Cairn V. India – Investment Treaty Arbitration

Foreign Investors Continue to Find Relief from Soverign Retrospective Taxation Powers of States Under International Law

Introduction 

On December 21, 2020, the international arbitral tribunal (Tribunal) constituted in the case of Cairn Energy Plc and Cairn UK Holdings Limited (collectively ‘Cairn’) v. The Republic of India1 held that India had failed to uphold its obligations under the 1994 Bilateral Investment Treaty between Republic of India and United Kingdom (India – UK BIT) and under international law. The Tribunal ordered India to compensate the Claimants for the total harm suffered by Cairn as a result of India’s breaches. Reports of passing of the award became public on December 23, 2020. The award is not in public domain, save for an excerpt.

The ill-reputed retrospective taxation by India in 2012 spurred three investment treaty arbitration cases against India, viz. (i) Vodafone International Holdings BV v. The Republic of India (Vodafone case); (ii) Cairn Energy Plc and Cairn UK Holdings Limited v The Republic of India (Cairn case); and (iii) Vedanta Resources Plc v. The Republic of India (Vedanta case). In the past three months, two of the three cases (Vodafone case and Cairn case) have been ruled in favour of the foreign investors against India. For a detailed analysis of the Vodafone case, please see our Case Analysis here. For a detailed analysis of various investment treaty arbitration cases involving India in 2019, please see here.

In this piece, we endeavour to provide a comprehensive understanding of the subject transaction, the retrospective taxation measures and other measures adopted by India against Cairn, the arbitration proceedings initiated in 2015; and set out the reported portion of the award. While we do not have the benefit of reviewing the awards in Vodafone case and Cairn case to understand the manner in which the Tribunal has considered subject issues, we conclude with an analysis of the contentious defence of sovereign taxation powers, and how the Vodafone and Cairn cases are a stern reminder of the limits placed by international law upon the State’s sovereign rights of taxation.

The Transaction–3006HE TRANSACTION – 2006

Cairn India Holdings Limited (“CIHL”) was incorporated in Jersey in August, 2006 as a wholly owned subsidiary of Cairn UK Holdings Limited (“CUHL”), a holding company incorporated in the United Kingdom in June, 2006. Under a share exchange agreement between CUHL and CIHL, the former transferred shares constituting the entire issued share capital of nine subsidiaries of the Cairn group, held directly and indirectly by CUHL, that were engaged in the oil and gas sector in India.

In August 2006, Cairn India Limited (CIL) was incorporated in India as a wholly owned subsidiary of CUHL. In October 2006, CUHL sold shares of CIHL to CIL in an internal group restructuring (the Transaction). This was done by way of a subscription and share purchase agreement, and a share purchase deed, through which shares constituting the entire issued share capital of CIHL were transferred to CIL. The consideration was partly in cash and partly in the form of shares of CIL. CIL then divested 30.5% of its shareholding by way of an Initial Public Offering in India in December 2006. As a result of divesting Approx. 30% of its stake in the Subsidiaries and part of IPO proceeds, CUHL received Approx. INR 6101 Crore (Approx. USD 931 Million).2

In December 2011, UK-based Vedanta Resources Plc (Vedanta UK) acquired 59.9% stake in CIL. In April 2017, CIL merged with Vedanta Ltd. (VL), a subsidiary of Vedanta UK. Under the terms of the merger, Cairn Energy, a subsidiary of Vedanta Resources Plc, received ordinary shares and preference shares in VL in exchange for the residual shareholding of approximately 10% in CIL. As a result, Cairn Energy had a shareholding of approximately 5% in VL along-with an interest in preference shares. As on December 31, 2017, this investment was valued at approximately US$ 1.1 billion.3

THE SUPREME COURT DECISION IN VODAFONE CASE – 2012

On January 20, 2012, pursuant to a challenge by Vodafone International Holdings B.V in the Supreme Court of India against imposition of tax by ITD,4 the Supreme Court of India5 discharged VIHBV of the tax liability. The Supreme Court held that sale of share in question to Vodafone did not amount to transfer of a capital asset within the meaning of Section 2(14) of the Income Tax Act. The Apex Court not only quashed the demand of INR 120 billion by way of capital gains tax but also directed refund of INR 25 billion deposited by the Vodafone in terms of the interim order dated November 26, 2010 along with interest at 4% p.a. within two months.

THE INDIAN RETROSPECTIVE TAX LEGISLATION – 2012

Soon after the above judgment, in March 2012, the Indian Parliament passed the Finance Act 2012, which provided for the insertion of two explanations in Section 9(1)(i) of the Income Tax Act (2012 Tax Amendments).6 The first explanation clarified the meaning of the term “through”, stating that: “For the removal of doubts, it is hereby clarified that the expression ‘through’ shall mean and include and shall be deemed to have always meant and included ‘by means of’, ‘in accordance of’ or ‘by reason of’.” The second explanation clarified that “an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India”.

