CEPANI/VIAC - CASE STUDY

CEPANI/VIAC - CASE STUDY Vienna,17 January 2014
Are the new CEPANI and VIAC Rules suitable
for new cases?
A tale of chocolate…
Kristof Cox, Deloitte Fiduciaire, Belgium
Emmanuel Kaufman, Wolf Theiss, Vienna
Herman Verbist, Everest, Ghent and Brussels
The parties
• Belle Choc S.A. (“BC”)  A Belgian chocolate
producer;
• ZauberTorte (“ZT”)  An Austrian cake
producer;
• Netkoo  A Belgian chocolate product
distributor active in the Benelux; and
• GCD  A major chocolate product distributor
active in the whole of Western Europe.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances - 2008
• Cooperation Agreement between BC and ZT
– BC will supply ZT with chocolate;
– BC will distribute ZT products in Benelux;
– CEPANI/VIAC arbitration clause; and
– Clause providing that ZT will avoid any actions that
affect the distribution of its products in Benelux.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances - 2009
• Because of the crisis  BC decided to focus on its core-business
(i.e. production of chocolate);
• BC enters into a sub-distribution agreement (including a
CEPANI/VIAC arbitration clause) with Netkoo  Distribution of ZT in
Benelux
• ZT agreed to BC’s decision about the sub-distribution of its products
in the Benelux through Netkoo; and
• The sub-distribution agreement 1) expressly refers to the
cooperation agreement between ZT and BC and 2) states that no
actions are going to be taken affecting the distribution of ZT in
Benelux.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (1)
• In an interview with a newspaper one of
Belgian’s top chefs lists ZauberTorte as his
favourite “little sin”; and
• ZauberTorte-hype in Belgium  Sales of ZT
increase.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (2)
• A major distributor of chocolate in Europe (GCD)
offers ZT to enter into a distribution agreement
for Western Europe;
• ZT and BC agree that this would be beneficial for
them both; and
• BC and ZT think there is no problem with Netkoo
because of the lack of exclusivity clause towards
GCD.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (3)
• Netkoo learns about the new distribution
agreement for Western Europe with GCD; and
• Netkoo’s CEO and General Legal Counsel want
to consider their options to start a legal action
against BC and ZT.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (4)
• The in-house counsel of Netkoo studies the
new CEPANI/VIAC Rules of 2013; and
• The new articles seem to be efficient tools,
which may prove helpful for Netkoo’s claim.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 1: How to ensure the applicability of the
new CEPANI/Vienna Rules? (1)
• Art. 7(1) CEPANI: “The Rules which are in effect on the
date of the commencement of the arbitral proceedings*,
unless they have agreed to submit to the Rules in effect on
the date of their arbitration agreement.”
– * Art. 3(3) CEPANI : “The date on which the secretariat receives the
Request for Arbitration and the annexes thereto and the payment of the
registration costs”
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 1: How to ensure the applicability of the
new CEPANI/Vienna Rules? (2)
• Art. 1(2) Vienna Rules: “[…] the version of the Vienna
Rules in effect at the time of commencement of the
arbitration shall apply.”
• Art. 47 Vienna Rules: “This version of the Vienna Rules
shall apply to all proceedings in which the Statement of
Claim was filed after 30 June 2013.”
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (5)
• Now that BC uses the biggest network to
distribute the products of ZT’s competitor in
the Benelux, the sales of Netkoo drop
dramatically; and
• Netkoo’s CEO demands from his legal counsel
that the arbitration should lead to results
ASAP.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 2: Speed-up the arbitration proceedings? (1)
• Art. 3 CEPANI Arbitration Rules for Disputes of
Limited Financial Importance (Section II):
– Claim + counterclaim < Euro 25.000
– What if amount is exceeded in the course of
the arbitration?
