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Thursday, March 1st, 2018

Remarks presented by Marc J. Goldstein in the lecture program of AAA/ICDR practice moot in New York on February 23, 2018. 


The CEO of a third-party funding firm in New York is an exceptionally capable attorney who was a colleague of mine at my former law firm. He was not just another colleague; we worked together on major international arbitration cases. One of them, as it happens, was a very early instance of the use of third-party funding — used by our client, and negotiated with the funder by a funding neophyte named Marc Goldstein, for a sizeable claim against a state-owned entity — in that instance, a Singapore-seated arbitration against a ministry of the People’s Republic of China. Having a client funded by a funder, in a large firm disputes practice circa 2000, was déclassé to put it mildly. It implied that your practice, and your firm, were going down-market in search of business, in search of a firmer foothold in the world of    international  arbitration. How the world has changed.

Today, if my former colleague’s funding firm is providing funding for the Claimant in an arbitration in which I am appointed as an arbitrator – and especially if I am the Claimant’s party-appointed arbitrator – this is a fact that all parties might wish to know and have the opportunity to consider at an early stage, from the standpoint of whether the my appointment might be challenged, and whether the award might be in jeopardy if the matter goes undisclosed and is uncovered, say, by investigators for the award loser. It follows that the funding facts are facts that the arbitrator might prefer to know, and to consider for potential disclosure, so that there should be no serious question raised later on about the arbitrator’s independence and impartiality.


Role of IBA Guidelines

Students involved in the Moot will surely have read carefully and considered the relevant sections of the IBA Guidelines on Conflict of Interest in International Arbitration 2014. The arbitrators present in the room surely are familiar with them, but perhaps only a fraction of them have had to consider applying the guidelines to their own disclosures in an arbitration, or to a party’s application to the Tribunal for disclosures by the adverse party, when the applicant expressed a concern that the adversary’s case is funded by a Funder.

If a funded party volunteers a disclosure that it is funded, the arbitrators can take guidance from the IBA Guidelines —in essence analyze potential disclosures in regard to the Funder as if the Funder were a party —make suitable disclosures, make suitable follow-up inquiries to the disclosing party to enable the arbitrator to conduct due diligence. An ICC Guidance Note issued in 2016 is to similar effect. The problem of course is that voluntary disclosure of funding is not universal and probably is not even common; it is not mandated by institutional rules, or by industry self-regulatory measures, or, in all but a handful of important host jurisdictions for international arbitrations, by applicable law. Notably there is a mandate for disclosure in the arbitration provisions of the new Canada-EU Trade Agreement. And if you happen to have an investment arbitration under the Singapore Centre’s 2017 investment arbitration rules, it is explicitly stated in those rules that the Tribunal has power to order such disclosure by a party. But as to mandatory disclosure, Singapore in amending its arbitration law to permit third party funding  did not enact a mandate broadly — but did enact such a mandate as a Rule of Professional Conduct for Singapore attorneys.

If a party in an arbitration suspects or knows that its adversary is funded, as is the case in the Moot Problem this year, the IBA Guidelines, if adopted as guidelines by the Tribunal as is so commonly the case, give the arbitrators guidance on what the Tribunal may require – by a procedural order, for example — in terms of disclosure from the party that is, or is suspected to be, funded by a Funder. But that useful function of the Guidelines does not assist participants in the arbitration in sorting out the possible relationships between an arbitrator and a Funder, and the bearing of those relationships on the arbitrator’s eligibility to serve, at the critical early stage of nomination and appointment. In our Moot Problem this year, the problem surfaces very early on in the proceedings, but after the Tribunal has been constituted.  An urgent question that still troubles our community, and on which no consensus of approach has emerged, is how shall we tackle this problem at the earliest stage, when the administering institution, or perhaps an appointing authority in an ad hoc case, is collecting information relevant to the arbitrator’s eligibility to serve and sharing that information with the parties.


Framework for a Institutional Mandatory Disclosure Rule

In the few minutes I have before you return to battle, I would like to do three things. First, let’s try to list some relationship concerns an arbitrator may have about Funders – concerns that the parties may have about the arbitrator. Second, let’s look at the some of the key reasons why Funders (and maybe their funded clients) push back against the idea of mandatory initial disclosure. Third, let’s look at what the basic elements of a mandatory initial disclosure scheme might look like.


 1.  Concerns About Arbitrator Relationship With Funders

  1. Funder role in arbitrator’s selection?
  2. Arbitrator’s affiliation with Funder. (“Investment Adviser”)?
  3. Fellow arbitrator affiliation with Funder (Sitting as chair nominated by …)
  4. Funder is/was funding the cases arbitrator is or was handling as counsel
  5. Arbitrator’s prior appointments by other parties funded by same Funder (to extent known)
  6. Funder funding cases being handled by other lawyers in arbitrator’s firm
  7. Funder is providing “portfolio finance” to arbitrator’s (present or former) firm
  8. Arbitrator’s  former colleague now employed by Funder
  9. Arbitrator pitched case(s) to Funder & was turned down.
  10. Possible arbitrator relationships with the Funder’s funders (e.g. hedge funds, venture capitalists, )
  11. Arbitrator’s knowledge of Funder’s reputation for exacting due diligence
  12. Arbitrator’s knowledge of Funder’s reputation as newcomer eager

2.    Objections Voiced Against Mandatory Disclosure

One main objection voiced by some Funder spokespersons against mandatory disclosure is that the terms of the funding arrangement are confidential between the parties and irrelevant to the arbitration. To this objection I would say that the terms of the arrangement may or may not be relevant at some stage of the arbitration, such as when a motion is made for security for costs. But at the initial stage when the objective is to enable the arbitrator to unearth and disclose to an appropriate degree her connections to the Funder, the terms of the funding arrangement should not usually be of consequence. Why not limit disclosure to the fact of funding and possibly the identity of the Funder, and see where that goes? There seems to be a consensus gathering around such limitation —indicated in ICCA-Queen Mary Task Force comment draft issued September 2017.

A second objection of some Funder-affiliated persons to mandatory initial disclosure is that such disclosure raises a suspicion if not an assumption, at least for the adverse party, that the funded party is impecunious and not financially capable on its own of satisfying an eventual, possible, award for costs should the non-funded party prevail. The stated concern is that arbitrations will then be routinely encumbered with costly and contentious motions for security for costs, and also with an ever greater number of vexatious challenges against arbitrators. These concerns are genuine. But they should be manageable. The solution of addressing them by suppressing the very fact of funding and identity of the Funder seems quite overbroad. Funders systematically do, and will continue to, publicize the fact that many of their clients are not impecunious but are very solvent entities that opt for funding as a cash management and risk management tool. And funded parties who must face down security for costs applications will continue to advocate the emergent rule that mere impecuniousness of the party is not alone a sufficient basis for a security for costs order unless there is other evidence of the party’ s unwillingness to satisfy such obligations and its avoidance of such obligations on other occasions. And institutions will readily adopt efficiency measures as needed to process arbitrator challenges relating to third-party funding.