The 2012 Tax Amendments also clarified that the term “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights had been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.

MEASURES BY INDIA AGAINST CUHL – 2014 AND 2015

In January 2014, the Indian tax Assessing Officer initiated reassessment proceedings against CUHL under Sections 147 and 148 of the Income-tax Act, 1961 which provide for reassessment proceedings in cases where income has escaped assessment. The Indian Income Tax Department (ITD) issued a notice to Cairn Energy, requesting information related to the Transaction. The ITD claimed to have identified unassessed taxable income resulting from the Transaction, such transactions having been allegedly undertaken in order to facilitate the IPO of CIL in 2007. The notification sought to implement the 2012 tax Amendments which the ITD sought to apply retrospectively to the Transaction. CUHL was also restricted from selling its shareholding of approximately 10% in CIL, which at that time had a market value of approximately US$ 1bn.

On March 9, 2015, a draft assessment order was passed against CUHL, assessing a principal tax due on the 2006 Transaction to INR 102 billion (US$1.6bn), plus applicable interest and penalties. (CUHL preferred an appeal against the order before the Income Tax Appellate Tribunal, Delhi. On March 9, 2017, the ITAT upheld the capital gains tax demand on CUHL, but rejected the ITD’s demand for interest. In August 2017, CUHL filed an appeal against the ITAT order before the High Court of Delhi, challenging ITAT’s imposition of capital gains tax demand. In October 2017, a cross-appeal was filed by ITD, challenging ITAT’s rejection of the interest demand.

INVOCATION OF INDIA UK BIT BY CUHL AND VEDANTA UK – 2015

On March 10, 2015, Cairn Energy initiated international arbitration proceedings under the India-UK BIT against the aforesaid measures adopted by the Indian government. It reportedly sought restitution of the value effectively seized by the ITD in and since January 2014.7 Cairn’s principal claims were that the assurance of fair and equitable treatment and protections against expropriation afforded by the Treaty have been breached by the actions of the ITD, which had sought to apply punitive retrospective taxes to historical transactions already closely scrutinised and approved by the Government of India.

Soon thereafter, on March 13, 2015, a draft assessment order was passed by the AO against CIL for failure to deduct withholding tax on alleged capital gains arising during 2006 Transaction in the hands of CUHL. The tax demand comprised INR 10247 Crores of tax, and the same amount as interest (approximately USD3.293 billion). On March 27, 2015, Vedanta UK served a notice of claim against the Government of India under the India-United Kingdom BIT, challenging the tax demand (Vedanta case).

The Treaty proceedings in the Cairn case formally commenced in January 2016. Cairn’s submitted its statement of claim in June 2016. In June 2016, India sought a stay on proceedings in Cairn Energy’s arbitration, stating that it is “unfair” that India has to defend two cases at once. On October 6, 2016, India filed an application for bifurcation of the proceedings to decide issues of jurisdiction and admissibility of claims. India submitted its statement of defence in February 2017. On March 31, 2017, the tribunal rejected the application for ‘stay’. On April 19, 2017, the Tribunal rejected the bifurcation application.

DEVELOPMENTS DURING PENDENCY OF ARBITRATION – 2016 TO 2018

Between 2016 and 2018, during the pendency of the international arbitration proceedings, the ITD seized and held CUHL’s shares in VL for a value of approximately USD 1 billion. While the seizure of those shares remained in place, CUHL could not freely exercise its ownership rights over those shares and could not sell them. Further aggravating matters, the ITD sold part of CUHL’s shares in VL to recover part of the tax demand, realising and seizing proceeds of USD 216 million. It continued to pursue enforcement of the tax demand against CUHL’s assets in India. These enforcement actions seizure of dividends due to CUHL worth USD 155 million, and offset of a tax refund of USD 234 million due to CUHL as a result of overpayment of capital gains tax on a separate matter.

Since the ITD attached and seized assets of CUHL to enforce the tax demand, CUHL pleaded before the Tribunal that the effects of the tax assessment should be nullified, and Cairn should receive recompense from India for the loss of value resulting from the attachment of CUHL’s shares in CIL and the withholding of the tax refund, which together total approximately USD 1.3 billion. The reparation sought by CUHL in the arbitration was the monetary value required to restore Cairn to the position it would have enjoyed in 2014 but for the Government of India’s actions in breach of the Treaty.

