arbitration in southern europe: insights from a large ... - SSRN papers

ARBITRATION IN SOUTHERN EUROPE: INSIGHTS FROM A LARGE-SCALE EMPIRICAL STUDY Tony Cole, Pietro Ortolani, and Barbara Warwas* I.

INTRODUCTION

Arbitration has achieved a central place in dispute resolution around the globe, whether as a mechanism for the resolution of high value disputes between companies engaged in cross-border transactions, or for the resolution of smaller consumer, business or employment disputes.1 Despite this prominence, however, little is actually known about the practice of arbitration beyond the elite confines of top-level international commercial arbitration. Books and articles on arbitration are certainly now common, and an extensive network of arbitration conferences exists around the world.2 As a result, despite the confidentiality that often shrouds individual arbitrations, information is unquestionably readily available about both arbitration law and arbitration practice. The difficulty, however, is that the dissemination of information about arbitration through publications and conference talks ensures that an overwhelming focus is placed on the work of elite practitioners, with broader trends in arbitral practice receiving little attention. Both published articles and conference speeches, after all, are written/delivered either by elite practitioners themselves, by academics with little direct knowledge of contemporary arbitral practice who unavoidably must rely on the information provided by elite practitioners, or by individuals wishing to become elite practitioners themselves who therefore have an incentive to portray * Tony Cole, Senior Lecturer, Brunel Law School; Director, Brunel Centre for the Study of Arbitration and Cross-Border Investment. Pietro Ortolani, Senior Research Fellow, Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law. Barbara Warwas, Lecturer in Commercial Law, The Hague University; Of Counsel, Studio Legale Associato Calabresi Guadalupi. 1 See, e.g., LUTZ-CHRISTIAN WOLFF, THE LAW OF CROSS-BORDER BUSINESS TRANSACTIONS 487 (2013) (“Arbitration is a very important if not the most important dispute settlement method in international trade and investment”); SIMON GREENBERG, CHRISTOPHER KEE & J. ROMESH WEERAMANTRY, INTERNATIONAL COMMERCIAL ARBITRATION: AN ASIA-PACIFIC PERSPECTIVE 1 (2011) (“Over the past 20-30 years, international arbitration has become by far the most popular mechanism for resolving international commercial disputes in the Asia-Pacific and globally”). 2 In addition to numerous publications on arbitration in non-specialized journals, leading specialized arbitration journals include THE AMERICAN REVIEW OF INTERNATIONAL ARBITRATION, ARBITRATION INTERNATIONAL, THE JOURNAL OF INTERNATIONAL ARBITRATION, ARBITRATION, TRANSNATIONAL DISPUTE MANAGEMENT, and THE JOURNAL OF INTERNATIONAL DISPUTE SETTLEMENT. Arbitration conferences serve as an important means of professional networking, so are too numerous to mention here. 187

Electronic copy available at: http://ssrn.com/abstract=2652298

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their own practice as consistent with that of elite practitioners. In a field, that is, in which cross-border practice dominates attention, and career progression depends on personal contacts, there is not only little incentive to emphasize local deviations from the transnational norms of elite arbitral practice, but strong disincentives to do so. It was with this situation in mind that when the Legal Affairs Committee of the European Parliament commissioned the authors of this article, along with other members of the Brunel Centre for the Study of Arbitration and Cross-Border Investment, to undertake a study of the “Legal Instruments and Practice of Arbitration across the EU” (the “Study”), it was decided that a central platform of that Study should be large-scale empirical research dedicated to identifying the realities of arbitral practice in each of the States in the European Union plus Switzerland.3 This empirical research took the form of a Survey of arbitration practitioners across the European Union and Switzerland, consisting of 95 questions,4 and addressing such diverse topics as the backgrounds of arbitration practitioners, the procedures used in the arbitrations in which respondents had been involved, the considerations important for recommending arbitration and for selecting an arbitrator, and environmental questions such as the attitude of judges towards arbitration and the desirability of action by the European Union to harmonize arbitration law across the European Union (the “Survey”). The present article reports on and discusses the results of this Survey with respect to six States collectively described here as constituting “Southern Europe”: Cyprus, Greece, Italy, Malta, Portugal and Spain. While these States share an obvious geographic proximity, it is important to emphasize that the decision to collect them into a single article was made not just on this geographic basis, but also due to certain cultural and legal elements shared by these States that might be thought to impact on local arbitral practice. Thus, for example, each of these States has a highly developed legal profession, thereby providing a large number of individuals with the legal expertise necessary to support an effective system of arbitration. In addition, each of these States has had long-standing problems with the slowness of domestic court litigation, a situation that is often seen as a major encouragement to the development of arbitration. Nonetheless, while in some of these States certain types of domestic arbitration have developed to a notable level, and some of these States have generated a significant number of individual arbitration practitioners with international reputations, no State discussed in this article has yet achieved any significant international recognition as a forum for arbitration. The goal of this article, then, is not merely to report the results of the Survey, but is instead to use the results of the Survey, interpreted in the light of the additional information developed in the course of the Study, to generate a picture 3

Available at http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/ IPOL_STU%282015%29509988_EN.pdf 4 Not all questions were asked of all respondents, with inapplicable questions being omitted.

Electronic copy available at: http://ssrn.com/abstract=2652298

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of arbitration in each of these States. In this way the article seeks to deviate from the norm of concentration upon elite international arbitration practice, in order to provide important new information on the realities of and variations that exist in the practice of arbitration across Southern Europe. Indeed, as the discussion below will demonstrate, even within this grouping of six States pre-selected for their significant similarities, notable differences exist in the reality of arbitral practice, whether in the form of domestic arbitration or of international arbitration. Recognizing and appreciating this reality of diversity provides an important foundation for enriching the academic study of arbitration beyond this single article and these six States, moving such study away from an exclusive focus on elite arbitral practice, towards an appreciation of the significant variations that do indeed often characterize the reality of arbitration around the world.5 Part II of the article will provide more detail on the methodology underlying the Survey, as well as on the additional research undertaken for the Study and in the light of which the results from the Survey are interpreted. Chapters III through VIII will then focus on arbitration in one of the States to be discussed here, Chapter III addressing Cyprus, Chapter IV Greece, Chapter V Italy, Chapter VI Malta, Chapter VII Portugal, and Chapter VIII Spain. II. METHODOLOGY As already mentioned, the results reported in this article were generated through the use of a large-scale Survey that was delivered in all States of the European Union and Switzerland. Particular attention was paid to the methods used for generating participants in the Survey, as the reality of arbitration as a field of practice means that it is not possible to identify a discrete group of individuals engaged in arbitral practice, and ask them to complete a survey. Rather, while in each jurisdiction covered by the Survey there were identifiable leading arbitration practitioners, a large amount of arbitration work is often done by individuals who do not specialize in arbitration, but rather specialize in another field and practice arbitration on a more occasional basis. In order to generate a realistic picture of arbitral practice, however, rather than merely repeat the traditional focus of academic arbitration study on leading arbitral practitioners, it was necessary to include such non-specialist practitioners amongst those answering the Survey. Thus, the reality that arbitration as a field of practice is routinely divided into a smaller “core” of leading specialists and a larger “periphery” of less specialized individuals means that a survey solely of individuals in the “core” would risk generating results reflecting solely how arbitration was practiced by its most 5

It should certainly be acknowledged that other publications have already provided some recognition to the importance of regional or local differences in arbitration, the most prominent being GREENBERG ET AL., supra note 1. However, such publications have overwhelmingly focused on differences in national arbitration laws and in arbitration case law, rather than in arbitration practice, as is the focus of this article.

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specialized practitioners, thereby misrepresenting a practical reality in which much arbitration work is done by individuals for whom arbitration is not their central area of work. On the other hand, as the “periphery” is substantially larger than the “core,” a broad survey open to all respondents would risk generating results overwhelmed by responses from individuals who engage in arbitration relatively rarely, thereby misrepresenting again the reality of arbitral practice. This problem was addressed by promoting the Survey in two broad ways. Firstly, international directories were used to identify individuals who could plausibly be seen as members of the “core” of arbitration practitioners within each State, and these individuals were directly contacted and invited to take the Survey. Two of these directories, Chambers Europe and WhosWhoLegal, are best understood as focusing on the “elite” level of practitioner, and individuals recommended in these guides for their arbitration expertise were invited to take the Survey. The third guide, Legal500, provides a broader coverage of domestic legal practice, and was therefore important as a means of identifying individuals with strong domestic practices but potentially less international recognition. In order to achieve this goal, Legal500 was used differently, and individuals were invited to take the Survey if they were identified by Legal500 as prominent in litigation within a State and they self-identified as an arbitration practitioner on their law firm website. The second method of generating participants in the Survey, designed to encourage the participation of “periphery” members of arbitral practice in each State, involved opening the Survey to public participation, by any individual who engaged in the practice of arbitration, whether as a lawyer or as an arbitrator. In order to achieve this goal, the Survey was promoted in a number of ways: (i) the leading arbitral institutions in each State were contacted and asked to promote the Survey; (ii) the Chartered Institute of Arbitrators, the leading global professional arbitration institution, distributed the survey to its membership; (iii) links to the survey were distributed several times on OGEMID, the central online discussion forum for arbitration specialists; (iv) two postings were made on the Kluwer Arbitration Blog, a widely read specialized arbitration blog; (v) law firms identified in Chambers Europe as leading litigation firms in each State covered by the Survey were contacted, and asked to distribute the survey to any individuals at their firm engaged in arbitration; (vi) law societies and similar professional bodies were contacted and asked to distribute the survey. Furthermore, in order to ensure maximum participation, the Survey was translated into all official languages of the European Union. The Survey was ultimately taken by 871 respondents across all States in the European Union/Switzerland, with 723 respondents (83%) completing all questions asked. Because of the cross-border nature of much arbitration practice, individuals were asked to identify the State in which they primarily worked, rather than being allocated to a particular State based upon their geographical location. Distribution of respondents across the European Union was high, with individuals from England, Wales and Northern Ireland, the source of the largest number of

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respondents, constituting only 19.29% of the whole, and all States providing at least eight respondents.6 The Survey itself, however, merely constituted part of the work that was done for the Study, which also included a large amount of traditional academic research, consultation with individual “Reporters” for each State,7 in-person visits with a number of leading arbitral institutions across Europe,8 and the collection of questionnaires from further arbitral institutions.9 Moreover, the Survey was designed to produce results that would be interpreted within the context of the additional information generated in the course of the Study, rather than presented entirely independent of it. In this way, the combination of the results of the Survey and the additional information generated for the Study would provide a richer understanding of the practice of arbitration in each State than would be possible from consideration of the results of the Survey on their own. Finally, in order to ensure the accuracy of the interpretations developed of arbitral practice in each of the States addressed in this article, each national section of this article has been reviewed by members of the “core” group for that State. Feedback from those individuals has been incorporated into the interpretation of the Survey results, and the individuals themselves are identified at the beginning of each national section.

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While the number of respondents from England, Wales and Northern Ireland is significantly larger than the next largest source of respondents, France (6.08%), it is unclear that this constitutes the result of any English-language bias. Such a bias certainly cannot be discounted as potentially part of the explanation, however. London has become the leading center for arbitration practice in Europe, and has by far the largest concentration of leading arbitration professionals of any city in Europe. Consequently, while the most accurate ratio of English arbitration respondents to non-English respondents is obviously open to question, it is to be expected that significantly more respondents would report England, Wales and Northern Ireland as their State than any other State. 7 Reporters for those States included in this article were: Costas Tsirides and Sonia Ajini (Cyprus); Lia Athanasiou (Greece); Domenico Di Pietro (Italy); Marisa Vella (Malta); Gonçalo Malheiro (Portugal); Alejandro López Ortiz (Spain). 8 Institutions visited in the States included in this Study were: The Barcelona Arbitration Court (Spain); The Chamber of Arbitration of Milan (Italy); The Madrid Court of Arbitration (Spain); The Spanish Court of Arbitration (Spain); The Venice Chamber of Arbitration (Italy). 9 Questionnaires were collected from the following institutions in the States included in this Study: The Barcelona Arbitration Court (Spain); The Chamber of Arbitration of Milan (Italy); The Civil and Mercantile Court of Arbitration (Spain); The Cyprus Arbitration & Mediation Centre (Cyprus); The Department of Arbitration, Athens Chamber of Commerce and Industry (Greece); The Italian Association for Arbitration (Italy); The Madrid Court of Arbitration (Spain); The Malta Arbitration Centre (Malta); The Spanish Court of Arbitration (Spain); The Venice Chamber of Arbitration (Italy).

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III. ARBITRATION IN CYPRUS10 A. Respondents The respondent group for Cyprus includes nine individuals, five of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. All respondents were located in Cyprus, with five located in Nicosia, and four located in Limassol.11 Eight respondents were male and one was female.12 All nine respondents self-identified as white.13 Eight respondents work in law firms, with one located in a construction company.14 Eight of the nine respondents were qualified to practice as lawyers, and of the seven respondents who provided the information, two qualified as lawyers in the 1980s, one in the 1990s, two in the 2000s, and one in the 2010s, with one concluding legal study in the 2000s without formally qualifying for legal practice.15 Two respondents were also qualified to practice as lawyers in England, and one in Greece.16 In terms of their participation in arbitration, six serve as lead external counsel, two as non-lead external counsel, and two as in-house counsel for a party.17 Four respondents serve as an arbitrator.18 B. Cyprus as an Arbitral Seat Arbitration in Cyprus is fundamentally characterized by the split that exists between the law and practice relating to international arbitration and to domestic arbitration. While Cyprus is not the only State in which such a difference exists, and arguments have been made for the benefits such a split can provide, the extent of the difference between the two regimes in Cyprus, combined with the small size of the legal marketplace in Cyprus, has created significant problems. Ultimately, the international arbitration market in Cyprus is simply too small to sustain a vibrant community of specialists in international arbitration, which is 10

The authors would like to thank the following for their feedback on arbitration in Cyprus. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: Sonia Ajini (L.G. Zambartas LLC Law Offices, Limassol); Costas Tsirides (Costas Tsirides & Co, Limassol). 11 Amongst “core” respondents, all were located in Cyprus. Three were located in Nicosia, and one in Limassol. 12 Amongst “core” respondents, all were male. 13 Amongst “core” respondents, all self-identified as white. 14 Amongst “core” respondents, all worked in law firms. 15 Amongst “core” respondents, all were qualified to practice as lawyers. Of the three “core” respondents who provided an answer, two qualified in the 1980s, and one in the 1990s. 16 Amongst “core” respondents, two were also qualified to practice law in England. 17 Amongst “core” respondents, all serve as lead external counsel, none performing any other role. 18 Amongst “core” respondents, 2 serve as an arbitrator.

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subject to a far more supportive legal regime than is domestic arbitration. Consequently, practitioners engaged in international arbitration must unavoidably also engage in domestic arbitration, as well as in litigation, and this is in turn likely to affect their approach to international arbitration. In addition, any negative views of arbitration caused by the problems that exist in domestic arbitration in Cyprus will unavoidably impact on the acceptance of and support within Cyprus for international arbitration. Because of the extent of this division between international arbitration and domestic arbitration in Cyprus, it is important initially to examine them separately when considering the characteristics of Cyprus as an arbitral seat. International arbitration in Cyprus is governed by the International Commercial Arbitration Law of 1987, which fundamentally conforms to the UNCITRAL Model Law as it existed at that time, and so is overwhelmingly consistent with contemporary views on the proper regulation of international arbitration in commercial matters. In addition, although few Cypriot respondents to the Survey reported involvement in international arbitration over the past five years, those who had been involved reported a quicker procedure than was reported by respondents Survey-wide, with Cypriot respondents reporting that the international arbitrations on which they had worked took 7-12 months to conclude, compared to a Survey-wide average of 13-24 months. Further, Cypriot respondents to the survey reported that enforcement of international awards in Cypriot courts is, on average, slightly faster than was reported by respondents Survey-wide with respect to the courts of their own States.19 With a modern international arbitration law, little court involvement in ongoing arbitrations, and apparently efficient arbitration proceedings and award enforcement, international arbitration in Cyprus is in many ways a very effective process. Indeed, this positive view of Cypriot international arbitration law and practice is reflected in the fact that when asked in the Survey to recommend five States as the seat for an international arbitration, 87.5% of Cypriot respondents selected Cyprus as one of their five preferred States.20 By contrast, domestic arbitration in Cyprus is regulated by a law known as Cap. 4, which was adopted in 1944, long before arbitration became an important mechanism for the resolution of disputes, and which deviates significantly from modern standards regarding the regulation of arbitration.21 However, while this might suggest that domestic arbitration in Cyprus could potentially benefit 19

Both groups on average reported that enforcement of international awards took 4-6 months; however the average for Cypriot respondents was at a lower level in this range. 20 For purposes of comparison, 1.8% of respondents Survey-wide selected Cyprus as one of their five preferred seats for an international arbitration, making Cyprus the 20th most preferred State out of the 30 States included in the Study. 21 See, e.g., Loizos Papacharalambous, International Arbitration in Cyprus: An Alternative Forum, April 29, 2011, available at http://www.eurojuris.net/en/node/41567 (last visited Jan. 22, 2015) (“Some scholars argue, quite rightly, that the relevant legislation is outdated and contrary to the modern trend since domestic arbitration law is susceptible to extensive intervention by the courts at every stage of the proceedings”).

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significantly from a reform of the applicable legislation, there seems to be little reason to be optimistic that such a reform will take place in the near future. When asked to evaluate the level of understanding of arbitration on the part of Cypriot legislators, Cypriot respondents described that understanding as being between Adequate and Low, with no respondent selecting either High or Very High.22 Moreover, while no Cypriot respondent described Cypriot legislators as having a Negative or Very Negative view of arbitration, less than half of Cypriot respondents described Cypriot legislators as having a Positive view of arbitration, with no respondent describing legislators as having a Very Positive view of arbitration.23 This suggests that while Cypriot legislators are not overtly hostile towards arbitration, there does not currently exist among Cypriot legislators a widespread recognition that arbitration is a desirable dispute resolution mechanism, or the understanding necessary to identify how current problems with domestic arbitration in Cyprus might best be solved. Further evidence of the lack of support for arbitration on the part of the current Cypriot government can be seen in recent government statements regarding the inclusion of arbitration clauses in government contracts. For example, in the 2008 Public Procurement Best Practice Guide, issued by the Public Procurement Directorate of Cyprus, arbitration is described as a “time consuming and high cost process” and an “aggressive method of resolution.”24 Similarly, in 2013 the Accountant General of Cyprus issued instructions to lawyers preparing government contracts not to include arbitration agreements.25 That Cypriot respondents themselves are skeptical about the possibility of legislative reform is arguably indicated by the very high levels of support amongst Cypriot respondents for harmonization by the European Union of both national arbitration laws in European Union Member States, and the laws applicable to international arbitration across the European Union. In both cases Cypriot respondents on average regarded harmonization by the European Union as “Desirable,” with no respondent in either case selecting “Undesirable” or “Very Undesirable.” In the context of the points just made about the attitudes toward and understanding of arbitration on the part of Cypriot legislators, the best explanation for these results, which display a significantly more positive view of

22

By way of comparison, respondents Survey-wide on average described the understanding of arbitration on the part of legislators in their own States as between “Adequate” and “High,” with 38.25% selecting “High” or “Very High.” 23 By way of comparison, respondents Survey-wide on average described legislators in their own States as having a “Positive” view of arbitration, with 18.88% of respondents Survey-wide describing legislators in their own State has having a “Very Positive” view of arbitration. 24 Public Procurement Directorate, Public Procurement Best Practice Guide, Contract Implementation and Management 72 (2008), available at http://www.publicprocurement guides.treasury.gov.cy/OHS-EN/HTML/index.html (last visited Feb. 20, 2015). 25 These instructions are, however, currently under review.

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EU intervention than was found Survey-wide,26 is that Cypriot respondents appear to view legislative intervention by the European Union as a mechanism for forcing domestic legislative change for which there is inadequate support amongst domestic legislators. However, obstacles to the development of arbitration in Cyprus do not only exist at the legislative level, as Cypriot courts were described by Cypriot respondents on average as being stricter on both the validity and the scope of arbitration agreements than was the case with respondents Survey-wide with respect to judges in their own States.27 That is, according to Cypriot respondents to the Survey, a Cypriot court is more likely to find that an arbitration agreement is invalid, or that a particular dispute is not covered by an otherwise valid arbitration agreement, than would most courts across the European Union. Such an uncharacteristically strict approach to the interpretation of arbitration agreements unavoidably creates a disincentive to the use of arbitration, as parties face a significant risk that they will be forced to litigate their dispute in Cypriot courts despite the incorporation into their contract of what they believed to be a valid arbitration agreement. Consistent with this result, while Cypriot judges were described by respondents on average as having an understanding of arbitration between Adequate and High, consistent with the average result Survey-wide, they were also described as having on average a less positive (although non-negative) view of arbitration than was the case with respondents Survey-wide with respect to judges in their own States.28 In other words, Cypriot respondents described Cypriot judges as not having a positive view of arbitration, but did not attribute this view to the judges having an inadequate understanding of arbitration. Rather, Cypriot judges appear to understand arbitration reasonably well, but nonetheless still do not view it positively. A likely explanation for this initially curious result comes from the split already discussed between domestic and international arbitration in Cyprus, 26

For purposes of comparison, respondents Survey-wide on average described both types of harmonization as “Neutral,” although this averaged result hides a significant degree of diversity amongst respondents, rather than general convergence on “Neutral” as a response. In general, Cypriot respondents demonstrate a highly EU-friendly attitude: for example, no respondent qualified the level of understanding of arbitration displayed by the Court of Justice of the European Union as “Low” or “Very Low,” while 40% qualified it as “Very High” (a response only given by 5.99% of respondents Survey-wide). 27 Cypriot respondents on average described Cypriot courts as between “Neutral” and “Strict” with respect to both the validity and the scope of arbitration agreements. Respondents Survey-wide on average described the courts in their own States as between “Neutral” and “Liberal” with respect to both validity and scope. In particular, when asked to describe the attitude of Cypriot courts in interpreting the scope of arbitration agreements, no Cypriot respondent described it as “Liberal” or “Very Liberal.” 28 Cypriot respondents on average described Cypriot judges as being between “Neutral” and “Positive” about arbitration. Respondents Survey-wide on average described judges in their own States as being “Positive” about arbitration.

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combined with what appear to be comparatively low rates of international arbitration in Cyprus. Cypriot respondents, for example, reported that international commercial arbitration constituted 1-25% of their arbitration work over the past five years,29 compared with an average response of 26-50% for respondents Survey-wide. Similarly, when asked to estimate the proportion of international commercial contracts entered into in Cyprus over the past five years that contained an arbitration agreement, Cypriot respondents provided an average estimate of 26-50%, compared with an average estimate of 51-75% from respondents Survey-wide.30 Notably, this is in a context in which Cypriot respondents reported arbitration-related work as constituting only 1-25% of their workload over the past five years,31 with no respondent stating that arbitration constituted over 50% of his/her workload in this period. Indications from the Survey are that despite the supportive legal framework applicable to international arbitration in Cyprus, as discussed above, international arbitration remains comparatively rare. This is important for understanding the views of arbitration held by Cypriot judges because it indicates that those views will to a large degree have been developed through experiences with domestic arbitration, rather than international arbitration. As already discussed, however, and as will be discussed further below, domestic arbitration in Cyprus operates under a problematic legal regime that encourages court intervention into the arbitral process, and is also in other respects significantly less effective as a dispute resolution mechanism than is international arbitration in Cyprus. Where courts have a negative view of domestic arbitration, however, there is a risk that this will affect their decisions in all arbitration-related cases, whether domestic or international, particularly in a jurisdiction in which international arbitration is relatively uncommon, as judges are unlikely to have enough experience with the differences between the two forms of arbitration to be able to draw an appropriate distinction between them in their decisions. As a result, it is perhaps unsurprising that despite not having a low understanding of arbitration, Cypriot judges do not have a strongly positive view of arbitration, as a large proportion of their experience with arbitration is with a system of domestic arbitration that is indeed in some ways problematic.32 29

In terms of both the number of cases and the number of hours worked. Estimates of this nature cannot, of course, serve as accurate guides to the actual number of arbitration agreements included in contracts in a State, but they provide important information on the experience of arbitration professionals regarding the degree to which arbitration has been incorporated into a State’s business practices. 31 In terms of hours worked. 32 Nonetheless, as will be discussed in the following section of the article, whatever the impact of the problems with domestic arbitration in Cyprus on the views of Cypriot judges regarding the value of arbitration as a dispute resolution mechanism, the existence within Cyprus of separate legal regimes for domestic and international arbitration appears to have provided Cypriot judges with a mechanism for justifying differential treatment of the two types of arbitration, with international arbitration being treated in a far more “hands off” manner than domestic arbitration. 30

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C. Arbitral Procedure in Cyprus An analysis of arbitration procedure in Cyprus offers further explanations for the relative underdevelopment of arbitration in Cyprus. For example, while speed is commonly referred to as a key advantage of arbitration over litigation, Cypriot respondents on average reported domestic arbitrations as taking 13-24 months from the initial request for arbitration to the delivery of the final award. Notably, this is not only longer than was reported with respect to domestic arbitrations by respondents Survey-wide, which were on average completed in 7-12 months, but is also longer than was reported by Cypriot respondents for international arbitrations, which were reported as concluding on average in 7-12 months. The primary explanation for the comparative slowness of domestic arbitration in Cyprus appears to be the practices adopted by participants in those arbitrations. Cypriot respondents, for example, reported that arbitrators in domestic arbitrations took on average 7-12 months to deliver the final award after conclusion of the hearings. By comparison, respondents Survey-wide on average reported arbitrators in domestic arbitrations taking 0-3 months after the hearings to deliver their final award. Moreover, while the procedural freedom of arbitration allows an arbitral proceeding to be conducted more quickly than litigation, and Cypriot respondents listed the potential speed of arbitration as the most important reason to propose the use of arbitration, Cypriot respondents nonetheless reported that domestic arbitrations in Cyprus generally closely resemble Cypriot court proceedings. Indeed, according to 40% of Cypriot respondents, domestic arbitration in Cyprus shares “many” procedures with litigation in Cypriot courts, while for another 20% it adopts “effectively the same procedures.” By contrast, none of the respondents stated that domestic arbitration and court litigation share “few” or “no” procedures.33 Notably, if only “core” respondents are considered this result becomes even more pronounced, with all “core” respondents stating that domestic arbitration either shares “many” procedures with court litigation or uses “effectively the same procedures.” While this similarity between domestic arbitral and court procedures might appear merely to be a waste of the procedural freedom that arbitration allows, the practical realities of litigation in Cyprus suggest that adoption of Cypriot court procedures is unlikely to result in an efficient dispute resolution process.

