disputes or differences may be faced with a choice of the various types of arbitrations which can be conducted under either self-administered ad hoc or institutional rules or procedures.

Institutional arbitration

An institutional arbitration is one in which a specialized institution intervenes and takes on the role of administering the arbitration process. Each institution has its own set of rules which provide a framework for the arbitration, and its own form of administration to assist in the process.

Advantages of institutional arbitration.

the availability of pre-established rules and procedures which ensure the arbitration proceedings begin in a timely manner;

administrative assistance from the institution, which will provide a secretariat or court of arbitration;

a list of qualified arbitrators to choose from;

assistance in encouraging reluctant parties to proceed with arbitration; and

an established format with a proven record.

Some of the most important arbitration institutions[ 12 ]

International Chamber of Commerce (ICC) – Paris.

Swiss Chambers’ Arbitration Institution (SCAI) – Geneva.

London Court of International Arbitration (LCIA) – London.

Arbitration Institute of the Stockholm Chamber of Commerce.

Stockholm – Singapore International Arbitration Centre (SIAC) – Singapore.

International Centre for Settlement of Investment Disputes (ICSID) – Washington.

D.C. – Court of Arbitration for Sport (CAS) – Lausanne.

Ad hoc arbitration

An ad hoc arbitration is one which is not administered by an institution such as the ICC, LCIA, DIAC or DIFC. The parties will therefore have to determine all aspects of the arbitration themselves – for example, the number of arbitrators, appointing those arbitrators, the applicable law and the procedure for conducting the arbitration.

Provided the parties approach the arbitration with cooperation, ad hoc proceedings have the potential to be more flexible, faster and cheaper than institutional proceedings. The absence of administrative fees alone provides an excellent incentive to use the ad hoc procedure[ 13 ].

The arbitration agreement, whether reached before or after a dispute has arisen, may simply state that “disputes between parties will be arbitrated”. It is infinitely preferable at least to specify the place or “seat” of the arbitration as well since this will have a significant impact on several vital issues such as the procedural laws governing the arbitration and the enforceability of the award. If the parties cannot agree on the detail all unresolved problems and questions relating to the implementation of the arbitration – for example, how the tribunal will be appointed or how the proceedings will be conducted – will be determined by the “seat” or location of the arbitration. However, this approach will only work if the seat of the arbitration has an established arbitration law.

Ad hoc proceedings need not be kept entirely separate from institutional arbitration. Often, appointing a qualified arbitrator can lead to the parties agreeing to designate an institutional provider as the appointing authority. Additionally, the parties may decide to engage an institutional provider to administer the arbitration at any time.

Ad hoc arbitration – advantages[ 14 ]

ad hoc arbitration is less expensive than institutional arbitration;

no administration fees;

total flexibility and adaptability (tailor made);

control of the process, Parties and arbitrators are, in principle, in control of the proceeding;

in ad hoc arbitrations, the parties will have to agree the scale of remuneration; and

with the arbitral panel and agree fees directly with the arbitral tribunal.

The Egyptian experience in investment disputes arbitration

The existence of a regulated legal framework for investment in any State contributes to the creation of the necessary environment for the foreign investor through national laws, which ensure that the return is adequate for its investments and guarantees foreign capital protection against sources and other damages that may be caused to it at any time.

It also guarantees neutrality and objectivity in the consideration of disputes that may arise between Egypt and foreign investors as a result of investing these funds.

The national legal framework

Through its experience at the international and regional levels, Egypt has sought to benefit from this experience by changing in its legislative frameworks and laws to allow the foreign investor the opportunity to resort to international arbitration to present the dispute that may arise between it and the host country. This gives investors some reassurance in view of their fears of national litigation systems, as well as the length of the proceedings.

In this regard, two main points are emphasized:

First, the laws governing investment.

Which Egypt has adopted in succession since the signing of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the location of arbitration within these laws and the guarantees it provides to investors in exchange for Egypt's obligations as a host country for investment toward these investors.

Between 1953 and Egypt's signing of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which it signed on March 9, 1959, the laws governing investment are:

Law No. 55 of 1952 on the system of free zones on 2/12/1952.

