Table Of Content“Do I believe in arbitration? I do. But not in arbitration between the lion and
the lamb, in which the lamb is in the morning found inside the lion”.
Samuel Gompers (1850-1924)
President of the American Federation of Labour (1888-1924)
1
CONTENT
Introduction............................................................................................................................................................5
Historical
development
of
international
arbitration..........................................................................................5
Arbitration
in
ancient
history..........................................................................................................................5
The
development
of
international
arbitration
in
medieval
times..................................................................6
The
arduous
acceptation
of
arbitration
process
in
European
modern
history...................................................7
In
the
English
system......................................................................................................................................7
In
France.........................................................................................................................................................8
The
evolution
of
arbitration
towards
the
international
sphere......................................................................9
Clarification
of
notions
forming
International
Commercial
arbitration............................................................11
Definition
of
Arbitration...............................................................................................................................11
A
private
system
of
adjudication..................................................................................................................11
Controlled
by
the
parties..............................................................................................................................12
Designed
to
be
binding
upon
them..............................................................................................................12
An
attempt
to
a
complete
definition............................................................................................................12
Definition
of
“International”.........................................................................................................................13
The
definition
of
“Commercial”....................................................................................................................14
Introducing
the
study
of
the
choice
of
law
in
International
arbitration...............................................................16
Chapter
1:
Various
types
of
strategy
in
the
legal
field..........................................................................................18
Strategies
designed
to
win................................................................................................................................18
Strategies
that
constraint
the
decision
maker..............................................................................................18
Strategies
that
transcend
the
decision
maker..............................................................................................20
Choices
allowing
increased
cost-‐efficiency
and
time
reduction
in
International
Commercial
Arbitration......23
Arbitration rules and cost..............................................................................................................................23
Arbitration
rules
and
place
of
arbitration.....................................................................................................24
Number
of
arbitrators...................................................................................................................................25
Ad
hoc
or
institutional
arbitration................................................................................................................25
Reducing
procedural
disputes
and
shortening
of
the
procedure.................................................................25
Chapter
2:
The
Parties’
choice
of
law...................................................................................................................27
The
choice
of
law
as
part
of
the
arbitration
agreement...................................................................................28
2
The
issue
of
the
validity
of
the
Arbitration
agreement.................................................................................28
The
choice
of
the
applicable
law
to
the
procedure..........................................................................................36
Distinction
between
the
procedural
rules
and
the
Lex
Arbitri......................................................................36
The
opposition
between
the
“Seat
theory”
and
the
theory
of
“delocalisation”...........................................39
The
choice
of
the
substantive
law....................................................................................................................41
Parties’
autonomy
in
the
scope
of
the
choice
of
law....................................................................................41
The
various
types
of
choices
possible...........................................................................................................44
Chapter
3:
The
outcomes
of
the
absence
of
choice
of
law...................................................................................52
The
duties
of
the
arbitrators.............................................................................................................................52
The
duty
to
deliver
an
enforceable
award....................................................................................................52
The
duty
to
apply
the
law.............................................................................................................................53
Applications
of
the
conflict
of
law
rules...........................................................................................................53
“Voie
indirecte”............................................................................................................................................53
“Voie
directe”...............................................................................................................................................55
Chapter
4:
The
issue
arising
when
drafting
an
arbitration
clause/agreement.....................................................57
General
Framework
for
the
drafting
of
an
arbitration
clause
or
agreement...................................................57
General
principles
for
the
drafting
of
an
arbitration
clause/agreement......................................................58
Specific
considerations
to
the
choice
of
laws
clause....................................................................................60
Analysis
of
potential
grounds
for
annulment
of
refusal
of
enforcement
of
the
court.................................63
Analysis
of
arbitration
clauses
in
context.........................................................................................................67
Dallah
Real
Estate
v
Pakistan........................................................................................................................67
Sulamerica
CIA
Nacional
De
Seguros
&
Ors
v
Enesa
Engenharia..................................................................70
Proposition
of
a
comprehensive
draft..............................................................................................................73
Dallah
Real
Estate
v
Pakistan........................................................................................................................73
Sulamerica
CIA
Nacional
De
Seguros
&
Ors
v
Enesa
Engenharia..................................................................73
Proposition
of
comprehensive
clause...........................................................................................................74
Conclusive
remarks:..............................................................................................................................................75
Bibliography
:........................................................................................................................................................82
Books:...............................................................................................................................................................82
Articles:.............................................................................................................................................................82
Legislation:........................................................................................................................................................84
3
Codes:...............................................................................................................................................................84
Cases:................................................................................................................................................................85
Reports:............................................................................................................................................................86
Websites:..........................................................................................................................................................86
dictionary
&
Encyclopedia:...............................................................................................................................87
4
INTRODUCTION
HISTORICAL
DEVELOPMENT
OF
INTERNATIONAL
ARBITRATION
The development of international commercial arbitration is still an ongoing process. Its
history can be traced back to the commencement of human history.
