Litigation & Dispute Resolution
Second Edition
Contributing Editor: Michael Madden Published by Global Legal Group
CONTENTS Preface
Michael Madden, Winston & Strawn London
Austria
Christian Eder, Christoph Hauser & Alexandra Wolff,
Belgium
Fiebinger Polak Leon Attorneys-at-Law
1
Koen Van den Broeck & Thales Mertens, Allen & Overy LLP
9
British Virgin Islands Scott Cruickshank & David Harby, Lennox Paton
14
Bulgaria
Assen Georgiev, CMS Cameron McKenna LLP – Bulgaria Branch
25
Canada
Caroline Abela, Krista Chaytor & Marie-Andrée Vermette, WeirFoulds LLP
35
Cayman Islands
Ian Huskisson, Anna Peccarino & Charmaine Richter, Travers Thorp Alberga
44
Cyprus
Anastasios A. Antoniou & Louiza Petrou, Anastasios Antoniou LLC
51
England & Wales
Michael Madden & Justin McClelland, Winston & Strawn London
59
Estonia
Pirkka-Marja Põldvere & Marko Pikani, Aivar Pilv Law Office
75
Finland
Markus Kokko & Niki J. Welling, Attorneys at Law Borenius Ltd
86
France
Philippe Cavalieros, Winston & Strawn LLP, Paris
92
Germany
Dr. Stefan Rützel & Dr. Andrea Leufgen, Gleiss Lutz
99
Guernsey
Christian Hay & Michael Adkins, Collas Crill
107
India
Siddharth Thacker, Mulla & Mulla & Craigie Blunt & Caroe
114
Indonesia
Alexandra Gerungan, Lia Alizia & Christian F. Sinatra, Makarim & Taira S.
123
Ireland
Seán Barton & Heather Mahon, McCann FitzGerald
131
Isle of Man
Charles Coleman & Chris Webb, Gough Law
142
Italy
Ferdinando Emanuele & Milo Molfa, Cleary Gottlieb Steen & Hamilton LLP
149
Jersey
Kathryn Purkis & Dan Boxall, Collas Crill
158
Korea
Kap-you (Kevin) Kim, John P. Bang & David MacArthur, Bae, Kim & Lee LLC
167
Malaysia
Claudia Cheah Pek Yee & Leong Wai Hong, Skrine
176
Mexico
Miguel Angel Hernandez-Romo Valencia & Miguel Angel Hernandez-Romo, Bufete Hernández Romo
186
Nigeria
Matthias Dawodu, Olaoye Olalere & Debo Ogunmuyiwa, S. P. A. Ajibade & Co
192
Pakistan
Ashtar Ausaf Ali, Zoya Chaudary & Nida Aftab, Ashtar Ali & Co.
203
Portugal
Nuno Lousa & Manuel Castelo Branco, Linklaters LLP
214
Slovenia
Matej Perpar & Sana Koudila, Kirm Perpar Law Firm
222
Spain
Álvaro López de Argumedo & Juliana de Ureña, Uría Menéndez
229
Switzerland
Balz Gross, Claudio Bazzani & Julian Schwaller, Homburger
237
Turkey
Gönenç Gürkaynak & Ayşın Obruk, ELIG, Attorneys at Law
247
Ukraine
Andrey Astapov, Oleh Beketov & Oleksiy Zorin, AstapovLawyers International Law Group
255
USA
Stephen R. Smerek, Bruce R. Braun & Andrew S. Jick, Winston & Strawn LLP
266
Uruguay
Carlos Brandes & Federico Florin, Guyer & Regules
275
Venezuela
Jesus Escudero E. & Raúl J. Reyes Revilla, Torres, Plaz & Araujo
283
USA Stephen R. Smerek, Bruce R. Braun & Andrew S. Jick1 Winston & Strawn LLP Efficiency/integrity The United States is world-renowned for the efficiency and integrity of its judicial system in resolving criminal and civil litigation. The U.S. court system is split into a federal system and 50 independent state systems. Although there is some overlap between the systems, they are separate. State courts are courts of general jurisdiction − unless pre-empted by federal law, state courts can generally hear any type of claim. Federal courts, on the other hand, can only adjudicate claims if they have “subject matter” jurisdiction (most commonly in cases arising under federal law, or involving citizens of different states). Within both the federal and state judicial systems, there are trial courts, intermediate appellate courts which hear appeals as of right, and supreme courts which hear appeals as a matter of discretion. Various procedural mechanisms exist allowing courts to dispose of cases early. In response to a plaintiff’s complaint, a defendant may file a motion to dismiss (or a “demurrer”, as it is called in many state courts) seeking dismissal of the complaint. Courts may dismiss a complaint if its factual allegations, even if they are assumed to be true, are insufficient to state a plausible entitlement to relief. Courts have held that bare recitals of the elements of a cause of action are insufficient to survive a motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662 (2009). Even if a case proceeds past a motion to dismiss and through discovery, both sides have the option to move for summary judgment, which allows a court to decide the case in the moving party’s favour as a matter of law, if the non-moving party fails to introduce admissible evidence establishing the existence of a genuine issue of material fact for trial. Additionally, courts can order parties to engage in alternative dispute resolution mechanisms including mediation, settlement conference, or early neutral evaluation. (These mechanisms are described in more detail below.) As the number of civil lawsuits continues to increase, courts’ budgets continue to get cut, and the strain on the court system continues to rise, courts may feel more pressure to utilise these various mechanisms to dispose of cases early and free up their dockets. American law, like English law from which it derives, is founded on principles of natural justice. The U.S. Constitution guarantees that the individual’s right to due process and equal protection of the laws cannot be infringed by governmental action. In general, due process requires that an