In the Arbitration under Chapter Eleven
of the North American Free Trade Agreement
and the ICSID Arbitration (Additional Facility) Rules
between
|
ADF Group Inc., Claimant/Investor, -and- United States of America, Respondent/Party. |
Case No. ARB(AF)/00/1 |
Final Observations on
Place of Arbitration of
Respondent United States of America
Mark A. Clodfelter
Assistant Legal Adviser for International
Claims and Investment Disputes
Barton Legum
Chief, NAFTA Arbitration Division, Office
of International Claims and Investment Disputes
Andrea J. Menaker
Laura A. Svat
Attorney-Advisers, Office of International
Claims and Investment Disputes
United States Department of State
Washington, D.C. 20520
April 16, 2001
Contents
Argument 1
- The Tribunal May, With Agreement Of The Parties,
Hold A Hearing Outside The Place of Arbitration 2
- The United States' Laws On Arbitral Procedure Are
Eminently Suitable for purposes of this case 2
- The Location Of The Subject Matter And Proximity
Of Evidence Clearly Point To Washington, D.C. As The
Place Of Arbitration 6
- Holding The Arbitration In Washington, D.C. Would Be
Substantially Less Inconvenient Than Montreal 8
- The Tribunal Should Consult With The ICSID Secretariat
Regarding The Cost Of Needed Support Services 9
VI. There is no foundation to ADF's allegation that the united
states courts would be unfair to adf
Conclusion 12
In the Arbitration under Chapter Eleven
of the North American Free Trade Agreement
and the ICSID Arbitration (Additional Facility) Rules
between
|
ADF Group Inc., Claimant/Investor, -and- United States of America, Respondent/Party. |
Case No. ARB(AF)/00/1 |
Final Observations on
Place of Arbitration of
Respondent United States of America
Pursuant to Item 12 of the Minutes of the First Session of the Tribunal, Respondent United States of America respectfully submits these final observations on place of arbitration. For the reasons set forth here and in the United States' March 19 Submission, the Tribunal should select Washington, D.C. as the place of arbitration.
Argument
In its second submission on place of arbitration, claimant ADF Group Inc. ("ADF") misstates the position of the United States in several key respects and, thereby, fails to effectively refute that Washington, D.C. is the proper place of arbitration for purposes of this case. In addition, ADF's supplemental arguments ignore authorities previously relied on (including the UNCITRAL Notes and Chapter Eleven decisions) without identifying any alternative authority to guide the Tribunal.
I. The Tribunal May, with Agreement of the Parties, Hold a Hearing Outside the Place of Arbitration
As a threshold matter, the United States wishes to clarify its views concerning the physical location of hearings in these proceedings. It is not the position of the United States, as ADF submits, that the physical location of hearings may never deviate from the place of arbitration selected by the Tribunal. See ADF April 2 Submission ¶ ¶ 6-7. Rather, the United States' view is that the Tribunal's determination of place of arbitration determines the presumptive location of physical hearings only. When the disputing parties agree, the Tribunal may hold a hearing in another location, as it did for its first session. See Arbitration (Additional Facility) Rules art. 29 ("the Tribunal shall apply any agreement between the parties on procedural matters"). The first session was therefore properly held - by decision of the Tribunal with agreement of the parties - by videoconference in three distinct locations. In no way did such a hearing "vitiate[] these arbitral proceedings," as ADF suggests. ADF April 2 Submission ¶ 7.
Therefore, provided the disputing parties so agree, the Tribunal will again be free to designate an alternate site for a particular hearing in this case. Absent such agreement, however, Article 21 of the Arbitration (Additional Facility) Rules does not grant the Tribunal discretion to hold a hearing "any place it deems appropriate" outside the place of arbitration.