A third objection, voiced by certain prominent Funder spokespersons, is that no disclosure mandate should be imposed on Funders who are in what may be called the private equity model, while omitting other Funders, such as insurers and direct equity investors in or commercial lenders to the funded party.  Failure to be inclusive would be discriminatory, it has been claimed. Perhaps the strategy of this objection is to fend off mandatory disclosure for as long as possible by prolonging debate on definitions. Or perhaps the nub of this objection is that traditional insurance has not been thought of as raising a potential conflict of interest situation for the arbitrator, and that the private equity mode of Funder should be seen in the same way. But if you look at the list of concerns reviewed above, I submit that the range and seriousness of concerns about arbitrator independence and impartiality does not arise nearly as often when the Claimant or Respondent merely has insurance coverage. The ICCA-Queen Mary Task Force Report, at least in the 2017 comment draft, seeks to address the objection by including insurers in the proposed disclosure standard. Perhaps that is the solution providers should adopt — it means more due diligence work and more disclosure and perhaps more unmeritorious challenges. But if that is the price to be paid for broader market acceptance of a disclosure rule covering the Funders we are mainly concerned about from a conflict perspective, then the wider definition of Funder seems a price worth paying.

I will ask you now to permit me to speculate on what may be a key but unarticulated source of the Funders’ reluctance toward a rule of mandatory disclosure. I would speculate that the more prominent is a Funder, the larger its investments in cases and potential returns, the more the Funder is staffed by highly skilled disputes lawyers with extensive international arbitration experience, then the greater will be the influence of the Funder in the selection of arbitrators. This influence may be more pronounced when the funded party has engaged counsel who are not regular players in international arbitration and who may not be particularly well-informed about the community of arbitrators and the relevant selection criteria.  I would speculate that Funders have preferred arbitrator lists just as law firms do. And over time perhaps the firms that maintain such lists may conform their lists to those of the Funders that fund them. And I would speculate, in turn, that such preferred arbitrators would more often face resistance to their service, by a non-funded party, if it emerged that, while the arbitrator has had no other cases in recent years for either the Claimant or the Claimant’s law firm, he or she is currently sitting in seven cases funded by the Funder.

The logic of the Funding business would tell us that this should be the case, because the selection of the arbitrator should logically be for the Funder, as it usually is for the Party, one of the most if not the single most critical arbitration planning decision. For the party that decision is framed as how to proceed. For the Funder it will affect whether to proceed at all. Confidentiality among Funders, parties, and law firms makes it difficult to measure objectively the scope of Funder influence in arbitrator selection.

So there may well be a giant Elephant In The Room — Funder influence over arbitrator selection — whenever we discuss third party funding in an open forum like this, even when a Funder representative is not on the program. And perhaps the presence of that Elephant explains why, with some of the exceptions earlier noted, initiatives for mandatory disclosure has failed to gain traction within the institutional framework of international arbitration. Repeat appointments of arbitrators by the same law firm are a well-known issue. Systematic repeat appointments of the same arbitrator by the same Funder probably could not long survive in a mandatory disclosure environment.

3.    A Possible Mandatory Disclosure Rule in Operation

Whether there should be mandatory disclosure of the identity of the Funder is perhaps a question that deserves more attention. Funders have market identities, and they burnish them. Some of them engage prominent arbitrators and retired judges as “investment advisers.” Some of them boast of how selective they are in identifying cases to be funded (although this is somewhat diminished as larger Funders move to a portfolio finance model). If the Funder’s identity potentially carries with it a sort of endorsement of the funded party’s claim (or defense), arguably the identity of the Funder is information the arbitrators should receive only on a need-to-know basis. But there is a price to be paid: to determine if the arbitrator needs to know the identity of the Funder, the arbitrator would need to make disclosure, to the institution, of a complete list of Funders with whom she or her firm have connections. The institution could then determine if there is a “match,” and often there would not be, and the conflict check process would end there, with the identity of the Funder protected. But the arbitrator, especially the arbitrator affiliated with a large firm, will have done quite a bit of information gathering. This is a cost-benefit calculus that would need to be made, in promulgating a mandatory disclosure protocol in institutional rules.

In the protocol outline that follows, I will assume that the calculus is made in favor of shielding the arbitrators from the identity of the Funder unless there is a need to know:

  1. Filing party informs institution whether it is funded and if so identifies to the institution the Funder and Funder’s material investors.
  2. In a funded case, the institution will submit to the arbitrators a questionnaire calling upon the arbitrators to disclose to the institution the identity of the Funders (i) in past or pending cases as arbitrator where the Funder was identified, (ii) in past or pending cases of arbitrator’s firm as counsel, (iii) from which arbitrator’s firm sought or maintained funding in last X number of years, (iv) with whom the arbitrator has or in last X years had other relationships with Funder such as Board member or consultant, and (v) with whom the arbitrator has present or meaningful past professional or personal relationships with officers/employees of Funders.
  3.  If no match, then the parties would be informed that the arbitrator’s responses to the questionnaire reveal no matters for potential disclosure, and therefore the identity of Funder will not be disclosed to Tribunal as there is no need.
  4. If there is a match, the arbitrators would be notified of the identity of the Funder and invited to make disclosures as they deem appropriate. The parties would be notified that the Funder has been identified to the arbitrators. This conveys to the parties only the bare fact of some connection between one or more of the arbitrators and the Funder, and leaves to the arbitrator the discretion to determine in the first instance whether the connection amounts to a matter for which disclosure ought to be made.


Having now outlined this proposal let me conclude by telling you why this may not work, why institutions that administer international arbitrations  could be loathe to adopt it. The providers obviously are in competition for cases, and any one of them considering to be a pioneer in mandating disclosure risks having major law firms flee from their rules at the urging of their Funders. Maybe, then, Singapore is on the right track in making a disclosure mandate into a rule of professional conduct for lawyers. Perhaps we will see lawyer disciplinary bodies around the world being urged to follow Singapore’s lead in the years to come.

Any Interest in Compounding?

Monday, February 5th, 2018

Reflecting recently on the fact that the question of interest compounding has received essentially no attention in the submissions of the parties in nearly all of my recent cases, I set out to search the online universe for recent scholarship on the issue, and found rather little. Seminal treatments of the question, such as those by Professors Gotanda and Mann , date back more than a decade and in some instances much longer. Instances of commentaries from the investment arbitration community are the exception rather than the rule it seems (see for example Judge Brower’s article in collaboration with Jeremy Sharpe in Transnational Dispute Management in 2006), perhaps because the prominent exponents of the position that the right to compound interest should be recognized as a more or less general principle prefer to confine their advocacy of the position to their awards.

