19 December 2011
Arbitrating with sovereigns involves all of the issues inherent in proceedings between private entities plus a variety of specialized concerns. This article lists 10 of the most critical terms to ensure a level playing field in resolving a dispute with a sovereign party.
- Unambiguous agreement to submit to arbitration. (Example: “Any dispute arising out of or relating to this agreement shall be finally resolved by arbitration …”.)
- Explicit agreement to submit to arbitration signed by any governmental entity that may be necessary to the dispute or to enforcement of the award, including the ultimate sovereign if necessary under the circumstances. Enforcement against non-signatories cannot be presumed.
- Strict compliance with the laws of the sovereign as to procedures to ensure that the substantive agreement, the agreement to arbitrate and the waiver of sovereign immunity by each signatory are all authorized under the sovereign’s constitution, laws and regulations. This should include, if necessary, approval by the legislature, cabinet of ministers or other ultimate authority.
- Specification of the site of the arbitration. This should be carefully chosen for its political neutrality, the quality and reliability of its arbitration jurisprudence and the respect that its courts have for the arbitral process. If at all possible, the arbitration site should not be in the country of the counterparty.
- Broadest possible waiver of sovereign immunity. The waiver should encompass both the arbitration and collection/enforcement against assets of the sovereign or a sovereign entity sufficient to satisfy any award under the laws of the jurisdictions in which assets are located.
- Incorporation of the contracting party or an intermediate or ultimate parent in a jurisdiction that is party to a robust investment protection treaty with the sovereign of the counterparty.
- Precise and unambiguous definition of any exceptions to the agreement to arbitrate (if they absolutely cannot be avoided).
- Unambiguous definition of the time for commencement of any negotiation or mediation that is to precede arbitration. This definition should clearly reference objective dates or events. (Example: “If no agreement has been reached within __ days of the delivery of written notice of the existence of a dispute, either party may serve a request for arbitration …”.)
- Designation of the usual elements of effective arbitration agreements:
- Administering institution (if desired) and applicable rules:
- Number of arbitrators and the means of their selection; and
- Language of the proceedings.
- Explicit provision of any confidentiality desired with regard to the proceedings, evidence and award. This should not rely on an assumption that there are confidentiality provisions in the arbitral rules or applicable law, because these may not exist.