individual be given notice, and an opportunity to be heard before a fair and impartial tribunal before that person’s rights can be adjudicated. For example, the Federal Rules of Civil Procedure have strict rules regarding service of process, including that summons and a complaint must be personally served on a defendant, where feasible. Litigants have a right to an impartial judge. As the United States Supreme Court has held, if a judge has a direct personal or pecuniary interest in the outcome of a case, the judge must recuse himself or herself from deciding the case. Otherwise, such a conflict of interest taints the judgment and is grounds for reversal. Equal protection of the laws guarantees that individuals will not be treated discriminatorily based on certain protected characteristics, including but not limited to race, national origin, gender, and wealth. All citizens are entitled to equal access to justice. The independence of the judiciary from political influence is also a core tenet of U.S. law, but it is GLI - Litigation & Dispute Resolution Second Edition
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implemented differently in the federal and state judicial systems. Under the Constitution, all federal judges are appointed by the President, confirmed by a majority vote of the Senate, and serve lifetime terms. Some states have a similar process for judicial appointments. But, in other states, judges are elected, similar to public officials. In these states, judges can run (sometimes contentious) campaigns and must stand for re-election after a number of years. Even state supreme court justices must be reelected periodically. Thus, in these states, judges may be subject to pressure to make politically popular rulings in high-profile cases to avoid polarising the electorate against them. To paint with a broad brush, federal courts tend to demand strict compliance with the rule of law and apply procedure more closely, whereas state courts are more attuned to local tendencies and may give more consideration to equitable principles of justice or fairness. State courts have a higher volume and more diversity in their cases, and are more susceptible to local budgetary issues. Thus, state courts have less time than federal courts to delve into complex legal issues, and are more likely to allow cases to proceed to trial. Federal courts tend to be more likely to dispose of cases on motions to dismiss, or for summary judgment. Enforcement of judgments/awards U.S. courts are authorised by statute to enforce foreign judgments. To enforce a foreign judgment, the party seeking enforcement must file a request with the appropriate U.S. court. The party against whom enforcement of a foreign judgment is sought may oppose enforcement. U.S. courts will not enforce a foreign judgment if the opponent can show that the foreign court lacked personal jurisdiction over the defendant or subject matter jurisdiction over the action; that the foreign judicial system did not provide the defendant with adequate procedural protections; or that the judgment was obtained by fraud. In short, U.S. courts will not enforce a judgment if the party resisting enforcement can show that enforcement would violate the party’s right to due process. When considering whether to enforce an injunction issued by a foreign tribunal, U.S. courts consider whether issuance of the injunction would frustrate public policy, would be vexatious or oppressive, or would otherwise run afoul of considerations of equity. Parties seeking to enforce certain kinds of judgments must satisfy additional procedural requirements. To enforce a foreign judgment of forfeiture or confiscation, the party seeking enforcement must submit a request with the U.S. Attorney General (“AG”). The application to the AG must include, among other information, an affidavit or sworn declaration testifying that the foreign nation took steps to ensure that due process of law was afforded. The AG has sole authority whether to certify the request. The AG’s decision is not reviewable by a district court. Upon certification by the AG, the district court will enter the appropriate order compelling the payment of money or forfeiture of property. Moreover, due to the United States’ jealous protection of its citizens’ freedom of speech, a party seeking to enforce a foreign judgment for defamation must demonstrate that the laws of the foreign jurisdiction provide at least as much protection for freedom of speech as do the laws of the United States. In other words, the party seeking enforcement must show that the opposing party would have been found liable for defamation even if sued in a U.S. court. Conversely, a U.S. citizen against whom a foreign judgment based on speech has been entered may seek an order by a district court declaring that the foreign judgment is repugnant to U.S. law, and therefore invalid. Cross-border litigation Under a federal statute, persons and entities in the United States may be compelled to give testimony or produce documents for use in foreign judicial proceedings. A federal district court can so compel a person or entity residing within the court’s jurisdiction under two circumstances: (1) pursuant to a letter rogatory issued, or request made, by the foreign tribunal; or (2) upon the application of “any interested person”. Courts have interpreted this statute liberally. Discovery may be sought in connection with judicial, quasi-judicial, and administrative proceedings. Discovery may also be sought not only for ongoing proceedings, but for proceedings that are within reasonable contemplation. In Intel Corporation GLI - Litigation & Dispute Resolution Second Edition