Here it is not my purpose to review the literature or the case law, but mainly to provide some thoughts on why this matter should be so persistently overlooked in the submissions of parties in commercial arbitrations involving relatively large amounts in dispute. But for the reader who would like a nudge in the direction of some cases and contemporary literature on the subject, a very partial list of  respectable sources that support the position that awarding compound interest should be the norm in an international arbitration absent a prohibition in the agreement, treaty, or governing law would include: the awards of ICSID tribunals in the LG&E v. Argentina case and the BG Group v. Argentina case of 2007; the Yukos v. Russian Federation case of 2014 (but only as to Post-Award Interest); and, notably, a comprehensive scholarly treatment by Enrik Haxhirexha, Awarding Interest In Investment Arbitration (CTEI Working Paper 2014) at pp. 33-45, where the reader will find citations to additional relevant investment treaty awards and to many if not most of the leading scholarly treatments on the subject dating back at least to F.A. Mann’s seminal treatment in 1986 (remembered fondly by this commentator who was an eyewitness to the submission of Professor Mann’s expert opinion on this subject in the Starrett Housing v. Iran case, an opinion that in turn was cited by Judge Holtzmann in his dissenting opinion in that case). [* The citations here are a shorthand, sufficing to allow the reader to locate online the complete citation and full text].

A first level of challenge for the Arbitral Tribunal in a commercial case is likely to be that the question of compounding interest, indeed the question of interest generally, may have received little to no attention in the submissions of the parties. This is true even in cases with substantial sums in dispute. The lawyers and arbitrators who have been exposed to the issue are mainly those who have been involved in investment arbitrations with claimed damages in the billions of dollars and interest accrual periods that run a decade or more. When parties engage US counsel who mainly litigate rather than arbitrate, their counsel may assume that the historical reluctance of common law courts to award compound interest will carry over to arbitral tribunals, and for this reason opt not to raise the issue on a Claimant’s behalf. And among those arbitrators who sit in cases governed by New York substantive law, we suppose that Claimants seeking the nine percent rate prescribed in the New York Civil Practice Law and Rules (whose mandatory applicability in arbitration is doubtful) reason that the rate is so far beyond the market or the client’s borrowing costs that a request for compounding would not only appear to the Tribunal to be unduly voracious but might attract attention to the interest rate question from an adversary who might otherwise not be moved to comment.

Consider the following fact patterns from recent cases in which this commentator sat as an arbitrator, each involving substantial claims for damages beginning at accrual dates some years prior to the arbitration hearing, but in which no demand for an award of compound interest was made:

  1. Claim for lost royalties due to distributor’s alleged failure to market the product effectively. Alleged continuing breach beginning four years prior to the arbitration hearing.
  2. Claim for failure to pay contingent additional consideration in buy-sell agreement, where the parties disputed whether the condition precedent for the payments had been fulfilled. Accrual date 2.5 years prior to the arbitration hearing.
  3. Claim for value-diminution damages upon buyer’s re-sale at a loss of a product delivered by the seller with an allegedly latent defective condition. Accrual date three years prior to the arbitration hearing.

Each case presented a legitimate scenario for the awarding of compound interest, assuming liability and damages could be established. By saying this, I mean to convey that the following conditions were met: (1) neither the parties’ agreement nor the applicable law prohibited compound interest;  (2) neither the agreement nor the applicable law fixed a rate of interest, so there was not a situation where a prescribed above-market rate furnished an alternative approach to full compensation, (3) none of the Tribunal members came from legal cultures known to be formally opposed or informally hostile to compound interest; and (4) the jurisdiction of potential award enforcement in each instance was the US, so that the Tribunal need not have been concerned about a public policy obstacle to enforcement. Further, each Claimant was a significant corporate entity that presumably was active in financial markets, at least from time to time, as a borrower paying interest on a compound basis and as an investor deploying disposable cash in instruments that accrue compound interest.

So, on the basis that the trend in the law and outlook toward compound interest that is evident in investment arbitration should in principle influence commercial arbitrators in the same direction, I would ask two questions for the sake of discussion: (1) why are Claimants not claiming compound interest in suitable commercial cases as a matter of course, and (2) what should Tribunals do about this, if anything?

On the first question, I suppose that many advocates are simply not prepared for the issue, or, if they are advocating for the New York CPLR rate of nine percent or another above-market rate mandated by the law of the relevant jurisdiction, recognize that this rate on a simple interest basis may provide compensation exceeding that which might be calculated using the Claimant’s actual borrowing costs on a compound basis. Also, the Claimant’s counsel who knows of the legal uncertainty about the applicability of the CPLR nine percent rate in arbitrations might place an educated wager on the adversary’s and/or the Tribunal’s unawareness of this uncertainty —  by deliberately not making a request in the alternative for a compounded market-based interest rate.

Perhaps this is a dynamic peculiar to arbitrations, whether international or domestic, governed by New York law. But at least two other factors come into play that are not a function of an idiosyncratic interest rate environment. One is the ancient pull of the common law against compound interest, based in jurisprudence originating in a long-ago period when there was pervasive economic imbalance between debtors and creditors, lenders and borrowers, and compound interest came to be seen as a form of oppression. This legacy is well-described and annotated in the literature.  A second dynamic is that the advocate who knows she must persuade the Tribunal that her client’s aggressive position on damages should be seen as “conservative” may be reluctant to advance any position on the subject of interest that risks being seen as aggressive — even though, in the case of compound v. simple interest, the position is no more than a pragmatic combination of modern finance theory and practice, and principles of full compensation. The day has not quite yet come when the advocate for compounding of interest can be seen as simply invoking an accepted international standard.

On the question of what commercial arbitrators shall do about the all-too-common deficit of attention to the compounding issue, I have no clear solution but one principal discussion point. It is that we as arbitrators need to come to terms with whether the question of compounding is a special claim to be pleaded/requested at the risk that it will not otherwise be considered – a posture that gives a wide berth to a presumption of simple interest that does not seem to have a solid legal foundation. Arguably the question of simple v. compound interest is intrinsic to the Tribunal’s task once any request for an award of interest is made, even when made without specification that it should be compounded. Some arbitrators who will have already studied the literature and jurisprudence may be satisfied that the question of compounding interest is simply a component of the more general duty of the Tribunal recognized by the applicable law to provide “full compensation” to the Claimant.

