Arbitration Quarterly

    1. Significant Court Decisions in the Last Trimester Concerning Arbitration

    1.1 Decision of the 32nd Civil Chamber of Ankara Regional Court on implications of foreign element on execution of an arbitral award

    The dispute between the parties arose from a contract for manufacturing and installation works, Clause 25 of which states that the seat of arbitration is Ankara with the governing law being Turkish law. One of the parties to the contract (the creditor) initiated arbitration and upon receiving the arbitral award, it initiated execution proceedings to collect legal expenses in the arbitral award. The debtor, subsequently initiated a set aside lawsuit and objected to such proceedings. The debtor argued that the International Arbitration Law No. 4686 (“IAL”) should apply to the arbitration proceedings as there is a foreign element in the dispute because the goods that are subject to the contract were produced in a foreign country and then delivered to Türkiye. It then claimed that since pursuant to the IAL, the execution of the arbitral award cannot be done without obtaining a certificate of finalization, their objection should be accepted and the arbitral award cannot be executed as there is a pending set aside lawsuit.

    On the other hand, the creditor argued that considering the choice of jurisdiction (Türkiye) in Clause 25 of the contract, it cannot be argued that the dispute contains a foreign element. Accordingly, the creditor argued that the Code of Civil Procedure No. 6100 (“CCP”) instead of the IAL is the appropriate law to be applied to the dispute, and therefore, they should be able to execute the arbitral award without a certificate of finalization and despite a pending set aside lawsuit. This was based on the fact that unlike the IAL, the CCP does not stipulate a certificate of finalization to execute the arbitral award and set aside lawsuit does not automatically halt the execution of the award pursuant to the CCP. Thus, the creditor requested the dismissal of the case.

    The court of first instance ruled in favor of the creditor, citing that the contractual relationship does not contain a foreign element and the arbitral award can be executed without the certificate of finalization of the award under the CCP. The debtor appealed the decision of the court of first instance and took their case to the 32nd Civil Chamber of Ankara Regional Court. The Regional Court, in its ruling, acknowledged that the contractual relationship between the parties does not contain a foreign element as both parties are companies with Turkish capital. Accordingly, the Regional Court ruled that the CCP should be applied to the arbitration at hand. Furthermore, the Regional Court underlined that where the foreign element is not present, arbitral awards are directly executable without requiring a certificate of finalization or any confirmation from the court. Finally, the Regional Court also reminded that even though it is within the debtor’s right (as respondent in the arbitral proceedings) to file a set aside lawsuit, the mere application to a set aside lawsuit is not a reason to stop the execution of the underlying award.

    As a result, the Regional Court upheld the decision of the court of first instance and dismissed the debtor’s argument to stop the execution process.

    1.2 Decision of the 11th Civil Chamber of the Court of Cassation on the exclusive jurisdiction of the Turkish courts and its effect on the arbitration agreement

    The dispute arose from a maritime transportation agreement whereby, the defendant undertook to deliver cargoes owned by the plaintiff. A third party was conducting the loading and discharge of the cargoes owned by the plaintiff. During loading at one of the terminals, certain pieces of cargo were damaged and the plaintiff claimed to have suffered a significant amount of damage. As the defendant refused to cover the damages claimed by the plaintiff, the plaintiff initiated execution proceedings in Türkiye against the defendant. However, the execution proceedings were halted due to the defendant’s objection thereto. Subsequently, the plaintiff initiated a cancellation of objection lawsuit against the defendant in order to dismiss the objection and proceed with the execution proceedings. In response, the defendant requested the dismissal of the lawsuit by raising a preliminary arbitration objection, to the court’s jurisdiction.

    The court of first instance held that under Clause 30 of the agreement, the parties agreed that the applicable law to the dispute is the laws of England and Wales. According to Article 47 of the International Private and Procedural Law (“IPPL”), the court of first instance held that, as the contractual relationship between the parties involves a foreign element and a jurisdiction agreement is present, Turkish courts are not authorized to hear the case and the dispute must be resolved before the courts of England and Wales, since (i) no decision on lack of jurisdiction by the English courts is present, and (ii) a jurisdiction objection was raised to challenge the jurisdiction of the Turkish courts.

    The plaintiff appealed the court of first instance’s ruling and brought the case before the 9th Civil Chamber of Adana Regional Court, who adopted the reasoning of the court of first instance (while also adding that jurisdiction agreements cannot supersede the jurisdiction of Turkish courts in cases where Turkish courts enjoy exclusive jurisdiction to hear the dispute. The plaintiff appealed the Regional Court’s judgement and brought the case before the Court of Cassation.

    The Court of Cassation emphasized that, pursuant to Article 105 of the Turkish Commercial Code, agents are authorized to initiate lawsuits on behalf of foreign merchants they represent and lawsuits can be attributed to such agents in Türkiye on behalf of the foreign merchants they represent in terms of the commercial relationship. The Court of Cassation ruled that even if the foreign element is present in the case at hand and the parties have agreed on a jurisdiction agreement, no jurisdiction agreement can exclude the jurisdiction of Turkish courts in cases where Turkish courts have exclusive jurisdiction. Therefore, the Court of Cassation decided that, as the dispute at hand falls under the exclusive jurisdiction of Turkish courts, it should be considered not arbitrable and as a result, reversed the Regional Court’s judgement in favor of the plaintiff.

