Stephen Jagusch KC is well -respected in the markets as “a very impressive advocate and cross-examiner” in arbitration proceedings.
What challenges are posed as counsel and arbitrator when handling cases that are across different seats?
The legal seat can be of critical importance to an international arbitration in many respects. It’s impact however on how the proceedings are conducted is more limited. Some seats have local requirements which if not respected may jeopardise the integrity and enforceability of the award. Arbitrators are obliged to produce enforceable awards. This requires that they seek to understand and comply with the mandatory requirements that may apply at the seat of the arbitration. So, the skill required is to be generally informed of the range of local requirements that are known to apply in particular seats, and to have the foresight and determination to enquire whether there are any aspects of the local arbitration law that the tribunal needs to comply with. It is reasonable to make enquiries of counsel.
In my experience, however, that is sometimes not sufficient. Counsel themselves may not be specialists in the law of the seat. Further, where it may be in a party’s interest to be able to challenge an award the tribunal cannot expect that their counsel will be forthcoming in directing the tribunal away from the potential hazards.
Do you expect measures taken by states to prevent the spread of the coronavirus to result in investment treaty claims, and would any such claims be likely to succeed?
States frequently find themselves required to reconsider policy or develop new strategies in response to new or unexpected regional and international events. It is always possible that measures taken by such states will have an adverse economic impact upon particular markets or industries or investments in which foreign entities or persons have an interest. In some circumstances this may give rise to possible treaty claims, for example, where the home state of the foreign investor has negotiated investor-state benefits with the state that hosts the investment. There may even be an investment agreement. The host state may have local investment laws that offer benefits to foreign investors. In any case, the applicability and coverage of the protection will depend upon the particular protection offered and the facts giving rise to the claim. It is reasonable to expect that some investors might find that their protected investments suffer economic harm as a result of measures taken by host states in response to the coronavirus pandemic. If such claims are made, it is reasonable to expect host states to argue that the measures in question do not violate their investor protection obligations. Just as it is easy to imagine myriad potential claims, it is also easy to imagine the range of likely defences to those claims. As in all other areas of investor-state law and practice, the decisive features of pandemic-related cases will be the precise legal protections in question, the particular facts of the case, the inclinations and mindsets of the arbitrators, and the ingenuity and advocacy of counsel.
Out of commercial arbitrations and investor-state cases, which do you prefer and why?
You would be surprised at how often this question is asked. In some respects, it’s impossible to answer because every case, commercial or treaty, has its own unique features that can either dilute or enrich the experience. That said, in very general terms, and starting (somewhat counterintuitively) with quantum, both commercial and treaty arbitrations usually involve the subcontracting of the compensation analysis to domain-specialist forensic and economic experts. I have sat through many quantum sessions where the issues would be no different, or only marginally so, whether liability arose under an investment treaty (or investment agreement or foreign investment law) or under contract.
In my experience the real difference – and I readily admit to some sweeping generalisations here – is that commercial arbitrations tend to engage a broader range of evidence, both testifying and documentary. I enjoy that. By contrast, in many investor-state cases the essential facts are often not in dispute: the issues concern whether the investor has a qualifying investment, the proper meaning to be given to the protections in question and whether such protections have been violated. It is becoming increasingly common for counsel in investor-state cases to argue that the tribunal should take guidance from the ever-growing library of other investor-state awards. This creates a good deal of “oh, here we go again” in investor-state cases. I am attracted in commercial cases to complex facts, seemingly impossible situations and developing fresh or innovative commercial solutions or dispute strategies. In treaty cases I am attracted to the public international law issues and divination of those often fine lines between holding a state to the rule of law, including ascertaining and respecting an investor’s legitimate expectations, and protecting a host state’s sovereign right to act rationally and without discrimination and in the public interest. The fact that most investor-state awards find their way into the public domain (and into the arguments of counsel in subsequent cases) adds an additional element to investor-state cases that I also find appealing. Most commercial arbitrations are a zero-sum game. The dispute affects the commercial interests of the parties, it is generally private and (other than for challenge or enforcement purposes) the proceedings and their outcomes survive scrutiny.
The same is not true for most investor-state arbitrations. In those cases, there is usually a very real sense that you are involved in a process and with issues that may have implications beyond the consequences of any award, and where the reasoning and conclusions of the tribunal will be referenced and critiqued as part of an ever growing body of public international law resources.
The ICC has recently revised the rules for international commercial arbitration. What impact do you expect this will have on arbitration practice?
It is routine for leading arbitration institutions to revise their rules. This is one consequence of competition between arbitration institutions – each seeks to demonstrate that their rules and governance reflect current best practice. Particular revisions to rules do not in my opinion tend to have any direct bearing on arbitration practice, save of course for the utilisation of revised rules in particular cases. Most revisions are responsive to user needs, including greater flexibility and reduced time and cost. (In the case of the most recent ICC rules revision, a push towards greater transparency also features.) The real impact of rules revisions is therefore the signal being sent to users (and competitors) that the institutions care for the user experience and offer the latest in what the community consider to be the preferred framework for a contemporary arbitration: clearly defined powers, procedures and expectations of the institution, the arbitrators and the parties. For this reason, the leading institutions have a good track record of promoting and publicising their rules revisions and their object and purpose. Market commentators (especially law firms and barristers’ chambers) are usually quick to publish their own summaries and commentaries in order to demonstrate their expertise in this area.
If you could implement one reform in international arbitration, what would it be?
I haven’t yet figured out how, but the removal from (or at least better tools to identify) abuse of process by unscrupulous clients or their counsel, and the consequential skewering of due process and any level playing field, unwittingly or deliberately, by adopting measures to conceal, destroy, alter or create evidence, excessive manipulation of witness testimony and tactics that play upon those arbitrators who put due process paranoia ahead of early engagement with the case and proactive control over the proceedings. I predict that these very challenging yet multifaceted and interconnected problems, if left unchecked, will become an existential threat to arbitration. I can’t profess to offer a solution though it is something I think about often. That said, and in order to answer the question with an immediate reform, I would seek to implement proper hearing durations. Hearings should take as long as is necessary to permit proper examination of witnesses. I recognise that it is unfashionable to suggest longer hearings, but I do consider that in many cases counsel are unreasonably pressured to fit their interventions into increasingly small windows, leaving them with insufficient time purposefully and professionally to explore the fact and expert witness testimony. It is not right that counsel should have to surrender potentially useful cross-examination material because of the need to prioritise due to arbitrary time constraints. This problem is even greater when, as expected, counsel cannot know exactly which subjects are of more or less interest to the arbitrators.
The problem is further compounded by the often tactical use of oral testimony being given through an interpreter in order to run down the clock, give the witness more time to consider (or add to) answers and otherwise to lessen the impact of direct dialogue. I have grown tired of arbitrators who would seem from their approach to scheduling consider that every case is either three, five or 10 days, but whatever it is, the time available to counsel just gets split and that’s just how it’s done. These decisions are often taken at an early case management conference when little is known about the number of witnesses, the breadth of the evidence to which they will be testifying, the volume of documentary evidence relevant to the different witnesses, and which and how many of those witnesses will be giving evidence through an interpreter.
I accept that hearing dates normally need to be fixed well in advance and this creates challenges should the issues or evidence expand significantly during the course of the proceedings. However, it is not in my view acceptable that issues of scheduling should take priority over counsel’s desire to test the witness evidence of their client’s counterparty carefully and thoroughly and in their own time. When counsel is already feeling pressed for time, few things are then more irritating than the arbitrator who gives the appearance that strict adherence to an earlier estimate of time is more important than the careful and thorough testing of the evidence.