But even where the arbitrators recognize that they have such a duty, the question of what to do when the Claimant is silent is not one that admits of a clear and easy answer. If the Tribunal detected a flaw in Claimant’s damages analysis whereby the Claimant’s plea for damages actually fell short of full compensation from the Tribunal’s perspective,  most Tribunals would refrain from taking the initiative to award more than the Claimant had demanded or to ask the Claimant to reconsider its request. The stated elements of the Claimant’s claim arguably form the upper boundary of the Claimant shall recover; the principle of full compensation mandates full compensation insofar as it is claimed in accordance with the applicable arbitral procedure. Should that position carry over to simple v. compound interest? Arguably not. If the Claimant fails to advocate for a particular interest rate, or an accrual date, still the Tribunal if asked to award interest must decide those issues. Should not the same be said of the compounding issue, i.e. that any request for an interest award necessarily puts before the Tribunal decisions concerning the conceptual elements of interest: accrual starting date, rate, simple or compounded, compounding period, and accrual ending date. This may strike some readers as an aggressive position on the arbitrator’s discretion to award compound interest where it has not been specifically requested nor specifically opposed. But if we accept that most applicable legal systems, and contemporary practice and principles, furnish no basis for a presumption that interest shall be awarded on a simple basis unless compound interest has been specially demanded, then it is legitimately a matter for arbitral discretion unless by agreement the parties have withdrawn that discretion.


US Declaratory Judgments and the New York Convention

Monday, February 5th, 2018

In a recent New York Convention award enforceability case in the federal district court in Washington D.C., the Court held that the interim Award of an Emergency Arbitrator in a Singapore-seated arbitration, to the extent it enjoined a party to the arbitration from speaking publicly or to American government authorities about the matters in dispute, was not subject to denial of recognition and enforcement in the United States under Article V(2)(b) of the Convention on the basis of its alleged conflict with the First Amendment of the US Constitution as an embodiment of fundamental US public policy. (Sharp Corp. v. Hisense USA Corp., 2017 WL 5448805 (D.D.C. Nov. 13, 2017), appeal filed, U.S. Court of Appeals for the D.C. Circuit, Nov. 16, 2017)). This post does not concern that ultimate holding. Instead, it examines the Court’s foundational determination that FAA Chapter 2, implementing the New York Convention, provided subject-matter jurisdiction to hear the Award loser’s petition based on the Declaratory Judgment Act for a declaration of the non-enforceability of the “gag order” portion of the Singapore Emergency Arbitrator’s Award in a case where the Award winner did not cross-move or separately move for US recognition and enforcement of that Award.

Hisense, the Award winner, was Sharp’s licensee for the manufacture and distribution of Sharp-branded televisions in the US market. The Singapore arbitration, evidently ongoing, concerns a dispute over license termination, and the Emergency Arbitrator made an essentially two-pronged ruling, directing, firstly, that Sharp should continue Hisense’s license in effect during the arbitration, and, secondly, that Sharp should refrain from disparagement of Hisense and more generally from discussing Hisense’s performance as licensee with the market participants or government authorities. The second ruling, the so-called “gag order,” was the subject of Sharp’s declaratory action to declare the unenforceability of the gag order in the United States. Hisense responded, inter alia, with a motion to dismiss the case for lack of subject-matter jurisdiction and took the position that FAA Chapter 2 did not confer jurisdiction over the case.

The decision on subject-matter jurisdiction attracts the attention of this commentator because there is evidently no authoritative precedent for US courts to invoke FAA Chapter 2 to consider granting this type of relief, and there appear to be reasons in the underlying philosophy of the Convention, not to mention its text and the text of FAA Chapter 2, to suppose that the Convention is understood internationally to be invocable at the election of Award winners seeking recognition and enforcement, and not invocable at the election of Award losers seeking pre-emptive determinations against recognition in the Courts of Contracting States other than the seat of the arbitration.

In support of the motion to dismiss, Hisense’s counsel evidently found rather little in the way of directly apposite precedent, and elected not to submit a broader discussion in its brief of the history and philosophy of the New York Convention.  Hisense also did not take up the theme, that might have been sounded, that FAA Chapter 2 unlike other federal statutes that provide private civil remedies, trumps the Declaratory Judgment Act because it specifically forecloses the type of declaration sought by Sharp here. Hisense’s main theme, instead, was that a declaratory relief application was like a motion to vacate the award, and therefore was barred because the US court had no jurisdiction to vacate an award made in Singapore under Singapore procedural law. This framework evidently led the District Court to analyze the issue as it was presented, i.e. in terms of whether and to what extent this application was or was not equivalent to a motion to vacate the Award. Arguably that was not the proper framework, as the ensuing discussion seeks to show.

Hisense cited a Southern District of New York case in which the Court, while accepting FAA Chapter 2 jurisdiction through removal under Section 205, observed that the request in the state court complaint for a declaration that the Award was unenforceable was the equivalent of a motion to vacate the Award. But in that case the Award had been made in the United States, so Convention/Chapter 2 jurisdiction to vacate the Award was perfectly proper. (Kolel, 863 F. Supp.2d 351). The District Court in Sharp v. Hisense distinguished Kolel on the basis that it involved a motion to invalidate the entire Award rather than only a portion of it.  But isn’t the relevant distinction simply that when the Award is made at a US seat, an application framed as being for declaratory relief that the Award is invalid is not different in legal terms from an FAA-sanctioned motion to vacate the Award?

Hisense also cited, as authority that there is no Convention/Chapter 2 jurisdiction for a declaration of partial unenforceability in the US, a District Court case in which the Award loser in a domestic arbitration had coupled a time-barred FAA motion to vacate with a request for a declaratory judgment seeking as judicial relief the commercial outcome rejected in the Award. (Stedman, 2007 WL 1040367). The District Court held that the declaratory claim was merely a different way to state the claim to vacate the Award, and was equally time-barred. But the fact that declaratory relief and a motion to vacate have the same legal effect, and face the same legal constraints, when the Court has FAA jurisdiction to vacate, does not make it appropriate to characterize a claim for declaratory relief as an impermissible motion to vacate when the Court has no jurisdiction to vacate. All that the Court in Sharp v. Hisense could really take away from Stedman is that the analogy between vacatur and a declaratory judgment of non-recognition/non-enforceability breaks down when the Court has no jurisdiction to vacate.