    1.3 Decision of the 11th Civil Chamber of the Court of Cassation on contradicting decisions going against the public order

    The dispute between the parties is related to the Client Portfolio Purchase Agreement (“Agreement”) signed between Türkeli Asansör A.Ş., the transferee of the portfolio, and the transferor (the identity of the transferor is not disclosed in the decision) on 18 July 2018. Two individuals are also parties to the Agreement as guarantors.

    The transferee, Türkeli Asansör, initiated arbitration proceedings (with file numbered 2019/9) before the Istanbul Chamber of Commerce Arbitration and Mediation Center (“ITOTAM”) against the transferor and the guarantors for the transferor’s failure to fulfill its portfolio transfer obligation under the Agreement and its breach of the non-compete obligation agreed under the Agreement whereby, the transferee requested a contractual penalty, the return of the transfer price and compensation for loss of profit. During the arbitration process, the transferor (the defendant in the file numbered 2019/9) informed the arbitrator that another arbitration proceeding exists before the ITOTAM with the file number 2019/7 concerning the same Agreement according to which the transferor had claimed its remainder portfolio transfer receivable from the plaintiff (i.e., Türkeli Asansör) and thus, requested that the files be merged. However, the arbitrator in the file number 2019/9 concluded that, although both of the arbitration proceedings before the ITOTAM arose from the Agreement, the arbitrations could not be merged as the parties to the arbitrations are not identical and the requests differ from each other in certain ways.

    The setting aside of the arbitral award was requested by the plaintiff based on, among other things, the fact that the two arbitrations were not merged. The Regional Court ruled that the arbitrators’ decision in file number 2019/9 without waiting for the decision to be rendered in the file number 2019/7 does not qualify as a reason for setting aside of the arbitral award. Moreover, the Regional Court dismissed the claims that the arbitrator had misinterpreted certain evidence, or rendered an inaccurate decision as grounds for the set aside, as the Turkish courts are not authorized to review the merits of the arbitral award. Additionally, the Regional Court stated that the arbitral award was found to have made a logical assessment to a reasonable degree of the evidence and facts presented and did not violate the equality of the parties or the defense rights of a party in the present case. The decision of the Regional Court was appealed and reviewed by the Court of Cassation.

    The Court of Cassation stated that, although the claims subject to file number 2019/9 and the parties to the case are not identical, the main subject matter of both proceedings is whether the transferor fulfilled its obligations under the Agreement. Notably, the transferor and the transferee are parties to both of the arbitration proceedings. The Court of Cassation further stated that although the courts are not authorized to review the merits of the arbitral award under the prohibition of révision au fond, in cases where legal certainty, transparency and stability are at threat, Turkish courts may review the merits of the arbitral award under public order exception. Therefore, the Court of Cassation returned the judgement of the Regional Court on the grounds that the arbitrator failed to properly examine the previous decision.

    1.4 Decision of the 11th Civil Chamber of the Court of Cassation on notification of the parties of the arbitration proceedings and its implications for the right to be heard

    The dispute arose from the collection of the bonus receivable under the agency contract signed between the parties. The creditor, the defendant in the case, took its case to arbitration and the arbitral tribunal rendered its award. However, the plaintiff initiated a set aside lawsuit arguing that the arbitral tribunal did not examine whether the attorney, who declared that the plaintiff would not be involved in the appointment process of the arbitral tribunal, had the power of attorney and, as a result failed to duly conduct the arbitration process. Therefore, the plaintiff was kept in the dark, and as a result, the arbitral proceedings were not conducted in accordance with the parties’ agreement and the law. The Regional Court determined that the plaintiff responded to the notice sent to the plaintiff for the appointment of the arbitral tribunal, stating its absence, and that the petition submitted by the plaintiff illustrates the plaintiff’s knowledge of the arbitration procedure. Accordingly, the Regional Court decided that the arbitration procedure was conducted according to the law and the relevant procedural rules, the parties’ rights to a fair trial and to be heard were not violated during the proceedings, and dismissed the case. Appealing the Regional Court’s ruling, the plaintiff took the case before the Court of Cassation.

    The Court of Cassation determined that Article 23 of the agreement between the parties stated that disputes arising out of the agreement must be resolved in arbitration, and the parties would decide on the appointment of the arbitral tribunal. According to Article 15/A.1/b of the IAL, not complying with the terms specified in the agreement constitutes a reason to set aside the arbitral award. Furthermore, according to Article 439/2 of the CCP, non-application of the established terms in the agreement constitutes a violation of the parties’ rights to a fair trial and to be heard and is a justifiable basis to set aside the arbitral award under public order considerations. The Court of Cassation thereby concluded that, as the terms in the agreement between the parties were not followed, the arbitrators failed to inspect whether the plaintiff’s attorney had power of attorney, and if the notices throughout the arbitration proceedings were sent to an unauthorized attorney, then the plaintiff’s right to be heard would have been violated and, returned the ruling of the Regional Court.

    1.5 Decision of the 11th Civil Chamber of the Court of Cassation on multi-tier arbitration clause and hearing of witnesses

    The dispute between the parties is related to the sale of 25% of the shares in an energy company, owned by the plaintiff, to the defendant. For this purpose, the parties executed a Share Purchase Agreement (“SPA”) and the defendant paid the plaintiff the initial portion of the purchase price on the date of the execution. However, due to the plaintiff’s failure to deliver the temporary share certificates representing the sold shares within 45 days, as indicated in the SPA, the defendant initiated arbitration proceedings before the Court of Arbitration of the International Chamber of Commerce (“ICC”) per Article 23 of the SPA and the arbitral tribunal rendered its judgement on 25 June 2019.