ARBITRATION
IN
ANCIENT
HISTORY
The first traces of commercial arbitration were found in the Middle East, in what is now Iraq.
Clay tablets have been found reciting dispute over water rights between merchants in a
village near Kirkuk. The litigation was solved by arbitration, and ten silver shekels and an ox
were the award granted to the winning party. Agreements to arbitrate future disputes have
also been found in funerary trust in ancient Egypt, between 2500 BC and 2300 BC1.
Arbitration processes were also found in the Roman Empire and ancient Greece. In The Iliad
Homer describes a blood debt which was settled by a public arbitral process2. Roman law
very early offered the possibility of existence of an agreement to arbitrate, called
Compromissum. In this case the litigation had to be settled by an arbiter3.
Arbitration is a very familiar notion in the Jewish tradition. It is based on Deuteronomy 16,
18, when God orders Moses to “establish judges and officers in your gates”. Throughout the
second Temple era (4th cent. BC to 2nd cent. AC), Talmudic literature reports numerous
stories about arbitration of monetary matters by a “Beth Din” (a court generally composed of
three judges) with a particular emphasis on judges’ scholarship and integrity.
In Roman times and ancient Greece, reasons to refer to arbitration as well as the procedure
itself were very similar to modern times. Like in today’s national courts, researches proved
that Roman and Greek courts were suffering from congestion and backlogs. Thus arbitration
quickly appeared as a suitable mean to solve private matters, granting a quicker and
sometimes fairer solution to the parties. Arbitral procedure was in both cases essentially
subject to the parties’ control. The progressive recognition and validity of arbitration
agreements was based on the principle of Pacta sunt servanda. There were only a few limits
on the subject of arbitration, for example inheritance and the status of slaves/citizens4.
1 Mantica, Arbitration in Ancient Egypt, 12Arb.J.155,158-60(1957).
2 The Iliad, XVIII. 497-508.
3 Stein, Arbitration under Roman Law, 41 Arb. 203, 203-04 (1974).
4 D. Roebuck & B. de Fumichon, Roman Arbitration ,105 (2004).
5
Jurisdiction of the arbitrators was limited by the arbitration agreement. The award was
binding, but at the time judicial review was limited:
“The award of the arbiter which he makes with reference to the matter in dispute
should be complied with, whether it is just or unjust; because the party who accepted the
arbitration had only himself to blame.”5
With Christianisation in the late Roman Empire the church began to play a role. Christian
bishops often exercised Arbitral jurisdiction called episcopalis audentia, created by Emperor
Constantine at the beginning of the 4th century6. Roman law also allowed Jewish
congregations to be granted similar powers.
Those historical examples of arbitral procedure show that arbitration was somehow present
from the very beginning of human history. However those procedures were generally lacking
an “international” character. The internationalisation of arbitration began in the medieval
times.
THE
DEVELOPMENT
OF
INTERNATIONAL
ARBITRATION
IN
MEDIEVAL
TIMES
Following the movement of history arbitration developed in medieval Europe (France,
England, the Swiss confederation, northern Italy and Germany). Various types of arbitration
were used at that time to solve private matters. Arbitration became very common between
merchants gilds, trade fairs, and professional organizations.
This development was due to the growing exchange flow between European countries,
through fairs, markets and gilds. Several gilds provided mandatory arbitration in case of
litigation in their charters, like the Company of the Clothworkers, or the Gild of St. John of
Beverley of the Hans House7. It is not difficult to justify the existence of arbitral procedures
in fairs and markets. Fairs involved many itinerant and foreign merchants who could not
afford to leave their disputes unsettled or to the most often inadequate local jurisdictions. The
recurrent reasons to use arbitration in this context are still true today. Apart from avoiding the
inadequacy of local courts and potential enforcement barriers, the idea was to have a quick
procedure performed by arbitrators with commercial expertise.