But a third case relied upon by Hisense was not so readily distinguishable. In that case, the plaintiff, having been the Award loser in an arbitration in Ireland, commenced suit in Chicago seeking “‘a declaration that the Awards issued by the arbitrator are invalid and not enforceable….’” The federal district court judge  held that “the Convention does not empower us to enter such an order, which would be akin to setting aside or vacating the Awards.” (Gemini Consulting Group v. Horan Keogan Ryan Ltd., No. 06 C 3032, unpublished Memorandum Opinion, US District Court for the Northern District of Illinois, May 30, 2007). In the Gemini Court’s view, the fact that the Award loser was being “proactive not reactive” was dispositive because the text of the Convention and FAA Chapter 2 appeared to envision the assertion of the defenses in Article V of the Convention only in response to the Award winner’s application for recognition and enforcement. The mere fact that the movant was “contesting” enforceability of a foreign award did not, in the Gemini Court’s opinion, bring its declaratory relief complaint within the Court’s jurisdiction under the Convention.

The Court in Sharp v. Hisense however saw a distinction: that the Gemini declaratory claim sought to declare the Ireland-made Awards “[in]valid worldwide,” (as characterized by the Sharp v. Hisense Court) whereas Sharp sought “to determine only whether the Emergency Order is enforceable in the United States.” But that is not a faithful account of Gemini; the Gemini Court’s opinion reflects that the movant did not seek a global injunction against enforcement of the Award and indeed expressly disclaimed that it was seeking an anti-suit injunction.  Gemini held that a US District Court could not declare a foreign award unenforceable under the Declaratory Judgment Act because its authority under the Convention/Chapter 2 is confined to “enforcing or refusing to enforce the Awards.” Stated differently, Gemini supports the view that FAA Chapter 2 is a jurisdiction-conferring federal statute that makes declaratory relief unavailable, and that the Declaratory Judgment Act, as the more general of the two federal statutes, cannot overcome the specific mandate in the FAA that it should be invoked in regard to recognition and enforcement of an Award,  other than at the seat, only by the Award winner seeking confirmation.  This latter feature seems to be what sets FAA Chapter 2 apart from the run-of-the-mill declaratory relief scenario, as there are few if any federal statutory private causes of action (or common law claims) where the statute (or the common law) provides expressly or by implication that the allegedly injured party shall be the plaintiff and the putative defendant may not initiate suit to establish non-liability.

The District Court in Sharp v. Hisense cited no precedent directly holding that the Convention in tandem with the Declaratory Judgment Act confers subject-matter jurisdiction of an Award loser’s petition to declare the US unforceability of a foreign award. Instead, the Court cited a 2013 decision of a US District Court, in which the Court granted declaratory and injunctive relief to declare the non-existence of any agreement between the parties for international arbitration under the ICC Rules and to enjoin the arbitration Claimant from proceeding against the injunction movant.  (Hospira, Inc. v. Therabel Pharma N.V., 2013 WL 3811488 (N.D. Ill. July 19, 2013)).  But the Declaratory Judgment Act was not a necessary element of the movant’s application in Hospira. The FAA would have sufficed. There was (and is) considerable federal appellate authority under the FAA that judicial power to enjoin arbitration, where no arbitration agreement exists, is an implicit corrollary of  the FAA’s grants of power to compel arbitration, under both Chapters 1 and 2. Also, in regard to the existence of a justiciable case-or-controversy, the Constitutional quid pro quo for a declaratory action, the existence of an ongoing ICC case that the arbitration Claimant was actively prosecuting against the movant would appear to confer on the declaratory relief action the necessary elements of a live case-or-controversy. But that scenario is quite different from what was presented in Hisense, i.e. an Emergency Arbitrator Award that the Award winner was not seeking to have recognized and enforced in the United States. Arguably, the case-or-controversy point should make it unnecessary for courts to reach the question, posed in the preceding paragraph, of whether FAA Chapter 2 and the Convention by their terms foreclose a declaratory action for non-recognition/non-enforcement. If the Award winner in such a case cross-moves for recognition and enforcement, the question is moot; if the Award winner does not so move, then shouldn’t there be a finding of no case-or-controversy?

The Hisense decision, as to FAA Chapter 2 subject-matter jurisdiction, does not come to terms with a key underlying premise the Convention, which is to ensure the international portability of a Convention Award. That is to say, the Convention envisions that an Award winner might take the Award for enforcement to several different jurisdictions, and that refusal of recognition in one jurisdiction will not preclude recognition in another, save as the Award may have been vacated by a court of the State in which or under the law of which the Award is made, in which case the Convention permits but does not require refusal of recognition and enforcement. If a US Court refused enforcement on the basis that the Tribunal decided issues outside the mandate of the arbitration agreement, a Canadian court in a subsequent enforcement proceeding might be persuaded or not by the US Court’s view. but in all events it would determine the scope issue de novo. The Convention’s architecture, however, appears to envision that the Award winner will need to persuade the court in Country B to reject the reasoning behind a Country A court’s refusal of recognition and enforcement only if the Award winner had earlier submitted the Award to the Country A court for recognition and enforcement. The marriage of the Convention with the Declaratory Judgment Act as envisioned by the District Court in Hisense allows the Award loser to obtain a US judicial view on enforceability when the Award winner may have no interest in obtaining US recognition, and the Award winner may indeed consider that a US decision amounting to an advisory opinion on recognition and enforcement might be an impediment to recognition elsewhere.  When US courts are confronted in future cases with the same subject-matter jurisdiction issue as was presented in Sharp v. Hisense, they may perhaps devote more systematic attention to this question and more fully explore both the international framework for recognition and enforcement that the Convention provides, and the material difference that arguably exists between the Declaratory Judgment Act, on the one hand,  and the FAA as compared to federal statutory civil causes of action generally, on the other.

Thinking About Arbitral ESI Retention Orders

Tuesday, January 9th, 2018

In the United States, federal and state trial courts recognize a legal duty of a litigant to retain documents, a duty that comes into existence upon coming into possession of facts providing the party with actual or constructive notice of the reasonable possibility of litigation. The scope of the duty, i.e. the documents to which the duty applies, are those documents that would be subject to production under the court’s discovery rules in response to a (properly-framed and timely-presented) document request made by the adverse party. Documents potentially shielded from the obligation to produce them because they are covered by an evidentiary privilege such as the attorney-client privilege are covered by this duty to retain, because the existence of the privilege might be overruled by the court, or the privilege might be waived, or — the privilege being qualified and not absolute — the court might determine that special circumstances require production of a privileged document.

Whereas federal and state civil procedure rules broadly define “documents” to include all manner of electronically-stored information (ESI), the duty to retain such information is not limited by the possibility that a court might eventually but as a matter of discretion limit the types of ESI that must be produced. Prudent litigating parties in US state and federal courts who wish to avoid making a very broad litigation hold at great internal cost, and also wish to avoid the risk that they would be charged with breach of the duty of retention, negotiate the scope of a litigation hold, and if agreement cannot be reached seek judicial resolution of the areas of disagreement so that the scope of retention matches what is prescribed in the court’s order. Less cautious parties who fail to establish agreed or ordered limits on retention run the risk that they will suffer the loss of data that is later deemed subject to production in discovery, and run the risk of court imposed sanctions ranging from monetary penalties to preclusion of certain positions to more sweeping, possibly case-dispositive, adverse inferences.

