From 1 January 2019, a mandatory pilot scheme will operate in the Business and Property Courts across England and Wales, ushering in a new era of disclosure management in civil litigation. Walker Morris’ head of commercial dispute resolution, Gwendoline Davies, and senior associate and professional support lawyer, Amanda Kent, consider the changes and what they mean for in-house lawyers.

The ‘cards on the table’ approach to disclosure is one of the features which has traditionally attracted commercial parties to litigate their disputes in England and Wales. But it is widely known that disclosure can be an expensive exercise – it is one of the key drivers of litigation costs – and the ever-increasing amounts of electronic data are piling pressure on a system ripe for reform.

A working group established in May 2016 was tasked with identifying the problems with the disclosure regime and proposing a practical solution. Fast-forward to November 2017, and it had reached the unanimous view that ‘a wholesale cultural change is required’, which ‘can only be achieved by the widespread promulgation of a completely new rule and guidelines on disclosure’. Following a period of consultation, a proposed new practice direction for a two-year disclosure pilot scheme was approved by the Civil Procedure Rule Committee in July 2018. At the time of writing, the practice direction and associated documents are still in draft form and may be subject to minor changes. Ministerial sign-off is expected later this year.

One of the key criticisms levelled at the current system is that voluminous standard disclosure is still seen as the default. That is despite the rules having changed in 2013 to provide for a ‘menu’ of disclosure options which can limit disclosure, and the costs associated with it, to that which is necessary to deal with cases justly, having regard to the overriding objective.

Under the pilot scheme, the current menu of disclosure options will be replaced by initial disclosure of key documents with the parties’ statements of case (which may be dispensed with by agreement), and extended disclosure comprising a new list of ‘models’, ranging from disclosure of known adverse documents only, to wide search-based disclosure.

It is clear that parties will need to fully engage with the disclosure process at an early stage. This includes a requirement to discuss and jointly complete a disclosure review document, setting out the list of issues for disclosure, the proposals for the appropriate disclosure model, and sharing information about how documents are stored and how they might be searched and reviewed (including with the assistance of technology, and if so which). Estimates of the likely costs are required. This is intended to provide a mandatory framework for parties and their legal advisers to co-operate and engage prior to the first case management conference with a view to agreeing a proportionate and efficient approach to disclosure.

There will be no automatic entitlement to search-based disclosure, or indeed to any form of extended disclosure, and the working group is clear that the court should not accept without question the disclosure model proposed by the parties. The court may order extended disclosure using different models for different issues.

Another key feature of the pilot scheme is that it expressly sets out the parties’ duties, including: taking reasonable steps to preserve documents in the party’s control that may be relevant to any issue in the proceedings; undertaking any search for documents in a responsible and conscientious manner to fulfil the stated purpose of the search; and using reasonable efforts to avoid providing documents to another party that have no relevance to the issues for disclosure.

Importantly, the duty in relation to preservation of documents includes obligations to: suspend relevant document deletion or destruction processes for the duration of the proceedings; send a written notification to all relevant employees and former employees which identifies the documents or classes of documents to be preserved and notifies the recipient that they should not delete or destroy those documents and should take reasonable steps to preserve them; and take reasonable steps so that agents or third parties who may hold documents on the party’s behalf do not delete or destroy documents that may be relevant to an issue in the proceedings.

One of the steps involved in complying with an extended disclosure order (and following any initial disclosure) is the provision of a disclosure certificate. As part of that, the party giving disclosure is required to certify that it is aware of, and to the best of its knowledge and belief has complied with, its duties. There is a note at the end of the certificate which explains that, if the party making disclosure is a company or other organisation, the person signing the certificate should be ‘someone from within the organisation with appropriate authority and knowledge of the disclosure exercise’, and that they will have ‘received confirmation from all those people with accountability or responsibility within the company or organisation either for the events or circumstances which are the subject of the case or for the conduct of the litigation, including those who have since left the company or organisation, that they have provided for disclosure all adverse documents of which they are aware’. The role of the person signing is then specified, with an explanation as to why he or she is the appropriate signatory. Proceedings for contempt of court can be brought for signing a false disclosure certificate.

It will be essential to review and update internal policies and procedures, and to provide or refresh staff training, to ensure that these duties and other requirements are complied with.

Unsurprisingly, the parties are required to discuss and seek to agree on the use of software or analytical tools, including technology assisted review software and techniques (or TAR), with a view to reducing the burden and costs of the disclosure exercise. In the past few years, the English courts have approved the use of predictive coding, a form of TAR where a sample data set is reviewed by (probably senior) lawyers acting on the case and coded, with that coding then effectively being applied by specialist technology to review the remaining documents. While the use of TAR will not be appropriate in every case, it is likely to become increasingly prevalent.

The new approach to disclosure is designed to be more flexible than the current rules and to reflect developments in technology. In reality, it could be argued that the flexibility is already there, but the parties – and the court – do not make the best use of it. The provisions of the disclosure pilot are more prescriptive and will focus the parties’ minds. The challenge for in-house lawyers will be getting to grips with the management of the disclosure process at an early stage, and mobilising the key individuals within the business to get on board. External lawyers can expect to play an increasingly collaborative and strategic role in helping their clients to maximise efficiencies.

On 5 September 2018, the Court of Appeal re-enforced privilege as a cornerstone of a company’s protections in relation to internal investigations in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation.

This article considers the case and its practical implications, including continuing limitations on privilege and the pitfalls to avoid.

The case

Eurasian Natural Resources Corporation (ENRC), a company in the extractives and mining sector, received a whistle-blowing report in December 2010 alleging that corrupt activities were taking place in its subsidiaries in Kazakhstan and Africa. ENRC instructed solicitors to investigate these allegations and subsequently instructed the accountants, Forensic Risk Alliance (FRA), to review its books and records and conduct a governance review.

