W1: Introduction to ICA

Question 1

Alternative Dispute Resolution

Answer 1

1. NEGOTIATION IGF CLAUSE:
   It’s becoming commonplace for parties to provide that if a dispute arises, they should attempt to resolve it by negotiation before going to arbitration.
   - Obligation to negotiate ‘in good faith’ is nebulous: Who’s open to it? How long are they to last? How far does a party need to go to show ‘good faith’?
2. LACK OF OBJECTIVITY:
   Even negotiations-in-good-faith are unlikely to succeed UNLESS the parties are able to look objectively at crucial issues.
   - Objectivity = difficult to maintain when vital interests (and future of business) are at stake.
3. IMPARTIAL 3RD PARTY:
   Here, an impartial third-party may help rescue the dead-end discussions.
   - THUS, some int’l contracts stipulate ADR settlement proper to lit./arb.

Question 2

What is meant by ADR?

Answer 2

If ADR = ‘Alternative’ to formal court procedures; then Arbitration should be classified as a method of ADR - however:

i. It presents an alternative to the judicial process in offering privacy and procedural flexibility
ii. NONETHELESS, fundamentally the same, i.e., role of arbitrator = judgmental
iii. Function of the judge and arbitrator is NOT to decide how to resolve problems resulting in dispute, BUT to apportion responsibility for that problem.

ADR:

i. NON-BINDING: Independent 3rd Party: tries to bring disputing parties to a compromise agreement
ii. BINDING: Method in which a binding decision is imposed upon parties w/out formalities of lit./arb.
iii. MIXED: Some forms combine binding and non-binding elements; e.g. Med-Are.
- Unlike other methods of ADR, Int’l Arb. leads to a binding award that’s usually NOT open to challenge by national courts; and can be enforced both nationally and internationally, under instruments (e.g., NYC)

Question 3

Amiables Compositeurs, Equity Clauses, and decisions Ex Aequo Et Bono

Answer 3

Such clauses may become more common, since the Model Law specifically permits an arbitral tribunal to decide in accordance w/equity if the parties AUTHORISE it to do so.
- HOWEVER, an arb. conducted u/provision of such ‘equity clauses’ will still be an arbitration and not some ADR species .

Question 4

What Kind of Arbitration? (Types)

Answer 4

Types

i. Ad Hoc
ii. Institutional

1. Any arb. regardless of where it’s conducted – sub: mandatory rules of LEX ARBITRI, i.e., law of the seat/place of arbitration
2. Generally broad and non-specific
   - E.g., ‘parties must be treated w/equality’, but will not set out the way to achieve it
   - More specific rules reqd. for procedure
   - Parties have a choice on which type to pick

Question 5

Types: Ad Hoc

Answer 5

1. Parties est. their own rules of procedure (Condition: equality and right to present case)
2. Parties may agree to conduct w/out institutional involvement, but according to an estd. set of rules, e.g. UNCITRAL - which provide a sensible framework - within which tribunal and parties may add any detailed provisions as they wish, e.g., rules providing for submission of pre-trial briefs; or agreement of expert reports
3. If issues at stake = sufficiently imp. (particularly, if state/entity involved) - may be worth negotiating and agreeing detailed rules that take into a/c status of the parties and circumstances of the particular case.
   - E.g., any right to restitution may be expressly abandoned in favour of an award for damages
4. Such specially drawn rules generally set out in a formal ‘submission to arb.’, negotiated and agreed once dispute has arisen
5. Submission Agreement will:
   i. confirm the appointment of the tribunal
   ii. set out the substantive law and Seat
   iii. detail any procedural rules upon which the parties have agreed for the exchange of documents, witness statements, etc.