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v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), the U.S. Supreme Court held that a formal investigation by the European Commission was sufficient, even though a formal judicial proceeding was not pending or even imminent. There is no requirement that the requested materials would be discoverable if they were located in the foreign jurisdiction. Rather, U.S. district courts apply the Federal Rules of Civil Procedure to the discovery request. Courts have interpreted “any interested person” to include not only parties or litigants in the foreign judicial proceeding, but anyone with a reasonable interest and significant role in the proceeding. In the Intel case noted above, the Supreme Court held the complainant who triggered the investigation had a sufficient interest to request discovery. An interested party seeking discovery in the United States need not obtain permission from the foreign tribunal, but can apply to the U.S. court directly. Although district courts are authorised to assist foreign discovery requests, they are not required to do so. To obtain a district court order, the party seeking discovery must apply to the appropriate district court. District courts consider several factors in determining whether such requests should be granted, including the nature of the foreign tribunal; the character of the proceeding; the receptivity of the foreign government, court, or agency to U.S. judicial assistance; and whether the request is an attempt to circumvent foreign discovery procedures. Courts also consider whether compliance with the discovery request would be unduly intrusive or burdensome to the person or entity from whom the information is sought. Privilege and disclosure Discovery in federal and state courts is governed by rules of procedure enacted by the legislatures of their respective jurisdictions. Each state has its own rules governing discovery. As a general matter, the scope of discovery is extremely broad. Under the Federal Rules of Civil Procedure, any document that is reasonably calculated to lead to the discovery of admissible evidence is discoverable unless it is privileged. Most states have similar rules. Even documents that contain commercially sensitive information, such as trade secrets, or highly sensitive personal information, if relevant, are generally discoverable. Thus, in litigation involving sensitive matters (including most litigation involving large companies), it is common for parties to enter into discovery confidentiality agreements. Such agreements restrict the receiving party’s ability to disclose information designated as confidential by the producing party outside of the litigation. Parties may move for a protective order to block discovery when the information sought is unduly burdensome considering the importance of the information, the difficulty and expense of producing it, and its availability from some other, more convenient source. The most common forms of privilege include the attorney-client privilege and attorney work product doctrine. The attorney-client privilege protects from disclosure confidential communications between attorneys and their clients made for the purpose of seeking or providing legal advice. The privilege also includes communications between an attorney and a prospective client. When the client is a corporation, different jurisdictions apply different rules. In some states, only high-level management’s communications with its in-house or outside counsel are privileged, but in other states and in federal court, the privilege extends to communications with any employee of the corporation. The work product privilege protects from disclosure materials prepared by or for a party or party’s representative (including attorneys, consultants and agents) in anticipation of litigation. This privilege is, therefore, both broader and narrower than the attorney-client privilege: it covers not only communications, but documents as well; but it applies only when the material is prepared in anticipation of litigation. Certain confidential communications between a married couple are privileged. Some jurisdictions recognise other forms of privilege as well, including accountant-client, doctor-patient, priest-penitent, and parent-child privileges. Settlement discussions are not privileged, but in many jurisdictions they are inadmissible to prove liability (though they may be admissible, and therefore discoverable, for other purposes). GLI - Litigation & Dispute Resolution Second Edition