The investigation appeared to give rise to material concerns, and ENRC and the Serious Fraud Office (SFO) entered into a dialogue in August 2011 regarding a potential self-reporting process. The dialogue eventually broke down after a series of delays and the SFO launched a formal investigation into ENRC in April 2013. As part of this investigation, the SFO used its powers under s2 of the Criminal Justice Act 1987 to compel the production of documents relating to ENRC’s internal investigation, including ENRC’s lawyers’ notes of interviews with ENRC’s employees (so called first accounts), and reports produced by FRA.

ENRC withheld the above documents on the grounds that legal advice privilege or litigation privilege applied.

ENRC’s claims were roundly rejected at first instance in the High Court on the basis that the investigation itself was viewed by the Court as a fact-finding exercise, the notes of interviews were considered insufficiently connected to legal advice (and did not include legal advice) and the judge came to the conclusion that litigation was not in fact contemplated.

The Court of Appeal’s findings

The judgment at first instance was challenged and the Court of Appeal found overwhelmingly in ENRC’s favour, concluding that litigation privilege applied to all the relevant documents, including FRA’s documents and notes of interviews.

The Court provided its views on both litigation privilege and, to a lesser extent, legal advice privilege, both of which are set out below with the related practical implications for companies undertaking an internal investigation.

Litigation privilege findings

Changing recent understanding of litigation privilege (and reverting to a more familiar position to many experienced litigators), the Court of Appeal revealed that the threshold for litigation to be ‘reasonably in contemplation’ in internal investigations is relatively low. In this regard, the Court gave the following reasons:

• It is in the public interest that companies should investigate allegations of wrongdoing prior to engaging with a prosecutor, without losing the benefit of privilege.
• Litigation can reasonably be in contemplation before a company knows the full details of what is likely to be unearthed in its internal investigations or a decision to prosecute has been taken.
• Uncertainty as to whether or not proceedings are likely does not prevent litigation being reasonably in contemplation while conducting an internal investigation.

Applying the law to the facts

Applying this legal rationale to the case, the Court of Appeal found that criminal proceedings had been reasonably in contemplation by ENRC from April 2011 onwards. This was four months after the whistle-blowing report was made in December 2010 and the internal investigation was established, but four months before ENRC was first contacted by the SFO. The Court of Appeal considered the following factors to be material in making this finding of fact:

• media reports arose in April 2011 regarding an MP who raised questions in Parliament about ENRC and wrote to the SFO to ask it to investigate ENRC;
• emails between ENRC and its legal and compliance advisers referred to increasing concerns about SFO action in March and April 2011; and
• the scope of the investigation broadened to include the review by FRA of ENRC’s books and records at the same time.

The Court further found that the relevant documents were created for the ‘dominant purpose’ of the contemplated proceedings, given the overarching threat of criminal prosecution that exists in the UK where allegations of wrongdoing arise.

Litigation privilege: practical implications

In relation to the general applicability of the ENRC decision, although litigation privilege may much more easily be claimed in relation to internal investigations than had been thought, the decision in ENRC does not provide a blanket defence that all documents created during an internal investigation are privileged.

The initiation of an internal investigation, even where the client has taken the significant step of calling in external lawyers specialising in corporate crime, will not necessarily be sufficient to cloak all work in litigation privilege from the start. All the factors must be taken into account and to best advise clients, counsel should consider assessing the likelihood of litigation at regular intervals throughout an internal investigation and act accordingly.

Legal advice privilege findings

The Court of Appeal did not need to consider the claims to legal advice privilege as they found all documents in question were protected by litigation privilege. However, the Court made some strong (but non-binding) criticisms of the current narrow definition of the ‘client’ for legal advice privilege purposes, observing that the definition of the ‘client’ should be expanded to include all employees of a company who engage with its legal advisers as part of an investigation to reflect the realities of corporate life in a larger company. Nevertheless, the Court of Appeal concluded that it is only the Supreme Court that could reconsider the current law.

Legal advice privilege: practical implications

As a result, as regards claims for legal advice privilege, companies must still be cautious during internal investigations to manage carefully so-called ‘need-to-know lists’, strictly limit the circulation of sensitive documents and identify the ‘clients’ within the entity at an early stage. In-house counsel may also have to remind US and other non-UK counsel of this continued significant difference in practice relating to legal advice privilege in the UK and the US or Commonwealth jurisdictions.

Further practical implications

Finally, while the ENRC judgment has been hailed as a victory for privilege, corporates should not lose sight of the fact that it may only be of real significance to those with an appetite to fight the SFO, as ENRC did.

Deferred prosecution agreements (DPAs) are increasingly sought by corporates to avoid the uncertainty, risk and brand damage of criminal prosecution. DPAs require a high level of co-operation from corporates with the SFO, including an obligation to provide full and frank disclosure. This has led some companies to voluntarily disclose potentially privileged material to gain further credit for co-operation. Therefore, corporates and their advisers should bear in mind that even when creating documents that are now indisputably privileged, those documents may still eventually be provided to the SFO. Consequently, sensitive documents should only be created when necessary, drafted carefully and precisely, and with the above additional readership in mind.

For further update on this matters please contact Sam Tate or Lucy Kerr, the authors of this article, at sam.tate@rpc.co.uk and lucy.kerr@rpc.co.uk

Sam Tate is a partner at RPC. He is a specialist in anti-corruption investigations and a co-author of a leading UK anti-corruption compliance text book, ‘Bribery: a Compliance Handbook’, published by Bloomsbury.

Lucy Kerr is part of the regulatory group at RPC and advises clients on contentious financial services regulatory matters, as well as commercial disputes.