Let us assume that these rules, essentially common law extensions of discovery rules found in  codes of judicial civil procedure, are not generally applicable to an international arbitration at a US seat unless the parties, against expectations, have agreed that the arbitrators should apply judicial rules of procedure and evidence. With that assumption in mind, consider how these rules might or might not become implicated in an international commercial arbitration. First, suppose there is a dispute between a US and a foreign company, each represented by US lawyers admitted to the New York Bar, under a contract that provides that it is governed by New York law, but the seat of the arbitration is in Canada. As these are evidently rules of judicial procedure, the generic New York choice of law clause does not bring them into play in the arbitration. And whereas these rules are not classified as rules of professional conduct governing the conduct of attorneys generally, the fact that counsel for each party is New York-admitted does not logically lead an Arbitral Tribunal to adopt automatically rules governing retention of documents as rules governing the conduct of counsel in the arbitration. And it cannot be assumed that ethical constraints and ethical disciplinary risks in the attorney’s jurisdiction of admission will lead counsel to cause the client to retain documents to the same extent it would in a litigation. Further, even if one assumes that Canada’s provinces have relatively similar rules governing retention of documents that might be discoverable in judicial litigation, such rules have not been adopted into (for example) the international arbitration statutes as mandatory rules of arbitral procedure in Ontario, Quebec, or British Columbia.

But the rules that parties most often select to govern procedure in their international arbitrations contemplate that there will be some opportunity to obtain some documents possessed by the adverse party that are not merely the documents the adverse party wishes to present to advance its case. (The ICC Rules and those of a few arbitration centres in civil law European countries like Austria and Italy are actually exceptional in omitting express reference in their rules to the Tribunal’s power to order production of documents, and even in arbitrations under such rules the possibility of such document disclosure cannot be excluded because arbitrators have the power to conduct the proceedings as they consider appropriate). And the IBA Rules of Evidence, so widely and willingly adopted by mutual consent of parties and Tribunals, reflect a similar vision. Whereas neither these rules nor the arbitration statutes applicable in major arbitration venues provide very specific guidance about the scope of permitted inquiry into documents stored by the adverse party, the scope of any duty to retain documents cannot be linked, as it is in American courts, to a common expectation about what may need to be produced. This state of uncertainty would seem to serve as an invitation to parties and Tribunals to discuss the scope of document retention at an initial stage of the case. But in my own experience it seems that this is rarely done.

Several factors account for this, I believe. First, there are international arbitrations in which both sides are represented by litigators who are not arbitration specialists and bring along assumptions about the similarity of arbitration to litigation that are only challenged when a dispute arises. At the other extreme, where both counsel are specialist international arbitration practitioners, each may assume that the other will proceed upon a shared view that broad disclosure of ESI is antithetical to efficient arbitral process and will not become a contentious issue. Perhaps the main reason it is not done is that the Tribunal will not regard ESI retention as a primary item of its procedural agenda, being reluctant to initiate discussion on a subject that might imply that the Tribunal takes a liberal view of the scope of pre-hearing disclosure.

But in a few cases one or both parties will ask the Tribunal for the arbitral equivalent of what the American common law duty rule provides, and the question arises as to what the Tribunal ought to do. There is very little published guidance. The IBA Evidence Rules do not touch the question. In 2010, a working group of US practitioners under the auspices of the International Institute for Conflict Prevention (CPR) issued the CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration, and this Protocol adopts the premise that “speed and efficiency” is at least one of the considerations affecting disclosure in arbitration and that “requests for information based on possible relevance are generally incompatible with these goals, [and] disclosure should be granted only as to items that are relevant and material and for which a party has a substantial, demonstrable need in order to present its position.” Section (d)(3) of the CPR Protocol entitles “Preservation of Electronic Information” provides:

In view of the high cost and burden of preserving documents, particularly in the form of electronic information, issues regarding the scope of the parties’ obligation to preserve documents for potential disclosure in the arbitration should be dealt with at an early scheduling conference, or as soon as possible thereafter. The parties’ preservation obligations should comport with the Schedule 2 mode of disclosure of information selected.” Schedule 2 of the CPR Protocol envisions that the parties ideally will agree upon one of the four “Modes” for disclosure of electronic information described in Schedule 2 — each involving more ESI than the preceding Mode, such that that retention duty stipulated would, logically, correspond to the disclosure protocol adopted.

Writing about e-discovery in arbitration nearly a decade ago, thoughtful commentators observed: “The ‘preservation’ of ‘relevant’ documents once litigation is anticipated or commenced also requires rethinking in light of the fact that electronic information is dispersed and dynamic throughout a company’s computers, rather than statically awaiting collection in a drawer.” (R. Smit & T. Robinson, E-Disclosure in International Arbitration, 24(1) Arbitration International 105 at 109 (2008)). Those commentators proposed the following as a general guideline to be applied by international arbitration Tribunals with regard to retention: “The obligation to preserve electronically stored information requires reasonable and good faith efforts to retain information that may be necessary for pending or threatened arbitration. It is unreasonable to expect parties to take every conceivable step to preserve all electronically stored information that may potentially be relevant and necessary in the arbitration.”  (Id. at 133, Proposed Guideline 19). And yet as we turn the calendar to 2018, such rethinking either has not taken place, or has occurred ad hoc in case-specific settings and has not crystallized into a set of published best practices concerning e-document retention for potential arbitration disclosure.

One of the major challenges is that even where counsel accept that an international standard of relevance and materiality applies and that document requests should be very specific, counsel cannot know at the outset whether the key communicators of the adverse party, in their communications internally and with third parties, mainly used desktop servers in their offices to send e-mails, or also used mobile devices without generating copies of the messages on the desktop server. The cannot know whether the key communicators used personal e-mail accounts, or text messaging, as the standard or more than occasional means of business communication. So there is a cost-benefit calculation to be made by the parties, with very imperfect information, if they are to commit to limitations on e-discovery at an early stage of the case. If the parties do not agree upon the scope of potential ESI disclosure, however, they are unlikely to agree to the scope of document retention measures. The Tribunal, if asked to enter a document retention order, risks inefficient imposition of the costs to the parties for broad document retention (e.g., directions that various persons must save or centrally deposit mobile device messages) if this later proves to have been unnecessary because the scope of what later must be produced is far more limited that what is initially ordered to be retained.  At the opposite extreme, the Tribunal that concludes perhaps prematurely that (for example) metadata, text messages, i phone e-mails, and voice mails need not be the targets of specific retention measures, or draws a narrow circle of persons required to take retention measures, risks sanctioning the disappearance of evidence to an extent it may later regret.

