{"id":19398,"date":"2023-12-18T15:26:28","date_gmt":"2023-12-18T14:26:28","guid":{"rendered":"https:\/\/wiersholm.no\/?post_type=newsletter&p=19398"},"modified":"2025-03-13T13:41:45","modified_gmt":"2025-03-13T12:41:45","slug":"international-commercial-arbitration-q4-2023","status":"publish","type":"newsletter","link":"https:\/\/wiersholm.no\/en\/newsletters\/international-commercial-arbitration-q4-2023\/","title":{"rendered":"International Commercial Arbitration Q4 2023"},"content":{"rendered":"

International Commercial Arbitration Q4 2023<\/h1>\n\n\n
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This update explores trends and developments in international commercial arbitration seen from a Norwegian perspective.<\/p>\n\n\n

Dispute Resolution<\/a>International Commercial Arbitration<\/a><\/div><\/div>\n\n\n

In the final edition of our quarterly newsletter, we delve into several key topics: <\/p>\n\n\n\n

We begin with an analysis of a recent ruling from the Norwegian Supreme Court, that examines how and when a party must invoke an arbitration agreement to successfully claim that a case should be dismissed or discontinued by the ordinary courts. The provision in question mirrors Article 8(1) of the Model Law, so this ruling is also relevant for other UNCITRAL Model Law countries. <\/p>\n\n\n\n

Next, we explore a new public NOMA award and its aftermath in the ordinary courts after the losing party\u2019s unsuccessful attempt to have it set aside. The award also serves as a reminder that if annulment proceedings are commenced, the parties must be prepared for the award becoming public.  <\/p>\n\n\n\n

Finally, in this edition\u2019s \u201cWhat\u2019s On the Agenda\u201d, we provide an extended Christmas edition with some food for thought during the holidays. First, we focus on the latest efforts to establish guidelines on the use (and limitations) of AI and large language models in international arbitration. We then shift to an analysis of whether there is a decline in the number of international arbitrations. To wrap it up, we offer a preview of selected upcoming arbitration events \u2013 providing you with a head start on your 2024 plans. <\/p>\n\n\n\n

We hope you find these insights both engaging and informative. Wishing you a peaceful and arbitration-free Christmas! <\/p>\n\n\n\n

New judgment from the Norwegian Supreme Court on dismissal from ordinary courts due to an arbitration agreement<\/b> <\/h5>\n\n\n\n

In the recent ruling (HR-2023-2055-\ufffc<\/a>), the Supreme Court stated that a defendant must specifically request the dismissal or discontinuation of a case on the basis of the arbitration agreement, and that such requests must be submitted no later than during the first submission on the merits of the dispute. If the defendant fails to invoke the arbitration agreement at such time, the ordinary court is considered competent to hear and decide on the case. The ruling is a continuation of an existing strict approach to this question, following the Supreme Court\u2019s ruling in a previous case in Rt-2008-1623.   <\/p>\n\n\n\n

The case in HR-2023-2055-\ufffc<\/a>)revolved around a Danish and a Norwegian company that had a distribution agreement concerning hair products. The agreement stipulated that any disputes would be arbitrated in Denmark. The Danish company accused the Norwegian company of violating the Norwegian Marketing Act by producing and distributing products similar to theirs. <\/p>\n\n\n\n

The Danish company brought a claim for damages before the conciliation board, which is the lowest level in the ordinary court system in Norway for civil cases. In its first submission, the Norwegian company disputed the legal and factual basis for the claim, without any elaboration. Further, the Norwegian company argued for discontinuation of the case due to procedural issues, but it did not specifically invoke the arbitration agreement. <\/p>\n\n\n\n

The Supreme Court had to determine whether Section 7 of the Norwegian Arbitration Act (NAA)<\/a> requires explicit reference to the arbitration clause for dismissal and\/or discontinuation.  Section 7 of the NAA reads as follows:  <\/p>\n\n\n\n