You are nearing the end of the discussions for concluding a contract – the obligations and rights are defined, the terms are stipulated and you are making final decisions as to how your contract will be governed. This is vital, for contracting parties are fully aware that deciding on what law will govern the agreement and which court will have the jurisdiction to apply such chosen law is essentially a decision on how you can claim your rights if a dispute arises. Freedom of contract tells you that the choice is yours – so long as it expressly agreed.

However, freedom of contract does not tell you that the choice of jurisdiction may not be as unfettered as it seems. Numerous judgments by the Qatari courts have introduced an approach to the enforcement of jurisdiction clauses in contracts that are in one way or another linked to Qatar. It has been established that the agreement by the parties to submit their dispute to a foreign jurisdiction is not always enforceable.

It is of course not an unusual or unheard of concept that freedom of choice ends where sovereignty begins – the effect of the same can be found in the framework of many jurisdictions. What the Qatari court has done is essentially to expand the ambit of its sovereignty to include some contractual territory, in the name of public interest. Here is how.

A closer look at the judgments

The Qatari Court of Cassation, later followed by the Court of First Instance, based their above-mentioned conclusion on two subsequent principles. These are, (a) that access to, and serving of, justice in Qatar is a matter of public interest and is related to the public order and morale, and hence, (b) Qatari courts enjoy sovereignty over matters that are linked to Qatar notwithstanding any contrary agreement by the contracting parties.

Cassation sets the rule

In an employer-employee dispute case brought before the Qatari Court in 2009, the claimant employee filed a case before the Qatari court for the recovery of its end of service gratuity that the defendant employer had failed to pay. The defendant relied on the jurisdiction clause in the employment agreement, which designates jurisdiction to hear disputes to the Canadian courts.

The Court of First Instance rejected this defence and rendered a judgment against the defendant, obliging the latter with the end of service gratuity payment. The defendant filed an appeal, but the Court of Appeal rejected the appeal, upholding the decision of the Court of First Instance. The defendant thus took the case to Court of Cassation.

The Court of Cassation rendered a final judgment in 2012, whereby it upheld and confirmed the decision of the previous courts. The Court of Cassation stated that hearing disputes that are related in one way or another to Qatar is a form of serving justice, and that serving justice is a matter of the public interest. Accordingly, the Qatari courts cannot be stripped of their authority to cater to the interest of the public by submission of their jurisdiction to the jurisdiction of a foreign court. Any contractual clause which attempts to do so is null and void. The Court of Cassation added that as the employment contract was executed in Qatar, the Qatari courts must have jurisdiction over the dispute.

First Instance follows lead

The above ruling was adopted by the Court of First Instance in a later judgment in 2015. Similarly, the defendant in this case raised a defence that the Qatari court does not have the jurisdiction to hear the dispute in question due to the fact that the jurisdiction clause in the relevant agreement was stated as the Genevan court. The Court of First Instance reiterated and quoted the judgment of the Court of Cassation. Here, too, it was stated that as the concerned distribution agreement, was executed in Qatar, then the Qatari court has jurisdiction to hear the dispute.

What does this mean?

Thus, the Qatari courts have decided that where a dispute is linked to Qatar, this dispute is automatically brought under the ambit of the public interest, and in turn, under the jurisdiction of a Qatari court. A clause agreed otherwise, ie a clause giving a foreign court the jurisdiction to hear disputes linked to Qatar, is unenforceable and not binding on neither the parties nor the Qatari courts. The question arises: what does it take for a dispute to be deemed related to Qatar?

It so happens that in both of the above-mentioned cases, the ‘link’ that tied the dispute to Qatar was that the contract subject matter of the disputes was fully executed in Qatar. However, execution of a contract in Qatar is an example of such a relation, and not a condition. In an old judgment of the Court of Appeal in 1997, the court considered the elements that would grant the Qatari courts with jurisdiction to consider international disputes. These elements, which derive from principles of private international law, are: where the court has the real and effective authority enabling it to grant the enforcement of the judgment that would be issued, if the defendant resides in Qatar, if the defendant has a Qatari nationality, if the dispute subject-matter exists in Qatar and/or where parties agree to refer their dispute to the Qatari courts.

The existence of any one or all of the above-listed factors is sufficient for bringing the dispute in question under the jurisdiction of the Qatari courts. Accordingly, where such circumstances exist, the effect of any clause referring disputes to a foreign court will be extinguished.

Conclusion – the effect in practice

Thus, contracting parties should be aware that the freedom and discretion to choose which court will have the jurisdiction to hear their contractual disputes is not unrestricted, and the express agreement of the parties is not conclusive. Contracting parties should expect, when agreeing on a foreign court, that such agreed choice may be rendered without effect in favour of the jurisdiction of the Qatari courts. So long as the Qatari court finds that the dispute in question is related to Qatar in one way or another, the dispute will be subject to the Qatari courts’ jurisdiction. This is regardless of the intentional non-conformity by one contracting party to the agreed jurisdiction clause. Such breach does not serve as grounds for defence and nor can a foreign jurisdiction clause be relied upon as an objection to the jurisdiction of the Qatari courts.

It is for contracting parties to consider, when deciding on dispute resolution clauses, whether the materialisation of such circumstances poses any real risk to their ability to pursue their claims. Contracting parties must consider that such risk includes matters of enforcement. Where a foreign court has heard a dispute which is related to Qatar and issues a judgment on the same, such judgment may be rendered unenforceable on the basis that it was the Qatari courts, and not the foreign court, which held the real authority to hear the dispute in question. This can be done in hindsight – in other words, such objection to the foreign courts jurisdiction will be valid even if, at the time of the proceedings, both parties had bilaterally decided to refer to the foreign court.