• Art. 3.2 of Section II: Section II still
applicable, unless otherwise agreed by the
parties in which case Section I (Arbitration
Rules) shall apply
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 2: Speed-up the arbitration proceedings? (2)
• Art. 45 VIAC:
– Application of supplementary rules -> if the parties agree to their
application in the arbitration agreement or subsequently (Art. 45
paragraph 1)
– Specific rules applicable? -> The provisions of the Vienna Rules unless
Art. 45 foresees something differently (Art. 45 paragraph 2)
– Number of arbitrators? -> One arbitrator unless otherwise agreed
– Deadlines:
•
•
•
•
Answer to request for arbitration: 30 days (= to “normal” proceedings)
Payment of advance on costs: 15 days
Nomination of arbitrator (sole arbitrator, co-arbitrator and chairman): 15 days
Deadline to render the award: 6 months (can be extended)
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 3: Preliminary relief (1)
• Art. 26 CEPANI: Interim and Conservatory Measures prior to the
Constitution of the Arbitral Tribunal
- except if parties have agreed otherwise
- arbitrator deciding on interim and conservatory measures
- within 15 days from receipt of the file by him
- decision does not bind any arbitrator who will decide on merits
• Art 27 CEPANI : Interim and Conservatory Measures after the
Constitution of the Arbitral Tribunal
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 3: Preliminary relief (2)
• Art. 33 VIAC Rules:
– Unless otherwise agreed between the Parties, the Arbitral
Tribunal can grant interim and conservatory measures against
another party
– Right to be heard
– Appropriate security “may” be required
– Compliance by the parties “irrespective of whether they are
enforceable before State courts”
– In writing
– The provisions in the VIAC Rules do not prevent the parties from
applying to any competent State authority for interim or
conservatory measures.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (6)
How much will the arbitration eventually cost?
• Netkoo’s CEO hears from a fellow entrepreneur that
arbitration is much more expensive than court
proceedings; and
• He is not pleased that his legal counsel has not
mentioned so during the contract negotiations.
Moreover, he is worried about the lawyer’s fees.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 4: Fees and costs of arbitrators,
administrative fees, lawyer‘s fees (1)
• Article 34 CEPANI: administrative expenses of CEPANI, fees and
expenses of arbitrator(s), expenses of parties, and of any experts and
witnesses
• CEPANI Schedule I: Scale of costs for arbitration
• CEPANI Schedule II: Parties‘ costs - Recommendations
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 4: Fees and costs of arbitrators,
administrative fees, lawyer‘s fees (2)
• Registration fee (Art. 10 Vienna Rules):
– EURO 1500 (increase by 10% for each additional party up to a maximum of 50%)
– Not refundable
• Advance on costs (Art. 42 Vienna Rules):
– Relevant -> amount in dispute, number of arbitrators and parties
– The Secretary General shall determine the VIAC‘s prospective administrative fees, the
arbitrators’ fees and the expenses (Annex 3 Vienna Rules)
• Advance on costs for additional costs of the proceedings (Art. 43
Vienna Rules)
• Composition and calculation of procedural costs (Art. 44 Vienna Rules)
– Three groups: 1) Costs of the arbitration (administrative fees, arbitrator’s fees and
expenses) 2) the Parties’ costs; 3) additional costs
– Who calculates and determines the procedural costs?
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (6)
How to avoid the delays in the arbitration?
• Netkoo’s legal counsel expects that BC and ZT will
“sabotage” the start of the arbitration proceedings.
• How to deal with:
–
–
–
–
Challenge of jurisdiction;
Lack of payment of advance on costs;
Failure to appoint an arbitrator; and
Signing of Terms of Reference (CEPANI).
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 5: Challenge of jurisdiction (1)
• Prima facie control of existence of arbitration agreement by CEPANI
• Art. 6 and 7 (2) CEPANI: If Respondent does not answer within one
month or refuses arbitration, CEPANI decides whether arbitration can
proceed
• Art. 7 (3) CEPANI: In case of plea concerning existence, validity or
scope of arbitration agreement, CEPANI shall transmit the matter to
Arbitral Tribunal for decision on merits
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 5: Challenge of jurisdiction (2)
• Does the VIAC have any role?
• Art. 24 Vienna Rules –> the jurisdiction of the
Arbitral Tribunal is determined by the Arbitral
Tribunal.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 6: Advance on costs (1)
• Art. 35(1) CEPANI: advance on costs to be paid before transmission file
• Art. 35(3) : - payable in equal shares by Claimant(s) and Respondent(s)
- in case a party fails to pay its share, the other party shall
be free to pay the whole advance on arbitration costs
• Art. 35(4) : separate advances on costs may be fixed by CEPANI,
- at request of a party
- in case counterclaim or request for intervention is filed
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 6: Advance on costs (2)
• Art. 11 Vienna Rules:
– Transmission of file to Arbitral Tribunal -> only after payment of advance on costs
• Art. 42 Vienna Rules:
– The parties undertake to bear the advance on costs in equal parts by agreeing on
the Vienna Rules
– If one party does not pay its share in full within the time limit, the Secretary
General will inform the other party and request the payment from this payment;
– The Arbitral Tribunal may order the non-paying party to reimburse the paying
party (through an award or other form).