    The plaintiff initiated a set aside lawsuit and requested the Regional Court to set aside the arbitral award based on the argument that the defendant’s failure to conduct good faith negations, which was agreed in the SPA, before initiating arbitration proceedings has rendered the arbitral award against public order. The plaintiff also argued that the arbitral tribunal’s rejection of the plaintiff’s request for a witness to be heard via teleconference violates its right of defense and is against the mandatory rules of the law and public order as it violated the right to a fair trial. Thus, the plaintiff requested that the arbitral award be set aside.

    The defendant argued that good faith negotiations were conducted, but the parties failed to come to an agreement. The defendant further argued that it is the plaintiff’s responsibility to ensure the plaintiff’s witness be present at the hearing venue and witness’ absence does not constitute a violation of public order.

    The Regional Court ruled that (i) the initiation of the arbitral proceedings before the completion of the first step of the dispute settlement procedure provided under SPA between the parties does not disable or impair the arbitration intention of the parties, and (ii) the arbitral tribunal’s rejection of the request for the witness to be heard via teleconference does not prevent the right of defense as the witness was allowed to be heard at the hearing, and the written statements of the witness were submitted and accepted by the arbitral tribunal as evidence. Thus, the plaintiff’s set aside request was dismissed on both grounds.

    Although the plaintiff took its case to the 11th Civil Chamber of Court of Cassation, the Regional Court’s ruling was upheld and the plaintiff’s case was dismissed.

    1.6 Dutch Court’s decision on intra-EU BIT claim

    A Dutch investor brought an arbitration claim against Poland, claiming that its investment in Poland faced expropriation and was treated unfairly and discriminatorily, with reference to the bilateral investment treaty (“BIT”) signed between the Netherlands and Poland. However, a year before the investor brought its arbitration claim, Poland and the Netherlands mutually terminated the BIT following the decision in Achmea case, which underlined that “investor-state arbitration provisions in such intra-European Union (“EU”) BITs were incompatible with EU law”.

    Even though the BIT was terminated, as the treaty included a sunset clause, contracting states were bound by the treaty for another 15 years and still owed obligations to the existing investors. Regardless, with signing the EU’s termination treaty, both parties agreed to neutralize the sunset clause in their terminated BITs. However, it is essential to note that the investor made its application for arbitration when the sunset clause of the relevant BIT was still in force, i.e., before the contracting states agreed to neutralize it.

    With regards to the above developments, Poland argued to the Amsterdam District Court for preliminary relief that it is no longer bound by the BIT and claimed that the investor’s actions to bring an arbitration claim against Poland under the relevant BIT constitutes an unlawful act. However, in its judgement, the Amsterdam District Court adhered to the principle of competence-competence and ruled that it is not within its authority to decide on the arbitral tribunal’s jurisdiction, or lack thereof, and subsequently terminate an arbitration application. It also underlined the possibility of the investor’s claim succeeding in arbitration as the investor applied for arbitration before the sunset clause included in the BIT was terminated. Moreover, the arbitration was seated outside the EU. Accordingly, even though the investors chances are slim following the Achmea case, in theory Poland may still own duties to the investor and can still be liable under the BIT.

    Various sources underlined the gracefulness of this decision in its emphasis on the principle of competence-competence and the fact that the arbitration could still be successful due to the timing of its initiation and the fact that the seat was outside of the EU; meaning that the national court with the authority to set aside the arbitral award would not be bound by EU law.

    2. What is Happening with the ECT?

    2.1 The modernized text of the ECT has been published

    The modernized text of the Energy Charter Treaty (“ECT”) was published on 13 September 2022 after a long process that took more than three years.

    The main goal of the modernization works was to provide legal certainty, greater transparency and to reflect the climate change and clean energy transition goals. That said, it has long been stated that the modernized text falls short of reaching some of these goals in full, for instance, fossil fuel investments are still within the scope of the ECT. In fact, the Spanish Minister for Ecological Transition expressed her disbelief towards the newly proposed reform to the ECT and even though the suggested modifications to the ECT include “the option for signatories to withdraw protections for fossil fuel investments in their territory” and “barring intra-EU investor state dispute settlements”, the minister voiced her concerns on whether the relevant changes will be enough to comply with the Paris Agreement. Spain was not the only country dissatisfied with the new text, as evidenced by the ongoing exodus from the ECT as detailed below.

    Emphasizing the critical state that the ECT is in, Urban Rusnák, Secretary General of the ECT stated:

    Even though the modernized text still needs final agreement to be implemented, it was previously stated that the contracting parties to the ECT were in an agreement in principle to adopt the text. However, it was recently announced that the vote to determine whether to adopt the text, which was due to be held on 22 November 2022, was delayed due to a disagreement between officials of the EU’s 27 member states on whether to support the proposed reforms. The European Parliament has passed a resolution, expressing its concerns regarding the modernized ECT and its incompatibility with the set climate goals, calling for an exit from the “outdated” ECT and nullification of its 20 year sunset clause. Although the European Parliament decided to withdraw from the treaty, as the resolution is not binding, the withdrawal needs to be approved by the Council of the EU.

