The Optimization of Court Involvement in International Commercial Arbitration

279 Pages·2016·1.81 MB·English

THE OPTIMIZATION OF COURT INVOLVEMENT IN INTERNATIONAL
COMMERCIAL ARBITRATION

A thesis submitted to the University of Manchester for the degree of
Doctor of Philosophy
in the Faculty of Humanities

2016

Nahal Allahhi

School of Law
Table of Contents
Introductory Chapter ................................................................................................................... 9
• The research problem: theoretical and practical importance of the study
 ...................
 9

• Research questions
 ...........................................................................................................
 13

• Objectives of the research
 ................................................................................................
 14

• Scope of the study and methodology
 ...............................................................................
 15

• Structure and Contribution of the research
 ...................................................................
 17

Chapter One: An Overview of Dispute Settlement Mechanisms in International
Commercial Transactions .......................................................................................................... 21
1.1 Introduction ........................................................................................................................... 21
1.2 History and background of arbitration and ADR
 .........................................................
 22

1.3 Arbitration
 ........................................................................................................................
 23

1.3.1 Different types of arbitration .................................................................................................. 24
1.4 Other mechanisms in dispute settlement
 ........................................................................
 25

1.5 Adversarial methods
 .........................................................................................................
 25

1.6 Non-adversarial methods
 .................................................................................................
 27

1.6.1 Negotiation ................................................................................................................................ 28
1.6.2 Mediation .................................................................................................................................. 29
1.6.3 Conciliation ............................................................................................................................... 30
1.7 Expert determination (enquiry)
 .......................................................................................
 31

1.8 Comparison between various dispute settlement mechanisms
 .....................................
 32

1.8.1 Cost ............................................................................................................................................ 32
1.8.2 Speed of dispute resolution ...................................................................................................... 33
1.8.3 Confidentiality and privacy ..................................................................................................... 35
1.8.4 Flexibility .................................................................................................................................. 36
1.8.5 Perceived fairness ..................................................................................................................... 37
1.8.6 Effectiveness ............................................................................................................................. 38
1.9 Impact on continuing business relations
 .........................................................................
 39

1.10 Conclusion
 .......................................................................................................................
 40

Chapter Two: Court Involvement Prior to Establishment of Arbitral Tribunal ................. 42
2
2.1 Introduction
 ......................................................................................................................
 42

2.2 Various stages of court involvement
 ...............................................................................
 44

2.3 Separability and competence-competence
 ......................................................................
 47

2.4 Injunctions involving arbitration
 ....................................................................................
 53

2.4.1 Anti-arbitration injunctions .................................................................................................... 54
2.4.2 Should national courts grant anti-arbitration injunctions? ................................................. 60
2.5 Anti-suit injunctions
 .........................................................................................................
 64

2.6 Pro-arbitration orders
 ......................................................................................................
 67

2.6.1 When should courts compel parties to arbitrate? ................................................................. 68
2.6.2 To what extent can courts compel third parties to participate in arbitration? .................. 72
2.7 Gateway problem in international commercial arbitration
 ..........................................
 74

2.8 Conclusion
 .........................................................................................................................
 79

Chapter Three: Court Involvement at the Commencement of the Arbitration Process ..... 83
3.1 Introduction
 ......................................................................................................................
 83

3.2 Establishment of the arbitral tribunal
 ............................................................................
 86

3.2.1 Party autonomy for constituting the tribunal ....................................................................... 88
3.2.2 Various techniques to appoint the tribunal ........................................................................... 91
3.2.3 Who has jurisdiction to interfere ............................................................................................ 98
3.3 Challenges of arbitrators
 ................................................................................................
 100

3.3.1 Impartiality and independence of arbitrators ..................................................................... 101
3.3.2 Grounds for challenging arbitrators .................................................................................... 104
3.3.3 Procedures for challenge: Who has jurisdiction, the court or the arbitral tribunal? ..... 112
3.4 Consolidation
 ..................................................................................................................
 117

3.4.1 Grounds for consolidation and joinder/intervention in international arbitration .......... 118
3.4.2 Theoretical debates on extension doctrines ......................................................................... 124
3.4.3 International arbitral proceedings and issues of multiparty cases .................................... 136
3.4.4 Towards a transnational approach to consolidation .......................................................... 144
3.5 Conclusion
 .......................................................................................................................
 148

Chapter Four: National Courts and their Complementary Roles in Granting Interim
Measures .................................................................................................................................... 154
4.1 Introduction
 ....................................................................................................................
 154

4.2 Arbitrators’ ability to order interim measures
 ............................................................
 156

3
4.3 Limitation on arbitral tribunal power to order provisional measures
 .......................
 164

4.3.1 Party autonomy ...................................................................................................................... 164
4.3.2 Lack of power to order provisional measures prior to establishment .............................. 165
4.3.3 Limitation on subject matter of the dispute ........................................................................ 166
4.3.4 No ex parte application .......................................................................................................... 168
4.3.5 Lack of power of enforcement .............................................................................................. 171
4.4 Exercise of tribunal’s authority to order provisional relief
 ........................................
 175