Law 156 of 1953 on the investment of foreign capital in economic development projects on 2/4/1953 and amended by Law No. 475 of 1954.

These laws did not include any articles on arbitration as a mechanism for the settlement of disputes arising within them.

Even after Egypt signed the agreement, Law No. 2108 of 1960 on the investment of foreign capital was issued without any of its articles referring to the settlement of any disputes that may arise under this law, whether between the State and the investor or between investors. In 1971.

Law No. 65 of 1971 concerning the investment of money, Arab and free zones is a real beginning for Egypt to include arbitration as a mechanism for settling investment disputes between it and investors and the beginning of its commitment and then its commitment to accept international arbitration as a mechanism. This is evident in the articles of Law No. 2, 38, 39 and 40 and 41[ 15 ].

Such as Law No. 43 of 1974 issuing the Arab and Foreign Investment and Free Zones Law, the first investment laws approved by Egypt, and expressly provided for the presentation of investment disputes to the International Center for the Settlement of Investment Disputes. Article 8 of the law stipulates that “This law shall be in the manner agreed upon with the investor or within the framework of the agreements in force between the Arab Republic of Egypt and the Investor State or within the framework of the Agreement on the Settlement of Investment Disputes between the State and the nationals of other countries to which Egypt has acceded under Law No. 90 1971 NH, which lays down the conditions.

Law No. 230 of 1989 on Investment and its amendments represents the affirmation of Egypt's continued commitment to international arbitration as a mechanism for settling investment disputes between investors. Article 55 of the law states that “To implement the provisions of this law in the manner agreed upon with investors and may be agreed between the parties concerned to settle these disputes under the agreements in force between the Arab Republic of Egypt and the State of the investor or within the framework of the Convention on the Settlement of Investment Disputes between States and citizens Other countries that acceded to the Arab Republic of Egypt Law No. 90 of 1971 […][ 16 ].

In spite of the termination of this law, Law No. 8 of 1997 on the issuance of the Investment Guarantees and Incentives Law also represents a continuation of Egypt's commitment to international arbitration as a mechanism for resolving investment disputes. Article 7 of the law stipulates that “investment disputes related to the implementation of the provisions of this law In the manner agreed upon with the investor. It may also be agreed between the parties concerned to settle these disputes within the framework of the agreements in force between the Arab Republic of Egypt and the Investor State or within the framework of the Convention for the Settlement of Disputes arising out of Investments between States and between States' In accordance with the provisions of the Arbitration Law in Commercial Articles promulgated by Law No. 27 of 1994, as well as the settlement of disputes referred to by arbitration before the Cairo Center Regional Center for International Commercial Arbitration”.

The Law of Guarantees and Incentives No. 8 of 1997 was amended by Law No. 17 of 2015. One of the most important amendments was the amendment of Article 7 on the use of international arbitration, as well as the regulation of reconciliation with investors.

Although the amendments to the Law on Investment Guarantees and Incentives No. 8 of 1997 have not been passed for a long time, they were canceled on 1/6/2017 and replaced by the new Investment Law No. 72 of 2017 and its executive regulations. Investment and gradually addressed over four chapters, where the fifth section at the beginning of the settlement of any dispute between the investor and any one or more governmental bodies relating to capital or the interpretation of the provisions of this law or its application amicably without delay through negotiations between the parties to the conflict, Without prejudice to the right to litigation.

Second: Egyptian arbitration law.

The Egyptian Arbitration Law promulgated by Law No. 27 of 1994 is an integrated development of Egypt's commitment to arbitration as a dispute resolution mechanism related to contracts of an economic nature, including investment. The law consists of 58 articles divided into seven sections.

The most prominent features of this law:

The law expressly defines in its article two what is commercial arbitration, which lists the forms of commercial disputes, where the origin of which is the existence of legal relationship of an economic character and the market of many examples and not limited to these disputes, including investment, exploration, extraction and land reclamation. This law also calls the term arbitration The parties to the conflict will voluntarily.

The Egyptian Arbitration Law included arbitration subject to the law of the parties where the parties are free to choose the law governing the arbitration agreement even if there is no link between the agreed law and the law governing the legal relationship in dispute. applied to the conflict ( Al-Qalloubi, 2005 ).