\u201cThe courts shall dismiss an action that is the subject of arbitration if a party requests dismissal no later than in his first submission on the merits of the dispute.\u201d <\/i> <\/p>\n\n\n\n

This provision mirrors Article 8 (1) of the UNCITRAL Model Law. According to Section 1 (2) of the NAA, the provision also applies when the place of arbitration is abroad or has not yet been determined.  <\/p>\n\n\n\n

The Supreme Court agreed with Borgarting Court of Appeal that a blank rejection of the claim is sufficient to be considered as the party\u2019s \u201cfirst submission on the merit<\/i>s\u201d, according to Section 7 of the NAA. The Norwegian company had therefore lost its right to invoke the arbitration agreement. In its reasoning, the Court expressed that there did not seem to be a uniform international practice for the interpretation of the phrase \u201chis first statement on the substance of the dispute\u201d, as outlined the Model Law.  <\/p>\n\n\n\n

The Supreme Court ruled that a party must explicitly request dismissal or discontinuation based on the arbitration agreement, and that a request due to unspecified procedural issues does not suffice. <\/p>\n\n\n\n

The Supreme Court also assessed whether NAA \u00a7 7 only applies if the party \u201crequests <\/i>dismissa<\/i>l\u201c, or whether the provision also includes cases where a party requests discontinuation<\/i>. The Supreme Court concluded that both are covered by \u00a7 7. <\/p>\n\n\n\n

This ruling underlines the need to look carefully at the dispute resolution clause in a contract before submitting the first submission in a case. The effect of a party not making a correct objection within the relevant timeframe, is that the ordinary court is considered competent to hear and decide on the case. It is also assumed that the court will be competent to decide on claims that would naturally have been included in the case if the dispute had been settled by arbitration. <\/p>\n\n\n\n

New public NOMA award and its aftermath in the ordinary courts<\/b> <\/h4>\n\n\n\n
NOMA award (ND-2021 p. 161 \u2013 179)<\/b> <\/h5>\n\n\n\n

The most recent issue of Nordiske Domme i Sj\u00f8fartsanliggender<\/a>\u202f(Nordic Maritime Judgments), includes a notable NOMA award dated 24 July 2021, referenced as ND-2021 p. 161 \u2013 179<\/a>. The case centred around the sale of a vessel and the handling of funds in an escrow account that had been established as security for pending claims under a management agreement. The case touched on issues regarding legal interest, compliance with evidence requests, the arbitral tribunal\u2019s authority and jurisdiction, and the unique dual role of the legal counsel for one of the parties, who simultaneously served as a legal representative and escrow agent.  <\/p>\n\n\n\n

A particularly intriguing aspect of this case pertains to the allocation of legal costs. The sole arbitrator\u2019s application of Article 37.1 of the NOMA Rules<\/a> is noteworthy. This rule empowers the tribunal to consider whether any party has caused any unnecessary increase of documents or arguments which has resulted in an unnecessary protraction of the proceedings. In paragraph 106 of the award, the arbitrator determined that such circumstances were present in this case, resulting in the claimant being awarded full costs, with the defendant being ordered to bear the full costs of the tribunal proceedings (which was noted by the arbitrator to have become very high due to the same reasons). <\/p>\n\n\n\n

From our perspective, the proactive use of cost-rules by arbitral tribunals to discourage parties from straying from the principles of efficiency in the arbitration process is a commendable practice. This approach promotes fairness and expediency in resolving disputes, which are vital aspect of effective international commercial arbitration. <\/p>\n\n\n\n

The attempt to set aside the NOMA award was ultimately dismissed by the Court of Appeal  <\/b> <\/h5>\n\n\n\n

As the seat (place of arbitration) for the NOMA award of 24 July 2021 was Norway, the Norwegian Arbitration Act (NAA) was lex arbitri<\/i>. Pursuant to section 9 of the NAA, the losing party (Delta Bulk AS) sought to partly set aside the award before Hordaland District Court. (See more in our Q2 newsletter<\/a> on the topic of setting aside awards in Norway.) The grounds cited for this included alleged jurisdictional overreach by the arbitral tribunal and an inappropriate allocation of costs.  <\/p>\n\n\n\n