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This is an important difference between Cypriot domestic and international arbitration: as for the latter, 25% of respondents stated that it shares “few” procedures with litigation in Cyprus, and for another 25% the two systems share “No or almost no” procedures. This result evidences that international arbitration could potentially have a positive impact on the way arbitration is conducted in Cyprus; however, given the very limited use of international arbitration in Cyprus, its influence is not strong enough to trigger a change of procedural attitudes in parties and practitioners operating exclusively on the domestic level.

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According to the World Bank’s 2015 Doing Business Report,34 for example, enforcing a contract through litigation in Cyprus takes on average 735 days, as opposed to an average across Europe and Central Asia of 448 days.35 Cypriot respondents do, it should be noted, on average describe arbitration in Cyprus as “Much Faster” than litigation in Cyprus, so it is clear that not all of arbitration’s potential speed advantage is being lost. However, given the slowness of domestic arbitration in Cyprus compared to domestic arbitration across the European Union, this comparative speed advantage of arbitration over litigation appears to result primarily from the particular slowness of litigation in Cyprus, rather than from any benefit being provided by arbitration itself. Given the less than ideal nature of Cypriot court procedures, it might initially be surprising that these same procedures are adopted in arbitration, given that Cypriot law allows procedural freedom in arbitration. However, the low levels of arbitration within Cyprus offers an explanation for this situation, as it precludes the development of a community of specialized arbitration practitioners. As a result, since arbitration is always a minority element of the practice of even those practitioners most familiar with arbitration, both practitioners and arbitrators can be expected to adopt the procedures with which they are most familiar, namely those from court litigation. Thus, domestic arbitration in Cyprus may be trapped in a “vicious circle,” in which arbitration is relatively little used because the procedures used in arbitration do not provide the speedy process that parties expect from arbitration; in turn, however, this means that Cypriot practitioners gain little experience of arbitration, thereby ensuring that when practitioners are involved in arbitration they use the only procedures with which they are familiar – Cypriot court procedures. As a result, domestic arbitration in Cyprus remains comparatively slow, and consequently remains comparatively little used. Importantly, however, a notably different picture of arbitration in Cyprus emerges when international arbitration is considered. For example, as discussed above, while domestic arbitration in Cyprus is a comparatively slow process, taking on average 13-24 months, Cypriot respondents reported the international arbitrations in which they have been involved over the past five years as concluding on average within 7-12 months. Notably, this is not only faster than 34

Available at http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/ Documents/Profiles/Country/CYP.pdf (last visited Feb. 20, 2015). 35 Id. at 72. Indeed, Court litigation in Cyprus is problematic from many points of view. According to the 2014 Council of Europe’s evaluation report on European judicial systems, Cyprus is one of the few European jurisdictions which has not implemented a regular system to evaluate the performance of courts. CEPEJ Report on “European judicial systems – Edition 2014 (2012 data): efficiency and quality of justice,” available at http://www.coe.int/t/dghl/cooperation/cepej/evaluation/2014/Rapport_2014_en.pdf (last visited Feb. 20, 2015) at 134. The same report characterizes Cyprus as a jurisdiction with a low level of computerization of courts. Id. at 126. According again to the World Bank’s 2015 Doing Business Report, supra note 34, at 71, Cyprus stands at 113 in the ranking of 189 economies on the ease of enforcing contracts.

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domestic arbitration in Cyprus, but is also faster than the reported average for international arbitrations Survey-wide, which was 13-24 months. It is, however, this latter comparison, between international arbitration in Cyprus and international arbitration across the European Union, that suggests one explanation for the comparative speed of international arbitration in Cyprus. International arbitration, wherever practiced, usually takes longer than domestic arbitration because international arbitrations are often larger and more complex than domestic arbitrations, due both to the nature of the transactions involved and to the need to assemble parties, arbitrators, counsel and witnesses from two or more States. Cyprus, however, has not yet managed to develop a place within international arbitration, as reflected by the fact that when Survey respondents were asked to recommend five States as the seat of an international arbitration, only seven of the 862 non-Cypriot respondents recommended Cyprus. What this suggests is that Cyprus is unlikely to be selected as the seat of a major international arbitration. Moreover, even if a Cypriot company is involved in an international arbitration, the comparative lack of experience of Cypriot practitioners with international arbitration means that Cypriot companies are unlikely to select Cypriot practitioners as counsel where significant amounts are at stake. Because Cyprus does not have a developed arbitral community, or an international reputation for arbitration, Cypriot respondents are arguably less likely to be hired for the largest and most complex international arbitrations. Consequently, when Cypriot respondents are asked about the speed of the international arbitrations in which they have been involved, the comparatively quick speed of international arbitration in Cyprus is likely to reflect to at least some degree the comparatively smaller nature of the international arbitrations in which Cypriot practitioners serve as counsel. However, while this might serve as an explanation for the comparative speed of international arbitration in Cyprus compared with international arbitration Survey-wide, it cannot explain the similar comparative speed of international arbitration in Cyprus compared with domestic arbitration in Cyprus. It should, then, be emphasized that there are clear indications that the speed of international arbitration in Cyprus is also to a significant degree due to the practices of those involved in such arbitrations. For example, while arbitrators in domestic arbitrations in Cyprus were reported as taking on average 7-12 months to deliver their final award, Cypriot respondents reported that arbitrators in international arbitrations took only 4-6 months, equivalent to the average response for international arbitrations from respondents Survey-wide. Similarly, while Cypriot respondents reported that procedures in domestic arbitrations in Cyprus largely conformed to the procedures used in litigation in Cypriot courts, the picture is far more varied in international arbitration, with 50% of respondents reporting “many” shared procedures, and 50% reporting “few” or “no or almost no” shared procedures. It is clear, therefore, that not only are there significant differences in the laws applicable to domestic and international arbitrations in Cyprus, but practical differences have developed as well, with international arbitration in Cyprus

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converging on the dominant standards within international commercial arbitration, while domestic arbitration remains dominated by Cypriot court practice. However, it is important to remember that while arbitration serves as an important alternative to dispute resolution through court litigation, arbitration practice is nonetheless unavoidably affected by court procedures due to the need to secure court assistance in various aspects of arbitration procedure. Consequently, whatever the attitude of Cypriot practitioners to the use in arbitration of Cypriot litigation procedures, the practices of Cypriot courts will affect all arbitration in Cyprus in some manner, and indeed an impact of this type can arguably be seen in the rates at which arbitration agreements are challenged in Cyprus. Cypriot respondents reported, for example, that although challenges to the validity of an arbitration agreement remained a minority occurrence in domestic arbitration in Cyprus, occurring on average in 1-25% of arbitrations, the rate of challenges reported for domestic arbitration in Cyprus was higher than the rate reported for domestic arbitrations Survey-wide.36 As already noted, Cypriot courts were described by Cypriot respondents on average as being stricter on both the validity and the scope of arbitration agreements than was the case with respondents Survey-wide with respect to their own States. A higher frequency of challenges to the validity of an arbitration agreement, however, is to be expected in a jurisdiction in which courts interpret arbitration agreements relatively strictly. In such a context it makes sense for respondents to challenge the validity of an arbitration agreement, as even if the tribunal finds that it does have jurisdiction, a court can ultimately overrule this decision. This explanation is supported by the fact that Cypriot respondents also reported that once a challenge is made to the validity of an arbitration agreement, parties engaged in a domestic arbitration in Cyprus are considerably more likely to reach a settlement before the tribunal reaches a decision on the issue than was reported on average by respondents Survey-wide,37 indicating a recognition by parties of an increased likelihood that a challenge to the validity of the agreement will ultimately be successful. Notably, however, unlike challenges to the validity of an arbitration agreement, challenges to the jurisdiction of the arbitral tribunal (i.e. to whether a particular issue is covered by an otherwise binding arbitration agreement) were reported to be less common in domestic arbitration in Cyprus than was the case Survey-wide, with 66.67% of Cypriot respondents reporting not having experienced such a challenge in domestic arbitrations in the past five years. The same answer was given by only 39.18% of respondents Survey-wide. A likely 36

Both results were on average 1-25%, but the result for Cyprus was at a higher end of that range. 37 Cypriot respondents reported settlement as occurring on average in 26-50% of domestic arbitrations in which they had been involved and in which a challenge was made to the validity of the arbitration agreement, with the average being at the top end of the 2650% range. By comparison, respondents Survey-wide reported settlement as occurring in 1-25% of such domestic arbitrations, with the average occurring at the very bottom of the 1-25% range.

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explanation for this divergence (more challenges to validity, fewer challenges to jurisdiction) can be found in the lack of a developed arbitration culture in Cyprus. That is, challenges to jurisdiction are more sophisticated than challenges to validity and require a specific knowledge of arbitration: by way of example, the respondent could argue that the arbitration agreement is valid and binding, but does not cover the claims (or some of the claims) put forth by the claimant. By contrast, challenges to the validity of the arbitration agreement are more immediately understandable for practitioners with no specific knowledge of arbitration, since they rely on a commonly invoked defense applicable to any type of contract (i.e. the agreement simply is not binding). Consequently, a divergence between the rate of challenges to validity and to jurisdiction is, perhaps, to be expected in a jurisdiction in which knowledge of the intricacies of arbitration law and practice is relatively uncommon. Court procedure also, of course, impacts directly on arbitration through the need for court involvement in the enforcement of arbitral awards, and the results from the survey indicate a further problem for domestic arbitration in Cyprus in this respect, as Cypriot respondents on average reported the enforcement of domestic arbitration awards in Cyprus as taking 7-12 months, longer than the 4-6 months reported for the enforcement of domestic arbitration awards Survey-wide. Given the slowness of Cypriot courts, as already discussed, such a result should not be surprising. More notable, however, is that starkly different results are reported for international arbitrations, both with respect to the rates of challenge to the validity of arbitral agreements, and with respect to the speed of enforcement of arbitral awards. Cypriot respondents reported the enforcement of foreign arbitral awards as taking on average only 4-6 months, which is not only faster than the speed of enforcement of domestic arbitral awards in Cyprus, but is also faster than the 7-12 month average reported Survey-wide for the enforcement of foreign arbitral awards. Similarly, while Cypriot respondents reported challenges to the validity of arbitration agreements as occurring more often in domestic arbitration than was reported Survey-wide, they reported such challenges as occurring less often in international arbitration than was reported Survey-wide.38 These results are initially surprising, but are perhaps best explained by the different attitudes that Cypriot courts are encouraged to take toward domestic and toward international/foreign arbitration. As discussed above, domestic and international arbitration are regulated by two separate laws, with the law applicable to international arbitration requiring courts to adopt the fundamentally “hands off” approach encapsulated in the UNCITRAL Model Law, while the law 38

41.94% of respondents Survey-wide reported not having worked on a domestic arbitration in the past five years in which the validity of the arbitration agreement was challenged. This was true of only 28.57% of Cypriot respondents. By comparison, while only 30.53% of respondents Survey-wide reported not having worked on an international arbitration in the past five years in which the validity of the arbitration agreement was challenged, this was true of 66.67% of Cypriot respondents.

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applicable to domestic arbitration encourages a far more interventionist approach. What the results just reported suggest, then, is that although, as argued above, Cypriot judges will unavoidably have their views on international arbitration colored by their experiences with domestic arbitration, they have nonetheless maintained the ability to distinguish between the two forms of arbitration with respect to the manner in which court control and support should be exercised. Cypriot judges ultimately see domestic arbitration as a form of dispute resolution fundamentally placed under their control, while they have accepted that international and foreign arbitrations bring different policy concerns into play, and should be granted much greater freedom. The ability of Cypriot judges to endorse this distinction is unquestionably a positive fact for the future of international arbitration in Cyprus. One further aspect of the influence of Cypriot courts on arbitration in Cyprus relates to the long duration of court proceedings in Cyprus. The slowness of Cypriot courts would be expected to serve as an incentive for parties to submit their disputes to arbitration, and indeed the Survey provides evidence for such a conclusion. Specifically, not only did Cypriot respondents place much greater emphasis on the speed of arbitration as a reason to arbitrate than did respondents Survey-wide, rating it as the most important consideration supporting the use of arbitration,39 but Cypriot respondents also reported a much higher rate of postdispute arbitration agreements than was reported Survey-wide, for both domestic and international arbitration.40 Respondents Survey-wide reported that only a minority of the arbitrations in which they had been involved over the past five years were based on an arbitration agreement reached between the parties after a dispute had arisen, reflecting the fact that once a dispute has arisen it is highly likely that one or both parties will see a tactical advantage in resorting to litigation.41 On the other hand, Cypriot respondents reported that post-dispute arbitration agreements served as the basis of the majority of the domestic arbitrations in which they had been involved over the past five years.42 Similarly, while Cypriot respondents reported that 50-75% of the international arbitrations in which they had been involved over the past five years were based upon a pre-dispute arbitration agreement, the results were strongly split, with 57.14% of respondents selecting 76-100% while 42.86% of respondents selected either 1-25% or 0%. 39

By comparison, this was the sixth most important consideration for respondents Survey-wide. 40 While 64.50% of survey respondents stated that 76-100% of arbitrations on which they have worked over the past five years were based on a pre-dispute agreement, the same answer was given by only 25% of Cypriot respondents. 41 Respondents Survey-wide on average reported pre-dispute arbitration agreements as serving as the basis of 50-75% of both the domestic and international arbitrations in which they have been involved over the past five years. 42 Cypriot respondents on average reported pre-dispute arbitration agreements as serving as the basis of 26-50% of the domestic arbitrations in which they have been involved over the past five years, with 50% of respondents selecting 1-25% or 0%.

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Given the lack of a developed arbitration culture in Cyprus, it is unlikely that these results can be explained by parties simply realizing the virtues of arbitration and so voluntarily agreeing to arbitrate rather than litigate. A far more likely reason is that Cypriot parties enter post-dispute arbitration agreements precisely to avoiding the delays inherent in court litigation in Cyprus. This is an important conclusion because despite there being clear recognition of arbitration’s ability to serve as an alternative to court litigation, arbitration remains undeveloped in Cyprus. The most likely explanation for this situation is the degree to which Cypriot courts are willing to intervene in domestic arbitrations. Ultimately, so long as parties believe that any arbitration will ultimately be subjected to intervention and review by Cypriot courts, then they will see little benefit in attempting to avoid court involvement by agreeing to arbitrate. Consequently, until the law and practice relating to the involvement of Cypriot courts is reformed, and a more “hands off” model adopted, arbitration will continue to struggle to develop in Cyprus. D. Cyprus as a Market for Arbitration As already noted, the international arbitration market in Cyprus is simply too small to sustain a vibrant community of arbitration specialists. Consequently, practitioners engaged in international arbitration must unavoidably also engage in litigation, resulting in the problems described in the preceding section. This situation is reflected clearly in the results of the Survey, as none of the Cypriot respondents to the Survey reported arbitration as their primary field of work.43 Indeed, whereas respondents Survey-wide reported, on average, that arbitration constituted 26-50% of their work, the average for Cypriot respondents was 1-25%. Also, 88.89% of Cypriot respondents reported only having taken on between one and four new arbitration cases per year over the past five years, with none of them taking more than nine cases per year. The low degree of involvement in arbitration reported by Cypriot respondents is particularly important because individuals with only a peripheral involvement in arbitration are far less likely to take a survey of this nature, while leading individuals in arbitration in Cyprus were specifically invited to do so. Consequently, the group of individuals taking the Survey can be expected to reflect the more active end of those involved in arbitration in Cyprus. That even these individuals report that arbitration constitutes a minor proportion of their work indicates the level of difficulty involved in attempting to forge an arbitral practice in Cyprus. The impact of the low levels of arbitration in Cyprus, however, can be seen beyond simply the degree to which counsel in Cyprus can become arbitration specialists, as it is also reflected in the ability of individuals in Cyprus to serve as arbitrators. Having an active community of arbitrators is not only essential for the 43

For purposes of comparison, the same response was provided by 37.91% of respondents Survey-wide.

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development of arbitration, as without experienced arbitrators many parties will see arbitration as too risky, it is also essential for the development of local arbitral expertise, and consequently for the ability of local Cypriot practitioners to expand into international arbitration. It is notable, then, that not a single Cypriot respondent who reported having worked as an arbitrator in the past five years reported that serving as arbitrator constituted more than 1-25% of his or her work.44 Indeed, no Cypriot respondent reported accepting more than three appointments as arbitrator per year, and only one of the four respondents who reported serving as arbitrator reported having served in the past five years in an arbitration seated outside Cyprus. As can be expected for a jurisdiction in which opportunities to develop and display arbitration expertise are comparatively rare, the results from the Survey indicate that development as an arbitration practitioner is particularly dependent on social links and personal recommendations. For example, while Survey-wide the most common mechanism through which respondents obtained their first appointment as arbitrator was appointment by an arbitral institution, in Cyprus it is “Appointment by party for whom you had previously performed work” and “Appointment by party due to a social connection with a representative of the party,” with no Cypriot respondent reporting that his/her first appointment as arbitrator was received from an arbitral institution. On one level this difference can be attributed to the fact that prior to 2010 Cyprus did not have an active arbitral institution.45 However, the fact that no Cypriot respondent selected “Appointment by party with which you had no previous connection,” the second-most common source of first arbitrator appointment Survey-wide, indicates that the absence of an arbitral institution in Cyprus is not the only operative factor. Rather, the lack of development of arbitration in Cyprus itself contributes to creation of a situation in which personal contacts achieve a paramount importance, as parties wishing to appoint an arbitrator will have no other mechanism to identify a potential appointee.46 The unfortunate consequence of this situation, however, is that the development of promising individuals is hampered, as access to the appointments necessary to develop arbitral expertise, and to develop an arbitral career, is decided by social and professional contacts, rather than predominantly by merit. This situation can be expected to change with the continued development of the Cyprus Arbitration and Mediation Centre (“CAMC”), established in 2010 with arbitration rules largely based on the 2010 UNCITRAL Arbitration Rules.47 However, the long 44

In terms of the number of hours worked. This was the year in which the Cyprus Arbitration and Mediation Centre (CAMC) was established. 46 For Cypriot arbitrators, the first appointment came from a party for which the arbitrator had previously performed work in 50% of cases (5.59% survey-wide). Social connections with the representative were indicated as the reason for the first appointment in the other 50% of cases (7.45% Survey-wide). 47 See the ARBITRATION RULES OF THE CAMC, available at the CAMC’s website, http://www.cyprusarbitration.com.cy/default.asp?pid=18 (last visited Jan. 8, 2015). 45

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tradition of ad hoc arbitration48 in Cyprus remains an obstacle to the quick development of institutional arbitration, and it will be several years before a significant effect of the CAMC on arbitrator appointments can realistically be expected. In principle, however, the CAMC has the potential to play a key role in the development of a culture of arbitration and in opening up the Cypriot arbitration market for a new generation of arbitrators. The CAMC already offers training seminars and has implemented a system of progressive membership, thereby both assisting new professionals to acquire the necessary expertise to serve efficiently as arbitrators, and providing them with an easily recognizable means of displaying that expertise, thereby potentially enlarging the local arbitration market in an unprecedented way.49 To date, however, the caseload of the CAMC is too limited to allow it to have any direct influence on the way Cypriot arbitrators are appointed. One further aspect of the Cypriot legal market is also important as a constraint on the development of arbitration in Cyprus: The Cypriot legal market is a relatively crowded one, and court proceedings constitute the core business and the primary source of revenue for the vast majority of Cypriot legal practitioners. In this context, therefore, long proceedings and extensive court hearings are often seen as a necessary source of income. Conversely, the encouragement of arbitration triggers an automatic opposition amongst Cypriot legal practitioners, as it would undermine the traditional court-centered system, thus reducing the income of many practitioners. The development of arbitration in Cyprus, then, is currently hindered by a complex interplay between different factors primarily affecting domestic arbitration, including an outdated domestic arbitration statute, an interventionist approach on the part of local courts, procedural similarity with court litigation, the newness of its leading arbitral institution, and the opposition to arbitration on the part of both Cypriot lawyers and parts of the Cypriot government. In turn, the lack of development of domestic arbitration in Cyprus means that practitioners do not gain the experience required to develop the expertise necessary for a career in international arbitration, despite the positive characteristics of international arbitration in Cyprus. In this respect the establishment of the CAMC is an important step for arbitration in Cyprus, as it is primarily through the diffusion within Cyprus of both understanding of and expertise in arbitration that these problems will be surmounted, and the educational activities of an active arbitral institution will be an essential component of that process. Unavoidably, however, the process will not quick.

48

I.e., arbitration not administered by an arbitral institution. To consult the list of the past events organized by CAMC see the information at the CAMC’s website via: http://www.cyprusarbitration.com.cy/default.asp?pid=25 (last visited Jan. 8, 2015). 49

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IV. ARBITRATION IN GREECE50 A. Respondents The respondent group for Greece includes 17 individuals, eleven of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. All respondents were located in Greece, with all located in Athens. Twelve respondents were male and five female.51 All 17 respondents self-identified as white. Fourteen respondents work in law firms, one as a sole practitioner, one in Barristers’ chambers, and one as a “Contractor.”52 Sixteen of the 17 respondents were qualified to practice as lawyers, and of the 15 respondents who provided the information, two qualified as lawyers in the 1970s, six in the 1980s, five in the 1990s, and two in the 2000s.53 One respondent was also qualified to practice as a lawyer in France.54 In terms of their participation in arbitration, eleven serve as lead external counsel, four as non-lead external counsel, and one as in-house counsel for a party.55 Eight respondents serve as an arbitrator.56 B. Greece as an Arbitral Seat The international prominence of Greece within the maritime shipping industry, combined with the reportedly high levels of use of arbitration to resolve maritime disputes, would suggest that Greece should have a thriving arbitration industry.57 However, while arbitration is certainly far from unknown in Greece, it 50

The authors would like to thank the following for their feedback on arbitration in Greece. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: Lia Athanasiou (AthanassiouGerapetritis and Partners Law Firm, Athens); Sotiris I. Dempegiotis (Dryllerakis & Associates Law Firm, Athens); Kriton Metaxopoulos (A. & K. Metaxopoulos & Partners Law Firm, Athens); Nicholas D. Moussas (Moussas & Partners Attorneys at Law, Athens); Marsia Vitali (Athanassiou-Gerapetritis and Partners Law Firm); Gregory Vlachos (Sarantitis Law Firm, Athens). 51 Amongst “core” respondents, nine were male and two female. 52 Amongst “core” respondents, ten worked in law firms, and one as a sole practitioner. 53 Amongst “core” respondents, all were qualified to practice as lawyers. Of the ten “core” respondents who provided an answer, two qualified in the 1970s, four in the 1980s, three in the 1990s, and one in the 2000s. 54 Amongst “core” respondents, one was also qualified to practice law in England. 55 Amongst “core” respondents, eight serve as lead external counsel, four as non-lead external counsel, and one as in-house counsel for a party. 56 Amongst “core” respondents, three serve as an arbitrator. 57 GEORGIOS I. ZEKOS, INTERNATIONAL COMMERCIAL AND MARINE ARBITRATION 299 (2008); ANGHELOS C. FOUSTOUCOS, L’ARBITRAGE – INTERNE ET INTERNATIONAL – EN DROIT PRIVE HELLENIQUE (1976).

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remains a specialized practice, and Greece has obtained very little recognition internationally as an arbitral seat. This unpopularity of Greece as a seat of arbitration can be seen very clearly in two results from the Survey, arising from the question in which respondents were asked to recommend five seats for an international arbitration from among those States covered in the Study. Firstly, of the 854 non-Greek respondents, only four recommended Greece as one of their five preferred seats. Moreover, three of those four respondents were from Greek-speaking Cyprus. Greece has clearly not achieved broad recognition across Europe as a desirable arbitral seat. This first result, however, might simply reflect a lack of knowledge of the nature of arbitration in Greece on the part of non-Greek respondents, rather than reflecting anything undesirable about arbitration in Greece. It cannot, therefore, by itself support a conclusion that Greece is regarded as an undesirable seat for arbitration. Stronger support for this latter conclusion arises from the second result, namely that only 56.25% of Greek respondents themselves recommended Greece as a preferred arbitral seat. This result is significant because one of the common characteristics of responses to this question across the Survey was the existence of a “local bias,” according to which respondents from a particular State would routinely include their own State as one of the five they recommended. That almost half of Greek respondents failed to do this is a notable reflection of their judgment of the current state of arbitration in Greece. Moreover, a local bias of this type can be expected to be particularly prominent among practitioners with less practical experience in international arbitration, who will as a result be less familiar with alternative foreign seats, and will recommend their own jurisdiction on the ground that at least the risks and weaknesses of their jurisdiction are known.58 Nonetheless, when only those Greek respondents are considered who reported that a minority of their arbitration work was made up of international commercial arbitrations, the same result obtains, with only approximately 60% of such respondents recommending Greece as one of their five preferred arbitral seats.59 That even those respondents whose primary familiarity with arbitration is with arbitration in Greece do not strongly endorse

58

In addition, such a pro-domestic bias is likely to be stronger in Southern European jurisdictions, since the relative underdevelopment of arbitration in Southern Europe may breed a stronger perceived need in respondents to bridge the gap between their home State and pro-arbitration Western European jurisdictions. As noted by Thomas J. Stipanowich & Zachary P. Ulrich, Arbitration in Evolution: Current Practices and Perspectives of Experienced Commercial Arbitrators, 25 AM. REV. INT’L ARB. 395, 399 (2014), “respondents may be tempted to provide answers that enhance perceptions of themselves or to “fake good”. . . Thus, they might . . . make statements regarding their practices or perceptions tailored to the purpose of bringing themselves into line with what they perceive to be accepted or desirable conventional norms.” 59 This is true whether the percentage of work is calculated in terms of hours worked or number of cases.

