THE AUTHOR:
Fernando Benites Goncalves, Associate at BMA Advogados
Arbitration Channel’s 18th Rio de Janeiro International Arbitration Conference
On May 14th, the Arbitration Channel held its 18th International Arbitration Conference of Rio de Janeiro (the “Conference”) at the FGV Rio campus. Organized by João Bosco Lee, Lauro Gama, and Mauricio Almeida Prado, and presented by Lauro Parente, the Conference focused on “Impossibility in International Arbitration.” The event featured 22 speakers across four panels, an introductory keynote speech, and a closing report.
Introduction to the Impossibility in International Arbitration
The introduction to the theme of impossibility in international arbitration comprised (i) a keynote speech by José Ricardo Feris and (ii) a panel on obstacles in the constitution, functioning, and jurisdiction of arbitral tribunals.
José Ricardo Feris began his speech with the Latin maxim “Ad impossibilia nemo tenetur,” highlighting that no one can be obliged to fulfill an impossible obligation. He argued that in international arbitration, the impossibility is often overlooked due to the emphasis on autonomy of will. According to Feris, we are accustomed to the idea that anything agreed upon by the parties is allowed in International Arbitration. However, the autonomy of will is imperfect and can lead to impossible situations.
Feris identified the origin of this issue in the premature, untrained, hasty, and overly standardized exercise of the autonomy of will when drafting arbitration clauses. He detailed four main themes impacting arbitration legitimacy: access to justice, initiation of arbitration and tribunal constitution, ethical issues, and problems related to multiple proceedings. Feris concluded that addressing these issues requires collaborative efforts from arbitrators, arbitration institutions, and the judiciary to mitigate the imperfections in the exercise of autonomy of will.
Following the keynote, the first panel of the Conference, moderated by Michelle Grando and initiated by Gisela Mation, focused on various obstacles to the arbitral tribunal and their impact on arbitration’s effectiveness. Ana Serra e Moura from the ICC highlighted issues arising from poorly drafted arbitration agreements, such as imprecise identification of arbitral institutions, hybrid clauses (addressed by the ICC in Articles 1(2) and 6(2) of the Arbitration Rules), inefficient or illegal choices regarding arbitrators, overly specific arbitrator qualifications, and conflicts between autonomy of will and fundamental principles (Article 12(9) of the Arbitration Rules).
Pedro Metello de Nápole from PLMJ discussed the complications of over-regulating arbitration clauses, suggesting that parties should rely on standard clauses provided by institutions to avoid unforeseen issues. He shared experiences of non-cooperative parties causing delays, especially through frequent arbitrator challenges that suspend procedures. Despite these challenges, Ana countered that concerns about arbitrator challenges are exaggerated, citing ICC statistics showing a low success rate for such challenges, indicating that arbitral institutions are effectively managing these problems.
The panel also addressed external factors affecting arbitral procedures, with Galina mentioning the new Russian legislation that grants jurisdiction to Russian courts if a party claims no access to justice through international arbitration. This has become a significant issue.
Impossibility In International Arbitration Proceedings
The Conference also featured panels on: (i) court intervention in situations where arbitral tribunals cannot exert their own jurisdiction and (ii) protecting the integrity of arbitral proceedings.
The panel on “Court Intervention in Situations Where the Arbitral Tribunal Cannot Exert its Own Jurisdiction,” initiated by Leonardo de Campos Melo and moderated by André Marini, offered diverse perspectives on court and tribunal interactions. Andrea Carlevaris discussed interim measures, detailing five scenarios where arbitrators cannot exercise their jurisdiction, including legislative limitations, lack of power over third parties, measures requiring state judges by their nature, restricted tribunal powers in the arbitration clause, and material impossibility due to tribunal non-constitution.
Andrea noted that emergency arbitration rules address some issues but not all. James Hosking responded by highlighting that emergency arbitrator rules demonstrate the arbitration community’s ability to address such challenges. He explained that emergency arbitrators operate under different constraints, mainly temporal. Their decisions are subject to local laws, have the nature of an order rather than an award, and are modifiable by the tribunal.
Marie-Isabelle Delleur added that courts should support arbitration by applying the Kompetenz-Kompetenz principle, ensuring arbitration agreements are upheld unless manifestly null. She noted that some jurisdictions, like the UK, are particularly supportive of arbitration despite challenges like the new Russian legislation, as evidenced by the use of anti-suit injunctions and favorable court decisions maintaining the efficacy of arbitration agreements under British law. The Brazilian experience has also been positive regarding jurisdictional conflicts.
