Corporate disputes a new territory for commercial arbitration?

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Pauline Campbell
5 years ago
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1 Corporate disputes a new territory for commercial arbitration?

arbitration can be much faster, Corporate disputes often concern the corporation s internal matters there is

2 Why choose arbitration in corporate disputes? The company needs to keep going there is no time for lengthy complicated litigation in state courts, arbitration can be much faster, Corporate disputes often concern the corporation s internal matters there is a need for more control over the dispute resolution process, state courts cannot guarantee this The Everything stays in the family approach corporate disputes require confidentiality

3 Corporate disputes common issues around the Globe Up to now there has not been any global empirical data on the prevalence of arbitration in corporate disputes yet the potential of arbitration in this field seems untapped Jurisdictions around the world share the same problems connected with the admissibility of arbitration in corporate disputes: A. lack of consensus on the arbitrability of corporate disputes (and certain categories of those disputes: e.g. dissolution of companies, validity of shareholders meetings) B. admissibility of issuing awards ex aeqo et bono C. impact of corporate disputes on third parties and their inclusion in the proceedings (binding power of awards, selection of arbitral tribunal, etc.). (see: comparative study by M. Viscasillas, Arbitrability of (Intra-) Corporate Disputes, [in:] L. A. Mistelis, S. L. Brekoulakis (ed.), Arbitrability: International & Comparative Perspectives, Kluwer Law International 2009)

4 Insufficient rules - main issue with the current status of arbitration for corporate disputes At present it seems that the main obstacles expanding the use of arbitration for corporate disputes are insufficient regulations which result in the lack of legal certainty There is no clear standard that has to be satisfied so that the arbitral award rendered in corporate disputes is deemed enforceable Even though some jurisdictions have decided to partially regulate corporate arbitration, this in fact gives rise new problems without solving the old ones

5 Insufficient regulation - examples Examples of insufficient regulations which instead of solving problems provoke even more doubts: A. Spain Spanish law provides for the admissibility of arbitration in corporate disputes; it also states that if a dispute concerns the validity of a company resolutions, then the arbitral tribunal should be appointed by an arbitral institution so there is an ongoing discussion in Spain regarding whether ad hoc arbitration is allowed in such disputes or not; B. Poland Polish law provides that an arbitration agreement may be contained in the articles of association of a company and that arbitration may concern all disputes that could be resolved by a court imposed settlement again, there is discussion whether all corporate disputes satisfy the criterion;

6 Judicialization of corporate arbitration Two models for solving the problem of insufficient regulations: A. Italian Model B. German-Austrian Model Both models (Italian and German-Austrian) present comparable solutions for the problem of the admissibility of arbitration in corporate disputes Both models lead to greater formalism of arbitration in corporate disputes as compared to typical commercial arbitration

7 Italian Model In 2003 Italy passed a separate statute that regulates arbitration in corporate disputes (decree No. 5 of January 17, 2003) Main points of the Italian regulation: A. Selection of the arbitral tribunal should be done by an entity that is outside the corporation B. Request for arbitration should be entered into the company register and available for examination to all shareholders C. Shareholders other than those who started the dispute may participate in the arbitration as the so-called main intervener D. Third parties may participate in the arbitration as the so-called side interveners E. Arbitrators cannot resolve the dispute ex aeqo et bono Works on a similar Russian regulation are currently underway

8 German-Austrian Model Germany and in Austria - it is those countries Supreme Courts rather than parliamentary legislative bodies which in their decisions prescribed guidelines (preconditions) for the admissibility of arbitration in corporate disputes (see Germany s Supreme Court s decision dated April 6, 2009, Ref. No. II ZR 255/08. and Austria s Supreme Court s decision of October 22, 2010, Ref. No. 7 Ob. 103/10p). According to those courts it is up to arbitral institutions (and arbitrators) to shape the proceedings in such a way that the conditions established by the Supreme Courts are satisfied and their awards may be enforced.

9 German-Austrian Model German Supreme Court s decision, example of rules: corporate disputes are arbitrable, the arbitration clause has to ensure that each shareholder as well as the company can participate in the nomination of the arbitral tribunal, all shareholders, directors and other interested parties must be granted an opportunity to participate in the arbitration. Similar Austrian Supreme Court s decision, example of rules: corporate disputes are arbitrable and require separate, carefully drafted arbitration agreements and if the award will yield effects for third persons (such as in the case of the invalidity of shareholders resolution) there should be a mechanism for the inclusion of those parties in the proceedings.

10 Conclusions Many jurisdictions presently see the need for more regulations or guidelines from courts or lawmakers on the admissibility and framework of corporate arbitration. The lack of those rules and guidelines impedes the development and use of arbitration for corporate disputes. However, more regulations lead to greater formalism in corporate arbitration and less flexibility.

11 Rafał Kos, LL.M.

INTERNATIONAL COMMERCIAL ARBITRATION - THE ESSENTIALS.

INTERNATIONAL COMMERCIAL ARBITRATION - THE ESSENTIALS The Issues 1. Arbitration as a mechanism for resolving disputes 2. Why Arbitrate rather than Litigate or Mediate 3. Drafting Arbitration Agreement