    2.2 The current rush to exit the ECT

    It would not be an exaggeration to say that the proposed modifications to the ECT were heavily criticized by many as it has been argued that the suggested changes still fall short to meet the requirements set out in the Paris Agreement and is still an obstacle to the transition to green energy. That said, the Energy Charter Secretariat supported the proposed reforms to the ECT and expressed that the changes will in fact limit the effects of global warming and will assist states to achieve the objectives set out in the Paris Agreement.

    Like many European states, France expressed its concerns regarding the ECT and announced on 21 October 2022 its decision to pull out therefrom. The Netherlands and Spain also recently announced their desire to pull out of the ECT. In fact, the Netherlands is facing two claims by energy companies arguing that the new legislation imposed by the government to fight climate change is against the ECT provisions and negatively effect coal-fired power plant investments. Accordingly, the Dutch government argues that the obligations imposed under the ECT contradict with the agreed objective in the Paris Agreement. However, the ECT’s sunset clause prevents contracting states to pull out from the treaty for another 20 years and states are obligated to protect existing energy investments even after the exit.

    Poland took concrete steps to withdraw from the ECT after the news broke on the recent court decision, also summarized under 2.3(c) below, ordering Italy to pay more than EUR 190 million to a UK oil company for breaching its duties under the ECT. Prime minister of Poland states that the Komstroy and Achmea decisions, which pointed out that the right granted to investors by the ECT to bring claims against contracting EU states under investment treaties directly contradicts with the principles of EU law illustrated the incompatibility between the ECT provisions and EU law.

    Moreover, on 10 November 2022, Slovenia, who is currently facing an EUR 500 million ECT claim announced that it is joining the other EU members in their withdrawal from the ECT. Following shortly after Slovenia, Germany and Luxembourg also announced their intention to withdraw from the ECT in mid-November.

    2.3 Other significant cases and news concerning the ECT

    (a) ECT claim against Latvia

    Latvia recently announced that an ECT claim was brought against it by a renewables investor, the Swiss-registered RSE Holding, on the grounds that Latvia’s modification “to the country’s regulatory framework for the sale of electricity from high-efficiency combined heat and power plants” are negatively affecting their energy investment and it is against the fair and equitable treatment principle of the ECT. While Latvia denied these arguments and argued that the changes made to the regulatory framework are fully compatible with the ECT regulations, it also challenged the arbitrator appointed by RSE Holding claiming that her history of defending investors on ECT disputes questions the equality and impartiality of the arbitral tribunal. Even though both RSE Holding and the arbitrator they have appointed argued that Latvia’s arguments were based on a “general abstract assumption” and that the appointed arbitrator’s previous cases do not affect her independence and integrity, the Secretary-General of the Permanent Court of Arbitration (“PCA”) upheld Latvia’s argument simply because the appointment of the arbitrator would “seed justifiable doubts in the mind of an observer”.

    (b) France faces first ECT claim

    A German investor brough an ECT claim against France, which is the first ever disclosed case against France under the ECT. Even though the recent energy investment dispute cases illustrate that investor-state disputes initiated under the ECT are against the EU law, the German energy company argues that by “retroactively cutting subsidies for solar projects” France has failed to protect their investments and acted against its obligations under the ECT.

    (c) Italy ordered to pay compensation to UK oil company

    In 2014 Rockhopper Exploration, a London-listed oil and gas company, acquired Mediterranean Oil & Gas (“MOG”), a company which discovered hydrocarbon deposits in Italy’s Adriatic coast and applied for production concession to start their project in the year 2008. In 2010, Italy introduced new law, which banned “oil and gas concessions within 12 nautical miles of the country’s coastline”, but later introduced exemption to the ban for product concession applications made before the ban came into force. Accordingly, Rockhopper Exploration invested in MOG to carry on with the authorization process and subsequently to start the drilling project. However, almost a year after Rockhopper Exploration invested in MOG, Italy decided to dismiss the exemption given to the ban. After Rockhopper Exploration brought the case to the arbitral tribunal, it was decided that Italy’s actions amounted to “immediate and complete deprivation of Rockhopper Exploration’s investment and an unlawful expropriation”. As a result, Italy was ordered to pay EUR 190 million for breaching its obligations under the ECT.2 Even though Italy has left the ECT in 2016, it is still bound by it with regards to existing investors due to the 20 year sunset period provided under the ECT. After two months from the arbitral tribunal’s decision, Italy has filed its claim for the annulment of the award.

    (d) Yet another solar case decided against Spain

    After Spain’s reform proposal on renewable energy subsidy regime came into force, Cavalum SGPS, a Portuguese investor, claimed that the reform in question had a negative effect on their solar plan investment. Cavalum SGPS was unable to profit from their investment and had to abandon their projects due to Spain’s new regulations and the losses suffered because of it. Accordingly, an ICSID tribunal found a causal link between the losses suffered by the investor and Spain’s actions and ordered Spain to pay damages for the losses Cavalum SGPS has suffered, legal fees and for Cavalum SGPS receiving less than a reasonable rate of return on their investment. In total, Spain has been ordered to pay more than EUR 9 million for the changes made to the regulatory framework that effected Cavalum SGPS’ solar plant investments.

    (e) Ukraine denies ECT’s benefits to investors from Russia

    After being threatened with a potential ECT claim over seizure of the assets of a petrol station chain, Ukraine has announced that it is invoking the denial of benefits provision under Article 17 of the ECT for investments owned by Russian parties as of 15 August 2022. Article 17 of the ECT allows for the denial of benefits in cases where: (i) the investment belongs to the investor of a third state with whom the host state lacks diplomatic relations; and (ii) the host state has implemented measures, i.e., sanctions in this case, prohibiting transactions with investors of the third state.

