International arbitration can be defined as arbitration between companies or individuals in different states, usually by including a provision for future disputes in a contract.[i]
The system of rules which is predominantly followed is the UNCITRAL Arbitration Rules, as well as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New York Convention”).The International Centre for the Settlement of Investment Disputes (ICSID) also handles arbitration, however this body is particularly focused on investor-state dispute settlement and hears relatively few cases.
Drafted under the auspices of the United Nations, the New York Convention was and has been ratified by more than 150 countries, including major and minor countries involved in significant international trade and economic transactions. The New York Convention mandates that the states that have ratified it would have to recognize and enforce international arbitration agreements and foreign arbitral awards issued in other contracting states, subject to certain limited exceptions.Thus these bodies along with the New York Convention, along with the large number of contracting states, have thus created an international legal regime that to a significant extent favours the enforcement of international arbitration agreements and awards.This was preceded by the 1927 Convention on the Execution of Foreign Arbitral Awards in Geneva.
One of the primary benefits and important functions of International arbitration is that it allows the parties to avoid local court procedures. The rules of conduct are different from that of domestic arbitration[ii] and it has its own non-country-specific standards of ethical conduct.
The process can be considered more limited than typical litigation and thus forms a hybrid between common law and civil law legal systems. For example, the International Bar Association (IBA)’s Rules on the Taking of Evidence in International Commercial Arbitration, revised in 2010,refrains from adopt common law broad disclosure procedures (discovery) or for that matter follows the civil law in eliminating entirely the ability of engaging in some disclosure-related practices. The IBA Rules seek to blend common and civil systems so that parties can narrowly tailor disclosure to the particular subject matter of the agreement.
David Rivkin,chair the committee that drafted the rules, has further noted that the wide adoption of these rules in international arbitration has in practice led to an unexpected use by common law practitioners to restrict disclosure and by civil law practitioners to expand it.
The rules can be further impacted by arbitral rules that may be agreed between the parties.
A lot of countries, majorly those belonging to the developed world, are signatories of the New York Convention. Consequently, judgements can be enforced across the world. The New York Convention, more formally known as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, has provisions for court recognition and enforcement of foreign arbitration decisions, that allow arbitration proceedings to piggyback on the authority of domestic jurisdictions across the world.[iii]
On the other hand, there is no reaty for the international recognition of court decisions that can be considered equivalent with a large membership although the Hague Convention of 30 June 2005 on Choice of Court Agreements entered into force in 2015 for the European Union and Mexico. Similarly, no other treaty exists on the same level, so far for the international recognition of settlements achieved in mediation or conciliation, up till now, a meeting of the UNCITRAL Working Group II in New York had taken place in February 2015 consequent to a US proposal for that working group to develop a convention on the enforcement of conciliated settlement agreements for international commercial disputes.[iv]Such a convention previously existed only for independent countries like within the EU, the enforceability of mediation agreements is ruled by Directive 2008/52/EC.
Protection from lawsuits
The New York Convention stipulate that if a party to arbitration files a lawsuit in breach of an arbitration agreement, the court would have an obligation to stay the proceedings. Chapter 2 of the Federal Arbitration Actsets down the statutory basis for an American court to issue a stay in connection with contracts falling within the ambit of the New York Convention.However it is imperative to adopt one organization related to arbitration.
The New York Convention, Article V provisions have seven reasons on the basis of which a court can use to refuse to enforce an arbitration judgment.[v]
Information available publicly on overall and specific arbitration cases is quite limited as there is no requirement to involve the courts at all unless there is a dispute, however in most cases the party liable pays on their own. In China, a pattern has been found. A review of disputed cases in China discovered that from 2000 to 2011, in 17 cases the Supreme People’s Court have refused to enforce the arbitration agreement due to a provision in Article V; China has an automatic appeal system to the highest court, so this includes all such refusals.
International Arbitration Agreements should include a number of essential elements, with model language available. This primarily includes the agreement to arbitrate, a definition of the scope of disputes subject to arbitration, the means for selecting the arbitrator(s), a choice of the arbitral seat, and the adoption of institutional or ad hoc arbitration rules.Several more ancillary provisions can also be included in international arbitration clauses, including the language for the conduct of the arbitration, choice of applicable law, arbitrator qualifications, interim relief, costs, and procedural matters.
Some international arbitration specialists recommend using an arbitration clause that authorizes two arbitral institutions in the same city in order to bridge the gap when parties to an international agreement have difficulty in agreeing upon an arbitral institution. This is also a mechanism to empower the party commencing the arbitration to select the arbitral institution.[vi]
A mnemonic device, “BLINC LLC”, reflects some of the most important clauses: broad, law, institutional, number, costs, location, language, and carve-out.
Other Important Institutions for Arbitration in North America are JAMS International, the British Columbia International Commercial Arbitration Centre (BCICAC, Canada).
Some ADR bodies also are specialists designed for only one type of subject matter, such as the World Intellectual Property Organisation (WIPO), which has an arbitration and mediation centre and a panel of arbitrators and mediators that are extremely neutral, only specialising in intellectual property and technology related disputes.A number of arbitral institutions have adopted the UNCITRAL Rules for use in international cases. For example, Australia’s adoption of the UNCITRAL Rules in its 6 July 2010 amendment to the ‘International Arbitration Act 1974’.
