Linked below is my article “A Glance Into History for the Emergency Arbitrator”, published last month in the Fordham International Law Journal. The article was written in conjunction with my presentation on the same topic at the Fordham Conference in New York in October 2016.

http://ir.lawnet.fordham.edu/ilj/vol40/iss3/3

It has been fashionable in some international arbitration circles of late to bemoan the shortcomings of a staple of the arbitral diet: the written testimonial statement of a fact witness, submitted in advance of the merits hearing and intended to stand as the testimony-in-chief (direct). For arbitrators who thrive on a constant regimen of procedural nourishment, this pot-stirring resonates like an anti-croissants diatribe at a conference of the French bakery association: too flaky, too buttery, too … prévisible! (Francophobes, use your Google Translator!).

Avid readers of the burgeoning literature on this subject, and even workaday arbitrators and advocates, will be familiar with the essential virtues of the witness statement (it brings coherent organization to complex facts, and affords disclosure in advance of the party’s evidence) and with its vices (mainly due mainly to its preparation by counsel, it may be tendentious, prolix, and a crude approximation of “the truth”). Your commentator, while reluctant to expose the hazards of a croissant-free French breakfast, does boldly venture below several observations about the more indigestible attributes of arbitration without witness statements:

1. The advocate’s theory of the case may remain a work in progress at the time of submitting the pre-hearing memorandum of law. This being rather late in the game for a party to have a case in search of a theory, arbitrators at the hearing and post-hearing stage can contribute rather less than they might to a focusing of the parties’ attention on potentially decisive issues. And the advocates in turn have less opportunity to advocate on issues the Arbitral Tribunal genuinely cares about. If theories of claim and defense are modified from the pre-hearing to the post-hearing brief, the Tribunal, except in the unlikely event that counsel will confirm the abandonment of positions earlier articulated, now has a greater number of liability theories and defenses to address in deliberations and in the Award.
2. The advocate, lacking confidence that the direct testimony of two witnesses rather than six will be sufficient and effective, protectively names six on the witness list. Seeing the list of six, opposing counsel protectively expands its own provisional witness list of four into an actual list of eight. The Tribunal now wonders, aloud, how it will hear 14 fact witnesses (plus experts) in a four-day hearing, when there promises to be direct, cross, re-direct, re-cross, Tribunal questions, and follow-up to Tribunal questions, for each witness.
3. Lacking adequate foreknowledge of the adverse party’s witnesses’ testimony, the advocate’s preparation for cross-examination is unfocused. What can most safely be done by the advocate is to prepare to read, on cross, helpful highlights of documents the adverse witness is associated with (followed by the unhelpful question “Did I read that correctly?”).
4. The parties’ lists of witnesses being hedged promises of those they may call and not necessarily those they will call, each side insists on the right to call two of the adverse party’s listed witnesses on its own case. Skirmishes ensue about what the adverse party could possibly want from these witnesses that cannot be adduced from its own employees or in cross-examination, and the Tribunal, having only a vague sense of what any witness might contribute, is reluctant to limit any procedural option for either side. Undesirable outcomes abound — such as witnesses waiting, sequestered, for a testimonial appearance that may not materialize (not to mention the legal costs of preparing the witness for the unknown examination by opposing counsel), or, to avoid such a scenario, a commitment is made by the party that employs the witness that she will be called, and this adds a witness who might otherwise not be needed, in service of control over the timing and presentation.
5. The Claimant having no advance disclosure of what the Respondent’s fact witnesses will actual say in their testimony, seeks to reserve the ability to call new witnesses on a “rebuttal case” as well as the opportunity to re-call witnesses who will have already testified in the Claimant’s case-in-chief. The parties are unlikely to have anticipated this hearing-lengthening prospect at the time the hearing schedule was fixed, and the potential necessity to add hearing days for the rebuttal case, after a lengthy hiatus, may loom as the first hearing dates approach.

These are serious disadvantages to proceeding without written witness statements in a complex international arbitration. It is desirable that arbitrators and advocates should become familiar with them so that decisions on witness procedure made at the early stages of the case will be well-informed, and will neither opt in favor of written witness statements merely because their use is customary nor opt against them merely because the backlash against custom has come into fashion.

Surely you sometimes wonder why Elena Kagan is a Justice of the Supreme Court and a former Dean of the Harvard Law School, while you, on the other hand, plod along in your quotidian existence as a world-renowned, universally-esteemed, brilliant and magnificently accomplished international arbitrator.  Well, you should read Justice Kagan’s masterful opinion for the nearly-unanimous* Supreme Court in Kindred Nursing Centers v. Clark, 137 S.Ct. 1421, 2017 WL 2039160 (May 15, 2017). If you could write such compelling prose, you might have had a different destiny. (Note: It helps to breathe the air of Manhattan’s Upper West Side, as Justice Kagan did in her youth, and your Commentator has done each day for 28 years. But the Justice re-read Jane Austen’s Pride and Prejudice every year in her youth, whereas for your Commentator that masterpiece remains on a very long to-do list).