That is not to say that the option to choose a non-Qatari court as the competent court to hear contractual disputes is not available. Contracting parties may opt for foreign jurisdiction, however, as can be seen, such option is only available where the dispute in question is not ‘linked’ to Qatar. Otherwise, for the avoidance of the above-discussed outcomes, contracting parties may choose instead to refer their Qatar-related disputes to arbitration, where the implications of sovereignty do not apply.

After the landmark decision by a Chinese court finding reciprocity between China and the US, and recognising and enforcing a US judgment for the first time, there have been heated discussions on whether this case signals a genuine broader trend towards recognition and enforcement of foreign judgments in China. The term ‘foreign judgments’ does not include foreign divorce judgments, which are generally enforceable subject to certain limited exceptions. Also for the purpose of this article, the term ‘China’ does not include the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

We analyse the status quo of foreign judgments recognition and enforcement in China, with a focus on recognition and enforcement based on reciprocity.

Legal basis for enforcement of foreign judgments

Under PRC law, a foreign court judgment may only be recognised on the following grounds.

International convention

China signed the Hague Convention on Choice of Court Agreements (the Convention). Under the Convention, courts of member states must, subject to limited exceptions, recognise and enforce judgments with exclusive choice of court agreements in civil and commercial matters of the courts of other member states. The European Union (all member states except Denmark), Mexico and Singapore are parties to the Convention. China, along with the US, Ukraine and Montenegro, has signed but not yet ratified the Convention. It is expected that China will ratify the Convention in the future and given China’s commitment to promoting and safeguarding the ‘Belt and Road Initiative.’

Bilateral treaty

Up to February 2018, China has entered into bilateral treaties with 39 countries in respect of judicial assistance in civil matters, among which 34 include judicial assistance in the enforcement of civil judgments and are currently in force.

Reciprocity

A foreign judgment can be recognised and enforced by a people’s court in China in accordance with the principle of reciprocity. However, there is no legislative or judicial interpretation on what constitutes reciprocity. To this date, there are only two published cases where a court has recognised a foreign judgment based on reciprocity, ie Kolmar Group AG v Jiangsu Textile Industry (Group) Import & Export Co, Ltd (2016) (the Nanjing decision) and Liu Li v Tao Li and Tong Wu (2015) (the Wuhan decision). Both courts in those two cases interpreted the principle of reciprocity in its more conservative sense as de facto reciprocity, meaning that there is reciprocity if a foreign court has recognised a Chinese court judgment before.

Unresolved issues under de facto reciprocity

It sounds simple and direct to apply de facto reciprocity. However, the apparently simple test conceals some uncertainties that reflect the need for a more comprehensive standard in finding reciprocity.

Whether application of de facto reciprocity is subject to geographic limitations remains to be tested

In the Nanjing decision, the Nanjing Court recognised a judgment by the High Court of Singapore, the same court that had previously recognised a judgment by the Suzhou Intermediate People’s Court. Both the Nanjing Court and the Suzhou Intermediate People’s Court are located in Jiangsu Province. On the other hand, in the Wuhan decision, the Wuhan Court recognised a judgment by the Los Angeles Superior Court in California, based on the reciprocity evidenced by the recognition of a judgment by the Higher People’s Court of Hubei Province by the US District Court Central District of California. The Higher People’s Court of Hubei Province is the appellate court of the Wuhan Court and both courts are located in Hubei Province.

De facto reciprocity may lead to refusal in the absence of precedent, or even retaliatory treatment

Although not explicitly stated, Chinese courts seem to have been adopting the position that if a foreign court has never recognised a Chinese judgment before, there will be no reciprocity found. This mechanical application of de facto reciprocity may lead to refusal in the absence of precedent, or even retaliatory treatment by foreign courts.

Judicial willingness to take one further step in reciprocity

Chinese court overturned previous position and found reciprocity with the US

In fact, before the Wuhan decision, from our research on published cases, Chinese courts previously, in two other cases, refused to find reciprocity between China and the US, where one in particular concerned a judgment by the Superior Court of California.

Signals from the Supreme People’s Court to move towards clearer standards in reciprocity

On 16 June 2015, the Supreme People’s Court issued ‘Several Opinions on Providing Judicial Services and Safeguards by the People’s Court for the Construction of the “Belt and Road”‘. In particular, Article 6 points out that in the absence of bilateral treaties on judicial assistance with some countries along the Belt and Road, depending on the intention for judicial communication and cooperation or commitment to provide reciprocity to Chinese courts in the future, Chinese courts may consider providing judicial assistance first and actively facilitate the formation of reciprocity.

In a recent journal article, a judge from the Supreme People’s Court advocates for the establishment of a new reciprocity standard by legislation or judicial interpretation. It is suggested that such a standard should either adopt a ‘substantive equal term’ theory, where reciprocity should be found if the substantive requirements for enforcement of foreign judgments are the same between two countries, or a ‘reverse presumption theory,’ where reciprocity should be found if there are no substantive impediments for the successful enforcement of a Chinese judgment in the courts of a particular foreign country.

That article evidences high-level discussions on the reciprocity issue at the Supreme People’s Court. In our view, this may signal the judicial willingness to a more feasible and reasonable standard of reciprocity in China, which we may expect to be released in the form of a judicial interpretation in the near future.

The main focus of this article is on international arbitration in Kenya. However, we shall take a short glimpse at alternative dispute resolution methods in Kenya in this section.

The use of alternative dispute resolution methods is established in the Constitution of Kenya of 2010. As a guiding principle in exercising judicial authority, Article 159(2)(c) states that the court is to promote all forms of alternative dispute resolution which include arbitration, reconciliation, mediation and traditional dispute resolution mechanisms. As the foundational piece of legislative authority, this firmly establishes Kenya as a pro-arbitration country.