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Greece as an arbitral seat is a clear indication that problems are perceived with the current state of Greek arbitration. The most likely explanation for these results appears to be a combination of certain features of Greek law and the relationship between arbitration and Greek courts. Firstly, while Greek law incorporates a formal distinction between domestic and international arbitration, with different statutes governing each, the application of this distinction by Greek courts can be problematic. Greece adopts a double-track approach to the regulation of arbitration – Book Seven (Articles 867-903) of the Code of Civil Procedure governing domestic arbitration, and Law No. 2735/1999 (commonly referred to as the Law on International Commercial Arbitration or LICA), largely based on the UNCITRAL Model Law, regulating international arbitration.60 This distinction has practical importance because in general the LICA contains more flexible provisions on procedure, while the domestic regime is stricter: by way of example, arbitral tribunals can issue interim measures in an international arbitration, but not in a domestic arbitration;61 similarly, the grounds on which an arbitral award can be annulled62 in domestic arbitration are broader than those on which an award can be annulled in international arbitration.63 As will be clear from the preceding chapter on Cyprus, Greece is far from unique in adopting a legislative distinction between domestic and international arbitration. Problems have arisen in the Greek context, however, with respect to the application of this distinction by Greek courts. Under the terms of the LICA, Greek courts have the power to investigate sua sponte whether an arbitration qualifies as international or domestic,64 and Greek practitioners have reported a willingness on the part of some Greek courts to exercise this power. The problem this practice creates is that the differences between the legal regimes applicable to domestic arbitration and to international arbitration mean that a court’s determination on this point will have significant impact on the legitimacy of the procedures used in an arbitration, and on the enforceability of

60

Although the LICA reflects most provisions of the 1985 version of the UNCITRAL Model Law, it has not yet incorporated the 2006 revisions of the UNCITRAL Model Law. See Ioannis Vassardanis, National Report for Greece (2012), in ICCA INTERNATIONAL HANDBOOK ON COMMERCIAL ARBITRATION 1-58, at 1 (Jan Paulsson ed., 1984, Supp. No. 72, Dec. 2012). 61 Pursuant to Article 889 of the Greek Code of Civil Procedure, the arbitral tribunal in domestic arbitrations cannot order or modify interim measures, which must be requested from the competent State court. Conversely, in international arbitration, the tribunal has the power to issue anticipatory (Art. 17 LICA) and conservative (Art. 9 LICA) provisional measures. 62 I.e., declared by a court to have no binding legal effect. 63 On domestic arbitration, see Art. 897 of the Code of Civil Procedure. On international arbitration see Art. 34 of the LICA. 64 The substantive law applicable to this decision is the LICA, Art. 1(2) (modeled on Art. 1(3) of the 1985 UNCITRAL Model Law on International Commercial Arbitration).

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any resulting arbitral award.65 By deciding that an arbitration qualifies as domestic when the parties and the arbitrators were operating under the assumption that the arbitration was international, the court fundamentally alters post-hoc the legal regime to which the arbitration needed to conform. As a result, an arbitral award delivered in an arbitration that conformed perfectly to the law regulating international arbitration, risks being annulled because of its non-conformity to the law regulating domestic arbitration, even though no-one involved in the proceeding believed they were engaged in a domestic arbitration.66 Indeed, this issue links directly with a second difficulty in the relationship between Greek courts and arbitration, namely the approach of Greek courts to the annulment of domestic arbitration awards under the Greek Code of Civil Procedure. Although Article 895 of the Code of Civil Procedure expressly states that arbitral awards may not be appealed, and Article 897 provides a limited list of grounds on which an award may be annulled, Greek courts have, in some cases, interpreted Article 897 broadly, undertaking an examination of the merits of the award.67 While this is certainly not the dominant practice amongst Greek courts, it is also not a practice isolated to minor courts,68 and so reflects a significant willingness of Greek courts to intervene in the arbitral process, beyond the degree found in the leading arbitral jurisdictions. Results from the Survey provide further evidence for the conclusion that difficulties have been created for the development of arbitration in Greece by both Greek law and the application of that law by Greek courts. When asked about the supportiveness of the Greek laws applicable to arbitration, for example, Greek respondents, while generally having a positive view of those laws, were generally less positive than were respondents Survey-wide with respect to their own national laws.69 While 62.5% of Greek respondents described the Greek laws applicable to arbitration as “Supportive,” only one respondent described them as “Very Supportive,” and 25% described them as “Neutral.” By comparison, Survey-wide 54.78% of respondents described their national laws as “Very Supportive” of arbitration, 29.34% as “Supportive,” and only 11.04% as “Neutral.” Consistent with the above description of Greek arbitration law, then, in which the LICA fundamentally conforms to the UNICTRAL Model Law, and so to contemporary norms on the regulation of international arbitration, while the Code of Civil Procedure adopts a somewhat more restrictive approach to the regulation of domestic arbitration, Greek law can certainly not be described in itself as a significant problem for arbitration in Greece, but it is also not perceived 65

On the differences between domestic and international arbitration in Greece see Panagiotis Asproulias, The Greek Arbitration System: Time for Reform?, available at http://www.ethemis.gr/greek-arbitration-system-time-reform/ (last visited Feb. 20, 2015). 66 The award can be set aside under Art. 34, LICA or Art. 897, CCP. 67 See, e.g., Judgment No. 1735/2014, issued by the Court of Appeal of Athens. 68 Id. 69 On average Greek respondents described Greek law as between “Neutral” and “Supportive” of arbitration, while respondents Survey-wide on average described their own national laws as between “Supportive” and “Very Supportive” of arbitration.

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by Greek practitioners as providing the level of support for arbitration that is found across much of the European Union. The application of that law by Greek courts, then, becomes a more important consideration, as even the conformity of the LICA to the UNCITRAL Model Law does not in itself guarantee that Greek courts will apply the LICA in the same way that courts in leading arbitral jurisdictions apply the Model Law. Indeed, as would be predicted from the preceding discussion, the Survey provides evidence that Greek courts are less supportive of arbitration than courts generally are across the European Union. For example, when asked to describe the strictness of Greek courts in interpreting the validity of arbitration agreements, only 25% of Greek respondents described Greek courts as “Liberal,” and only 6.25% as “Very Liberal.” By comparison, Survey-wide 35.32% of respondents described their own national courts as “Liberal”, and 21.47% as “Very Liberal.” Similar results were received when respondents were asked about the strictness of Greek courts in interpreting the scope of arbitration agreements, with only 18.75% of Greek respondents describing Greek courts as “Liberal” (compared to 34.67% Surveywide), and 6.25% as “Very Liberal” (compared to 21.47% Survey-wide). More broadly, Greek respondents described their national judges as having both a lower understanding of arbitration and a less positive view of arbitration than did respondents Survey-wide on average with respect to judges in their own States.70 Indeed, no Greek respondent described Greek judges as having a “Very High” understanding of arbitration (compared to 20.57% of respondents Surveywide) and only 18.75% described the understanding of Greek judges as “High” (compared to 32.21% Survey-wide). Similarly, no Greek respondent described the attitude of Greek judges towards arbitration as “Very Positive” (compared to 23.44% Survey-wide) and only 25% described it as “Positive” (compared to 42.68% Survey-wide). It should be emphasized, however, that this does not mean that Greek respondents described their national statutes or the attitude of their courts as inadequate or openly unsupportive, as although Greek respondents were less positive about Greek law and judges than were, on average, respondents across the EU, they were rarely negative, with 68.75% of Greek respondents describing Greek judges as having an Adequate understanding of arbitration, and 62.5% of Greek respondents describing Greek judges as having a “Neutral” attitude to arbitration. In other words, Greek respondents to the Survey do not see either Greek law or Greek judges as genuine obstacles to arbitration, but rather as inadequately supportive of it. Nonetheless, the fact that Greek respondents are also strongly supportive of the possible harmonization by the European Union of both national

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On average Greek respondents described Greek judges as having an “Adequate” understanding of arbitration and a “Neutral” attitude towards arbitration. Survey-wide respondents on average described judges in their own States as having an understanding of arbitration between “Adequate” and “High,” and a “Positive” attitude towards arbitration.

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arbitration laws and of the laws applicable to international arbitration, suggests that they do not see this situation as likely to change of its own accord.71 C. Arbitral Procedure in Greece One of the traditional appeals of arbitration over litigation has always been the opportunity that arbitration provides for parties to avoid courts systems that are slow, biased, or otherwise problematic. While arbitration is not inherently fast, the flexibility of arbitral procedure allows parties to create a quicker procedure than they might otherwise experience if they took their dispute to court. The low levels of development of arbitration in Greece, then, are particularly surprising given the notorious slowness of the Greek judicial system.72 Arguably arbitration should thrive in Greece, if only because of the possibility it offers of a speedy resolution of disputes, and indeed 81.25% of Greek respondents described arbitrating a dispute in Greece as “Much Faster” than litigating the same dispute in Greek courts, with a further 12.5% describing it as “Faster.”73 Nonetheless, as already noted, arbitration has not developed substantially in Greece, and as the previous section explained, while Greek arbitration law and Greek courts are not strongly supportive of arbitration, they are not so problematic with respect to arbitration that in themselves they explain this lack of development. The results of the Survey, however, indicate that the procedures used in arbitration in Greece are likely to be a substantial part of the explanation for arbitration’s failure to develop significantly in Greece. While Survey respondents overwhelmingly described arbitration in Greece as significantly faster than litigation in Greek courts, the results of the Survey indicate that this speed benefit arises to a large degree from the extreme slowness of Greek courts, rather than from any particular speed attributable to arbitration in Greece. Indeed, according to Greek respondents, both the domestic and the international arbitrations in which they have been involved over the past five years have taken longer to conclude than was the case with respondents Survey-wide. Survey-wide, for example, 54.34% of respondents reported that in the domestic arbitrations in which they had been involved in the past five years, the award was on average delivered within 12 months of the initial request for arbitration, and 93.77% reported an average period of less than 24 months. Greek respondents, by 71

Seventy-five percent of Greek respondents described the harmonization by the European Union of national arbitration laws as “Desirable” or “Very Desirable,” compared with 39.7% of respondents Survey-wide. 81.25% of Greek respondents described the harmonization by the European Union as “Desirable” or “Very Desirable,” compared with 47.72% of respondents Survey-wide. 72 See, e.g., Access to Justice in Europe: Thematic Study – Greece (2011) at 4-5, available at https://fra.europa.eu/sites/default/files/fra_uploads/1528-access-to-justice2011-country-EL.pdf (last visited Feb. 20, 2015). 73 By comparison, 47.52% of respondents Survey-wide described arbitrating a dispute in their State as “Much Faster” than litigating the dispute in the courts of their State, with a further 34.77% describing it as “Faster.”

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contrast, reported longer time periods, with only 33.33% of respondents reporting an average of less than 12 months, although a comparable 91.66% reported an average of less than 24 months. Similarly, in international arbitrations, 16.15% of respondents Survey-wide reported average periods of less than 12 months, 72.15% less than 24 months, and 98.61% less than 60 months. By contrast, only 7.14% of Greek respondents reported an average period of less than 12 months, 71.42% less than 24 months, and only 87.71% less than 60 months. Arbitration in Greece, then, while notably faster than litigation in Greece, is nonetheless also notably slower than arbitration as broadly practiced across the European Union. Examination of the Survey results relating to arbitral procedure provide some indication of why this is the case. Greek respondents, for example, reported that in both the domestic and the international arbitrations in which they have been involved over the past five years, arbitrators took on average 4-6 months after the end of hearings to deliver the final award. By comparison, 64.21% of respondents Survey-wide described a period of 0-3 months for delivery of an award in domestic arbitration, with 30.46% describing the same period for international arbitration (compared to 14.29% for Greek respondents). More broadly, it should initially be noted that the Survey results do not provide a uniform picture of arbitral procedure in Greece, with Greek respondents providing a range of answers to the question of the level of similarity between the procedures used in Greek courts and those used in the domestic and international arbitrations in which they had been involved in the past five years. Ultimately, however, this level of diversity in procedure is perhaps unsurprising in a country such as Greece, in which Greek litigation procedure is acknowledged to be in some respects problematic, but in which arbitration constitutes a mostly secondary branch of professional activity, episodically used by practitioners with a primary focus on litigation. As a result, while arbitration procedure can be expected to diverge somewhat from litigation procedure, litigation procedure remains the format with which practitioners are most comfortable, and the absence of a developed and professionalized arbitral community means that no coherent alternative has yet been developed. As this would suggest, then, despite the diversity just noted, the influence of court litigation can indeed be seen in certain procedural aspects of arbitration in Greece, particularly in domestic arbitration, in which both the arbitrators and the counsel involved in the proceedings will almost always be Greek. Greek respondents, for example, reported a much higher usage of both pre-hearing written submissions and post-hearing written submissions in both domestic and international arbitration in Greece than was reported on average by respondents Survey-wide.74 In addition, Greek respondents reported that arbitrators in both 74

63.64% of Greek respondents stated that the parties made written submissions after the conclusion of the hearing in 75-100% of all domestic arbitrations on which they have worked in the past five years, compared with 32.19% of respondents Survey-wide. The same answer was given by 64.29% of Greek respondents with respect to international arbitration, compared with 42.81% of respondents Survey-wide.

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domestic and international arbitrations in Greece expected a much greater degree of conformity during oral hearings to pre-hearing written submissions than was reported by respondents Survey-wide. This prioritizing of written submissions reflects closely Greek litigation procedure.75 Similarly, Greek respondents reported that arbitral tribunals in both domestic and international arbitrations were more likely to directly question witnesses than was reported by respondents Survey-wide, and on average described arbitrators in both domestic and international arbitration in Greece as acting in a more “inquisitorial” way than was described by respondents Survey-wide.76 These results again reflect Greek litigation procedure, in which questioning of witnesses by judges and the adoption of an inquisitorial approach more generally by judges is standard.77 It is clear, then, that despite there being no overall conformity between the procedures used in arbitration in Greece and those used in Greek litigation, important similarities do exist. Moreover, the specific similarities identified by the Survey, particularly the emphasis on written pleadings, are likely to provide a significant part of the explanation for the comparative slowness of Greek arbitration. After all, not only are written pleadings unavoidably time-consuming to research and draft, but given the insistence on the part of Greek arbitrators on a close adherence to written pleadings during oral hearings, it becomes especially important that any written pleadings be thorough. The slowness of Greek courts, combined with the unresolved attitude of Greek courts towards arbitration and the characteristics of Greek arbitration law described above also, however, have a further effect on arbitration in Greece through their impact on annulment proceedings. As discussed in the previous section, while the LICA includes only the limited grounds for annulment of international arbitral awards included in the UNCITRAL Model Law, the Code of Civil Procedure provides a broader range of grounds on which domestic arbitral awards can be annulled. Unsurprisingly, then, Greek respondents reported that awards in domestic arbitrations in Greece are far more likely to be subjected to an application for annulment than is the case for domestic arbitral awards Survey75

Nikolaos K. Klamaris, Oral and Written Proceedings as Factors Influencing on the Efficiency in Civil Procedure in Greece (2008), available at http://www.uv.es/ coloquio/ coloquio/comunicaciones/ORAL%20AND%20WRITTEN%20PROCEEDINGS%20AS%20 FACTORS%20INFLUENCING%20ON%20THE%20EFFICIENCY%20IN%20CIVIL%20 PROCEDURE_2_.pdf (last visited Feb. 20, 2015). 76 72.73% of Greek respondents reported arbitrators directly questioning witnesses in 75-100% of the domestic arbitrations in which they had been involved in the past five years, with 71.43% saying the same about international arbitrations. By comparison, the same response was given with respect to domestic arbitration by 50.65% of respondents Survey-wide, and with respect to international arbitration by 53.83% of respondents Survey-wide. 77 See, e.g., Dionysios Spinellis & Calliope D. Spinellis, The Criminal Justice System of Greece, at 6.1, available at http://www-rohan.sdsu.edu/faculty/rwinslow/links/ HEUNI99.htm (last visited Feb. 20, 2015).

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wide. For example, whereas only 11.11% of respondents Survey-wide reported that annulment applications had been made in more than 50% of the domestic arbitrations in which they had been involved in the past five years, the same response was given by 50% of Greek respondents. More surprisingly, despite the more limited grounds for annulment available under the LICA, applications for annulment of international awards are just as common as in domestic arbitration, with 53.84% of Greek respondents reporting such applications in more than half of the arbitrations on which they have worked in the past five years, compared with 8.14% of respondents Survey-wide. In theory, such a result could potentially be explained by the underdevelopment of Greek arbitration, as respondents who have only been involved in one arbitration, for example, would answer with “76-100%” if the award in that arbitration was challenged, thus undermining the statistical relevance of the result. This is certainly a consideration given that 81.25% of Greek respondents stated that they take on four or fewer new arbitration cases each year. Further results from the Survey, however, indicate that this is not the likely explanation. For example, almost all of the Greek respondents who stated that they had experienced annulment attempts in more than 50% of the arbitrations on which they have worked were actually members of the “core” group of Greek respondents, representing individuals with recognized leading arbitration practices. Annulment attempts, that is, actually appear to be more common in those arbitrations in which sophisticated arbitration practitioners are involved. This suggests, then, that a more likely explanation for the reported high rates of annulment applications is that parties who were unsuccessful in an arbitration will use the slowness of the Greek court system, and the willingness of some Greek courts to review the substance of arbitral awards, to avoid or at least slow down the enforcement of arbitral awards. This explanation would be consistent with the high representation of “core” respondents amongst those experiencing annulment attempts, as inexperienced practitioners are less likely to be aware of the grounds on which an annulment application can be made, of the likely success of such an application, and even just how long such an application will take to be resolved. Annulment becomes not a means of remedying a flawed arbitration, but a mechanism through which the problematic nature of the Greek courts can be used to undermine the effectiveness of an arbitral award. D. Greece as a Market for Arbitration Arbitration as a field of practice in Greece is rather small and static: since arbitration is not widely used, it is relatively hard for professionals to enter the field, whether as arbitrators or as counsel. Indeed, the relative underdevelopment of arbitration as a field of practice in Greece can be seen in several of the responses given by Greek respondents to the Survey. Greek respondents, for example, on average reported spending longer in their careers before their first involvement in arbitration than did respondents Survey-wide. While 44.67% of respondents Survey-wide reported their first involvement in an arbitration

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occurring 0-2 years after qualifying to practice law, this was true of only 12.5% of Greek respondents, with 68.75% of Greek respondents reporting a period of over six years.78 Similarly, while 62.17% of respondents Survey-wide reported that arbitration constituted their primary field of work, this was true of only 31.25% of Greek respondents, and of only 27.27% of Greek “core” respondents. Moreover, amongst those for whom arbitration was their primary field of work, all Greek respondents reported spending 10-15 years in legal practice before this was the case. By comparison, 26.49% of respondents Survey-wide for whom arbitration was their primary field of work reported that this became the case 0-2 years after entering legal practice, with 44.53% saying it had occurred in less than five years. In addition, as already mentioned, 81.25% of Greek respondents reported taking on four or fewer new arbitration cases each year, compared with 47.02% of respondents Survey-wide. These results indicate, then, that not only is arbitration in Greece a limited field of practice, unlikely to be the primary field of work even for leading figures, but it is also a relatively static field, difficult for younger practitioners to penetrate. Similar results were found with respect to serving as an arbitrator. While serving as an arbitrator is by its nature a restricted and highly sought after aspect of the profession, and respondents Survey-wide indicated no greater ease in becoming an arbitrator than did Greek respondents, the considerations important for securing appointments as an arbitrator in Greece differed from those Surveywide in significant respects. For example, whereas 47.2% of respondents Surveywide who served as arbitrators reported receiving their first appointment as arbitrator from an arbitral institution, this was the case for only 14.29% of Greek respondents, with the most important source of appointments for Greek respondents, selected by 42.86% of respondents, being “Appointment by party with which you had no previous connection.” This distinction is important because in most jurisdictions arbitral institutions play a major role in the professional development of younger practitioners, with their intimate knowledge of the field allowing them to identify promising individuals who have not yet served as an arbitrator. Parties, on the other hand, will be much less likely to take a chance on an untested individual, unless that individual has already achieved prominence in some other respect. Reflecting this, while 57.14% of Greek respondents who serve as arbitrator reported having received their first appointment as arbitrator within ten years of entering their profession, this was true of only 33.33% of individuals whose first appointment came from a party with whom they had no previous connection, the remainder receiving this appointment after having been in their profession for 10-15 years. A similar picture emerges with respect to the means by which arbitrators secure appointments after their first appointment. Whereas Survey-wide arbitral institutions were the single most important source of appointments for working 78

Compared with 31.76% of respondents Survey-wide who reported a period of over six years.

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arbitrators, for Greek respondents the most important source was again “a party with which you had no previous contact.” While appointment by an arbitral institution was the second most important source for Greek respondents, it was no more important than another source that primarily benefits experienced and highprofile individuals, namely “a party with which your connection was a social connection with a representative of that party,” a far more minor source of appointments Survey-wide.79 The primary explanation for this situation is that there is no major arbitral institution in Greece. While the Department of Arbitration of the Athens Chamber of Commerce and Industry serves as Greece’s primary arbitral institution, it only administered 25 completed arbitrations over the past five years. Just as importantly, however, the Department of Arbitration’s rules regarding the appointment of arbitrators seem ill-structured for the development of new arbitrators, restricting potential appointees to a list of 100 individuals, updated only every two years, and having stringent requirements of qualifications and experience.80 However, the absence of a major arbitral institution is not the sole influencing factor, and results from the Survey indicate that the preferences of Greek parties also play a significant role. For example, when asked to evaluate several factors in terms of their importance in the selection of a party-nominated arbitrator, Greek respondents placed particular emphasis on factors that favor well-established professionals. For example, Greek respondents placed more emphasis than did respondents Survey-wide on “Prior experience with the individual as an arbitrator,” “Professional standing of the arbitrator in the State in which enforcement of the award is expected,” and on “Affiliation of the arbitrator with a law school,” all factors most likely to favor senior and established figures. One particularly notable aspect of the responses given by Greek respondents to this question is that Greek respondents put a stronger emphasis than did respondents Survey-wide on the possession by potential arbitrators of official qualifications, with the examples specified in the Survey being those issued by the Chartered Institute of Arbitrators. This might initially seem to provide an 79

In each case the response was given by only a single Greek respondent, three Greek respondents having selected “Appointment by party with which you had no previous connection.” 80 Presidential Decree No. 31, Jan. 12, 1979, establishing the Athens Chamber of Commerce and Industry, Article 5(2): “[t]he list of arbitrators comprises up to 100 persons, that are distinguished for their integrity, morality, qualifications, and experience, and belong to various branches of Commerce or Industry, or are high grade civil servants, lawyers, judges, professors or assistant professors of Universities, engineers, chemists, chartered accountants, etc., so that suitable arbitrators might be appointed, according to the kind of the dispute. Judges are included in the list following a proposal by the High Council of Judicature.” It should also be noted that, pursuant to Article 11(1) of the 1999 Law on International Commercial Arbitration, there are no particular restrictions for the function of arbitrator: therefore, the introduction of such rigid requirements must be seen as a deliberate regulatory choice for the institution.

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opportunity for junior practitioners, as such qualifications are generally accessible through training, rather than requiring years of practical experience. However, Greek respondents made no distinction between the types of qualification mentioned, placing equal emphasis on ACIArb, MCIArb, FCIArb and Chartered Arbitrator, even though these represent radically different levels of expertise. This suggests that the possession of such qualifications are important as a signifier of prestige and professional distinction, rather than because they are seen as actually assuring expertise. In other words, qualifications are important in Greece because they signal that the prospective arbitrator belongs to an élite of legal practice and is therefore considered fit to perform adjudicatory functions. The effect of such qualifications is, as a result, likely to be much less for junior practitioners who have no other indications of professional distinction. Given the limited number of experienced arbitrators and arbitration practitioners in Greece, it is perhaps unsurprising that arbitrator availability is perceived by Greek respondents as a particular problem. Whereas Survey-wide only 21.77% of respondents described arbitrator availability in domestic arbitration as a “significant” or a “serious” cause of delay with respect to scheduling of hearings or other proceedings requiring in-person participation by arbitrators, the same response was given by 50% of Greek respondents. A similar result was reported in international arbitration, with 38.49% of respondents Survey-wide describing arbitrator availability as a “significant” or “serious” cause of delay, while the same response was given by 46.67% of Greek respondents. It could be argued that the negative impact of the limitations seen in Greece on access to the market for arbitrator appointments is, at least partially, counterbalanced by the positive effect these limitations provide of ensuring a very high quality service, which only top-level experts can guarantee. However, it is difficult to see such an argument succeeding in the context of Greece, both because of the very limited number of individuals in Greece with genuine experience or expertise in arbitration, and because Greek arbitration law incorporates a cap on the fees that can be paid to arbitrators in domestic arbitrations, which is likely to discourage from serving as arbitrator senior practitioners able to earn larger fees in their regular employment.81 Indeed, this conclusion is supported by the fact that whereas 43.75% of Greek respondents reported having served as arbitrator in the past five years, this was true of only 27.27% of Greek “core” respondents, precisely the group most likely to possess significant arbitral expertise.

81

Greek Code of Civil Procedure, Art. 882.

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V. ARBITRATION IN ITALY82 A. Respondents The respondent group for Italy includes 42 individuals, 28 of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. Forty respondents were located in Italy, one in France, and one in the United Kingdom.83 Nineteen respondents were located in Milan, 18 in Rome, three in Florence, one in Paris and one in London.84 Thirty-three respondents were male and 9 female.85 All 42 respondents self-identified as white, with one also self-identifying as American Indian or Alaska Native.86 Thirty-seven respondents work in law firms, two as sole practitioners, one in a company, two in arbitral institutions, and three as academics.87 Thirty-nine of the 42 respondents were qualified to practice as lawyers, and of the 38 respondents who provided the information, one qualified as a lawyer in the 1950s, six in the 1960s, one in the 1970s, ten in the 1980s, thirteen in the 1990s, five in the 2000s, and two in the 2010s.88 One respondent was also qualified to practice as a lawyer in England, one in France, one in Poland, one in Spain, and two in New York (one being qualified only to practice in New York, and not in Italy).89 In terms of their participation in arbitration, 22 serve as lead external counsel, six as non-lead external counsel, five as counsel in an arbitral institution, three as

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The authors would like to thank the following for their feedback on arbitration in Italy. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: Massimo Benedettelli (Arblit, Milan); Piero Bernadini (Ughi e Nunziante Studio Legale, Rome); Cecilia Carrara (Legance – Avvocati Associati, Milan); Antonio Crivellaro (Bonelli, Erede, Pappalardo, Milan); Domenico Di Pietro (Freshfields Bruckhaus Deringer, Milan); Ferdinando Emanuele (Cleary Gottlieb Steen & Hamilton, Rome); Riccardo Luzzatto (Studio dell’Avv. Prof. Riccardo Luzzatto, Milan); Vincenzo Mariconda (Studio Mariconda Associati, Milan); Silvio Martuccelli (Chiomenti Studio Legale, Milan); Luca Radicati di Brozolo (Arblit Milan); Giorgio Sacerdoti (Bocconi University, Milan) 83 Amongst “core” respondents, all were located in Italy. 84 Amongst “core” respondents, 17 were located in Milan, and eleven in Rome. 85 Amongst “core” respondents, 24 were male and four female. 86 Amongst “core” respondents, all self-identified as White, with one also selfidentifying as American Indian or Alaska Native. 87 Amongst “core” respondents, 26 worked in law firms, one as a sole practitioner, and two as academics. 88 Amongst “core” respondents, 27 were qualified to practice as lawyers. Of the 26 “core” respondents who provided an answer, one qualified in the 1950s, five in the 1960s, one in the 1970s, eight in the 1980s, ten in the 1990s, and one in the 2000s. 89 Amongst “core” respondents, one was also qualified to practice law in England, one in France, and one in Spain.