    According to Ukraine, diplomatic relations between Russia and Ukraine were severed as of February 2022 and Ukraine has implemented sanctions against Russia, thereby claiming that it has successfully denied the protection of the ECT to investments owned by Russian parties.

    3. Developments in the Arbitration Practice

    3.1 Cooperation of the arbitration institutions

    (a) SCC and GIAC signed a cooperation agreement

    The Stockholm Chamber of Commerce (“SCC”) and Georgian International Arbitration Centre (“GIAC”) signed a cooperation agreement on 12 October 2022. The cooperation agreement aims to “promote the wider use of arbitration as an independent, impartial and efficient procedure for the settlement of commercial disputes and to facilitate trade and economic transactions between companies in Georgia, Sweden and in other countries” and the two arbitration institutions have thereby agreed to organize joint events and update each other related to the developments on arbitration happening in their respective countries.

    (b) HKIAC and TIAC signed a cooperation agreement

    Hong Kong International Arbitration Centre (“HKIAC”) announced on 19 September 2022 that the HKIAC and Tashkent International Arbitration Centre (“TIAC”) signed a cooperation agreement with the aim to finalize the establishment of TIAC-HKIAC Cross Institutional Rules, which presents a unique form of dispute resolution system. Accordingly, while both TIAC and HKIAC will be jointly involved in the administration of disputes, HKIAC will assist TIAC on certain procedural issues arising in arbitrations without charging administrative fees except under certain situations.

    (c) PCA and the Republic of Ecuador enter into a host country agreement

    A host country agreement was signed between the Republic of Ecuador and the PCA on 17 October 2022. Accordingly, the rules for PCA proceedings and other activities to take place in Ecuador are established. With the host country agreement, PCA officials, as well as arbitrators and participants of cases administered by the PCA are granted certain immunities and privileges in the host country. The host country agreement also provides a framework for use of facilities in Ecuador for PCA administered proceedings therein. This host country agreement is aligned with the PCA’s mission to make dispute resolution services more accessible around the world.

    (d) SIAC’s recent collaborations

    (i) Memorandum of understanding with Chongqing Yuzhong District People’s Government

    On 31 October 2022, Singapore International Arbitration Center (“SIAC”) signed a memorandum of understanding with Chongqing Yuzhong District People’s Government in furtherance of its mission to promote international arbitration as the prime method of dispute resolution. Pursuant to the memorandum of understanding, the parties will work in cooperation to promote international arbitration and will set workshops and organize joint events with the same aim. Additionally, Chongqing Yuzhong District People’s Government will promote SIAC to local companies, chambers of commerce and associations, as well as campaign for its inclusion in the list of recommended institutions.

    (ii) Strategic alliance with FedArb

    The Federal Arbitration (“FedArb”), a private alternative dispute resolution service based in the USA, and SIAC entered into a strategic partnership where SIAC’s case management services, arbitration rules and panel of arbitrators for intellectual property related matters will be made available for parties in California, United States. Both institutions expressed their hopes for a long and successful partnership.

    (e) ICC and Jus Mundi partner up

    The ICC and Jus Mundi, a leading global online platform enabling access to extensive sources of information on legal issues to its subscribers, furthered the scope of their existing partnership on 1 October 2022. Accordingly, subscribers to Jus Mundi can access the ICC Dispute Resolution Library. As such, various information and sources are now available to Jus Mundi users after the recently extended partnership between ICC and Jus Mundi. The extended partnership aims to “enhance arbitration globally and bolster transparency.”

    (f) ICSID and Quito Chamber of Commerce sign cooperation agreement

    The newly signed cooperation agreement in October 2022 between the International Centre for the Settlement of Investment Disputes (“ICSID”) and the Arbitration and Mediation Center of the Quito Chamber of Commerce in Equador, reflecting Article 63 of the ICSID Convention, allows ICSID hearings to be heard in the Arbitration and Mediation Center of the Quito Chamber of Commerce. The new development is a promising step to ensure ICSID’s widespread support and service on investment dispute settlements.

    3.2 Other developments

    (a) Amendment of the English Arbitration Act

    The Arbitration Act 1996 of the UK is nearly 30 years old and many consider that it is time for an update. Accordingly, the Law Commission of England and Wales have been working on the possible updates and published a consultation paper including their proposals for amendment.3 Also there is a request for consultation where opinions on the proposed amendment can be submitted until 15 December 2022.

    The Law Commission is currently continuing its works to endure that the Arbitration Act of 1996 will remain state of the art and the transparency of the amendment process as well as request for input from exterior sources is undoubtedly an inspiring and exemplary lawmaking style.

    (b) Amendment of the Swiss Code of Obligations for arbitration in corporate law disputes

    The amended Swiss Code of Obligations, which will come into force on 1 January 2023, will expressly allow Swiss corporations, limited liability companies and limited partnerships to implement a statutory arbitration clause in their articles of association. While applying to all corporate disputes, the statutory arbitration clause will also be binding on “the company itself, the company’s governing bodies and its members as well as the company’s shareholders, irrespective of whether the particular person gave its consent thereto”. Furthermore, according to the amended Swiss Code of Obligations, the seat of the arbitration in any arbitration arising in accordance with the statutory arbitration clause implemented in articles of association must be in Switzerland, while also be subjected to the “provisions on domestic arbitration contained in part 3 of the Swiss Civil Procedure Code”.

