FAI award addressing the recoverability of the costs of injunction proceedings in the subsequent FAI arbitration
In the arbitration practice, a question sometimes arises whether a party may seek reimbursement of costs that are not directly related to the arbitration itself but to some ancillary proceedings. For example, a party may have resorted to a state court for conservatory or other interim measures of protection before initiating the arbitration proceedings. Are the costs of such interim measure proceedings recoverable in the following arbitration?
Below is a brief description of an FAI arbitral award rendered in a cross-border dispute regarding the termination of a business contract governed by Finnish substantive law. The seat of arbitration was Helsinki, and the arbitral tribunal was composed of three arbitrators, all of whom were of different nationalities (but all with a civil-law background). The factual circumstances of the dispute were as follows:
A FAI arbitral tribunal recently rendered an award in a cross-border dispute where the tribunal had to assess the interplay between the contractual confidentiality obligations binding on the parties, on one hand, and the respondent party’s alleged right to disclose confidential information to third parties for the purposes of pleading its case in the arbitration, on the other hand. The key elements of the dispute can be summarized as follows:
An international arbitral tribunal constituted under the FAI Rules recently rendered a final award in a post-M&A dispute between Finnish company A and German company B. The dispute concerned the calculation of purchase price in an M&A transaction: Claimant (seller) A contended that the wording of the Sale and Purchase Agreement (“SPA”) concluded between A and B was accidentally formulated in a way that did not correctly reflect the parties’ mutual intention, with the result that Respondent (buyer) B had paid millions of euros less purchase price than it ought to have paid. Respondent B denied all claims raised against it, mainly relying on the unambiguous wording of the contract document.
Sole Arbitrator’s jurisdictional decision finding that an arbitration clause contained in a loan agreement was valid and binding on both the lendee and the guarantor
On 6 June 2009, A (a Finnish entity) and B (an Indian company) entered into a loan agreement, which was subsequently amended three times: twice in 2009 (the first and second amendment), and once in October 2012 (the third amendment) (hereinafter collectively referred to as the “Loan Agreement”). Pursuant to the terms of the Loan Agreement (as amended), B had received from A in three drawdowns a total amount of USD 4,214,269.12 as a loan.
Article 33.3 FAI Rules contains an important provision designed to promote swift and cost-efficient resolution of a dispute submitted to FAI arbitration. It empowers the arbitral tribunal, after consulting with the parties, to set a so-called “cut-off date” prior to the commencement of an evidentiary 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”.
Article 33.2(b) FAI Rules grants the arbitral tribunal the power to order any party, at any time during the proceedings, to produce any documents or other evidence “that the arbitral tribunal may consider relevant to the outcome of the case”. Based on this provision, the arbitral tribunal is authorized to request the production of evidence from any party either on its own initiative or at the request of one of the parties.
In a recent FAI arbitration, parties X and Y had concluded a software license agreement (“License Agreement”) according to which Y was entitled to use certain software developed by X on the conditions set forth therein. The License Agreement contained the following arbitration clause:
“Any and all disputes, differences or questions between the Parties with respect to any matter arising out of or relating to this Agreement shall be finally settled in arbitration by a sole arbitrator in accordance with the Rules of the Arbitration Committee of the Finnish Central Chamber of Commerce pursuant to the regulations in force. The arbitration shall be conducted in Helsinki, Finland, in the English language. Any arbitration award shall be final and binding and may, if necessary, be enforced by any court or authority having jurisdiction.”
Sole arbitrator’s ruling on an “Independent Auditor clause” as an alleged bar to arbitral proceedings
With the proliferation of various ADR procedures, it has become customary to include so-called “multi-tiered dispute resolution clauses” (MDR clauses) in commercial contracts. Such clauses typically provide for some form of negotiation or mediation followed – in the event of failure – by binding arbitration. However, parties may also agree in an MDR clause to obtain some type of expert determination before commencing arbitration proceedings.
Arbitration agreements sometimes stipulate that one of the parties shall be solely responsible for the costs of the arbitration irrespective of the outcome of a dispute. Such provisions may occasionally be found, for instance, in managing director agreements or shareholders’ agreements. An arbitral tribunal must respect any such provision if found valid and binding on the parties. Nonetheless, the claimant who intends to commence FAI arbitration proceedings is required to pay the filing fee in accordance with Article 7 of the FAI Rules and Article 1 of Appendix II thereto even if the applicable arbitration clause provides that it is the respondent party that shall be ultimately responsible for the costs of the arbitration in the relationship between the parties. In such case, the claimant may request that the arbitral tribunal order the respondent to compensate for the filing fee that the claimant has paid in connection with the commencement of the arbitration (see Mika Savola: Guide to the Finnish Arbitration Rules, 2015, pp. 57-58).