Wolf von Kumberg 16 March 2015.

NGC International ADR Guidelines and Model International Disputes Clause

Drafting the Clause: Choosing the Process Consider whether multi-step approach should be employed (as in the Model Clause) –Ascending levels of management: negotiation between senior executives of the parties (if possible, specify by title) –Mediation prior to arbitration or litigation (if possible, specify institutional mediation rules, e.g. ICDR AAA ICC CEDR –Specify time period for each successive step 3Attorney-Client Privileged

Choosing the Process: Arbitration Arbitration Versus Litigation – Issues to Consider –Does arbitration provide a safer alternative than foreign judicial system? Is foreign court system expeditious, trustworthy, reliable and fair? –Does NG’s bargaining power allow it to insist on U.S. courts as the forum for dispute resolution if that is our preference? –Does arbitration provide demonstrable cost and time savings over litigation in foreign courts? –Does litigation provide surer means to enforce the outcome (judgment versus award)? –How does each forum handle discovery issues? –Would a dispute process benefit from expertise in the decision-maker? –Is the subject matter of the transaction one that would benefit from a private, as opposed to public, dispute resolution process? –Are there any local law requirements or constraints? Arbitration: Ad Hoc or Institutiona l –Preference is to use Institutional arbitration. The Institution will help administer the proceeding, and its Rules will govern the conduct of the arbitration. 4Attorney-Client Privileged

Drafting the Clause: Choosing the Rules The chosen Institutional body will have its own set of governing rules. These rules may be modified from time to time, so one must consult the most current set of rules before making a final decision. Also, there may be reasons to modify the current set of rules. Factors to consider when choosing rules include: –Extent to which the rules may be modified –Who chooses arbitrators/how many –Any nationality/professional criteria –Previous history with a particular party. Where a customer has previously agreed to a particular acceptable institution, attempt to use it again. –Administrative/arbitrator costs. This can vary between fixed fee based on value of the dispute or hourly rates. –Joinder of parties/issue consolidation –Limits on discovery –Issuance of award Timeliness Reasoned decision 5Attorney-Client Privileged

Drafting the Clause: Choosing the Location (Seat) Seat of arbitration determines the arbitration’s procedural law, which can impact manner and conduct of arbitration, including –Degree to which national courts may intervene or assist, e.g., issuing interim measures such as injunctions or preservation orders or requiring posting of security bonds –Ease of enforcement –1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (146 signatory countries) identifies any reservations made by the State in which the seat is located. See for such information. Preferred Seats (depending on location of contract performance) –New York: for contracts in the Americas –London, Geneva, Paris (in that order): for contracts in Europe or the Middle East –Singapore or Sydney, Australia: for contracts in Asia 6Attorney-Client Privileged

Drafting the Clause: Choosing the Arbitrator Appointment of Arbitrators –Qualifications of arbitrators should be expressly included if important, including Legal qualifications Other professional qualifications (accountant, engineer, etc.) Government contracting expertise Language skills Potential conflicts Availability 7Attorney-Client Privileged

Drafting the Clause: Choosing the Scope Scope of Arbitration –Arbitration should cover all disputes “arising from” or “related to” contract and not just contract-based claims –Consider whether access to local courts should be preserved for temporary injunctive relief Interim injunctive relief typically available under institutional rules –Jurisdiction should not be limited because subject matter implicates public policy or national statutory rights –Arbitrator should not have jurisdiction to decide matters under general concepts of natural justice (known as “amiable composition”) –Consolidated proceedings Multiple disputes: Consider whether you want to agree to consolidate in single arbitration proceeding all disputes relating to the contract Multiple parties: Make sure clause is consistent in prime and subcontracts; determine how arbitrators to be chosen if there are multiple parties 8Attorney-Client Privileged

Drafting the Clause: Various Provisions Language –Arbitration proceedings should be conducted in English –Specify that all documents produced in the arbitration are to be in English or translated into English at the expense of the producing party Governing Law –Clause should encompass performance and interpretation of the contract and any other (including non- contractual) claims arising from or related to the contract –If NG contracting entity is U.S. based, default is for U.S. based law (with strong preference for New York given its international reputation). Foreign law may not be used absent prior approval of the Law Department –If NG contracting entity is outside U.S., default is for English law. Sovereign Immunity –If the contract involves a State, State Agency, or Corporate Entity in which a State has an interest, obtain an express waiver of the right to assert sovereign immunity as to both jurisdiction and execution. Also, obtain a warranty that all approvals needed to make the waiver enforceable have been obtained Privacy –Arbitration proceedings are not a matter of public record, but need to ensure that other party maintains confidentiality –Confidentiality is particularly important if the proceeding will involve sensitive information –ITAR issues need to be addressed 9Attorney-Client Privileged

Drafting the Clause: Choosing Discovery Rules Institutional Rules tend not to deal with discovery or if they do are not uniformly applied, thus making them somewhat unpredictable –But ICDR Guidelines require parties to exchange supporting documents in advance of hearing and give arbitrator right to approve targeted document requests Parties usually able to modify discovery procedures by agreement in the arbitration clause –For example, parties may agree to adopt the IBA “Rules on Taking of Evidence in International Commercial Arbitration,” which provides for more restrictive discovery than might be ordered in litigation, particularly if Anglo Saxon focused –Model Clause incorporates IBA Rules on discovery 10Attorney-Client Privileged

Drafting the Clause: Choosing the Remedies Continuing Performance Obligation –Parties to continue performing notwithstanding any dispute –NOTE: consider deleting this provision where NG is the supplier Limitations on Damages –Consider whether to exclude categories other than compensatory damages, e.g., indirect, consequential, incidental, multiple or punitive damages. (Tie this in to the Contract limitation provision.) Reasoned Award –Consider whether a reasoned award (decision) is desired. In most cases, this should be included 11Attorney-Client Privileged

Drafting the Clause: Ensuring Finality and Enforceability Finality and Enforceability –While most institutional rules provide for finality of the award, some jurisdictions provide for review by local courts. To eliminate this potential, expressly exclude the right to appeal –Finality (little or no ability to overturn award through judicial intervention) largely protected, particularly in countries that have adopted the New York Convention. –Simplified international enforcement through New York Convention Check the New York Convention regarding any reservations made by the State in which the other parties to the contract are located. See Attorney-Client Privileged

Summary: The Top Ten Things to Remember 1.Arbitrations are creatures of contract, i.e., parties choose how they will be structured. 2.Some arbitral institutions are better than others (AAA-ICDR, ICC, LCIA,DIS). 3.Some arbitral seats are better than others (London, Geneva, Paris, New York, Singapore). 4.English is the language of choice. 5.When negotiating with a sovereign, get an express waiver of immunity (along with warranty that waiver is enforceable). 6.Confidentiality is key. 7.Limit discovery. 8.Limit damages. 9.Ensure finality and enforceability. 10.When drafting, start with the NG Model International Disputes Clause. 13Attorney-Client Privileged

Text with an image Copy and paste slides to create more PICTURE

Presentation Title