Czech (& Central European) Yearbook of Arbitration

Czech (& Central European) Yearbook of Arbitration® Czech (& Central European) Yearbook of Arbitration® Volume VI 2016 Rights and Duties of Parties ...
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Czech (& Central European) Yearbook of Arbitration®

Czech (& Central European) Yearbook of Arbitration® Volume VI 2016 Rights and Duties of Parties in Arbitration

Editors

Alexander J. Bělohlávek Professor at the VŠB TU in Ostrava Czech Republic

Naděžda Rozehnalová Professor at the Masaryk University in Brno Czech Republic

Questions About This Publication www.czechyearbook.org; [email protected]

COPYRIGHT © 2016 By Lex Lata BV __________________ All rights reserved. No part of this publication may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems without permission in writing from the publisher. __________________ Printed in the EU. ISBN/EAN: 978-90-824603-2-2 ISSN: 2157-9490 Lex Lata BV Mauritskade 45-B 2514 HG – THE HAGUE The Netherlands __________________ The title Czech (& Central European) Yearbook of Arbitration® as well as the logo appearing on the cover are protected by EU trademark law. Typeset by Lex Lata BV.

Anton Baier Vienna, Austria

Bohuslav Klein Prague, Czech Republic

Stanislaw Soltysiński Warsaw, Poland

Silvy Chernev Sofia, Bulgaria

Andrzej Kubas Warsaw and Krakow, Poland

Jozef Suchoža Košice, Slovak Republic

Sir Anthony Colman London, UK

Nikolay Natov Sofia, Bulgaria

Vladimír Týč Brno, Czech Republic

Piotr Nowaczyk Warsaw, Poland

Evangelos Vassilakakis Thessaloniki, Greece

Editorial Board Alena Bányaiová Prague, Czech Republic

Marek Furtek Warsaw, Poland

Asko Pohla Talinn, Estonia

Radu Bogdan Bobei Bucharest, Romania

Wolfgang Hahnkamper Vienna, Austria

Květoslav Růžička Pilsen/Prague, Czech Republic

Viorel Mihai Ciobanu Bucharest, Romania

Vít Horáček Prague, Czech Republic

Matthias Scherer Geneva, Switzerland

Marcin Czepelak Krakow, Poland

Miluše Hrnčiříková Olomouc, Czech Republic

Thomas Schultz Geneva, Switzerland

Filip Černý Prague, Czech Republic

Lászlo Kecskes Budapest, Hungary

Jiří Valdhans Brno, Czech Republic

Ian I. Funk Minsk, Belarus

Vladimir Khvalei Moscow, Russia

Kamil Zawicki Warsaw and Krakow, Poland

Czech (& Central European) Yearbook of Arbitration®

Advisory Board

Address for correspondence & manuscripts Czech (& Central European) Yearbook of Arbitration® Jana Zajíce 32, Praha 7, 170 00, Czech Republic [email protected] Editorial support: František Halfar, Jan Halfar, Lenka Němečková, Karel Nohava

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Impressum

Institutions Participating in the CYArb® Project Academic Institutions University of West Bohemia in Pilsen, Czech Republic Faculty of Law, Department of International Law & Department of Constitutional Law Západočeská univerzita v Plzni, Právnická fakulta Katedra mezinárodního práva & Katedra ústavního práva Masaryk University in Brno, Czech Republic Faculty of Law, Department of International and European Law Masarykova univerzita v Brně, Právnická fakulta Katedra mezinárodního a evropského práva Pavol Jozef Šafárik University in Košice, Slovak Republic Faculty of Law, Department of Commercial Law and Business Law Právnická fakulta UPJŠ, Košice, Slovensko Katedra obchodného a hospodárskeho práva VŠB – TU Ostrava, Czech Republic Faculty of Economics, Department of Law VŠB – TU Ostrava, Ekonomická fakulta Katedra práva Institute of State and Law of the Academy of Sciences of the Czech Republic, v.v.i. Ústav státu a práva Akademie věd ČR, v.v.i.

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Non-academic Institutions Participating in the CYArb® Project International Arbitral Centre of the Austrian Federal Economic Chamber Wiener Internationaler Schiedsgericht (VIAC), Vienna Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania Curtea de Arbitraj Comercial Internaţional de pe lângă Camera de Comerţ şi Industrie a României, Bucharest Arbitration Court attached to the Hungarian Chamber of Commerce and Industry A Magyar Kereskedelmi és Iparkamara mellett szervezett Választottbíróság, Budapest Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic Rozhodčí soud při Hospodářské komoře České republiky a Agrární komoře České republiky, Prague Arbitration Court attached to the Czech-Moravian Commodity Exchange Kladno Rozhodčí soud při Českomoravské komoditní burze Kladno (Czech Republic) ICC National Committee Czech Republic ICC Národní výbor Česká republika The Court of Arbitration at the Polish Chamber of Commerce in Warsaw Sąd Arbitrażowy przy Krajowej Izbie Gospodarczej w Warszawie Slovak Academy of Sciences, Institute of State and Law, Slovak Republic Slovenská akadémia vied, Ústav štátu a práva. Bratislava, Slovensko

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Proofreading and translation support provided by: Agentura SPĚVÁČEK, s.r.o., Prague, Czech Republic, and Pamela Lewis, USA.

List of Abbreviations.................................................................................. xi

Czech (& Central European) Yearbook of Arbitration®

Contents

ARTICLES Alexander J. Bělohlávek Rights and Duties of Parties in Connection with Taking of Evidence in Investor-State Arbitration ................................................. 3 Ondřej Čech A Party‘s Right to Appoint an Arbitrator and its Limits Issue Conflict in International Arbitration ............................................. 23 Petr Dobiáš Rights and Duties of Parties in Insurance Arbitration .......................... 43 Cristina Ioana Florescu The Contractual Legal Nature of the Relationship Between the Major Participants in Arbitration ..................................... 69 Garðar V. Gunnarsson │ David Earnest Raul Gallardo │ Tobiasz Kaczor How to Sharpen the Sword of Efficiency in International Arbitration? ................................................................. 101 Andrzej Kubas │ Maciej Durbas Conditional Effectiveness of the Arbitration Agreement ..................... 125 Harald Sippel Med-Arb: Recent Trends and an Outlook on the Future .................... 151 Antuen Skënderi │ Aulona Hazbiu │ Klotilda Bushka (Ferhati) Legal Framework and Implementation Issues Concerning Parties’ Rights and Duties During the Arbitration Process: An Albanian Case Study......................................................................... 177

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Elena Zucconi Galli Fonseca │ Carlo Rasia Third Parties Between Arbitration Agreements and Review of Arbitral Awards.............................................................. 191

CASE LAW Poland Kuba Gąsiorowski │ Magdalena Matejczyk │ Kamil Zawicki The Supreme Court Judgments ............................................................. 213

NEWS & REPORTS Jan Iosifovich Funk │ Inna Vladimirovna Pererva Settlement of Disputes by International Arbitration Court at BelCCI ...................................................................................... 227 Asko Pohla Validity of Arbitration Agreements in Estonian law............................ 247

BIBLIOGRAPHY, CURRENT EVENTS, CONFERENCES, CYIL & CYArb® PRESENTATIONS, IMPORTANT WEB SITES Alexander J. Bělohlávek Selected Bibliography for 2015 .............................................................. Current Events ........................................................................................ Past CYIL and CYArb® presentations .................................................. Important Web Sites ............................................................................... Index ......................................................................................................... All contributions in this book are subject to academic review.

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271 285 301 303 315

United Kingdom the English Arbitration Act 1996 AAA Code of Ethics AAA The Code of Ethics for Arbitrators in Commercial Disputes AAA American Arbitration Association AAR ARIAS (UK) Arbitration Rules, per the wording in force as of 1 January 2014 (Third Edition) ADR Alternative Dispute Resolution AFTAR ARIAS (UK) Fast Track Arbitration Rules (2013) AIIB Asian Infrastructure Investment Bank Albanian CCP Albanian Code of Civil Procedure AMA Protocol Arb-Med-Arb Protocol ARIAS U.S. AIDA Reinsurance and Insurance Arbitration Society United States ARIAS UK AIDA Reinsurance and Insurance Arbitration Society United Kingdom ARRUS ARIAS Rules for the Resolution of U. S. Insurance and Reinsurance Disputes ARRUS ARIAS Rules for the Resolution of U. S. Insurance and Reinsurance Disputes CEFAREA French Reinsurance and Insurance Arbitration Center CEFAREA Rules CEFAREA‘s 2013 Arbitration Rules CEFAREA-ARIAS France The new rules of the French Reinsurance and Insurance Arbitration Centre

Czech (& Central European) Yearbook of Arbitration®

List of Abbreviations

AA 1996

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CIETAC CLE BC Directive EU HKIAC IBA Rules

IBA ICC Rules ICC

ICDR ICSID Convention

ICSID JCAA KCAB LCIA Rules

LCIA MEDART Model Law SCC Rules

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China International Economic and Trade Arbitration Commission Continuing Legal Education Society of British Columbia EU’s Mediation Directive European Union Hong Kong International Arbitration Centre International Bar Association’s Rules on the Taking of Evidence in International Commercial Arbitration International Bar Association Rules of Arbitration of the ICC International Court of Arbitration International Chamber of Commerce (often used in terms International Court of Arbitration attached to the International Chamber of Commerce) International Centre for Dispute Resolution Convention on the Settlement of Investment Disputes between States and Nationals of Other States of March 18, 1965 International Center for Settlement of Investment Disputes Japan Commercial Arbitration Association Korea Commercial Arbitration Board LCIA Arbitration Rules – The London Court of International Arbitration (see also ‘LCIA’) London Court of International Arbitration (see also ‘LCIA Rules’) Albanian Centre on Commercial Mediation and Arbitration UNCITRAL Model Law on International Arbitration1 SCC Institute Arbitration Rules. Arbitration Rules of the Arbitration

1 The template was approved on 21 June 1985 as UN Document A/40/17, Annex I, within the framework of the unification program of the UN Commission on International Trade Law (UNCITRAL).