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 7: Appointment of arbitrators (1)
• Art. 15(2) CEPANI : if parties agreed to settle dispute through sole
arbitrator,
- parties may select sole arbitrator within one month (extendable)
- failing which, sole arbitrator shall be appointed by CEPANI
• Art. 15(3) : if parties agreed to settle dispute through three arbitrators
- each party shall nominate its co-arbitrator
- if party fails to do so, the co-arbitrator shall be appointed by CEPANI
• Art. 15(5): in case of multiparty arbitration
- in absence of joint nomination and if parties do not agree on
appointment method, CEPANI shall appoint all arbitrators
• Art. 15(4): if parties did not agree on number of arbitrators, a sole
arbitrator shall be appointed, unless requested or decided otherwise
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 7: Appointment of arbitrators (2)
• Art. 17 Vienna Rules:
– The parties may agree on 1 or 3 arbitrators and the mechanism of appointment
– Appointment under the Vienna Rules:
• No agreement on number of arbitrators -> Board determines the number
• If one arbitrator -> the Parties jointly nominate within 30 days -> Failure ->
appointed by Board
• If three arbitrators -> Each Party nominate one arbitrator within 30 days ->
failure -> appointed by the Board
• If three arbitrators -> the co-arbitrators nominate the chairman within 30 days
-> failure -> appointed by the Board.
• Art. 18 Vienna Rules: Rules in the case of multy-party arbitration
• Art. 19 Vienna Rules: Confirmation of the nomination
– Secretary General (Board if required) shall confirm the nominated arbitrator/s
– After the confirmation -> the arbitrator will be considered appointed
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 8: Terms of Reference (CEPANI)
• Art. 22(1) CEPANI : to be established prior to examination of file
• Art. 22(2) CEPANI :
• - to be signed by the parties and the arbitrator(s) within 2 months of
transmission of file
• - if party refuses to take part in drawing up ToR or to sign,
• - parties shall continue after expiration of time limit granted by
CEPANI to the arbitrator(s) for obtaining the missing signature
• - thereupon, deemed to conform to rules of due process
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 9: Challenge of arbitrator(s) (1)
• Art. 16(1) CEPANI : alleged lack of independence or other reason
• Art. 16(2) CEPANI : must be filed by party within one month
- of receipt of notification of arbitrator‘s appointment ; or
- of date on which it was informed of facts and circumstances
• Art. 16(3) : CEPANI invites arbitrator concerned, other parties and
other arbitrators (if any) to file written observations
- written observations are communicated to parties and arbitrators
- parties and arbitrators may respond to these observations
• Art. 16(4) : CEPANI Challenge Committee decides
- without any recourse
- reasons for decision shall not be communicated
• Art. 26(7) CEPANI : Challenge of emergency arbitrator
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 9: Challenge of arbitrator(s) (2)
• Art. 20 VIAC Rules:
– “[…] [I]f circumstances exist that give rise to justifiable doubts as to his
impartiality or independence, or if he does not fulfill the qualifications
agreed by the parties […]”
– Deadline for filing the challenge of the arbitrator before the Secretariat:
15 days
– Specification of the ground and inclusion of corroborating materials
– Board of the VIAC makes the decision on the challenge
– Comments from the Parties and from the challenged arbitrator required
– Arbitration proceedings may continue -> However, no award until
decision on the challenge
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 10: Examination of the case – Evidence (1)
• Art. 23(2) CEPANI: Arbitral Tribunal shall examine the case
- within as short a time as possible
- by all appropriate means
• Unless agreed otherwise by parties, Arbitral Tribunal shall be free to
decide on rules as to taking of evidence
- may i.a. obtain evidence from witnesses and appoint expert(s)
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 10: Examination of the case – Evidence (2)
• Art. 29 Vienna Rules:
– Arbitral Tribunal:
• Not limited in the determination of the disputes to the evidence
submitted by the Parties
• The Arbitral Tribunal may collect 1) evidence, 2) question parties and
witnesses; 3) request the parties to submit evidence and call experts.