II. The United States' Laws on Arbitral Procedure Are Eminently Suitable for Purposes of this Case
ADF's attempt to discredit U.S. law on arbitral procedure fails for several reasons: (1) its suggestion that U.S. law is relatively uncertain is without merit; (2) amply suitable
procedures for review of a Chapter Eleven award are available under U.S. law; and (3) in the most important respect - enforcement - the laws on arbitral procedure of the United States could not be more suitable.
First, contrary to ADF's suggestion, it is impossible at this stage of Chapter Eleven's evolution for ADF or any other claimant to have absolute certainty as to the legal regime governing review of a Chapter Eleven award. See ADF April 2 Submission ¶ 10 (claiming entitlement to grounds for review that are "clear, predictable and limited"). To date, no decision in a proceeding to review a Chapter Eleven award has issued, even in a court of first instance, in any of the NAFTA Parties. As a result, there can be no absolute certainty when it comes to judicial review of such an award - whether that review takes place in Canada or in the United States.
In fact, where a Canadian venue has been selected as the place of arbitration for a Chapter Eleven case, there has been considerable uncertainty regarding the applicable standard of review. In the case currently pending between the United Mexican States and Metalclad Corporation before the Supreme Court of British Columbia, both Mexico and Canada have submitted arguments that raise significant questions regarding the proper standard of review. Notably, their arguments apply even if British Columbia's version of the UNCITRAL Model Law governs and whether or not Chapter Eleven awards are considered "commercial."
Mexico and Canada both argue, based on decisions of the Supreme Court of Canada that would presumably apply in Quebec as well, that factors unique to investor-State arbitration ought to determine the proper standard of review of Chapter Eleven awards. For example, Canada's submission in the Metalclad appeal distinguishes between "public" and "private" law issues: "The 'pragmatic and functional approach' of the Supreme Court of Canada to determine the standard of review in matters of public law is the more appropriate approach for Chapter Eleven tribunals." Outline of Argument of Intervenor Attorney General of Canada in United Mexican States v. Metalclad at ¶ 24 (at Tab 17 to ADF February 26 Submission). Under such a standard, Canada concludes, "it is clear that in interpreting NAFTA, Chapter Eleven tribunals should not attract extensive judicial deference and should not be protected by a high standard of judicial review." Id. at ¶ 30. ADF offers no reason to believe that an action to review a Chapter Eleven award in Quebec would not be subject to similar questions as to applicable standards, even under the Quebec Code of Civil Procedure.
Second, a request to the U.S. courts to review a Chapter Eleven award issued in the United States will by no means result in "legal mayhem." ADF April 2 Submission ¶ 32. Despite what ADF alleges, suitable procedures for review of a Chapter Eleven award are available in the United States under both federal law and D.C. law, regardless of whether the award is deemed commercial for purposes of review. A Chapter Eleven award made in Washington, D.C. would be covered by Chapters 2 and 3 of the Federal Arbitration Act (and residually by Chapter 1 in either case), as well as by Chapter 43 of the District of Columbia Uniform Arbitration Act. Moreover, a party subject to such an award could seek review in a U.S. court on grounds that differ little from the UNCITRAL Model Law. See 9 U.S.C. §§ 10, 208; D.C. Code § 16-4311. That a U.S. court has not yet heard such a motion does not make U.S. law any less suited to Chapter Eleven awards than that of Quebec - the courts of which have not entertained such a motion either.
Third, and most important to determining place of arbitration, there can be no debate that U.S. law on arbitral procedure encourages and protects international arbitration by enforcing Convention awards, except in the specific circumstances set forth under the New York and Inter-American Conventions. That ADF relies on dissenting opinions in Mitsubishi Motors and Scherk proves, rather than undermines, the United States' point. In the United States, both foreign and non-domestic arbitral awards covered by the New York and Inter-American Conventions (Chapters 2 and 3 of the FAA) are enforceable according to the provisions, and subject to the exceptions, of those Conventions.