SIAC SIMC UNCITRAL Rules

UNCITRAL VIAC

Czech (& Central European) Yearbook of Arbitration®

SCC

Institute of the Stockholm Chamber of Commerce (see also SCC) Stockholm Chamber of Commerce. In this book in the sense of the Arbitration Institute of the Stockholm Chamber of Commerce (see also ‘SCC Rules’) Singapore International Arbitration Centre Singapore International Mediation Centre UNCITRAL Arbitration Rules within the meaning of the UN General Assembly resolution 31/98 of 15 December 1976,2 as amended in 2010 by the UN General Assembly resolution 65/223 United Nations Commission on International Trade Law4 Vienna International Arbitration Centre

2

Available online in English at: http://www.uncitral.org/pdf/english/texts/arbitration/arb-rules/ arb-rules.pdf (accessed on 5 May 2014). Also available in other UN languages. 3 Full text of the UNCITRAL Rules 2010 is available online in English at: http://www.uncitral.org/ pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf (accessed on 5 May 2014). 4 See www.uncitral.org.

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Alexander J. Bělohlávek Rights and Duties of Parties in Connection with Taking of Evidence in Investor-State Arbitration ....................................................................... 3

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Articles

Ondřej Čech A Party’s Right to Appoint an Arbitrator and its Limits .................... 23 Petr Dobiáš Rights and Duties of Parties in Insurance Arbitration ....................... 43 Cristina Ioana Florescu The Contractual Legal Nature of the Relationship Between the Major Participants in Arbitration ................................. 69 Garðar V. Gunnarsson │ David Earnest Raul Gallardo │ Tobiasz Kaczor How to Sharpen the Sword of Efficiency in International Arbitration ................................................................ 101 Andrzej Kubas │ Maciej Durbas Conditional Effectiveness of the Arbitration Agreement ................ 125 Harald Sippel Med-Arb: Recent Trends and an Outlook on the Future ................. 151 Antuen Skënderi │ Aulona Hazbiu │ Klotilda Bushka (Ferhati) Legal Framework and Implementation Issues Concerning Parties’ Rights and Duties During the Arbitration Process: An Albanian Case Study ...................................................................... 177 Elena Zucconi │ Galli Fonseca │ Carlo Rasia Third Parties Between Arbitration Agreements and Review of Arbitral Awards.................................................................................................... 191

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Rights and Duties of Parties in Insurance Arbitration

Abstract  │The rights and duties of the parties in insurance abitration shall be guaranteed to the same extent as in unspecialized arbitral proceedings. On the other hand, insurance arbitration has a specific character given by the subject of the controversy. The majority of insurance disputes originate from contractual or noncontractual obligations. The parties are business partners preferring amicable and accelerated proceedings. Therefore, insurance arbitration is less formal than consumer and other arbitrations, as those arbitration place an emphasis on the protection of the weaker party (the consumer).

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JUDr. Petr Dobiáš, Ph.D. currently holds the position of Senior Lecturer at Charles University in Prague. In his research activities, he primarily focuses on international arbitration, international insurance law and European private international law specifically contract law under the Rome I Regulation. Petr Dobiáš is the author of the publication Selected Issues of the International Insurance Law in Consideration of the Resolution of Insurance Disputes in Arbitration Proceedings. E-mail: [email protected] seznam.cz

Czech (& Central European) Yearbook of Arbitration®

Keywords: Arbitration │ Insurance │ Arbitration Court

Petr Dobiáš

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I. Introduction 3.01.

All the basic principles that guarantee litigants the right to a fair trial must be observed in arbitration proceedings pertaining to insurance matters. The first peculiarity of resolving disputes in insurance matters is the emphasis on the need to arrive at a quick resolution of the dispute, which typically pertains to insurance benefits given by an insurance company upon occurrence of an insurance event. Another characteristic feature is that at least one of the litigants is an insurance company.1 In terms of the procedural rights and obligations of the parties, insurance disputes can be divided into two groups, from the standpoint of whether or not the litigant is a consumer. Whereas in consumer disputes protection will often be guaranteed to the weaker contracting party by mandatory procedural consumer protection laws, disputes with insurance businesses, have less formalized arbitration proceedings. This is also reflected in the contents of the arbitration rules of specialised arbitration courts, notably in France, the United Kingdom and in the United States. This paper will focused on those courts and will also mention the provisions of the arbitration rules of some arbitration courts with general competence. Nevertheless it shloud be mentioned, that preliminary negotiations are often entered into when resolving disputes involving large insurance risks in order to prevent a dispute from being resolved by arbitration or in court.

II. The Right to Participate in the Constitution of the Arbitrator/Arbitration Panel II.1. Constitution of the Arbitrator/Arbitration Panel and Their Independence 3.02.

1

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Whilst resolving disputes in arbitration proceedings, litigants are entitled to choose an independent and impartial arbitrator or to constitute an independent arbitration panel, as the case may be. The litigants in insurance arbitration proceedings may have an interest in choosing an arbitrator who they believe will be favourably inclined to the arguments they put forward. If the policyholder or the insured party is a party with the status of a consumer, the insurer, as the stronger (and usually better experienced) party, may push through the inclusion in the

A dispute pertaining to a reinsurance contract involves a dispute between an insurance company and a reinsurance company. Insurance companies based in the Czech Republic have, as a rule, concluded contracts with reinsurance companies based outside of the Czech Republic (note: VIG RE zajišťovna, a.s. is the only reinsurance company based in the Czech Republic), and thus such arbitration proceedings will, as a rule, have an international element.

3.03.

3.04.

insurance policy of an arbitration clause expressly stating the first name and surname of the arbitrator. It may also arise that the arbitration clause contains a mechanism for the constitution of the arbitrator or the arbitration panel, which will be drafted in favour of one of the contracting parties. This was a topical issue in the Czech Republic namely in relation to consumer disputes ensuing from insurance policies containing arbitration clauses in favour of arbitrators appointed on an ad hoc basis. Likewise, there are currently discussions in foreign literature about the impartiality and independence of arbitrators in the event that the members of the arbitration panel are appointed by the litigants. The argument2 is that an arbitrator appointed by a litigant is inclined to decide in this litigant’s favour. This is especially true in the event of commodity or other forms of specialised arbitration, where the arbitrators are selected from among people operating in the relevant professional circles.This is also true due to the fact that the arbitrator’s personal contacts enable them to find a compromise decision and issue it in the form of an arbitration award. Arbitrators have a duty to notify litigants of any and all facts or matters that may raise doubts about their own impartiality and ability to settle the dispute fairly, even in the event that an arbitrator is not sure that these circumstances could affect his decision in the case at hand.3 AIDA Reinsurance and Insurance Arbitration Society United States (ARIAS U.S.) recommends ascertaining these circumstances by the use of a questionnaire, the contents of which must not include questions pertaining to the manner in which the arbitrator shall make decisions. AIDA Reinsurance and Insurance Arbitration Society United Kingdom (ARIAS UK) prescribes, in Articles 7.1 and 7.2 of the ARIAS (UK) Arbitration Rules, per the wording in force as of 1 January 2014 (Third Edition) (AAR), that an arbitrator is obliged, at the request made by either litigant within 14 days of the constitution of the arbitration panel, to produce a declaration of impartiality setting out any facts or matters that may reasonably raise doubts as to their impartiality. An arbitrator shall also be obliged to disclose circumstances pertaining to their impartiality at any

2 J. Uff demonstrates his conclusion using the example of UK‘s Arbitration Act of 1996. Mondaq: J. Uff, UK: Party-Appointed Arbitrators: What Is Their Proper Role? (Article), 7 October 7 2013, available at: http://www.mondaq.com/x/267544/Arbitration+Dispute+Resolution/ PartyAppointed+Arbitrators+What+Is+Their+Proper+Role (accessed on 18 June 2015). 3 The question of the impartiality of an arbitrator in insurance disputes was discussed by the author in detail in the paper The Distinctive Features of Independence and Impartiality of Arbitrators in Insurance Matters in Independence and Impartiality of Arbitrators - Czech (& Central European) Yearbook of Arbitration, New York: Juris Publishing Int. 25 (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2014), to which he refers herein.