You need not read Kindred Nursing to discern any change in US arbitration law. It is a reaffirmation of first principles, a smack-down of a State court that was trying to be too clever by half in its hostility to arbitration. Arbitration agreements stand on equal footing with other contracts under the FAA, and shall not be invalidated or denied enforcement by the individual States on grounds not generally applicable to all contracts. You knew that (or else you have been practicing arbitration law under a rock since 1925).

2017 is the year of alternative facts, and the Supreme Court of Kentucky had contrived a set of alternative facts about why it was OK to deny arbitration where a nursing home made an arbitration agreement with an elderly resident through the agency of a compos mentis relative of the resident who held a valid and broad power of attorney. Presumably so that the outcome would not have the appearance of being the handiwork of the conservative wing of the Court supporting the nursing home industry in the vicitimization of the elderly, the task of writing the opinion of the Court fell to a member of the Blue State liberal quartet.

Referring to the Kentucky court’s so-called “clear statement rule” that a power of attorney must declare in express terms a delegation of authority to enter into a contract that would waive the “sacred” and “God-given” right to a trial by jury, Justice Kagan wrote that the Kentucky court “adopted a legal rule hinging on the primary characteristic of an arbitration agreement — namely, a waiver of the right to go to court and receive a jury trial.” The requirement of special express authorization to delegate such contractual power to an attorney-in-fact “subject[s] [agreements to arbitrate] by virtue of their defining trait, to uncommon barriers …” And answering the arguments advanced by Respondent in support of the Kentucky court’s decision, that the “clear statement rule” applied equally to other kinds of contracts that could forfeit fundamental rights – the examples given at argument were contracts sacrificing freedom of worship, providing for an arranged marriage, or committing the principal to personal servitude – Justice Kagan characterized these examples as “a slim set of both patently objectionable and utterly fanciful contracts that would be subject to its rule.”  She continued: “Placing arbitration agreements within that class reveals the kind of ‘hostility to arbitration’ that led Congress to enact the FAA. … And doing so only makes clear the arbitration-specific character of the rule, much as if it were made applicable to arbitration agreements and black swans.”

I intend to read, and then re-read, Pride and Prejudice….and to breathe more Upper West Side air. Anything for a chance at such vivid clarity in legal writing.

*Justice Thomas insists the FAA does not apply in courts of the individual States. Justice Gorsuch arrived too late participate.

You are not finished learning from the ICSID annulment committee’s non-annulment of the Suez/Vivendi v. Argentina award, at least not if you actually read these posts (a covert activity that leaves cookies, and suggests you probably did not heavily annotate the latest issue of the ICSID Review). Some number of you will remember that Argentina turned up at the US Supreme Court a few years back, trying to sell the idea that the Supremes should tell British investors they had to spend 18 months cooling off in the Argentine courts day-by-day (with an allowance for Tango and Malbec at night) if they wanted to eventually pursue international arbitration at the World Bank to show that Argentine fiscal policies had sunk the profitability of their investments against settled expectations. The Court did not buy the argument that 18 months in the Cooler was a condition of Argentina’s consent to ICSID arbitration, because the UK-Argentine investment treaty couldn’t fairly be read to say that (not even after a half bottle of REALLY GOOD Malbec). [BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (2014)]

So it will not surprise you to know that in the Suez/Vivendi case [Suez & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Annulment, May 5, 2017], Argentina also tried and failed to convince the arbitrators that the investors should be shut down because they refused to comply with the 18 months in the Cooler clause – this one in the Spain-Argentina investment treaty. What sunk Argentina in this case was that the France-Argentina investment treaty had no such clause, and the Spain-Argentina treaty had a “most favored nation” (MFN, hereinafter Grass-is-Greener) clause. Said the Spanish investor to the ICSID Tribunal: “The Grass-is-Greener in France, so we play by French rules.” Game, set, and match to the Spanish investor. (R. Nadal, citing this precedent, won his round of 64 match at Roland-Garros yesterday, 6-2, 6-4, 6-1. On clay not grass).

