W2: Sources of the Law in ICA

Question 1

Regulation of Int’l Arbitration

Answer 1

1. National/domestic arb. will usually involve the domestic laws of that country
2. Int’l arb. is quite different:
   - does not fit into orthodox moulds of dispute procedures
   - lie astraddle the frontiers of foreign and domestic laws
   - raise Qs that do not fit into the categories of pvt. int’l law either
   - raise peculiar problems of enforcement
3. Int’l arb. depends for its effectiveness upon the support of diff. national systems of law, and in particular upon:
   i. the law of the seat
   ii. the law of the country(its) in which R and E of award is sought

Question 2

Regulation: Role of National Systems of Law

Answer 2

1. Understanding of interplay b/w pvt. arbitral process and different national systems of law that may impinge on process if fundamental to a proper understanding of int’l arb. - ‘interplay’ may take place at any stage of the process
   i. ENFORCEMENT OF AGREEMENT: May be necessary at the outset for claimant to ask the relevant national/local court to enforce an arb. agreement, which adverse party is seeking to circumvent by commencing legal proceedings
   ii. APPOINTMENT OF TRIBUNAL: May be necessary to ask the relevant court to appoint the tribunal (if cannot be done u/arb. agreement or u/relevant arb. rules)
   iii. BLOCK/SEZURE OF ASSETS: May be necessary for a party to apply to relevant court for assistance as it’s empowered to give, e.g., blocking go a bank a/c or secure of assets to prevent their disappearance
   iv. CHALLENGE OF AWARD: When award is made, losing party may seek to challenge it on basis of tribunal exceeding jurisdiction/other legally recognised ground
   - If successful: award = amended/set-aside completely
   v. ENFORCEMENT OF AWARD: Winning party may need to apply to national court for R and E of award in a state(s) in which the losing party has (or believed to have) assets that can be sequestrated

Question 3

Regulation: State Participation in the Arbitral Process

Answer 3

1. States that recognise int’l arb. as a valid method of int’l DR are generally ready to give assistance to the arbitral process
   - In many cases, BOUND to do so by int’l conventions to which they are parties
   - Also expected: measure of control over process; usually exercised on a territorial basis:
   i. over arbitrations conducted in territory of state concerned: to ensure certain min. standards of justice are met, particularly in procedural matters
   ii. over awards brought into territory of concerned state for R and E: entitled to ensure that certain min. standards of
   (a) DUE PROCESS have been observed in making the award
   (b) ARBITRABILITY of subject matter wrt own laws
   (c) PUBLIC POLICY is not offended by the award
2. Dependance of int’l arbitral process upon national systems of law should be recognised but NOT exaggerated
   - Growing global harmonisation of national laws governing conduct of arbitral processes, and R and E of awards
   - Harmonisation inspire by NYC, and given fresh impetus by the Model Law
   - Imp. of int’l arb. wrt contribution to global trade and economic benefits for host country increasingly recognised
   - New arb. centres being estd. in different parts of the world (some only nominal existence but taken as a whole, represent a potential source of revenue and prestige to a country)

Question 4

Regulation: Role of Int’l Conventions and the Model Law

Answer 4

1. Most effective system of creating a UNIVERSAL system of law governing int’l arbs. has been thru int’l conventions (and Model Law).
2. Int’l Conventions helped link national law systems into a network of laws that while they may differ in wording, have a common objective of int’l enforcement of arb. agreements and awards

CONVENTIONS:

i. Montevideo Convention 1889: certain Latin American states; essentially a regional convention
ii. Geneva Protocol 1923: drawn up at initiative of ICC, under auspices of League of Nations; first and genuinely int’l convention
iii. Followed by GP 1927

Question 5

Int’l Conventions and Model Law

Answer 5

GP 1923:
2 Objectives:-
i. Ensure arb. clauses were int’lly enforceable - to oblige parties to choose arb. over lit.
- requiring national courts to refuse certain legal proceedings brought in breach of arb. agreement
ii. Ensure arb. awards would be enforced in states where they were made

GP 1927:

i. Widen scope of GP 1923
ii. Providing for R and E of Protocol awards made w/in territory of ANY contracting state (not merely @ Seat)
- Party seeking enforcement had to PROVE conditions necessary for enforcement
- Led to problem of ‘double exequatur’: successful party obliged to
i. seek a declaration of enforceability (an exequatur) in courts of Seat; then
ii. seek to enforce award (a second exequatur) int he courts of the place of enforcement