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counsel assisting an arbitrator, and three as in-house counsel for a party.90 Thirtyone respondents serve as an arbitrator.91 B. Italy as an Arbitral Seat Arbitration in Italy has developed in the context of a famously slow Italian court system, which has not only resulted in what anecdotal evidence indicates is a high rate of ad hoc arbitration, but has also to a significant degree prevented Italy from becoming a major arbitral center, despite the presence in Italy of a substantial body of highly regarded arbitration specialists.92 Concerns about the delays that will result from litigating in Italian courts provide an incentive for Italian parties to resort to arbitration, and consequently have resulted in the development of a significant level of domestic arbitration.93 However, concerns about those same delays have often deterred foreign parties from agreeing to arbitrate in Italy, lest the arbitration be delayed by the need to seek court assistance.94 Indeed, Italian legislators have themselves recently begun to promote the use of alternative dispute resolution mechanisms, both in the form of mandatory forms of mediation and negotiation, and by implementing a mechanism through which cases already pending before a State court can be referred to an arbitral tribunal.95 90

Amongst “core” respondents, 24 serve as lead external counsel, three as non-lead external counsel, two as counsel in an arbitral institution, and one as in-house counsel. 91 Amongst “core” respondents, 26 serve as an arbitrator. 92 See, e.g., FERDINANDO EMANUELE & MILO MOLFA, SELECTED ISSUES IN INTERNATIONAL ARBITRATION: THE ITALIAN PERSPECTIVE (2014). 93 The Survey results demonstrate how the long duration of court proceedings operates as a powerful incentive towards arbitration: when asked to enumerate the reasons to propose arbitration, Italian respondents placed a particular emphasis on the need to have the dispute solved, and compensation paid, as quickly as possible. 94 Some nuance should, however, be maintained when discussing the possible impact of court delays on arbitration in Italy. Practitioners have reported, for example, that arbitration-related court proceedings in the major arbitral centers of Milan and Rome are significantly faster than most Italian court proceedings; although this qualification must itself be qualified with recognition that any appeal resulting in a second or third instance court procedure will be likely to result in significant delays. In addition, in case of disputes regarding the validity of an arbitration agreement referring to Italy as the arbitral seat and providing for arbitrato rituale, the parties can bring the dispute directly before the Corte di Cassazione (Italy’s highest instance court) through the use of a “regolamento di giurisdizione” (CPC, Art. 41, as interpreted by the Corte di Cassazione in order No. 24153 of Oct. 25, 2013), reportedly a relatively fast procedure (emails of Feb. 3 and 4, 2015). On the applicability of the “regolamento di giurisdizione” to the case at hand, see Antonio Leandro, Regolamento preventive di giurisdizione e arbitrato estero: riflessioni sul nuovo orientamento della Cassazione italiana, 97(3) RIVISTA DI DIRITTO INTERNAZIONALE 811 (2014). 95 See the introduction of mandatory mediation in certain civil and commercial matters by Law Decree No. 69 of June 21, 2013, which entered into force on June 24,

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The Survey provides evidence that arbitration does indeed, at least to some degree, provide a relatively effective remedy to the slowness of Italian courts, as all Italian respondents described arbitrating a dispute in Italy as faster than litigating the same dispute in Italian courts, with 78.95% describing it as “Much Faster,” and 21.05% describing it as “Slightly Faster.” Nonetheless, while arbitration in Italy is faster than litigation in Italian courts, this has to be seen as to some degree a consequence of the slowness of Italian courts, as Italian respondents also reported that the domestic arbitrations in which they have been involved in the past five years were significantly slower than was reported for domestic arbitrations Survey-wide. Survey-wide, 54.34% of respondents reported that final awards in domestic arbitrations were on average delivered less than 12 months after the initial request for arbitration, with 93.77% reporting final awards being delivered in less than 24 months. By contrast, only 8.82% of Italian respondents reported final awards being delivered on average less than 12 months after the initial request for arbitration, and only 73.53% of Italian respondents reported an average period of less than 24 months.96 Domestic arbitration in Italy, then, while faster than litigation in Italy, remains comparatively slow. While the situation is somewhat improved in the context of international arbitration, Italian respondents still reported notably slower proceedings than were reported by respondents Survey-wide. While 16.15% of respondents Survey-wide reported international arbitration proceedings on average concluding in less than 12 months, only 5.88% of Italian respondents provided the same response. Similarly, while 72.15% of respondents Survey-wide reported international arbitrations on average concluding in less than 24 months, the same response was provided by only 52.94% of Italian respondents. International arbitration in Italy, then, does not suffer from the same extent of delays as domestic arbitration, but nonetheless remains comparatively slower than international arbitration across the European Union. While arbitration in Italy may be a slower process than is found in many other European jurisdictions, it remains significantly faster than Italian litigation. It is, therefore, initially surprising that while domestic arbitration is certainly more developed in Italy than in many other European jurisdictions, it remains a minority dispute resolution mechanism, even for commercial disputes. When 2013, and the enactment of Law Decree No. 132 of Sept. 12, 2014 (in force as of Nov. 10, 2014) that contain the provisions providing for mandatory negotiation and the possibility of transferring certain cases already pending before State courts to arbitration. 96 Notably, under Article 820 of the Italian Code of Civil Procedure, arbitral awards must be rendered within 240 days of the appointment of the arbitrators, with an automatic extension of 180 days where certain conditions exist (e.g. evidence must be collected; a partial award has been delivered). Further extensions are only possible upon agreement of the parties, or if a reasoned decision is provided by the chairman of the arbitral tribunal. See, e.g., Luca G. Radicati di Brozolo & Michele Sabitini, Italy (2012), available at http://www.abanet.org/Document/Default.aspx?DocumentUid=1607A591-F647-F4231-86640C8B7C1FE397. Results from the Survey, however, clearly support a conclusion that extensions beyond the limits provided in Article 820 are common in Italian arbitration.

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Italian respondents were asked to estimate the proportion of domestic commercial contracts entered into in Italy in the past five years that included an arbitration agreement, 76.12% of Italian respondents estimated that arbitration agreements were included in 50% or less of such contracts, with 35.09% estimating 25% or less. 97 However, a much different situation is found with respect to international commercial contracts, with 82.05% of Italian respondents estimating that arbitration agreements are included in more than 50% of such contracts, and 25.64% estimating they are included in more than 75% of such contracts.98 One potential explanation for both the comparatively low estimate of the rate of incorporation of arbitration agreements into domestic commercial contracts, despite the well-known problems with court litigation in Italy, as well as for the apparent disparity between the use of arbitration in international versus domestic commercial contracts, is the perceived high cost of arbitration in Italy compared with litigation in Italy. 97.37% of Italian respondents described arbitrating a dispute in Italy as more expensive than litigating the same dispute in Italian courts, with 71.05% describing it as “Much More Expensive.” By comparison, only 59.87% of respondents Survey-wide described arbitration in their State as more expensive than litigation in the courts of their State, with only 25.91% of respondents Survey-wide describing it as “Much More Expensive.” This result must, of course, be understood in the context of the low direct cost of litigation in Italian courts. However, once court fees, enforcement costs and average lawyers’ fees are all taken into account, Italian litigation is actually among the most expensive in Europe.99 Consequently, this one consideration cannot explain why significantly more Italian respondents described arbitration as more expensive than litigation compared with respondents Survey-wide. A further important consideration, then, must be the specific structure of arbitration in Italy, and the impact that structure has on the cost of domestic Italian arbitration. While in terms of speed arbitration is recognized as providing a desirable alternative to litigation, its costs are perceived as often excessive, even when compared with lengthy court proceedings, thus making it unattractive unless the amount in dispute between the parties is high enough to justify the expense.100 97

By comparison, 78.86% of respondents Survey-wide estimated that arbitration clauses were included in 50% or fewer domestic commercial contracts, with 51.93% estimating 25% or less. 98 By comparison, Survey-wide 60.62% of respondents estimated that arbitration clauses were included in over 50% of international commercial contracts, and 22.46% estimated over 75%. 99 OECD, What Makes Civil Justice Effective (2013), at 3, available at http://www.oecd.org/eco/growth/Civil%20Justice%20Policy%20Note.pdf (last visited Feb. 20, 2015). 100 Although, as is discussed below, a distinction should be noted here between ad hoc arbitration and administered arbitration. The Chamber of Arbitration of Milan, for example, is known for its strongly “hands on” approach to administering arbitrations, which in turn allows greater control of costs than is usually found in ad hoc arbitration. Nonetheless, because administered arbitration remains less common in Italy than ad hoc

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High amounts in dispute are more likely to be the case in international contracts than domestic contracts, due to the greater complexity or size often found in such transactions, hence the different impact that the expense of Italian arbitration appears to have on the use of arbitration in domestic versus international commercial contracts. As already noted, domestic arbitration in Italy is characterized by a high rate of ad hoc arbitration and this distinction between ad hoc and institutional arbitration is important for understanding the cost and duration of arbitration in Italy. Whereas institutional arbitrations will be run in accordance with the rules of the relevant arbitral institution, and hence will operate under a pre-decided scheme of costs, costs in ad hoc arbitrations result entirely from the agreement of the specific individuals involved, including not only those paying (the parties), but also those being paid (arbitrators and counsel). Perhaps unsurprisingly, then, the reality of arbitration costs in Italy is sharply divided between ad hoc and administered arbitration. On the one hand, ad hoc arbitration is commonly regarded in Italy as much more expensive than court litigation, since it is primarily used as an élite service for sophisticated users who wish to avoid court litigation for the resolution of high value disputes, and who can afford to pay for counsel and arbitrators knowledgeable in arbitration, so that an arbitral institution is not necessary.101 On the other hand, the costs of institutional arbitration are significantly lower, as most institutional rules set fee caps for both the institution and the arbitrators.102 Similar considerations apply with respect to the duration of arbitral proceedings: in the absence of a set of institutional rules limiting the arbitration, particularly outside the major arbitral centers of Milan and Rome, cost controls put in place by arbitral institutions can only have a limited effect on the broad perception of the cost of arbitration in Italy. 101 This is not, of course, to suggest that administered arbitration in Italy cannot be effectively used for high value disputes, or is not used at all for such disputes. It has been suggested that the popularity of ad hoc arbitration in Italy might be rooted in a long tradition of Italian businesses to rely on ad hoc arbitration proceedings outside of any institutional support in the resolution of domestic commercial disputes. See MICHAEL MCILWRATH & JOHN SAVAGE, INTERNATIONAL ARBITRATION AND MEDIATION: A PRACTICAL GUIDE 106 (2010). 102 For example, the Chamber of Arbitration of Milan (CAM) sets forth a detailed schedule of fees including the maximum amount of fees of both institution and arbitrators (whether acting as sole arbitrators or members of arbitral panels), depending on the value of a dispute. By way of illustration, should the value of the dispute be determined as 3.000.000 EUR (this approximately corresponds with the average size of disputes administered by the CAM in 2013), the maximum amounts due to the arbitral institution and a sole arbitrator deciding on such matter would not exceed 24.000 EUR and 80.000 EUR respectively. See a schedule of fees in force from Sept. 1, 2014, available on the CAM’s website at http://www.camera-arbitrale.it/en/Arbitration/Costs/Fees+in+force+from+1+Sept+2014.php ?id=395 (last visited Jan. 5, 2015). For a detailed analysis of the cost determination under the CAM’s Arbitration Rules, see Stefano Azzali, Arbitration in Italy: Features of the Milan Chamber of Arbitration, in INTERNATIONAL COMMERCIAL ARBITRATION: DIFFERENT FORMS AND THEIR FEATURES 188 (Giuditta Cordero-Moss ed., 2013).

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length of an arbitration, the length of the proceedings will be determined entirely by the participants in the arbitration, not all of whom may have an incentive to conclude the arbitration quickly. Importantly, however, although institutional arbitration is in principle available throughout Italy, the reality of Italian arbitral institutions means that there is often no serious alternative to ad hoc arbitration, thereby effectively depriving parties of the option of a cheaper and faster institutional arbitration. Institutional arbitration in Italy is characterized by the existence of a very large number of local arbitral institutions, mostly affiliated with local chambers of commerce.103 In principle this means that there is always a local arbitral institution available, no matter where the disputing parties are located, and parties always, therefore, have the option of institutional arbitration. In reality, however, very few of Italy’s arbitral institutions have significant experience in the administration of arbitrations, with only one, the Chamber of Arbitration of Milan, having a sizeable caseload.104 As a result, while a large number of arbitral institutions are in theory available, they vary significantly in the quality of service they are able to offer. The unavoidable consequence of this situation is that while administered arbitration is a viable alternative for parties located in a region with an effective local arbitral institution, it does not provide a true alternative throughout much of Italy.105

103

Historically, chambers of commerce have played vital roles as providers of ADR services in Italy. The reason for this was the enactment of Law No. 580 of 1993 that conferred certain regulatory functions on chambers of commerce in the field of ADR. This legislation aimed at encouraging different forms of ADR as alternatives to traditional court litigation and therefore also at increasing the effectiveness of dispute resolution in Italy. See Teresa Giovannini & Valentinna Renna, The Italian Experience of Arbitration and the Arbitration Rules of the Chamber of Arbitration of Milan: A Parallel View, 14 VINDOBONA J. INT’L COM. L. & ARB. 297, 299 (2010). 104 The Chamber of Arbitration of Milan has had 717 new arbitrations commenced over the past five years. By comparison, Venice and the AIA, arguably the next two most important Italian arbitral institutions, have had 66 and 23 respectively. Tony Cole, Ilias Bantekas, Christine Riefa, Federico Ferretti, Barbara Warwas & Pietro Ortolani, The Legal Instruments and Practice of Arbitration in the EU, (2015), at 676, available at http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_STU%2820 15%29509988 (last visited Feb. 20, 2015. See also CAM 2013 – Facts and Figures, available at http://www.camera-arbitrale.it/Documenti/arbitration_facts-figures_2013.pdf (last visited Jan. 5, 2015) (noting that in 2013 the number of cases administered by the CAM substantially increased, to 167, constituting a 21% increase compared to 2012). For an explanation of the CAM’s approach to arbitration, see THE CHAMBER OF ARBITRATION OF MILAN RULES: A COMMENTARY (Ugo Draetta & Riccardo Luzzatto eds., 2012). Anecdotal reports are that many Italian arbitral institutions are simply not active in the administration of arbitrations. 105 See, e.g., the section on the leading arbitral institutions in Italy in Cole et al., supra note104.

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These considerations of cost and speed no doubt partially explain why even among Italian respondents Italy was not highly recommended as a seat of arbitration. Indeed, when asked to recommend five States, from those included in the Study, as a seat for an international arbitration, only 71.79% of Italian respondents recommended Italy, making Italy the fourth most preferred State even amongst Italian respondents.106 Notably, roughly the same result occurs if only “core” Italian respondents are considered, with only 80% of “core” Italian respondents listing Italy as one their five recommended States, making Italy the third most preferred State amongst “core” respondents. As “core” respondents are those individuals most likely to be regularly involved in arbitrations in which larger amounts are in dispute and longer proceedings are expected, the fact that Italy still remains only the third most recommended State indicates that concerns beyond cost are affecting the perceived desirability of Italy as an arbitral seat. This is also confirmed by the low popularity of Italy as an arbitral seat amongst respondents Survey-wide, few of whom can be expected to know the details of arbitral practice in Italy, and so are unlikely to be deterred by the apparent reality of relatively high costs and relatively low speed in Italian arbitration. Indeed, only 2.46% of non-Italian respondents listed Italy as one of their five preferred seats for an international arbitration, making Italy 19th out of 30 States amongst such respondents. One primary explanation for these results, particularly with respect to nonItalian respondents, is no doubt the slowness of the Italian court system, as one of the most important considerations in selecting an arbitral seat is the degree to which the local court system will assist the arbitration if the need arises. Anecdotal reports indicate that court proceedings in Italy relating to arbitration do not actually suffer from the same delays as courts proceedings in Italy more broadly. However, foreign practitioners are unlikely to be aware of this, and hence will not have taken it into account. Nonetheless, this can clearly not be the entire explanation, as it cannot explain the relatively low rate of recommendation of Italy by Italian respondents, who can be expected to know that arbitrationrelated court proceedings in Italy are less characterized by delay than are court proceedings in Italy more generally. What the Survey suggests is that a further important consideration in this respect is Italian arbitration law. Although Italian respondents did not describe Italian law as unsupportive of arbitration, they did describe it as less arbitrationfriendly than did respondents Survey-wide on average with respect to their own national laws. Indeed, while 76.32% of Italian respondents described Italian law as supportive of arbitration, roughly comparable to the 84.12% of respondents Survey-wide who described their own national laws as supportive of arbitration, only 15.79% of Italian respondents described Italian law as “Very Supportive” of arbitration, compared with 54.78% of respondents Survey-wide with respect to 106

The most popular seat of arbitration amongst Italian respondents was France (recommended by 94.87%), followed by Switzerland (92.31%) and England, Wales and Northern Ireland (76.92%).

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their own national laws. Notably, these results do not change significantly if only “core” Italian respondents are considered, 84% of whom described Italian law as supportive of arbitration, but only 24% of whom described it as “Very Supportive.” The explanation for these results lies in the fact that while Italian law is generally consistent with contemporary views on the regulation of arbitration, as reflected in the UNCITRAL Model Law, it deviates from that standard in some very prominent ways.107 Most famously, under Article 818 of the Italian Code of Civil Procedure (“CPC”), arbitrators may not order any form of provisional relief, unless such an order is specifically allowed under another legal provision.108 Consequently, under Article 669(5) CPC, parties who conclude an arbitration agreement must usually apply for interim relief before the national Court that would have been competent on the merits of the case in the absence of the arbitration agreement.109 In addition, Italian law also incorporates a distinction between two types of arbitration, referred to as arbitrato rituale and arbitrato irrituale. While awards resulting from an arbitrato rituale, which resembles a conventional arbitration, have the nature of a judgment, awards issued at the end of an arbitrato irrituale have the nature of a contractual settlement. Consequently, while an irrituale award is binding on the parties, it does not produce res judicata effects and cannot be directly enforced. In other words, if the arbitration is irrituale, the winning party cannot apply for an exequatur before the competent State court in order to start enforcement proceedings, but must instead file a distinct action before a State

107

On the particularities of Italian arbitration law, see Stefano Azzali, Does the Seat of Arbitration Still Matter? Can Italy be a “Good” Place for Arbitration?, Jan. 7, 2013, available at http://blogs.law.nyu.edu/transnational/2013/01/does-the-seat-of-arbitrationstill-matter-can-italy-be-a-good-place-for-arbitration/ (last visited Jan. 6, 2015). 108 This is the case, for example, with respect to the suspension of the decisions of the general meeting of a company, pursuant to Article 35(5) of Legislative Decree No. 5/2003. 109 The prohibition against interim relief is a mandatory rule of civil procedure: as such, the parties cannot overcome it by referring to a set of institutional rules providing for the tribunal’s powers to issue interim measures. For example, while Article 22(2) of the rules of the Chamber of Arbitration of Milan allows arbitrators to issue provisional measures “that are not barred by mandatory provisions applicable to the proceedings,” this provision has never been applied in a proceeding seated in Italy. See also ALESSANDRO BOSSI, LA PRASSI DELL’ARBITRATO RITUALE 307 (2012); Edoardo F. Ricci, Il nuovo regolamento della Camera Arbitrale Nazionale e Internazionale di Milano, 4 RIV. ARB. 663, 671 (2003). On the mandatory nature of Article 818, see Antonio Barletta, L’exequatur dei provvedimenti arbitrali stranieri – tendenze e prospettive di riforma, RIV. DIR. PROC. 1193, 1202 (2003); CLAUDIO CECCHELLA, L’ARBITRATO 201 (2005). However, other commentators and practitioners maintain that this limitation on arbitrators ordering provisional measures can be circumvented in the case of administered arbitrations (emails of Feb. 2 & 4, 2015).

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court for breach of contract.110 Since 2006, Italian law111 has specified that arbitrations will only be qualified as irrituale if this is specified in the arbitration agreement; however, while this means that the distinction between these two types of arbitration no longer has a major problematic impact on arbitration practice in Italy, there can be little doubt that the formality involved in the specification of two different types of arbitration reaffirms an image of Italian arbitration law as unnecessarily formalized and complex. A further component of the reticence of Italian respondents to praise Italian law as highly supportive of arbitration is also, perhaps, tied to the perceived likelihood that the arguable weaknesses in Italian arbitration law will be fixed in the near future. That is, when asked to describe the level of understanding of arbitration on the part of Italian legislators, Italian respondents were less positive than were respondents Survey-wide with respect to legislators in their own States, on average describing Italian legislators as having only an “Adequate” understanding of arbitration, compared with an average of between “Adequate” and “High” for respondents Survey-wide. More specifically, while only 21.89% of respondents Survey-wide described legislators in their State as having a “Low” or “Very Low” understanding of arbitration, this was true of 30.56% of Italian respondents. Similarly, while Survey-wide 38.94% of respondents described legislators in their State as having a “High” or “Very High” understanding of arbitration, this was true of only 27.77% of Italian respondents. Notably, however, Italian legislators were not described as having a less positive view of arbitration than respondents Survey-wide, suggesting that while Italian legislators view arbitration in a relatively positive light, they do not have the understanding of arbitration necessary to craft a legal regime that is truly supportive of arbitration. This is perhaps not surprising given the likelihood that the form of arbitration with which many Italian legislators will be familiar is the problematic variety most commonly found in Italian domestic arbitration, as discussed above. Skepticism regarding the likelihood of legislative reform is also arguably seen in the high levels of support seen amongst Italian respondents for the harmonization by the European Union of the laws applicable arbitration. While Survey-wide 39.7% of respondents saw harmonization of national arbitration laws as either “Desirable” or “Very Desirable,” a similar 34.71% saw such harmonization as either “Undesirable” or “Very Undesirable.” Amongst Italian respondents, on the other hand, 72.98% saw harmonization of national arbitration laws as “Desirable” or “Very Desirable,” while only 8.11% saw it as “Undesirable,” none seeing it as “Very Undesirable.” Similarly, while 47.82% of respondents Survey-wide saw the harmonization of the laws applicable to international arbitration across the E.U. as “Desirable” or “Very Desirable,” this was true of 75.68% of Italian respondents. In turn, while 30.29% of respondents 110

The Supreme Court of Cassation has confirmed that irrituale awards have the effect of a binding contract. Case No. 527/2000, Cassation Court judgment (Aug. 13, 2000). 111 Article 808 ter (1) CPC.

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Survey-wide saw such harmonization as “Undesirable” or “Very Undesirable,” this was true of only 10.81% of Italian respondents. As suggested already, the most likely explanation for these results is that Italian respondents are not optimistic that desired legislative reforms will be made by Italian legislators in the near future, and see harmonization of arbitration legislation by the European Union as a means to achieve the same goal. C. Arbitral Procedure in Italy The impact of the Italian court system on arbitration in Italy can also be seen in the responses of Italian respondents to questions about the procedures used in arbitration in Italy. Indeed, Italian respondents reported a smaller proportion of the arbitrations on which they have worked over the past five years as based on a pre-dispute arbitration agreement. Survey-wide, 64.50% of respondents reported domestic arbitrations as based on pre-dispute arbitration agreements in 75-100% of the cases on which they had worked in the past five years, while only 52.78% of Italian respondents provided the same response. Similarly, Survey-wide, 73.27% of respondents reported international arbitrations as based on predispute arbitration agreements in 75-100% of the cases on which they had worked in the past five years, while only 55.56% of Italian respondents provided the same response. This greater tendency of parties to agree to arbitrate after a dispute has arisen is easily understood given the delays inherent in Italian litigation, where arbitration will often appear to be a more attractive alternative to both parties. However, while this illustrates the positive impact that the problems with Italian litigation can have on the development of arbitration in Italy, a more problematic impact can also be seen in the rate at which the validity of arbitration agreements are challenged in Italian arbitration. Just as both parties in a dispute may see arbitration as desirable when faced with the alternative of lengthy court proceedings, so one party to a dispute may see lengthy court proceedings as a desirable mechanism for avoiding an unfavorable decision, and as a result challenge the validity of an arbitration agreement in the hope that the dispute may ultimately end up in Italian courts. Consistent with this, Italian respondents reported challenges to the validity of arbitration agreements to be more common in domestic arbitration in Italy than was reported by respondents Survey-wide. While 41.94% of respondents Survey-wide had not experienced such a challenge in the preceding five years, this was true of only 22.86% of Italian respondents. Notably a similar difference did not occur in international arbitration, in which a successful challenge to the validity of an arbitration agreement may result in the parties ending up in a foreign court, rather than Italian courts. In international arbitration, 30.53% of respondents Survey-wide had not experienced such a challenge in the past five years, while this was true of 26.47% of Italian respondents. In parallel, Italian respondents also reported that challenges to the jurisdiction of the arbitral tribunal, arguing that an otherwise binding arbitration agreement does not cover the specific claim being brought, were also more common in

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domestic arbitration than was reported by respondents Survey-wide. While Survey-wide, 39.18% of respondents reported not having experienced such a challenge in the past five years, the same response was provided by only 22.86% of Italian respondents. Notably, Italian respondents also indicated that settlement was more likely to occur if such a challenge was indeed made. Survey-wide, 62.53% of respondents reported that in no domestic arbitration on which they had worked in the past five years, and in which a challenge to the jurisdiction of the tribunal was made, did the parties settle before the tribunal delivered a decision on the issue. This was true of only 43.31% of Italian respondents.112 Further, even once an award has been made, Italian respondents reported that awards in both domestic and international arbitration are more likely to be subjected to an application to a court for the award to be annulled, thereby depriving it of legal effect, than was reported by respondents Survey-wide. Survey-wide, 39.36% of respondents reported not having experienced an annulment application in a domestic arbitration in the past five years, while only 11.11% reported experiencing such an application in the majority of domestic arbitrations on which they had worked. Amongst Italian respondents, however, only 9.38% of respondents reported not having experienced an annulment application, while 18.76% reported having experienced such an application in the majority of domestic arbitrations on which they had worked in the past five years. Similarly, Survey-wide, 32.85% of respondents reported not having experienced an annulment application in an international arbitration in the past five years, while only 8.14% reported having experienced such an application in the majority of international arbitrations on which they had worked. By contrast, 24.24% of Italian respondents reported not having experienced an annulment application in an international arbitration, while 15.15% reported having experienced one in the majority of international arbitrations in which they had worked in the past five years. Of course, the existence of annulment applications does not mean that annulment is granted, and there is evidence that at least in Milan, the leading arbitration jurisdiction in Italy, such applications are indeed rarely granted.113 Nonetheless, the willingness of parties to challenge awards evidences a perception that Italian courts are open to such challenges. This is particularly so given that the commencement of an application for annulment of an award does not prevent that award from being enforceable in Italian courts, meaning that commencement 112

It should also be noted, however, that Italian arbitrators have been reported to regularly encourage settlement between the parties at the beginning of an arbitration, which would add a further pressure encouraging settlement prior to the tribunal delivering a decision on a challenge to the its jurisdiction (email of Feb. 4, 2015). 113 Azzali, supra note 107 (“One example for all: the data collected by the Milan Court of Appeal shows that – regarding the recognition of foreign awards in Italy – from 2005 to 2012, thirty-eight requests for recognition and enforcement have been filed to the Milan Court of Appeal. Thirty-five of these requests were granted, while only three were rejected: one for non-arbitrability of the subject matter, the other two for lack of formal requirements.”).