The District Court affirmed the award on 29 October 2021 (THOD-2021-93973), firmly rejecting Delta Bulk\u2019s claims. Delta Bulk appealed this judgment. In a decision from Gulating Court of Appeal of 1 March 2022 (LG-2021-175409<\/a>), the appeal was not admitted, as it \u201cclearly could not succeed\u201d, ref. Section 29-13 of the Norwegian Dispute Act. This procedure extended the finality of the award from 24 July 2021 to 1 March 2022. <\/p>\n\n\n\n

During the formulation of the Norwegian Arbitration Act (NAA), there was a debate on whether annulment claims should commence directly at the appellate level, similar to the solution in Sweden, where such case begin (and end) in Hovr\u00e4tten (Court of Appeal) to prevent prolonged proceedings1. However, Norwegian legislators decided in favour of initiating these cases at the district court level to preserve the standard right to a two-instance process, and also to avoid giving precedence to these cases over others. They also stated that if a case is straightforward, the appellate court can refuse to hear the appeal. <\/p>\n\n\n\n

Recent amendments have broadened the appellate courts\u2019 discretion to dismiss appeals if there is a \u201cclear preponderance of probability\u201d (Norwegian: \u201cklar sannsynlighetsovervekt\u201d) that it will not prevail. Previously, the appellate courts\u2019 discretion was confined to appeals where it was \u201cclear\u201d (Norwegian: \u201cklart\u201d) that the appeal would not be successful. The general sentiment among the Norwegian appellate courts was that the threshold for rejecting an appeal had been set too high, and that the power to dismiss an appeal should be moderately extended to ensure efficiency in such cases. This has now been done.  <\/p>\n\n\n\n

Nevertheless, we believe it is time to reconsider whether annulment cases should start directly at the appellate level. For Norway to maintain its attractiveness as an arbitration jurisdiction, expediency is crucial. Given the relatively low volume of annulment cases, handling them at the appellate level should not pose a significant burden. Moreover, these cases can be managed through a written process as outlined in Section 9-9 (2) of the Norwegian Dispute Act. In instances of principle matters, the Supreme Court remains available to offer interpretations of the NAA, ensuring legal clarity and consistency. <\/p>\n\n\n\n

One more thing: If annulment proceedings are commenced, be prepared for the award becoming public<\/b> <\/h5>\n\n\n\n

You may have wondered why the NOMA award dated 24 July 2021 was not published until now. This is a valid question. Initially, the confidentiality of the award, as stipulated by Article 30.5 of the NOMA Rules, restricted its disclosure. However, with the award\u2019s submission as evidence in the annulment proceedings, there was subsequently basis for a right for the public to have access to the award in accordance with the rules under Chapter 14 of the Norwegian Dispute Act.<\/p>\n\n\n\n

What\u2019s On the Agenda?<\/b> <\/h4>\n\n\n\n
Initiatives to make guidelines for use of generative AI in international arbitration <\/b> <\/h5>\n\n\n\n

The debate on whether generative AI, such as as ChatGPT, will revolutionise the field of law in general, and dispute resolution in particular, is ongoing all over the world. What the future will bring remains to be seen. However, it is clear that the development is extremely fast. According to Ray Kurzweil, the performance of neural networks (the technology that underlies most current AI systems) is doubling every 3.5 months3.  <\/p>\n\n\n\n

With new developments come discussions about potential regulations safeguarding important legal principles. Within international commercial arbitration, these principles are well known to our readers. In Norway, and in the Nordics, the need for specific regulations has not yet been loudly voiced. Instead, we seem to welcome generative AI as a tool for more efficient and speedy processing (time is money). However, it is important to monitor these developments and establish necessary regulations if and when required.  <\/p>\n\n\n\n