THE AWARD – DECEMBER 21, 2020

The following excerpt of the award is available in public domain:8

“ X. DECISION

2032. For the foregoing reasons, the Tribunal:

Declares that it has jurisdiction over the Claimant’s claims and that the Claimant’s claims are admissible;

Declares that the Respondent has failed to uphold its obligations under the UK-India BIT and international law, and in particular, that it has failed to accord the Claimants’ investments fair and equitable treatment in violation of Article 3(2) of the Treaty; and finds it unnecessary to make any declaration on other issues for which the Claimants request relief under paragraph 2(a), (c) and (d) of the Claimants’ Updated Request for Relief;

Orders the Respondent to compensate the Claimants for the total harm suffered by the Claimants as a result of its breaches of the Treaty, in the following amounts:

(this portion is not available).”

The Tribunal has reportedly ordered the government to desist from seeking the tax, and to return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.9

CONCLUSION

The Vodafone and Cairn cases are a stern reminder of limits placed by international law upon States’ sovereign rights of taxation. The fundamental argument in favour of upholding treaty obligations, in the wake of other sovereign powers, is that treaties also constitute sovereign commitments by State to protect foreign investment in their territory. This places sovereign powers defined under national laws against sovereign commitments under international law. However, does the latter trump the former? The answer is clichéd; it depends.

Tax disputes present a strong case for non-arbitrability under majority national laws. They are also safeguarded by special statutes, special fora and specific redress mechanisms. Most States would urge that special statutory mechanisms be fully utilised prior to knocking the doors of fora under international investment treaties. Further, availability of redress under special international tax treaties could also remove tax disputes from the ambit of an investment treaty and place them before a special alternate forum.

Additionally, not only the forum but the stage at which investment treaty protection is invoked may also be important. Tribunals have held that claimants cannot simply treat as irrelevant their statutory rights of appeals and available constitutional review processes, and bring before tribunals a decision made by the lowest revenue officer in the assessment chain and purport to treat it as a finally adjudicated demand.10

It may be possible to decipher limits on international law commitments. For instance, it may be possible to adopt interpretations that narrow the scope of treaty application, restrict the qualifying requirements of ‘investment’ and ‘investors’, restrict the standards of treatment to certain circumstances, or interpret implied exclusions in the absence of express ones. What prevails will therefore depend on the language of the treaty and the creative interpretations adopted by lawyers and tribunals.

However, it is also possible to cut the clutter of a ‘tax dispute’ and bring the dispute within the four corners of an ‘investment dispute’ under the treaty. For instance, in the Vodafone and Cairn cases, it may have been possible to make a case for a tax-related investment dispute covered under a BIT, rather than a pure tax dispute that could be arguably excluded. This is also discernible from the fact that while accepting jurisdiction, Vodafone and Cairn tribunals have not directed India to annul the retrospective tax amendments.

This would be beyond the powers of an investment treaty arbitral tribunal, which has jurisdiction solely over the dispute between the State and the investor. Hence, an investment treaty arbitral tribunal that recognises a dispute as a tax-related investment dispute can provide restitution by restraining application of the tax-related measure on the investment. Yet, this continues to be a broad power placed in the hands of investment treaty tribunals, and must be wielded carefully.

In Cairn case, as much as in the Vodafone case, several questions relating to jurisdictional objections seem to have been put to rest by acceptance of jurisdiction by the Tribunal. Most of these objections and rulings could come to light as India has challenged the award in the Vodafone case in Singapore on December 24, 2020 – the final day of the limitation period of 90 days since the award was passed on September 24. It is likely that India will challenge the award in Cairn case as well before the Dutch courts. Hopefully, this will throw light on key issues decided by the Tribunal.

Further, Cairn could also face hurdles in enforcement of the award in India, and may have to find alternate avenues, if the existing rulings of the Delhi High Court are maintained by the enforcing courts in India.11 As per these rulings, there is no scheme for enforcement of treaty arbitration awards under the Indian Arbitration & Conciliation Act 1996, since it purportedly covers only commercial arbitration. It will also be interesting to see how the Indian courts consider an award restraining Indian tax authorities from imposing tax against the foreign investor, under Indian public policy.

International law is a ‘political construct’, Tory MP says

A Conservative MP has defended the government’s intention to break international law by claiming that countries violate it on a “routine” basis. Theresa Villiers, one of Boris Johnson’s former cabinet ministers, argued that it was “not unusual” for countries to disregard the rules and said such laws were merely a “set of political constructs”.

MPs on Monday are debating the Internal Market Bill, which includes provisions that violate the Brexit withdrawal agreement signed by Boris Johnson last year. Senior figures such as John Major, Theresa May and Tony Blair have warned against the plan, saying it will undermine the UK’s standing in the world and make it harder to criticise other countries that violate international law.