NYC 1958:

i. Cornerstone of Int’l Arb. - b/c of which int’l arb. has become the estd. method of int’l DR (major trading nations have become parties)
ii. Provides a simpler, more effective method of obtaining R and E of foreign arb. awards than u/GP 1927
iii. Title: misleading as also concerned w arb. agreements
- Arts. II, IV(1)(b), V(1)(a)
iv. Enforcement technique = GP 1923: Courts of contracting states reqd. to refuse to allow an arbitrable dispute to be litigated if an objection to such lit. is raised by any party to the arb. agreement
5. Courts of diff. countries have differed (and continue to) in their interpretation of NYC - often for local, purely political, reasons (thus, NYC made for a simpler, less ‘globalised’ world shows its age)

BITs:

i. Predecessor: FCN Treaties
ii. Here, arb. agreement starts off as ‘standing offer’, which is perfected by ‘acceptance’ upon dispute arising
- Diff. from conventional model, where parties are known to each other, thus described as ‘ARBITRATION W/OUT PRIVITY’.
- Once ‘standing offer’ is ‘accepted’, an effective arb. agreement to which both the State/entity and the investors are parties comes into existence

MODEL LAW 1985:

i. To harmonise arb. laws of different countries
ii. Text goes thru arb. process from beginning to end, in a simple and readily understandable form
iii. Adopted or Adapted
- England: modernises their arb. laws w/out adopting Model Law whilst being careful to follow its format and have close regard to its provisions
iv. If NYC put int’l arb. on the world stage, Model Law made it a star
v. Model Law has been overtaken by fast-moving world of int’l arb in 2 ways:
a) requirement for arb. agreement to be in writing
b) provisions governing the power of a tribunal to order interim measure of relief
vi. REVISED MODEL LAW: ‘writing requirement’ widely defined; also an ‘option’ to adopt the wide meaning or dispense w requirement altogether
- Ex Parte applications (behind the back of a party) - allowed BUT only on strictly limited conditions [UNCITRAL Working Group 2000]

Question 6

Regulation: Practice of Int’l Arb.

Answer 6

1. There are no fixed, detailed rules of procedure governing an int’l arb - each case/tribunal is diff. - each dispute deserves to be treated differently
2. Basic underlying structure; built upon essential elements:
   i. The int’l conventions (and Model Law) that have helped form modern national arb. laws
   ii. Estd. rules of int’l arb.
   iii. Practice of experienced arbitrators and counsel

Question 7

Practice: Int’l Conventions and Model Law

Answer 7

1. Do NOT prescribe way in which int’l arb. should be conducted - instead, lay down certain general principles
   - NYC: proper notice, due process, opportunity to present case
   - If NOT done, liable to be refused R and E
   - General principles of NYC now form internal art of arb. law (lex arbitri) of countries thru out the world
2. ICSID Convention goes into more detail than NYC but avoids setting down detailed procedural rules
3. Model Law:
   i. contains detailed provisions for appointment and challenge of arbitrators and substitutes, where necessary
   ii. authorises an arbitral tribunal to rule on its own jurisdiction (Doctrine of Separability)
   iii. authorises tribunals to grant interim measures of relief (e.g. preserve assets/material evidence)
   iv. deals in outline w/submission of statements of claim and defence, and other matters
4. Countries that have adopted/adapted Model Law thus have ‘arbitration friendly’ national laws of arb. - some consider it necessary to go beyond Model Law (making more detailed provisions); nevertheless take FULL NOTE of the Model Law

Question 8

Practice: Estd. Rules of Int’l Arb.

Answer 8

1. Rules (UNCITRAL, ICC, LCIA) define the ‘shape’/outline of the proceedings from est. of tribunal to publication of eventual award
   - Do NOT prescribe in detail, the procedure for conduct
2. Answers to imp. practical Qs found in ‘soft law’ of int’l arb., and in practice of experiences arbitrators and counsel

Question 9

Practice: Hard and Soft Law

Answer 9

HARD LAW:

i. Looks at process from outside: perspective of judges and legislators charged w/providing a framework of statutes, treaties and cases setting the contours for judicial R and E of arb. agreements and awards [Prof. Park]
ii. Int’l treaties and national systems of law

SOFT LAW:

i. Looks at process from inside
ii. Over the years, many rules and guidelines have been drawn up by estd. professional bodies/institutions
- E.g.:
a) IBA Rules on Taking of Evidence in Int’l Arb.: testimony of witnesses and experts; principles governing disclosure of docs.
b) ICC Rules: case mgmt techniques (control costs and time)
- Soft law to be welcomes, but cautioned against proliferation of ‘rules’ and ‘guidelines’ that may deprive arb. of flexibility and adaptability
iii. One particular area to develop ‘soft law’: conduct by counsel in int’l arbs.
- IBA Rules on Taking of Evidence in Int’l Arb., Art 4(3) - helpful but does not seek to set down detailed practice rule indicating to what extent they may be implemented

