International Commercial Arbitration - Introduction - Dr. V. Lazic, Associate professor Molengraaff Institute Utrecht University

METHODS OF RESOLVING DISPUTES IN INTERNATIONAL COMMERCE Negotiations between the parties Technical expertise - Conciliation/mediation and other forms of alternative dispute resolution (ADR) - Arbitration - Litigation

METHODS OF RESOLVING DISPUTES IN INTERNATIONAL TRADE (2): - Negotiations between the parties - certain degree of objectivity - always possible, even after other method(s) have been set in motion

METHODS OF RESOLVING DISPUTES IN INTERNATIONAL TRADE (3): - Conciliation/mediation -other forms of alternative dispute resolution (ADR) - mini-trial - mediation/arbitration (med/arb) - neutral listener agreement - baseball or ‘last offer arbitration’ - summary jury trial - court-annexed arbitration

METHODS OF RESOLVING DISPUTES IN INTERNATIONAL TRADE (4): - Technical expertise and procedures akin to arbitration - the dispute referred to a third person, without resorting to arbitration proper - if not complied with voluntarily (marginal control, but no de novo trial) - arbitrato irrituale, schiedsgutachten, bindend advies

METHODS OF RESOLVING DISPUTES IN INTERNATIONAL TRADE (4): - Technical expertise and procedures akin to arbitration - the dispute referred to a third person, without resorting to arbitration proper - if not complied with voluntarily (marginal control, but no de novo trial) - arbitrato irrituale, schiedsgutachten, bindend advies

IS ARBITRATION A FORM OF ADR?

ADVANTAGES OF INTERNATIONAL ARBITRATION: 1.speed of the proceedings (possibility) 2.expertise of the arbitrator 3.informal nature of arbitration (basic principles of procedural law, such as equality between the parties, must be respected) 4.private nature of the arbitration 5.“neutrality” of the forum 6.enforceability of arbitral award (national and international)

DISADVANTAGES OF INTERNATIONAL ARBITRATION: 1. arbitration is expensive 2. length of the arbitral procedure 3. limited powers of the arbitrators

ARBITRATION AGREEMENT ARBITRATION CLAUSE is incorporated in the main or substantive contract. It relates to disputes which might arise between the parties. SUBMISSION AGREEMENT is a separate agreement. It deals with disputes which have already arisen between the parties.

ARBITRAL PROCEDURE the parties are free to choose the rules of the procedure. AWARD is the result of a private arrangement and is made by a private arbitral tribunal. It constitutes a binding decision on the dispute between the parties.

TYPES OF ARBITRATIONS Ad hoc arbitration The arbitration clause does not refer to arbitration rules of a particular arbitration institution Institutional arbitration The arbitration clause does refer to a set of arbitration rule of a particular arbitral institution

The present system of international arbitration only works effectively because it is held in place by a complex system of national laws and international treaties. Redfern & Hunter (2009) p. 3

PROCEDURAL FRAMEWORK AND REGULATION 1. Arbitration Agreement (usually incorporating a set of Arbitration Rules) 2. National arbitration laws (statutes) 3. International Treaties 4. Arbitral practice and doctrine

NATIONAL STATUTES Code of CivilNetherlands, Belgium, Procedure Germany, Italy, France and Greece Commercial Code Mexico PIL StatuteSwitzerland Separate StatuteSpain, Portugal, Hong Kong, Scotland, England, United States

INTERNATIONAL CONVENTIONS Convention on the recognition and enforcement of foreign arbitral awards, New York 1958 European Convention on International Commercial Arbitration, Geneva 1961 Convention on the settlement of investment disputes between States and nationals of other States, Washington 1965 Inter-American Convention on International Commercial Arbitration, Panama 1975 Bilateral Conventions

ARBITRATION INSTITUTIONS AND RULES International Chamber of Commerce - ICC London Court of Intern. Arbitration – LCIA Stockholm Chamber of Commerce Netherlands Arbitration Institute – NAI American Arbitration Association – AAA International Centre for the Settlement of Investment Disputes – ICSID UNCITRAL Arbitration Rules (ad hoc arbitration)