But, taking to the TV studios to defend the government’s actions, Ms Villiers argued: “The reality is that there are routine occasions where countries or indeed the EU are in violation of obligations under international law.

“You can see, for example, parliament’s failure to vote to give prisoners votes. Arguably that is in violation of international law but I don’t see people calling the United Kingdom a pariah state because it has failed to abide by that judgment in the European Court of Human Rights.”

She told Sky News: “The reality is international law is a set of political constructs, which actually countries abide by or depart from in a number of circumstances – including the European Union itself. For example, it didn’t apply WTO rules on Airbus. Arguably that’s a violation of international law but the EU did it because the EU felt it was inappropriate to do that.

“It is not unusual for there to be disputes over international law, it is not unusual in certain limited circumstances for countries not to comply with all obligations under international law.”

A new poll by YouGov shows the public is wary of the government’s approach. Forty-seven per cent of voters say planning to break the law is unacceptable, compared to just 25 per cent who say it can be acceptable. Young people are said to be particularly opposed to the government’s plan, with just 6 per cent of 18- to 24-year-olds in favour. Fifty-two per cent of Conservative voters support the move.

Wera Hobhouse, Liberal Democrat justice spokesperson, said: “It seems that under Boris Johnson, accepting the rule of law has become optional. ”

“For the sake of the future of our country, Ministers must stop playing fast and loose with the rule of law. Far from protecting the national interest, Boris Johnson’s government seem content to see the UK’s international reputation trashed.”

 

2021 ICC Arbitration Rules Come Into Force

The International Chamber of Commerce (“ICC”) launched the Revised Rules of Arbitration (“2021 ICC Rules”), on 1 December 2020.1 The 2021 ICC Rules enter into force on January 1, 2021. The ICC Arbitration Rules 2017 (“2017 ICC Rules”) will continue to apply to cases registered prior to January 1, 2021.2 The amendments in the 2021 ICC Rules are a step towards greater efficiency, flexibility and transparency in ICC arbitrations.3

Notably, the following revisions have been undertaken by way of the 2021 ICC Rules:

  1. Joinder of Parties and Consolidation of Proceedings;
  2. Disclosure of Third-Party Funding;
  3. Conflict of Interest and Integrity;
  4. Provisions for Investment Treaty Arbitrations;
  5. Remote Hearings;
  6. Additional Awards;
  7. Increase in Threshold for Expedited Arbitrations;
  8. Governing Law and Settlement of Disputes

We are glad to have comments and inputs from leading arbitrators, practitioners and ICC members around the world on the implications of the 2021 ICC Rules.

Notable Revisions

I. Joinder of Parties and Consolidation of Proceedings

Under the 2017 ICC Rules, additional parties could be joined to the arbitration proceedings after appointment or confirmation of Arbitral Tribunal only upon the agreement of all the parties and the additional parties.4

The 2021 ICC Rules have inserted Article 7(5) to allow for the joinder of additional parties to be decided by the Arbitral Tribunal subject to the additional party accepting the constitution of the arbitral tribunal and agreeing to the Terms of Reference, where applicable. In making its decision, the arbitral tribunal is required to consider all relevant circumstances.5 Thus, additional parties may now be permitted to be joined by the arbitral tribunal without requiring the agreement of all the parties.

Article 10(b), which pertains to consolidation of proceedings has also been amended by the 2021 ICC Rules. The amendment provides much needed clarity with respect to consolidation being allowed: (i) where all parties agree to consolidation; (ii) where all claims are made under the same arbitration agreement or agreements between different parties; and (iii) claims involving different parties and may not be under same arbitration agreement, provided that the dispute arises in connection with the same legal relationship and the arbitration agreements are compatible.6 Thus, the 2021 ICC Rules now clarify that claims that are made under similar arbitration agreement(s) can now be consolidated into a single arbitration proceeding. This inclusion is similar to the newly introduced LCIA Rules 2020.7

Guy Pendall, Partner and Head of Commercial, Regulatory and Disputes Practice at CMS, London states “The amendments to the joinder and consolidation provisions reflect the shift in international practice to provide more practical solutions to parties involved in complex projects or transactions. Empowering a tribunal to join a third party to proceedings, provides a simple procedural solution to what may be needed for certainty in the proceedings. It is not always the case that joinder of a party is a controversial step, and this amendment facilitates such a joinder where all parties agree. The updated consolidation mechanism for proceedings between the same parties even where they are not made under the same arbitration agreement(s), represents a small drafting change, but provides another practical solution for disputes arising under different agreements between the same parties, typically where the disputes arise in relation to the same project or transaction. This trend can also be seen in the recent amendments made to the LCIA Rules in what is now Article 22A. There will be many drivers for the legitimate separation of disputes into separate arbitral proceedings between the same or connected parties, but inflexible arbitral rules should not be one of them. Facilitating efficient joinder or consolidation, with appropriate safeguards, is an important element of modern arbitral practice.”