    Building upon the momentum of this amendment, the Swiss Arbitration Centre published the Supplemental Swiss Rules for Corporate Law Disputes, to supplement the Swiss Rules of International Arbitration in relation to the conduct of arbitration proceedings concerning the corporate law disputes under the amended provisions. The adjustments made under the Supplemental Swiss Rules mainly include; (i) a model statutory arbitration clause, (ii) a set of rules to achieve dynamic and efficient corporate law dispute resolution, (iii) provisions on notification and participation of third parties who may be affected by the arbitral award rendered as a result of an arbitration, and (iv) discretion given to arbitral tribunals to decide on interim and emergency relief without being influenced by judicial authority.

    (c) Possibility of an appeal mechanism in investor-State dispute settlement

    A recent note (“Note”) published by the Working Group III of the United Nations Commission on International Trade Law (“UNCITRAL”), aims to provide recommendations for an appellate mechanism of investor-State dispute settlement (“ISDS”).4 The Note provides an insight on, among others, the scope of appeal, grounds for appeal and decisions of the appellate tribunal. Accordingly, the scope of appeal is contemplated to cover decisions on both jurisdiction and merits. That said, an arbitral tribunal’s (referred to as a “first-tier tribunal” in the Note) decision on interim measures or a decision on lack of jurisdiction are not subject to appeal in the current proposal.

    The grounds for appeal are broadly defined to cover: (i) an error in the application or interpretation of the law, or (ii) a manifest error in the appreciation of the facts, including the appreciation of relevant domestic legislation and the assessment of damages. Additionally, the draft provision 2 also lists specific grounds for appeal, which are: (i) invalidity of the arbitration agreement or incapacity of the parties thereto, (ii) arbitral tribunal not being properly constituted, (iii) the arbitral tribunal manifestly exceeding its powers, (iv) an arbitrator being corrupt, (v) rules of procedure being seriously disregarded, (vi) decision of the arbitral tribunal not being reasoned (unless the parties agreed otherwise), or (vii) decision of the arbitral tribunal being against international public order.

    According to the Note, the arbitral tribunal may, if appropriate and requested by a party, suspend the arbitral proceedings upon an appeal, until the decision of the appellate tribunal. Draft provision 7 specifies that the appellate tribunal may: (i) uphold, (ii) verify, or (iii) reverse the decision of the arbitral tribunal.

    The possibility of an appeal mechanism of this scope has been a long discussion point for ISDS, the Note reflects the current position and proposition of the works, which are the product of an extensive project.

    (d) Angola ratifies the ICSID Convention

    Angola becomes the most recent state to ratify the ICSID Convention, making it the 158th signatory to the Convention. The Convention will enter into force on 21 October 2022.

    (e) ICSID 2022 caseload statistics

    ICSID recently published its annual report, revealing its caseload between July 2021 and June 2022.5 While the report presents details about the past year’s investment disputes, it also illustrates diversity of cases and arbitrators, recent investment trends, the continuing effects of the pandemic.

    Meg Kinnear, ICSID Secretary-General noted: The past year demonstrates how ICSID, and investor-State dispute settlement, are continuously adapting to meet the needs of stakeholders.

    According to the presented data, while an increase in administered cases can be observed with the current number of 346 cases being the largest ever caseload administered by ICSID in a single fiscal year, the number of registered new cases decreased by almost 30%. Another record was for the number of concluded cases with 77 cases concluded in the last fiscal year.

    The largest portion of administered cases were once again energy and extractives investment disputes, making up 54% of administered cases. Furthermore, disputes stemming from both bilateral investment treaties and the ECT are rising. The data also shows that there is a 7% decrease in women appointed as arbitrators. In terms of diversity, arbitrators from 42 different nationalities were appointed, which is the second largest number to date. Another crucial information to take away from the report is, while certain number of hearings were done in-person, still 91% of the hearings were held remotely.

    (f) ICCA 2022 Congress Edinburgh

    The 25th Congress of the International Council for Commercial Arbitration (“ICCA”) took place between 18 and 21 September 2022, after four years of postponing due to the coronavirus pandemic and opened its doors to the individuals from all around the world despite the funeral of Queen Elizabeth II. The next ICCA congress taking place in 2024, will be hosted by Hong Kong. During the Congress, the governing board of the ICCA has announced its much awaited decision to hold the 27th ICCA Congress in Madrid in 2026.

    The ICCA Congress is a monumental international event held every second year to gather all leading arbitration practitioners from all around the globe to discuss papers on various topics related to international dispute resolution. Ceyda Sıla Çetinkaya, one of the associates of our Firm was selected to receive the ICCA’s Inclusion and Diversity scholarship to attend the ICCA 2022 Congress Edinburgh, which is only given to 20 people worldwide.

    The ICCA 2022 Congress focused on various important topics related to international arbitration. Accordingly, the overarching theme was “Arbitration’s Age of Enlightenment?”. In pursuit of this theme, various panels focused on contemporary topics such as the use of technology in arbitration; the roots, current state and future of international arbitration in terms of the progress already made and can yet be made and how it may be affected from the developments around the word, as well as hot topics such as the climate crisis, investment arbitration (and perhaps even a world without it).