The Egyptian legal framework is consistent with the New York Convention of 1958 on the availability of the two pillars of consent and writing. Writing is then a cornerstone of the arbitration agreement ( Al-Qalloubi, 2005 , p. 65).

The law defines four criteria on the basis of which international arbitration is considered.

This Agreement shall be in writing or otherwise void.

It is not permissible to agree on arbitration except for the natural or juridical person who has the right to dispose of his rights.

The arbitration clause shall be regarded as an independent agreement from the other conditions of the contract. The invalidity, dissolution or termination of the contract shall not result in any effect on the arbitration clause it contains if that condition is in itself correct.

The law provides for a full chapter dealing with the arbitral tribunal where it gives the parties to the dispute the right to form their members from one arbitrator or more, provided that the number is fixed. This section deals with the conditions of selecting the arbitrators and their nationalities and controls in case of disagreement between the parties to the dispute of arbitrators.

The law expressly provides for the role of the judiciary and distinguishes between the first two cases in matters referred by the law to the Egyptian judiciary and the jurisdiction of the court that is originally competent to hear the dispute. The second is that when the dispute is international, whether the arbitration is inside or outside Egypt, the court gives the court many powers during the various stages of arbitration, whether from the beginning of the dispute and presented to arbitration or during the course of the proceedings or even after the issuance of the judgment and implementation.

The law affirms in the various articles the will of the parties and their dispute, beginning with the agreement to resort to arbitration before or after the outbreak of the dispute through their agreement on the selection of the arbitral tribunal as well as the agreement on the arbitral proceedings and the applicable law), as well as the place of arbitration both inside and outside Egypt. Consent shall extend to the choice of the language of arbitration.

The law recognizes that the arbitration provisions issued in accordance with this law cannot be appealed against any of the methods of appeal stipulated in the Civil and Commercial Procedures Law. However, it is permissible to file an action for nullification of the ruling in certain cases defined by the law.

Although the law has set out a full chapter (Chapter VII) on the validity of the decisions of the arbitrators issued and implemented, and stressed that these provisions are enforceable, but they set conditions for the issuance of order to implement the provision.

Egypt on the map of investment disputes in the world

In this section, we will focuses on the Egypt investment disputes before the International Center for Settlement of Investment Disputes (ICSID) by locating Egypt on the map of investment disputes in the world.

The cases before the International Center for the Settlement of Investment Disputes (ICSID) are focused on the fact that it is one of the first specialized bodies in the examination of disputes arising from investments.

The map of arbitration disputes until the end of 2015 indicates a continuing trend toward the filing of claims for investment disputes by investors toward countries or vice versa ( Figure 1 ).

As evidenced by the graph, there are increasing cases registered before the Center on investment disputes, either arbitration or other services provided by the Center of mediation or conciliation or other services, where the cases rose from one case in 1972 to a maximum in 2012 to reach 50 cases in general Although it fell to 40 during 2013 and to 38 cases in 2014, but it remains high reflecting the continued trend toward resorting to the Center for Settlement of Investment Disputes or to obtain mediation and conciliation services and other services related to the settlement of investment disputes, In 2015 to 52.

As for the geographical distribution of the countries against which the arbitration claims are filed, we find that the Middle East region includes North African countries against which there are fewer cases compared to other regions of the world, where the countries of South America and the countries of East and Central Asia in the top with 25 per cent each, (Africa) by 16 per cent and is ranked third in the Middle East by 10 per cent of the total cases filed before the Center.

Egypt still holds the largest share of the number of arbitration cases filed against it before the International Center for Settlement of Investment Disputes (ICSID), whether or not a final judgment is pending, as the number of cases against Egypt is still more than three or three times the second largest Arab or African Country Followed immediately.

Egypt, according to the 2012 UNCTAD report, is among the top ten countries in the world with arbitration cases ranked seventh in the world with 27 cases and third in a study conducted by a number of specialists and researchers at Quir Aspiration.

The following chart shows the total number of claims filed until the end of 2015 compared to 2015 only, and the location of Egypt compared to other countries ( Figure 2 ).

Egypt, according to the International Center for Settlement of Investment Disputes (ICSID), is among the first four countries to be sued by the International Center for Settlement of Investment Disputes (ICSID) between 2011 and 2013.