The excellent and comprehensive report of the ICC Commission on Arbitration and ADR entitled “Management of E-Document Production” sensibly states that if production of electronic documents is confined in accordance with the IBA Rules of Evidence to the same extent of production of paper documents, as the IBA Rules expressly envision, then most of the efficiency challenges associated with E-Discovery should be avoidable. But these guideposts often will be unhelpful to the Tribunal in a case with US counsel on both sides, particular where those counsel are litigators bringing their litigation instincts to bear in the arbitral forum. Even when one or both parties are represented by specialist arbitration practitioners, they may prefer to follow their litigator instincts for tactical reasons.  As soon as the Tribunal accommodates the parties’ professed mutual desire to work out disclosure matters by agreement without Tribunal involvement — a common posture at the preliminary conference stage — there is a recipe for trouble if disputes arise. Suppose, for example, that at a time just after the deadline for the parties to produce requested documents to one another — the Tribunal per the parties’ agreement on procedure having taken no active disclosure-management role up to this point — now receives an objection by one party that the other has produced the electronic equivalent of several hundred thousands of pages of documents in a format that is not keyword-searchable or otherwise searchable by use of search software, ostensibly forcing the objector into a costly page-by-page review of the producing party’s production. Possibly search software usable with the production exists, but neither the objector nor its counsel has acquired it nor has heretofore employed IT specialists capable of applying it. Possibly the document in searchable format still exist in some electronic data storage facility of the producing party but the retrieval costs are substantial. The objector might assert that the producing party should be made to bear this cost, as a penalty for having violated a duty (articulated in judicial but not arbitral e-disclosure rules) to preserve and produce in a readily searchable format.

What sort of initiative might become an operating standard for Tribunals? Perhaps some sort of e-disclosure questionnaire would suffice: (1) Do you envision e-disclosure by the adverse party of e-data from sources other than e-mail (and attachments) stored on corporate servers? If yes, what sources/devices, and why will this be sought? (2) Can the needed documents be obtained by searching the e-mails (and perhaps text messages) of a limited number of persons? (Each party is asked to reasonably investigate to determine the person most directly involved in the transactions at issue). (3) What is the relevant time period for production? Do auto-delete protocols based on message age make some portion of the data universe less readily accessible? Can the parties agree to do without data if that vintage, and if not, how should retrieval costs be borne? Has the auto-delete protocol been overridden, at least for relevant individuals, to prevent impediments to the gathering of relevant data? (4) What is the format in which production of electronic documents is expected to be made? Is this satisfactory the adverse party?

A questionnaire of this type does not appear to favor either party nor does it encourage e-discovery of a scope comparable to what might be permitted in a US court. It may indeed prompt parties to recognize and concede early on that disclosure in arbitration often is different and more limited unless both parties clearly want an arbitration that resembles a US litigation at least in its discovery phase. And the questionnaire seems reasonably calculated identify whether there is a need for some sort of retention order, and to lead to an order whose scope is tailored to the expected scope of e-disclosure.


Toward a Uniform Position on US Arbitral Subpoenas

Tuesday, January 9th, 2018

American arbitration law in force since 1925 empowers arbitrators to issue subpoenas to non-parties. This power is found in Section 7 of the US Arbitration Act (FAA). This provision is essentially the only provision of the FAA that directly states a micro-level rule of procedure concerning how proceedings shall be conducted in  an arbitration involving interstate or international commerce. Therefore authoritative decisional law about the meaning of FAA Section 7 has considerable importance to the day-to-day work of arbitrators in domestic and international cases that are seated in the United States (or by agreement are governed by US arbitral procedural law).

It is a rare occasion when an issue concerning enforcement of an arbitral subpoena is decided by a US Circuit Court of Appeals. Such a rare occasion occurred last month when the US Court of Appeals for the Ninth Circuit, agreeing with holdings of the Second, Third and Fourth Circuits, held that an arbitrator’s power under FAA Section 7 to obtain documents by subpoena is confined to requiring a witness to come to an arbitral hearing and to bring along documents for submission as evidence at the hearing. (CVS Health Corp. v. Vividus, LLC, 2017 WL 6519942 (9th Cir. Dec. 21, 2017)). According to these four federal appellate courts — in decisions from 1999, 2004, 2008, and now 2017 — that conclusion is compelled by the plain meaning of the words used in the statute: “… may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence.

One US appellate court, the Eighth Circuit, adopted a different view in a decision in 2000 that predates the Second and Third Circuit cases. The Eighth Circuit held that an implicit power to require document production in advance of a hearing — in the manner of discovery in a US litigation — could be inferred from the explicit statutory power to order production in conjunction with the appearance at a hearing of a witness under subpoena.

In US legal parlance a “Circuit split” exists whenever different federal courts of appeals rule differently on the same issue. And so it has been conventional in discussion of the arbitral subpoena power to refer to a “Circuit split” because of the 8th Circuit ruling (and to a small degree because the Fourth Circuit allowed that, despite the evident plain meaning of the statutory words, perhaps in a case of special need or hardship there might be a power to subpoena documents to be produced separately from any hearing).

Here we have a “split,” but it is far from being down-the-middle, for multiple reasons. First one should consider the US cities whose US District Courts are bound by the Eighth Circuit’s decision, as compared to the list of cities in the Second, Third, and Ninth Circuits. The former includes Minneapolis, St. Louis, Kansas City, Des Moines, Little Rock, and Omaha. The latter includes New York, Philadelphia, Los Angeles, San Francisco, San Jose/Silicon Valley, San Diego, Seattle, Phoenix, Portland, and Pittsburgh. Consider also the fact that US District Courts in Dallas, Chicago, Miami, New Orleans, and Northern Virginia have followed the 2d-3d-4th (and now 9th) Circuit view — this survey is based only on published decisions — on the basis of the persuasive force of this position and not because of appellate authority they were bound to follow in their own Circuits.

The consequence is that in most of the US cities of greatest economic significance, and thus probably in most of the places where non-party witnesses in US-seated international arbitrations and high-value domestic arbitrations will be found, the rule is likely to be that the arbitral subpoena must summon a witness to a hearing in order to compel the witness to produce documents.  The Eighth Circuit view has no such retinue of unbound District Court adherents, and this is presumably because its view is simply less persuasive. It finds no support in the text of the statute and relies upon an analogy between arbitration and litigation: that whereas a judicial subpoena may issue for trial or discovery, an arbitral subpoena should be able to issue for a hearing or for discovery. But evidently most courts have been persuaded that this analogy fails because discovery occupies a different place in arbitration.