II. Disclosure of Third-Party Funding

Under the 2021 ICC Rules, parties are now required to disclose the presence of third-party funding arrangements, i.e., “of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration”.8 This change has been brought in to assist prospective arbitrators in complying with their duties of independence and impartiality during the arbitration and obligation on parties to disclosure funding arrangements. Introduction of this specific provision is in sync with their earlier note9 to check conflict of interest between arbitrators and any party having a direct economic interest.

Quentin Pak, Director at Burford Capital, Singapore welcomed the new rules and states that “they support the ICC’s desire to ensure impartiality and independence of arbitral tribunals and understand their view that greater transparency around the presence of arbitration finance has a role to play. Indeed, the new Article 11(7) of the 2021 Arbitration Rules reflects existing ICC practice and the fact that many parties already disclose the fact of external financing voluntarily.

However, the disclosure of arbitration finance may be misused by respondents to create expensive and time-wasting frolics and detours. For instance, although security for costs applications have been rare in ICC arbitrations, the new Article 11(7) may lead to an increase in frivolous applications. With that in mind, ICC tribunals may become more willing under Article 38(5) to take into account such applications in making decisions on costs against respondents. Furthermore, since respondents will now be cognizant of the use of arbitration finance very early on in an arbitration, tribunals may be more likely to permit successful claimants to recover the costs of funding under Article 38(1).”

III. Conflict of Interest and Integrity

Nicola Peart, Associate, Three Crowns LLP, Washington and Member of IBA Arb 40 Sub-Committee, commented that “the ICC Court is the world’s leading arbitration institution, and it works at the forefront of developments in international arbitration procedure. For example, Three Crowns recently represented the ICC in the UK Supreme Court in the case of Halliburton Company v Chubb Bermuda Insurance Ltd & Ors [2020] UKSC 48, to provide an international and independent perspective on the question of when arbitrators need to disclose appointments in multiple references involving one common party. The recent updates to the ICC’s rules demonstrate the ICC’s focus on ensuring its rules reflect the latest procedural developments in international arbitration.”

The 2021 ICC Rules have strengthened the integrity of the arbitration process by including a new provision, Article 17(2), which provides arbitral tribunals the power to take necessary measures to avoid conflict of interest of an arbitrator arising from a change in party representation. The arbitral tribunal can undertake measures after providing the parties an opportunity to comment (in writing) within a suitable time period. These measures can include exclusion of the new party representative from participating in whole, or a part of, the arbitration proceedings.10 Thus, the arbitral tribunal has now been vested with powers to exclude new counsels representing the parties from the arbitration proceedings, or a part thereof, in the event of a conflict of interest.

Article 12(9) has also been inserted, which provides the International Court of Arbitration of the International Chamber of Commerce (“Court”) with powers to appoint each member of the arbitral tribunal, notwithstanding the agreement between the parties on the arbitral tribunal’s constitution, to avoid a significant risk of unequal treatment and unfairness that may affect the validity of the award.11 The interpretation of the term “exceptional circumstances” for Court to intervene is open to intervention and will be adjudicated on a case-to-case basis. Thereby, the Court now has powers to step in and appoint the arbitral tribunal in case the appointment of arbitrators as per the arbitration agreement between the parties would result in unequal treatment and unfairness that may affect the validity of the resultant award. Both the provisions have been introduced with the idea to bring in more transparency and avoid arbitrator challenges.

IV. Provisions for Investment Treaty Arbitrations

The 2021 ICC Rules provide two new provisions pertaining to Investment Treaty Arbitrations. Article 13(6) has been inserted to ensure that in a treaty arbitration, unless the parties agree otherwise, no arbitrator shall have the same nationality of any party to the arbitration.12 Further, Article 29(6)(c) now provides that the ‘Emergency Arbitrator Provisions’ under the 2021 ICC Rules will not be applicable to applications from arbitration agreements arising from a treaty,13 thus clarifying the 2017 ICC Rules.

V. Remote Hearings

The 2021 ICC Rules have modified Article 26 (Hearings) to allow for hearings to be conducted remotely by videoconference, telephone or other appropriate means of communication.14 The 2017 ICC Rules did provide the Tribunal with the discretion to conduct virtual hearings as clarified in their earlier Guidance Note15, the new provision codifies the discretion. This change will cater to the efficiency of arbitration given the risks of travel due to the Covid-19 pandemic.