The increasing use of arbitration in medieval times led to various types of challenges coming
from local authorities. Political and judicial distrust arose correlatively with a wider use of
5 Digest, 4, 8, 27, 2 (Ulpian), in S. Scott ed., The Civil Law, Vol. 3 (1932).
6
J.
Gaudemet,
La
legislation
religieuse
de
Constantin,
in
Revue
de
l’église
de
France,
Paris
1947.
7 J. Cohen, Commercial Arbitration and the Law, 4 (1918).
6
arbitral procedure. But most of the time this jealousy was overcome by the obvious
advantages of arbitration in commercial settlements.
THE
ARDUOUS
ACCEPTATION
OF
ARBITRATION
PROCESS
IN
EUROPEAN
MODERN
HISTORY
England as well as France showed a desire to restraint the possibility using arbitration in any
private or commercial matters. The various actions taken by the authorities of these countries
reflected either an honest will to protect public order, or a mere hatred of the process.
IN
THE
ENGLISH
SYSTEM
In 1609 Lord Coke (in Vynior V. Wilde) rendered abitrations agreements revocable at will:
“Although (. . .) the defendant was bound in a bond to (. . .) observe the arbitrament,
yet he might countermand it; for a man cannot by his act make such authority (. . .) not
countermandable, which is by the law and of its own nature countermandable.” 8
In order to limit the effects of Lord Coke’s Dicta on commercial arbitration, the English
parliament promulgated a statute commonly referred to as the Arbitration act of 1698. This
act allowed the parties to make their arbitration agreement “a rule of any of His Majesty’s
Courts of Records”9, thus rendering the enforcement of such agreement easier. But the
interaction between Vynior’s case and the Arbitration act of 1698 ended up in an
impossibility to enforce an arbitration agreement outside the scope of the Arbitration act.
This problem was solved in 1833 with The English Civil Procedure Act, which stated that an
arbitration agreement could not be revoked10. This evolution is also reflected in an English
precedent. In the 1856 case Scott v. Avery Lord Campbell said:
“I can see not the slightest ill consequences that can flow from such an agreement,
and I see great advantage that may arise from it. (. . .) Public policy, therefore, seems to me
to require that effect should be given to the contract.”11
Finally at the end of the 19th century England enacted the 1889 Arbitration Act. The act
established the irrevocability of agreement to arbitrate future disputes12.
8 Vynior v. Wilde (1609) 77 Eng. Rep. 595 (K.B.).
9 English Civil Procedure Act, 1698, 9 & 10 Will. III, Ch. 15
10 English Civil Procedure Act, 1833, 3 & 4 Will. IV, Ch. 42, §§39-41
11 Scott v. Avery (1856) 5 H.L. Cas. 809, 853
12 English Arbitration Act, 1889, 52&53 Vict., Ch.49
7
The English way of showing reluctance to accept a broad validity of arbitration agreement
was subtler than the French way.
IN
FRANCE
In 1560 an Edict issued by Francis II rendered arbitration compulsory for commercial
matters. This Edict led to a widespread use of arbitration among merchants. Even though the
French system appeared to be more open to arbitral process at first, the French revolution
completely changed view on the validity of arbitration agreement for future disputes.
Right after the revolution arbitration was considered as one of the best applications of the
general notion of social contract. It was regarded as “the most reasonable means for the
termination of disputes arising between citizens”13. Arbitration was even brought to a
constitutional status in the year I (1793) and year III (1795) constitutions14.
Soon after the French revolution turned its back to its own creations. Arbitration was
considered a danger to the rule of law and the authority of state. The Napoleonic codes
imposed many restrictions on arbitration agreements. For example article 2059 of the Civil
Code, and 1006 of the Code of Civil Procedure provides that agreements to settle future
disputes by arbitration are not enforceable. Only a few exceptions to this principle were given
in the Commercial Code for maritime insurance contract and corporate partnership15. This
policy of limitation was the demonstration of a desire to eliminate this type of process
considered to be too vague and a “satire to the judicial system”16.
The first pretence of evolution appeared with a case of 1843. There the Cour de Cassation
held that agreement to arbitrate future disputes were not binding unless they identified
particular disputes and define potential arbitrators17. But the improvement was very limited.
French citizen will have to wait 1925 to obtain an almost complete freedom to create binding
agreement to arbitrate future litigations18. A new article in the Commercial Code gave
complete enforceability of arbitration agreement. This new article was created consequently
to the ratification of the 1923 Geneva Protocol on Arbitration clauses.