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The rise in electronic discovery (often called “e-discovery”) presents unique challenges in this context. In complex cases, parties may demand that other parties forensically copy and search through entire hard drives of dozens of witnesses with potentially relevant information. This process can result in the collection of hundreds of thousands − if not millions − of documents which, ostensibly, must be reviewed before being produced to the requesting party. Inadvertent waiver of privilege is a major concern. The general rule is that when a privileged document is disclosed, the privilege is waived not only with respect to that document, but all documents concerning the same subject matter. In 2008, Congress enacted a federal rule of procedure preventing waiver in the case of inadvertent disclosures where the holder of the privilege took reasonable steps to prevent such a disclosure, and, upon discovering the error, promptly took action to rectify it. The same provision allows parties to enter a stipulation which would prevent waiver resulting from an inadvertent disclosure not only in the pending litigation, but in all other proceedings. Parties can also adopt provisions in a discovery confidentiality agreement that would govern inadvertent disclosure of privileged information, which are often referred to as “claw back” provisions. Costs and funding In the United States, parties bear their own litigation costs. Exceptions to this general rule vary by jurisdiction. For example, some courts allow winners to apply for costs, but only grant attorney fees if a statute or a contract between the parties mandates it. Also, some courts have mechanisms that allow for cost-shifting arising out of entry of judgment. In federal court, for instance, where a defendant makes a settlement offer to a plaintiff before the court has determined damages, the plaintiff rejects the offer, and the court ultimately awards less in damages than the defendant offered, the plaintiff must pay the defendant’s costs incurred after the offer was made. As a general matter, trial courts have fairly wide discretion regarding whether to award attorneys’ fees and costs to the prevailing party, even where authorised by statute or permitted by contract between the parties, and attorneys’ fees awards are not common. As a result, the nuisance value of litigating even a frivolous case can be comparatively high, with little chance to recover reasonable defence fees and costs. One of the best known − and most controversial − forms of litigation funding in the United States is the contingency fee system. Under this scheme, the working capital is provided by the plaintiff’s law firm in exchange for a portion (usually a percentage) of the eventual recovery it may obtain on behalf of its client. The contingent fee system has largely dominated the history of U.S. litigation, serving both a risk-spreading function (allowing under-funded plaintiffs an opportunity to pursue claims) and a gatekeeping function (limiting attorneys’ incentive to litigate meritless claims). However, the high costs of defending against even weak claims can encourage contingent fee cases asserting spurious allegations (where plaintiff’s counsel seek early settlement at substantial value, but still less than the cost to the defendant of litigating the action). Traditionally, while some leading plaintiffs’ firms fund contingent fee cases using their own capital, many rely on outside funding − usually credit lines from commercial banks. Two new forms of litigation funding that have recently gained prominence, ascending with both acclaim and controversy, include alternative litigation finance (“ALF”) and non-practising patent claimants. One form of ALF involves short-term loans to finance small consumer claims. In this scenario, the funder provides capital directly to plaintiffs, usually for medical or housing claims, often with high monthly compound interest. (The interest is almost always very high, in some cases reaching up to 500 per cent.) This “legal loan-sharking” often targets low-income plaintiffs willing to trade early, and certain cash payments against a potentially large future recovery. By funding plaintiffs directly and labelling the funding as “advances” rather than “loans”, these funders avoid statutes that protect against fee-splitting and usury. Some ALF proponents argue that these funders provide justice for cashstrapped plaintiffs. This may be particularly true in tort class actions against deep-pocketed defendants, where ALF provides numerous injured plaintiffs with a unique opportunity to recover damages. The second form of ALF, which involves large loans to businesses funding corporate litigation, is often criticised for increasing litigation. Regardless of the source and magnitude of a plaintiff’s