Question 6

Types: Ad Hoc - Advantages and Disadvantages

Answer 6

ADVANTAGES:

1. Can be shaped to meet the wishes of the parties and facts of the dispute
   - cooperation of parties and their advisors is necessary for efficiency and effectiveness
   - if such cooperation is forthcoming - diff. b/w Ad Hoc and Institutional = ‘tailor-made’ suit and one ‘off the peg’
2. Ad Hoc Cases (Oil Concession Agreements):
   i. Sapphire
   ii. Texaco
   iii. BP
   iv. Liamco
   v. Aminoil
3. In practice, usually conducted on basis of UNCITRAL Arbitration Rules
   - States in particular prefer, since they don’t derive authority from an arbitral org. based in a particular country, but from the UN itself

DISADVANTAGES:
1. Depends for its full effectiveness on COOPERATION b/w parties and their lawyers, supported by an adequate legal system @ Seat

2. Delays:
   i. refusing at outset to appoint an arbitrator
   ii. no agreed book of rules
   iii. Necessary to rely on provisions of law available to offer necessary support
3. Only when arbitral tribunal is in existence and a set of rules estd. will an Ad Hoc arb. be able to proceed if one of the parties fails/refuses to play its part in proceedings

Question 7

Types: Institutional

Answer 7

1. Administered by a specialist arbitral institution u/its own rules
2. Well-known: ICC, ICSID, LCIA, ICDR
   - Regional: Beijing, Cairo
   - Chambers of Commerce: Stockholm, Switzerland, Vienna
3. Rules follow broadly similar pattern
   - Reflect civil law: ICC
   - Inspired by common law: LCIA
4. Common factors: all sets of rules formulated specifically for arbs. that are to be admin. by the concerned institution are usually incorporated into main contract thru arb. clause
   - Convenient shorthand way of incorporating a detailed book of rules into the contract, to govern any arb. that takes place u/contract, e.g., ICC Recommended Arb. Clause
5. Non-Cooperation of parties - nevertheless possible for cooperative parties to arb. effectively - because set of rules to regulate both: appointment of tribunal, and arb.’s conduct and conclusion

Question 8

Types: Institutional - Advantages and Disadvantages

Answer 8

ADVANTAGES:

1. Institutional Rules = proven to work well in practice
   - AUTOMATIC INCORPORATION OF RULEBOOK: Parties who submit to institutional effectively incorporate the ‘rulebook’ into their arb. agreement
   - Challenge of arb. (on grounds of lack of independence and impartiality); non-cooperation of party - the rulebook provides for such a contingency, e.g. ICC Rules Art. 26(2)
2. SPECIALIST STAFF: Most institutions provide specialist staff to admin. the arb. - ensure tribunal is appointed, advance payments made wrt fees and expenses of arbitrators, limitation periods kept in mind, smooth running of arb.
3. SCRUTINISING AWARDS: Institution itself reviews tribunal’s award draft before sending it to the parties
   - Measure of ‘quality control’ - does not comment on substance of award, or interfere w/tribunal’s decision - BUT does ensure the tribunal has dealt w all issues before it, and award covers matters such as interests and costs

DISADVANTAGES:

1. Fixed Fee - assessed on ad volerem basis
   - If amounts at stake are considerable, and parties represented by advisors experienced in Int’l Arb., then ad hoc may be less expensive
   - Ability to pay fixed fee may be to the advantage of parties, but disadvantage of arbitrators wrt they renumeration
2. Delay - need to process certain steps in arbitral proceedings thru institutional machinery inevitably leads to some procedural delays
   - Limitation periods imposed are often unrealistically short (problem for respondent not claimant, e.g. International Construction Contract dispute)
   - Extension of time usually granted either by the institution/tribunal, respondent is placed in invidious position of seeking extension of time from outset of case
   - Problem is worse if respondent = state/entity
   - Time limits fail to take into a/c time needed for state/entity to obtain necessary approvals thru own official channels

Question 9

Why Arbitrate? (Advantages)