The new provision encourages virtual and remote hearings in arbitration based on request of parties, at the same time giving some discretion to the Arbitral Tribunal to decide based on relevant facts and circumstances. While the newly constituted ICCA Task Force is currently deliberating the question, “Does a Right to a Physical Hearing Exist in International Arbitration?”, this new provision is aimed at moving forward with the changing times.

Michael Cartier, Partner at Walder Wyss notes that “Even without the new wording of the 2021 ICC Rules, hearings have of course already been conducted by way of videoconference. However, previously remote hearings were often only considered as a second-best option if a witness could otherwise not participate. COVID-19 has led to a shift in perception due to the large-scale adoption of videoconferencing in business life going hand in hand with technical improvements (bandwidth, quality of sound and video) making hearings by videoconference currently the default rather than the exception. Post COVID-19, video conferences will remain an important tool in the arbitrator’s toolbox, and this is rightly reflected in the 2021 ICC Rules.”

Keeping pace with these changes, the 2021 ICC Rules have also introduced amendments to written communications exchanged between parties,16 aligning to a more technology-oriented and environment-friendly form of arbitration proceedings.

Michael further notes that “Arbitration has inexorably been shifting from paper to electronic over the past years. From paper only filings, to simultaneous filing on paper and email, to determinative filing by email followed up by a courtesy hardcopy, to only electronic filing. This development has been fueled due to additional features available by electronic files (full text search, hyperlinked eBriefs) and technical devices (tablets, dual screens) on the one hand, but also the ever-increasing amount of data and hence exhibits that can be submitted on the other hand. The 2021 ICC Rules do away of the anachronism of requiring hardcopies when parties invariably go for an electronic only arbitration.”

VI. Additional Awards

The 2021 ICC Rules have also inserted a provision for additional awards. Parties can now make an application, within 30 days of receipt of the award, for any additional award on the claims made in the arbitration which the arbitral tribunal has omitted to decide.17 This amendment should result in increasing the enforceability of ICC arbitral awards and compliance with due process.

VII. Increase in Threshold for Expedited Arbitrations

The monetary threshold for applying the ‘Expedited Procedure’ provisions of the 2021 ICC Rules (Article 30 and Appendix VI), has been increased from USD 2 Million to USD 3 Million.18 Thus, the scope of application has been enhanced to permit disputes under USD 3 Million to be adjudicated under the Expedited Procedure.

VIII. Governing Law and Settlement of Disputes

The 2021 ICC Rules have provided clarity on the applicable governing law for claims arising out, of or in connection with, the administration of the arbitration proceedings by the Court under the 2021 ICC Rules. Article 43 has been inserted clarifying that such claims shall be governed by French law and settled by the Paris Judicial Tribunal (Tribunal Judiciaire de Paris) in France, having exclusive jurisdiction.19

Conclusion

The changes in the 2021 ICC Rules have certainly aimed to improve transparency and the integrity of the arbitral process, particularly by requiring the disclosure of third-party funding and strengthening the provisions on conflicts of interest. Further, the amendments on joinder and consolidation should be helpful in improving the flexibility and efficiency of the arbitral process. The 2021 ICC Rules have also adapted to the current global scenario by codifying the availability of remote hearings during the arbitral process, keeping pace with the ‘new normal’. The recent amendments solidify the ICC’s presence as the leading arbitral institution.

China takes action after NYSE delist three Chinese telecom firms

The Chinese Ministry of Commerce said Saturday that it would take “necessary measures” to protect its enterprises’ interests, after the New York Stock Exchange (NYSE) announced Thursday that it had begun proceedings to delist three Chinese telecom firms.

The NYSE’s announcement comes in response to US President Donald Trump’s recent executive orderprohibiting any transaction in “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Communist Chinese military company.”

The NYSE has determined to delist China Mobile, China Telecommunications and China Unicom Hong Kong.

A spokesperson for the Chinese Ministry of Commerce stated, “China opposes the US practice of abusing national security to include Chinese enterprises on the list of so-called ‘Communist Chinese military companies’ and will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.”

The ministry also expressed its hope that “the US and China will work together to create a fair, stable and predictable business environment for enterprises and investors, so as to get bilateral economic and trade relations back on track.”

UN rights office condemns Iran’s fourth juvenile execution

UN rights office condemns Iran’s fourth juvenile execution in one year, breaching international law

The Office of the UN High Commissioner for Human Rights (OHCHR) condemned Thursday Iranian officials’ fourth execution of a child offender in 2020, stating that the execution of child offenders is “categorically prohibited under international law.”