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funds, however, attorneys are limited by their own ethical standards and the rules of civil procedure. Further, financial incentives may pressure funders to provide non-recourse loans only for meritorious claims. ALF may even deter tortious behaviour, decreasing litigation in the long run. Empirical studies regarding ALF’s impact on the U.S. economy and legal system will inform this debate in the coming decades. Non-practising patent owners (pejoratively referred to as “patent trolls”) are another example of the monetisation of legal claims. While the term is used broadly, patent trolls generally refer to entities that do not practise any patented invention or make any product, but hold patent rights and sue others for infringement. A typical patent troll business model is to buy patents from bankrupt companies or cash-strapped owners, threaten to sue potential infringers, then either collect licence fees or sue with the intent to settle. Trial is the last resort, because the patent troll’s goal is to monetise the patent, and the risk of having the patent claims invalidated at trial usually outweighs the benefit of earlier settlement. With even a modestly meritorious claim, the fact that litigation costs alone could possibly drive a small company out of the market gives the patent troll tremendous bargaining power. Thus, settlements tend to occur early, before the validity of the claim is adjudicated. Critics view trolling as a societal burden. All three branches of the U.S. Government have taken the stance that trolls do more harm than good, and have taken action to mitigate their power. Some defend patent trolls, noting that many potential plaintiffs are victims, not exploiters, of the high costs of discovery. Thus, they argue, patent trolls promote justice by alleviating the all-or-nothing nature of patent litigation for underfunded individuals or small companies. More broadly, supporters argue that patent trolls serve to foster market efficiency and innovation by providing liquidity and assurance that inventors will be paid for their inventions. Given the emerging ALF litigation system and the slow, incremental policy adaptations, ALF and patent trolls will likely continue to impact the U.S. economy and legal system for decades to come. Interim relief In cases where a plaintiff’s injury cannot be adequately compensated by money damages alone, various forms of injunctive relief may be available. Courts can, for example, enjoin companies from making false or misleading statements in connection with an advertising campaign, stop developers from breaking ground on construction projects, or force employers to reinstate employees who were wrongfully terminated. Even in the face of irreparable injury, courts’ power to grant injunctions is tempered by considerations of enforcement and the nature of the activity sought to be enjoined. Courts are less likely to grant injunctions requiring a defendant to affirmatively do something than preventing a defendant from doing something, as the former is more difficult to supervise and enforce. Courts cannot require individuals to perform personal services contracts, not only because of the difficulty in enforcement (particularly where the contract involves the application of taste, skill or judgment), but also because this form of injunction has been found to constitute an impermissible form of involuntary servitude. Additionally, courts normally will not issue injunctions that would stifle speech − for example, to prevent defamation or invasion of privacy. Also, courts generally will not enjoin the commission of a crime. Courts may award “permanent” injunctive relief only after a determination has been reached on the merits. When irreparable harm is imminent, however, and the matter cannot wait until a permanent injunction can be granted, a plaintiff may seek a temporary restraining order (“TRO”) or preliminary injunction. These provisional forms of relief are intended to preserve the status quo until a final decision on the merits is reached and a permanent injunction can be granted. In general, to obtain a preliminary injunction, plaintiffs must show that: (1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm if the injunction is not granted; (3) the balance of harms weighs in their favour; and (4) the grant of an injunction would serve the public interest. In emergency situations, plaintiffs can seek a TRO by proving that these requirements are satisfied and, in addition, that there is an immediate need for the court’s intervention that cannot wait until a preliminary injunction can be granted. Courts can grant a TRO ex parte − i.e., without GLI - Litigation & Dispute Resolution Second Edition
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notifying the party to whom the TRO is directed. In some situations, notifying the adverse party would frustrate the purpose of the TRO − for example, where the adverse party might dispose of or hide assets, or reveal a trade secret. TROs are often used in the contexts of domestic violence, stalking, and sexual assault or harassment, where they are often referred to as “restraining orders”. Attachment is a provisional remedy that a plaintiff can use to secure a defendant’s assets while attempting to obtain a judgment. A writ of attachment allows creditors holding unsecured claims to create judicial liens on the debtor’s property before final adjudication of the claims sued upon. The creditor must prove the probable validity of his or her claim, and that the attachment is not being sought for a purpose other than the recovery of the claim upon which the attachment is based. With respect to personal property, replevin is