Furthermore, the Arbitration Act 1995 (which was further amended in 2010), reflects the necessary elements of a functioning national arbitration law as provided by the 2010 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. Notably, s36(5) of the Arbitration Act takes cognizance of the New York Convention on the enforcement of foreign arbitral awards, as Kenya has been a signatory to the said Convention since 10 February 1989 with a reciprocity reservation. Consequently, for a foreign award to be recognised and enforced, the applicant must provide the court with the following as seen at s36(3):

1. The original award or a duly certified copy; and
2. The original arbitration agreement or a duly certified copy.

The Act recognises only two instances when a Kenyan court may refuse to recognise or enforce a foreign award, and these are: (1) when the subject matter is not arbitrable under the laws of the jurisdiction in which the award is to be enforced; and (2) where the subject matter is against public policy.

An interesting development in the dispute resolution landscape of Kenya is the introduction of the court annexed mediation project in the Nairobi High Court (family division) which was introduced on 4 April 2016. This initiative sought to cut down the typical 24-month process that litigation took to a much more reasonable duration of 66 days. The programme has since referred over 600 cases to mediation and has a settlement rate of 55.24% as reported by the judiciary. Due to this success, the Kenyan judiciary has embarked on a guide to replicate the mediation process across the country.

The attitude of Kenyan courts towards international arbitration

The first Arbitration Act of Kenya was enacted in 1968. This Act provided too many intrusive powers for the courts to interfere with arbitral proceedings and the awards. This was contrary to the spirit of arbitration which needed to be unfettered from the courts’ intricate legal procedures. Court influence in arbitration had to be reduced. This led to the adoption of the UNCITRAL model arbitration law, and the Arbitration Act 1995 of Kenya is based on this model law.

Consequently, the current Arbitration Act provides for minimal interference in any arbitration process, and this is clearly spelt out under s10 of the Act. Mainly, these circumstances are:

1. issuance of stay of legal proceedings where the contract governing the parties provides for an international arbitration clause;
2. issuance of interim orders where necessary;
3. instances where an aggrieved party makes an application to set aside an arbitral award; and
4. instances where a party makes an application to the Kenyan courts for recognition and enforcement of an award.

There is growing jurisprudence in the Kenyan courts that is indicative of the abidance to the provisions of the Arbitration Act as far as they relate to Section 10. Interestingly, a bulk of this jurisprudence relates to applications to set aside arbitral awards under s35 of the Arbitration Act. A read through these cases demonstrates that the High Court of Kenya is not willing to go beyond the scope set out under s35 as grounds for setting aside of an award, and any decision made by the court with regards to s35 cannot be appealed in the higher courts.

National arbitral institutions

There is currently one arbitration centre conducting domestic and international arbitration in Kenya. This is the Nairobi Centre for International Arbitration (NCIA) which is established under the Nairobi Centre for International Arbitration Act of 2013. The Centre was officially launched in December of 2016. The NCIA issued its Arbitration Rules and Mediation Rules in December 2015.

The NCIA rules are very similar to the London Court of International Arbitration (LCIA) and its rules. Recently, in the context of Africa, the LCIA has withdrawn from the LCIA-MIAC in Mauritius, which was viewed as one of the more advanced arbitration centres in Africa. We are yet to witness the impact of this withdrawal on the MIAC centre, which remains.

The climate for investment arbitration in Kenya

Kenya offers a good climate for investment, given the internationally recognised mechanisms for dispute resolution enforced by the country. Kenya has so far signed 19 bilateral investment treaties (BITs)with various countries, of which 11 are in force. These BITs provide for international arbitration as the mode for the resolution of any disputes that may arise between an investor and the government of Kenya, with most providing for international arbitration through the International Centre for Settlement of Investment Disputes (ICSID) forum.

Kenya signed the ICISD convention on 24 May 1966, and became a contracting state on 2 February 1967. Since then, there have been three ICSID arbitration claims commenced against the Government of Kenya. These are the World Duty Free case, which has already been determined; and the WalAm case and the Cortec Mining case which are still ongoing. On a comparative scale, this number is not very high compared to other African countries. 31 claims under ICSID have so far been commenced against the government of Egypt. However, this is not to say that there are only three investment arbitration claims that have been brought against the government of Kenya. These three are in the public domain, given the transparency of cases commenced under the ICSID convention. We are aware that there have been other investment arbitration cases that have been commenced against the government of Kenya under the auspices of the LCIA, the International Chamber of Commerce (ICC) and the ad hoc UNCITRAL rules.

As a general comment, Kenya is doing well compared to other countries on the African continent. South Africa is not a member of ICSID, and is currently in the process of terminating its BITs. Also, coming closer home to Kenya, Tanzania has, in 2017, enacted new laws in relation to natural resources in the country, which require that any dispute arising from a contract relating to natural resources in Tanzania be resolved by the courts in Tanzania. These developments in South Africa and Tanzania are recent, and we are yet to see how they will impact on the investment climate of these countries.

Conclusion

In conclusion, Kenya has come a long way in formulating its position in the international arbitration scene. Internationally acceptable standards have been absorbed into the law to ensure that Kenya identifies itself as a hub for investment. A constructive criticism for Kenya is the slow processes of its court system, which in certain instances hinders access to justice. n

About JMiles & Co

JMiles & Co is a legal services entity that provides specialised services in the fields of international arbitration, mediation, forensic investigation and legal consulting out of Africa. We are strategically based in Nairobi, Kenya. JMiles & Co is one of the only legal entities in Africa that specialises purely in international arbitration and fraud/asset chasing investigations out of Africa.