Egypt remains the same, according to the data of the various international institutions within the top ten countries in the world in terms of the number of investment disputes filed with the Center, and that its ranking varies from year to year. Egypt continues to hold the largest share of the total number of lawsuits against countries in the Middle East and North Africa.

According to the data, by the end of 2017, Egypt had filed 30 arbitration cases against 22 cases in which judgments had been issued or had been settled while 8 of them were still under arbitration. Most of these cases were filed after the revolution of 25 January 2011, Just.

Arbitration cases brought against Egypt before the ICSID can be divided between cases in which a judgment has been handed down and others still under arbitration.

A statement of the arbitral proceedings brought against Egypt before the International Center for the Settlement of Investment Disputes (ICSID) in which it was ruled ( Table I ).

The cases listed in this table are divided between cases in which a judgment was issued in favor of Egypt, and other cases in which a judgment was issued in favor of the investor and some of these cases are discussed in detail.

The cases in the table also include the cases in which the arbitration has been suspended after informing the Center of the settlement of the dispute between the parties through negotiations between them. Accordingly, the arbitral tribunal has issued a decision to discontinue the proceedings and some of the cases resolved by negotiation will be dealt with in detail at the end of this section.

A statement of the proceedings against Egypt before the International Center for the Settlement of Investment Disputes and is still under arbitration ( Table II ).

A case study

Waguih Elie George Siag and Clorinda Vecchi VS the Arab republic of Egypt (ICSID Case No. ARB/05/15).

Summary of facts about case study:

This case involves an investment dispute between (Claimants), Waguih Elie George Siag and Clorinda Vecchi, and) Respondent), the Arab Republic of Egypt (“Egypt”)[ 17 ], they filed with the International Centre for Settlement of Investment Disputes a Request for Arbitration directed against Egypt On 26 May 2005[ 18 ].

According to the Request, in 1989 the Egyptian Ministry of Tourism sold a parcel of property on the Gulf of Aqaba to a company called Siag Touristic Investments and Hotels Management Company (“Siag Touristic”), which is owned principally by the Claimants. Siag Touristic is an Egyptian joint stock company. The purpose of the sale was to permit Siag Touristic to develop a tourist resort on the property. Development commenced on the property. However, in 1996 the property was confiscated by the Egyptian Government. Although the Claimants obtained relief from the Egyptian courts, this was ignored by the Egyptian Government[ 19 ].

The Claimant (Siag – Clorinda) according to the request seeks a declaration that the Respondent (Egypt) has violated the BIT, international law and Egyptian law, compensation for all damages suffered, costs and an award of compound interest.

Article 25(1) of the ICSID Convention and decide on the jurisdiction of the Centre :

Under Rule 41 of the ICSID Arbitration Rules the Tribunal is required to decide the Respondent’s objection that the present dispute “is not within the jurisdiction of the Centre or, for other reasons, is not within the competence of the Tribunal”. The Claimants contend that the Tribunal’s jurisdiction is established under two instruments referred to at the outset of this Decision: (a) the BIT and (b) the ICSID Convention.

Egypt’s objection to jurisdiction of tribunal based on three reasons.

Siag’s nationality..

Egypt argued that Siag remained an Egyptian national and accordingly failed the negative nationality requirement of Article 25(2)(a) of the ICSID Convention. The Tribunal was therefore without jurisdiction[ 20 ].

Egypt noted that the Tribunal had found in its Decision on Jurisdiction that, pursuant to Article 10(3) of the Egyptian nationality law, Siag had been required to state his intention to retain his Egyptian nationality within one year of gaining permission from Egypt to obtain Lebanese nationality. As Siag did not state such an intention within the relevant time, the Tribunal held that he had lost his Egyptian nationality.

Egypt filed its Counter-Memorial on the merits on October 12, 2007 expert opinion of Professor Smit which accompanied it, also addressed Egypt’s Lebanese nationality objection. Egypt submitted that Professor Smit’s opinion made it clear that Siag had never properly shed his Egyptian nationality when he “supposedly took on Lebanese nationality[ 21 ].

