International Distribution Institute NEW ISSUES IN INTERNATIONAL DISTRIBUTION The recourse to international arbitration: when should it be chosen and how should it be managed in order to be effective. 12 June 2010 Andrea Montanari 1

ADVANCES ON ARBITRAL COSTS ARE TO BE PAID TIMELY ?

ADVANCES ON ARBITRAL COSTS ICC Rules of Arbitration (Art. 30) The advance on costs is to be paid in equal shares by the parties; Should a party fail to pay its share, the other party can pay the whole of the advance on costs; Pursuant to Court’s practice, in the event one party fails to pay its share and the other party refuses to substitute, separate advances on costs may be fixed: in such case each party pays an advance on costs corresponding to its claims; When the Court fixes separate advances, it considers the total amount in dispute (claims + counterclaims), and due to the regressive character of the Scales of Administrative Expenses and Arbitrator’s Fees, a party may pay an higher amount than the one resulting from a calculation in equal shares; Should a party do not pay its separate advance, the Secretariat may invite the Arbitral Tribunal to suspend its work, and may grant the party in default a final time-limit (no less than 15 days) to make payment, failing which its claims would be considered withdrawn, without prejudice.

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Jan 2006: Claimant files a Request for Arbitration; ICC fixes the advance on costs at USD 380,000, to be paid in equal shares by the parties by August 25, 2006; Only Claimant meets this deadline;

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION The ICC, without any request, grants the Respondent additional time for payment as follows: August 31, 2006  September 15, 2006; September 20, 2006  October 1, 2006; October 11, 2006  October 18, 2006; No deadline is met by Respondent

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION ICC invites Claimant to substitute for Respondent; Claimant requests the ICC to fix separate advances on costs, as Claimant deems the counterclaims grossly inflated; ICC grants Respondent additional time until December 4, 2006 to pay its (equal) share of the advance;

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Failing payment by Respondent, the ICC fixes separate advances as follows: Claimant: USD 130,000 (instead of the original USD 190,000) Respondent: USD 360,000 (instead of the original USD 190,000) Time-limit for payment: Jan 23, 2007 (5 months after the original due date); Respondent misses again the deadline; ICC grants again additional time: Feb 8, 2007  Feb 23, 2007 Mar 1, 2007  Mar 8, 2007

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Respondent pays USD 190,000 (sum originally due); ICC increases Claimant advance from 130,000 to 340,000 (!); ICC grants Respondent a “final time-limit” to Apr 13, 2007 to pay the balance, “failing which the counterclaims shall be considered withdrawn”, and invites the Arbitral Tribunal to suspend the work related to counterclaims; Respondent misses again the deadline, and requests the ICC to consider the counterclaims “decreased proportionally” to the partial payment made (!); ICC “invites Respondent to inform it of the exact meaning” of the above (?);

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Apr 22, 2007 (8 months after the original due date, and in any case after any term granted by the ICC): Respondent pays the balance and “apologize(s) for the delay and the disturbance caused”; May 4, 2007: ICC, notwithstanding the letter of art. 30(4) of the Rules, decides that the counterclaims “shall not be considered withdrawn upon expiry of the time limit set forth by the Secretary General in its letter dated 29 March 2007”.

DO THE PARTIES DESERVE “EQUAL TREATMENT” BY THE ICC?

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Respondent: changes the lawyers, withdraws its counterclaims, files a new Request for Arbitration, and multiplies 12 times its original counterclaims. The arbitrations are consolidated.

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Nov 2007: ICC fixes the advance on costs at USD 510,000, to be paid in equal shares; May 2008: ICC increases the advance at USD 680,000, to be paid in equal shares; June 2009: ICC increases the advance on costs at USD 920,000, to be paid in equal shares (i.e. USD 340,000 already paid + USD 120,000 to be paid for each party);

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Claimant requests the ICC to fix separate advances on costs, due to substantial imbalance between claims and counterclaims; ICC fixes separate advances as follows: Claimant: USD 510,000 Respondent: USD 735,000 Claimant promptly pays its balance. Respondent does not pay.

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION Respondent requests the ICC to reconsider its decision and revert to equal shares, arguing that, among other things, it never refused to substitute the Claimant should they fail to pay their balance of equal share (i.e. USD 120,000 due by Respondent + USD 120,000 due by Claimant); ICC invites Respondent to confirm that it is committed to paying an additional USD 240,000 (i.e the total balance of the original equal shares) should the ICC reconsider its decision (?); Respondent confirms that it shall pay such sum should the ICC revert to a global advance and Claimant refuses to pay its equal share;

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION ICC does not revert to equal shares, but… decreases Respondent’s share from USD 735,000 to USD 580,000 [the balance to be paid by Respondent becomes … USD 240,000 (!)]; ICC does not decrease Claimant’s share (already paid in due time); DISCOUNT ONLY GRANTED TO THE RESPONDENT

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION HOW IS IT ENDED? Claimant objects and requests a reconsideration; ICC for the first time in the arbitration replies that the Court will not reconsider its decision unless a substantial new element arises (?)

ADVANCES ON ARBITRAL COSTS A REAL CASE IN ICC INTERNATIONAL COURT OF ARBITRATION HOW IS IT ENDED? The Chairman of ICC International Court of Arbitration states: the actual position “seems appropriate, having regard to the current status of the claim and counterclaim” (!) and “I have nothing to add” Claimant: Value of Claim  USD 11 million Advance paid  USD 510,000 Respondent: Value of Counterclaim  USD 66 million Advance paid  USD 580,000