Answer 9

1. Where commercial interests are at stake, a dispute need not necessarily lead to all-out confrontation.
2. Initially, opposing parties will attempt to settle matters by meeting and negotiating, sometimes assisted by expert mediator
3. There may come a point where attempts to negotiate fail, it’s clear no agreement is possible
4. What is needed is a DECISION by an outside party - binding and enforceable
5. Choices: Arbitration before neutral tribunal; or recourse to a court of law

Question 10

Arbitration Advantages

Answer 10

MAIN REASONS:
1. Neutrality: gives parties ‘neutral’ place and tribunal for dispute resolution

2. Enforcement: leads to a decision that is enforceable against the losing party not only @ Seat, but also internationally
   i. Binding Decision (unlike mediation/concilliation - recommendation parties are free to accept/reject)
   ii. Final Award (unlike lit. - another step on ladder of appeals, game of snakes and ladders)
   iii. Directly Enforceable - by court action - nationally and internationally

ADDITIONAL REASONS:

1. Flexibility
2. Confidentiality
3. Additional Powers of Arbitrators
4. Continuity of Role

Question 11

Is Arbitration Perfect? (Disadvantages)

Answer 11

Ofc not.

Based on principles of CONSENT and PARTY AUTONOMY, so usual lit. procedures may not be available, or work very well in int’l arb.

Question 12

Arbitration Disadvantages

Answer 12

1. Multiparty Arbitrations, Joinder, and Consolidation
   * Dutco case: right of each party to nominate an arbitrator
   - ICC Rules:
   i. Art 7: joinder of parties
   ii. Art. 8: claims against any party in multiparty claims
2. Non-Signatories: consideration of ‘deemed’/’assumed’ consent to arb.
   - E.g.,
   i. ‘Group of Co.’s Doctrine’
   ii. ‘Reliance’ Theory
   iii. Concept of Agency
   iv. Concept of ‘Piercing Thru Corp. Veil’ (US concept)
3. Conflicting Awards: No system of precedents = no development of law. Merely persuasive effect.
   - The ‘impossible dream’ = New Int’l Court for Enforcement of Arb. Awards
4. Judicialisation
5. Costs
   - ‘One-stop shopping’: Initial costs unlikely to be less than lit., BUT award is unlikely to be followed by series of costly appeals to superior local courts.
6. Delay
   - ICC Rules: Deliver award w/in 6 months of signature of terms of reference; without unnecessary delay/expense

Question 13

Dispute Resolution - Worldwide

Answer 13

1. Arbitration is now the principal method of resolving int’l disputes involving states, individuals or corps.
   - Consequence of increased globalisation of world trade and investment
   - Resulted in increasingly harmonised arb. practices by specialised int’l arb. practitioners who speak a COMMON PROCEDURAL LANGUAGE, whether they practice in England, Switzerland, Nigeria, S’pore, or Brazil
2. These harmonised practices rest on sophisticated rules of arb. administered by various institutions.
   - The sophisticates rules themselves are supported by enlightened national arb. laws inspired by the UNCITRAL Model Law
   - AIM: MAXIMISE effectiveness of the arbitral process, while MINIMISING judicial intervention, other than when needed to support arb. agreements and awards
   - RESULT: impressive edifice of laws and procedures, supported by treaties (e.g. NYC), which impose obligations on national courts around the world to R and E both arb. agreements and awards.

Question 14

What is Arbitration? (Nature)

Answer 14

1. Essentially a v. simple method of dispute resolution
2. Disputants agree to submit their disputes to an individual (arbitrator)/tribunal whose judgment they’re prepared to trust
3. S/he listens to the parties, considers the facts and arguments, and makes a decision
4. Decision is final and binding on parties - b/c parties have agreed that it should be, rather than any coercive State powers
5. Effective way of obtaining final and binding decision on a dispute/series of disputes, w/out ref: a court of law (altho, failure to voluntarily implement will lead to enforcement by courts)
6. Basically, private and consensual dispute resolution system