a legal remedy by which a litigant can obtain goods that have been unlawfully withheld from his or her possession. Replevin forces the defendant to return the property in question at the outset of the action. For example, automobile finance companies commonly use replevin upon a borrower’s default to obtain possession of the vehicle securing the loan. Although U.S. law permits creditors to obtain a writ of attachment, the U.S. Supreme Court has held that federal courts cannot issue injunctions freezing a debtor’s assets, prior to judgment, in which no lien or equitable interest is claimed. Such orders are commonly referred to as “freezing orders”, or “Mereva injunctions” in Commonwealth jurisdictions. State court interpretations regarding their powers to issue freezing orders have been inconsistent. In 2012, the Uniform Law Commission, which is tasked with drafting model legislation, completed the Uniform Asset-Freezing Orders Act. The Act borrows heavily from existing law relating to asset-freezing orders in England and Canada, as well as U.S. law relating to TROs and preliminary injunctions. Under the Act’s provisions, a party can obtain an asset-freezing order only if it establishes that there is substantial likelihood that the assets of a party against which the order is sought will be dissipated and, as a result, will be insufficient to satisfy a judgment. As of May 2013, two states (Colorado and North Dakota) and the District of Columbia have introduced versions of the Act, but no jurisdictions have yet adopted it. International arbitration The recognition and enforcement of international arbitration agreements and foreign arbitral awards in the United States is largely governed by multilateral conventions. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and the Inter-American Convention (the “Panama Convention”) have been incorporated into domestic U.S. law through Chapters Two and Three of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. Currently, 148 States are parties to the New York Convention and nearly 20 States are parties to the Panama Convention. Both Conventions require courts of Contracting States to recognise and enforce arbitration awards made in other Contracting States. The FAA creates a uniform body of substantive law regulating arbitration agreements in the United States. However, the FAA does not necessarily dictate the procedural rules governing how an arbitration is conducted. For instance, parties to an international arbitration often select the procedural rules of a particular State or arbitration institution to govern an arbitration. Arbitral institutions provide arbitration services to assist parties in successfully resolving their disputes. These services include administering arbitration rules, ensuring qualified arbitrators are appointed, controlling costs, and facilitating communications. Many of these institutions also publish procedural rules for use in arbitrations. Two of the most prominent international arbitration institutions in the United States are the International Centre for Dispute Resolution (“ICDR”) and the International Centre for the Settlement of Investment Disputes (“ICSID”). The ICDR, headquartered in New York, is part of the American Arbitration Association. The ICDR administers a slightly higher number of international commercial cases than the International Chamber of Commerce. The ICSID, located in Washington, D.C., is affiliated with the World Bank and facilitates arbitration and conciliation of legal disputes between international investors. Since its inception in 1966, ICSID has registered nearly 400 arbitration cases. The United States is a popular venue for international arbitration because its laws are favourable to the recognition and enforcement of foreign arbitration awards. New York, Washington, D.C., Houston, GLI - Litigation & Dispute Resolution Second Edition
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Miami, Chicago, Los Angeles and San Francisco are among the most popular places to conduct international arbitrations in the United States. Many of these locations have their own specific draw. For instance, New York is a popular venue for financial disputes; Miami is commonly used for Latin American arbitrations; Houston is often chosen for oil and gas disputes; and Washington, D.C. hosts investment disputes administered by the ICSID. Review of arbitration awards by U.S. courts is very limited. Under the New York Convention as incorporated by the FAA, federal courts will enforce foreign arbitration awards unless one of a limited number of grounds for denial is shown to exist. Grounds for denial include that the award is invalid under the law of the foreign country, or that enforcement of the award would violate public policy. The most common attack (but one that is rarely successful) is that the arbitrators exceeded their powers under FAA section 10(a). Although the FAA provides federal courts with subject matter jurisdiction over proceedings falling under the New York and Panama Conventions, a growing number of U.S. courts have refused to enforce international awards based on a lack of “personal jurisdiction” over a foreign defendant. Under the doctrine