ARBITRAL PRACTICE Yearbook Commercial Arbitration International Handbook on Commercial Arbitration - national reports and basic legal texts International Council for Commercial Arbitration Directory of arbitration website: icca.org/directory_of_arbitration_website.htm icca.org/directory_of_arbitration_website.htm

DUALIST SYSTEM the national legislator formulates two regulations, one for domestic arbitration and one for international arbitration MONIST SYSTEM the national arbitration statute applies to domestic and international arbitration

INTERNATIONALITY OF ARBITRATION Article 1492 French Code of Civil Procedure An arbitration is international when it involves the interest of international trade.

INTERNATIONALITY OF ARBITRATION Article 176 Swiss Federal PIL Act The provisions of this chapter (12 on international arbitration) shall apply to any arbitration if the seat of the arbitral tribunal is in Switzerland and if, at the time when the arbitration agreement was concluded, at least one of the parties had neither domicile nor its habitual residence in Switzerland.

INTERNATIONALITY OF ARBITRATION Article 1(3) UNCITRAL Model law 1985 An arbitration is international if: (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) one of the following places is situated outside the State in which the parties have their places of business: i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; ii) any place where a substantial part of obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.

MODEL OF AN AD HOC ARBITRATION CLAUSE Any dispute arising out of or in connection with this contract or related agreement or amendment thereto, in particular as to their existence, validity, interpretation, performance or non-performance, whether arising before or after the expiration of the contract, shall exclusively be referred to and determined by an ad hoc arbitral tribunal consisting of three arbitrators [or: a sole arbitrator]. The place of arbitration shall be at …(town). The language of proceedings shall be … (language).

ICC MODEL ARBITRATION CLAUSE All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

UNCITRAL ARBITRATION RULES MODEL ARBITRATION CLAUSE Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. UNCITRAL’s note: Parties may wish to consider adding: (a) The appointing authority may be … (name of institution or person); (b) The number of arbitrators shall be … (one or three); (c) The place of arbitration shall be … (town); (d) The language(s) to be used in arbitral proceedings shall be … (language).

ROLE OF NATIONAL COURTS IN ARBITRATION * Role of support and assistance - “indirect” enforcement of arbitration agreements, appointment of arbitrators, taking evidence, provisional measures, enforcement of arbitral awards S ARBITRATION A FORM OF ADR? * Role of control and supervision - challenge of awards, enforcement of awards

ROLE OF NATIONAL COURTS IN ARBITRATION (2) Important in different stages of arbitration - before the commencement of arbitration - during arbitral proceedings - after the award has been rendered

CONTROL OVER ARBITRAL AWARDS (1) Choices of the losing party after the award has been rendered 1. To oppose the enforcement of the award in the enforcement procedure initiated by the winning party, and/or 2. To institute proceedings to challenge the award.

CONTROL OVER ARBITRAL AWARDS (2) Meaning of the “Challenge” to an arbitral award - expression broad enough to encompass various means of recourse against the award that may be available in different legal systems.

CONTROL OVER ARBITRAL AWARDS (3) 1. internal challenges a) appeals to a ‘second-instance’ arbitral tribunal (two-tier system of arbitration), e.g. according to the rules of trade associations b) internal review procedures (ICSID) 2. challenge before the competent national court

CONTROL OVER ARBITRAL AWARDS (4) 1. Internal challenge 2. challenge before the competent national court - appeals - available usually only in DOMESTIC arbitration - appeal on point of law in England - action for the annulment - often the only remedy available against arbitral awards - other means of recourse (exceptional and usually of little practical importance)

CONTROL OVER ARBITRAL AWARDS (5) Grounds for challenge - limited in number - usually no control on the merits - often reduced to the invalidity of the subject-matter, lack of due process, non-arbitrability of the subject-matter and violation of public policy