The most prominent feature of the ICC is its use of the “terms of reference” in its rules. The “terms of reference” is actually a summary of the claims and issues in dispute and the particulars of the procedure is prepared by the tribunal and signed by the parties near the beginning of the proceedings.[vii]
More recently, the Swiss Chambers of Commerce and Industry of Basel, Berne, Geneva, Lausanne, Lugano, Neuchâtel and Zurich have now created and adopted a new set of Swiss Rules of Commercial Mediation that are going to fully integrate with the Swiss Rules of International Arbitration that were previously adopted by these chambers to harmonize international arbitration and mediation proceedings across Switzerland.
Research and other organizations
The International Arbitration Institute, headed by Emmanuel Gaillard, was founded in 2001, under the body, the Comitéfrançais de l’arbitrage (CFA), to promote exchanges and transparency in the international commercial arbitration community.
The Association for International Arbitration is a non-profit organisation which is created in Paris in 2001 by Johan Billiet. It’s main function is to provide information, training and educational activities however the parties themselves will have to appoint their arbitrators.
International investment and ICSID
The International Centre for the Settlement of Investment Disputes (ICSID) is an ad hoc tribunal established pursuant to UNCITRAL Rules to arbitrate International Investment Agreements and further be the guardian for foreign investors by providing them with a means for redress against states for breaches of contract. The ICSID was designed in manner that made it more enforceable. Its inability to be reviewed by domestic courts was the main factor. However, till today state immunity to lawsuits and judgments poses a serious barrier to collection.Foreign direct investment have guaranteed legal through a network of more than 2750 Bilateral Investment Treaties (BITs), Multilateral Investment Treaties, most prominently the Energy Charter Treaty and a number of free trade agreements containing chapter on investment protection through investor-state dispute settlement, such as NAFTA. The overall number of cases concluded reached 244. Out of these 244 cases, about 42% went in favour of the state and approximately 31% in favour of the investor and about 27% of the cases were settled.
This form of arbitration has been used for centuries, including in antiquity, for the resolution of disputes between states and state-like entities.[viii] After a period of relative disuse, Jay’s Treaty between the United States and Great Britain was instrumental in bringing back international arbitration as a means of resolving interstate disputes. The 1899 and 1907 Hague Conferences spoke of using arbitration as a mechanism for resolving state-to-state disputes, thus leading to the adoption of the Hague Conventions for the Pacific Settlement of International Disputes. The Conventions established the Permanent Court of Arbitration are actually a rudimentary institutional framework for international arbitration of interstate disputes.[ix]Recently, international arbitration has been used to resolve a large number of disputes between states or state-like entities, including Eritrea v. Yemen[x], the Abyei Arbitration[xi], the OSPAR Arbitration[xii], and the Iron Rhine Arbitration[xiii].
Edited by Shuvneek Hayer
Approved & Published – Sakshi Raje
[i]Gary B. Born, International Commercial Arbitration, 187, 197, 217 (2009); Julian M. Lew, Loukas A. Mistelis& Stefan M. Kröll, Comparative International Commercial Arbitration 1-10 to 1-11, 6-1 to 6-6 (2003
[ii]Yves Dezalay& Bryant G. Garth, Dealing In Virtue: International Commercial Arbitration And The Construction Of A Transnational Legal Order 9-10, 124, 198 (1996)
[iii]Druzin, Bryan. “Anarchy, Order, and Trade: A structuralist Account of why a global Commercial Legal Order is emerging”. Vanderbilt Journal of Transnational Law. 47: 1057.
[iv]Lorraine Brennan: Do We Need a New York Convention for Mediation/Conciliation?, Mediate.com, February 2015
[v]“Enforcement of Arbitral Awards under the New York Convention – Practic” by Joseph T. McLaughlin and Laurie Genevro”. scholarship.law.berkeley.edu. Retrieved 2016-03-21.
[vi]Eric Sherby, “A Different Type of International Arbitration Clause,” Int’l Law News (American Bar Association) Winter 2005 at 10.
[vii]Barin, Babak; Little, Andrew; Pepper, Randy (2006). The Osler Guide to Commercial Arbitration in Canada. The Netherlands: Kluwer Law International. p. 34.
[viii]Jackson H. Ralston, International Arbitration From Athens To Locarno 153-154; John L. Simpson & Hazel Fox, International Arbitration: Law And Practice 1 (1959)
[ix]Shabtai Rosenne, The Hague Peace Conferences Of 1899 And 1907 and International Arbitration: Reports and Documents xxi (2001); Alan Redfern, Martin H. Hunter, Nigel Blackaby & Constantine Partasides, Redfern And Hunter On International Arbitration 1.197 (2009)
[x]Eritrea v. Yemen (Perm. Ct. Arb. 1999)
[xi]Abyei Arbitration (The Government of Sudan v. The Sudan People’s Liberation Movement /Army) (Perm. Ct. Arb. 2009)
[xii]OSPAR Arbitration (Ireland v. United Kingdom) (Perm. Ct. Arb. 2003)
[xiii]Iron Rhine Arbitration (Belgium v. Netherlands) (Perm. Ct. Arb. 2005)