of personal jurisdiction, a court can only adjudicate the rights of a defendant residing outside the geographical jurisdiction of the court if the defendant has a sufficiently meaningful connection with the jurisdiction. A recent decision by a federal court of appeal highlights this issue. A corporation based in the Marshall Islands filed a lawsuit in Louisiana federal court to enforce an arbitration award it had obtained in London against two Chinese shipbuilding companies. The district court dismissed the enforcement action for lack of personal jurisdiction over the Chinese companies, and the court of appeal affirmed. The court rejected the plaintiff’s argument that personal jurisdiction is not a valid defence under the New York Convention, and held that dismissal was appropriate as a matter of due process. Under the doctrine of federal pre-emption, the FAA pre-empts state laws which are inconsistent with its purpose. But, since the FAA allows state laws to address matters that are not covered by the federal statute, a growing number of U.S. states have passed laws in the field of international arbitration. Notably, the state of Georgia recently passed a law which expressly allows Georgia state courts to enforce arbitral awards regardless of the country where the award was made. The law also specifies grounds for refusing to recognise or enforce such awards, though the grounds specified in the statute appear co-extensive with the FAA’s similar provisions. Mediation and ADR As the number of lawsuits has increased, courts’ dockets have become more congested and litigation costs have skyrocketed, alternative dispute resolution (“ADR”) has become an increasingly popular choice for litigants and courts. The most common forms of ADR include arbitration, mediation, settlement conferences, and early neutral evaluation. Arbitration is an adversarial proceeding before a neutral arbitrator authorised to render a judgment on the merits of the case. Arbitration is generally believed to be faster, less formal and less expensive than a court trial. Arbitration awards are subject to judicial review but, as discussed previously, can be vacated only where certain enumerated grounds under the FAA are met. Parties can agree to arbitrate after a dispute arises, or before. In fact, many companies include provisions in their contracts mandating that any dispute arising out of the parties’ contractual relationship may be resolved only through arbitration. Arbitration agreements are generally upheld by the courts, but may be subject to some scrutiny when they are included in “contracts of adhesion” − i.e., contracts drafted by the party with superior bargaining power and offered on a “take it or leave it” basis. In 2011, the Supreme Court decided the case of AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011), in which the Court upheld the enforceability of provisions in consumer contracts requiring the arbitration of consumer disputes. Under Concepcion, arbitration provisions have been used successfully by large corporations to thwart potential consumer class action lawsuits. An alternative to traditional arbitration is non-binding arbitration, in which the arbitrator’s award does not bind the parties. Non-binding arbitration is most commonly used as a basis for voluntary settlement negotiations. GLI - Litigation & Dispute Resolution Second Edition
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Mediation and settlement conferences provide a forum for parties to engage in supervised settlement discussions. Mediation is facilitated by a neutral mediator, who can be selected by the parties or appointed by the court. Typically, mediation begins with presentations of each side’s view of the case, followed by individual or joint sessions, or a combination. During individual sessions, the mediator engages in “shuttle diplomacy,” acting as an intermediary between the parties. Settlement conferences are similar in nature, but are presided over by a judge, typically a magistrate judge. Although mediation and settlement conferences are usually voluntary, they can also be ordered by the court. Early neutral evaluation aims to position a case for early resolution, whether by settlement, dispositive motion, or trial. Under this process, an evaluator, generally an experienced attorney with expertise in the case’s subject matter, hosts an informal meeting of clients and counsel. At this meeting, each side presents evidence and arguments supporting their case. The evaluator will identify the strengths and weaknesses of each side’s case, provide an estimate of likely damages (or a range), and generate a written evaluation report. Early neutral evaluation provides a unique opportunity to engage in frank discussions and make significant progress towards, if not reach, a mutually agreeable settlement before spending significant amounts of money on discovery. Importantly, all of these forms of ADR are bound by confidentiality. As a general rule, statements made by parties, counsel or neutrals in the context of an arbitration, mediation or early neutral evaluation, are strictly confidential, and will not be admissible as evidence in any future court proceeding. ***
1.