    Owing to its ever innovative and festive nature, Young ICCA gave five selected young practitioners the opportunity to “pitch” which case they considered to be the most significant decision related to international commercial arbitration. The cases were limited to those after the ICCA 2018 Sidney Congress. Also reflected by the five minute time limitation, this was a true “shark tank” so to speak for international commercial arbitration and ignited a wonderfully energetic debate. In the end Vishal Aggarwal’s pitch on the UK Supreme Court Decision in Enka v Chubb, which according to Aggarwal stood most notably because it provided “a clear test for interpreting the arbitration clause, especially where there is no clear choice of the law governing the main contract” stood victorious. That said, it is undoubted that all the pitches and related cases were important and well deserving of the attention they received.

    (g) The SAC opens its door for arbitration cases

    At the 25th Congress of the ICCA, the former chair of the Scottish Arbitration Centre (“SAC”) has announced that the institution has launched its very own arbitration rules and will start to administer cases. Lord Glennie, in his speech, expressed that the SAC rules will also include commitments to the diversity and environment.

    (h) The impact of Russia and Belarus sanctions on international arbitration

    (i) EU’s eighth package of sanctions on Russia and Belarus

    On 6 October the EU adopted the eight package of sanctions against Russia and Belarus, in response to Russia’s continuing aggression in the Ukraine. With regard to dispute resolution, this new package most notably includes a ban on the provision, whether directly or indirectly, of legal advisory services to the Russian government or legal persons, entities and bodies established in Russia. Although the new sanctions are intended not to prevent the fundamental right to access to justice and an effective legal remedy, the prohibition of legal services may still affect dispute resolution (including arbitration) by, among others, dissuading attorneys from providing trial or arbitration related advice before the initiation of the proceedings. This ban is intended to significantly hinder international operations of Russian parties and thereby weaken Russian economy. In fact, it has been reported that Russia imports 85% of all legal services from G7 countries, i.e. Canada, France, Germany, Italy, Japan, the UK and the USA. It is, therefore, apparent that the newly updated sanctions regime on the provision of legal services is a major hit on Russian economy.

    The main difference between the previous sanctions regime concerning legal services and the newly established one is the indiscriminate prohibition targeting all Russian legal entities. As such, the scope of sanctions has clearly been widened from being limited to specific persons and/or sectors. The new ban does not only include prohibition on contracting with Russian persons on certain goods and/or technologies but it also prohibits provision of services, potentially including legal services related thereby.

    (ii) LCIA’s exemption from Russia and Belarus Sanctions

    A general license6 was granted by the UK’s Office of Financial Sanctions Implementation on 17 October 2022 to the London Court of International Arbitration (“LCIA”). Accordingly, LCIA is now allowed to receive payments from parties in relation to the arbitration costs, which would be otherwise prohibited due to sanctions on Russia and Belarus. Please note that only cases that are administered by the LCIA under its arbitration rules are covered under the general license. The general license also allows the already deposited funds to be used and nonsanctioned parties to make payments for arbitration costs when the sanctioned party fails to do so.

    Jacomijn van Haersolte-van Hof made the following statement, highlighting the importance of general license: We are grateful for the constructive cooperation with OFSI in procuring this General Licence. Striking the right balance between the efficiency and effectiveness of sanctions and upholding valid and binding arbitration agreements, while generally protecting the rule of law, is a delicate exercise.”

    (i) Potential regulation aimed at third party funding in the EU

    It has been reported that the European Parliament has called for third party funding to be regulated. The proposed regulation includes a 40% cap on third party funders’ shares from recovery received at the end of the funded case as well as disclosure of the third party funding arrangements and an obligation to pay the adverse costs. According to the report adopted by the European Parliament on 13 September 2022, the legal affairs committee will now start works on remedying the lack of regulation concerning third party funding.

    The reasoning behind the call for regulation is that whether or not third party funding actually improves access to justice has not been proven by experience and it appears instead to have transformed into a profit making scheme. Therefore, the ultimate aim of the regulation is to prevent financial exploitation of EU citizens.

    (j) The launch of ICC Case Connect

    It is undeniable that legal services need to evolve and adapt to the current world of constantly evolving technology and digitalization. In fact, the usefulness and assistance of technology in increasing the efficiency of legal services, making them more accessible and environmentally friendlier is globally recognized.

    Following the SCC’s launch of the SCC Platform7 in September 2019, ICC has finally launched “ICC Case Connect” which is, in ICC’s own words, is “a pioneering digital case management platform” that will bring parties to the arbitration, the arbitral tribunal and the ICC Secretariat together on a single venue. In essence, ICC Case Connect provides a secure file sharing platform for all documents related to arbitration cases, including most notably parties’ submissions and accompanying evidence. ICC’s aim with ICC Case Connect is to provide a secure and easily accessible location where all documents related to a case can be stored and accessed by the parties, arbitrators and the ICC Secretariat, thereby facilitating and securing the document sharing process and record-keeping.

    Alexander G. Fessas, Secretary General of the ICC International Court of Arbitration and Director for ICC Dispute Resolution Services made the following statement in relation to ICC Case Connect: The trusted technology offered by ICC Case Connect provides easy-to-use, secure file-sharing. By digitising ICC Arbitration processes and eliminating often repetitive administrative actions for each case, our goal is to increase operational efficiency for all involved.”