To sum up the issue, James Hosking likened international arbitration to “Mission Impossible” movies, where seemingly impossible situations are resolved through mechanisms like the U.S. discovery rules, illustrating the adaptability and resourcefulness of the arbitration framework.
The third panel of the Conference, chaired by Gustavo Schmidt and moderated by Natália Nizrahi Lamas, focused on the enforceability of arbitral awards despite parties’ cooperation. Sofia Martins addressed challenges posed by antisuit and antiarbitration injunctions, emphasizing the importance of the arbitration seat in protecting proceedings. She recounted a case where she, as president of an ICC tribunal, proceeded with arbitration despite a state court’s suspension order, as the court lacked jurisdiction. Christian Albanesi highlighted the need for arbitrators to include liability waivers in the Terms of Reference and to secure liability insurance, based on his experience with severe penalties imposed by a Mexican state court.
Alex Wilbraham discussed third-party funding, noting its growing acceptance as a means of access to justice, particularly in common law countries, despite initial stigma. He stressed that arbitral tribunals should consider conflicts of interest, confidentiality, and the possibility of requiring security for costs, although funding does not necessarily imply impecuniosity. Christian resumed the discussion by addressing guerrilla tactics used to delay or obstruct arbitration, such as procedural delays, abuse of mechanisms, and criminal activities.
To combat these tactics, Christian suggested setting clear expectations at the start of arbitration, incorporating the IBA Guidelines on Party Representation into the terms of reference, taking a firm stance against disruptive behavior, sanctioning parties through cost penalties, cautiously excluding problematic representatives, and publicly acknowledging counsel who employ these tactics. Notably, the Chinese Arbitration Association Rules allow for public disclosure of arbitrators who fail to render timely awards under Article 41.
The Solution to the Impossibility in the Arbitration Procedure
The third part of the Conference addressed the topics of: (i) “Anticipating the Arbitral Tribunal’s view on the Dispute as a Way to Promote Settlement Between the Parties”; and (ii) the “Rapport de Synthèse.”
The last panel, chaired by Flávia Bittar and moderated by Renato Beneduzi, explored perspectives on preliminary assessments. Anna-Katharina Scheffer discussed the German approach, emphasizing the state court’s procedural duty to facilitate settlements, pursuant to Section 278 of the German Civil Procedure Code, and Section 139, which obliges judges to establish facts, engage in legal discussions with parties, and provide legal indications to ensure complete submissions. However, these provisions do not necessarily apply in arbitration.
Henry Burnett furthered the discussion by contrasting the receptiveness to preliminary views in different jurisdictions. He noted the USA’s judicial culture favoring adjudication over settlement facilitation, contrasting it with the German approach. Burnett cited the Glencot Development & Design Co Ltd v Ben Barrett & Son (Contractors) Ltd case as an example, where an arbitrator’s mediation involvement led to questions regarding impartiality, reflecting differing attitudes towards preliminary views in arbitration.
Isabela Lacreta, at the Rapport de Synthèse, concluded the Conference by emphasizing the dynamic nature of international arbitration, where new challenges lead to innovative solutions and evolving regulations. She stressed that acknowledging impossibilities in arbitration is crucial for maintaining its legitimacy. Lacreta echoed José Ricardo Feris’s earlier sentiment that no one should be obligated to the impossible, underscoring the importance of respecting boundaries in arbitration to ensure its effectiveness and credibility.
Conclusion
The Conference was a success. As José Ricardo Feris aptly noted, the Rio de Janeiro Conference was indeed “the warmest conference, literally and figuratively, in the arbitration circuit and the most stimulating from an academic standpoint.” The different topics of Impossibility in International Arbitration were deeply discussed by the delegates to create real perspectives on how to make the impossible possible in international arbitration.
ABOUT THE AUTHOR:
Fernando Benites Goncalves is an Associate with the Litigation and Arbitration practice at BMA Advogados. He has experience in national and international commercial arbitration and litigation, representing clients in disputes involving corporate, biotechnology, intellectual property, and construction issues. He holds a bachelor’s degree in law from the Universidade de São Paulo and a Master 1 degree from the Université Lumière Lyon 2. He is the Coordinator of the Corporate Law Center at the Universidade de São Paulo – NEDS-USP. Fernando is a native Portuguese speaker and works in English, French and Spanish.
