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David Bateson
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Paul Starr
(保羅仕達)
In November 2008, the Federal Attorney-General released a Discussion Paper announcing a review of the International Arbitration Act 1974 (the “Act”) and calling for submissions on possible amendments to the Act. The Act is the legislation that gives effect to Australia’s obligations under the New York Convention of 1958, and deals with a range of matters including the enforcement of international arbitration agreements, the enforcement of international awards, and the circumstances in which the support of the Australian courts may be invoked in support of arbitrations. This is the first full-scale review of the Act since it became effective, and is likely to result in some important amendments.
The Attorney-General has now received submissions from a number of bodies interested in the practice of arbitration. Those submissions, and the terms of the Discussion Paper, identify the following potential amendments.
Grounds on which a court may refuse to enforce a foreign award
Sections 8(5), 8(7) and 8(8) of the Act set out the grounds upon which an Australian court may refuse to enforce a foreign arbitral award: the grounds reflect those set out in Article V of the New York Convention. However, a drafting ambiguity exists in section 8 of the Act, which suggests that (as was held in the case of Resort Condominiums International Inc v Bolwell [1995] 1 Qd R 406) an Australian court has a residual discretion whether or not to enforce a foreign award on other grounds.
This has resulted in parties suggesting, in enforcement proceedings, that the court should exercise its residual discretion to reconsider the merits of awards - something that is inconsistent with the purpose of the New York Convention. An amendment to the Act, to make it plain that no residual discretion exists, would provide greater certainty in the enforcement of awards, and would bring Australia into line with general international practice.
Application of the UNCITRAL Model Law
Section 16 of the Act provides that the UNCITRAL Model Law on International Commercial Arbitration has the force of law in Australia. The Model Law, which has widespread international acceptance, deals with a wide range of matters concerning the conduct of international arbitrations.
It was held in Australian Granites Limited v Eisenwerk Hensel Bayreuth Dipl.-ING Burkhardt GmbH [2001] 1 Qd R 461, that parties who elect to adopt institutional arbitration rules (in this case, the ICC Rules) elect, by doing so, to exclude the application of the Model Law. This has created uncertainty as to which rules and laws apply to the conduct of arbitrations conducted in Australia. It is likely that the Act will be amended to provide that parties do not elect to exclude the Model Law merely by entering into an arbitration agreement that refers to or adopts rules of arbitration. A similar amendment was made to Singapore’s International Arbitration Act in 2001, following a court decision that raised the same issue.
Exclusive jurisdiction
The Attorney-General is considering whether exclusive jurisdiction ought to be conferred upon the Federal Court in respect of matters arising under the Act. It is thought that the creation of a specialist list within the Federal Court may concentrate the expertise of the court and create greater consistency in judicial decision-making in relation to issues arising under the Act. It is possible that the Act will be amended so as to confer exclusive jurisdiction upon the Federal Court, at least in relation to some matters arising under the Act.
A number of other issues are also under consideration, including some drafting inconsistencies, and whether amendments are required to clarify the extent to which arbitral proceedings are confidential.
The results of the Attorney-General’s review, and the proposed amendments to the Act, are expected to be available later this year.
Author
Max Bonnell, Partner
Anti-suit injunctions no longer an efficient tool for arbitration in the EU: Allianz SpA, Generali Assicurazioni Generali SpA v West Tankers Inc
In the House of Lords decision that referred the issue of whether anti-suit injunctions granted to give effect to arbitration agreements are compatible with Brussels Regulation No 44/2001 to the European Court of Justice (ECJ), Lord Steyn commented that “if Member States of the European Community are unable to offer a seat of arbitration capable of making orders restraining parties from acting in breach of the arbitration agreement, there is no shortage of other states which will. For example, New York, Bermuda and Singapore”. His Lordship is correct.
The ECJ decision carries grave implications for arbitrations between parties from EC Member States that are party to an arbitration agreement with a London seat, or any other seat in the EU for that matter. In line with the ECJ decision, parties wanting to avoid quick and efficient arbitral hearings could be subjected to lengthy litigation procedures in courts that take significant periods of time to come to a decision. For parties in this situation, it may then become a race for jurisdiction between the parties as to who commences proceedings in a EC Member State first, irrespective of the legitimacy of the proceedings.