    (k) Diversity in international dispute resolution

    (i) Gender diversity pledge for experts

    Kathryn Britten and Isabel Kunsman have initiated a pledge to increase the number of women appearing as expert witnesses in disputes and so far, more than 500 individuals, law firms and expert firms have shown their support to the pledge. The architects of the movement voiced their concerns about women’s involvement in disputes as experts and how women, who are very capable of being expert witnesses in high-class disputes, are only present in the background.

    A survey, illustrating that “more than half of the arbitrators and counsels had not seen women in expert roles in the last three years while only 1% seen four or more women in expert roles”, actually inspired the pair to initiate the pledge to tackle the issue at hand.

    (ii) Gender parity on ASA board

    The newly elected board of the Swiss Arbitration Association (“ASA”), who will start its three-year term on 1 January 2023, with its new members from all over the world achieved gender parity for the first time in its history. The president of the board, Felix Dasser, who is getting ready to serve his second term as the president of the ASA, expressed his excitement and pleasure to be working with “more diverse members with so many different backgrounds” and his desire to assist worldwide arbitration users.

    (l) SCCA to open Dubai office

    As a step towards becoming a prominent dispute resolution forum in the region, the Saudi Center for Commercial Arbitration (“SCCA”) announced on 13 November 2022, that it will open its first office outside the Kingdom of Saudi Arabia in Dubai, namely SCCA Dubai in the Dubai International Financial Centre (“DIFC”). SCCA’s ever growing case load is one of the leading reasons for this expansion and the SCCA assured that it will assign the most qualified people to SCCA Dubai.

    SCCA Chairman Dr. Walid Bin Sulaiman Abanumay stated: Since its first day, SCCA sets its sights on becoming the regional leader in offering ADR services to all business sectors. Today, it takes a monumental step on this path to establish a presence among businesses and investors in Dubai and the region.”

    (m) AAA welcomes new rules and the president

    Bridget McCormack, formerly working as chief justice of the Michigan Supreme Court, has been appointed as the new president and CEO of the American Arbitration Association (“AAA”). The chair of the AAA’s board of directors congratulated the newly appointed president and clarified that McCormack is “a leader who is not only an expert in the legal field, but who also possesses outstanding business acumen.” and that this is the ultimate reason behind their decision to appoint her.

    Another development is that AAA updated its commercial arbitration and mediation rules, which came into effect in early September 2022. The new rules most notably contain an entirely new provision that enables consolidation of arbitration and joinder of additional parties (which did not exist under AAA before). Provisions concerning the expedited proceedings have also been updated. Additionally, the previous threshold of USD 1 million for the case to be heard by an arbitral tribunal of three arbitrators has been brought-up to USD 3 million. Also, arbitrators have been granted the power to interpret awards. Finally, there are improvements on the use of virtual hearings and technology to facilitate the proceedings, following the recent trends in the international arbitration community.

    Furthermore, hoping to further develop its applications in the healthcare industry, the AAA modified its Healthcare Payor Provider Arbitration Rules and Mediation Procedures to adapt to the dynamics of the healthcare sector. While the newly implemented alterations introduce changes to strengthen civility and efficiency, the most crucial aspect of the amendments include developments made to reinforce confidentiality within AAA staff and arbitrators.

    (n) Suriname joins the New York Convention

    On 10 November 2022, Suriname acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Suriname has become the 171st state to be party to the New York Convention, which will enter into force on 8 February 2023 for Suriname.

    On acceding to the New York Convention, Suriname made two reservations as permitted by Article I(3) of the New York Convention:

    • Reciprocity reservation: The New York Convention will only ensure the recognition and enforcement of foreign arbitral awards made in the territory of another contracting state.
    • Commerciality reservation: The New York Convention will apply for disputes which are considered commercial disputes under the laws of Suriname.

    Suriname’s accession to the New York Convention is an important step to create security for all who need to have their award recognized and enforced in the country.

    (o) BCDR’s new arbitration rules came into effect

    The new arbitration rules of Bahrain Chamber for Dispute Resolution (“BCDR”) entered into force as of 1 October 2022 and will automatically apply to arbitrations commenced after its entry into force. Most notably, the new rules include provisions on disclosure of third-party funding agreements and arbitral tribunal’s authority to order security for costs, which is in line with the contemporary trend in the arbitration rules of prominent international arbitration institutions.

    In addition to these, the new rules also promote the use of videoconferencing and other remote means to increase the efficiency of arbitral proceedings.


    The updates in the fall of 2022 of the arbitration world are generally related to recent global developments such as the states’ changing politics in the energy sector and Russia’s invasion of Ukraine. These issues specifically affect investment arbitration. The ECT in particular is at a very critical breaking point, with European states withdrawing from the treaty in masses. In that regard, the courts and arbitral tribunals also make decisions that may have an effect on the investment policies of the states, especially in terms of the sunset clauses and their effects on the protection of investments.

    We believe that these changes that have occurred in the last two quarters, especially in investment arbitration, will continue to be contemporary hot topics in the next quarter and that the policies of the governments in relation to environmental issues will continue to change and evolve.

    In addition, the arbitral institutions continue to make a cooperation with each other to be able to create an environment where the parties from all over the world can easily access an arbitral institution from another region.

    Tagged with: Arbitration, Litigation, Dispute Resolution, ICSID, LCIA, ICC, Arbitral AwardEsin Attorney Partnership, Ismail G. Esin, Yalin Akmenek, Demet Kasarcıoglu

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