Siag was born in Egypt on March 12, 1962 to Egyptian parents. He was, therefore, an Egyptian national from birth, On March 5, 1990 the Egyptian Minister of Interior issued his Decree No. 1353 of 1990 acknowledging Siag’s prior acquisition of Lebanese nationality and granting him permission to maintain his Egyptian nationality, but he lost his Egyptian nationality because do not notify the Egyptian Interior Ministry within the period of one year of the desire to retain Egyptian nationality Siag acquired Italian nationality on May 3, 1993 on the basis of his marriage to an Italian citizen.

Siag’s bankruptcy.

Egypt filed a notification and application concerning objection to the center subject matter jurisdiction, Egypt discovered that Waguih Siag had been declared bankrupt on 16 January 1999 as a result of a debt of 23,545.16 Egyptian Pounds.

Egypt contended that, under Egyptian bankruptcy law Siag, from the date he became bankrupt in 1999, could no longer validly agree to arbitrate any dispute relating to any asset forming part of the bankruptcy estate. Egypt argued that at the time the Request for Arbitration was lodged in 2005 Siag therefore lacked the capacity to arbitrate the dispute. Siag also lacked capacity to maintain the present arbitration[ 22 ].

After long discussions, the Tribunal finds that Egypt has not demonstrated that Siag was bankrupt at times relevant to the jurisdiction of the Tribunal under the ICSID Convention.

Existence of an “investment”.

On the subject of its objections to jurisdiction, Egypt submitted that although the term investment has a broad definition it is not without limitations and should be determined on a case-by-case basis, also the purpose of the ICSID Convention is to afford a higher level of protection to foreign investors.

At the date, Egypt and Italy concluded the BIT on 2 March 1989, and at the date of entering into the sale contract on 4 January 1989 the Claimants were Egyptian nationals. The two companies, Siag Touristic and Siag Taba were established under Egyptian laws. From their inception, the economic activities of the Claimants were devoid of any foreign element.

Word of tribunal about jurisdiction.

finds and declares that at all relevant times Siag was not an Egyptian national;

finds and declares that Egypt’s objection to jurisdiction based on Siag’s alleged Egyptian nationality and all of its related contentions about his alleged disqualifying dual nationality fail and are hereby dismissed;

finds and declares that Egypt’s objection to jurisdiction concerning Siag’s alleged fraud or other misconduct in relation to his acquisition of Lebanese nationality fails and is hereby dismissed; and

finds and declares that Egypt’s objection to jurisdiction based on Siag’s alleged bankruptcy fails and is hereby dismissed.

Applicable law.

Second step after discussing the parties, the Tribunal decided that the applicable law is the bilateral agreement between Egypt and Italy

The claimant's requests.

The Tribunal finds that the evidence clearly establishes that Egypt has unlawfully expropriated Claimants’ investment, in breach of Article 5(1)(ii) of the BIT; that Egypt failed to provide full protection to Claimants’ investment, in breach of Article 4(1) of the BIT; that Egypt failed to ensure the fair and equitable treatment of Claimants’ investment, in breach of Article 2(2) of the BIT; and that Egypt allowed Claimants’ investment to be subjected to unreasonable measures, in breach of Article 2(2) of the BIT[ 23 ].

Main point in the word of tribunal[ 24 ]:

All of Egypt’s defenses on the merits have been dismissed.

Egypt was responsible for greatly increasing the costs of these proceedings.

Claimants should be compensated for their reasonable legal fees and related expenses in respect of both the original jurisdictional phase and subsequent phases.

The Tribunal agrees that “it is not unusual for claimants to spend more on costs than respondents given, among other things, the burden of proof.

Tribunal has also noted that Egypt has made a number of unsuccessful jurisdictional objections, some of which were filed late in the course of proceedings and which represented in modified form issues which had already been decided by the Tribunal.

Egypt is liable to Claimants for unlawfully expropriating Claimants’ investment, consisting of the Property and the Project, in breach of Article 5(1)(ii) of the BIT.

Egypt is liable to Claimants for failing to provide full protection to Claimants’ investment, consisting of the Property and the Project, in breach of Article 4(1) of the BIT.

Egypt is liable to Claimants for failing to ensure the fair and equitable treatment of Claimants’ investment, consisting of the Property and the Project, in breach of Article 2(2) of the BIT.