Facts
On 10 February 2009, the European Court of Justice handed down its decision in Case C-185/07, Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) and Generali Assicurazioni Generali SpA v West Tankers Inc. This decision was the end of a lengthy dispute between the parties, that began in August 2000 when the “Front Comor”, a vessel owned by West Tankers and chartered by Erg Petroli SpA (“Erg”) collided in Syracuse, Italy with a jetty owned by Erg.
The charter party was governed by English law and contained a clause providing for arbitration in London. Erg claimed compensation from its insurers Allianz and Generali and commenced arbitration proceedings in London against West Tankers for the excess. West Tankers denied liability. After paying Erg compensation, Allianz and Generali brought proceedings against West Tankers in the Tribunale di Siracusa, Italy in 2003, to recover the money they had paid to Erg. West Tankers claimed that the Tribunale di Siracusa lacked jurisdiction to hear the matter due to the existence of the arbitration agreement.
English proceedings
West Tankers brought proceedings at the same time in the United Kingdom, Queen’s Bench Division, seeking a declaration that, in accordance with the arbitration agreement, the dispute between Allianz and Generali was to be settled by arbitration. West Tankers also sought an anti-suit injunction restraining Allianz and Generali from pursuing the proceedings in the Tribunale di Siracusa.
The Queen’s Bench Division upheld West Tanker’s claims and the anti-suit injunction. However Allianz and Generali appealed this decision in the House of Lords on the basis that it was contrary to Council Regulation (EC) No 44/2001 (“the Regulation”), that governs the jurisdiction of the Courts of Member States. Notably, article 1(2)(d) of the Regulation makes clear that the Regulation shall not apply to arbitration.
After observing that the answer to the question was not obvious, the House of Lords stayed the proceedings and referred the following question to the ECJ for a preliminary ruling:
“Is it incompatible with Regulation No 44/2001 for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings are in breach of an arbitration agreement?”
ECJ decision
In light of Article 1(2)(d) of the regulation that explicitly purports to exclude arbitration from its scope, the ECJ turned firstly to the question of whether the proceedings brought by Allianz and Generali against West Tankers before the Tribunale di Siracusa comes within the scope of the Regulation. In answering that question in the positive, the Court found that because the subject matter of the dispute is the nature of the rights to be protected in proceedings, those proceedings come within the Regulation. Therefore, the Court found that any issue concerning the applicability of an arbitration agreement, including its validity, came under the scope of the Regulation.
Following this line of reasoning, the Court found that the use of an anti-suit injunction to prevent a court of a Member State, which normally has jurisdiction to resolve a dispute under Regulation No 44/2001, from ruling on the applicability of the Regulation to the dispute, amounts to “stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001”. Accordingly, the Court ruled that an anti-suit injunction is contrary to the general principle that every court seized itself, determines under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it. The crux of the Court’s decision seemed to be that no court of one Member State is in a better position to determine whether the court of another Member State has jurisdiction.
The Court concluded by affirming that the answer to the question referred to it was that it is incompatible with Regulation No 44/2001 of a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement.
What this means for you
The practical implications of this decision only applies if one party is domicile to an EC country. If so, the message to parties is not to arbitrate in a country where the ECJ has jurisdiction, or else risk being caught in protracted litigation with the effect of obstructing the arbitration. For parties that are both from non-EC states, this decision is not relevant, as the Brussels Regulations will not apply.
On 1 September 2008, the new Administered Arbitration Rules (the “Administered Rules”) introduced by the Hong Kong International Arbitration Centre (“HKIAC”) came into effect.
Previously, HKIAC arbitrations were conducted under the United Nations Commission on International Trade Law Arbitration Rules (the “UNCITRAL Rules”), supplemented by its own HKIAC Procedures for the Administration of International Arbitration (the “Procedures”). However, in response to a demand for HKIAC to have its own international arbitration rules, the Administered Rules were introduced. The Administered Rules may be adopted for use in both domestic and international arbitral proceedings.