We have represented clients, both governments and the private sector based around the continent, in international arbitration matters before Tribunals of the ICC in London and Paris, LMAA, LCIA, DIFC-LCIA, GAFTA, FOSFA and ad hoc tribunals in Stockholm, Zurich and Geneva. John Miles has also been appointed as an Arbitrator under the auspices of the LCIA, UNCITRAL, and most recently, was appointed to the board of directors of the Lagos Chamber of Commerce International Arbitration Centre (LACIAC). We are also involved in mediation, and we have two CEDR-qualified mediators in our team.

The JMiles & Co team has conducted a number of forensic audits on behalf of listed companies and regulators. The team also advises corporations and governments in local and international asset recovery.

Lastly, JMiles & Co is heavily engaged in international legal consultancy work which ranges from sector reviews and reports, training government ministries on alternative dispute resolution, providing legal advice, drafting publications and involvement in legislative reviews for governments. Most recently, JMiles & Co has been involved in training of business registration services and various stakeholders in Kenya on the beneficial ownership concept.

For more about JMiles & Co, please visit our website on www.jmilesarbitration.com

For a number of decades, The Bahamas has been one of a number of select jurisdictions utilised by high net worth individuals to manage their wealth. In prior times, terms such as tax evasion, and banking secrecy were, in some cases, attached to such practices. As such, these terms became increasingly stigmatic. Continue reading “Whose money is it? Financial disclosure and judicial assistance in changing times”

When companies face financial difficulties in Mexico, our legislation provides a formal procedure known as concurso mercantil (insolvency) to restructure its finances and provide legal security to their creditors. This procedure is divided into two phases: i) conciliation and ii) bankruptcy or liquidation. The purpose of the conciliation phase is to achieve the continuation of the company, that is, to allow the company to restructure through an agreement with its creditors; whereas the purpose of the liquidation phase is to sell all the assets to try to pay all the recognised creditors, once the conciliation phase failed.

In these legal proceedings the debtor may file for a voluntary insolvency, with or without a preliminary plan to restructure its debts. Also any creditor, or the district attorney’s office may file for an involuntary insolvency. Once the petition is filed, the judge has to analyse if the debtor meets the requirements before declaring its insolvency. For that matter, pursuant to the Commercial Bankruptcy Law (Ley de Concursos Mercantiles), to be declared in concurso mercantil, the debtor has to be in a ‘generalised default’ or breach of payment of its obligations, which consists of being in default of payment with two or more different creditors and the fulfilment of two conditions: i) that the due obligations are at least 30 days overdue and represent 35% or more of the obligations of the debtor on the date on which the petition for declaration of concurso mercantil is filed; and ii) that debtor is unable to cover at least 80% of its due and payable obligations on the date on which the petition is filed.

Now, if the debtor files for insolvency without a plan to restructure, once the claim is admitted, the judge will consult the opinion of experts known as inspectors (visitador), which are designated by the Federal Institute of Commercial Bankruptcy Specialists (Instituto Federal de Especialistas de Concursos Mercantiles, IFECOM), that act as the consulting body of the courts, to determine if the debtor is in a ‘generalised default’ of payment state. This expert must appear before the debtor, to determine, based on accounting books, and other documents, whether it has met the conditions to be declared in concurso mercantil. Once the judge receives the inspector’s opinion, it will be made available to the debtor so that it may argue and, thereafter, the judge will issue a judgment declaring or denying the insolvency of the company.

On the other hand, if the debtor files with a restructuring plan, the judge issues a judgment declaring the insolvency, without the need to appoint an inspector or to make a visit to the debtor. This proceeding shall be treated as an ordinary concurso mercantil, with the only exception that the conciliator, which is an expert designated by the IFECOM in the first phase of the legal proceeding, should consider the restructuring plan presented with the petition for insolvency when proposing any plan or agreement among the creditors.

Similarly, if a concurso mercantil is filed against the debtor, the same process shall be followed as in a voluntary concurso mercantil without a preliminary restructuring plan, except that in addition, a term of nine days shall be granted to answer the complaint and offer the corresponding evidence.

Once the conditions to enter into insolvency are fulfilled, the judge will issue a judgment declaring the concurso mercantil, which has the following effects, among others:

1. The opening of the conciliation phase, unless the complaint was filed to declare the company in bankruptcy.
2. The order to the IFECOM to appoint a conciliator.
3. The order to the company to give access to the conciliator to their accounting, meaning all the books and documents they need to determine if the company meets the requirements to declare its insolvency.
4. The order to suspend any warrant of injunction (embargo) or execution against the debtor’s assets, except those of a labour-related nature.
5. The establishment of the retroaction date – this is the period of suspicion, in which it is determined if there are acts in fraud of creditors.
6. The order to the conciliator to publish the insolvency judgment and to record the sentence in the public records of the company before the Public Registry of Commerce.
7. The initiation of the credit acknowledgement procedure.
8. The order to suspend payment of the debts incurred before the date the commercial insolvency sentence enters into effect.
9. The ne exeat order against the debtor or company. In the case of legal entities, against the people responsible for their management, solely for the purpose of preventing them from leaving the domicile.

The day after the judgment is issued, the judge must personally notify the debtor, the IFECOM, the inspector, the creditors whose addresses are known, the competent tax authorities, the district attorney’s office, the union representative if one exists and, failing this, a labour rights attorney. Additionally, within the following five days of their designation, the conciliator shall proceed to request the registration of the commercial insolvency judgment in the corresponding Public Registry of Commerce and shall have a summary or extract of it published in the Mexican Official Gazette and in one of the major circulation journals in the location where the legal proceedings take place. That way all creditors can appear before the judge and file a petition to acknowledge their credit.