PROBLEMS w/CODIFYING INT’L CODE OF CONDUCT FOR COUNSEL:

i. Identifying what standards of conduct will be universally acceptable
ii. Enforcing compliance w these standards

Question 10

Practice: Experienced Arbitrators and Counsel

Answer 10

1. Mix of diff. national practices emerges, best of each selected, and worst rejected
2. Common thread:
   i. Tribunal may decide for itself on any challenge to jurisidiction
   ii. As proceedings develop, tribunal may be called upon to issue interim measures of relief
   iii. At stage of documentary disclosure: usual procedure will ve for each party to submit to tribunal all docs it relies on and limit request for disclosure of docs by other side to only those relevant and material to the outcome of the case
   - disputed requests for docs usually dealt w/by means of so-called ‘Redfern’ Schedule
   iv. Evidence of witnesses usually submitted as written statements, w/reply statements if necessary/apt.; direct examination of witnesses will usually eb ltd. by agreement to no more than 10 mins or so
   v. Old fashioned advocacy (long speeches, theatrical flourishes, and ‘jury-type’ appeals to emotions) no longer custom - REPLACED by written briefs (altho not always free of evocative words/heartfelt appeals to ‘honesty’ and ‘good faith’)

Question 11

Regulation: Summary

Answer 11

1. Int’l conventions on arb, Model Law, and worldwide recognition of the imp. of arb. in resolving trade, commerce, and investment disputes have brought about modernisation and harmonisation across the globe of laws that govern process of int’l arb.
2. Int’l conventions operate thru the national laws of contracting states - may be adopted w reservations (e.g., only commercial disputes), and applying their own criteria (e.g., public policy) - these conventions nevertheless represent a compelling force for unification of national arb. laws; same for Model Law.
   - when looking at a particular national/local law, generally possible to look thru text of that law to a framework derived from a general treaty/convention/Model Law
3. Int’l arb. is a place where lawyers, counsel, and arbitrators, trained in diff. legal systems meet and work together. They have no choice but to find some common ground.
4. Practice of int’l arb: no uniform practice/procedure - arbitrators, counsel and parties work together to ‘find common ground’ by devising a procedure that fits the dispute concerned
5. Int’l disputes take on many forms - any attempt to design a uniform arbitral procedure would be problematic - also run the risk of defeating the purpose of int’l arb. (flexibility)
6. Within general framework of ‘hard law’, and taking advantage of the best features of so-called ‘soft law’, it is possible to adopt/adapt procedures that are apt. to the particular dispute concerned

Question 12

Law Governing the Arb.

Answer 12

1. An Int’l arb. usually takes place in a country that is ‘neutral’, i.e., none of the parties to the arbitration has a place of business/residence there
2. In practice, law of the Seat (lex arbitri) will generally be diff. from the law that governs substantive matters in dispute
3. There should be a distinction in lex arbitri and substantive law of dispute - where parties choose a Seat, they usually choose a ‘neutral’ place - may not necessarily intend to choose the law of Seat to govern their dispute - may choose a substantive law that has no connection w the law of the Seat
4. If parties fail to expressly choose Seat, choice will have to be made for them, either by arbitral tribunal or designated institution
   - UNCITRAL Arb. Rules, Art 18(1): Tribunal decides
   - ICC Rules Art 18(1): ICC Court decides
5. Seat of Arb. = unconnected choice - illogical to conclude that law of Seat = Substantive Law (EXCEPT when parties choose Seat but not Substantive Law of Contract)

Question 13

What is Lex Arbitri?

Answer 13

At present:

i. a body of rules which sets a standard external to arb. agreement and parties’ wishes, for conduct of arb.
ii. law governing the arb, comprises the rules governing:
a) interim measures
b) exercise by courts of Supportive Measures
c) exercise by Courts of supervisory jurisdiction over arbitrations

Question 14

Content of Lex Arbitri

Answer 14

1. Each state decides for itself what laws it wishes to lay down to govern the conduct of arb. w/in its own territory
2. Some states have introduced a code of law specifically designed for int’l arbs.
   - usually fairly short, e.g. French Code, Swiss PIL
3. Model Law = baseline for states wishing to modernise their arb. laws
   - Art. 19: no detailed procedural laws, relatively broad terms