Egypt is liable to Claimants for allowing Claimants’ investment, consisting of the Property and the Project, to be subjected to unreasonable measures, in breach of Article 2(2) of the BIT.

The Claimants are entitled to recover from Egypt the total sum of USD 74,550,794.75 in compensation for its actions in breach of the BIT.

Results related to the legal framework regulating investment disputes in Egypt

Multiplicity of advantages provided by different legal frameworks governing the arbitration process, which benefit Egypt as other countries of the world and provide the reassurance that the investor needs to make his decision to invest.

The arbitration rules adopted over the years from 1958 until now at different levels internationally and regionally are an advantage that cannot be ignored in an attempt to avoid the settlement of international disputes in the fields of investment in accordance with the national laws of the States parties to these disputes.

The basis in the various frameworks governing the arbitral mechanism and the previous reference to its recognition of the right of the parties to the dispute to agree and freely decide what they want with respect to arbitral proceedings followed in the course of arbitral proceedings, the selection of arbitrators and agreement on applicable law and other matters relating to the subject matter of arbitration, any other procedure shall be used only if such agreement is not possible. All these rights are subject to the rights of the parties to the dispute to submit their claims, defenses and rights to payment after the jurisdiction of the arbitral tribunal.

The various legal frameworks emphasize the necessity of arbitral decisions, and therefore the refusal to recognize or not to implement such decisions. The only way to challenge these decisions is to cancel the award at the request of the party against whom the decision is made. Represent evidence that the competent court may rely on to issue a judgment on the annulment of the award.

Results related to the arbitration cases against Egypt

The arbitration cases that were filed with the Center in economic terms related to sectors of vital importance in the Egyptian economy, for example tourism sector, which received the largest number of cases filed, agricultural sector and the activities of infrastructure and construction received.

Investors’ decision to arbitration in these cases led to the cessation of vital projects whose completion was supposed to contribute to the national economy. Many of them were associated with large projects in terms of investment volume or the nature of the targeted projects (new or existing infrastructure or large industrial projects, Tourism activities have been associated with huge projects for the development of hotels, land and resorts in a sector that plays a vital role as a source of national income in Egypt.

Investment Law No. 72 of 2017, limited to the settlement of investment disputes on the three committees formed in accordance with the provisions of the law, as well as resort to the judiciary and delete the reference to the use of the arbitration mechanism with a compromise on the friendly methods and negotiations between the parties only, although this reflects the attempt of those who Investment Management Reducing investors' recourse to international arbitration as a mechanism for settling investment disputes. The text of the Investment Law on the investor's right to resort to international arbitration means accepting Egypt to international specialized agencies to arbitrate as a mechanism without the need for prior agreement with investors. However, investment officials have overlooked a very important point that the amendment of the Investment Law as the most important part of the legislative framework governing investment in Egypt is bilateral agreements to ensure and protect mutual investments. Which Egypt signed more than 100 agreements with its counterparts from other countries, in which Egypt guarantees investors belonging to these countries the right to resort to international arbitration in investment disputes, and with the fact that these agreements are the support of more than 70 per cent of the cases before the International Center for Settlement of Investment Disputes, which means that it does not stand when amending the investment law and delete the arbitration clauses as a mechanism for settling disputes with investors, and I require a broader view of the legislative framework governing investment as different as we discussed in Chapter I, International and regional bilateral and multilateral agreements, as well as the internal framework of investment law, arbitration law, commercial law and other laws relating to investor transactions within Egypt, which requires a greater effort and a broader vision to achieve the desired change.

The investment guarantees and protection agreements signed between Egypt and a large number of countries in the world have placed successive Egyptian governments with a large number of obligations that would give the investor a lot of rights in return for less obligations. In this regard, the rights of Egyptian investors in the countries signed with these agreements, and because Egypt is a country mainly seeking to attract foreign investment, it currently needs more to legalize and put an officer to ensure that these rights are in place and not abused by investors.

Total number of ICSID cases registered, by calendar year

A statement of the arbitral proceedings brought against Egypt before the International Center for the Settlement of Investment Disputes (ICSID) in which it was ruled