– The discretion of the Arbitral Tribunal is limited by the provision of the
applicable arbitration law
• Article 28 Vienna Rules: fair treatment of the Parties and the right to be heard
– Continuity of the arbitration proceedings regardless of the failure of any
party to participate
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 11: Challenge of expert(s) (1)
• Art. 23(2) CEPANI : Arbitral Tribunal may obtain evidence from
witnesses and appoint one or more experts
• Arbitral Tribunal should check independence and impartiality of
expert(s) prior to appointment
• Arbitral Tribunal shall decide about challenge of appointed expert(s)
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 11: Challenge of expert(s) (2)
• Article 23 Vienna Rules:
– The rules relating to the challenge of an arbitrator apply by
analogy (Art 20 paragraph 1 and 2)
• 15 days to submit the challenge to the Secretariat
• Circumstances exist that give rise to justifiable doubts as to
impartiality or independence or expert does not fulfill the
qualification agreed by the Parties
– The Arbitral Tribunal decides on the challenge
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (7)
• Hearing?
• BC finds it important that the Tribunal
personally hears the CEOs of all parties
involved about:
– Agreements reached orally
– Clause not affecting distribution in BENELUX
• ZT and Netkoo want to avoid a hearing on the
basis that it is unnecessary and overly costly.
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 12: Hearing (1)
• Art. 23(3) CEPANI: Arbitral Tribunal may decide the case solely on
basis of documents submitted by the parties, unless the parties or
one of them requests a hearing
• Art. 23(4): At request of parties or of one party or on its own motion,
Arbitral Tribunal may summon the parties to a hearing
• Art. 23(5): If a party fails to appear, although duly summoned, and if
there is no valid excuse for its absence, Arbitral Tribunal may proceed
• Art. 23(6): Persons not involved in proceedings shall not be admitted
• Art. 23(7): Parties shall appear in person or through duly authorized
representatives
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 12: Hearing (2)
• Art. 30 Vienna Rules:
– Oral or written proceedings? -> Unless otherwise agreed by the Parties,
the Arbitral Tribunal decides
– If no exclusion of an oral hearing -> A hearing will be held upon request
of a party
– Date of hearing -> fixed by chairman or sole arbitrator
– Hearings shall be private
– The sole arbitrator or the chairman shall prepare and sign minutes of the
hearing (minimum content –> summary of the hearing and its results)
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Case circumstances 2013 (8)
Award
• All three arbitrators have conflicting opinions
on the merits of the claims. They fail to reach
agreement. Quid?
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 13: The Award (1)
• Art. 29(1) CEPANI: Where there is more than one arbitrator,
- the award shall be made by a majority decision
- if no majority can be reached, the chair of the Arbitral Tribunal
shall have the deciding vote
• Art. 29(2) CEPANI : Award shall state reasons upon which it is based
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Issue 13: The Award (2)
• Art. 35 Vienna Rules:
– An award or any decisions of the Arbitral Tribunal ->
requires a majority ruling
– If no majority can be achieved -> the chairman decides
– Questions of procedure -> The chairman may decide by
himself/herself if authorized by the other arbitrators
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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Summary guide
Issue
CEPANI Rules
VIENNA RULES
1. Applicability of New Rules
Art. 7(1)
Arts. 1(2) and 47
2. Fast-track arbitration
Section II(Lim. Fin. Imp.) Art. 45
3. Preliminary relief
Arts. 26-27
Art. 33
4. Costs
Art. 34; Sched. I and II
Arts. 10, 42-44
5. Challenge of Jurisdiction
Art. 7(2)-(3)
Art. 24
6. Advance on costs
Art. 35
Arts. 11, 42-43
7. Appointment of arbitrators
Art. 15
Arts. 17-19
8. Terms of Reference
Art. 22
9. Challenge of arbitrator(s)
Art. 16 ; Art. 26(7)
--Art. 20
10.Examination case:Evidence Art. 23(2)
Art. 29
11. Challenge of expert(s)
Art. 23(2)
Art. 23
12. Hearing
Art. 23(3)-(7)
Art. 30
13. Award
Art. 29
Art. 35
CEPANI/VIAC - Case study - Vienna, 17 January 2014
Kristof Cox/ Emmanuel Kaufman / Herman Verbist
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