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3.05.

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4 Most of the permanent arbitration institutions have incorporated in their rules a provision under which the given arbitration court, its employees and arbitrators shall not be liable for acts or omissions connected to the arbitration proceedings. Compare, for example, the provisions of Article 35 of CEFAREA‘s 2013 Arbitration Rules (CEFAREA Rules), Article 21 of the Rules of ARIAS (UK) and Article 18 of AFTAR, Article 40 of the Arbitration Rules of the International Court of Arbitration of the International Chamber of Commerce in Paris (per the wording in force as of 1 January 2012), the provisions of Article R-40(d) of the Rules of AAA, Article 48 of the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce of 2010. In the Czech Republic, however, we must remember that pursuant to Section 2898 of the Czech Civil Code (Act. No. 89/2012 Coll., the Civil Code), (NCC) arrangements that pre-preclude or limit the duty to compensate for damages to a person’s natural rights or caused intentionally or by gross negligence are not taken into consideration; arrangements that pre-preclude or limit the right of a weaker party to compensation for any damage are likewise not taken into consideration. Nor can the right to compensation be validly waived in such cases. As regards to Czech case law, the question of the possible liability of an arbitration court was dealt with by the Supreme Court of the Czech Republic, in its ruling of 28 November 2007, file reference 32 Cdo 1044/2005, and the Constitutional Court of the Czech Republic, in its finding of 15 July 2002, file reference IV ÚS 174/02. 5 Compare Pavel Raban, Alternative Dispute Resolution, Arbitration and Arbitrators in the Czech Republic, Slovakia and Abroad, Prague: C. H. Beck, 129-135 (2004), Pavel Raban, Concerning the Liability of Arbitrators and Arbitration Courts, 1 Bar Association Bulletin 31 (2003), Martin Maisner, Liability and Independence of the Arbitrator, in Party Autonomy versus autonomy of Arbitrators, Czech (& Central European) Yearbook of Arbitration, New York: Juris Publishing Int. 149 (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2012), Karl Pörnbacher; Inken Knief, Liability of Arbitrators, in Ibid. 211, Aliana Mioara Cobuz Bagnaru, Liability of Arbitrators, in Independence and Impartiality of Arbitrators - Czech (& Central European) Yearbook of Arbitration, New York: Juris Publishing Int. 25 (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2014).

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time during the course of the proceedings. ARIAS (UK) Fast Track Arbitration Rules (2013) (AFTAR) do not contain any provision on the declaration of the impartiality of an arbitrator nor on the opportunity of litigants to propose the exclusion of an arbitrator who is not impartial. This is surprising, as even litigants in streamlined arbitration proceedings must be given the opportunity to object to the constitution of an arbitrator on impartiality grounds, even though it may cause a delay in the proceedings. Furthermore, in such a case litigants will be left with no other options than to file a petition with a court for the removal of an arbitrator pursuant to Article 24(1)(a) of the Arbitration Act (1996). This will be a more time-consuming procedure than the internal remedy mechanism that should be prescribed by AFTAR for such a situation. During the organizational meeting, the parties are, as a rule, asked to confirm the proper constitution of the arbitration panel. The parties also agree not to exercise claims against the arbitrators by virtue of their decision-making in the proceedings in question.4 The exclusion of an arbitrator’s liability should ensue from the arbitrator’s status itself. This should be similar, within the framework of deciding disputes, as that of a judge of the general court. It is nevertheless recommended, considering the various concepts in existence in various jurisdictions dealing with the issue of an arbitrator’s liability,5 that arbitrators have the parties sign a declaration on the exclusion of an arbitrators’

3.06.

liability.6 It is also appropriate that arbitrators take out insurance, by way of prevention, against liability for damage caused by the performance of their office. In insurance arbitration, there can be discussions about the equality of the parties in the event that it involves multiple subjects on one or both sides of the proceedings. This mainly concerns disputes with an insurer, when the policyholder and the insured party are two separate parties. It may also concern disputes between insurance companies and a reinsurer. The question that also arises is whether each subject has the right to appoint ‘its own’ member of the arbitration panel or how to proceed if the parties cannot agree on the person acting as the sole arbitrator. The arbitration rules of permanent arbitration courts that have been examined do not provide an answer to this question.

Czech (& Central European) Yearbook of Arbitration®

Rights and Duties of Parties in Insurance Arbitration

II.2. Qualification Requirements for Arbitrators 3.07.

Litigants choose to settle their disputes in arbitration proceedings held before permanent arbitration courts primarily in anticipation of a quick and qualified decision being made. They are thus entitled to have the dispute settled by arbitrators with the necessary qualifications and experience. In Article 6.3 of the AAR, the ARIAS UK arbitration court prescribes as a condition for the registration of an arbitrator on the list of arbitrators not less than ten years’ experience in insurance or reinsurance within the industry or as a lawyer or other professional advisor serving the industry. Similarly, ARIAS U.S. allows for a current or former managing officer of an insurance company or a reinsurer, or an arbitrator certified by ARIAS U.S. to become an arbitrator or umpire. Besides this, the qualification requirements for arbitrators may be set by the litigants themselves, which is taken into consideration by some permanent arbitration courts in their arbitration rules, where they require the parties to provide at least a brief characterisation of the requirements placed on the arbitrators.7 If an arbitrator fails to meet the requirements placed by a party on his professional qualities, this arbitrator may be disqualified from deciding in the case. The requirements for the qualifications of arbitrators are defined in a relatively vague manner by ARIAS Europe in its model arbitration clause.

6 It is interesting that besides the obligation of the parties to refrain from taking legal action against an arbitrator in regards to the decision that they made in a given dispute, sample form 3.2 of ARIAS U.S., on the declaration of the inviolability of an arbitrator, also contains the obligation of the parties to pay all the costs connected with the arbitrators‘ participation in proceedings on lawsuits filed as a consequence of the given arbitration proceedings. 7 Explanatory note to Article 4.1.4 of AAR and AFTAR.

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It requires arbitrators to have many years of experience relating to customs and trade practices in the field of insurance and reinsurance practice. Unless agreed otherwise by the parties, the chairperson of the arbitration panel may only be a person with a legal education knowledgeable of the customs and trade practices in the field of insurance and reinsurance legal practice. These qualifications and experience may be documented namely by way of certification to serve as an arbitrator in arbitration proceedings granted by ARIAS Europe.8 Even more general in character is the regulation of the Spanish Insurance Arbitration Court, with its seat in Madrid, which allows registration in the list of arbitrators9 of recognised experts in their respective fields, who are independent.10

III. The Right to a Fair Trial III.1. The Independence and Impartiality of Arbitrators 3.08.

3.09.

8

ARIAS Europe Rechtswahl-, Mediations- und Schiedsklausel 2010. Article 9(1) of ESTATUTOS DE FUNCIONAMIENTO DEL TRIBUNAL ESPAÑOL DE ARBITRAJE DE SEGUROS, available at: http://seaida.com/que-ofrecemos/tribunal-espanol-de-arbitraje-de-segurosteas/ (accessed on 19 July 2015). 10 The opposite extreme was represented by the arbitration rules of the now defunct LEGIBEL, the centre for alternative dispute resolution, which prescribed that disputes shall be settled by a three-member arbitration panel, the chairperson of which had to be an independent attorney appointed by LEGIBEL. The remaining two members of the panel had to be a neutral lawyer specialising in insurance law operating in one of the LEGIBEL member companies and a lawyer from the Test-Achats consumer association. 9

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In resolving disputes arising from insurance and reinsurance, litigants often prefer to employ less formal proceedings, compared with the more formalised settlement of disputes in arbitration or court proceedings. The reason for such a procedure is often a long-standing business relationship between the insurer and the policyholder or between the insurance company and the reinsurer. There is a relatively limited circle of potencial contracting partners, especially in the case of insurance of large risks and reinsurance contracts in respect to the delivery of capital equipment. The question is to what extent the arbitrator is required to be neutral in relation to the subject of the dispute and to the litigants and their representatives. Article 2.4 of ARIAS Rules for the Resolution of U. S. Insurance and Reinsurance Disputes (ARRUS) provides that an arbitrator must be disinterested, unbiased and impartial. An arbitrator could thus be disqualified from hearing a dispute even if he had prejudices towards any of the parties prior to the commencement of the proceedings. On the other hand, it is not ruled out for an arbitrator to have

3.10.

previous experience with the case being heard. This envisages the situation whereby an arbitrator has knowledge pertaining to the establishment and history of the obligation, or has already participated in unsuccessful informal negotiations aimed at resolving the dispute prior to the arbitration proceedings. In the case of resolving a dispute by arbitration proceedings, the parties often prefer to select an arbitrator known to them from insurance business circles. This may raise doubts as to impartiality and independence, unless both parties were aware in advance of this arbitrator’s professional links (e.g. on the basis of the arbitrator’s notification) and still gave their consent to the appointment. In such a case, the parties may sign a declaration irrevocably committing themselves, for an unlimited time, to compensate arbitrators in the event that claims are exercised against them on the grounds of their decision-making in the arbitration proceedings. This applies if these arbitrators had disclosed to the parties in advance all the circumstances that might raise doubts about their bias and the parties have concluded that no grounds for the bias of arbitrators exist.11 This is the reason why, as a rule, specialised insurance arbitration courts require arbitrators to sign a detailed declaration of their independence and impartiality before accepting the office.12 An interesting feature of American insurance arbitration is that state