Mohammad Hassan Rezaiee was executed early Thursday morning for an offence allegedly committed by him at the age of 16. This was Iran’s fourth confirmed execution of a juvenile offender in 2020, while at least 80 others are believed to be on death row.

Iran is a party to the UN Convention on the Rights of the Child (UNCRC). Article 37 of the UNCRC prohibits capital punishment for offences committed by persons below the age of 18. The OHCHR said that the country’s recent spate of executions is, therefore, a marked breach of its international obligations, hinging only upon the reservation it made when ratifying the UNCRC that “if the text of the Convention is or becomes incompatible with the domestic laws and Islamic standards at any time or in any case, the Government of the Islamic Republic shall not abide by it.”

Amnesty International has repeatedly urged Iranian authorities to amend Article 91 of its penal code to abolish capital punishment for crimes committed by people under the age of 18.

The OHCHR also referred to the “troubling allegations” that Rezaiee was convicted on the basis of forced confessions extracted through torture. Amnesty International reported that despite his young age, he had been kept in prolonged solitary confinement, beaten with sticks, kicked and punched, and whipped with pipe hoses.

High Commissioner Michelle Bachelet “urges Iranian authorities to halt all executions of child offenders and immediately review their cases in line with international human rights law.”

Venezuela high court denies attempt to extend legislative term

The Supreme Court of Venezuela invalidated a motion by the National Assembly on Wednesday to extend its term an additional year in light of the December 6, 2020, parliamentary elections. The National Assembly is currently controlled by the opposition party led by speaker Juan Guaidó. Most of the opposition parties boycotted the December elections on the grounds that it would not be conducted in a free and fair manner.

The Great Patriotic Pole, a party consisting of allies to Nicolas Maduro, won 67.6 percent of the votes in December’s election, according to Indira Alfonso, President of the National Electoral Council. However, it was also reported that only 31 percent of eligible voters cast their votes, only half the turnout of the previous elections held in 2015. Later, the opposition rejected the results as “illegitimate” and voted to extend their term in the National Assembly.

The Supreme Court held that any action by the outgoing lawmakers “with the purpose of perpetuating, extending or continuing their status as National Assembly lawmakers” will be “lacking in judicial validity and effect.”

In the 2015 elections, the opposition was voted into the Assembly with a landslide victory. But two years later, the legislative body was supplanted by Maduro through the creation of a parallel body called the National Constituent Assembly filled with his supporters. The National Assembly is the last institution controlled by the opposition and is now set for takeover by Maduro and his allies.

After becoming the speaker in 2018, Guaidó invoked Article 233 of the Venezuelan Constitution to declare the presidency vacant on grounds of Maduro’s election being “neither free nor fair”. With the opposition’s support, Guaidó swore himself in as interim president on January 23, 2019. Maduro remained in control of the government institutions but many foreign countries recognised Guaidó’s claim. After the court decision, Guaido’s claim to the presidency will also be in limbo as he will no longer be the speaker of the National Assembly.

The new legislators are expected to be sworn in on January 5, 2021. Many Western democracies such as the United States, Canada, and Germany, as well as the European Union, have denounced the December elections.

Zimbabwe Court rules national pledge is unconstitutional

The Constitutional Court of Zimbabwe on Monday ruled that the country’s national pledge was an unconstitutional violation of school children’s right to freedom of conscience and parental rights.

The court’s decision comes four years after Mathew Sogolani applied to the court on the basis of the national pledge’s unconstitutionality. The father of three argued that the national pledge amounted to “fascist propaganda.” Sogolani was represented by David Hofisi of the Zimbabwe Lawyers for Human Rights who filed Sogolani’s application in April 2016. The application called for the court to suspend the mandatory recitation of the pledge in schools. The national pledge went into effect in May 2016.

Sogolani took issue with the pledge’s inclusion of the term “Almighty God” in an otherwise secular pledge:

Almighty God, in whose hands our future lies, I salute the national flag. United in our diversity by our common desire from freedom, justice and equality. Respecting the brave fathers and mothers who lost lives in the Chimurenga/Umvukela and national liberation struggles. We are proud inheritors of the richness of our natural resources. We are proud inheritors of the richness of our natural resources. We are creators and participants in our vibrant traditions and cultures. We commit to honesty and the dignity of hard work.

As a member of the Apostolic Faith Mission church, Sogolani found the inclusion of religious language in government “offensive to his faith.” Hofisi argued that the pledge violated Sogolani’s constitutional rights todignity, freedom of conscience, freedom of expression and equal protection of the law. He also told the court that the pledge was written “in the manner of an oath, a prayer and seems, in the very least, a religious observance.” Sogolani argued that the pledge misused the language of shared by his faith by including God in an oath otherwise addressed to the nation of Zimbabwe.

