International Arbitration Law Library

THE FORCES OF ECONOMIC

GLOBALIZATION:
CHALLENGES TO THE REGIME OF
INTERNATIONAL COMMERCIAL
ARBITRATION

by

KATHERINE LYNCH

KLUWER LAW INTERNATIONAL

THE HAGUE LONDON NEW YORK
Table of Contents

Preface xiii

CHAPTERI INTRODUCTION 1
1 Risk and Uncertainty in International Commercial Transactions 3
2 The Process of International Commercial Arbitration 7
3 Private Neutral Forum for International Dispute Resolution 11
4 Historical Development of International Commercial Arbitration 15
5 Economic Globalization: Impact on State Sovereignty 22
6 Issues Raised and Arguments Advanced 28
7 Topics Covered in Book 34

CHAPTER II ECONOMIC GLOBALIZATION AND

NATIONAL SOVEREIGNTY 37
1 Introduction 37
2 Characteristics of Economic Globalization 39
Complex Web of International and Transnational Contracts 42
Emergence of Powerful Transnational Economic Actors 44
Global Integration of Financial Markets 45
Dominance of Liberal Free Market and Free Trade Policies 46
3 The Transformative Effect of Globalization 49
Globalization and Loss of Sovereignty Arguments 50
Refuting the Loss of Sovereignty Claim 52
Unraveling of Territoriality: The Denationalization Theory 56
4 Changing Conceptions of State Sovereignty 58
Modern Conception of State Sovereignty 59
Continuing Relevance of State Sovereignty 61
5 State Sovereignty and International Arbitration 65
Contractual Theory of Arbitration 66
Jurisdictional Theory of Arbitration 68
Hybrid Theory of Arbitration 71
Autonomous Theory of Arbitration 72
A New Theoretical Approach Required 73
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CHAPTER III THE REGIME OF INTERNATIONAL

COMMERCIAL ARBITRATION, THE EPISTEMIC
COMMUNITY & INSTITUTIONALIZATION 77
1 Introduction 77
2 The Relevance of International Regime Theory 80
3 The Current International Arbitral Regime 84
4 The Role of the Epistemic Community Within the Regime 94
5 Institutionalization and the Regime of International Commercial
Arbitration 104

CHAPTER IV MULTILATERALEM AND REGIONALEM IN

INTERNATIONAL COMMERCIAL
ARBITRATION 125
1 Introduction 125
2 Multilateral and Regional Conventions Concerning International
Commercial Arbitration 128
1923 Geneva Protocol on Arbitration Clauses and 1927 Geneva
Convention on the Execution of Foreign Arbitral Awards 128
1958 New York Convention 129
1961 European Convention 141
1972 Moscow Convention 143
Montevideo Convention and Panama Convention 143
Inter-Arab Conventions 144
3 Bilateral, Regional and Multilateral Trade and Investment
Related Treaties and Conventions 145
1965 Washington Convention 147
World Trade Organization and GATT 150
NAFTA 153
Energy Charter 156
MERCOSUR 157
Multilateral Agreement on Investment 158
4 Impact of Multilateralism and Regionalism on the
International Arbitral Regime 160

CHAPTER V NATIONALIZATION OF INTERNATIONAL

COMMERCIAL ARBITRATION:
HARMONIZATION & DENATIONALIZATION
TRENDS 167
1 Introduction 167
2 The Nationalization of International Commercial Arbitration 169
Relevance of National Laws in the International Regime 170
Divergent Trends: Denationalization and Harmonization 173
Importance of the Place of Arbitration 176
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Essential Features of Denationalization Debates 178

Proponents of Denationalized Arbitration 181
Opponents of Denationalization 183
Application of the Denationalization Theory 186
The Future of Denationalization 195
3 Efforts to Harmonize Nationalize Arbitration Laws 196
Meaning of Harmonization 197
Justifications for Harmonization 200
Methods to Achieve Harmonization 203
Harmonization Efforts Within International Trade and
Commerce 205
Harmonization Within International Commercial Arbitration 207
4 UNCITRAL and the Drafting of the Model Law on
International Commercial Arbitration 212
Drafting of the UNCITRAL Model Law 215
Provisions of the UNCITRAL Model Law 225
5 Conclusion 232

CHAPTER VI REFORM AND MODERNIZATION OF

NATIONAL ARBITRATION LEGISLATION 235
1 Introduction 235
2 Extensive Period of Legislative Reform 238
3 Adoption and Translation of the UNCITRAL Model Law in
National Legislation 246
4 Reform at the Regional Level 261
Reform in Latin American States 262
Reform in African States 264
Reform in Central and Eastern Europe 266
Reform in Arab States 267
Reform in Asian States 268
5 Trends in the Reform of National Arbitration Legislation 269
Specialized Legal Regime for International Arbitration 269
Emphasis on Territoriality 270
Harmonization and Denationalization 272
Competitive Nature of Legislative Reform 273
Potential Problems Associated With Regulatory Competition 276
The Race to the Bottom: Diminished State Control 282
6 Convergence and Diversity in International Commercial
Arbitration 286
Convergence of Norms in International Commercial
Arbitration 288
Areas of Continuing Divergence in International Commercial
Arbitration 297
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Continuing Diversity in the Face of Globalization 301

7 The Paradox of Globalization and Nationalization 305

CHAPTER VII GLOBALIZATION AND LEX MERCA TORIA:

A THIRD SUPRANATIONAL LEGAL SYSTEM 309
1 Introduction 309
2 Lex Mercatoria: A Third Supranational Legal System? 311
3 Historical Development of Lex Mercatoria 314
4 Existence, Sources and Content of Lex Mercatoria 317
5 Acceptance & Application of Lex Mercatoria By Nation States 323
National Arbitration Laws 324
UNCITRAL Model Law 327
International Arbitral Conventions 328
International Arbitral Rules 329
Application by Arbitration Tribunals 330
6 Efforts at Codifying Lex Mercatoria 331
UNIDROIT Principles of International Commercial Contracts...332
7 The Future of the New Lex Mercatoria 335
Changing View of Lex Mercatoria: A Shift in Paradigms 336
Privatized Decentralized Privatized Law Making 339

CHAPTER VIII INTERNATIONAL COMMERCIAL ARBITRATION

IN CYBERSPACE: A NEW DIMENSION 345
1 Introduction 345
2 Regulation of the Internet and International E-Commerce 352
Debates Over the Regulation of Cyberspace 352
Regulatory Initiatives at the International Level 360
Regulatory Initiatives by National States 365
Private Seif-Regulatory Initiatives 368
3 Development of ADR Schemes in Cyberspace: Diverse Approaches...370
Development of Online Negotiation and Mediation Schemes 373
Emergence of Online Arbitration Systems 377
ICANN and Arbitration of Domain Name Disputes 384
4 Governance of Cyberspace Arbitration: Challenges to State
Sovereignty and Control 388
Adaptation of Current Regime of International Commercial
Arbitration 391
5 The Future of Cyberspace Arbitrations and Dispute Resolution 396

CHAPTER IX CONCLUSION 401

1 Complexity of the International Arbitral Regime 403
Dynamic Nature of the Regime 404
Increased Density of the Institutional Matrix 404
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Multilateralism Within the Arbitral Regime 406

Emergence of Cyberspace Arbitrations 407
2 National Legal Systems and Transnationalism 408
Convergence and Divergence in International Arbitral Process...409
Market Modernization and Transnationalism 410
3 Impact of Globalization on State Sovereignty 412
4 Emergence of a World Polity or Transnational Order 414

Bibliography 415

Index 457