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Rights and Duties of Parties in Insurance Arbitration

11

In practice, the parties use, for example, ARIAS U.S. Sample Form 3.2: Hold Harmless Agreement. The Neutral Selection Questionnaire used by ARIAS U.S. contains a series of questions pertaining to the past as well as existing labour-law and other contractual relationships (e.g. on the basis of a contract on commercial representation, or on the basis of a power of attorney) between the arbitrator and the litigants. It also contains questions regarding any involvement by the arbitrator in the resolution of other disputes between both parties (as an arbitrator, legal representative, witness or expert). These questions are understandably focused primarily on the contractual relationships arising within the framework of insurance and reinsurance. This questionnaire also includes questions about whether the arbitrator has not been a member or shareholder of any of the litigants‘ organisations in the past. A similar declaration of independence is also required from arbitrators under Article 17(2) of the AAR, with arbitrators obliged to notify the parties of circumstances giving rise to reasonable doubts as to their impartiality as soon as they learn of these circumstances. The litigants may, in accordance with Article 17(3), request an arbitrator to produce a declaration of independence whenever they learn of reasons raising doubts as to the independence of the arbitrator, but not later than 14 days from learning of these facts. A peculiarity of CEFAREA is that, pursuant to Article 12 of the CEFAREA Rules, arbitrators must disclose circumstances rasing doubts as to their impartiality to the Arbitration Committee and that it is the obligation of the Arbitration Committee to inform the parties of the existence of such curcumstances. Pursuant to Article 11 of the CEFAREA Rules, a litigant wishing to have an arbitrator disqualified may only do so by filing an application to the Arbitration Committee within a period of 15 days (counted from the revelation of the circumstances raising the doubt of the arbitrator’s impartiality), with the Arbitration Committee’s decision being final (and without the possibility of appeal). The decision of the Arbitration Committee is made without justification and the arbitration proceedings shall be suspended during the course of the proceedings upon the application of the party for the arbitrator’s disqualification. For that matter, a justification is unnecessary in a situation in which a decision cannot be appealed and its preparation would only lead to delays in the proceedings. On the other hand, a justified decision could have a greater impact on the parties in terms of the argument’s persuasiveness. Interestingly, in order to respect the interests of the representatives of business circles, the Arbitration Committee is composed of the representatives of insurers, reinsurers, brokers and legal professions, so that excessive emphasis is not placed on legal and professional formalism [Alexandre Job; Romain Dupeyré, The new rules of the French Reinsurance and Insurance Arbitration Centre (CEFAREAARIAS France): the modernisation of arbitration in insurance law 80(4) Arbitration 362, 364 (2014)]. 12

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courts sometimes dismiss as unfounded objections concerning the disqualification of an arbitrator from hearing a case made prior to the commencement of the case itself and tend to deal with these objections only in the event of the justification of such objections as part of proceedings on the petition for the annulment of the arbitration award.13 However, it is important to note that an objection may be rejected not only on the grounds of being filed prematurely, but also because of the late filing of the objection that an arbitrator is biased. Objections concerning the disqualification of an arbitrator because he is not independent or impartial must be filed within the period prescribed by law or arbitration rules.14

III.2. The Right to Propose Evidence and the Burden of Proof III.2.1. The Character of Insurance Disputes from the Viewpoint of Evidence 3.11.

13

Compare Article 3.7 ARIAS U.S. Practical Guide to Reinsurance Arbitration Procedure of 2004. The 1st Civil Chamber of the French Supreme Court (Cour de Cassation), in its decision of 25 June 2014, case no. 11-26.529 Tecnimont v Avax, concluded that a party shall be deemed to have waived its right to challenge circumstances pertaining to the presiding arbitrator if it failed to exercise its right within the time limit of thirty days set by the ICC Rules of arbitration. Article 17.5 of the CEFAREA Rules is based on this judgment, which prescribes, so as to prevent delays during proceedings, that should a party, in the course of the proceedings, knowingly and without lawful reason fail to exercise an objection on the grounds of illegality, it shall be deemed that this party has waived its right to file an objection on the grounds of unlawful procedure.

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Insurance disputes resolved through arbitration proceedings have, as a rule, the character of disputes ensuing from contractual or non-contractual obligations. This can also be demonstrated by the AAR, Articles 16.1.4 to 14.1.6 of which expressly confers upon arbitrators the power to order the amendment of a written contract, and to decide on the invalidity, nullity and enforceability of a contract. A peculiarity of these rules is that Article 15.2.2 does not allow arbitrators to settle disputes relating to the ‘payment of exemplary, punitive, multiple or other noncontractual damages’, unless the parties agreed otherwise. In principle, an insurance policy is always executed in writing, or at least the insurance certificate shall be in writing [note: in the Czech Republic this regulation is contained in Sections 2758(2) and 2777(1) of the NCC]. In the case of a reinsurance contract, it is out of the question, in view of the character of the commitment, for either of the parties to agree to it being concluded in a nonwritten form. An arbitration clause recommended by one of the permanent arbitration institutions may be incorporated into both types of contracts, unless it is also a consumer dispute

subject to the law of a state that does not allow the resolution of consumer disputes by arbitration proceedings.15 Furthermore, a situation can, in exceptional cases, be envisaged whereby insurance disputes cannot be arbitrated in a certain state (see the interpretation of the contentious arbitrability of insurance disputes in the United States).

III.2.2. Taking of Evidence in Insurance Disputes 3.12.

3.13.

A characteristic feature of insurance disputes is relatively frequent taking of evidence in the form of expert reports (e.g. to ascertain the state of health of an insured party, to ascertain the causes of a traffic accident, or the reasons for the spoilage of insured goods). Given that litigants can submit expert reports containing conflicting conclusions on the same matter, situations arise where the arbitrator/arbitration panel must decide whether to side with one of these reports or whether to arrange for the execution of a review report. Such a procedure causes delays in the proceedings and increases its costs and thus, according to Article 22 of the CEFAREA Arbitration Rules, the expert(s) and the parties should agree on the resolution of any disputes at the time of preparing the reports and only if they fail to agree can such a dispute be settled by an arbitrator/arbitration panel. This solution also corresponds to Article 5.4 of the IBA Rules on the Taking of Evidence in International Arbitration (2010), which however leave it at the discretion of arbitrators as to whether they hold a meeting of experts in order to arrive at a consensual opinion on the mutually opposing passages of their reports right through to their compilation. Nathan D. OMalley recommends, if need be, a confrontation of the experts in accordance with Article 8(3)(f ) of the IBA Rules on the Taking of Evidence in International Arbitration (2010).16 A peculiarity offered in view of the need for informal proceedings enabling the expert assessment of disputed matters by some

15 Opponents of the resolution of consumer disputes in arbitration proceedings argue that some companies abuse their position as the economically stronger entity by forcing consumers to enter into asymmetric arbitration clauses allowing only the entrepreneur to choose whether the dispute shall be resolved through judicial or arbitral proceedings [Jonnette W. Hamilton, Pre-Dispute Consumer Arbitration Clauses: Denying Access to Justice?, 51 McGill L.J. 693, 733 (2006)]. But we have to realise that there is legislation and case law, particularly in Europe and in the United States, directed against unfair practices in consumer arbitration. In the United States, a bill has been introduced aimed at preventing the conclusion of arbitration clauses in consumer matters (Arbitration Fairness Act of 2015, S. 1133; H.R. 2087, 29 April 2015). This bill provides that it would only be possible to resove consumer disputes in arbitration proceedings after they arise on the basis of an arbitration agreement. Permanent arbitration institutions are also aware of the trends towards the protection of the consumer, and are creating their own rules guaranteeing consumers‘ procedural rights (e.g. AAA Consumer Due Process Protocol 2007). 16 Nathan D. OMalley, Rules of Evidence in International Arbitration: An Annotated Guide, Oxon/New York: Informa Law 153 (2013).