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of an annulment application only makes sense in the context of some level of optimism that the challenge will ultimately succeed. Of course, the reported high rates of annulment applications in Italy may simply reflect past judicial practices, rather than the current attitude of Italian courts, and it is clear that at least in Milan such optimism is unfounded. However, absent clear statistics from jurisdictions across Italy, the responses given by Italian respondents to the Survey suggest that at least in some jurisdictions in Italy, annulment applications are perceived as having a high enough chance to succeed that the time and costs involved in such an application are worthwhile. One further aspect of arbitral procedure in Italy is particularly worth highlighting, which is that Italian respondents were far more likely to describe arbitrators as active participants in the proceedings than was the case for respondents Survey-wide. For example, whereas 63.64% of respondents Surveywide reported that arbitrators had directly questioned witnesses in the majority of domestic arbitrations on which they had worked, this was true of 78.78% of Italian respondents. Similarly, the same response was given by 67.41% of respondents Survey-wide with respect to international arbitration, while it was given by 76.47% of Italian respondents. In addition, Italian respondents reported a higher rate of arbitrators appointing their own experts, rather than relying on those appointed by the parties, than was reported by respondents Survey-wide, both in domestic and international arbitration,114 and they also reported a greater proportion of cases, in both domestic and international arbitration in which the experts appointed by the arbitrators were the only experts, than was reported by respondents Survey-wide.115 Notably, however, Italian respondents did not consistently describe the arbitrators in the cases on which they had worked in the past five years, in either domestic or international arbitration, as inquisitorial, with some reporting inquisitorial arbitrators, and some adversarial.116 This suggests a certain level of 114

43.76% of Italian respondents reported that arbitrators appointed their own experts in over 50% of the domestic arbitrations on which they had worked in the past five years, compared with 13.08% Survey-wide. 27.27% of Italian respondents reported that arbitrators appointed their own experts in over 50% of the international arbitrations on which they had worked in the past five years, compared with 8.7% Survey-wide. 115 28.13% of Italian respondents reported that tribunal-appointed experts were the only experts in over 50% of the domestic arbitrations on which they had worked in the past five years, compared with 10.12% Survey-wide. 18.76% of Italian respondents reported that tribunal-appointed experts were the only experts in over 50% of the international arbitrations on which they had worked in the past five years, compared with 4.98% Survey-wide. 116 For the purposes of this question, a “Highly Inquisitorial” arbitrator will actively control the substance of the proceedings, specifying the issues to be addressed, questioning witnesses and counsel, raising arguments of his/her own, etc. By contrast, a “Highly Adversarial” arbitrator will leave the substance of the proceedings entirely under the control of the parties, and sees his/her role as primarily to deliver a decision at the conclusion of the proceedings, based on the evidence and arguments presented by the parties.

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flexibility to the procedures used in arbitration in Italy. Arbitrators in Italy do appear to regard themselves as having a responsibility to determine the truth of the matters in dispute, and so are less likely merely to rely on the presentations made by counsel for the parties. Whether or not this results in an “inquisitorial” level of strongly controlling the substance of the proceedings will vary. This apparent flexibility is particularly important to note in light of the discussion earlier in this section of the comparative slowness of arbitration in Italy. The procedural flexibility of arbitration is the primary means through which arbitration can provide a faster procedure than is available in domestic courts. It is notable, then, that Italian respondents reported a lower rate of correlation between the procedures used in both domestic and international arbitrations and those used in Italian courts. While Survey-wide, 21.45% of respondents reported that domestic arbitration shared “Few” or “No or almost no” procedures with litigation in their State, this response was given by 42.10% of Italian respondents. Similarly, while 42.69% of respondents Survey-wide reported that international arbitrations seated in their State shared “Few” or “No or almost no” procedures with litigation in their State, this was true of 70.27% of Italian respondents. What this indicates is that while arbitration in Italy may not currently match the speed of arbitration in leading jurisdictions, it does not remain bound to Italian court procedure, and so does already incorporate the procedural flexibility necessary for a faster process. D. Italy as a Market for Arbitration Given the inefficiency of litigation before Italian courts, Italy constitutes a particularly promising market for arbitration, and indeed when Italian respondents were asked to estimate the proportion of domestic commercial contracts and international commercial contracts entered into in Italy in the past five years that included an arbitration agreement, they provided higher estimates with regard to both types of contract than did respondents Survey-wide with respect to their own States.117 Given this tendency towards arbitration, it is natural to assume that Italy has a vast arbitration industry, involving a high number of practitioners. However, the reality of Italy as a market for arbitration is more complex. Although Italy has produced a number of leading arbitration specialists and its community of international arbitration lawyers is highly regarded within the field, a broad arbitration community has so far failed to take shape. In other words, arbitration, especially in its ad hoc form, is traditionally conceived by Italian practitioners as an extremely limited market, in which only a small number of 117

While both Italian respondents and respondents Survey-wide estimated on average that 26-50% of domestic commercial contracts contained an arbitration agreement, the result for Italian respondents was at the higher end of that scale. Similarly, while both Italian respondents and respondents Survey-wide estimated on average that 51-75% of domestic commercial contracts contained an arbitration agreement, the result for Italian respondents was at the higher end of that scale.

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specialists with particular professional and academic qualifications can operate successfully. This perception is consistent with the overall character of Italian ad hoc arbitration as a remunerative but marginal field of legal practice, the development of which has been hindered by perceived excessive costs. As this description would suggest, the development of arbitration in Italy is also hindered by the lack of a widespread arbitration culture, not only amongst legal practitioners, but also amongst business people. This is indicated by the fact that when asked to describe the level of understanding of arbitration on the part of business people in Italy, Italian respondents, while on average describing it as “Adequate,” were more modest in their characterization of this understanding than were respondents Survey-wide. That is, while 36.18% of respondents Surveywide described business people in their State as having either a “High” or “Very High” understanding of arbitration, the same was true of only 22.22% of Italian respondents. On the other hand, however, while 22.07% of respondents Surveywide described business people in their State as having a “Low” or “Very Low” understanding of arbitration, the same description was given by 44.44% of Italian respondents. This is consistent with a situation, as described above, in which arbitration is relatively widespread in Italy, so it is fairly familiar to business people, but remains a niche dispute resolution practice, so it is not understood in depth by most business people. Nonetheless, the strength of the leading practitioners of arbitration in Italy, who often operate at the most elite levels of international arbitration, gives reason for optimism about the spread of understanding of arbitration in Italy. In addition, while Italian respondents to the Survey do describe Italian legislators as having a strong understanding of arbitration, the Italian government has in recent years taken some measures that provide support for arbitration, even since the 2006 reforms to sections of the Code of Civil Procedure specifically addressing arbitration. Most recently, for example, Law Decree No. 132 of September 12, 2014 has introduced a new mechanism for actions pending before a State court, under which parties to a dispute can agree to transfer their dispute to arbitration; in this case, the State court forwards the file of the proceedings to the local bar association, which can then appoint arbitrators if the parties cannot agree on the appointment of the members of the arbitral tribunal.118 The statement of claim, originally filed before the State court, is converted into a request for arbitration, and its substantive and procedural effects (e.g. the effects on limitation periods) are preserved. The reform also sets specific fee caps for this type of arbitration, thus aiming at promoting this mechanism of ADR beyond its traditional niche. However, it remains to be seen whether this measure will indeed lead to increased rates of arbitration, and hence an increased understanding of arbitration beyond a community of specialized practitioners, as in many cases parties may be unable to reach an agreement to submit their dispute to arbitration once proceedings are already pending before a State court. Nonetheless, this does at least indicate a 118

Antonio Briguglio, L’ottimistico Decreto-legge sulla «degiurisdizionalizzazione» ed il trasferimento in arbitrato delle cause civili, 24(3) RIVISTA DELL’ARBITRATO 633 (2014).

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recognition and endorsement of arbitration on the part of Italian legislators as a useful dispute resolution mechanism. A more problematic impact on the development of arbitration in Italy is, somewhat ironically, also one of the main drivers of that development, namely the slowness of Italian courts. While anecdotal reports suggest that court action in support of arbitrations is relatively fast, Italian respondents to the Survey report that enforcement of both domestic and foreign arbitral awards takes longer in Italy than was reported on average Survey-wide. While 65.68% of respondents Survey-wide reported enforcement proceedings of domestic awards in which they had been involved in the past five years taking on average less than six months, and 85.68% less than 12 months, only 51.72% of Italian respondents reported proceedings taking an average of less than six months, and only 72.41% less than 12 months. Similarly, while 53.32% of respondents Survey-wide reported enforcement proceedings of international awards in which they had been involved in the past five years taking on average less than six months, and 79.97% less than 12 months, only 40.74% of Italian respondents reported proceedings taking an average of less than six months, and only 66.67% less than 12 months. This indicates that enforcement is also subject to the delays endemic in other parts of the Italian court system. One potential positive influence on the development of the arbitration industry in Italy would be the emergence of a more diverse range of arbitral institutions. While often viewed primarily as administering institutions for arbitral proceedings, arbitral institutions also play an important role in spreading awareness of arbitration among non-specialists, business people and legislators, and in opening the arbitration market to a wider range of practitioners.119 For example, Survey-wide, arbitral institutions were the single most important source of first appointments for arbitrators, with 47.2% of arbitrators reporting that their first appointment as arbitrator came from an arbitral institution, and 34.37% stating that the majority of their appointments over the past five years have come from an arbitral institution.120 However, the diffuse nature and minority status of institutional arbitration in Italy, as described above, means that a similar effect has not yet developed in Italy, as illustrated by the fact that only 32% of Italian respondents who serve as arbitrator reported that they received their first appointment from an arbitral institution, and only 16% stated that the majority of their appointments over the past five years have come from an arbitral institution. While these amounts are far from insignificant, they do indicate that arbitral 119

The Chamber of Arbitration of Milan is exemplary of such promotional techniques that, at least indirectly and in light of legislative changes, have resulted in Milan emerging as an international arbitration venue. See, e.g., Fernando Dias Simões, Is Legal Reform Enough to Succeed in the ‘Battle of the Seats’?, Sept. 30, 2014, available at http://kluwerarbitrationblog.com/blog/2014/09/30/is-legal-reform-enough-to-succeed-inthe-battle-of-the-seats/ (last visited Jan. 6, 2015). 120 The second most important source of appointments was “appointment by party with which you had no previous connection,” which was the majority source of appointments for 22.77% of respondents.

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institutions in Italy do not yet play the leading role in the development of the field that they do in many other European States. VI. ARBITRATION IN MALTA121 A. Respondents The respondent group for Malta includes eleven individuals, three of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. All respondents were located in Malta.122 Ten respondents were located in Valletta, and one in Attard.123 Six respondents were male and five female.124 All eleven respondents self-identified as white.125 Eight respondents work in law firms, one as a sole practitioner, one in an arbitral institution, and one at the Malta Institute of Taxation.126 Eight of the eleven respondents were qualified to practice as lawyers, and of the seven respondents who provided the information, two qualified as a lawyer in the 1980s, two in the 2000s, and three in the 2010s.127 No respondent was qualified to practice as a lawyer in any jurisdiction other than Malta. In terms of their participation in arbitration, seven serve as lead external counsel, two as non-lead external counsel, one as counsel in an arbitral institution, and one as counsel assisting an arbitrator.128 Three respondents serve as an arbitrator.129 B. Malta as an Arbitral Seat Arbitration in Malta has been given some distinctive features as a result of the embracing of arbitration by the Maltese government as a mechanism for the resolution of a range of smaller disputes that rarely go to arbitration in other European States. Specifically, under Maltese law a number of types of dispute, including those relating to condominiums, traffic accidents, electricity and water, agency and construction (excluding personal injuries), must necessarily be 121

The authors would like to thank the following for her feedback on arbitration in Malta. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: Marisa Vella (Camilleri Preziosi Advocates, Valletta). 122 Amongst “core” respondents, all were located in Malta. 123 Amongst “core” respondents, all were located in Valletta. 124 Amongst “core” respondents, two were male and one female. 125 Amongst “core” respondents, all self-identified as white. 126 Amongst “core” respondents, all worked in law firms. 127 Amongst “core” respondents, all were qualified to practice as lawyers. Of the two “core” respondents who provided an answer, both qualified in the 1980s. 128 Amongst “core” respondents, two serve as lead external counsel, and one as counsel assisting an arbitrator. 129 Amongst “core” respondents, two serve as an arbitrator.

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resolved by recourse to arbitration.130 In addition, not only is the Malta Arbitration Centre, Malta’s only arbitral institution, established in Malta’s Arbitration Act, but the Act gives the Centre several powers more commonly exercised by national courts, including empowering the Registrar of the Centre to issue subpoenas to compel witnesses to give evidence or produce documents in a domestic arbitration. This has unquestionably given arbitration a prominence within Malta, and the Malta Arbitration Centre reports an average caseload of approximately 400 cases per year.131 However, approximately 95% of those cases involve a claim for €25,000 or less, reflecting the fact that they are cases arising out of Malta’s mandatory arbitration provisions. Consequently, while it is clear that arbitration is in one sense commonplace in Malta, it also appears to be the case that the type of arbitration that is most familiar in Malta is very different in nature from commercial arbitration. This background is essential to take into account if the reality of Malta as an arbitral seat is to be understood. While arbitration is generally recognized as requiring a voluntary choice to arbitrate by the parties, who enter into an arbitration agreement and thus waive their rights to bring an action before State courts, the Maltese government has embraced arbitration as a mandatory mechanism for the resolution of a range of smaller disputes, that rarely go to arbitration in other European States. As a result, Maltese parties have on the one hand the conventional option of voluntarily entering into an arbitration agreement whenever their dispute is arbitrable, but on the other hand also have the legal obligation to arbitrate whenever their dispute falls within the scope of application of the Maltese mandatory arbitration provisions.132 130

The range of disputes covered by mandatory arbitration is specified by Part A of the Fourth Schedule to the Maltese Arbitration Act (Act II of 1996, as amended by Acts XVIII of 1999 and XXXI of 2002; Legal Notice 304 of 2004; Acts IX and XIII of 2004; Legal Notices 420 of 2004, and 7 and 279 of 2005; Act XXII of 2005; Legal Notices 165 and 166 of 2006, and 425 of 2007; Act IX of 2010; and Legal Notices 218 and 244 of 2012), with the exception of construction disputes, which have been later added by Art. 21(2) of Legal Notice No. 72 of 2013. 131 The MAC declares a caseload of 2127 cases over the past five years, 1912 of which were under €25,000. See Cole et al., supra note 104. Since only 230 of the cases were based on a voluntary agreement and not on the mandatory arbitration provisions, it can be concluded that there is an almost perfect identity between the number of cases exceeding the value of €25,000 (215) and the number of voluntary proceedings. Conversely, the virtual entirety of cases based on the mandatory arbitration proceedings involves a claim for €25,000 or less. 132 Mandatory arbitration often raises doubts of constitutionality, as it entails a limitation of the ability of claimants to access to State courts. For this reason, it has been declared unconstitutional in other EU Member States, such as Italy (Italian Constitutional Court, Judgment Nos. 35 of May 2, 1958; 127 of July 4-14, 1977; 488 of Dec. 18-27, 1991; 49 of Feb. 9-23, 1994; 206 of May 23-June 2, 1994; 232 of June 6-10, 1994; 54 of Feb. 21-27, 1996; 52 of May 2-9, 1996; 381 of Nov. 27-Dec. 11, 1997; 325 of July 14-24, 1998; 221 of June 15, 2005). In general, on the possibility and limits to mandatory

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In light of this endorsement of arbitration, it is initially surprising that while 87.5% of Maltese respondents described Maltese law as supportive of arbitration, equivalent to the 84.15% of respondents Survey-wide who described their own national laws as supportive of arbitration, only 12.5% described Maltese law as “Very Supportive,” compared with 54.78% of respondents Survey-wide. This result becomes particularly surprising when it is considered that Maltese law, as it relates to both domestic and international arbitration, is closely based on the UNCITRAL Model Law, and indeed Article 55 of the Maltese Arbitration Act specifically makes the Model Law itself “part of the laws of Malta and . . . enforceable as such.” Furthermore, Maltese respondents described Maltese legislators as having a higher understanding of arbitration than did respondents Survey-wide with respect to legislators in their own States. Fifty percent of Maltese respondents described Maltese legislators as having either a “High” or “Very High” understanding of arbitration, with the same response being given by only 38.94% of respondents Survey-wide. Of Maltese respondents, 71.43% also described Maltese legislators as having a “Positive” or “Very Positive” attitude

arbitration in an international context, see Gilles Cuniberti, Beyond Contract – The Case for Default Arbitration in International Commercial Disputes, 32 FORDHAM INT’L L.J. 417 (2009). Initially, the position of the Maltese Constitutional Court as to the constitutionality of mandatory arbitration was difficult to interpret: the first two rulings on mandatory arbitration (judgment of Sept. 6, 2010, Joseph Muscat v. Prime Minister, Minister of Justice and Attorney General and a judgment of Sept. 30, 2011, H. Vassallo & Sons Limited v. Attorney General, Water Services Corporation and Enemalta Corporation did not clarify whether the system set forth in the arbitration act is compatible with the constitutional framework of Malta. Eventually, in January 2013, the Maltese Constitutional Court rendered a judgment in the case Untours Insurance Agency Ltd and Emanuel Gauci v. Victor et al, in which it specifically addressed whether the appointment of arbitrators by the chairman of the Malta Arbitration Centre, in the absence of an arbitration agreement signed by the parties, infringed their right to a fair trial enshrined in Article 6 of the European Convention on Human Rights. The Court held that in the case under analysis the mandatory arbitration proceedings did not breach either the Constitution of Malta (Article 39(2)) or the right to a fair trial under Article 6 of the European Convention on Human Rights, as the mere fact that the arbitrators were appointed by the chairman of the Malta Arbitration Centre did not raise justifiable doubts regarding the independence and impartiality of the arbitrators themselves. Although the decision in Untours was focused on a specific issue, it required the Court also to decide on the constitutionality of mandatory arbitration, thereby resolving the issue under Maltese law. This position was further confirmed in judgments of Nov. 5, 2013, Gasan Mamo Insurance Limited v. Alexander Jan Edward Van Reeven and Jeanette Marie Van Reeven and Feb. 11, 2014, Joseph M. Zrinzo v. Prime Minister. Thus, according to the Maltese Constitutional Court, the right to a fair trial encompasses the right to an independent and impartial adjudicator, but not the right to access a State court. On mandatory arbitration in Malta, see generally Jonathan Scerri-Diacono & Rachel Mamo, The Constitutionality of Mandatory Arbitration in Malta, 75 ARB. 603 (2009) and Jotham Scerri-Diacono & Timothy A. Bartolo, Mandatory Arbitration Revisited: The Curious Case for Constitutionality, 79 ARB. 367 (2013).

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towards arbitration.133 Given this background, it would seem that Malta should have an ideal legislative framework for arbitration, with a modern arbitration law, supportive legislators, and the prominent integration of arbitration into ordinary domestic dispute resolution. However, it is precisely the existence of mandatory arbitration in Malta that appears to have led to the less positive evaluations of Maltese arbitration law given by Maltese respondents. While the adoption of mandatory arbitration in Malta has unquestionably given arbitration a prominence within Malta that it has not achieved in many other European States, as already noted, disputes taken to mandatory arbitration in Malta are of a very different size and character than those that are usually found in commercial arbitration. Since mandatory arbitration is the form of arbitration with which individuals in Malta are most familiar, the existence of mandatory arbitration in Malta appears to have led to the perception in Malta of arbitration as a fundamentally different type of dispute resolution mechanism than it is generally perceived as being, and more specifically as being part of the formal dispute resolution mechanisms made available by the State, rather than an independent alternative to them. Evidence for this interpretation can be found in the fact that despite the prominence of mandatory arbitration in Malta, Maltese respondents described Maltese judges as having a lower understanding of arbitration than was the case with respondents Survey-wide with respect to judges in their own States. While 57.14% of Maltese respondents described Maltese judges as having on average a “High” or “Very High” understanding of arbitration, compared with 52.78% of respondents Survey-wide, no Maltese respondents selected “Very High,” compared with 20.57% of respondents Survey-wide. Moreover, while only 10.15% of respondents Survey-wide described judges in their State on average as having a “Low” or “Very Low” understanding of arbitration, this description was given by 28.57% of Maltese respondents, each of whom selected “Low.” Given the prominence of arbitration in Malta, the most likely explanation for these results is not that Maltese judges are unfamiliar with arbitration, but rather that the form of arbitration with which they are familiar is mandatory arbitration, and that this then informs their understanding of arbitration generally, leading to misunderstandings of the very different nature of commercial arbitration. This explanation would also be consistent with further results from the Survey relating to the approach of Maltese judges to arbitration. For example, Maltese respondents described Maltese courts as stricter in interpreting both the validity and the scope of arbitration agreements than was the case Survey-wide. Respondents Survey-wide on average described judges in their States as between “Neutral” and “Liberal” in their interpretation of the validity of arbitration agreements, with 35.32% of respondents selecting “Liberal” and 21.47% selecting “Very Liberal.” By contrast, Maltese respondents on average described Maltese courts as between “Neutral” and “Strict” in their interpretation of the validity of arbitration agreements, with 33.33% of respondents selecting “Strict” and 11.11% 133

Compared to 65.67% of respondents Survey-wide.

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selecting “Very Strict.” Parallel results were received with respect to the interpretation by courts of the scope of arbitration agreements. Respondents Survey-wide on average described the courts in their State as between “Neutral” and “Liberal” in their interpretation of the scope of arbitration agreements, with 34.67% selecting “Liberal” and 21.47% selecting “Very Liberal.” Again, however, Maltese respondents on average described Maltese courts as between “Neutral” and “Strict,” with 44.44% selecting “Strict” and 11.11% selecting “Very Strict.” Finally, Maltese respondents also described Maltese judges as overall having a less positive view of arbitration than was the case with respondents Survey-wide with respect to judges in their own States. Whereas 66.12% of respondents Survey-wide described judges in their State as having a “Positive” or “Very Positive” attitude towards arbitration, with 23.44% selecting “Very Positive,” only 57.15% of Maltese respondents gave this response, with only 14.29% selecting “Very Positive.” While in some contexts results such as these may indicate a hostility of courts towards arbitration, in the Maltese context a more likely explanation arises, as already suggested, from the prominence of mandatory arbitration in Malta. It is not unlikely that the degree to which arbitration has been incorporated into the Maltese legal system has encouraged Maltese judges to view arbitration in precisely that way – as an element of the Maltese judicial system, rather than as a distinct and independent dispute resolution mechanism. While judges more familiar with non-mandatory arbitration will no doubt make a distinction between mandatory domestic arbitration and voluntary commercial arbitration, when a judge’s primary knowledge of arbitration comes from mandatory domestic arbitration, this is highly likely to influence his/her understanding of arbitration in general, and as a result influence the view he/she adopts of the proper relationship between arbitration and national courts. The relative strictness of Maltese courts regarding arbitration, then, is best understood as arising not from a lack of understanding of arbitration per se, or from a hostility towards arbitration, but rather from the fact that Maltese judges have developed a particular understanding of arbitration, in which arbitration is properly conceived of as a State mechanism of adjudication, rather than as a private and independent system of alternative dispute resolution. Consequently, as arbitration is perceived by judges as merely an arm of the judicial system, it is unsurprising that they feel entitled to exercise more control over it than is usually seen in arbitration-friendly jurisdictions. Another aspect of Maltese law that would tend to confirm Maltese judges in this conception of arbitration can be found in Article 15(11A) of the Maltese Arbitration Act, according to which all parties to a mandatory arbitration have, unless otherwise agreed in writing, the right to appeal against the award both on points of law and fact before the Court of Appeal.134 Under this provision, an arbitral award in a mandatory arbitration is not final, but can instead be reviewed 134

The provision contains an explicit reference to Article 41(6) of the Maltese Code of Organization and Civil Procedure.