13 Law of 16-24 August 1790, Art. 1
14 French Constitution of Year I, 1793, Art. 86; French Constitution of Year III, 1795, Art. 210.
15 French Commercial Code, 1804, Arts. 51-63, 332
16 Mounier, Rapport Rigaud sur le projet de loi relative a l’arbitrage forcé: DP 56, at 113.
17 10th July 1843, Cie L’Alliance v. Prunier, Recueil Sirey 1843, 561
18 French Commercial Code, 1925, Art. 631.
8
As we can see arbitration process have always been present in developed societies throughout
history, but it is often said that “as a technocratic mechanism of dispute settlement, with a
particular set of rules and doctrines, international commercial arbitration is a product of this
century"19.
THE
EVOLUTION
OF
ARBITRATION
TOWARDS
THE
INTERNATIONAL
SPHERE
Most developed societies have already witnessed the development of arbitration as a mean of
settlement of disputes. Before the expansion of international commercial arbitration, disputes
were mainly of a domestic nature and therefore reflecting the nature of a particular society.
One could then witness considerable differences between the different societies, like
continental Europe, Islamic countries, Latin America.
With the exponential growth of international exchange at the end of the 19th century, the need
for non-domestic arbitration grew correlatively. The 1923 Geneva Protocol on Arbitration
Clauses adopted by the League of Nations is the foundation stone of the development of
international commercial arbitration, as we know it. This Protocol solves one of the main
problems of arbitration. At that time many countries didn’t recognise the validity of an
agreement to arbitrate future disputes, parties could only decide about arbitration once the
litigation had arisen. The main provision was that:
“Each of the Contracting States recognises the validity of an agreement whether
relating to existing or future differences between parties subject respectively to the
jurisdiction of different Contracting States by which the parties to a contract agree to submit
to arbitration.”20
But the recognition of the validity of the arbitration agreement was not the only problem
arising from the internationalisation of exchanges.
19 Shalakany, Arbitration and the Third World: A Plea for Reassessing Bias Under the Specter of Neo-
Liberalism, 41 Harv. Int’l L.J. 419, 430 (2000).
20 Assembly of the League of Nations, Geneva Protocol on Arbitration Clauses, art 1, 1923.
9
The issue of the enforcement and execution of foreign arbitral awards became a huge
problem. The key roots of this problem are the definition of the applicable law and
jurisdiction. Treaties and protocols have been adopted to deal with this problem such as the
1927 Geneva Convention for the Execution of Foreign Arbitral Awards, the 1958 Convention
on the Recognition and Enforcement of Foreign Arbitral Awards (New-York Convention),
the 1961 European Convention on International Commercial Arbitration.
The New-York Convention is placing consequent obligation on the courts. A court seized for
the application of a foreign award is pretty much required to enforce it. The exceptions given
in article V of the convention are very limited. The award can be denied enforcement only if
there is a clear violation of the procedural rules governing the arbitration21, if the subject
matter is not arbitrable under the applicable law22, or if the enforcement of the award is
contrary to the public policy of the country23.
In 1985 (revised in 2006) the United Nation Commission on International Trade Law
(UNCITRAL) published a document called the Model Law on International Commercial
arbitration. This document proposed a model for countries which had not yet promulgated
proper law on arbitration. The Model Law only concerns International Commercial
Arbitration. It does not only encourage the development of international arbitration but also
allows parties to carry out the arbitration procedure as they wish24.
Nowadays the UNCITRAL is still working on the global recognition of international
arbitration, and the harmonization of arbitration rules. The most important treaties and
Conventions that have to be kept in mind for the study of contemporary International
Commercial Arbitration are:
- The Geneva Protocol of 1923.
21 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art V(1), 1958.
22 See Supra note 20, art V(2a), 1958.
23 See Supra note 20, art V(2b), 1958.
24 Model Law, Article 19(1), 1985. (“the parties are free to agree on the procedure to be followed by
the arbitral tribunal in conducting the proceedings”).
10
Description:Dallah Real Estate v Pakistan . For example article 2059 of the Civil. Code,
and 1006 of the Code of 17 10th July 1843, Cie L'Alliance v. Prunier, Recueil
Revision of the Model Law, adopted in December 2006. Empirical studies
proved that the struggle over venue is most of the time determining t