A noteworthy development comes from Silicon Valley Arbitration & Mediation Center \u2013 SVAMC, which is working towards publishing guidelines on the use of artificial intelligence in International Arbitration. They have also published such draft guidelines<\/a> and invited \u201cthe market\u201d to provide comments, see here<\/a>. When we loaded these draft guidelines into ChatGPT4, and prompted for a short summary and highlight of the top three most important proposals, we received the following reply after a couple of seconds (which is inserted here, unredacted and neither quality checked nor verified by us, to highlight the already existing powers within ChatGPT4<\/i><\/b>): <\/p>\n\n\n\n

The SVAMC\u2019s AI Guidelines draft for international arbitration provides a framework for AI usage in arbitration, focusing on general guidelines, specific guidelines for parties, and guidelines for arbitrators. The top three proposals are:
<\/p>\n\n\n\n

1) Understanding the uses, limitations, and risks of AI applications, ensuring participants are familiar with and adapt to these aspects.
<\/p>\n\n\n\n

2) Maintaining confidentiality of information, particularly when using third-party AI tools.
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3) Ensuring arbitrators do not delegate decision-making to AI tools, upholding their responsibility for judgments and decisions. These guidelines aim for fair, efficient, and transparent AI use in arbitration. <\/p>\n\n\n\n

This AI-generated summary shows the powers of ChatGPT4 in generating summaries of vast material in \u201cno time\u201d. Against this backdrop, it is easy to understand that there is at least a need for regulations that require the \u201cauthor\u201d (both the counsels and the arbitrators) to disclose whether a text is prepared by generative AI and how it has been quality controlled by a human. The Vis Moot<\/a> (a yearly arbitration competition) is, in our view, taking a very proactive and sensible approach \u2013 as the rules for next years competition<\/a> are both encouraging and restricting the use of AI, se paragraphs 64 \u2013 66, which regulate: <\/p>\n\n\n\n

a) Allowed use of Artificial Intelligence (AI)<\/p>\n\n\n\n

b) Prohibited use of AI<\/p>\n\n\n\n

c) AI Disclosure<\/p>\n\n\n\n

If you want a visual presentation of these rules, we recommend Vis Moot\u2019s informative video on YouTube<\/a>. This screenshot is taken from the video and shows permitted (green) and prohibited (red) use:  <\/p>\n\n\n\n

Decline in the number of International Commercial Arbitrations?<\/b>  <\/h5>\n\n\n\n

In a recent article from Global Arbitration News (link to article: Arbitration Statistics 2022: the number of arbitration proceedings continues to drop \u2013 Global Arbitration News)<\/a>, it is clear that the number of arbitration proceedings has been on a downward trend. Despite a 60% increase in arbitration proceedings from 2012 to 2022, there was discernible decrease in 2021 and 2022. The reasons for this decline remain uncertain, but it could be influenced by market shifts and a growing preference for alternative dispute resolution methods, such as mediation.  <\/p>\n\n\n\n

The article also points out a a significant surge in the amounts in dispute. For instance, the value of disputes in SCC cases has nearly doubled, reaching EUR 1.63 billion. Similarly, the amounts disputed in the German Arbitration Institute (DIS) have risen by 78%, amounting to EUR 2.8 billion. This suggests that although the number of cases may be decreasing, the complexity and value of the disputes could be on the rise. However, this trend is not universal. The Korean Commercial Arbitration Association (KCAB) reported a nearly 50% decrease in the amounts in dispute in 2022, and Hong Kong International Arbitration Centre (HKIAC) recorded a decrease of EUR 1.5 billion. <\/p>\n\n\n\n

Another noteworthy development is the record number of emergency arbitration requests filed with the International Centre for Dispute Resolution (ICDR) in 2022, totalling 145. This statistic may indicate an increasing demand for swift dispute resolution mechanisms. <\/p>\n\n\n\n

Lastly, it\u2019s important to highlight the encouraging trend in the appointment of female arbitrators, though there is still considerable progress to be made. <\/p>\n\n\n\n

Upcoming events<\/b> <\/h5>\n\n\n\n

On the international commercial arbitration scene, there are many events to choose from. We recommend considering the following upcoming events: <\/p>\n\n\n\n