Application of the Administered Rules
Adoption of the Administered Rules is voluntary. Parties are still able to name the HKIAC as the appointing authority or request administrative services from the HKIAC without adopting the Administered Rules. However, Article 1 of the Administered Rules provides that the Administered Rules shall apply (unless the parties have agreed otherwise) where an agreement to arbitrate:
- Provides for the Administered Rules to apply, or
- Provides for an arbitration “administered by the HKIAC”, or contains words to the same effect.
In respect of transitional provisions, Article 1.3 of the Administered Rules provides that:
- The Administered Rules supercede the Procedures, except where the parties had agreed before 1 September 2008 to adopt the Procedures.
- Where an arbitration agreement dated after 1 September 2008 provides for arbitration under the UNCITRAL Rules administered by the HKIAC, the HKIAC shall be the appointing authority and the HKIAC Secretariat shall invite the parties to agree to the application of the Administered Rules.
Administrative and procedural changes
Some of the administrative functions of the HKIAC have been added to the Administered Rules. For example, all appointments of arbitrators are subject to confirmation by the HKIAC. In addition, parties can choose whether arbitrators will be remunerated in accordance with agreed rates or the Schedule of Fees and Costs of Administration attached to the Administered Rules (fixed by the HKIAC Council, taking into consideration matters including the amount in dispute, complexity of the subject matter and time spent).
The Administered Rules provide that if the parties to an arbitration are of different nationalities, the sole arbitrators or the chairman of a three-member tribunal may have the same nationality as any party, unless previously agreed by the parties in writing.
With respect to procedural requirements, a notice and answer is now required, followed by statements of claim and defence. The tribunal is required to prepare a timetable at an early stage of the proceedings. There is limited provision for the joinder of third persons as parties (by written consent of such third persons and the applicant party), but there is no express provision for consolidation of proceedings. Article 25 permits the tribunal to appoint experts after consulting with the parties.
Article 38 provides for an expedited procedure where the amount in dispute representing the aggregate of claims does not exceed US$250,000.
Advantages of Administered Rules
The Administered Rules are based on the UNCITRAL Rules but incorporate perceived improvements and user-friendly wording, and are ‘light touch’, allowing for more flexibility to enable parties to cater for their own specific needs. The arbitral tribunal is given a wide discretion as to how to conduct the proceedings.
The Administered Rules should prove attractive to Chinese/non-Chinese party disputes as there are both English and Chinese versions of the Administered Rules.
As noted above, the parties may opt to remunerate the tribunal with reference to the Schedule of Fees and Costs of Arbitration. The ad valorem rates and administrative fees set out in the Schedule appear to be very competitive.
According to the HKIAC, cases applying the new Administered Rules have already been filed.
Author
Fiona Tai, Trainee Solicitor
Partial enforcement of New York Convention awards?: IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2009] 1 Lloyd’s Rep 89
Can a party appeal an arbitral award to tactically delay or avoid enforcement? Not necessarily, according to the English Court of Appeal (the “Court of Appeal”) in IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2009] 1 Lloyd’s Rep 89.
In this case, the Court of Appeal held that part of an award may be enforced notwithstanding proceedings to set aside the award had not yet been determined. The Court of Appeal also considered whether only part of an arbitral award may be enforced. The Court of Appeal held that partial enforcement of an award was, in this case, consistent with the purpose of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which is to ensure the effective and speedy enforcement of international arbitration awards.
Facts
IPCO is a Nigerian contractor specialising in the construction of oil and gas facilities. In March 1994, IPCO entered into a contract with the Nigerian National Petroleum Corporation (“NNPC”), a Nigerian Federal Government corporation, for the design and construction of a petroleum export terminal in the Port Harcourt area of Nigeria. The completion of the project was delayed by 22 months as a result of alleged variations by NNPC for which IPCO sought compensation from NNPC.
The contract was governed by Nigerian law and provided for disputes to be referred to arbitration in Lagos, Nigeria. IPCO referred the dispute to arbitration, and in October 2004 the arbitral tribunal issued an award in favour of IPCO in the amount of approximately US$150 million under six distinct heads of claim. In late 2004, IPCO sought to enforce the award against NNPC in the English courts, from which the above proceedings arose. At the same time, NNPC commenced proceedings in Nigeria to set aside the arbitral award.