MATTERS LEX ARBITRI MIGHT DEAL WITH:

i. definition and form of arb. agreement
ii. arbitrarily of dispute u/lex arbitri
iii. constitution of tribunal and grounds for its challenge
iv. entitlement of tribunal to rule on its own jurisdiction
v. equal treatment of parties
vi. freedom to agree upon detailed rules of procedure
vii. interim measures of protection/relief
viii. statements of claim and defence
ix. hearings
x. default proceedings
xi. court assistance (if reqd.)
xii. powers of arbitrators, incl. powers to decide as AMIABLES COMPOSITEURS
xiii. form and validity of the award
xiv. finality of award, incl. right to challenge it in courts @ Seat

THREE ESSENTIAL POINTSL

i. Effective conduct of an int’l arb. may depend upon provisions of law @ Seat
ii. Choice of a particular Seat may have imp. and unintended consequences
iii. Obvious prospect of conflict b/w lex arbitri and a diff. legal system that may be equally relevant

STATE MONOPOLY: Each state reserves as matter of public policy, a monopoly of certain types of disputes

• Arbitrability is decided by each state
• Restrictive States result in ‘forum shopping’ (‘good for business’)
• An award validly made u/lex arbitri may prove to be enforceable u/NYC at place of enforcement for not being arbitrable in that place

Question 15

Procedural Rules and Lex Arbitri

Answer 15

1. Most, if not all national arb. laws deal w general propositions, rather than detailed procedural rules
2. Nevertheless, at some stage in conduct of proceedings (fairly early), parties will need to know where they stand wrt detailed procedure to be followed - particularly where parties are from diff. backgrounds, w diff. approaches to procedural rules
3. Rules (of institutions, e.g., ICC, LCIA, and UNCITRAL Rules) provide overall framework w/in which to operate
   - Even these need to be supplemented by more detailed provisions by parties/tribunal
4. Advisable to agree at outset to such rules, by parties’ agreement/tribunal’s order

Question 16

Seat Theory

Answer 16

1. Estd. concept that arb. is governed by law of Seat (forum/locus arbitri)
   - GP 1923 Art. 2
   - NYC
   - Model Law Art. 1(2)
2. Seat of Arbitration defined as ‘the juridical seta of arb.’ designated by the parties, or by an institution, or by arbitrators themselves
   - Unless otherwise agreed by parties, Seat must be stated in the Award
3. Not merely a matter of geography - it is the territorial link b/w the arb. itself and the law of the place where the arb. is legally situated
   - Under the ‘curial law’ of the relevant country
   - Geographical place of arb. is the factual connecting factor b/w the arbitration law and the arbitration proper (considered as a nexus of contractual and procedural rights and obligations b/w the parties and the arbitrators)
4. Seat = Legal Centre of Gravity (tho does NOT mean all proceedings have to take there, altho preferred)
   * Naviera Amazonia case: may be convenient to hold meetings/hearings in other countries, does NOT mean Seat changes w/each change of location - legal place of arb. remains same even if physical place changes, unless the parties agree to change it
   - ICC Rules Art. 18
   - LCIA Rules Art. 16(3)
   - Model Law Art. 20(2)
5. ‘Visiting Arbitrations’ must respect the law of that country
6. Reducing Seat of Arb. to a legal fiction = permissible; conforms w the letter, if not the spirit of the law/applicable rules

Question 17

Is Lex Arbitri a Procedural Law?

Answer 17

1. In some countries, arb. laws (incl. int’l) is part of a code of civil procedure
   - E.g., France, Germany
2. Lex Arbitri may deal w procedural matters, but it is much more than a purely procedural law
3. Parties may well choose a particular place of arb. precisely because is lex arbitri is attractive
   - Nevertheless, once chosen, brings w it its own law (mandatory provisions of arb. are to be OBEYED)
   - Not a matter of choice

Question 18

Choice of Another Procedural Law

Answer 18

1. Complicated - tribunal would need to have regard to 2 procedural laws
2. Recourse to courts (of chosen procedural laws) may cancel each other out due to lack of territorial jurisdiction
3. No theoretical reason which precludes parties to agree that an arb. held @ a place/country ‘X’ but sub: to procedural laws of ‘Y’.
4. Complexities and inconveniences which such an agreement would involve makes such cases rare
   - Under English Law principles, which rest upon territorially ltd. jurisidiction of the courts, an agreement to arbitrate in X sub: English Procedural Law would NOT empower English courts to exercise jurisidiction over the arb. in X
   * Naviera Amazonica case

Question 19

Where an Award is Made (Seat)

Answer 19

1. May be necessary to determine where an award is made
   - Invalidity of arb. agreement u/law of Seat
   - Award has been set aside/suspended by Courts @ Seat
2. Some arb. rules and some national laws deal expressly w/place at which award is ‘made’.
   - E.g., ICC Rules, Model Law, Netherlands Act 1986, EEA 1996
3. In an int’l arb., with a tribunal of 3 arbitrators, the final award may well be signed in 3 diff. countries - strongly argues that in such circumstances, the award should be deemed to have been ‘made’ @ Seat
4. Alternatively, award is ‘made’ at place it was signed (view taken by English courts, REVERSED by EAA 1996)