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German arbitration courts, for example, is the conducting of proceedings before an expert appointed by the parties, who can issue either a report that is binding17 or non-binding18 on the parties in respect to the disputed matter identified by them. The purpose of special procedural arrangements for selecting and constituting experts is to guarantee their independence. This is because, in some states, an expert report submitted as evidence by the litigant carries less weight than a report submitted by an expert appointed by a state court.19 This method of dispute resolution is used in practice in the case of, for example, a loss event occurring on a seagoing vessel, when it is necessary to quickly20 obtain a qualified and fast assessment of the circumstances of the case, on the basis of which the insurance company can provide an insurance benefit. This applies if the expert proceedings were initiated pursuant to a written agreement between the parties, who agreed that the expert report will be binding for them. Expert proceedings can thus be a more effective and faster manner of resolving a dispute than 17 The commentary to Adolf Baumbach, Wolfgang Lauterbach, Zivilprozessordnung, Munich: C. H. Beck, 2572 (2013) is based on the fact that a report has a binding and irrevocable nature after its communication to the parties of the proceedings. As further characteristics differentiating arbitration and expert proceedings, it can be noted that an expert proceedings is entirely informal in character, is not subject to the principles of a fair trial and its output is not enforceable. More detail on this matter is contained in Jens-Peter Lachmann, Handbuch für die Schiedsgerichtspraxis, Cologne: Verlag Dr. Otto Schmidt, 23-27 (2008). The point of departure of some authors is that the subject of an expert report is solely to assess issues of fact [Klaus Sachs, in Karl-Heinz Böckstiegel, Klaus Peter Berger, Jens Bredow, Schiedsgutachten versus Schiedsgerichtsbarkeit, Cologne: Carl Heymanns Verlag 15 (2007)]. Nevertheless, the DIS Rules on Expertise, valid as of 1 May 2010, prescribe that parties may, pursuant to Section 1, submit any disputed matter to an expert for assessment, with Section 12 requiring the equality of the parties in accordance with the right to a fair trial. 18 The expertise proceedings pursuant to Section 1(1) of the DIS Rules on Expertise valid as of 1 May 2010, is non-binding in nature. But the DIS Rules on Expert Determination in force as from 1 May 2010 apply where the parties wish to obtain a preliminary binding expert determination to clarify a dispute in connection with a contract. Upon termination of the expert determination proceedings, all disputes shall be finally settled in accordance with the Arbitration Rules of the German Institution of Arbitration. 19 Alexander Bělohlávek and Renáta Hótová mention Germany as an example of such a state [Alexander Bělohlávek, Renáta Hótová, Experts in the International Environment, Prague: C. H. Beck 47 (2011)]. In 2012, the School of International Arbitration of the Queen Mary University of London conducted an International Arbitration Survey, titled Current and Preferred Practices in the Arbitral Process, as part of which it ascertained that in 90% of the cases it is the litigants who proposed the taking of evidence by way of an expert report, with an expert report being compiled upon the initiative of the arbitrators in only 10% of the cases. 20 Pursuant to Section 3 of the German Maritime Arbitration Association Rules on the Expert Report, an expert must, in the event of a dispute, be appointed by the agreement of the parties within three days, and if the parties fail to agree on the expert within this time period, the expert shall be appointed as fast as possible (with utmost dispatch) by the chairperson or his deputy. By way of comparisson, the 2015 Expert Rules of the International Chamber of Commerce (ICC Publication 869-1 ENG) do not stipulate any time periods for the appointment of an expert and merely impose that the International Centre for ADR set a time period in which the parties must give their comment on the proposed expert [Article 2(3) of the ICC Rules for the Proposal of Experts; Article 1(4) and Article 3(4) of the ICC Rules for the Appointment of Experts and Neutrals; Article 3(3) of the ICC Rules for the Administration of Expert Proceedings] and for the expert to set a deadline for the compilation of a written expert report [Article 8(1) of the ICC Rules for the Administration of Expert Proceedings] in a timetable (Article 7 of the ICC Rules for the Administration of Expert Proceedings). Such a complicated procedure can lead to delays in the proceedings.

3.14.

formalised arbitration proceedings,21 during which the report of the expert would be submitted during the oral hearing after the constitution of the arbitrator/arbitration panel.22 Restriction of the right to make proposals for evidence is demonstrated in streamlined insurance arbitrage proceedings in Article 12.1.1. of AFTAR, which confers on arbitrators the power to determine the maximum scope of submissions available to the parties, including their supplementation.

III.3. Equality of the Parties in Insurance Arbitration 3.15.

3.16.

The equality of the parties in insurance arbitration must be guaranteed to the same extent as in unspecialised arbitration proceedings. This also includes the right of the parties to be heard in the presence of the other party and to therefore have the opportunity to comment to the same degree and to make proposals for the taking of evidence. A breakthrough in this principle is the possibility of conducting negotiations with the parties separately on organisational matters before the start of the case itself pursuant to Article 3.9 of the ARIAS U.S. Practical Guide to Reinsurance Arbitration Procedure (2004). The equality of the parties must also be guaranteed in the event that the parties agree to employ the rules for streamlined arbitration proceedings.23 The disadvantage of streamlined forms of arbitration tends to be the need to pay an increased fee for arbitration proceedings24 and the limitation of the maximum value of the claim25 up to which this form of arbitration

21 Arbitration proceedings tend to be the subject of criticism from some authors, given the ponderous nature of the initial phase of the proceedings and in view of the need to appoint the arbitrator/arbitration panel and, in the case of certain arbitration rules, also the requirement to convene an organisational meeting of the arbitrators and the parties in order to clarify the procedural questions (typically: an organisational meeting pursuant to Article 10 of ARIAS U.S. Neutral Panel Rules for the Resolution of U. S. Insurance and Reinsurance Disputes, per the wording in force as of 14 January 2015 and terms of reference pursuant to Article 17.4 of the CEFAREA Rules) – compare with this Peter Turner, Reza Mohtashami, A Guide to the LCIA Arbitration Rules, Oxford: Oxford University Press, 70 (2009). As such, some arbitration courts try to avoid organisational meetings by virtue of being identified in their rules as optional and required to be held within a short, predetermined time period (e.g. within 7 days of the appointment of the arbitrator pursuant to Article 9.2 of AFTAR). 22 Identically John F. Wilson, Carriage of Goods by Sea, Harlow: Pearson Education Limited 338 (2010). 23 ARIAS U.S. Streamlined Procedures for Small Claim Procedures (Streamlined Rules) and AFTAR. 24 e.g. according to Section 49 (Expedited Proceedings) of the Rules of the Arbitration Court attached to the Czech Chamber of Commerce and the Agricultural Chamber of the Czech Republic: The fee for conducting a dispute in expedited proceedings is increased a) by 75 % of the fee according to the Tariff in cases where the dispute is to be resolved within two months [Section30 (1) (a)]; b) by 50 % of the fee according to the Tariff in cases where the dispute is to be resolved within four months [Section 30 (1) (b)]. 25 The application of the Streamlined Rules is conditional on the maximum value of the claim being USD 1,000,000, unless the arbitrator finds reason to hear a dispute with a value of up to USD 2,000,000.

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proceedings is permissible. It is therefore surprising that neither the Streamlined Rules nor AFTAR mention the question of an increased fee for arbitration proceedings and leaves the decision on its amount at the discretion of the arbitrator (Article 11.7 of the Streamlined Rules and Article 15 of the AFTAR). Further characteristics of streamlined proceedings are the resolution of disputes by a sole arbitrator26 and the streamlining or setting of procedural periods for participants’ actions (including the proposing of evidence), as well as for the conclusion of the arbitration proceedings (or, more precisely, for the issue of the final decision in the form of a ruling or award). Article 11 of the Streamlined Rules sets, in comparison to ‘non-streamlined proceedings’, a time period for the holding of an oral hearing which must be held no later than 180 days from the end of the organisational meeting and is to last a maximum of one day. It also sets restrictions for the proposing and taking of evidence.27 The proposing of evidence restrictions, under Articles 10.6 and 11.3 of the Streamlined Rules and presumably in order to prevent delays in the proceedings, actually prohibits the taking of evidence in the form of expert reports. Shortened time periods are also set for the summoning of parties to an oral hearing. Under Article 11.1 of AFTAR an arbitrator is allowed to summon parties on the basis of a summons served two days prior to the holding of the oral hearing, without specifying that these should be business days. Although the equality of the parties is maintained in informing the litigants at the same time in advance of the hearing, it seems questionable whether the parties and their representatives will have sufficient time to prepare and will not excuse themselves from the hearing (e.g. due to time conflicts with other work obligations). This will result in the need to adjourn the hearing and lead to delays in the proceedings. Besides streamlined arbitration proceedings, the institute of the emergency arbitrator is becoming increasingly popular. This is regardless of the fact that questions are starting to be expressed as to whether an emergency arbitrator is a real arbitrator and whether his preliminary rulings are enforceable.28 It can also be

Pursuant to Article 6.1 of AFTAR, disputes in streamlined proceedings are resolved by a sole arbitrator, whereas pursuant to Article 6.2 of the AAR decisions are ruled upon by a three-member panel, unless the parties agree otherwise. The same solution is contained in Article 6.1 of the Streamlined Rules and Article 6.1 of ARIAS U.S. Neutral Panel Rules for the Resolution of U. S. Insurance and Reinsurance Disputes. 27 It is therefore an equivalent of the concentration of judicial proceedings, although AFTAR, unlike the Streamlined Rules, does not itself set a fixed procedural time period for the submission of proposals for evidence, but in Article 9.3 it imposes upon the arbitrator the obligation to set, so as to attain this purpose, a closing date (of not more than 4 months in duration), after the expiry of which an arbitration award must be issued within a period of 14 days. 28 Fabio G. Santacroce, The emergency arbitrator: a full-fledged arbitrator rendering an enforceable

3.18.