Moreover, contrary to ADF's argument, the Chromalloy decision does not suggest that review of Chapter Eleven awards in the United States "will severely test judicial deference to international arbitration awards." ADF April 2 Submission ¶ 44. In Chromalloy, the U.S. court disregarded an Egyptian court's vacatur under Egyptian law of a Convention award, not because of any antipathy toward foreign interests, but because it found the Egyptian court's reasoning (i.e., that the arbitrators' decision constituted a mistake of law) to reflect a "suspicious view of arbitration." 939 F. Supp. 907, 911 (D.D.C. 1996). The court elected to enforce the foreign award rather than recognize the vacatur because the latter would have violated the United States' clear public policy favoring "judicial enforcement of binding arbitration clauses." 939 F. Supp. at 913 (citations omitted). Consistent with the findings of the Methanex and Ethyl tribunals, therefore, this Tribunal should find U.S. law on arbitral procedure eminently suitable for purposes of Chapter Eleven.
III. The Location of the Subject Matter and Proximity of Evidence Clearly Point to Washington, D.C. as the Place of Arbitration
ADF erroneously asserts that the location of the subject matter is "of virtually no relevance in the present case" (ADF April 2 Submission ¶ 49). It provides, however, no principled basis for the Tribunal to disregard either the UNCITRAL Notes or the reasoning of the Ethyl and Methanex tribunals.
To begin, ADF's assertion that the location of the subject matter is relevant only to private-law disputes is baseless. It is true that the substance of this dispute will be governed by a law (the NAFTA and international law) that will necessarily differ from the local law that will provide the lex arbitri. But that is a common scenario in international commercial arbitration, where the law governing the contractual relationship between the parties generally provides the rule of decision, but the lex arbitri governs procedural matters. Far from supporting ADF's position, the importance of this factor to international commercial arbitrations confirms its relevance for this arbitration.
Moreover, "the location of the subject-matter and proximity of evidence" is specifically relevant to this dispute by virtue of the UNCITRAL Notes and their acceptance by ADF and other NAFTA tribunals. ADF fails in particular to apprehend the relevance of the tribunal's reasoning in the Ethyl Decision. Contrary to ADF's inapt reference, the Ethyl tribunal did not recognize - "clearly" or otherwise - that the location of the subject matter "was a municipal law concept of questionable applicability in a Chapter Eleven arbitration." ADF April 2 Submission ¶ 62. To the contrary, the Ethyl tribunal "[left] aside" the question of whether the forum conveniens doctrine is relevant to international arbitration, and found instead that "Canada indisputably [was] the location of the subject-matter in dispute," which in turn "finally turn[ed] the Tribunal definitely to selection of a place of arbitration in Canada." Ethyl Decision at 4, 10, 8. The Ethyl case simply does not support ADF's position.
Nor does Methanex. That tribunal discounted the importance of the location of the subject matter because the UNCITRAL Arbitration Rules gave it unfettered authority to hold hearings outside the legal seat. See Methanex Decision at ¶ 24. But the Methanex tribunal nevertheless considered the factor relevant and found it to point to a place of arbitration in the United States, because that claim, like ADF's claim, was "based on alleged actions in the USA affecting a US enterprise." Id. at ¶ 33.
This factor plainly prefers proximity over distance and, therefore, points in this case to Washington, D.C as the place of arbitration. The vast majority of matters in dispute either took place or were located in the Washington area. Two of the three parties to the relevant construction contracts are located in Virginia, while the third is in Florida; the construction site is only thirty minutes away from Washington; and all of the United States agencies and individual decision-makers implicated by ADF's claim are based in Washington, D.C. and Virginia. For these reasons, the location of the subject matter undeniably points to Washington, D.C.