The enforcement proceedings
In 2005, NNPC applied to the English courts to adjourn the enforcement of the award on the basis that the Nigerian proceedings to set aside the arbitral award had not yet been determined. Gross J granted NNPC’s application pending the determination of the Nigerian proceedings, concluding that some of the grounds of NNPC’s challenge had real prospects of success.
The enforcement of IPCO’s award against NNPC remained adjourned until early 2008, when IPCO renewed its application to enforce the award because NNPC’s challenge to the award in Nigeria was taking much longer than expected. The history of the Nigerian proceedings is beyond the scope of this article, however Tomlinson J noted that their resolution at first instance may take a further five years with a potential nine year appeal process to follow. In describing the Nigerian proceedings as “catastrophic”, Tomlinson J decided that the inordinate delay justified revisiting Gross J’s decision to adjourn the enforcement of the award against NNPC.
Tomlinson J held that IPCO may enforce the award in respect of two of its six heads of claim, despite NNPC’s application to set aside the award in Nigeria had yet to be determined. Tomlinson J selected two of the six heads of claim on the basis that they were unlikely to be set aside by the Nigerian courts. The effect of Tomlinson J’s decision was that IPCO could partially enforce its award against NNPC.
The appeal
NNPC appealed the decision of Tomlinson J on the basis that Tomlinson J did not have jurisdiction to enforce part of the award in this way. NNPC argued that neither the New York Convention, or the Arbitration Act 1996 (UK) expressly provided for part enforcement of an award where an award is challenged before a competent authority - in this case the Nigerian court. NNPC also contended that the role of the enforcing court, in this case the English court, is mechanistic and should only decide whether to enforce the award as it stands. NNPC argued that the enforcing court is not entitled to pick and choose which parts of the award it will enforce, as that is for the home (Nigerian) court to decide.
The Court of Appeal rejected NNPC’s arguments and held that:
- The purpose of the New York Convention is to ensure the effective and speedy enforcement of international arbitration awards, which is not inconsistent with the partial enforcement of awards in certain circumstances.
- The New York Convention and the Arbitration Act 1996 (UK) did not expressly prevent part enforcement of awards.
- An ‘all or nothing’ approach to the enforcement of awards is inconsistent with the purpose of the New York Convention.
- The fact that a challenge has been made to the validity of an award in the home court does not prevent a court in another New York Convention country from enforcing the award. To do otherwise, the Court of Appeal noted, “would encourage unscrupulous parties to mount minor challenges to awards so as to frustrate their speedy and effective enforcement”.
- Part of an award may be enforced provided that the part to be enforced can be ascertained from the face of the award, and judgment can be given in the same terms as those in the award.
What this means for you
Given the importance of uniformity in the interpretation of international conventions (see, for example, Forthergill v Monarch Airlines [1981] AC 251 at 293 per Lord Wilberforce) it is hoped that an Australian court would adopt a similar approach to the English Court of Appeal in determining whether the New York Convention precludes part enforcement of awards.
This is an important decision for parties seeking to set aside or enforce international arbitral awards, as it demonstrates that an application to set aside an award in one jurisdiction does not necessarily preclude an award, in whole or in part, being enforced in another New York Convention country. This decision may serve to thwart the efforts of so-called unscrupulous parties in delaying the enforcement of an award by challenging the validity of only a small component of the overall award, and may assist recovery of damages by the successful party in a more timely manner.
Mallesons in 2009 Global Arbitration Review top 100
Mallesons was again named in the Global Arbitration Review Top 100 firms with international arbitration specialist expertise. Mallesons was noted as being a particularly active advocate, with Max Bonnell, Peter Megens, David Fairlie, Simon Lee, Jonathan Kay Hoyle, Paul Starr, Jennifer Lee-Shoy and Christopher Tung all named for their expertise in international arbitration matters, as well as their diversity of backgrounds. Beth Cubitt was also named as a young practitioner to watch.
Mauritius implements International Arbitration Act
Mauritius enacted its International Arbitration Act in December 2008. The Act came in force on 1 January 2009 and applies to all arbitrations commenced after that date irrespective of the date on which the relevant arbitration agreement was concluded.