argued that insurance disputes involving large insurance risks concern a relatively narrow group of entrepreneurs. If one of the litigants fails to voluntarily respect a preliminary injunction, the said litigant shall suffer a loss of credibility in the eyes of the other business partners, who will not be willing to enter into future insurance policies with them. In the case of insurance disputes in which one of the litigators is a policyholder or the insured party and is simultaneously also in the position of a consumer, some legal regulations place special emphasis on the protection of the weaker party. If such a situation were to arise in the Czech Republic, the provisions of the Act No. 216/1994 Coll., on Arbitration Proceedings and Enforcement of Arbitration Awards (APA), which are designed to protect consumers, would be applied. A special system of consumer mediation and arbitration centres exists in Spain29 and Portugal, within the framework of which insurance disputes between consumers and insurers (e.g. disputes arising from compulsory motor vehicle insurance) are also addressed. A special situation exists in the United States, where it is questionable to this day whether insurance disputes can be arbitrated30 and thus procedural rules of arbitration proceedings in insurance matters exist in a number of states of the union which, in the case of a dispute with a weaker contracting party (policyholder, the insured party, the damaged party), is based on the domestic law of the relevant state of the union.31

decision?, 31(2) Arbitration International 283, 302 (2015). 29 In Spain it acts as an umbrella for the system of arbitration centres (in Spanish: juntas arbitrales) subsidised by the state’s Spanish Agency for Consumers, Food Safety and Nutrition (in Spanish: La Agencia Española, Consumo, Seguridad Alimentaria y Nutrición). In Portugal, the Consumers‘ Arbitration Tribunal (in Portugese: Tribunal Arbitral de Consumo) exists as part of the Information and Arbitration Centre in Porto (in Portugese: Centro de Informacao de Consumo e Arbitragem Porto). 30 Michael J. Ritter, Disputing Arbitration Clauses in International Insurance Agreements: Problems with the Self-Execution Framework, 3(2) Pace Int’l L. Rev. Online Companion 41, 67 (2012). 31 E.g. New Jersey PIP (Personal Injury Protection) No-Fault Arbitration Rules in force as of 15 April 2013. New Jersey automobile insurance law was amended in 1998 to require that all automobile insurers provide any party with the option of submitting a dispute concerning personal injury protection benefits to binding arbitration. Such dispute resolution is governed by N.J.S.A. 39:6A-5.1 et seq. and N.J.A.C. 11:3-5.1 et seq. These administrative rules apply to disputes arising under contracts affected by the provisions of the 1998 New Jersey ‘Automobile Insurance Cost Reduction Act,’ specifically, to claims under policies issued or renewed on or after 22 March 22 1999, and any voluntary submission by the parties pursuant to N.J.S.A 39:6A-9.1 and 39:6A-11. These administrative rules also apply to such cases as may be ordered to dispute resolution by a court. The Minnesota No-Fault Comprehensive or Collisions Damage Automobile Insurance Arbitration Rules, amended and effective 15 October 2012, or the Rules for Arbitration of No-Fault Disputes in the State of New York, amended and effective 16 August 2013, can also be mentioned. In the state of New York, Article 5105(b) of the Insurance Law of 26 June 2014 actually establishes mandatory arbitration in respect of disputes relating to the payment of insurance benefits arising between insurers.

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IV. The Right to a Reasoned Arbitration Award32 3.19.

3.20.

An arbitration award must be reasoned, if the applicable procedural rules do not permit the parties to renounce the right to the provision of a reason. This concerns namely the case whereby the parties agree on settlement in the form of a consent award pursuant to Article 17.10 of the AAR. Article R-46 of the Resolution of Intra-Industry U.S. Reinsurance and Insurance Disputes Supplementary Procedures (2013) is somewhat unusual in that it provides that the arbitrator need not render a reasoned award unless the parties agree on the rendering of such an award. On the other hand, Article 20 of the New Jersey No-Fault PIP Arbitration Rules (2013) contains a mandatory stipulation that an arbitration award must be reasoned. CEFAREA, following the example contained in Article 33 of the ICC Arbitration Rules (2012), incorporated into its CEFAREA Rules the institute for the scrutiny of an arbitration award (including its reasoning) by an Arbitration Committee pursuant to Article 26.2 of the CEFAREA Rules, which must be submitted to the Arbitration Committee for possible comments prior to its issue. A procedure is not prescribed in the event that the arbitrators do not comply with the comments of the Arbitration Committee and fail to amend the award. Pursuant to Article 1513 of the French Code of Civil Procedure, the chairperson of the arbitration panel may, pursuant to Article 26(1) of the CEFAREA Rules, solely decide a dispute and issue an award, if each of the three members of the arbitration panel holds a different opinion as to how the dispute should be decided. In this way, the risk of arbitration proceedings being blocked in their final phase is eliminated, but only as regards international disputes.

V. The Right to the Review of an Arbitration Award 3.21.

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Speed is one of the main and frequently cited advantages of arbitration proceedings, which is due to these proceedings being less formal and the impossibility to review an arbitration award au fond. The scrutinising of an arbitration award is permitted in some legal regulations on the basis of an agreement between the parties (e.g. Article 27 of APA). Emphasis in arbitration

Reasoned award means that the arbitration award provides some findings and explanations for the outcome (Cf. also ARIAS U.S. Checklist for Arbitration Reasoned Awards 2007, available at: https://www. arias-us.org/forms/Checklist_for _Reasoned_awards.pdf ).

proceedings dealing with insurance matters will often be placed on the making of a fast decision33 and it will thus not be practical for the proceedings to be prolonged by the scrutinisation of the arbitration award by another arbitrator or arbitrators. However, in disputes with a weaker contracting party, the possibility of a remedy can be enshrined in law regardless of the agreement reached by the parties. An example of such regulation is represented in the state of New York by scrutinising conducted via Master Appeal Arbitration, which ensues from Article 5106 of the Insurance Law of 26 June 2014. The use of this procedure can be counterproductive in view of the fact that letter b. of the Rules for Arbitration of No-Fault Disputes in the State of New York regulates streamlined arbitration proceedings, although the Master Appeal Arbitration scrutinisation process has time periods set for the submission of a proposal for scrutiny (15 days in the case of streamlined arbitration proceedings), for the submission of proposals for evidence and for the holding of an oral hearing.

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VI. Non-public and Confidential Nature of the Proceedings 3.22.

With respect to the nature of insurance disputes, litigants have an interest in respecting the confidentiality of the proceedings. There are exceptions when the confidential nature of the proceedings may be breached such as with regard to an ongoing court proceedings relating to the arbitration or if so provided by the parties’ agreement, law or judicial decision. However, the arbitration rules of insurance arbitration courts34 contain special reasons enabling a breach of the confidentiality principle of the proceedings. This concerns cases when the subject of the arbitration proceedings is a dispute pertaining to direct insurance and the reinsurer needs to know the result of the proceedings in order to exercise its claim of recourse. It also concerns cases where the subject of the arbitration proceedings is a dispute relating to reinsurance and the reinsurer needs to

33

For example, the insurer may often be forced to conduct an investigation of an insurance event and to pay out the insurance benefit within the statutory deadline, the shipper may have other contracts in place involving the means of transport in respect of which the damage occurred and the owner of the transported goods may face a contractual penalty for late delivery of these goods, which were destroyed in transit. Pursuant to Section 2797 of the NCC, an insurer must commence insurance investigations without undue delay of receiving notification of the insurance event. The premium is payable within 15 days of the conclusion of these investigations, and should these investigations not be concluded within a period of three years the insurer shall be obliged to pay the party exercising a right to the insurance benefit an advance, unless there is a valid reason to withhold the payment of such an advance [Section 2798(1) and (2) of the NCC]. 34 Article 7(2) of ARIAS U.S. Streamlined Procedures for Small Claim Procedures and Article 7(2) of ARRUS.

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3.23.

know the result of the dispute in order to exercise a retrocessive claim. On the other hand, arbitration courts are attempting to make the proceedings more attractive in the eyes of litigants by guaranteeing the non-public nature of the proceedings,35 particularly in a situation where the confidentiality/non-public nature of proceedings is not regulate by domestic legislation. In the United Kingdom the English Arbitration Act 1996 (AA 1996) and in the United States the Federal Arbitration Act 1925 do not regulate the confidentiality of the arbitration proceedings.36 Article 1464(4) of the French Civil Procedure Code, amended by Decree No. 2011-48 of 13 January 2011, reforming the law governing arbitration, regulates the confidentiality of domestic arbitration proceedings. However, the said provisions of Article 1464(4) are not found in the list of provisions pertaining to domestic arbitration which shall, in the absence of the conclusion of a divergent agreement between the parties, also be applied to international arbitration proceedings (Article 1506 of the same legislation). For this reason, the confidentiality of the proceedings is enshrined in Article. 17.6 of the CEFAREA Rules and the confidentiality of the arbitration award is enshrined in Article. 29.1.