It is also inferable that this is not the type of “Circuit split” that is likely to be resolved by the US Supreme Court — not when the issue has only reached federal appellate courts four times in almost 20 years and participants in an ongoing arbitration are likely to find solutions that do not involve taking this avoidable issue to the Supreme Court.

So what shall the arbitrator do? Arbitration counsel who are sensitive to the issue may be willing to design the proposed subpoena to order production at a witness hearing. To that end, since 2015 many arbitrators have provided to counsel the New York City Bar’s Annotated Model Federal Witness Summons.   (A link can be found on this Commentator’s general website But what if counsel, so informed, insists on a discovery-style subpoena and declares its willingness to litigate for its enforcement in a jurisdiction where the issue is technically open?  And suppose the adverse party does not object? It is not for the Tribunal to declare predictively that the subpoena is not likely to be enforced. But if arbitral persuasion of counsel fails, it is surely within the Tribunal’s discretion to warn counsel that delays in obtaining non-party evidence due to judicial enforcement proceedings might not furnish a basis for postponement of the final merits hearing, thereby encouraging counsel to follow the now-customary pre-merits hearing route for document disclosure: i.e. the issuance of a subpoena calling for a pre-merits hearing before members of the Tribunal, at a place of compliance close to where the witness is found, with the understanding conveyed by the Tribunal to counsel that if the witness and both parties will agree to waive the hearing, there is no obstacle to consensual third-party document production in a non-hearing setting in advance of the merits hearing.


Mediation for Catalonia and Spain?

Wednesday, November 1st, 2017

In the past two days, the international news media following the Catalonia independence movement crisis have reported that the independence leader and deposed Catalonia President Carlos Puidgemont has arrived in Brussels, possibly eventually to seek asylum, conceivably to form a “government in exile,” perhaps only, and ostensibly, to secure assurances of fair judicial process for his potential criminal prosecution in Spain.  The New York Times reports that “Belgium is virtually the only national government in Europe that has been even remotely sympathetic to Mr. Puidgemont’s pleas for mediation, not least perhaps because the country has faced separatist tensions of its own led by Flemish hard-liners.”

Those readers who take an interest in the elements of successful mediation of international disputes have perhaps been giving thought recently to how mediation might play a role in bringing about a solution to the Catalonia crisis. I have done so over the past several days, and here present some of my own thoughts. (My motivation of course is not to solve the crisis, but to derive lessons that those who act as mediators might apply to the successful resolution of complex disputes both international and domestic, commercial and political).

  1. Why mediation has not happened: It appears that the Catalan leader Puidgemont began advocating mediation quite immediately after the independence referendum held on October 1. The invitation was renewed several times in October, was rejected each time by Spain, and Puidgemont’s advocacy for EU intervention as a mediator was rejected by the EU.  The EU’s refusal to act as mediator may be seen as an admission that it could not be an independent and impartial neutral, as its interest (and the interest of its members) in the unity of EU member states is evident. As to Spain’s rejection of mediation, it appears as a classic case of a disputant considering that any form of engagement is a legitimation of the other side’s position. But here it seems possible that Spain had options short of refusing negotiations to declare publicly its non-negotiable positions: the illegality of the referendum, the absence of a Catalan mandate for independence, the unacceptability of secession under any circumstance.  Spain evidently concluded that it had a better alternative to any imaginable negotiated agreement: the dismantling of Catalonia’s regional government under Art. 155 of the Spanish Constitution, and the criminal prosecution of Puidgemont and other Catalan leaders. That is what is unfolding, but whether it is a good solution remains to be seen.
  2. Defining an agenda for mediation: Mounting a confidential mediation that allows the participants flexibility without pressure from their constituencies is extremely difficult in such a transparent, media-saturated environment. But if such a confidential channel could be established, an initial mediation session might be devoted to defining an agenda for further mediated discussions within the period preceding the new regional election in Catalonia scheduled for December 21.  What would a possible confidential agenda items be? Adjournment of criminal proceedings in Madrid against the deposed Catalan leaders pending the December 21 elections? Security arrangements for the December 21 elections and methods for tabulating the ballots? Terms and conditions for campaigning and debates ahead of those elections? A commitment to a moratorium on unilateral action and to engagement in discussions for a minimum period of time following the December 21 elections?
  3. The Mediator’s preparation:  There are many effective mediators who refrain from actively seeking opportunity for separate discussions with each disputant prior to the first mediation “session”. There are also many effective mediators, I believe a smaller group, who seek leave from the parties to treat the mediation as underway as soon as the mediator’s engagement is established, such that the mediator may (and actually does) conduct separate telephonic or in-person discussions before bringing the parties together for a joint session. Would the latter approach be advisable for this dispute, assuming it can be accepted by Spain and the representatives of Catalonia? While this is a dispute about sovereignty, autonomy, and culture, among other things, from a mediation perspective its shares many of the attributes of complex inter-corporate disputes: e.g., personal motivations and idiosyncrasies of the leaders, dynamics between the leaders and their constituencies, highly-evolved narratives of each side’s position that may operate at least early on as barriers to creativity in the negotiation process.   Consensual separate sessions before any joint session is convened might begin to overcome these potential barriers to progress.
  4. Defining success in the mediation: Sometimes success in a mediation needs to be defined incrementally, and this is as true of civil and geopolitical conflicts as it is for commercial disputes. In a difficult mediation that promises no immediate final status solution, an initial measure of success can be that the mediation does not fail, that the parties agree to return for another session, and that the parties to commit to refrain from or at least not to expand upon efforts to bring about a final status change by other means. In a conflict like this one involving the very fabric of civil society and how the “rule of law” and “democracy” are defined and understood, an agreement to continue  discussions and to refrain from certain pressure tactics outside the mediation might well be an interim measure defining success in the mediation. (Possible voluntary restraint measures for Catalonia: no civil service strikes? no establishment of a government-in-exile? No Catalan efforts to establish international diplomatic recognition?  For Spain: no violent action by police against non-violent protest? suspension of the prosecution of Catalan secession leaders? restraint from seizing control of news media in Catalonia?).



As the question of Catalonia’s political autonomy moves forward in this post-Declaration, post-Dismantlement, pre-Election phase, it will be interesting to see if initiatives for mediation are forthcoming from any source other than the advocates for Catalan independence. It seems evident that much can be gained from effective mediation. If the initiative were to come from another source such that Spain might embrace mediation without the embrace being seen as a capitulation, perhaps some progress or at least a deferral of a seriously destabilized civil and political environment can be achieved.