The Act is based on the UNCITRAL Model Law on arbitration and has a specific focus on investment arbitration.
Mauritius is currently the only country in the South African Region to have this system in place and has entered into cooperation agreement with arbitration centres in several countries including Australia, France, India and Kenya with a view to becoming an attractive jurisdiction for international arbitration disputes.
United States signs Hague Convention on Choice of Court Agreement
On 19 January 2009, the United States of America signed the Hague Convention of 30 June 2005 on Choice of Court Agreements. Mexico is the only other party to the Choice of Court Convention, having acceded to it in September 2007. The Choice of Court Convention provides that the court specified by an exclusive and valid choice of court agreement must hear the case; all other courts must suspend or dismiss the case; and courts in other Contracting States should enforce the judgment of the chosen court (subject to certain limited exceptions).
Australia is amongst a number of states actively working on ratifying the Choice of Court Convention which, if adopted by the international community, may create a uniform basis for upholding exclusive choice of court agreements and enforcing judgments resulting from them.
The Arbitration (Scotland) Bill
On 29 January 2009, the Arbitration (Scotland) Bill was introduced by the Scottish Parliament following the conclusion of the lengthy consultation period on the draft Bill in September 2008.
The Bill draws on the UNCITRAL Model Law and the UK Arbitration Act 1996 and was introduced to consolidate the existing statutory provisions into a single statute covering domestic and international arbitration. The Bill aims to provide a framework for arbitrations in Scotland to resolve disputes fairly, impartially and without unnecessary delay or expense.
It is hoped that the Arbitration (Scotland) Bill will become law in 2009 and will encourage domestic industries and professions to set up their own low-cost arbitration schemes and ultimately attract international arbitration business.
IBA International Arbitration Day, Dubai
The International Bar Association (IBA) held its 12th annual International Arbitration Day on 15-16 February 2009 in Dubai, United Arab Emirates (UAE). Over 400 international delegates attended the conference, including Mallesons Partner Max Bonnell.
The IBA conference emphasised Dubai’s increasing prominence as a centre for international commercial arbitration, evident in the recent partnership between the Dubai International Financial Centre (DIFC) and the London Court of International Arbitration (LCIA), and the well established Dubai International Arbitration Centre (DIAC). The main focus of International Arbitration Day was ‘due process’.
Another interesting development that emerged from the conference was that there is currently an IBA sub-committee at work on revising the IBA Rules on Taking Evidence in International Commercial Arbitration. These rules are often applied in arbitrations by procedural orders made by tribunals, so it is important that their importance is understood. It is expected that the IBA sub-committee will recommend some changes to the IBA Rules, in particular to legal professional privilege when it completes its work later this year.
Mallesons Perth hosts the Chartered Institute of Arbitrators Australia seminar
On 26 February 2009, Mallesons Perth centre hosted a lunch-time seminar on behalf of the Western Australian Chapter of the Chartered Institute of Arbitrators Australia (CIArb). Sam Luttrell, a Murdoch University lecturer of law specialising in the area of international commercial arbitration, spoke on the topic “Opportunities for Australian Arbitration Practitioners in the Global Financial Crisis”. The seminar was well attended and more seminars are planned by the Western Australian CIArb Chapter to ensure all interested parties are kept up to date on recent and topical developments in the area of international commercial arbitration.
Chartered Institute of Arbitrators Australia lunch, Mallesons Melbourne
A Chartered Institute of Arbitrators (CIArb) arbitrators lunch was hosted in Mallesons’ Melbourne office on 26 March 2009 by Partners Peter Megens and Max Bonnell, with a video link of the session to Mallesons in Sydney. The CIArb lunch was very well attended, with presentations by Barristers Jonathon Redwood and Albert Monichino on recent developments in Australian International Commercial Arbitration. Both presentations gave rise to a lively debate.
Peter Megens
Peter is a Partner in the Melbourne office of Mallesons Stephen Jaques where he specialises in dispute resolution - litigation, arbitration and mediation, construction, energy and natural resources, infrastructure and project structuring. Peter is extensively involved in arbitration and mediation throughout Australia and internationally and has recently been appointed Adjunct Professor of Law at Murdoch University in Western Australia.