VII. The Right to be Represented 3.24.

35

Article 14.1.4 of the AAR Rules and Article 12.1.3 of AFTAR. A more detailed analysis of the issue of preserving the confidentiality of arbitration proceedings in these two states can be found in Kyriaki Noussia, Confidentiality in International Commercial Arbitration, Heidelberg/Dordrecht/London/NewYork: Springer 57-62 (2010), which points out that the legal regulations of the EU Member states, which in some cases regulate the confidentiality of arbitration proceedings (general legal provisions are contained in the legal regulations of Arkansas, California, Missouri and Texas), shall be applied in international commercial arbitration. 36

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As is the case in other types of arbitrable disputes, the parties of insurance disputes may be represented. The employees of insurance and reinsurance companies can be represented by their legal departments or by an attorney hired from outside the company. Policyholders, insured parties, entitled parties and damaged parties may be represented by organisations for the protection of consumer rights in the event that it is an insurance as well as a consumer dispute. They can be also be represented by private attorney’s.

VIII. The Rights of Subsidiary Participants of Arbitration Proceedings and Third Parties 3.25.

A very complicated situation often arises in insurance disputes if the contract between the insurance company and the reinsurer makes reference to an insurance policy (containing general insurance terms and conditions, including an arbitration clause) or if an obligation to cover insurance risks is being transferred from one reinsurer to another. In such a situation, the reinsurer does not review the contents of individual insurance policies and thus, in the event of disputes, the question that must frequently be resolved is whether or not the reinsurer is covered by the arbitration agreement. In general, it is held that an arbitration clause must identify the circle of legal relations (and the disputes that may possibly ensue from them) that it covers to a sufficient extent. English specialist legal literature37 as well as case law38 agree on this fact, as does the author of this paper, because it is not possible to establish an obligation to submit to arbitration proceedings on the basis of an arbitration clause in a contract that does not specify that the provision on the resolving of possible disputes in arbitration proceedings should also be applied to relations between the insurance company and the reinsurer. Another approach can be found in the case law of state courts in the United States, wherein the founding premise is that if obligations ensuing from a reinsurance contract are transferred from one reinsurer to another, it is sufficient for the applicability of a generally worded arbitration clause (i.e. the arbitration clause refers only to ‘contractual parties’) that the assignment contract concluded between the reinsurers contains a reference to the previous contract between the insurance company (or insurance companies) and the reinsurer.39 This conclusion was approved by the Court of Appeals of the United States (Third Circuit), which moreover decided that a reference to an arbitration clause in a contract on the assignment of obligations from a reinsurance contract need not be more precise and clear than any other contractual provisions and

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Stavros Brekoulakis, Third Parties in International Commercial Arbitration, Oxford: Oxford University Press 68 (2010); Andrew Tweeddale; Keren Tweeddale, Incorporation of Arbitration Clauses Revisited, 76(4) Arbitration: The Journal of the Chartered Institute of Arbitrators 657 (2010). 38 Trygg Hansa lnsurance Co Ltd v Equitas Ltd [1998] 2 Lloyd’s Rep 439 (QB Commercial Court, England & Wales). 39 Decision in the case of Progressive Casualty Insurance et al. Co v  CA Reaseguradora Nacional De Venezuela of 30 September 1992, United States District Court, Southern District of New York, No. 91 Civ 4580 (CSH) and of 6 April 1993, Court of Appeals of the United States (Second Circuit), (1994) 19 YBCA 825.

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3.26.

3.27.

40

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must thus correspond to the general requirements prescribed by the legal regulations governing contractual obligations. For an arbitration agreement to be applicable it is therefore sufficient that the contracting parties agree that ‘all the conditions and arrangements’ of the previous contract concluded between the insurance company and the reinsurer40 shall be applied to the contract on the assignment of the obligation. We deduce from this that the approach taken by American courts to the incorporation of an arbitration clause into a contract on the assignment of an obligation is more liberal than that of the courts in the United Kingdom. The legal successor of a contracting party may also be bound by an arbitration clause under the law, which is recognised, for example, in Article 82(2) of AA 1996 or in Section 2(5) of the APA. In insurance disputes, the claim is quite often assigned to the insurer, especially in the case of loss insurance, because if, in connection with an imminent or existing insured event, a person who is entitled to the insurance indemnity, an insured person or a person who incurred salvage costs became entitled to be compensated by another person for damage or another similar right, the claim, including accessories, security and other associated rights, passes to the insurer upon the payment of the insurance indemnity, up to the amount of indemnity which the insurer lawfully paid to the beneficiary [Section 2820(1) of the Czech NCC]. The participation of a third party in arbitration proceedings may also occur in insurance disputes on the basis of the consolidation of proceedings or subsidiary participation. Consolidation of proceedings as well as subsidiary participation may be regulated by legislation or by the rules of permanent arbitration courts. In arbitration proceedings, the insured party may be a party different to that of the policyholder who concluded the policy with the insurance company. In the event of a dispute between the insurer and the policyholder, the insured party may exercise its claims against the insurance company during the proceedings. The Court of Appeals for the First Circuit (4th Division) in  California41 arrived at the conclusion that an insured party may base its claim against the insurer on an arbitration award issued in the insured party’s previous dispute with the injured party. The Court of Appeals further arrived at the conclusion that there is such a close link between a noncontractual obligation arising between an insured party and a

Century Indemnity v Certain Underwriters at Lloyd´s 2009 584 F.3d 513 (3rd Cir. 2009). Executive Risk Indemnity, Inc v Jones 89 Cal. Rptr. 3d 747 (Cal. Ct. App. 2009).

damaged party from a liability for damage and a contractual obligation existing on the basis of an insurance policy, that the insurer cannot argue that it is a stranger in relation to the arbitration proceedings. In the opinion of the Court of Appeals, the insurer could have participated as a third party (subsidiary participant) of the arbitration proceedings and could have filed a petition for the annulment of the arbitration award, because it was notified of the launch of the arbitration proceedings and could have protected its interests (rights) within these proceedings. If the insurer does not do so, it cannot argue that the arbitration award is not binding on it and to demand its review in court proceedings with the insured party, which concerns the obligation of the insurer to pay an insurance benefit. This is particularly the case when the arbitration award was not issued on the basis of fraudulant conduct or collusion between the insured party and the damaged party at the insurer’s expense. The said decision is pivotal, as it stated that an arbitration award issued in proceedings between an insured party and the damaged party is binding on the insurer in terms of assessing whether the insured party is responsible and in relation to the amount of damage that is to be paid to the damaged party. The said case is noteworthy because of the fact that policies in the liability insurance field usually tend to contain a provision stipulating that the insurer shall be bound by court decisions or, more precisely, arbitration findings relating to disputes between the insured party and the damaged party, and that the insurer shall pay compensation on behalf of the insured party in the amount granted to the damaged party.

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IX. Fee Payment Duty 3.28.

Permanent insurance arbitration courts, which were the subject of investigations conducted in this paper, do not generally have a schedule of fees for arbitration proceedings. Nevertheless, ARIAS (UK), which declares in the AAR that it does not provide administrative, advisory or supervisory services, does issue its own rules of arbitration proceedings, administers a list of arbitrators and constitutes arbitrators if the respondent fails to do so. It is therefore not overly surprising that it does not levy fees for the arbitration proceedings. According to Article 19(2) of the AAR, litigants are jointly and severally liable to pay arbitrators’ remuneration in a justified and reasonable amount. The parties should agree on the amount of the arbitrators’ remuneration with the arbitrators prior to the launch of the proceedings on the basis of an hourly, daily or other rate. The arbitrators are

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3.29. 3.30.

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required, upon the parties’s request, to disclose the amount of their remuneration and costs prior to the publication of the final arbitration award. The final amount of the remuneration and costs shall be stated in the final arbitration award. Such a system of remunerating arbitrators may logically lead to disputes, which shall be abjudicated, at the request of any litigant or arbitrator, by the umpire appointed by the ARIAS (UK) chairperson pursuant to Article 20(2) of the AAR. The purpose of this umpire is to determine the reasonable level of the arbitrators’ remuneration and costs. An advance may be requested from the party proposing the appointment of the umpire for the abovementioned purpose to defray this umpire’s remuneration, with this advance payable to the chairperson of ARIAS (UK). This method of determining the costs of the proceedings constitutes a weak point of the arbitration proceedings conducted before ARIAS (UK), as it can lead to unnecessary cost overruns and a prolongation of the arbitration proceedings, which is contrary to the parties’ interest in being able to predict the costs of arbitration. It would be appropriate to resolve this deficiency by creating rules on the costs of the proceedings, containing the specific amount or exact method of determining the amount of arbitrators’ remuneration and the fees for the arbitration proceedings. The costs of arbitration proceedings must be paid in full by the losing party, unless the arbitrators decide otherwise with regard to the particular circumstances of the case. A very diverse regulation of the fees of arbitration proceedings is contained in the rules of arbitration proceedings for mandatory insurance arbitration before the American Arbitration Association (AAA). According to Article 4 of the Rules for Arbitration of Supplementary Uninsured/Underinsured Motorist Insurance Disputes and Uninsured Motorist Insurance Disputes in the State of New York, per the wording in force as of 1 October 1998, the applicant/plaintiff shall pay a fee in the amount of USD 250 together with the filing of the application for initiation of the proceedings. According to Article 34, the other costs of administrating the AAA arbitration proceedings shall be allocated among insurers in an equitable manner approved by the superintendent. This allocation shall be a function of the frequency with which the insurer is named as a respondent in AAA arbitration proceedings. In Article 29 of the Rules for NY Workers’ Compensation Health Insurers’ Match Program of 3 January 2007, a distinction is made between a fee of USD 150 for desk administered arbitration proceedings (i.e. conducted