Question 20

Delocalisation

Answer 20

1. It would save considerable time, trouble and expense if arb. laws were uniform thru out the world, i.e., a universal lex arbitri
   - Level playing field for conduct of arbs. wherever they took place
   - Highly unlikely, esp. in States w highly developed arb. laws
2. Escape route - two separate developments:
   i. State to relax control it seeks to exercise over int’ arbs. conducted on its territory (modern arb. laws) - role of courts = supportive NOT interventionist
   ii. Detach int’l arb. from control law of the Seat
   - Delocalisation Theory: instead of dual system of control (first by lex arbitri and then by courts of place enforcement), there should only be ONE point of control, i.e., place of enforcement
   - Judicial Manifestation: French Cour de Cassation: “[A]n int’l arbitral award, which does NOT belong to ANY state legal system, is an int’l DECISION OF JUSTCIE and its validity must be examined wrt the applicable rules of the country where its R and E are sought”
   * Dalla Real Estate case: HELD - “arb. agreements derive their existence, validity and effect from supra-national law, w/out it being necessary to refer to any national law”

ASSUMPTIONS:

i. int’l arb is sufficiently regulated by its own rules - either autonomously adopted by parties, or drawn up by the tribunal itself
ii. control should come only from law of place of enforcement of award

Question 21

Seat Theory and Lex Arbitri

Answer 21

1. Gives an estd. legal framework to an int’l arb., so instead of “floating in the transnational firmament, unconnected w/any municipal system of law”, the arbitration is “firmly anchored in a given legal system”.
2. Just as Law of Contracts helps ensure contracts are duly performed (not mere social arrangements), so the Lex Arbitri helps to ensure the arbitral process works as it should
3. Under English Law, Courts have held that altho sub: certain mandatory provisions, parties are free to agree the law and procedure that will govern the conduct of proceedings, the chosen law must satisfy this function
   * Halpern v Halpern: HELD - Jewish law as a religious law was deemed not be a ‘realistic candidate as the law of arbitration’, and was said to lack any supervisory/appellate jurisidiction over arbitrations.
4. Tft diff. states have diff. laws governing int’l arb., and that some may not be well suited to this task has 2 practical consequences:
   i. Wherever an int’l arb. is held, the provisions of local law should be checked for mandatory rules that must be observed to obtain a valid award
   ii. Means that not every country is a suitable SITUS for int’l arb., and certain degree of ‘forum shopping’ is advisable

Question 22

‘Representation’ of Int’l Arb. - Prof. Gaillard

Answer 22

1. “…accepts the idea that the juridicity of arb. is rooted in a distinct, transnational legal order, that could be labelled as the arbitral legal order, and not in a national system, be it that of the country of the seat or that of the place or places of enforcement.”
2. This representation corresponds to the international arbitrators’ strong perception that ‘they do not administer justice on behalf of any given State, but that they nonetheless play a judicial role for the benefit of the international community.’
3. Seductive as such theories might be, the reality is that the delocalisation of arbitrations — other than those, e.g. u/ICSID, which are governed directly by international law — is possible only if the local law (lex arbitri) permits it.

Question 23

Assessing Theory of Delocalisation - Prof. Paulsson [The Idea of Arbitration]

Answer 23

“[T]he development of int’l arb. owes a disproportionately large debt to FRENCH law and to the conceptual advances of French judges and scholars. Nowhere else have the twin lodestars of FREEDOM and INTERNATIONALISATION combined in the conception of a voluntary process that accommodates the reality of a transnational society, shone so bright.

Yet the zeal of those who make extravagant claims may do more harm than the resistance of non-believers and scoffers.

The proposition that an effective legal order may be built upon diaphanous abstractions like positive perspectives or transnational dynamics are more likely to impede than to facilitate respect for the arbitral process.”

Question 24

Belgian Delocalisation Story

Answer 24

1. One country that opted in favour of a substantial degree of delocalisation was Belgium.
2. By its law of 27 March 1985, a provision was added to article 1717 of the Belgian Code Judiciaire to the effect that a losing party was not permitted to challenge in the Belgian courts an award made in an international arbitration held in Belgium, unless at least one of the parties had a place of business or other connection with Belgium.
3. In the event, however, it appears that this legal provision discouraged parties from choosing Belgium as the seat of the arbitration and the law has since been changed.