If requested by the debtor, the conciliator, or if the conciliation phase ends without the agreement of a restructuring plan or an agreement among the creditors, a bankruptcy or liquidation judgment shall be issued in which the trustee will administrate the goods and assets of the debtor and will proceed to its disposal, seeking to obtain a high auction value, except when the trustee considers that a different proceeding will obtain a better recovery or when the goods and assets require an immediate liquidation as they can no be longer conserved without deterioration etc. After the liquidation judgment, at least every two months, the trustee shall submit to the judge a report of all sales executed, the status of the assets, and a list of the creditors that will receive payments by means of the bankruptcy.

In conclusion, the concurso mercantil is a legal procedure that all companies and corporations can enter into, to try to restructure financially and possibly enter into an agreement with their creditors. Failing that, the company enters into a liquidation phase where all the remaining assets are disposed to pay all their recognised creditors.

The arbitration landscape has changed significantly in the Kingdom of Saudi Arabia (KSA) in recent years. In this note, we will explain two important developments that have precipitated this change, namely, a new arbitration law and a Saudi centre for arbitration.

New arbitration law

On 24/5/1422H (corresponding to 16 April 2012), a new set of arbitration rules was issued in the KSA by Royal Decree No 34/M (the new arbitration law). The new arbitration law replaced the arbitration law dated 12/7/1403H.

The law contains many changes and improvements over the old regime. Under the new rules, the court retains its supervisory role over the arbitration process but the role it plays is significantly reduced, with many of its former tasks being delegated to the arbitration tribunal and the parties. Furthermore, under the new arbitration law, the parties are granted broad discretion to determine many aspects of the arbitration process, such as the language to be used in the arbitral proceedings and the substantive law and procedures to be applied, as long as such law and procedures do not contravene Sharia law.

Moreover, appeals based on the merits are no longer permitted under the new regime; the new rules only allow appeals based on enumerated procedural or jurisdictional grounds. However, as in the old regime, the court still retains the authority to re-examine the merits of the underlying case to determine if the arbitration decision is contrary to Sharia.

The following are the salient changes in the new rules:

• Unlike the old regime, the law does not require the parties to submit an arbitration agreement to the court for its approval. This is a significant improvement since it grants arbitration tribunals more independence from the courts and reduces the time and cost of disputes. These advantages will render arbitration a more attractive option for dispute resolution than it had been previously.
• Under the new law, the panel’s decision is final. The new rules differ from the old regime in that appeals of the panel’s decisions to the competent court are not permitted except in a few limited cases. The enumerated grounds for appeal are procedural and jurisdictional in nature, not merits based.

Although the new law does not allow appeals based on the merits of the case, the new rules require the competent court, before issuing a judgment executing the panel’s decision, to determine if the decision is contrary to Sharia. This implies that the competent court can re-examine the merits of the case. It is not clear how much of an impact this provision will have on the arbitration process and whether it will allow the parties to circumvent the prohibition on merits-based appeals. It remains to be seen how the courts will apply this provision in practice.

• Under the old regime, arbitration proceedings were required to be conducted in Arabic. This is no longer required under the new rules, which permit the parties to stipulate the use of a language other than Arabic.
• The arbitration panel has the authority to adjudicate disputes under its jurisdiction, including disputes over the validity of the arbitration agreement. This is a significant change from the old arbitration rules which required that such disputes be resolved by the competent court.
• In contrast to the old rules, the new law grants the parties broad discretion to choose the substantive law and procedures that govern their dispute. The parties can agree to subject their arbitration to the procedures of any organisation, committee, or arbitration centre, either in KSA or outside it, as long as such procedures do not contravene the dictates of Sharia.

Saudi Centre for Commercial Arbitration

Following a council of ministers decree in 2014 to form an arbitration centre to work under the auspices of the Council of Saudi Chambers, the Saudi Center for Commercial Arbitration (SCCA) has been established for the supervision of domestic and international commercial arbitration in the Kingdom. The SCCA is the first of its kind in KSA and sets forth rules for conducting arbitration in KSA in accordance with international arbitration standards.

Participation in the SCCA is voluntary. Therefore, both parties must consent to submitting their dispute to the SCCA. The SCCA assists in all facets of the arbitration process, including the selection of arbitrators (the SCCA keeps a roster of arbitrators from which the parties can choose, or they may appoint arbitrators who are not registered with the SCCA), provides state-of-the-art facilities, and so forth.

The SCCA has been recently established, so it is still untested in practice. However, it appears to be a sophisticated institution with well-defined rules and procedures for conducting arbitrations.

Conclusion

The changes to the old arbitration rules are important because they significantly reduce the role that Saudi courts have traditionally played in the arbitration process and leave many of the tasks formerly performed by the courts to the arbitration tribunal or the parties. These are welcome developments because they reduce the cost and duration of arbitration by minimising judicial involvement in the process. Limiting judicial review of arbitration decisions to jurisdictional and procedural issues also significantly streamlines the process and renders arbitration a more attractive option. However, the court’s authority under the new rules to review the merits of a case to determine if the arbitral decision complies with Islamic law does raise concerns that this may undermine the goal of the new law to streamline the arbitration process and increase its efficiency.

Moreover, the creation of a sophisticated institution to administer arbitration in the Kingdom is a welcome development to arbitration practitioners. Although it was established two years ago and is still untested, it looks promising and may prove to be an attractive alternative to judicial forums.

There are many differences between UK and Norwegian litigation. In this article, we will give a brief outline of some of the possibilities in Norwegian litigation, as well as some issues that one needs to avoid. Since the language before the court is Norwegian, there is a need to seek out Norwegian counsel, but this article can in any case give some initial input as to what to consider when a dispute has connections to Norway.