essentially only on the basis of documentary evidence, without the holding of an oral hearing) and a fee of USD 475 for arbitration proceedings involving an oral hearing, which shall be paid by the insurer or the entitled party. Section bb. of the Rules for Arbitration of No-Fault Disputes in the State of New York, per the wording in force as of 16 August 2013, regulates the mechanism by which the costs of administering AAA arbitration proceedings are allocated among insurers in an equitable manner approved by the superintendent. This allocation shall be a function of the frequency with which the insurer is named as a respondent in AAA arbitration proceedings. Insurers are obliged to pay semiannual advances towards the costs of arbitration proceedings, which are calculated on the basis of the number of cases in which a certain insurer is named as a respondent in proportion to the total number of disputes in the preceding year. A final fee analysis shall be prepared at the end of each calendar year of the actual number of disputes resolved. If a plaintiff filed an action which was unfounded, lacked legal or factual basis, or was filed for the purpose of harassing the respondent, the arbitrator may order the plaintiff to pay the administrative costs of the proceedings. Such an amount shall be deducted from the total costs of administering the arbitration proceedings conducted in a calendar year.

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X. Conclusion 3.31.

3.32.

An analysis of the specialised permanent insurance arbitration courts revealed that their rules do not contain fee schedules for arbitration proceedings or mechanisms for determining arbitrators’ remuneration. This is surprising, as the fees of arbitration courts with general jurisdiction (AAA and the Arbitration Institute of the Stockholm Chamber of Commerce) are specified in their arbitration rules (or rather in the appendices thereto) for insurance disputes. In other respects, the procedural regulation of the rights and obligations of the parties to arbitration proceedings in insurance disputes does not show substantial differences, but tends to instead reflect industry peculiarities given by the character of the pending disputes and the circle of litigants involved. The arbitration rules of permanent arbitration courts set out to guarantee the right to a fair trial, which is expressly declared in some of them (e.g. Article 10 the the AAR Rules and Article 9 of AFTAR). Of course, the arbitration rules examined herein also regulate other rights of the parties besides those analysed, but these do not deviate from the framework of the usual procedural

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regulations, and were thus not included in this paper (e.g. an objection on the grounds of the arbitrators’ lack of power).

│││ Summaries DEU

[Rechte und Pflichten der Parteien in Schiedsverfahren wg. Versicherungsstreitigkeiten] Die Rechte und Pflichten der Parteien vor Schiedsgerichten in Versicherungssachen müssen im selben Umfang gewährleistet sein wie in einem allgemeinen Schiedsverfahren. Auf der anderen Seite kommt dem Versicherungsschiedsverfahren schon aufgrund des Streitgegenstands ein besonderer Charakter zu. Die meisten Versicherungsstreitigkeiten ergeben sich aus vertraglichen oder außervertraglichen Schuldverhältnissen. Die Parteien sind Geschäftspartner, die einer gütlichen und beschleunigten Schlichtung den Vorzug geben. Von daher ist das Schiedsverfahren wg. Versicherungsstreitigkeiten im Vergleich etwa zu einem Schiedsverfahren in Verbrauchersachen weniger formell, denn letzteres legt besonderen Wert auf den Schutz der schwächeren Partei (d. h. des Verbrauchers).

CZE

[Práva a povinnosti stran v  rozhodčím řízení v  pojistných sporech] Práva a povinnosti stran v pojistné arbitráži musí být zaručeny ve stejném rozsahu jako v nespecializovaném rozhodčím řízení. Na druhou stranu pojistná arbitráž má zvláštní charakter daný předmětem sporu. Většina pojistných sporů vzniká ze smluvních nebo mimosmluvních závazkových vztahů. Strany jsou obchodními partnery, kteří upřednostňují přátelské a urychlené řízení. Proto je pojistná arbitráž méně formální v porovnání s např. spotřebitelskou arbitráží, která klade důraz na ochranu slabší strany (spotřebitele).

│││ POL

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[Prawa i obowiązki stron w postępowaniu rozjemczym w sporach ubezpieczeniowych] Prawa i obowiązki stron w arbitrażu ubezpieczeniowym są określone w regulaminach wyspecjalizowanych sądów polubownych z różnym stopniem precyzji. Ogólnie można stwierdzić, że badane regulaminy w zadowalającym stopniu

gwarantują prawa procesowe i obowiązki stron w sporach ubezpieczeniowych. FRA

[Les droits et les obligations des parties à l’arbitrage dans des contentieux en matière d’assurance] Les droits et les obligations des parties aux arbitrages en matière d’assurance sont plus ou moins précisément fixés par les règlements d’arbitrage des tribunaux d’arbitrage spécialisés. De manière générale, on peut dire pour résumer que les règlements d’arbitrage examinés garantissent de manière suffisante les droits de procédure et les obligations des parties dans des contentieux en matière d’assurance.

RUS

[Права и обязанности сторон в арбитраже по страховым делам] Права и обязанности сторон в страховом арбитраже, в разной мере, урегулированы арбитражными правилами специализированных арбитражных (третейских) судов. В общем, можно подвести итог, что рассматриваемые арбитражные правила достаточно гарантируют процессуальные права и обязанности сторон в страховых спорах.

ESP

[Los derechos y las obligaciones de las partes en el arbitraje en materia de seguros] En los sistemas de arbitraje especializados de los tribunales de arbitraje, los derechos y las obligaciones de las partes en el arbitraje en materia de seguros se regulan con diversos grados de detalle. En general, puede resumirse de modo que la normativa arbitral examinada garantiza suficientemente los derechos procesales y las obligaciones de las partes en litigios de seguros.

Czech (& Central European) Yearbook of Arbitration®

Rights and Duties of Parties in Insurance Arbitration

│││ Bibliography Alexander Bělohlávek, Renáta Hótová, Experts in the International Environment, Prague: C. H. Beck (2011) Alexandre Job; Romain Dupeyré, The new rules of the French Reinsurance and Insurance Arbitration Centre (CEFAREA-ARIAS France): the modernisation of arbitration in insurance law 80(4) Arbitration (2014) Aliana Mioara Cobuz Bagnaru, Liability of Arbitrators, in Independence and Impartiality of Arbitrators - Czech (& Central European) | 65

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Yearbook of Arbitration, New York: Juris Publishing Int. (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2014) Andrew Tweeddale; Keren Tweeddale, Incorporation of Arbitration Clauses Revisited, 76(4) Arbitration: The Journal of the Chartered Institute of Arbitrators (2010) Fabio G. Santacroce, The emergency arbitrator: a full-fledged arbitrator rendering an enforceable decision?, 31(2) Arbitration International (2015) Jens-Peter Lachmann, Handbuch für die Schiedsgerichtspraxis, Cologne: Verlag Dr. Otto Schmidt (2008) John F. Wilson, Carriage of Goods by Sea, Harlow: Pearson Education Limited (2010) Jonnette W. Hamilton, Pre-Dispute Consumer Arbitration Clauses: Denying Access to Justice?, 51 McGill L.J. (2006) Klaus Sachs, in Karl-Heinz Böckstiegel, Klaus Peter Berger, Jens Bredow, Schiedsgutachten versus Schiedsgerichtsbarkeit, Cologne: Carl Heymanns Verlag (2007) Kyriaki Noussia, Confidentiality in International Commercial Arbitration, Heidelberg/Dordrecht/London/ NewYork: Springer (2010) Martin Maisner, Liability and Independence of the Arbitrator, in Party Autonomy versus autonomy of Arbitrators, Czech (& Central European) Yearbook of Arbitration, New York: Juris Publishing Int. 149 (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2012) Michael J. Ritter, Disputing Arbitration Clauses in International Insurance Agreements: Problems with the Self-Execution Framework, 3(2) Pace Int’l L. Rev. Online Companion (2012) Nathan D. OMalley, Rules of Evidence in International Arbitration: An Annotated Guide, Oxon/New York: Informa Law (2013) Pavel Raban, Alternative Dispute Resolution, Arbitration and Arbitrators in the Czech Republic, Slovakia and Abroad, Prague: C. H. Beck, (2004) Pavel Raban, Concerning the Liability of Arbitrators and Arbitration Courts, 1 Bar Association Bulletin (2003) Peter Turner, Reza Mohtashami, A Guide to the LCIA Arbitration Rules, Oxford: Oxford University Press (2009) Petr Dobiáš, The Distinctive Features of Independence and Impartiality of Arbitrators in Insurance Matters in Independence and Impartiality of Arbitrators - Czech (& Central European) Yearbook of

Arbitration, New York: Juris Publishing Int. (Alexander J. Bělohlávek; Naděžda Rozehnalová eds., 2014) Stavros Brekoulakis, Third Parties in International Commercial Arbitration, Oxford: Oxford University Press (2010)

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