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by the Court of Appeal, just as can traditionally be done for a lower court judgment, but markedly unlike the way that arbitral awards are treated in most other jurisdictions worldwide.135 In addition, while arbitration is commonly understood around the world to be a private dispute resolution mechanism, with non-parties to an arbitration having no right to access arbitral hearings, under Article 15(15) of the Maltese Arbitration Act mandatory arbitration proceedings are conducted in public and the ensuing award is publicly available. Thus, mandatory arbitration, while clearly sharing important characteristics with arbitration as it is conventionally understood to function, is nonetheless structured under Maltese law in ways that make it more closely resemble a judicial process than a truly arbitral one. In this context, it is not surprising that Maltese courts tend to interpret the autonomy of arbitration vis-à-vis litigation in a comparatively restrictive way. While domestic arbitration in Malta has clearly gained momentum through the system of mandatory arbitration, international recognition of Malta as an arbitral seat nonetheless remains very low. When asked to recommend five States, from among those included in the Study, as the seat for an international arbitration, only 1.57% of non-Maltese respondents recommended Malta, making Malta the 21st most preferred State out of the 30 States included in the Study. Consistent with this result, Maltese respondents reported lower rates of involvement in international commercial arbitration than was reported by respondents Surveywide, with 60% of Maltese respondents reporting not having been involved in an international commercial arbitration in the past five years, and no Maltese respondent reporting that international commercial arbitration constituted more than 25% of his/her arbitration work over the past five years.136 By comparison, only 16.83% of respondents Survey-wide reported not having been involved in an international commercial arbitration over the past five years,137 with 58.11% of respondents Survey-wide reporting that international commercial arbitration constituted more than 25% of their arbitration work.138 Similarly, of the 2,127 cases commenced at the Malta Arbitration Centre over the past five years, only 13 constituted international arbitrations.139

135

Although some national arbitration acts allow for a limited review of the award in case of error in the interpretation and application of the law (see, e.g., Section 69 of the English Arbitration Act and Art. 829(3) of the Italian Code of Civil Procedure, allowing for a challenge on a point of law where expressly agreed between the parties), the possibility to review the determination made by the arbitrators on a point of fact is very unusual, and constitutes a major departure from the broadly shared international understanding of the proper relationship between arbitration and national courts. 136 Whether in terms of cases or of hours worked. 137 15.75% of respondents by cases, 16.83% by hours worked. The larger of the two numbers was selected for the present discussion. 138 58.11% of respondents by cases, 58.72% by hours worked. The smaller of the two numbers was selected for the present discussion. 139 Cole et al., supra note 104.

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However, it is also important to emphasize that the distinctive characteristics of Maltese arbitration could potentially have some positive future effects on the desirability of Malta as an arbitral seat. By way of example, while respondents Survey-wide on average described arbitrating a dispute in their State as between “Neutral” and “Slightly More Expensive” than litigating the same dispute in the courts of their State, with 59.87% of respondents Survey-wide describing arbitration as either “Slightly More Expensive” or “Much More Expensive” than litigation, Maltese respondents on average actually described arbitrating a dispute in Malta as “Slightly Cheaper” than litigating the same dispute in Maltese courts, with only 12.5% describing it as “Slightly More Expensive” than litigation, and none describing it as “Much More Expensive.” Similarly, when Maltese respondents were asked to evaluate certain features of a transaction with respect to the decision to include an arbitration clause in the related contract, they placed much greater emphasis on the suitability of arbitration for disputes that were low in value than did respondents Survey-wide. In addition, not only did Maltese respondents on average describe arbitration as cheaper than litigation in Malta, but they also on average described arbitrating a dispute in Malta as “Slightly Faster” than litigating the same dispute in Maltese courts, with 50% of Maltese respondents describing it as “Much Faster.” Malta, then, in principle has the potential to establish itself as a seat for the arbitration of lower value international disputes, as the emphasis within Malta on arbitration as a mechanism for the resolution of low value disputes has created an approach to arbitration that appears to be economically efficient. Moreover, as already noted, the laws applicable to international arbitration in Malta are based on the 1986 UNCITRAL Model Law, and so by and large reflect contemporary standards on the regulation of international arbitration.140 In addition, Malta’s prominent place in the international maritime shipping industry would seem to suggest Malta as a popular center for arbitration, particularly given the wide usage of arbitration within that industry. It is undoubtedly a reflection of these positive aspects of international arbitration in Malta that, when asked to recommend five States as the seat for an international arbitration, 80% of Maltese respondents recommended Malta, second only to England, Wales and Northern Ireland (100%). Consequently, while Malta’s size makes it unlikely that it will ever be the home of a large international arbitration community, there are reasons to believe that it has the ability to expand further into international arbitration, particularly if international standards regarding the interaction between arbitration and courts were more clearly respected by Maltese courts. C. Arbitral Procedure in Malta In light of the above, it is unsurprising that arbitration procedure in Malta can, in some important respects, be seen to have been influenced by the characteristics of mandatory arbitration. By way of example, Maltese respondents reported far 140

Part V of The Maltese Arbitration Act, which was adopted in 1996 and deals solely with international commercial arbitration, is based on the UNCITRAL Model Law.

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lower rates of involvement in arbitrations in which a challenge was made to the scope of the arbitration agreement than did respondents Survey-wide. Specifically, 55.56% of Maltese respondents reported that they had not worked on a domestic arbitration in the past five years in which a challenge to the scope of the arbitration had been made, and none reported that such challenges had occurred in more than 25% of the domestic arbitrations on which they had worked. By comparison, only 39.18% of respondents Survey-wide reported not having been involved in a domestic arbitration in the past five years in which a challenge to the scope of the arbitration agreement had been made, while 12.46% reported such a challenge being made in over 25% of the domestic arbitrations on which they had worked. These results are initially surprising, as the reported strictness of Maltese courts with respect to the interpretation of the scope of arbitration agreements, as discussed above, should, in principle, constitute an incentive for parties to make such challenges, as whatever the arbitral tribunal might itself conclude about the scope of the arbitration agreement, the final decision on the matter will be made by a court. However, the comparative rarity of challenges to the scope of arbitration agreements becomes easier to understand in the light of the central role that mandatory arbitration plays in Maltese arbitration. After all, where the arbitration in question is based on a statute, rather than consent, there is no arbitration agreement to be challenged, and the legislative provision will usually clearly encompass the dispute in question. The influence of mandatory arbitration on voluntary arbitration in Malta, through the development of a conception of arbitration as an element of the State judicial system, can also arguably be seen in the way the problem of parallel proceedings is dealt with in Malta. Concurrent jurisdiction of State courts and arbitral tribunals is regulated by Article 15(3) of the Maltese Arbitration Act and Article 742 of the Code of Organization and Civil Procedure. Article 15(3) expressly states that in cases where the parties have entered into an arbitration agreement and one party nevertheless initiates court proceedings, any party may at any time before delivering pleadings or undertaking other legal action apply to the court to stay the proceedings. The court should then issue an order staying the proceedings, unless it is satisfied that the arbitration agreement in question is inoperative or void. Although this provision mirrors in substance those adopted in arbitration-friendly jurisdictions around the world, in practice it is often interpreted by Maltese courts in a manner that actually endorses the overriding jurisdiction of courts over arbitral tribunals, rather than respecting the independence of arbitration as a dispute resolution system. This issue has been dealt with in a number of cases brought before the Maltese courts, with the courts in most cases continuing their proceedings even when they found that a valid arbitration agreement existed.141 This willingness of Maltese courts to intervene 141

See, e.g., Malta Court of Appeal, judgment of Feb. 25, 2003, Calibre Industries Ltd. v. Muscat Motors; judgment of Oct. 10, 2003, Gatt Ignatius v. Facchetti Franco; judgment of Nov. 9, 2012, Malta Shipyards Limited v. VPJ Limited. It has, for example, been held that where one party to an arbitration agreement did not respond to a letter from

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in the arbitral process constitutes a further illustration of the virtually supervisory role that Maltese judges appear to have allocated to themselves with respect to arbitration, in likely reflection of the genuine supervisory role that they have with respect to mandatory arbitration.142 The influence of mandatory arbitration also provides an explanation as to why more attempts to have an arbitral award annulled in domestic arbitration were reported by Maltese respondents than by respondents Survey-wide. While only 20.71% of respondents Survey-wide reported that annulment proceedings had been brought in more than 25% of the domestic arbitrations on which they had worked in the past five years, the same was true of 50% of Maltese respondents. Since the grounds for setting aside an award rendered within mandatory arbitration proceedings are much more permissive than usual and an appeal can also be brought on points of fact, it is unsurprising that Maltese domestic arbitration shows a general tendency towards the use of annulment proceedings, and that courts would be perceived as more likely to be willing to annul an award, even in a voluntary arbitration. Notably, in international arbitration, in which the influence of mandatory domestic arbitration is less direct, and non-existent when the arbitration is not seated in Malta, Maltese respondents reported a much more restrained approach, with no respondent stating that annulment was sought in more than 25% of cases.143 One further particularly notable feature about arbitration in Malta is the high degree of multilingual proceedings. For historical reasons, Malta as a nation is characterized by multilingualism, with a 2006 report stating that while Maltese was the mother tongue of 97% of Maltese respondents, 88% of respondents also spoke English, and 66% spoke Italian.144 Consistent with this cultural background, Maltese respondents reported far higher rates of more than one language being used in domestic arbitration than was reported Survey-wide. Indeed, 85.73% of Maltese respondents reported having been involved in a domestic arbitration in the past five its counterparty, this constituted a failure to cooperate with the performance of the arbitration, and sufficed to authorize the complaining party to commence an action before Maltese courts instead of an arbitral tribunal. Notably, this is in stark contrast to the dominant approach internationally, whereby the complaining party would be permitted to commence arbitration without the participation of the unresponding party, with the resulting award binding the unresponding party, rather than commence court proceedings. 142 The peculiarities of Maltese arbitration explain why local respondents, when asked to enumerate important factors for the choice of party-appointed arbitrators, often made reference to the knowledge by the arbitrator of the law of the seat. Although this factor was generally not considered as important by respondents Survey-wide, its relevance is clear when considering how the Maltese legislative framework for arbitration differs from the EU standard. In this context, the knowledge of the applicable law of the seat becomes an indispensable asset. 143 It is important to note, however, that the low rate of involvement of Maltese practitioners in international arbitration means that this result is based on only two respondents. 144 Europeans and Their Languages (2006), available at http://ec.europa.eu/ public_opinion/archives/ebs/ebs_243_en.pdf (last visited Feb. 20, 2015).

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years in which more than one language was used, compared with only 28.57% of respondents Survey-wide. Moreover, this multilingualism was incorporated throughout the arbitration, with 75% of Maltese respondents reporting having been involved in a domestic arbitration in the past five years in which written submissions, witness testimony, and even pleadings of the case by counsel functioned on a multilingual basis, and 87.5% reporting having been involved in an arbitration in which expert testimony was given in more than one language. Perhaps unsurprisingly given this context, when asked to evaluate several factors in terms of their importance in the selection of a party-nominated arbitrator, Maltese respondents also placed far greater emphasis on the importance of an arbitrator understanding the language of the nominating client than did respondents Survey-wide. Fifty percent of Maltese respondents described both reading-level knowledge and fluency in the language of the nominating party as “Important” or “Extremely Important.” By comparison only 35.65% of respondents Survey-wide described reading-level knowledge as “Important” or “Extremely Important,” with only 31.83% making the same statement about fluency. D. Malta as a Market for Arbitration The caseload statistics of the Malta Arbitration Centre, as discussed above, demonstrate how arbitration in Malta is used: it is common, but is also overwhelmingly domestic mandatory arbitration. As a result, Malta has so far failed to develop a significant body of specialist arbitration professionals, as reflected by the fact that no Maltese respondent reported devoting more than 50% of his/her working time to arbitration over the past five years, other than a single individual who reported working at an arbitral institution. Indeed, 70% of Maltese respondents reported spending less than 25% of their working time on arbitration. By comparison, 48.81% of respondents Survey-wide reported spending more than 50% of their working time on arbitration, and only 30.07% reported spending less than 25%. Given the high levels of mandatory arbitration in Malta, this result might be surprising, as mandatory arbitration clearly provides practitioners with the opportunity to become involved in arbitration. However, the nature of the mandatory arbitration procedure is such that no real arbitration expertise is needed on the part of participants. Consequently, the influence of mandatory arbitration on the practice of arbitration in Malta can be understood as twofold. Although it undoubtedly offers local professionals significant opportunities to be involved in arbitration, it also “monopolizes” the field, diffusing the involvement of arbitration experience across Maltese legal practitioners, and thereby hindering the development of arbitration as a specialized field of practice. Maltese respondents, for example, reported appointment by an arbitral institution as the most common way to receive appointments as arbitrator, arguably reflecting the central role that the Malta Arbitration Centre has come to play in Maltese arbitration because of its pivotal role in mandatory arbitration. Notably, under the mandatory arbitration rules published by the Malta Arbitration

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Centre,145 if the parties involved in a mandatory arbitration cannot agree on the appointment of the sole arbitrator, the appointment is made by the Chairman of the Centre. As it is a common feature of arbitrations involving a single arbitrator that the parties are unable to agree on an arbitrator, this gives the Centre a central role in the development of arbitral careers. In addition, however, not only did Maltese respondents report much less involvement in international commercial arbitration than did respondents Surveywide, as already noted, indicating a lack of international recognition of arbitral practitioners in Malta, but the leading international guides to arbitration practice, which were used as a means of identifying individuals to invite to take the Survey, also recommend very few individuals in Malta for their expertise in arbitration.146 This does not, of course, mean that expertise in arbitration in Malta is unavailable. However, Maltese practitioners in general appear not to be involved in international arbitration regularly enough for a community of international arbitration practitioners to have developed. This situation is evidenced, for example, in responses given by Maltese respondents when asked which factors are important in Malta for the selection of party-appointed arbitrators. Maltese respondents showed a low degree of interest in factors such as research into the prospective arbitrator’s publications, his/her public statements and available awards, his/her publication record on arbitration topics or a pre-appointment interview. These factors are commonly important for the selection of party-appointed arbitrators in arbitrations in which a significant amount is in dispute, so that the time and expense entailed in doing such research is justified by the potential negative effects of losing the arbitration. That they play little role in the selection of arbitrators in Malta is consistent with a picture of arbitration in Malta as focused primarily on smaller and less complex disputes, in which significant expense researching potential arbitrators would be unjustified. This conclusion is further supported by the fact that not only did Maltese respondents place greater emphasis than did respondents Survey-wide on the possession by potential arbitrators of qualifications from the Chartered Institute of Arbitrators, the leading arbitration training body, they made no significant distinction between possession of the ACIArb, MCIArb and FCIArb qualifications, or the status of Chartered Arbitrator, even though these four qualifications represent significantly different levels of training and recognized expertise. Possession of any arbitration qualification, that is, appears to serve primarily not as indicating the depth of knowledge of arbitration that the individual has obtained, but rather as evidence that the individual has had some level of training in and experience with arbitration, which in itself distinguishes the individual concerned from the vast majority of other individuals who might be considered for an arbitral appointment. 145

Available at http://www.mac.org.mt/en/Arbitration/Pages/Mandatory-Arbitration. aspx (last visited Feb.20, 2015). 146 For example, Chambers Europe recommends three individuals. Who’s Who Legal recommends none. Legal500 recommends two, one of them also being recommended by Chambers.

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The predominance of mandatory arbitration in Malta, combined with the limited international recognition of Maltese arbitral practitioners, is also likely to have an effect on the incentives of practitioners towards arbitration. Since arbitration in Malta is mostly used for disputes of low value and is comparatively less expensive than court litigation, it can be expected to constitute a less remunerative and attractive area of practice for Maltese lawyers than for practitioners operating in leading arbitral jurisdictions. Consequently, while international arbitration will still be an attractive field of practice, domestic arbitration will be less so. As a result of this lack of focus on domestic arbitration, however, few practitioners will develop the detailed expertise in arbitration necessary to enable a move into the more competitive and more lucrative practice of international arbitration. One potential counterargument to this analysis of the underdevelopment of arbitration as a field of practice in Malta would be the fact that arbitrator availability is not perceived by Maltese respondents as a cause of delay of arbitral proceedings, with no Maltese respondent describing it as “a significant cause”147 or “a serious cause” of delay.148 However, it would be wrong to assume that this indicates a widespread diffusion of arbitrator expertise within Malta, thanks to which the local industry can offer many experienced and reliable arbitrators. More likely, these results should be interpreted as reflecting the type of disputes that predominantly are resolved through arbitration in Malta: since most cases are low in value, they are not likely to require particular legal or professional expertise, and a suitable arbitrator will not be difficult to find. The lack of a developed arbitral community within Malta, however, suggests that the availability of experienced arbitrators could constitute far more of a problem for complex international arbitrations, in which genuine arbitration knowledge and experience is required. VII. ARBITRATION IN PORTUGAL149 A. Respondents The respondent group for Portugal includes 27 individuals, 24 of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. All respondents were located in Portugal. Twenty-six 147

Compared with 17.07% of respondents Survey-wide. Compared with 4.7% of respondents Survey-wide. 149 The authors would like to thank the following for their feedback on arbitration in Portugal. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: António Sampaio Caramelo (Morais Leitão, Galvão Teles, Soares da Silva & Associados, Lisbon); Francisco Colaço (Albuquerque & Associados, Lisbon); Nuno Ferreira Lousa (Linklaters, Lisbon); Gonçalo Malheiro (Pedro Pinto, Bessa Monteiro, Reis, Branco, Alexandre Jardim & Associados, Lisbon); Sofia Martins (Miranda Correia Amendoeira & Associados, Lisbon); José Alves Pereira (Alves Pereira e Teixeira de Sousa, Lisbon); João Maria Pimentel (Campos Ferreira, Sá Carneiro & Associados, Lisbon); Nuno Salazar Casanova (Uría Menéndez, Lisbon); Teresa Anselmo Vaz (Anselmo Vaz, Afra & Associados, Lisbon). 148

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respondents were located in Lisbon, and one in Porto.150 Twenty-five respondents were male and two female.151 All 27 respondents self-identified as white. Twenty-six respondents work in law firms, and one as a sole practitioner.152 All respondents were qualified to practice as lawyers, with one qualifying as a lawyer in the 1960s, five in the 1970s, six in the 1980s, seven in the 1990s, and eight in the 2000s.153 Two respondents were also qualified to practice as lawyers in Brazil, one in Macao, and one in Mozambique.154 In terms of their participation in arbitration, 23 serve as lead external counsel, four as non-lead external counsel, one as counsel in an arbitral institution, and three as counsel assisting an arbitrator.155 Thirteen respondents serve as an arbitrator.156 B. Portugal as a Seat Portugal amended its arbitration law in 2011, the new Act157 being largely based on the UNCITRAL Model Law, and replacing the old arbitration statute that had become outdated and was in many ways inconsistent with accepted contemporary standards for the regulation of arbitration. Notably, the adoption of this new law occurred within the context of the Portuguese debt crisis, with Portugal assuming the obligation to modernize its arbitration legislation by 2011 as one of the requirements of the Memorandum of Understanding (“MoU”) it signed with the International Monetary Fund, the European Commission and the European Central Bank, relating to the provision of “bail out” funding. Despite this context, however, it would be wrong to conclude that adoption of the new arbitration law was imposed on Portugal from the outside. Recognition of the need for reform had already developed within Portugal prior to the financial crisis, with the process of drafting the new law having already commenced in early 2009. Hence, despite its timing and the context of its ultimate adoption, the new Portuguese arbitration law is best understood as the voluntary expression of an arbitration-friendly attitude on the part of the Portuguese government. Indeed, empirical evidence emerging from the Survey provides further support for this interpretation, as Portuguese respondents gave a strongly positive description of the attitude of Portuguese legislators towards arbitration, with 65.22% of 150

Amongst “core” respondents, all were located in Lisbon. Amongst “core” respondents, 22 were male and two female. 152 Amongst “core” respondents, 23 worked in law firms, and one as a sole practitioner. 153 Amongst “core” respondents, all were qualified to practice as lawyers. One qualified in the 1960s, five in the 1970s, five in the 1980s, seven in the 1990s, and six in the 2000s. 154 Amongst “core” respondents, two were qualified to practice law in Brazil, one in Macao, and one in Mozambique. 155 Amongst “core” respondents, 20 serve as lead external counsel, three as non-lead external counsel, two as counsel assisting an arbitrator, and one as counsel in an arbitral institution. 156 Amongst “core” respondents, 12 serve as an arbitrator. 157 Voluntary Arbitration Law, No. 63/2011 of Dec. 14, 2011. 151

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Portuguese respondents describing it as “Positive,” and a further 26.09% describing it as “Very Positive.” The new arbitration law itself has also been well received by Portuguese arbitration practitioners, with 91.3% of Portuguese respondents describing Portuguese law as either “Supportive” or “Very Supportive” of arbitration, and 73.91% selecting “Very Supportive.” By comparison, while 84.12% of respondents Survey-wide described their national law as “Supportive” or “Very Supportive” of arbitration, only 54.78% selected “Very Supportive.” Importantly, Portuguese respondents report the same positive attitude towards arbitration on the part of the Portuguese judiciary, with 73.91% of Portuguese respondents describing the attitude of Portuguese judges towards arbitration as “Positive” or “Very Positive,” only 8.7% reporting a “Negative” attitude, and no respondent reporting a “Very Negative” attitude. Notably, this is so even though Portuguese judges were also described as having a slightly lower level of understanding of arbitration than was the case for judges across the European Union, with only 34.78% of Portuguese respondents describing Portuguese judges as having a “High” understanding of arbitration, and none describing them as having a “Very High” understanding.158 It should also be acknowledged that only 8.7% of Portuguese respondents described Portuguese judges as having a “Low” understanding of arbitration, and none selected “Very Low.” The picture these results create is of judges with a relatively low understanding of arbitration, but who nonetheless have developed a positive attitude towards it. Such a picture, however, is simply not consistent with a view of the new Portuguese arbitration law as one imposed externally by Portugal’s creditors. Rather, when these results are combined with the results given for the attitude towards arbitration of Portuguese legislators, it is clear that while arbitration is still in the relatively early stages of development as a dispute resolution mechanism in Portugal, it has been closely embraced by Portugal’s central legal actors as a mechanism to be promoted. Indeed, anecdotal reports indicate that the understanding of arbitration of Portuguese judges is increasing, due to active efforts by the Portuguese arbitration community to involve judges in arbitration conferences and training. This being said, it is nonetheless clear that this process of the evolution of Portugal into an “arbitration-friendly” State is not yet complete. Portuguese business people, for example, are reported by Portuguese respondents to have a lower understanding of arbitration and a less positive attitude towards arbitration than was the case with respondents Survey-wide with respect to business people in their own States. Whereas Survey-wide only 25.07% of respondents described business people in their State as having a “Low” or “Very Low” understanding of arbitration, this same description was given by 47.83% of Portuguese respondents. On the other hand, whereas 36.18% of respondents Survey-wide described 158

By comparison, Survey-wide 52.78% of respondents described judges in their own States as having a “High” or “Very High” understanding of arbitration, with 20.57% selecting “Very High.”

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business people in their State as having a “High” or “Very High” understanding of arbitration, this same description was given by only 13.05% of Portuguese respondents. Similarly, while Survey-wide only 8.79% of respondents described business people in their State as having a “Negative” or “Very Negative” attitude towards arbitration, 30.43% of Portuguese respondents gave this description of Portuguese business people. Notably, however, while Survey-wide 54.67% of respondents described business people in their State as having a “Positive” or “Very Positive” attitude towards arbitration, similar results were obtained for Portugal, with 52.18% of Portuguese respondents providing this description. What these results clearly indicate is that while arbitration may currently be being promoted in Portugal, with both a supportive arbitration law and largely arbitration-friendly judges, it has not yet been widely embraced beyond participants in the legal system itself. This is unsurprising given the relatively recent nature of the changes in question, and the significant number of Portuguese respondents who described the attitude of Portuguese business people in positive terms gives reason to believe that change in this respect is already underway. However, it reaffirms the picture of Portugal as a State that has embraced arbitration, and is attempting to develop a vibrant arbitration culture, but has not yet managed to spread understanding of and support for arbitration beyond those directly engaged in the legal system. Further positive signs for the development of arbitration in Portugal, however, can be seen in the decision by Portuguese lawmakers not only to support arbitration, but to introduce certain specialized forms of arbitration, regarding tax and pharmaceutical patent disputes. Not only do such measures reinforce the positive view of arbitration currently held by Portuguese legislators, but they will also serve to increase familiarity of arbitration within Portugal, and thereby potentially further contribute to the development of voluntary commercial arbitration. In 2011, for example, Portugal introduced a specific type of arbitration for tax disputes,159 granting taxpayers the ability to request arbitration, as an alternative to State court litigation, for a wide range of tax disputes.160 There are, it should be acknowledged, important differences between Portuguese tax arbitration and traditional commercial arbitration, including that while taxpayers have the right to request arbitration, they do not have the right to choose an institution to administer the arbitration, but must use the Centre for Administrative Arbitration (“CAAD”). In addition, once the tax payer has selected arbitration, the procedure is mandatory for the respondent governmental body, meaning that the procedure is not voluntary for both parties. It is notable, therefore, that while the European Court of Justice has held that a conventional commercial arbitration tribunal does not constitute a “court or tribunal of a Member State” under Article 267 of the Treaty 159

Decree-Law No. 10/2011, published on Jan. 20, 2011. For a detailed analysis of the tax arbitration regime in Portugal, see Rogério Fernandes Ferreire, José Calejo Guerra & José Mègre Pires, Tax Arbitration in Portugal: A New Tax Dispute Resolution Model, 35 COMP. L. Y.B. OF INT’L BUS. 189 (2013). 160

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on the Functioning of the European Union, a tribunal operating under this mechanism does.161 There are, then, significant ways in which Portuguese tax arbitration remains fundamentally a form of court-based dispute resolution, rather than true arbitration. Nonetheless, the incorporation into this procedure of prominent characteristics of arbitration clearly represents a further recognition by Portuguese legislators of the potential benefits of arbitration as a dispute resolution mechanism. Under a second procedure, more closely resembling conventional arbitration, from December 2011 pharmaceutical patent disputes concerning the alleged infringement of IP rights through the commercialization of generic medicines must be resolved through mandatory arbitration.162 Portuguese law now provides for a special procedure, under which whenever the national pharmaceutical agency, Infarmed,163 receives an application for approval of a generic pharmaceutical product, it must publish a notice. Within thirty days of that publication, the holder of a patent can file a request for arbitration (either ad hoc or institutional), if it deems that the generic medicine is in breach of its IP rights.164 This form of compulsory arbitration covers interim injunctions as well, thus entirely excluding these disputes from the jurisdiction of State courts. This is an exception to the general rule, according to which intellectual property disputes in Portugal are normally dealt with by a specialized IP court. While this procedure is not fully voluntary, it nonetheless results in a conventional arbitration, and so is a very clear endorsement by Portuguese legislators of the desirability of the use of arbitration in this context. Given the adoption in 2011 of a new Model Law-based arbitration law, along with the clear positive embrace of arbitration by Portugal’s central legal institutions, it is perhaps unsurprising that Portuguese respondents are themselves very positive about the potential of arbitration in Portugal. Indeed, when asked to recommend five States as the seat of an international arbitration, 96% of Portuguese respondents recommended Portugal. This said, however, it is also notable that out of the 844 non-Portuguese respondents who took the Survey, only six recommended Portugal, four of them being from neighboring Spain. Thus, however positive the recent developments relating to arbitration in Portugal may be, Portugal has clearly yet to develop any form of recognition as an arbitral seat beyond Portuguese practitioners.

