Wednesday, February 27, 2008

New Arbitration Center in Dubai, UAE

Further demonstrating that Dubai is an emerging location for the international financial market, the Dubai International Financial Centre (DIFC), in conjunction with the London Court of International Arbitration (LCIA), recently launched the DIFC/LCIA Arbitration Centre. (See articles in Gulfnews,,, The Economic Times, among many) In addition to its impact on this emerging market, this is an important development for international arbitration for two reasons: the involvement of the LCIA and the potential role of Islamic law in arbitration proceedings at the DIFC/LCIA Arbitration Centre.

The LCIA is one of the longest standing and prominent courts of arbitration. Until joining with the DIFC, the London Court of International Arbitration had not established a similar partnerships. As such, this speaks volumes of the perceived credibility of the new tribunal and shows an acceptance of the UAE as a viable location for arbitration. This is due in large part to the UAE's signing on the the New York Convention. As a signatory, it now allows for arbitration awards to be enforced in the UAE. (see this article). This is a great sign for the region as well, as it will invite more business into the Mideast. Given this legal progression, the UAE could prove to be a catalyst for change in the region, dependent on the success of this tribal among other things.

One question that I do have is: What, if any, will be the impact of Islamic law on this tribunal? If any of you knows of the convergence of arbitration and Islamic law, either in this venue or another, I would love to get your comments on the role it plays. I do not feel that basic principles of arbitration line up well with the application of Islamic law, given the more rigid process and structure of proceedings under Sharia.

Again, I would love your feedback and thoughts on this new tribunal and the potential impact of arbitration on the Mideast.

Monday, February 11, 2008

ExxonMobil's Arbitration Proceedings Against Petroleum of Venezuela S.A.

After Venezuela nationalized petroleum companies interests in the Orinoco Belt, they made an offer of compensation to those companies they were taking over. Because ExxonMobil, among other companies, disliked the offer, they decided to arbitrate their claim with International Centre for Settlement of Investment Disputes. Although the resolution of the claim can be a lengthy process, as an initial step, ExxonMobil has sought and won some injunctive claims in US, UK and other international courts freezing assets of Petroleum of Venezuela, S.A. In response to this, Venezuela's president, Hugo Chavez has threatened to stop shipping oil to the United States.

General information on the current status of the claim can be found as reported by: BBC News, CNN, Hindustan Times, and the Moderate Voice, among other news sources.

Personal Evaluation:
This is an interesting international arbitration situation for two main reasons: 1) One of the parties essentially is a state government and 2) The situation implicates judicial methods that are used in conjunction with arbitration.

1) State Government as a Party to Arbitration

Because Petroleum of Venezuela, S.A. is a state-owned entity, the government of Venezuela is directly implicated in the arbitration proceedings initiated by ExxonMobil. For any company doing business directly or indirectly with a foreign government, arbitration offers an excellent alternative in order to resolve any potential disputes. The benefit of arbitration is that it creates a more neutral venue where the claims can be discussed.

For example, in the Exxon case, the procedures of the Venezuela legal system (compensation offered for the nationalization) were inadequate to fully remedy or compensate ExxonMobil from their own perspective. Because they rejected that solution, they had three main options: Sue in Venezuela, sue in another country's court, or submit the claim to arbitration. There would be great difficulty in winning a law suit against Venezuela in a Venezuelan court. Trying to sue in another country's court presents jurisdictional issues. It is difficult to argue that, for example, a UK court should have jurisdiction of a claim that involves a dispute between a US company and a state-owned Venezuelan company over proper compensation for the nationalization of oil projects in Venezuela. From a court's perspective, the country with jurisdiction would most likely have to be Venezuela. That leaves ExxonMobil with the last option of taking the claim to an extra-judicial source.

In fact, that is the route that ExxonMobil has taken. The International Center for Settlement of Investment Disputes (ICSID) is a part of the World Bank that was set up specifically to deal with disputes between private companies and state governments. First, because any arbitration is an extra-judicial method of dispute resolution, it is necessary for the companies or other parties involved to have some legal basis for submitting the claim to arbitration. In the case of ICSID, it is necessary that the state government and the state of the foreign national involved be contract states (generally = signed and ratified the treaty or convention) to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. Presently this is the list of states that are contract states. Generally speaking, arbitration is a creature of both convention and contract. The convention is what give legal power to arbitration proceeding. The contract between the parties demonstrates their desire to take their claims to an extra-judicial source.

Ultimately, arbitration is a beneficial option for those companies that are doing business with national governments as foreign nationals because it allows them to "create" jurisdiction in a more neutral extra-judicial forum for the resolution of any disputes that might arise.

2) Judicial Processes Associated with Arbitration

The ExxonMobil case also demonstates one of the judicial processes that is general associated with arbitration: injunctive relief. Injunctive relief is necessary because arbitration, in and of itself, does not have the ability to enforce its own awards. That authority needs to come from the various national governments. Right now, some of the main Arbitration Conventions that apply in the United States are the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly know as the New York Convention) and the Inter-American Convention on International Commercial Arbitration (commonly known as the Panama Convention). Because arbitration awards do not carry their own enforcement power, it is important to seek injunctive relief when beginning the arbitration process. This establishes the assets that will be used to pay the award. If a company is seeking to use arbitration but does not take this first step, they run the risk of having assets moved during arbitration and then lacking any way of enforcing or collecting the award that they do receive. This is why ExxonMobil has sought to freeze the assets of Petroleum of Venezuela, S.A.; so that they will be able to collect whatever arbitration award they intend to receive in countries that will enforce the award.

This will be an interesting case to follow to see what the outcome is of the arbitration proceedings as well as what the reactions of the various countries involved will be. What are your thoughts on the ExxonMobil case, arbitration between states and foreign nationals and the use of injunctions as a part of the international arbitration process?


Welcome to this weblog on International Commercial Arbitration. This blog will place an emphasis on evaluating trends and changes in the law and the use of arbitration as a dispute resolution method for international transactions. It will also outline the structural and procedural situations that are a part of international arbitration. This blog will contain my ideas and evaluation of the present literature and law on international arbitration and, as such, I welcome your comments and ideas to increase the discussion on this alternative dispute method. I do emphasize that this blog is a general evaluation of general principles or circumstances and therefore should not be taken as legal advice on any individual matter. For any personal legal question that you might have, it is necessary to sit down with an attorney to discuss how the law applies to your circumstances. Thank you for reading!