4.4.1 Increased willingness in the arbitral tribunal ..................................................................... 176
4.4.2 Governing law and arbitrators-ordered interim measures ................................................ 177
4.5 Preliminary conditions to order provisional measures
 ................................................
 180

4.5.1 Irreparable or serious injury ................................................................................................ 181
4.5.2 Urgency ................................................................................................................................... 182
4.5.3 No pre-judgment of the merit ............................................................................................... 183
4.5.4 Probability of success on merit ............................................................................................. 184
4.5.5 Jurisdiction ............................................................................................................................. 186
4.5.6 Security ................................................................................................................................... 186
4.6 Types of interim measures
 .............................................................................................
 187

4.6.1 Preserving the status quo ...................................................................................................... 187
4.6.2 Measures aimed at relief in respect to parallel proceedings .............................................. 189
4.6.3 Requiring specific performance of contract ........................................................................ 190
4.6.4 Orders requiring security for legal cost ............................................................................... 191
4.6.5 Orders for interim payment .................................................................................................. 192
4.7 Rationale for concurrent judicial jurisdiction to grant provisional measures in aid of
arbitration
 .............................................................................................................................
 193

4.7.1 Introduction ............................................................................................................................ 194
4.7.2 Authority of national courts in granting provisional relief ................................................ 195
4.7.3 Future directions: Proper application of Article II(3) to court-ordered provisional
measures ........................................................................................................................................... 200
4.8 Conclusion
 .......................................................................................................................
 201

Chapter Five: Court Involvement in the Recognition and Enforcement of Foreign Arbitral
Award ......................................................................................................................................... 206
5.1 Introduction
 ....................................................................................................................
 206

5.2 The role of the New York Convention and national legislation in facilitating
recognition and enforcement of foreign arbitral awards
 ..................................................
 208

4
5.3 Impediments to recognition and enforcement of foreign arbitral awards
 .................
 213

5.4 Potential situations of court involvement in recognition and enforcement of arbitral
awards
 ....................................................................................................................................
 213

5.5 Grounds for non-recognition or enforcement of an arbitral award
 ...........................
 219

5.5.1 International public policy .................................................................................................... 220
5.5.2 International arbitrability ..................................................................................................... 227
5.6 Conclusion
 .......................................................................................................................
 231

Conclusion ................................................................................................................................. 234
Bibliography .............................................................................................................................. 241
Books
 ......................................................................................................................................
 241

Journal articles, reports & book chapters
 ..........................................................................
 246

Table of Cases ............................................................................................................................ 262
Table of Statutes ........................................................................................................................ 276
The final word count (including footnotes): 87341
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Abstract

Despite all the advantages of international arbitration, it has never been considered as an
entirely independent and complete dispute settlement system and as such has been traditionally
assisted by national courts. Nevertheless, the optimum model for courts’ involvements in
international arbitration is not clear. More importantly, given the latest development in the theory
and practice of international arbitration, the necessity and nature of such involvement is under
question. Accordingly, this thesis aims to determine the optimum scenario of court involvement
in international arbitration in order to enhance its efficiency by providing a fairly harmonised
(transnational) approach regarding court involvement in the various stages of international
arbitration.
Taking efficiency consideration as the main guidance and indicator in modern legal
scholarship, the thesis will develop normative discourse regarding harmonization of court
involvement in international arbitration based on the comparative and analytical study of two
major jurisdictions, the United Kingdom and the United States, and will suggest different
solutions which can minimize the need for court’s involvements through their substitution by
other mechanisms such as party autonomy as well as the expansion of the competence and the
authorities of arbitral tribunals.
To achieve the desired result, this thesis will analyse and respond to the following
fundamental questions: (a) Why, where and when can national courts become involved in
arbitration cases? (b) Is there any potential conflict between national courts’ competence and the
historical facts regarding independence of international arbitration? (c) What are the potential
solutions to harmonize court involvement in international arbitration at each stage? (d) To what
extent can it be argued that national courts should waive part of their authority in favour of
international arbitration in order to enhance the efficiency of international arbitration? (e) What
are the potential avenues that need to be explored in order to harmonize court involvement in
international arbitration?
After examining the abovementioned questions, the thesis concludes that courts’
involvement in international arbitration may occur in 4 different stages, namely, before the
establishment of arbitral tribunal, at the commencement of arbitration process, during the
arbitration and finally at the time of recognition and enforcement of foreign arbitral award. It
also suggests that prior to establishment of arbitral tribunal, recognition of a concurrent
jurisdiction for the court of the place of arbitration can significantly remove the potential
obstacles in front of the conclusion of the tribunal. Moreover, and given the extended role of
party autonomy in selecting substantive and procedural law, arbitrating parties can minimizes the
possibility of recourse to national courts at the commencement of the tribunal and during the
process by submitting their claims arbitration institutions which can offer most of the services
offered by national courts and as such will remove the need for national courts internvention.
Finally, the thesis proposes that although recognition and enforcement of arbitral award may
inevitably require the involvement of local courts, development of a transnational notion of
public policy and arbtirability based on efficiency will lead to a sort of universal approach in the
enforcement of international awards regardless of the place of business or the nationality of the
party-debtor in arbitration.

