Courts and Arbitrations: How they co-exist

Interactions between courts and tribunals UNICTRAL Model Law (2006) empowers the tribunal to run its own proceedings with limited judicial intervention: Article 16 – Kompetenz/kompetenz Article 17 – Power to order interim measures Article 17(H) and (I) – Recognition and enforcement, and the limited grounds for challenge Article 19 – Rules of procedure Article 27 - Court assistance in taking evidence

Interactions between courts and tribunals Courts can facilitate arbitral proceedings by: staying improperly brought court actions granting interim relief (or enforcing relief granted by tribunal) ordering production against third party in aid of arbitral proceedings (e.g. USC Title 28 Section 1782 discovery) In Chevron v. Ecuador, both parties to this BIT dispute filed numerous Section 1782 proceedings seeking US discovery from non-party witnesses. In its application for interim relief, Chevron presented the tribunal with evidence obtained from these requests (including depositions and emails). deciding appeals and set-aside applications enforcing arbitral awards

Two examples: Taizhou Haopu Investment Co., Ltd. v. Wicor Holding AG (2016, Taizhou Court, China) Taizhou Court refused to enforce ICC award rendered in Hong Kong based on public policy. A previous PRC Court ruled in another dispute between the same parties on the same contract that under Chinese law, an arbitration agreement must select an arbitral institution to be valid. The parties had only selected the ICC Rules, but did not appoint an arbitral institution. Arbitration agreement was found to be invalid. The PRC Court found it would be contrary to social public interest to recognize and enforce an ICC award rendered after the earlier ruling that the arbitration clause was unenforceable.

Two examples: Commisa v. Pemex, (2nd Cir, 2016) Arbitration between Commisa (Mexican subsidiary of US corp) and Pemex (subsidiary of Mexico state-owned oil corp) seated in Mexico. After the arbitration claim was brought, but before the tribunal issued $300 million award in favour of Commisa, Mexico passed laws that rendered the main claim in the arbitration inarbitrable. Mexican court annulled arbitral award on basis that Commisa's claims could not be arbitrated under new law. US 2nd Circuit Court enforced arbitral award even though it had been set aside at the seat of arbitration. "This case requires us to reconcile two settled principles that militate in favour of opposite results: a district court's discretion to confirm an award, and the comity owed to a foreign court's ruling on the validity of an arbitral award rendered in that country, here, Mexico."

The Start of the Chevron Saga: Oil and Gas Operations in Ecuador In 1993, a group of Oriente residents, represented by a New York lawyer, Stephen Donziger, among others, commenced a class action in the Southern District of New York, seeking billions of dollars of damages for environmental damage in Ecuador and injury to the health of the plaintiffs.  "Thus began this conflict which 'must be among the most extensively [chronicled] in the history of the American federal judiciary.'"   1965 – Ecuador granted a concession to Texaco (Tex-Pet.) subsidiary 1967 – Struck oil 1972 and following – PetroEcuador acquires first a minority interest and then a majority interest in the joint venture 1989 – PetroEcuador took over operation of the pipeline 1990 – PetroEcuador became operator of the project

Releases and Settlement Agreements 1992 – Concession Agreements expire and Tex-Pet's interest reverted to PetroEcuador (sole owner and operator) 1994-1995 – Tex-Pet and PetroEcuador enter into Settlement Agreements and carry out remediation plans 1998 – Ecuador and PetroEcuador release Tex-Pet

Ecuadorian Action 2003 - Lago Agrio plaintiffs representing 30,000 indigenous villagers sue Chevron (Texaco's successor) in Ecuador Invoked retroactive application of Environment Management Act 2011 – Judge Zambrano renders $17.2 billion award, later reduced to $8.646 billion on appeal

A Word about the Parties and Proceedings Texaco subsidiary Petro-Ecuador Donzinger et al. Chevron and its global subsidiaries Lago Agrio plaintiffs Ecuador Proceedings: Ecuadorian action US fraud proceedings Arbitration under BIT Enforcement proceedings in Canada, Brazil and Argentina

US Proceedings Findings by Lewis Kaplan J.– Ecuadorian judgment was obtained by: Falsifying one expert report Tampering with expert evidence Secret ex parte meetings with Judge Ghost writing expert report and judgment! Bribing trial judge and his ghost writer Chevron Corp v. Donziger, 768 F Supp (2d) 581

Arbitration under BIT (Dr. Horacio A Arbitration under BIT (Dr. Horacio A. Grigera Naón, Professor Vaughan Lowe and V. V. Veeder) Chevron and Texaco commenced UNCITRAL arbitration under Ecuador-US BIT 2 interim orders: May 14, 2010 February 9, 2011 3 interim awards: January 25, 2012 February 16, 2012 February 7, 2013

For example: Second Interim Award "… the Tribunal hereby orders: … the Respondent (whether by its judicial, legislative or executive branches) to take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador of the judgments of the Provincial Court of Sucmbios, Sole Division …"  Interim Awards upheld by District Court in the Hague

Enforcement Proceedings in Canada Lago Agrio plaintiffs sued in Ontario to enforce Ecuadorian judgment against Chevron Canada Supreme Court of Canada held Ontario had jurisdiction Ontario Court granted summary judgment to Chevron Canada – upheld corporate veil defence

Brazil and Argentina Brazil: Argentina enforcement proceedings in June 2012 Deputy Attorney General recommended against enforcement due to fraud Argentina Enforcement proceedings against subsidiary in November 2012 Enforcement refused – upheld corporate veil

David R. Haigh, Q.C. drh@bdplaw.com Concluding Remarks David R. Haigh, Q.C. drh@bdplaw.com