Peter is also a director of Australian Centre for International Commercial Arbitration (ACICA) and continues to be active in the Chartered Institute of Arbitrators and in various other bodies. In addition, Peter and Beth Cubitt (Senior Associate) have recently authored another article for the Asian International Arbitration Journal.
Recent matters
- Advising major international contractor on arbitration and dispute resolution in the Victorian Hospitals Co-generation private electricity general infrastructure project.
- Acting for the builder in one of the longest running commercial arbitrations concerning a major CBD building in Melbourne, Australia.
- Advising principals, contractors, sub-contractors and consultants in many construction and engineering disputes of all types including litigation in all Court jurisdictions, arbitration, mediation, expert appraisal and other forms of ADR throughout Australia and including some international parties.
- Advising Transfield Obayashi Joint Venture as builder of Melbourne City Link Project on dispute resolution in relation to matters arising out of the project, including extensive use of mediation, expert determination, expert assisted mediation, arbitration and litigation.
- Advising and representing Australian-based contractors in ICC arbitration proceedings in relation to Australian and Asian projects.
- Advising on various major arbitration and litigation matters in all Australian States and Territories, Asia and New Zealand over a range of projects including chemical plants, mining developments, electricity facilities, road projects, co-generation and hydro electric schemes and various other engineering and construction facilities.
- Acting for a national Australian construction contractor in an ICC arbitration involving approximately US$100 million of liability and quantum disputes arising out of a hydro power project in the Philippines. Numerous conflict of law issues arose and expert evidence on complex technical issues was obtained from experts in the UK, South Africa, USA, Canada, New Zealand, Sweden and Australia. Court applications were instituted in Australia, the Philippines and Singapore. Advising on and co-ordinating litigation in the Philippines as well as mediation in Hong Kong.
Experience
1978: Bachelor of Commerce, University of Melbourne
1979: Bachelor of Law (First Class Hons), University of Melbourne
1980: Admitted to practice, Law Institute of Victoria and now in all Australian States and Territories
1995: Harvard Negotiating Course at Conflict Management Centre, Melbourne
1996: Accredited Specialist in Alternative Dispute Resolution (Arbitration) before the specialty was abandoned by Law Institute of Victoria due to the small pool of practitioners accredited.
1996: Graded Arbitrator and Mediator with Institute of Arbitrators and Mediators Australia
1997: Graduate Diploma in Finance Law, University of Melbourne
2000: Partner, Mallesons Stephen Jaques, Melbourne
2000: Former Victorian Chapter Chairman and National Councillor of the Institute of Arbitrators and Mediators Australia
2000: Graded Arbitrator and Mediator
2000: Former Editor of the Building Disputes Practitioners Society Newsletter and former Secretary of the Society.
2000: Admitted to practice in Victoria, New South Wales, Queensland, South Australia, Western Australia and Tasmania and in the Federal and High Courts of Australia.
2000: Guest Lecturer in the Graduate Diploma in Construction Law and the Masters in Construction Law Course at the University of Melbourne.
2006: Councillor, Chartered Institute of Arbitrators (Australian Chapter)
2006: Member of the County Court Building Cases Users Group advising Judge in charge of the Building Cases List
2007: Chartered Arbitrator, Chartered Institute of Arbitrators.
2008: Member of the Supreme Court Building Cases Users Group advising the Judge in charge of the Building Cases List
2009: Adjunct Professor of Law, Murdoch University
2009: Accredited Mediator with IAMA
Professional memberships
- Fellow of Institute of Arbitrators and Mediators Australia
- Fellow of Australian Centre for International Commercial Arbitration
- Fellow of the Chartered Institute of Arbitrators
- Fellow of the Singapore Institute of Arbitrators
- Member of the Building Disputes Practitioners Society and former secretary of the Society and editor of its newsletter
- Deputy Chair of Law Council of Australia, Construction and Infrastructure Law Sub-Committee, Victoria
- Law Institute of Victoria
- Member of the London Court of International Arbitration Users Group
- A director of Australian Centre for International Commercial Arbitration.
Author
Peter Megens, Partner

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