161

Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta, C-377/13 (June 12, 2014). 162 Decree Law No. 62/2011 of Dec. 12, 2011, which came into force on Dec. 19, 2011. 163 An English version of Infarmed’s website is available at: http://www.infarmed. pt/portal/page/portal/INFARMED/ENGLISH. 164 Decree Law No. 62/2011.

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C. Arbitral Procedure in Portugal Despite the positive comments made above, it must be remembered that arbitration in Portugal has developed to a large extent in response to perceived weaknesses in the national court system. Indeed, the inefficiency of Portuguese State courts was the primary reason implementation of an efficient alternative method of redress of civil and commercial rights was required by the MoU between Portugal and its creditors. Arbitration, however, never functions entirely independently of national courts, and so the ongoing problems regarding the speed of Portuguese courts unavoidably have an impact on arbitration in Portugal. This can, for example, clearly be seen in the responses given by Portuguese respondents who have been involved in the enforcement of an arbitration award in Portuguese courts in the past five years. While 65.68% of respondents Surveywide reported that enforcement of domestic awards in the courts of their State took on average less than six months, and 85.68% reported less than 12 months, only 25% of Portuguese respondents reported the enforcement of domestic awards in Portugal on average taking less than six months, and only 50% reported less than 12 months. Similarly, while 53.32% of respondents Survey-wide reported enforcement of foreign awards in the courts of their State on average taking less than six months, and 79.97% reported less than 12 months, only 15.38% of Portuguese respondents reported an average of less than six months, and only 38.46% of respondents reported an average of less than 12 months. Given the delays characteristic of Portuguese courts, it is not surprising that Portuguese respondents overwhelmingly reported arbitration in Portugal to be faster than litigation in Portuguese courts, with 82.61% of Portuguese respondents describing arbitration as “Much Faster” than litigation, and a further 13.04% describing it as “Faster.”165 Arbitration, then, clearly has the ability to serve as a relatively fast alternative to the slowness of Portuguese courts. It would, however, be a mistake to interpret this result as indicating that arbitration in Portugal, particularly domestic arbitration, is indeed fast, as Portuguese respondents were clear that domestic arbitration in Portugal is actually on average a slower process than is arbitration across the European Union. While 54.34% of respondents Survey-wide stated that the domestic arbitrations on which they had worked over the past five years were on average concluded within 12 months, with 12.78% giving an average of less than six months, only 30.43% of Portuguese respondents provided an average of less than 12 months, and no Portuguese respondent provided an average of less than six months.166 165

By comparison, only 47.52% of respondents Survey-wide described arbitration as “Much Faster” than litigation, with a further 34.77% describing it as “Faster.” 166 One practitioner has suggested that a partial explanation for the comparative slowness of domestic arbitration in Portugal might be the high number of such arbitrations that deal with construction/concession matters. Disputes in such matters are routinely taken to arbitration in Portugal as a method of avoiding the delays inherent in litigation in Portugal. However, construction/concession arbitrations are often highly complex, resulting in longer proceedings (email of Feb. 18, 2015).

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International arbitration, however, is notably different, as although only 9.52% of Portuguese respondents reported that the international arbitrations in which they had been involved in the past five years on average concluded in less than 12 months, this is roughly comparable to the 16.15% of respondents Survey-wide who provided the same average. More notably, 85.71% of Portuguese respondents provided an average of less than 24 months, comparing favorably to the 72.15% of respondents Survey-wide who reported the same thing. The difference between these two sets of results for domestic and international arbitration in Portugal provides an initial indication that these two types of arbitration in Portugal function in significantly different ways, and with significantly different levels of effectiveness. Further results also support this conclusion. For example, Portuguese respondents reported that both challenges to the validity of arbitration agreements and challenges to the scope of arbitration agreements in domestic arbitration in Portugal occurred at rates roughly equivalent to or higher than those reported for domestic arbitration Surveywide.167 By contrast, however, when asked about international arbitration, Portuguese respondents not only reported lower rates of challenges to both the validity and the scope of arbitration agreements than they reported with respect to domestic arbitration in Portugal, but also reported lower rates of challenges than were reported with respect to international arbitration by respondents Surveywide.168 Similar results are apparent at the other end of the arbitral process, with respect to the annulment of arbitral awards. While 70% of Portuguese respondents reported actions for annulment being brought in 25% or less of the international arbitrations on which they had worked in the past five years,169 only 43.48% of Portuguese respondents gave the same response with respect to domestic arbitration.170 167

Ninety-two percent of Portuguese respondents reported challenges to the validity of arbitration agreements occurring in 25% or less of the domestic arbitrations on which they had worked in the past five years, roughly equivalent to the 89.22% of respondents Survey-wide who reported the same thing. On the other hand, while 87.54% of respondents Survey-wide reported challenges to the scope of the arbitration agreement occurring in 25% or less of the arbitration agreements on which they had worked in the past five years, with 39.18% reporting no challenges, only 75% of Portuguese respondents reported challenges in 25% or fewer arbitrations, with only 12.5% reporting no challenges. 168 While 82.91% of respondents Survey-wide reported that a challenge had been made to the validity of the arbitration agreement in 25% or less of the international arbitrations on which they had worked in the past five years, with 30.53% reporting no challenges, this response was given by 100% of Portuguese respondents, with 45.83% reporting no challenges. Similarly, while only 73.17% of respondents Survey-wide reported that a challenge had been made to the scope of the arbitration agreement in 25% or less of the international arbitrations on which they had worked in the past five years, 25.11% reporting no challenges, this response was given by 82.6% of Portuguese respondents, 30.43% reporting no challenges. 169 Compared with 80.65% of respondents Survey-wide. 170 Compared with 79.29% of respondents Survey-wide.

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These results support the conclusion already suggested that domestic arbitration and international arbitration in Portugal operate as significantly different processes, with international arbitration as practiced in Portugal operating in a relatively effective and efficient manner. By contrast, domestic arbitration not only remains relatively slow, but the high rates of challenge to both arbitration agreements and arbitration awards in domestic arbitration indicate that domestic arbitration is not seen by Portuguese parties as a fully legitimate dispute resolution procedure.171 As a result, domestic arbitration in Portugal is characterized by a relatively combative and arbitration-hostile environment, in which parties often try to escape the effects of both the arbitration agreement and any resulting award.172 A likely explanation for this difference in attitude between domestic and international arbitration in Portugal can perhaps be found in the cultural influence of Portugal’s previous arbitration legislation, prior to the adoption of the new arbitration law in 2011, on those Portuguese practitioners whose arbitration work focuses on domestic arbitration, as well as on the parties involved in domestic arbitration. Pursuant to the previous regime, parties were permitted to appeal against the substantive holding of an arbitral award in a domestic arbitration, rather than just against the fairness of the procedures used in the arbitration.173 This created a situation detrimental to the finality of the award, as it to a large extent turned arbitration into merely the first stage in a much longer courtcentered process. It is reasonable to expect that this will have generated a view of arbitration as a process that is not truly independent of the national court system, thereby validating the wishes of unhappy parties that wanted to have the final decision in their case made by a national court, despite the existence of an arbitration agreement. Consequently, attempts to avoid arbitration agreements and to have arbitration awards reviewed by courts will have been seen as a 171

While this conclusion is most consistent with the fact that both challenge and annulment application rates are high in domestic arbitration in Portugal, it should be remembered that high rates of challenge to arbitration agreements are also partially likely to be explained by the low cost of litigation in Portugal. Many parties engaged in domestic arbitration will be smaller companies with limited resources, and will wish to avoid arbitration simply because of its comparative higher cost, rather than as any judgement on the legitimacy of arbitration as a dispute resolution procedure. 172 One potential explanation for this combative approach found in domestic arbitration in Portugal may be the reportedly high rates of ad hoc domestic arbitration in Portugal. While ad hoc arbitration can certainly be an effective and legitimate procedure, it unavoidably lacks the quality assurance that derives from the supervision of an effective and neutral arbitral institution. This can encourage parties to approach the procedure in a more combative manner, and can encourage losing parties to see any resulting decision as less the result of a legitimate dispute resolution procedure than the result of an unsuccessful battle, now to be renewed on another front (i.e. court). 173 Article 29 of the Law on Voluntary Arbitration, No. 31/86, as amended by Legislative Decree 38/2003. This mechanism for appeal served as an additional mechanism to the more traditional one of annulment, which provided more limited grounds for the setting aside of an award.

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standard part of the arbitral process, rather than as extraordinary remedies reserved for situations of genuine unfairness of arbitral procedure. By contrast, however, under Portugal’s new Arbitration Law, awards can no longer be appealed unless the parties have expressly provided for such a possibility in their agreement.174 Instead, the primary mechanism for challenge of an arbitral award is the annulment mechanism in Article 46 of the new Arbitration Law, which is predominantly based on Article 34 of the UNCITRAL Model Law, and limits challenges mainly to procedural grounds, as is now standard in arbitration. While this legislative change is important, and can be expected to have a significant long-term effect on the dominant view in Portugal of the proper relationship between arbitration and the courts, it is unsurprising that a significant change is not yet visible, given the short period of time for which the new Arbitration Law has been in effect.175 Nonetheless, one further important factor gives reason to be confident that the new law will ultimately also bring a change in the Portuguese approach to arbitration, namely the difference in practice that already exists between domestic and international arbitration in Portugal. Portugal already has a group of arbitration practitioners familiar with the contemporary approach to arbitration embodied in the new Arbitration Law, and who already actively meet those standards in certain fundamental areas of arbitration practice. Rather than the new Arbitration Law having to bring about a fundamental change in Portuguese arbitration culture, then, it instead merely provides a mechanism for spreading the approach to arbitration already dominant in international arbitration in Portugal throughout Portuguese arbitration of all levels. It is still unlikely that this will be a rapid process, but the solid foundation for the change that already exists in arbitration practice in Portugal means that it is far more likely to succeed, and likely to succeed more quickly, than would be the case if all Portuguese arbitration resembled the practices adopted in much domestic Portuguese arbitration. This optimism is further confirmed by evidence from the Survey that even in domestic arbitration in Portugal, arbitrators themselves are willing to resist the traditional tendency to drive arbitrable disputes into the Portuguese court system. For example, despite the high rates of challenge to arbitration agreements in domestic Portuguese arbitration, Portuguese respondents reported that arbitrators in domestic Portuguese arbitrations were actually more likely than arbitrators Survey-wide to reject such challenges, with 80% of Portuguese respondents reporting that arbitrators retained jurisdiction despite a challenge to the validity of the arbitration agreement in more than 50% of the domestic arbitrations on which they had worked in the past five years, compared with only 57.2% of respondent

174

Voluntary Arbitration Law, No. 63/2011 of Dec. 14, 2011, Art. 39(4). However, it should be noted that anecdotal evidence indicates that when challenges to an arbitration award are now brought, they are rarely successful. 175

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Survey-wide. Similar results were reported with respect to challenges to the scope of an arbitration agreement.176 There is, therefore, not only evidence of strong arbitral practice in international arbitration in Portugal, but good reason to expect that the 2011 Arbitration Law will provide a foundation on which that practice will extend even to domestic arbitration in Portugal. Nonetheless, while there is a foundation for optimism that such changes will occur, it remains clear that the change has not occurred yet. Leading Portuguese arbitration practitioners, particularly in international arbitration, are already operating at a level equivalent to that common in the leading arbitration centers of the European Union. Much domestic arbitration, however, remains tied to the court-centered conception of arbitration that existed under the old Portuguese arbitration regime, and as a result fails to provide the efficient dispute resolution procedure that arbitration can be. D. Portugal as a Market for Arbitration As might be expected from the preceding discussion, arbitration in Portugal, while increasing in popularity, remains less developed than in the leading European arbitral States, with Portuguese respondents reporting that arbitration constituted a slightly lower proportion of their work than was reported on average by respondents Survey-wide. Indeed, while 48% of Portuguese respondents reported that arbitration constituted over 50% of their legal work,177 comparable to the 48.81% of respondents Survey-wide who reported the same thing, only 8% of Portuguese respondents reported that arbitration constituted 76-100% of their work, significantly lower than the 27.09% of respondents Survey-wide who reported the same thing. Similarly, Portuguese respondents who practice law also reported spending longer in their profession before their first involvement in arbitration than did respondents Survey-wide, with only 11.11% of Portuguese respondents becoming involved in their first arbitration within two years of qualifying to practice as a lawyer, and 55.56% taking longer than five years. By comparison, 44.67% of respondents Survey-wide reported becoming involved in their first arbitration within two years of qualifying to practice as a lawyer, and only 31.76% reported taking longer than five years. Portuguese respondents also reported practicing law longer before arbitration became their primary field of work than did respondents Survey-wide. Indeed, while 26.49% of respondents Survey-wide reported arbitration becoming their 176

Ninety-five percent of Portuguese respondents reported that arbitrators declined jurisdiction over all elements of the claim in 25% or fewer of the domestic arbitrations on which they had worked in the past five years, comparable to the 95.8% of respondents Survey-wide who reported the same thing. Similarly, 57.89% of Portuguese respondents reported that arbitrators retained jurisdiction over at least one element of the claim in over 50% of the domestic arbitrations on which they had worked in the past five years, comparable to the 51.95% of respondents Survey-wide who reported the same thing. 177 In terms of hours worked.

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primary field of work within two years of practicing law, and 44.53% within five years, no Portuguese respondent reported a period of less than two years, and only a single respondent178 reported less than five years.179 Similarly, while it took more than ten years for arbitration to become the primary field of work for 37.43% of respondents Survey-wide, this was the case for 70.59% of Portuguese respondents. Results of this type should be seen as unsurprising given the preceding discussion of arbitration in Portugal, as they reflect the fact that arbitration as a specialized field of work is a relatively young discipline in Portugal. Rather, particularly because of the traditional conception of arbitration as ultimately closely entwined with litigation in Portuguese courts, arbitration has traditionally been conceived in Portugal as an activity to be engaged in by individuals with a primary specialization in litigation, rather than as a distinct field justifying specialized practitioners. Consequently, the ability to specialize in arbitration was restricted to those individuals who had both developed significant practical experience in the field, and who also had been able to move into international commercial arbitration, where the reality that foreign parties in a dispute would probably be using specialized arbitration practitioners made the necessity for specialized practitioners on the Portuguese side readily apparent. Further evidence supporting this picture of arbitration practice in Portugal is provided by the fact that Portuguese respondents were far more likely than respondents Survey-wide to report that arbitrator availability was a significant cause of delay in domestic arbitration, with 43.48% of Portuguese respondents describing it as a “significant” or “serious” cause of delay, compared with only 21.77% of respondents Survey-wide. This is consistent with the image of Portugal as a State in which growing levels of interest in arbitration, spurred by both the delays that remain inherent in the Portuguese court system and by the efforts of the Portuguese government to encourage the use of arbitration, are not yet matched by suitably wide spread arbitration expertise. As a result, competition for experienced and expert arbitrators is high, causing delays to the arbitral process. It is, of course, not essential that arbitrators be experienced or expert, and so it might be expected that the delays involved in Portuguese litigation would lead Portuguese parties to compromise on the quality of arbitrators in order to make use of the best available alternative to the slow Portuguese court system. However, as already mentioned, Portuguese business people do not themselves have a strongly positive view of arbitration, most likely due to the long-standing weaknesses in Portuguese domestic arbitration. Parties with doubts about the reliability and value of arbitration, however, are particularly likely to insist upon arbitrators with experience and expertise, as a means of reducing their concerns about the legitimacy of the dispute resolution procedure itself. Consistent with this analysis, when asked to describe those characteristics that were most 178

Constituting 5.88% of the pool of Portuguese respondents. Notably, that individual only qualified to practice law in 2004, and is thus a member of the newer generation of arbitration practitioners in Portugal, for whom opportunities to practice arbitration are to some degree more common than was the case for practitioners entering law in earlier years. 179

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important in selecting party-nominated arbitrators, Portuguese respondents placed more emphasis than did respondents Survey-wide on signifiers of experience and expertise, including not only considerations such as the arbitrator’s reputation180 and the parties’ prior experience with the individual as an arbitrator,181 but also more formal considerations such as possession of qualifications from the Chartered Institute of Arbitrators182 and affiliation with a law school.183 Undoubtedly as a direct result of this emphasis on the experience and expertise of arbitrators, Portuguese respondents who work as arbitrators reported working for a longer period of time before receiving their first appointment as an arbitrator. Indeed, while Survey-wide 12.84% of respondents who work as arbitrators reported receiving their first arbitrator appointment within five years of entering their profession, 47.21% within ten years, and only 20.29% reported a period of over 15 years, no Portuguese respondent reported receiving his/her first arbitral appointment within five years, only 23.08% reported a period of less than ten years, and 46.15% reported their first arbitrator appointment taking longer than 15 years. In a market in which individuals are held to a high standard of demonstrated experience and expertise before being appointed as arbitrators such results are not surprising. It is, however, reasonable to expect that, in the long run, the recent reforms enacted by Portugal, combined with the clear support for arbitration that already exists at the legislative and judicial levels in Portugal, will have the effect of enhancing the legitimacy of arbitration amongst Portuguese business people, thereby reducing their reticence to hire less experienced or expert arbitrators, and thereby facilitating the emergence of the new generation of arbitration professionals that is already clearly developing. One further result relating to the practice of arbitration in Portugal is particularly worth noting. When asked to estimate the proportion of international commercial contracts entered into in Portugal in the past five years that contained an arbitration clause, Portuguese respondents estimated amounts equivalent to those estimated by respondents Survey-wide with respect to their own States.184 180

Described as “important” or “extremely important” by 91.3% of Portuguese respondents, compared with only 80.47% of respondents Survey-wide. 181 Described as “important” or “extremely important” by 65.22% of Portuguese respondents, compared with only 53.83% of respondents Survey-wide. 182 52.05% of respondents Survey-wide regarded the status of “Chartered Arbitrator,” the highest qualification awarded by the Chartered Institute of Arbitrators”, as “irrelevant,” with only 22.81% seeing it as “relevant,” “important” or “extremely important.” By comparison, only 39.13% of Portuguese respondents saw it as “irrelevant,” with 30.44% seeing it as “relevant,” “important” or “extremely important.” 183 54.92% of respondents Survey-wide regarded such an affiliation as “irrelevant,” with only 14.89% seeing it as “relevant,” “important” or “extremely important.” By comparison, only 30.43% of Portuguese respondents saw it as “irrelevant,” with 34.79% seeing it as “relevant,” “important” or “extremely important.” 184 Sixty-four percent of Portuguese respondents estimated that more than 50% of international commercial contracts entered into in Portugal in the past five years contained an arbitration agreement, with 16% estimating more than 75%. By contrast, 60.62% of respondents Survey-wide estimated greater than 50%, with 22.46% estimating more than 75%.

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However, while this suggests that Portuguese companies will be engaged in international commercial arbitration at rates equivalent to those found across Europe, this is not reflected in the reported involvement of Portuguese practitioners in international commercial arbitration, as Portuguese respondents reported international commercial arbitration as constituting a lower proportion of their arbitration work than did respondents Survey-wide.185 This disparity suggests that when a dispute related to an international contract containing an arbitration agreement arises, Portuguese parties do not necessarily choose Portuguese counsel, but instead often decide to be represented by a professional from a different jurisdiction. Such a result would be unsurprising for a developing arbitral jurisdiction such as Portugal, as business people would have developed a tradition of hiring foreign counsel for international arbitrations at a time in which international arbitration expertise in Portugal was limited to select leading individuals. It is, nonetheless, a situation that can be expected to change over time as recognition develops among Portuguese business people of the growing body of international arbitration specialists in Portugal. VIII. ARBITRATION IN SPAIN186 A. Respondents The respondent group for Spain includes 51 individuals, 30 of whom have achieved sufficient recognition to constitute members of the “core” group of Survey respondents. Forty-nine respondents were located in Spain, one in Italy, and one in the United States.187 Forty-five respondents were located in Madrid, one in Barcelona, one in Majadahonda, one in Mungia, one in Valencia, one in

185

While Survey-wide, 38.79% of respondents reported international commercial arbitration constituting over 50% of their arbitration work, in terms of number of hours, with 20.29% reporting over 75%, only 28% of Portuguese respondents reported over 50%, with none reporting over 75%. 186 The authors would like to thank the following for their feedback on arbitration in Spain. Naturally, all views expressed in this section are attributable solely to the authors, as are all remaining errors. Guidance provided by: Jesus Carrasco (Squire Patton Boggs, Madrid); Javier de Carvajal Cebrián (Herbert Smith Freehills, Madrid); Alberto Fortún (Cuatrecasas, Gonçalves Pereira, Madrid); Miguel Gómez Jene (National University of Distance Education (UNED), Madrid); Fernando Gonzalez (Squire Patton Boggs, Madrid); Clifford J. Hendel (Araoz & Rueda, Madrid); José Luis Huerta (Hogan Lovells, Madrid); Alfonso Iglesia González (Cuatrecasas, Gonçalves Pereira, Madrid); Álvaro López de Argumedo (Uría Menédez, Madrid); Alejandro López Ortiz (Mayer Brown, Paris); Silvia Martinez (Hogan Lovells, Madrid); Lucía Montes Saralegui (Cuatrecasas, Gonçalves Pereira, Madrid); Antonio Morales (Latham & Watkins, Madrid); Iñigo Rodríguez-Sastre (Olleros Abogados, Madrid); Elena Sevila Sánchez (Olleros Abogados, Madrid); Gonzalo Stampa (Stampa Abogados, Madrid); Angel M. Tejada (B. Cremades y Asociados, Madrid) 187 Amongst “core” respondents, all were located in Spain.

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Miami, and one in Rome.188 Forty-one respondents were male and ten female.189 Forty-nine respondents self-identified as white, one as black or African American, and one as American Indian or Alaska Native.190 Forty-five respondents work in law firms, four as sole practitioners, two in arbitral institutions, and one in a company.191 Of the 50 respondents who answered the question, all were qualified to practice as lawyers, with five qualifying as a lawyer in the 1970s, 13 in the 1980s, 16 in the 1990s, 12 in the 2000s, and four in the 2010s.192 Three respondents were also qualified to practice as lawyers in New York (one not being qualified to practice as a lawyer in Spain), two in France, one in Belgium, one in England, one in Ecuador (but not in Spain), and one in an unspecified jurisdiction in the United States (but not in Spain).193 In terms of their participation in arbitration, 37 serve as lead external counsel, 14 as non-lead external counsel, six as counsel assisting an arbitrator, and two as counsel in an arbitral institution.194 Twenty-eight respondents serve as an arbitrator.195 B. Spain as an Arbitral Seat Spain is arguably one of the most promising developing arbitral seats in Europe. While individual Spanish practitioners have long had a prominent role in international arbitration, Spain itself has traditionally not been a major arbitral center. This situation, however, began to change with the adoption of Spain’s current arbitration law (based on the UNCITRAL Model Law) in 2003,196 and while Spain cannot still claim to be one of Europe’s primary arbitral centers, it is now the home of both a highly professionalized body of arbitration lawyers and active and professional arbitral institutions. However, it is important to acknowledge that Spain is still in the process of developing as an arbitral center, as is demonstrated by its relatively low levels of international recognition. Indeed, when respondents to the Survey were asked to recommend five States as the seat of an international arbitration, only 5.79% of 188

Amongst “core” respondents, 29 were located in Madrid, one in Barcelona. Amongst “core” respondents, 29 were male and one female. 190 Amongst “core” respondents, all self-identified as white. 191 Amongst “core” respondents, 29 worked in law firms, and one as a sole practitioner. 192 Amongst “core” respondents, of the 29 who answered the question, all were qualified to practice as lawyers. Five qualified in the 1970s, eight in the 1980s, 13 in the 1990s, and three in the 2000s. 193 Amongst “core” respondents, of the 29 who answered the question, two were qualified to practice law in France, one in Belgium, one in England, and one in New York. 194 Amongst “core” respondents, 27 serve as lead external counsel, four as non-lead external counsel, one as counsel assisting an arbitrator, and one in-house counsel for a party. 195 Amongst “core” respondents, 19 serve as an arbitrator. 196 See generally PEDRO MARTÍNEZ GONZÁLEZ, EL NUEVO RÉGIMEN DEL ARBITRAJE (2011); M. GÓMEZ JENE, EL ARBITRAJE INTERNACIONAL EN LA LEY DE ARBITRAJE DE 2003 (2007); M. VIRGÓS SORIANO & F. GARCIMARTÍN ALFÉREZ, DERECHO PROCESAL CIVIL INTERNACIONAL. LITIGACIÓN INTERNACIONAL (2d ed. 2007). 189

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non-Spanish respondents recommended Spain, making Spain the fourteenth most recommended State out of the 30 States included in the Survey. Moreover, once those States with a regional/cultural connection with Spain (France, Italy, Malta, Portugal) are removed from consideration, only 14 respondents from the remaining 25 States recommended Spain. Thus, Spain has clearly not yet developed an international reputation as an arbitral seat. However, empirical evidence emerging from the Survey also suggests that Spain is progressively consolidating its position in the arbitration world and has the potential for further development. One reason for optimism in this respect can be found in the level of support that Spanish respondents to the Survey displayed for the laws applicable to arbitration in Spain. Not only were Spanish respondents slightly more likely than respondents Survey-wide to describe their national laws as “Supportive” or “Very Supportive” of arbitration,197 but no Spanish respondents described Spanish law as “Unsupportive” or “Very Unsupportive” of arbitration.198 Similarly, while Spanish respondents did describe Spanish judges as having a lower understanding of arbitration and a somewhat less positive attitude towards arbitration than were described by respondents Survey-wide with respect to judges in their own States, they nonetheless on average described Spanish judges as having an “Adequate” understanding of arbitration,199 and between a “Neutral” and a “Positive” attitude towards arbitration.200 Notably, these results are repeated even if only the responses of the “core” group of Spanish practitioners is considered.201 As will be discussed in the next section of the article, focusing on arbitral procedures in Spain, there are clear reasons why Spanish respondents would have a somewhat less positive view of the level of understanding of arbitration and the attitude towards arbitration of the Spanish judiciary than is the case Survey-wide, as problems with Spanish courts still exist with respect to both their speed and the approaches they at times adopt to the interpretation of arbitration agreements and 197

54.35% of Spanish respondents described Spanish law as “Very Supportive” of arbitration, with a further 34.78% describing it as “Supportive.” By comparison, 54.78% of respondents Survey-wide described their own national laws as “Very Supportive” of arbitration, with a further 29.34% describing them as “Supportive.” 198 By comparison, 2.29% of respondents Survey-wide described their national laws as “Unsupportive” of arbitration, with a further 2.56% describing them as “Very Unsupportive.” 199 58.70% of respondents described Spanish judges as having an “Adequate” understanding of arbitration, 19.57% “High,” 6.52% “Very High,” 15.22% “Low” and none “Very Low.” 200 39.13% of respondents described Spanish judges as having a “Neutral” attitude towards arbitration, 45.65% “Positive,” 10.8% “Very Positive,” 4.35% “Negative” and none “Very Negative.” 201 62.96% of “core” respondents described Spanish judges as having an “Adequate” understanding of arbitration, 18.52% “High,” 7.41% “Very High,” 11.11% “Low” and none “Very Low.” 40.74% of “core” respondents described Spanish judges as having a “Neutral” attitude towards arbitration, 37.04% “Positive,” 14.871% “Very Positive,” 7.41% “Negative” and none “Very Negative.”