At the time of its introduction, then Minister of Primary and Secondary Education Professor Paul Mavhima defended the national pledge by pointing to similar customs in both the United States and the United Kingdom. Both countries include a pledge/oath of allegiance before commencing official government matters. But the court rejected this argument and found for Hofisi and Sogolani.

Federal appeals court blocks Cuomo’s limits on religious gatherings in New York

The US Court of Appeals for the Second Circuit ruled Monday that New York Governor Andrew Cuomo’s restrictions on the number of attendees at religious gatherings were likely to be a violation of the Free Exercise Clause of the First Amendment. The Court enjoined the state from enforcing these limits, put in place to address the spread of COVID-19 in areas with the highest prevalence.

Governor Cuomo issued an executive order in October that categorized areas into “zones,” which were assigned colors corresponding to their COVID-19 rates. In all zones, a capacity limit was imposed on houses of worship, but not on essential businesses.

These measures were reviewed by the Supreme Court in late November, and it held similarly that the executive order be blocked because the plaintiffs, including Agudath Israel of America and the Roman Catholic Diocese of Brooklyn, New York, were likely to succeed in challenging these measures once the case was fully litigated.

The Second Circuit took particular issue with the separate identification of houses of worship for certain restrictions. It found the classification of essential businesses versus non-essential businesses, which also have different restrictions, to be “questionable” in some cases. It pointed to the fact that Cuomo “has not asserted that his categorization of businesses as ‘essential’ or ‘non-essential’ was based on any assessment of COVID-19 transmission risk.” Particularly, Cuomo failed to cite data supporting his belief that places of worship have greater transmission rates.

China amends criminal laws in latest anti-doping measure

The Standing Committee of the National People’s Congress on Saturday passed an amendment punishing acts of luring, instigating, forcing or offering banned substances to athletes competing in domestic or international events. Amendment XI was added to Article 355 of the Criminal Law of the People’s Republic of China, a provision which originally punished the act of providing addictive narcotics to another person.

The amendment stipulates that, “anyone who lures, instigates, or cheats athletes into using banned substances in either domestic or international competitions [shall face] up to three years’ imprisonment and a fine.” The amendment comes after the recent push towards imposing greater liability on the entourage of athletes, including doctors, physiotherapists, coaches and other officials who are often accomplice to the act of doping, however, operating confidentially.

The amendment is a historic step which strengthens China’s commitment to end doping in line with declarations of the 5th summit of the International Olympic Committee (2016). While commenting on the coverage of the amendment, Chen Zhiyu, executive director of the China Anti-Doping Agency (CHINADA) remarked that, “[t]he law isn’t aimed at athletes, because cheating athletes will be punished by bans and fines in accordance with the [existing] anti-doping rules.”

Human rights groups join WhatsApp suit against Israel spyware vendor

A coalition of human rights groups Wednesday joined WhatsApp’s lawsuit against Israeli spyware vendor NSO Group and accused the company of selling Pegasus surveillance software to government agencies to target human rights activists under the guise of terrorism laws. The groups filed an amicus brief before the U.S. Court of Appeals for the Ninth Circuit, alleging that NSO Group’s use of surveillance software violates free speech and privacy rights under international law. The rights coalition included Amnesty International, Committee to Protect Journalists, Internet Freedom Foundation, Paradigm Initiative, Privacy International, Red en Defensa de los Derechas Digitales, and Reporters Without Borders.

NGO attorney Kyle McLorg noted in the brief that surveillance technology “threaten[s]” rights to “free expression” and “privacy,” which “international law recognizes as foundational.” He further argued that states might not adopt counterterrorism measures to justify government intrusions, adding that these “justifications should be limited to situations in which the interest of the whole nation is at stake, rather than the interests of the government, a regime, or a power group alone.”

NSO Group has not responded to these allegations but previously argued that it is protected by the sovereign immunity doctrine. This doctrine shields foreign governments from lawsuits when national security issues are implicated because it supplies government and spy agencies with digital break-in tools “necessary for public safety.”

Advocacy Director at the Committee to Protect Journalists Courtney Radsch disagrees. “The repeated and extensive use of NSO Group’s Pegasus spyware to target journalists and their networks contradicts the claims that Pegasus is only used to combat terrorism or criminal activities.”

WhatsApp and parent company Facebook sued NSO last year in the Northern California District Court for hacking the WhatsApp server to plant Pegasus spyware on 1,400 user devices worldwide in violation of the U.S. Computer Fraud and Abuse Act (CFAA) and California Comprehensive Data Access and Fraud Act. These attacks targeted devices belonging to journalists, lawyers, religious leaders, and political dissidents.