IV. Holding the Arbitration in Washington, D.C. Would Be Substantially Less Inconvenient than Montreal
Moreover, the inconvenience to the United States that would result if the arbitration is located in Montreal is not offset by the existence of a U.S. Consulate in that city. ADF presumes incorrectly that Montreal's consular facilities can sustain, or even aid, the litigation preparation required for a substantive hearing on the merits. U.S. Government resources - especially computing facilities - are extremely limited in Montreal, both in number and capabilities. For example, it is likely that Internet-capable computers would not be available for dedicated non-mission use. Moreover, the extensive security precautions required to access the Montreal Consulate after business hours make its use for litigation support impractical. Thus, if this arbitration takes place in Montreal, U.S. counsel would in all likelihood transport its computing equipment and work out of hotel facilities just as it would if no U.S. Consulate existed. United States counsel would thus not be any less inconvenienced than ADF's attorneys would be in Washington.
In sum, the convenience of the parties favors Washington over Montreal, while neither the convenience of the arbitrators nor that of counsel favors either venue.
V. The Tribunal Should Consult with the ICSID Secretariat Regarding the Cost of Needed Support Services
Contrary to ADF's assertion, the United States has not conceded that Montreal and Washington ought to be considered "more or less equal" for purposes of weighing relative expense. ADF April 12 Submission ¶ 73. Rather, this is an issue in dispute. While there may
be no real difference between the availability of support services in Washington, D.C. and Quebec, the cost of such services would be significantly less in Washington given ICSID's role in administering this case. ADF offers no support for its claim that adequate facilities in Montreal could be virtually cost-free and, even if suitable facilities were available in Montreal at no charge, the expense to ICSID of administering the arbitration in Montreal may still exceed the cost of hosting it at its headquarters in Washington, D.C.
In order to resolve this dispute, the United States respectfully submits that, as contemplated by Article 21 of the Arbitration (Additional Facility) Rules, the Tribunal consult with the Secretariat with respect to the cost of support services needed. ICSID is in the best position to provide the Tribunal with accurate information concerning these types of costs.
VI. There Is No Foundation to ADF's Allegation that the United States Courts Would Be Unfair to ADF
Finally, ADF fails to support its argument that neutrality should outweigh the balance of UNCITRAL factors pointing to Washington, D.C. as the appropriate place of arbitration. Nor does ADF evaluate the particular circumstances in which the Ethyl and Methanex tribunals applied the concept of neutrality in the context of this Tribunal's determination on place of arbitration.
Instead, ADF casts aspersions on the impartiality of the entire United States judiciary. ADF insinuates that, because U.S. federal judges are appointed by the executive branch of the U.S. Government, the United States would "enjoy[] privileges" as a party to litigation in the Untied States. ADF April 2 Submission ¶ 80. This suggestion is outrageous. Indeed, the impartiality of judicial decision-makers is presumed within most legal dispute-resolution systems, including the instant arbitration. Just as the members of this Tribunal executed a declaration "to judge fairly as between the parties," U.S. judges take an oath of office to "faithfully and impartially discharge and perform all the duties incumbent upon" them. 28 U.S.C. § 453 (1993). A U.S. federal court judge is thus no more likely to abdicate his or her duty of impartiality in favor of the United States than is a Quebec judge in favor of ADF.
In short, ADF has provided no evidence or principled reason why neutrality should dictate a result at odds with the UNCITRAL Notes criteria strongly favoring Washington, D.C. as the place of arbitration.
For these reasons and those set forth in its March 19 Submission, Respondent United States of America respectfully submits that the Tribunal should designate Washington, D.C. as the place of arbitration pursuant to NAFTA Article 1130(a) and Article 21(1) of the Arbitration (Additional Facility) Rules.
Respectfully submitted,
Mark A. Clodfelter
Assistant Legal Adviser for International
Claims and Investment Disputes
Barton Legum
Chief, NAFTA Arbitration Division, Office
of International Claims and Investment
Disputes
Andrea J. Menaker
Laura A. Svat
Attorney-Advisers, Office of International
Claims and Investment Disputes
United States Department of State
Washington, D.C. 20520
April 16, 2001
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