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In the name of Allah, the beneficient, the merciful

Dedication
This thesis is dedicated to my beloved parents.
Anything good that has happened in my life has been because of their love and
support, either morally or financially.
And also to my sister, my uncle Ali and a special person in my life who have
always supported and encouraged me.
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Acknowledgements
First and foremost, I would like to thank my supervisor Jasem Tarawneh for being the best
supervisor anybody could wish to have. The support that he provided during my research has
been a great source of motivation. Without his encouragement and coaching none of these would
have happened.
I would also like to thank my supervisor Yenkong Ngangjoh Hodu for his guidance, support and
expert comments.
There are people in everyone’s life who make success both possible and rewarding: my parents,
Hassan Allahhi and Farideh Shahidi; my sister, Nasrin Allahhi, my Uncles Ali and Morteza and
my friends steadfastly supported and encouraged me. Also I would like to thank Reza who has
always believed in me and tried to give his support in any way possible. Finally, to my caring,
loving, and supportive closed friend, Maryam Ferdousi: my deepest gratitude as completion of
this research could not have been accomplished without her encouragement and support.
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Introductory Chapter
• The research problem: theoretical and practical importance of the study
In modern times, globalization and the increasing growth of international business in
addition to the swift and considerable changes happening in international transactions have made
it necessary to create a dispute settlement mechanism capable of responding to the needs and
requirements of international transactions. In addressing the need for a proper dispute settlement
mechanism for international business, attempts have been made to develop a new discourse for
global transactions which aims to minimize the likelihood of disputes emerging among the
professional market players.1 At the same time, market practitioners have strived to create
alternative dispute resolution (ADR) that is capable and efficient enough to respond to the actual
needs within the global market.
Negotiation, mediation, conciliation and international commercial arbitration are the most
prominent examples of these alternative dispute settlement mechanisms. However, given the
considerable advantages of international arbitration, including cost; speed of resolution;
confidentiality/privacy; flexibility; perceived fairness; effectiveness; and the impact on
continuing business relations, market practitioners have shown a preference for using it as the
main facility to resolve their disputes.2
Arbitration, given its consensual nature which gives significant autonomy and power to
the parties to control the arbitration, as well as having binding nature, has become more
promising than other ADR mechanisms. It also allows parties to benefit from a neutral, unbiased
forum that is based on fairness.3
In spite of the aforementioned advantages, international arbitration is associated with a
series of shortcomings –above all, a lack of autonomous enforcement mechanism. Hence, the

1 M Osama Jannadia and others, ‘Contractual methods for dispute avoidance and resolution (DAR)’ (2000) 18
International Journal of Project Management 41.
2 Deborah R Hensler, ‘Our courts, ourselves: How the alternative dispute resolution movement is re-shaping our
legal system’ (2003) 108 Penn St L Rev 165.
3 Amr A Shalakany, ‘Arbitration and the Third World: A Plea for Reassessing Bias Under the Specter of Neo-
Liberalism’ (2000) 41(2) Harvard International Law Journal 419.
9
enforcement of foreign arbitral awards must be sought from a national court when the final
arbitral award is not voluntarily enforced by the losing party. This creates a considerable ground
for the involvement of national courts in arbitration because, typically, a national judge who is
expected to recognize the res judicata effect of an arbitral award needs to ensure the fairness of
the proceedings leading to the award and determine that the award is free from procedural
irregularities and that the recognition of the award does not endanger public policy in the place
of enforcement.
There are other instances which may require the involvement of national courts in
arbitration proceedings. Before exploring these instances and in order to have a better
understanding of the potential grounds for the involvement of national courts in international
arbitration, the following four features of international arbitration should be taken into account.
First and foremost, international arbitration is independent in the sense that it exists in a
separate and autonomous domain from national laws and jurisdictions.4 In other words,
arbitration does not, as some have argued, function within a contractual structure or through
opting out of the competence of national courts to audit a dispute, or even a combination of these
two things. However, utilizing this consensual method of resolving mutual disputes requires a
contractual basis; this indicates mutual consent to adopt this method instead of litigation.5
Secondly, by opting for arbitration, parties have stipulated expressly their positive
intention to pursue an alternative dispute resolution system. This is the same regardless of the
express choice of a national law by the parties to govern the substantive issues of the contract or
of the arbitration. More specifically, this choice means that the parties have intentionally and
expressly abandoned national courts to settle their disputes. They may do so primarily because in

4 Derek Roebuck, ‘Sources for the History of Arbitration’ (1998) 3 Arbitration International 237; Julian DM Lew,
‘Achieving the dream: autonomous arbitration’ (2006) 22(2) Arbitration International 179.
5 Margaret Wang, ‘Are Alternative Dispute Resolution Methods Superior to Litigation in Resolving Disputes in
International Commerce’ (2000) 16(2) Arbitration International 189.
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