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the legislation applicable to arbitration. It should be emphasized, however, that problems of this type are far from unusual for a developing arbitration State, and can be expected to decrease as Spanish judges gain increased familiarity with high-quality arbitral practice. Indeed, there is already some evidence of the development of a more “arbitration-friendly” attitude on the part of Spanish courts, as Spanish respondents on average described Spanish courts as being between “Neutral” and “Liberal” in their interpretation of both the validity202 and the scope203 of arbitration agreements, equivalent to the average response given by respondents Survey-wide with respect to their own national courts.204 These results are again repeated if only “core” Spanish respondents are considered.205 Two important developments relating to the relationship between arbitration and the Spanish judiciary are worth particular notice, namely the creation of a specialized arbitration court in Madrid in 2010, and the 2011 concentration of jurisdiction over many aspects of arbitration in Spain’s Regional Superior Courts of Justice. The First Instance Court of Madrid No. 101 has exclusive jurisdiction with respect to judicial supervision of and assistance to arbitrations seated in the Judicial District of Madrid, Spain’s leading center of arbitral practice. In particular, this court has jurisdiction in all matters relating to assistance for the taking of evidence, provisional or interim relief, and enforcement of awards. There is an obvious benefit in having a specialized court for arbitration, as its expertise in the field of arbitration ensures a uniform and informed approach, contributing significantly to the desirability of Madrid as an arbitral seat. Moreover, such a court has the potential to have a broader impact on the understanding of and attitude towards arbitration of Spanish judges, both through the creation of case law informed by a high understanding of arbitration, and by ensuring the existence of one or more “peers” with whom Spanish judges can have an informed discussion of arbitration.

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28.89% of Spanish respondents described Spanish courts as “Neutral” with respect to the validity of arbitration agreements, 42.22% “Liberal,” 15.56% “Very Liberal,” 11.11% “Strict” and 2.22% “Very Strict.” 203 33.33% of Spanish respondents described Spanish courts as “Neutral” with respect to the scope of arbitration agreements, 42.22% “Liberal,” 11.11% “Very Liberal,” 13.33% “Strict” and none “Very Strict.” 204 20.05% of respondents Survey-wide described courts in their own States as “Neutral” with respect to the validity of arbitration agreements, 35.32% “Liberal,” 21.47% “Very Liberal,” 19.28% “Strict” and 3.88% “Very Strict.” 22.40% of respondents Surveywide described courts in their own States as “Neutral” with respect to the scope of arbitration agreements, 34.67% “Liberal,” 21.47% “Very Liberal,” 18.40% “Strict” and 3.07% “Very Strict.” 205 33.33% of “core” Spanish respondents described Spanish courts as “Neutral” with respect to the validity of arbitration agreements, 33.33% “Liberal,” 18.52% “Very Liberal,” 11.11% “Strict” and 3.70% “Very Strict.” 44.44% of “core” Spanish respondents described Spanish courts as “Neutral” with respect to the scope of arbitration agreements, 25.93% “Liberal,” 14.81% “Very Liberal,” 14.81% “Strict” and none “Very Strict.”

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Some important court proceedings relating to arbitration do not fall within the jurisdiction of this court, the most notable examples being the appointment of arbitrators, applications for annulment of arbitral awards and recognition of foreign arbitral awards. Since 2011 these issues have fallen within the jurisdiction of Spain’s Regional Superior Courts of Justice, the highest court in each Autonomous Community in Spain.206 As a result, fundamental decisions relating to arbitration across the country have been removed from the lower levels of Spain’s hierarchy of courts, and concentrated in a limited number of courts populated by leading judges. Anecdotal reports indicate that this has led to a significant improvement in both the quality and consistency of arbitration-related decisions, and from 2012 to February 2015 all foreign arbitral awards presented for enforcement before a Regional Superior Court of Justice were granted enforcement.207 This image of Spain as a State where arbitration is familiar but still developing and not completely consolidated as a mechanism of dispute resolution receives further support from the description by Spanish respondents regarding the level of understanding of and attitude towards arbitration on the part of business people in Spain. While 32.61% of Spanish respondents described Spanish business people as having a “High” or “Very High” understanding of arbitration,208 roughly equivalent to the 36.18% of respondents Survey-wide who said the same thing about business people in their own State,209 39.13% of Spanish respondents described Spanish business people as having a “Low” or “Very Low” understanding of arbitration,210 compared with only 25.07% of respondents Survey-wide.211 More notably, while 36.96% of Spanish respondents described Spanish business people as having a “Positive” or “Very Positive” attitude towards arbitration,212 this is considerably lower than the 54.67% of respondents Survey-wide who said the same thing.213 In turn, while only 8.79% of respondents Survey-wide described the business people in their State as having a “Negative”

206

Gilberto Pérez del Blanco, La modificación de la competencia objetiva en la intervención judicial en el arbitraje, in LA REFORMA DE LA LEY DE ARBITRAJE DE 2011 291, 299 (Juan Damián Moreno ed., 2011), see also Miguel Gómez Jene, Reflexiones en torno al Anteproyecto de Ley de reforma de la Ley de Arbitraje, 4 ARBITRAJE: REVISTA DE ARBITRAJE COMERCIAL Y DE INVERSIONES 77 (2011). 207 In this period seven cases were reported: TSJ Valencia, Feb. 10, 2012; TSJ Cataluña, March 15, 2012; TSJ País Vasco, April 19, 2012; TSJ Cataluña, May 30, 2012; TSJ Valencia, June 8, 2012; TSJ Cataluña, Nov. 29, 2012; and, TSJ Cataluña March 25, 2013. The authors would like to thank Professor Miguel Gómez Jene for providing this information (email of Feb. 13, 2015). 208 28.26% selected “High,” 4.35% “Very High.” 209 28.32% selected “High,” 7.86% “Very High.” 210 39.13% selected “Low,” none “Very Low.” 211 24.12% selected “Low,” 0.95% “Very Low.” 212 32.61% selected “Positive,” 4.35% “Very Positive.” 213 46.96% selected “Positive,” 7.71% “Very Positive.”

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or “Very Negative” attitude towards arbitration,214 this description was given by 32.61% of Spanish respondents.215 Arbitration is not only still in development in Spain with respect to its acceptance by Spanish courts, but it is not yet in a solid position as an acceptable dispute resolution mechanism among Spanish business people. This is obviously a serious obstacle to the development of arbitration in Spain, since if disputes are not taken to arbitration, arbitration cannot develop as a practice. However, it should be emphasized in this context that Spain does benefit from ongoing efforts by both the leading Spanish arbitral institutions and arbitration specialists to increase understanding of and support for arbitration, as well as the ongoing efforts of the Spanish Arbitration Club to promote arbitration throughout Spanish and Portuguese-speaking countries.216 Consequently, there is reason to be optimistic about longer-term improvements in this situation. C. Arbitral Procedure in Spain Spanish law and Spanish arbitral institutions place particular emphasis on the speed of arbitration, and while responses from Spanish respondents to the Survey do not provide grounds for any conclusion that arbitration in Spain is substantially faster than generally found across the European Union/Switzerland, Spanish respondents do report that both the domestic and the international arbitrations in which they have been involved in the past five years have concluded within times roughly equivalent to or slightly faster than those reported on average by respondents Survey-wide.217 Similarly, Spanish respondents on average reported that final awards in both the domestic and the international arbitrations in which they have been involved in the past five years were delivered within approximately the same period of time after the conclusion of hearings as did respondents Survey-wide.218 Moreover, although high rates of applications for 214

8.25% selected “Negative,” 0.54% “Very Negative.” 39.13% selected “Negative,” none selected “Very Negative.” 216 The Spanish Arbitration Club also promotes arbitration in further countries through local “chapers.” 217 In domestic arbitration, 11.36% of Spanish respondents reported arbitration taking on average less than six months, with 79.54% reporting less than 12 months, and 100% less than 24 months. Survey-wide, 12.78% of respondents reported an average length of less than six months, 54.34% less than 12 months, and 93.77% less than 24 months. In international arbitration, 11.63% of Spanish respondents reported arbitration taking on average less than 12 months, with 79.07% reporting less than 24 months, and 97.67% less than 36 months. Survey-wide, 16.15% of respondents reported an average length of less than 12 months, 72.15% less than 24 months, and 94.46% less than 36 months. 218 In domestic arbitration, 63.64% of Spanish respondents reported receiving the final award within three months of the conclusion of hearings, 97.73% within six months, and 100% within 12 months. Survey-wide, 64.21% of respondents reported receiving the final award within three months of the conclusion of hearings, 92.45% within six months, and 98.21% within 12 months. In international arbitration, 13.95% of Spanish respondents reported receiving the final award within three months of the conclusion of hearings, 215

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annulment often characterize developing arbitral jurisdictions, Spanish respondents reported rates of annulment applications with respect to awards from both domestic and international arbitrations in which they had been involved in the past five years that were no higher than those reported on average by respondents Survey-wide.219 Indications are that arbitration in Spain does not replicate the inefficiencies of litigation before Spanish courts. The Survey provides some insights as to how this result was achieved: unlike arbitration in other Southern European States, as discussed above, arbitral procedures in Spain have developed as an autonomous system of dispute resolution and does not emulate court proceedings, even in its domestic form. Spanish respondents reported domestic arbitration as having a lower level of similarity with the procedures used in court than both respondents Survey-wide and respondents from the other Southern European jurisdictions analyzed in this article.220 The survey, then, provides clear support for the conclusion that the development of arbitration in Spain has not been negatively affected by the procedural dichotomy between domestic and international arbitration that is visible in other developing arbitration States, such as Cyprus or Portugal, as even in its domestic form, Spanish arbitration has developed its own procedures, which allow for a relatively fast and efficient resolution of disputes. This procedural efficiency is not only the result of the autonomous evolution of the practice of arbitration in Spain, however, but also derives from specific efforts of Spanish legislators to help develop arbitration as an alternative to litigation in Spanish courts. The current Arbitration Law, adopted in 2003, for example, provides that, unless agreed otherwise by the parties, the final award in any arbitration seated in Spain must be issued within six months of the filing of the statement of defense or the answer to any counterclaim, or from the expiry of the period to file it.221 The possibility to extend this time limit without the

69.76% within six months, and 97.67% within 12 months. Survey-wide, 30.46% of respondents reported receiving the final award within three months of the conclusion of hearings, 75.04% within six months, and 95.29% within 12 months. 219 In domestic arbitration, 75.61% of Spanish respondents reported annulment applications in 25% or less of the arbitrations in which they had been involved in the past five years, with 26.83% reporting no annulment applications. By comparison, 79.28% of respondents Survey-wide reported annulment applications in 25% or fewer of arbitrations, with 39.36% reporting none. In international arbitration, 79.48% of Spanish respondents reported annulment applications in 25% or less of the arbitrations in which they had been involved in the past five years, with 33.33% reporting no annulment applications. By comparison, 80.65% of respondents Survey-wide reported annulment applications in 25% or fewer of arbitrations, with 32.85% reporting none. 220 46.67% of Spanish respondents described domestic arbitration in Spain as having either “few” or “no or almost no” shared procedures with litigation in Spanish courts. No Spanish respondent described domestic arbitration in Spain as having “Effectively the same procedures” as are used in Spanish courts. 221 This follows the previous arbitration law, adopted in 1988, which provided for the same time period, but starting from the appointment of the last arbitrator, although the

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agreement of the parties is very limited: the tribunal can only add two more months and must do so by means of a reasoned decision. For complex arbitrations this schedule would be extremely difficult to meet without compromising the quality of the proceedings, or enormously increasing the cost to the parties of the arbitration. However, parties are permitted to depart from this rule by mutual agreement before or after the initiation of the proceedings, and can set a mutually acceptable time limit. The parties can also depart from this rule by submitting to arbitration rules that provide for different time limits or that adopt a mechanism to modify those limits.222 Importantly, however, the latest amendment of the Arbitration Law, approved in 2011, makes clear that violation of the six-month time limit does not constitute grounds for having the award set aside, unless the parties have expressly agreed otherwise. Consequently, even where the parties have not specifically agreed to extend the six-month time period, an award delivered after six months will still be enforceable.223 Nonetheless, notwithstanding the lack of consequences for the parties of violating the time limit,224 the existence of the rule has had a clear normative effect on arbitration in Spain, by creating an expectation among parties that arbitration will be completed within six months of the filing of the statement of defense. This conclusion is consistent with the evidence emerging from the survey: 71.74% of Spanish respondents stated that arbitration is “much faster” than court litigation,225 whilst none of them described arbitration as “slightly slower” or “much slower” than court proceedings. This advantage of expeditiousness can be seen as offering a counterbalance to the perceived higher costs of Spanish arbitration than litigation in Spanish courts, with arbitration being

ability of the parties to set an alternative time limit through agreement is a new addition. Gómez Jene, supra note 206, at 115. 222 Time limits have indeed been addressed by Spanish arbitral institutions, in a manner similarly designed to encourage the speedy conclusion of arbitrations. For example, the Spanish Court of Arbitration (CEA) has formalized its commitment to the speed of arbitration in the form of a rule requiring that final awards in all arbitrations administered by the CEA must be delivered within five months of the filing of the Answer to the Claim, with the possibility of a single one-month extension. While the CEA reports that approximately 70% of arbitrators do indeed deliver their award within this time limit, it must be emphasized that failure to do so does not affect the enforceability of the award. Rather, it merely impacts upon the perception of the parties, and on the likelihood that the CEA will appoint the arbitrator in question in the future. This is, however, a significant threat, as the CEA appoints the arbitrators in approximately 80% of the arbitrations it administers. 223 Although this view has been challenged by some Spanish commentators (email of Feb. 12, 2015). 224 Consequences do potentially exist for the arbitrators, as Article 37(2) of Spain’s arbitration law expressly allows that parties may be able to claim compensation from the arbitrators for any damages resulting from the delay in the issuance of the award. 225 Compared with 47.52% of respondents Survey-wide.

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“Much More Expensive” than litigation according to 47.83% of Spanish respondents, and “Slightly More Expensive” for a further 28.26%.226 Nonetheless, despite these positive aspects of arbitration in Spain, other elements serve as a reminder that arbitration in Spain is still developing, rather than being solidly established. This can be seen, for example, in some problematic case law that has developed regarding the enforcement of arbitral awards in the context of consumer and other “small dispute” arbitrations.. The Spanish Law on Civil Procedure provides that, in order to enforce an arbitral award, the party desiring enforcement must submit a copy of the arbitration agreement.227 This is similar to the requirement in the New York Convention that parties seeking enforcement of an arbitral award must provide the enforcing court with either the original arbitration agreement or a duly certified copy.228 However, the absence in the Spanish legislation of a provision expressly allowing the substitution of a certified copy when the original agreement is unavailable has led some Spanish courts to deny enforcement of domestic awards where the claimant is not capable of producing the original copy of the arbitration agreement.229 Indeed, this is the case even though the Spanish Supreme Court has ruled, in the context of the recognition of a foreign arbitral award under the New York Convention, that this requirement must be considered satisfied when the respondent actively participated in the arbitration proceedings.230 While it is clearly important to establish that a party against whom an award is being enforced did indeed consent to have its dispute resolved through arbitration, the requirement that the original agreement be produced, when strictly applied, risks depriving the enforcing party of the dispute resolution procedure for which it negotiated. Such a requirement is excessively formalistic, as it does not differentiate in any way between cases in which there is genuine doubt regarding the existence of an arbitration agreement, and cases in which there is adequate evidence that an arbitration agreement existed, but the original agreement itself is

226

Compared with 25.91% of respondents Survey-wide selecting “Much More Expensive” and 33.96% selecting “Slightly More Expensive.” 227 Spanish Law on Civil Procedure, Art. 550.1.1. See in general on the requirements of validity of the agreement, RAFAEL VERDERA SERVER, EL CONVENIO ARBITRAL 151 (2009); JOSÉ F. MERINO MERCHÁN & JOSÉ MA CHILLÓN MEDINA, TRATADO DE DERECHO ARBITRAL 249 (3d ed. 2006); GÓMEZ JENE, supra note 196, at 81. 228 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), Art. IV(1)(b). 229 AAP Barcelona, Oct. 13, 2010, cited in Virginia Pardo Iranzo, De la Ejecución forzosa del laudo, in COMENTARIOS A LA LEY DE ARBITRAJE 1865, 1913 (Silvia Barona Vilar ed., 2d ed. 2011). 230 AATS March 12, 2002, ex. 2098/2000; May 16, 2001, ex. 350/2001; March 28, 2000, ex. 1724/98; Dec. 1, 1998, ex. 3660/96; March 31, 1998, ex. 524/97. For a comprehensive Study of the Spanish case law on this topic, see GÓMEZ JENE, supra note 196, at 157.

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not available, a distinction that has, as noted above, been acknowledged by the Supreme Court with respect to the recognition of foreign awards.231 Moreover, a similar formalistic approach has been adopted by some Spanish courts with respect to the service of any award to be enforced, again in the consumer or small award context, as some courts have held that enforcement of awards can be denied if there is no proof that the award was served on the defendant. This rule has been interpreted very strictly by some courts, which have required not only evidence of delivery of the award to the party against whom enforcement is sought, but additional proof that the document delivered did indeed have the same content as the award to be enforced. There are, then, certainly very positive aspects to arbitral procedure in Spain, and clear evidence that in certain respects arbitration in Spain operates in a manner consistent with practices found in Europe’s leading arbitral jurisdictions. Moreover, while some problems remain, particularly concerning the approach of Spanish courts to smaller and non-commercial arbitrations, the level of support for arbitration currently being provided by the Spanish government, combined with the existence in Spain of a growing body of experienced arbitration professionals and strong arbitral institutions, gives reason to conclude that these problems will eventually be resolved. D. Spain as a Market for Arbitration The developments in Spanish arbitration described above are also reflected in the changing face of Spain as a market for arbitration. Historically, arbitration in Spain suffered from the bad reputation of ad hoc proceedings, which were overwhelmingly conducted on an ex aequo et bono232 basis.233 One of the decisive consequences of the recent developments, however, has been the emergence of a group of arbitral institutions, most notable the Court of Arbitration of Madrid (“CAM”), the Barcelona Arbitration Court (“TAB”), the Spanish Court of Arbitration (“CEA”) and the Civil and Mercantile Court of Arbitration (“CIMA”), 231

Eduardo José Fontán Silva, El exequatur de laudos extranjeros – Algunos aspectos teóricos y prácticos, in LA NUEVA LEY DE ARBITRAJE 247, 266 (José Carlos Fernández Rozas ed., 2007); GÓMEZ JENE, supra note 196, at 157. 232 That is, on the basis of the arbitrator’s judgment of what would be fair and equitable in the case at hand, rather than on the basis of the law. 233 Before the 1988 reform of the Spanish arbitration law, the Spanish Court of Arbitration (CEA), established by Royal Decree in 1981, was the only arbitral institution in Spain. As a result, the majority of arbitrations were naturally conducted in an ad hoc fashion. After the reform allowed the establishment of competing institutions, many competing arbitration chambers were established; however, given the lack of practical experience in the administration of arbitral proceedings and the very regionalized nature of Spain, it was not until recently that some of them succeeded in developing an ongoing shift from ad hoc to administered arbitration. For a comparison between administered and ad hoc Spanish arbitration, see José María Alonso Puig, El arbitraje institucional, in COMENTARIO A LA LEY DE ARBITRAJE 679 (Alberto de Martín Muñoz et al. eds., 2006).

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which have enhanced the efficiency of arbitration by monitoring closely the proceedings in the arbitrations they administer. More broadly, as the following discussion will demonstrate, Spanish arbitral institutions have come to play a central role in the development of the particular characteristics of arbitration in Spain. Spanish respondents reported becoming involved in their first arbitration later than did respondents Survey-wide, and also reported having practiced law for longer before arbitration became their primary field of legal work than did respondents Survey-wide. Only 32% of Spanish respondents stated that they became involved in their first arbitration within the two years of qualifying to practice as a lawyer, compared with 44.67% of respondents Survey-wide, with 30% of Spanish respondents reporting having worked for over ten years prior to their first involvement in arbitration, compared with 17.99% Survey-wide. Analogously, while 57.57% of Spanish respondents reported arbitration becoming their primary field of work in nine years or less, roughly equivalent to the 62.57% of respondents Survey-wide who stated the same thing, 33.33% of Spanish respondents stated that arbitration became their primary field of work only after more than 15 years of practice, compared with only 19.77% of respondents Survey-wide. These results can be explained as the product of two factors. Firstly, Spanish arbitration has only developed into a significant practice in relatively recent times, meaning that respondents who have already practiced law for decades are less likely to have been involved in arbitration from the outset of their career. Secondly, the ongoing evolution in Spain away from ad hoc arbitration and towards administered arbitration also only commenced recently. Before this change occurred, however, entry into arbitration was significantly more difficult, as ad hoc arbitration generally works as a closed niche of legal practice where “repeat players” have a comparative advantage over newcomers in terms of reputation and social links. Indeed, evidence of the importance of Spanish arbitral institutions in expanding arbitration as a field of practice can be seen in the fact that 64.29% of Spanish respondents who work as arbitrators reported having received their first arbitral appointment from an institution. Similarly, while the Chamber of Arbitration of Madrid, arguably Spain’s leading arbitral institution, appoints arbitrators from a managed list of only 300 individuals and there is currently a waiting list of new professionals wishing to be added, it has nonetheless provided the first appointment to 80 new arbitrators in the past five years alone. While arbitral institutions Europe-wide play an important role in the development of arbitration as a field of legal practice, Spanish arbitral institutions are able to play a particularly important role in the development of new arbitrators, due to the central role they have in the appointment of arbitrators. The Spanish Court of Arbitration, for example, another of Spain’s leading arbitral institutions, itself appoints the arbitrator in approximately 80% of the cases it administers, due to the inability of parties to agree on the appointment of a sole arbitrator. More broadly, 53.37% of Spanish respondents who serve as arbitrator

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reported receiving over 50% of their appointments as arbitrator from an arbitral institution, with 89.28% receiving more than 25%. By comparison, Survey-wide only 34.37% of arbitrators reported receiving over 50% of their appointments from an arbitral institution, with only 60.04% receiving more than 25%. One further distinctive point regarding arbitration in Spain should also be noted, connecting as it does with the strongly regionalized nature of Spain as a State. When asked to evaluate certain characteristics in terms of their importance in selecting an arbitrator, Spanish respondents placed far more emphasis on the understanding of an arbitrator of the language of their client than did respondents Survey-wide. During discussions with Spanish arbitration professionals it has been suggested that the strong regional identities that exist in Spain encourage a correlation between language familiarity and cultural familiarity, allowing language to serve as a proxy for a potential arbitrator’s ability to understand a party’s perspective. IX. CONCLUSION While this article has focused on the discussion of arbitration practice in certain specific States in Europe, the underlying goal of this discussion has been a broader one. One important result of the empirical work reported here has been confirmation that not only do local variations in arbitral practice exist even between European countries that share cultural and geographic similarities, but that these variations can only be understood from a local perspective. States around the world have embraced the notion that arbitration should be left free from State control, to operate as a fundamentally unregulated form of dispute resolution, adaptable to the needs of the parties and of the legal professionals involved in each dispute. The immediate consequence of this freedom, however, is that arbitration unavoidably will develop differently in different contexts. Arbitration in Malta, for example, operates differently from arbitration in Greece, and this is precisely because it is being adopted in response to different concerns, and involves individuals who have gained their legal expertise in different legal cultures. Recognition of this localized reality of arbitral practice is essential for the proper study of arbitration. There is unquestionably an elite level of transnational arbitral practice, and at this elite level there is good reason to believe that certain standardized norms of arbitral practice are indeed developing.234 It is precisely the success of these elite practitioners, however, that has led to the substantial spread of arbitration across the globe, and consequently to the increased involvement in arbitration of practitioners whose arbitration practices are decidedly local or regional, rather than transnational, and of parties whose agreement to arbitrate is motivated by decidedly local concerns.

234

This point was most famously made in Gabrielle Kaufmann-Kohler, Globalization of Arbitration Procedure, 36 VAND. J. TRANSNAT’L L. 1313 (2003).

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As an unavoidable result of this localization of arbitration, though, much arbitration practice has developed in reflection of local legal traditions, and in response to local concerns, generating a practice that often differs significantly from that predominantly discussed in journal literature and conference talks that remain focused on the elite levels of transnational arbitration practice. It is, however, only by attending to these variations, rather than by dismissing them as merely failed attempts at replicating the more desirable practices found at the transnational level, that arbitration can really be understood.