The Norwegian Conciliation Board and lis pendens

In Norway there is a semi-court called the conciliation board, in which certain disputes need to be heard before it is possible to commence proceedings before the district courts. For instance, the dispute cannot be commenced directly before the district court if one of the parties has not been represented by an attorney. In international disputes, the obligatory conciliation board proceedings may represent a problem.

The Norwegian Supreme Court has stated that the lis pendens effect of the application for conciliation proceedings ceases when the conciliation board discontinues the case. The effect of being the court first seized, cf the Lugano Convention article 27, thus ceases when the conciliation board discontinues the case. In practical terms, this means that a foreign defendant may sue in another jurisdiction even after the obligatory Norwegian proceedings have been instigated, and still be the jurisdiction first seized. The effect is that the Norwegian proceedings will be dismissed.

The rule has been proposed to be changed in a hearing regarding the revision of the Norwegian Disputes Act, but no change has yet been adopted.

The international jurisdiction of Norwegian courts

Norway is a party to the Lugano Convention. For disputes covered by the convention, Norwegian courts will have jurisdiction as stated in the convention.

For disputes not covered by the Lugano Convention, or other conventions, Norwegian courts only have jurisdiction over the parties in international commercial disputes if a legal venue can be found in Norway pursuant to distinct venue provisions in Norwegian statutory law. The provisions generally coincide with the provisions of the Lugano Convention, but certain differences apply.

As a main rule jurisdiction in commercial disputes cannot be held merely by an assessment of what connection the dispute has to Norway. However, in exceptional cases Norwegian courts might have jurisdiction over a dispute with connection to Norway, even if no explicit grounds for jurisdiction can be found. Norwegian courts might also deny jurisdiction even if a legal venue can be found in Norway, if the dispute has a very weak connection to Norway, but no rule of forum non conveniens applies.

Securing of evidence

Normally the parties will present the evidence they have at hand to the court. A party might request the other party to present certain specified material to the court, but cannot request a party to present a vast and unspecified amount of material. There is no disclosure process. Furthermore, a decision from the court that a party should present certain material cannot be enforced against a party, but the court might rely on the reluctance in its consideration of the case. Witness testimony is given directly before the court, not in prior written witness statements. The testimony is not recorded. That implies that the court and counsel have to rely on notes and/or memory when deciding what the witness said and that the witness has to give testimony again if the case is appealed.

However, before initiating legal proceedings in Norway, Norwegian courts might grant a party the right to secure evidence to be used in the potential court hearing. An application is made to the court where the potential proceedings might be instigated, and the court should grant the application if there is a risk that the evidence otherwise might be lost or there are other special reasons why the evidence should be secured prior to the court hearing. The court decision will then be handed to the Norwegian enforcement office that will carry out the securing of evidence in accordance with any instructions in the court decision. Access to the secured material will normally be decided in a separate decision.

Preliminary injunctions and attachments

Norwegian courts might grant preliminary injunctions and/or attachments against defendants or assets in Norway, even if Norwegian courts do not have jurisdiction over the underlying claim.

As a main rule, the claimant needs to substantiate a claim against the defendant and a reason why it is necessary to secure the claim with a preliminary injunction or attachment that fulfils the statutory requirements. In special circumstances, the claimant might obtain a preliminary court order without substantiating a claim against the defendant.

Monetary claims are secured with a preliminary attachment of the debtor’s assets. Such attachment only prevents the debtor from disposing over the asset, and does not give any priority over non-voluntary enforcement in the relevant asset.

Non-monetary claims are secured with a preliminary court order forcing the defendant to tolerate, do or omit something in particular. In principle, the defendant might be forced to do, tolerate or omit anything, but there are certain limitations that apply, so the remedy requested should be carefully drafted.

Enforcement of foreign judgments

Norway is a party to the Lugano Convention 2007 and will enforce judgments from other countries party to the convention, in accordance with the regulations of the Lugano Convention. Judgments under the Lugano Convention are enforced by first submitting an application, to the local Norwegian court, to declare the judgment enforceable in Norway. The proceedings are ex parte, but the debtor to the judgment might appeal afterwards. Refusal to declare the judgment enforceable can only be based on the limited grounds stated in the Lugano Convention.

If there is no convention between Norway and the relevant country governing enforcement, Norway only accepts enforcement of foreign judgments if the parties have agreed to the jurisdiction of the relevant court. Such judgments are enforced by submitting an application for enforcement to the local Norwegian court. The proceedings are adversarial proceedings, but they are not fresh proceedings on the underlying claim. Enforcement will not be granted if enforcement would conflict with Norwegian law or would be contrary to Norwegian public policy.

Arbitral awards can be enforced even if there is no convention between Norway and the country in which the arbitration took place.

Other foreign judgments, where no convention nor consent to jurisdiction/arbitration exist, are not enforceable in Norway. If no convention or agreement is applicable, the case must be litigated anew in Norway. The foreign decision can be submitted as evidence, but is not decisive, and counterevidence as to fact and law may be presented. n

Simonsen Vogt Wiig is a leading commercial law firm in Norway, with 180 lawyers that provide assistance within all major business sectors. SVW has offices in the largest cities in Norway as well as an office in Singapore.

As reported in KPMG’s 2016 Global Profiles of the Fraudster, more than half of the frauds were uncovered by whistleblowers and tip-offs. So to more effectively root out corporate malfeasance and corruption, some countries have promulgated laws to make internal reporting channels in both the public and private sectors mandatory. The laws include the Whistleblower Protection Act (1989) and the Sarbanes-Oxley Act (2002) of the United States, the Public Interest Disclosure Act (1998) of the United Kingdom, and the Public Interest Disclosure Protection Act (2004) of Japan. Continue reading “Emerging need for whistleblower programmes”