So Argentina told the annulment committee that the Grass-is-Greener argument has a long history of not working for investors in regard to dispute resolution provisions in treaties, i.e. that many investment tribunals have rejected similar arguments by investors that MFN clauses gave them an escape from procedural preconditions to investment arbitration that were present in the treaty they invoked to launch arbitration, but not in another treaty between the Host State and another State. Argentina apparently was quite right about this, except for a small problem: that MFN clauses get interpreted one-by-one on their own terms, treaty by treaty, so what’s Green Grass for one may be weeds for another. The problem that sunk Argentina in the Suez/Vivendi case is that the MFN clause in its investment treaty with Spain had been construed as being applicable to dispute settlement procedures – and thus to give Spanish investors the benefit of less-encumbered passage to arbitration found in other States’ investment treaties with Argentina — on approximately four other occasions by four other Tribunals.

The ICSID annulment committee, after duly reminding its readers that its mandate is limited to ensuring that arbitrators act like a Tribunal and not like a lynch mob, found no basis to dislodge the Tribunal’s thoroughly-explicated and case-law-supported position (you get in trouble if you say “precedent”) that the Spanish investor was entitled to the benefit of the France-Argentina treaty rule of No Time in the Cooler Before Arbitration.

So today’s lesson, readers: get out there in cyberspace and read the bilateral investment treaties of some likely arbitration-target States. The Grass-is-Greener question is a hot topic – not only for dispute resolution, but for substantive protections like “fair and equitable treatment” which might mean one thing between Spain and Ukraine, and something else between the US and Ukraine, and who knows what between the EU and Ukraine, who sort of finalized a new treaty courtesy of a Dutch ratification vote as reported in yesterday’s New York Times.

Some of you, gluttons for punishment, demand longer, more heavily-annotated versions of these usually short and mainly citation-free posts. Trying to oblige, I draw your attention to:

• “A Glance Into History for the Emergency Arbitrator” just published in the Fordham International Law Journal as part of the collection of papers presented at the Fordham Conference On International Arbitration in November 2016.
• “Efficiency With Dignity: Early Dispositions and the Beleaguered Arbitrator”, a soon to be published manuscript on which your comments are welcomed.

Each is available upon emailed request, and the Fordham article is already uploaded to the Publications page of my website.

Best wishes.

Marc Goldstein

Engaging in imitation as a sincere form of flattery I begin this post with a warning: very short post, as your author on May 8 is already a week overdue to you, and is threatened with duties not consistent with his devotion to you for the next two weeks.

So, let us consider, quickly and with more than the usual disarray and risk of error from which these posts chronically suffer, what we take away from an ICSID Annulment Committee’s decision dated May 5, 2017 in the Vivendi and Suez v. Argentina case (Suez & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Annulment, May 5, 2017), in regard to the issue of the Arbitral Tribunal’s refusal to accept a challenge to the service of one of its members – a decision held by the Annulment Committee to have been not manifestly unreasonable. (Faint praise can be a blessing!)

Buffs who follow investment arbitration intensely will recall that a famous Swiss arbitrator famously joined the Board of Directors of a famous if not infamous Swiss bank in 2006, gave the Bank a list of her pending arbitrations, and in effect delegated to the Bank the task of ascertaining if any of her case commitments could result in her being perceived to lack independence of judgment as a Bank fiduciary. She determined not to investigate, on her own, the extent of the Bank’s proprietary or client-based investments in the companies appearing before her in this and another related investment arbitration against Argentina, and elected not to disclose, in either case, the fact of her election to the Bank’s board.

From the Annulment Committee’s holding and its remarks, we may discern that the following key elements of analysis by the Tribunal were at least not manifestly unreasonable: that the Bank’s holdings in the Claimant companies (proprietary and for clients in their accounts, combined), while making it a large if not the largest shareholder of each company with something north of two percent, constituted a very small fraction of the Bank’s investments even though the dollar amount of such investments, more than $2 billion, would appear substantial. Equally, while the stakes in the arbitration were in the hundreds of millions of dollars, in relation to the size and turnover of the Claimant companies the amounts in dispute were not particularly material, certainly not of “bet the company” proportions. Also, the arbitrator determined in 2009, at which point the Tribunal had unanimously upheld its jurisdiction but had not issued an award on liability or quantum, to give up her Board seat at the Bank.

Having promised brevity, I leave you with these questions: Should full time arbitrators, especially those who are regularly called upon to decide high-stakes cases involving large multinationals and States, confine their fiduciary service to predictably conflict-free institutions, mainly in the non-profit sector? Should an arbitrator’s duty to investigate potential conflicts of interest ever be delegable, at least not without disclosure to the parties of the determination to delegate? In the interest of making awards as invulnerable as possible, and of reducing the costs and uncertainties involved in post-Award challenges – whether in Annulment Committees or in ordinary courts – should prominent arbitrators involved with high-stakes disputes and high-profile entities more often err on the side of disclosure even where a strong case can be made under IBA Guidelines and other relevant conflicts guidance that disclosure is not required?