Endnote The authors would also like to thank Winston & Strawn’s Los Angeles summer associates Ashley Caldwell, Raquel Hagan, and Sam Payne for their contributions to this chapter.
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Stephen R. Smerek Tel: +1 213 615 1735 / Email:
[email protected] Stephen Smerek is a partner in Winston & Strawn’s Los Angeles office. Mr. Smerek concentrates his practice in class action, intellectual property, and complex commercial litigation matters. Mr. Smerek received a J.D., summa cum laude, in 1993 from Boston University School of Law, where he served as topic and book review editor for the Boston University Law Review and received several academic awards, including the Dr. John Ordronaux Prize and the Alumni Academic Achievement Award. He received a B.A., with distinction, from Indiana University in 1990. Mr. Smerek was awarded the 2011 Burton Legal Writing Award for his article, “The Long Arm of the Law: Morrison, Dodd-Frank, and the Extraterritorial Reach of U.S. Regulators”, published in the BNA Securities Regulation & Law Reporter and reprinted in the BNA International World Securities Law Report. In 2012, Mr. Smerek was a key member of the trial team in the highly publicised case of Monsanto Co. v. E.I. duPont de Nemours & Co., obtaining a billion dollar verdict for client Monsanto. The verdict – dubbed “remarkable” by The American Lawyer – was reported to be the fifth-largest patent verdict in U.S. history. Bruce R. Braun Tel: +1 312 558 5139 / Email:
[email protected] Bruce Braun, a partner in Winston & Strawn’s litigation department, is the firm’s Global Head of the Complex Commercial Practice Group. Mr. Braun’s practice focuses on complex commercial matters, including auditor malpractice and fraud defence, class action prosecution and defence, multi-district litigation, antitrust litigation, corporate internal investigations, fiduciary duty and contract cases, intellectual property disputes, and professional liability matters. Mr. Braun has been recognised as one of the top litigators in the nation. American Lawyer selected him as one of its “45 Under Forty-Five: the Rising Stars of the Private Bar”. Mr. Braun has also been named one of Chambers USA’s America’s Leading Lawyers for Business, and one of BTI Consulting’s Client Service All-Stars. Chambers describes him as “a ‘top-flight trial guy’ with a growing reputation”. The American Lawyer selected him as its “Litigator In The Spotlight” in its November 2009 issue for a series of high-profile victories. Most recently, he was selected as one of the 2011-2012 Lawdragon 500 Leading Lawyers in America, and Benchmark Litigation named him to its elite group of Chicago’s “Litigation Stars”. Andrew S. Jick Tel: +1 213 615 1942 / Email:
[email protected] Andrew Jick is a litigation associate in Winston & Strawn’s Los Angeles office. Mr. Jick concentrates his practice on complex business and commercial litigation, including securities litigation and class action defence. Mr. Jick received a B.S. in Business Administration, summa cum laude, from California State University, Los Angeles in 2007. He received his J.D. from the University of California, Berkeley in 2011, where he was an articles editor for the Berkeley Business Law Journal. While in law school, Mr. Jick served as a judicial extern to the Hon. Dean D. Pregerson, United States District Court for the Central District of California, and as a law clerk for the United States Attorney’s Office.
Winston & Strawn LLP 333 S. Grand Avenue, Los Angeles, CA, 90071-1543, USA Tel: +1 213 615 1700 / Fax: +1 213 615 1750 / URL: http://www.winston.com GLI - Litigation & Dispute Resolution Second Edition
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