FAI Arbitral Tribunal’s Decision concerning the Disqualification of Counsel in Arbitral Proceedings

The post FAI Arbitral Tribunal’s Decision concerning the Disqualification of Counsel in Arbitral Proceedings appeared first on Kluwer Arbitration Blog.

Introduction

It is generally accepted in international arbitration that an arbitral tribunal has an inherent power, and duty, to preserve the fairness and integrity of the arbitral proceedings and the enforceability of the award. On the other hand, it is equally uncontested that a party to an arbitration has a right to be represented by a counsel of its choice. Occasionally, these two principles may collide, e.g. if one party’s counsel engages in some highly inappropriate procedural conduct and the other party raises a request for the disqualification and exclusion of the counsel from the proceedings. Can the arbitral tribunal entertain such a request? (more…)

Posted in FAI cases |

Further FAI case law on sale of business disputes

Introduction

As noted in our previous FAI case comment, company acquisitions and sale of business often give rise to disputes that are submitted to be resolved in FAI arbitration. Apart from disputes over the purchase price, parties may raise various procedural objections and claim that the other party (either buyer or seller) has lost its right to invoke the remedies set forth in the share or asset purchase agreement.

For instance, the seller may argue that the buyer is precluded from claiming damages or price reduction on the basis of the seller’s purported contract breaches because the buyer has failed to give a timely notice of reclamation or present its monetary claims against the seller within the prescribed time limit. Further, the seller may contend that the buyer should have first invoked the specific price-adjustment mechanism agreed upon in the contract, and that the failure to do so should result in the forfeiture of the buyer’s right to bring any claims against the seller in the arbitration. Additionally, depending on the applicable limitation of liability clauses, the seller may argue that some of the buyer’s claims fall within their scope and should therefore be dismissed. The buyer, in turn, may counter that its claims are outside the ambit of the contractual limitation clauses and/or that those clauses should be adjusted and set aside as unreasonable. (more…)

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FAI award in a sale of business dispute regarding the calculation of purchase price

Introduction

Company acquisitions and sale of business frequently give rise to disputes. This is evidenced by the FAI statistics, which show that these types of cases typically constitute the largest share of all FAI arbitrations.

Disputes often arise from the parties’ disagreement as to how the purchase price should be calculated. It is customary that contracts for the sale of shares or assets of a company contain specific price-adjustment provisions, which can be divided into two main categories: (i) the first category deals with the net asset value of the target company, calling first for a comparison of a closing balance sheet with a predefined, earlier reference balance sheet to determine the difference in the net asset values between these two financial statements, and then for an adjustment of the price in accordance with the difference; and (ii) the second category are provisions that make the price contingent on some sort of earn-out mechanism, meaning that the purchase price is wholly or (more often) partially determined by reference to the future performance of the target company in terms of profit, turnover, or some other financial measure (see also our previous FAI case comment). (more…)

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FAI Board’s Recent Practice on the Consolidation of Arbitrations under the FAI Rules

The post FAI Board’s Recent Practice on the Consolidation of Arbitrations under the FAI Rules appeared first on Kluwer Arbitration Blog.

Introduction

Consolidation means combining two or more arbitrations that are pending under a specific set of rules into a single arbitration proceeding. In appropriate circumstances, consolidation has various advantages. Most importantly, it eliminates the risk of having contradictory awards rendered in different proceedings on closely related sets of facts. Additionally, it makes for procedural and cost efficiency as all issues in dispute will be decided by a single arbitral tribunal in one proceeding, rather than by different tribunals in two (or more) separate arbitrations. (more…)

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FAI arbitral tribunal’s separate award on the conditions of set-off under Finnish law

Introduction

Set-off means mutual amortization of debts without an actual exchange of performances. Often described as ‘a shield, not a sword’, set-off is a defensive instrument put forward by the debtor with a view to discharging the creditor’s claim with its own cross-claim. Where set-off is accepted, the parties who are mutually indebted to each other are relieved from rendering any actual performance to the extent that their claims are reciprocal. The defensive nature of set-off distinguishes it from a counterclaim, which is an independent claim brought against the original claimant with the result that the latter turns into a respondent with regard to the counterclaim. (more…)

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FAI Arbitral Tribunal’s Separate Award on the Reimbursement of Advance on Costs

The post FAI Arbitral Tribunal’s Separate Award on the Reimbursement of Advance on Costs appeared first on Kluwer Arbitration Blog.

Introduction

Article 48.1 FAI Rules provides that, in any international arbitration, FAI shall fix an advance on costs which the parties must pay in full before the case file is transmitted to the arbitral tribunal. Like under many other institutional arbitration rules, the starting point under the FAI cost regime is that FAI will fix one “global” advance on costs to be paid by the parties in equal shares. Accordingly, the respondent is normally required to contribute to the advance on costs to the same extent as the claimant irrespective of whether it has brought any claims of its own against the claimant. There is, however, a limited exception to this main rule that may apply where the respondent has raised a counterclaim or set-off claim. In such instances, FAI Rules permit FAI to fix separate advances on costs for the claims, counterclaims and set-off claims and order each of the parties to pay the advance on costs corresponding to its claims. (more…)

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FAI arbitral tribunal’s jurisdictional decision in a shareholders’ agreement dispute

Introduction

FAI arbitrators are called upon to decide all kinds of commercial disputes. Although the types of disputes submitted to FAI arbitration vary to some extent from one year to another, cases related to various corporate transactions typically constitute the largest share of all FAI arbitrations. This includes sale of business, mergers and acquisitions, and shareholders’ agreements.  (more…)

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FAI arbitral tribunal’s decision regarding a document production request

Background

Two Finnish companies, A and B, had entered into a business purchase agreement (“Agreement”) whereby B acquired from A the assets of a company engaged in private healthcare business. The Agreement was governed by Finnish law and the arbitration clause provided that any disputes shall be resolved in FAI arbitration proceedings before a sole arbitrator. (more…)

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Jurisdictional Decision Finding that an FAI Arbitration Clause in a Draft Agreement was Valid and Binding on the Parties

The post Jurisdictional Decision Finding that an FAI Arbitration Clause in a Draft Agreement was Valid and Binding on the Parties appeared first on Kluwer Arbitration Blog.

Introduction

It is not unusual that parties to FAI arbitration proceedings raise various jurisdictional objections before the Finland Arbitration Institute (“FAI”) and, provided that FAI will nonetheless allow the arbitration to proceed, subsequently also before the arbitral tribunal. Such objections come in all shapes and sizes. For example, respondent may dispute the existence of an arbitration agreement on the grounds that the main contract in which the alleged arbitration cause is embedded is merely a draft which was neither finalized nor accepted by the parties and which is therefore not binding on them. The following case from the recent FAI practice serves as an example of how an arbitral tribunal seated in Finland addressed this question under Finnish law.

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Further practice on the application of the “cut-off date” provision in Article 33.3 FAI Rules

Background

The “cut-off date” provision in Article 33.3 FAI Rules was one of the main innovations of the 2013 FAI Rules revision process. It gives the arbitral tribunal the power – after consulting with the parties – to set a specific cut-off date “prior to the commencement of any hearing”, and to “order that after the cut-off date, the parties will not be allowed to present any new claims, arguments or documentary evidence on the merits of the dispute, or to invoke any new witnesses not previously nominated, unless the arbitral tribunal in exceptional circumstances decides otherwise”.

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