Validity of the Yukos Award: Agreeable scope of Involvement of an Arbitral Secretary

By Shivansh Jolly

On 18th of July, 2014, a historical award in international investment arbitration was passed by the Permanent Court of Arbitration, commonly known as the “Yukos Arbitration”, in the case of Hulley Enterprises Ltd. (Cyprus) v The Russian Federation. The Tribunal comprised of arbitrators L. Yves Fortier (Chairman), Dr. Charles Poncet, and Judge Stephen M. Schwebel. The award went down in the books of unprecedented events for granting, by far, the largest sum of damages ever allowed in the field of investment arbitration, i.e., to the tune of 50 billion USD.

On 28th January, 2015, the Russian Federation challenged the landmark award in the District Court of Hague, seeking to annul the award on the ground that the Assistant hired by the Tribunal performed substantive duties with regard to drafting of the final award.[1] The said award has been challenged under Article 1065 (1) (c) of the Dutch Civil Procedure Code, which allows a party to an award to challenge the same on the ground of an arbitrator failing to perform his/her official mandate with regard to the arbitration proceedings in question. It has been contended by the Russian Federation that the Assistant appointed, Mr. Martin J. Valasek, spent substantially greater number of working hours (2,625 hours) over the course of the proceedings than the respective Arbitrators concerned (Chairman L. Yves Fortier – 1,592 hours; Dr. Charles Ponet – 1,540 hours; Judge Stephen M. Schwebel – 1,852.6 hours), which thereby allegedly indicates that the Assistant’s involvement in the matter was not restricted to merely administrative duties, hence breaching into the personal mandate of the arbitrators of being involved in substantive questions of the award.Yukos

Therefore, the material question which has been raised to test being, what is the nature of duties which can be delegated to an Assistant by a tribunal, and to what extent concerned?  Appointment of assistants is a common practice in the field of arbitration, which can be ascertained from several precedents to that regard which witnessed the involvement of assistants in the respective arbitration proceedings. Some of such precedents being – Glamis Gold, Ltd. v. United States, Award, 8 June 2009; The Rompetrol Group N.V. v. The Republic of Romania, ICSID Case No. ARB/06/3, Decision on Respondent’s Preliminary Objections on Jurisdiction and Admissibility, 18 April 2008; Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012.

Furthermore, the practice of appointment of assistants to the Tribunal finds validation in the Young ICCA Guide on Arbitral Secretaries. The relevant provisions of the said Guide being –

Article 1. General Principles on the Appointment and Use of Arbitral Secretaries: (1) An arbitral secretary should be appointed to support an arbitral tribunal where it considers that such appointment will assist it in resolving the dispute effectively and efficiently; (2) An arbitral secretary should only be appointed with the knowledge and consent of the parties;….

Article 2. Appointment of Arbitral Secretaries: (1) The arbitral tribunal may suggest to the parties that an arbitral secretary be appointed. The selection of an appropriate candidate shall be made at the discretion of the tribunal taking into account all of the circumstances of the case….”

As far as the scope of duties of Arbitral Secretaries or Assistants is concerned, the Young ICCA Guide provides the following –

Article 3. Role of the Arbitral Secretary: (1) With appropriate direction and supervision by the arbitral tribunal, an arbitral secretary’s role may legitimately go beyond the purely administrative: (2) On this basis, the arbitral secretary’s tasks may involve all or some of the following:

(a) Undertaking administrative matters as necessary in the absence of an institution;

(b) Communicating with the arbitral institution and parties;

(c) Organizing meetings and hearings with the parties;

(d) Handling and organizing correspondence, submissions and evidence on behalf of the arbitral tribunal;

(e) Researching questions of law;

(f) Researching discrete questions relating to factual evidence and witness testimony;

(g) Drafting procedural orders and similar documents;

(h) Reviewing the parties’ submissions and evidence, and drafting factual chronologies and memoranda summarizing the parties’ submissions and evidence;

(i) Attending the arbitral tribunal’s deliberations; and

(j) Drafting appropriate parts of the award

As can be observed, Article 3(1) of the Young ICCA Guide clearly states that duties of any Arbitral Secretary appointed need not necessarily be restricted to mere administrative duties in question. Interestingly, Article 3 (2) (e) allows an Arbitral Secretary to assist the tribunal with legal research on substantive questions involved, and Article 3 (2) (j) validates an act of drafting the necessary portions of an award by an Arbitral Secretary, if appointed. Taking these provisions into consideration, it is hard to contemplate how the contentions raised by the Russian Federation will stay faithful to the reasoning put forth by it before the District Court in the annulment proceedings.

However, one must also take note of the fact that though the Young ICCA Guide provides a liberal set of duties which could be delegated to arbitral secretaries, it also suggests some precautionary limitations over the same to avoid undue grant of discretion to the said personalities. To illustrate the same, one may refer to Article 2 (4) of the Young ICCA Guide, which reads as follows – “It shall be the responsibility of each arbitrator not to delegate any part of his or her personal mandate to any other person, including an arbitral secretary.” To express the concern in express words, the Commentary to Article 1 (4) of the Young ICCA Guide reads – “Any arbitrator who appoints an arbitral secretary must, therefore, do so appropriately and with great care not to delegate any part of his or her decision-making in a way that would dilute the arbitrator’s mandate.” The commentary continues to refer to Article 3 so as to clarify the ambiguity, at least in part, concerning the agreeable scope of an assistant’s involvement in an arbitral proceeding.

Furthermore, the claim raised by the Russian Federation seems to be rendered weak while taking note of the series of facts which followed the appointment of the Assistant by the Tribunal therein. The Chairman of the Tribunal sought the consent of the parties in question before the appointment was executed, with the Russian Federation expressing its assent for the same. Also, while taking into account the possible duties which an Arbitral Secretary could perform in accordance with the Young ICCA Guide, it only seems plausible and perhaps, quite reasonably possible that a secretary or an assistant unavoidably involves himself/herself for a considerable period of time, even if that be in a fair comparison with the hours put in by the arbitrators concerned.

Therefore, the question which the District Court of Hague would need to appropriately analyse is, whether an express provision in the Young ICCA Guide validating acts of researching on substantive questions of law and duties with regard to drafting substantive portions of an arbitral award by a secretary or an assistant extinguishes the right of a party to object against substantive involvement of an assistant in an arbitral proceeding. Also, the Court would be expected to examine whether prior consent of the Russian Federation for appointment of the Assistant divested it of its right to eventually challenge the validity of the award on the grounds as raised, against a possible justification by the Russian Federation that it could not foresee the extent of involvement of such Assistant while consenting to his appointment. Given the substantive questions involved before the District Court of Hague, the Yukos case might just turn out to be a landmark case in the field of international arbitration for reasons more than just one.

_________

[1] http://old.minfin.ru/en/news/index.php?id_4=24358

(The author is studying law at Gujarat National Law University and has a keen interest in the area of dispute resolution. He can be reached at shivanshjolly@gmail.com)

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