1 INTERNATIONAL COMMERCIAL ARBITRATION1 PROFESSOR ARTHUR VON MEHREN

CHAPTER I: INTRODUCTION Introduction The subject most akin to Arbitration is civil procedure. The difference between the two is that arbitration involves the consent of parties as contained in the contract.

Other ways in which arbitration differs from court litigation? Enforcement problems are common to both. A main difference is in the types of adjudicators in both forms of dispute resolution.

Advantages of arbitration: i. You can tailor your tribunal to fit your needs in terms of skills and language. Arbitrators are also generally not bound by precedent or complex systems of law (e.g. conflicts of laws rules), although arbitrators still nevertheless look at how national laws handle a particular problem. In principle, arbitrations are confidential, but there are collections of awards although not systematic in nature. The rule of confidentiality stands in the way of going into too much detail of the court. Arbitration is, in principle, a one level system with a limited right of appeal. Arbitration is meant to be expeditious. But when recognition of the award is sought, the enforcing court will scrutinize the award to some extent. Certain legal orders can set aside the award under the NY convention. NY convention – generally, the individual enforcing state only has the choice of whether to enforce the award or not, but not to set it aside. But the “seat” of the arbitration or the state of which procedure was adopted then you also have a right to set aside the award. There is considerable discussion on this point. Recent development is that if the jurisdiction under the NY Convention can set aside the award, the other courts may not have to accept that decision as a final word on the matter.

ii.

iii. iv.

v.

1

Abbreviations : ICA International Commercial Arbitration), P (Plaintiff), D (Defendant).

2 Litigation or Arbitration? Dispute resolution and international agreements, James Carter, pg 24.

1) Why is arbitration so prevalent? (a) Predictability – dispute will be resolved in one place rather than in multiple courts (b) Competence – in theory arbitrators will have the specialist commercial and technical skills to resolve the dispute (c) Party participation – procedures are shaped by the parties rather than dictated by detailed rules as in litigation (d) Finality – resulting award will be subject to relatively little risk of being set aside or altered by the court (e) Enforceablity – easy to enforce worldwide due to NY Convention (f) Costs – to some extent may result in less cost (g) Privacy – no open hearings or filings, but public ancillary litigation may defeat this. 2) Drawbacks (a) Panel must be selected before anything can be done. This is likely to take some time. (b) Not all courts provide provisional remedies in aid of arbitration. (c) Courts that do provide such remedies often only do this to the extent of preserving the status quo and no more. (d) Litigation may result in a bid to prevent arbitration. (e) Arbitration tends to split the difference rather than deciding whether one side is totally right or totally wrong. 3) Litigation may be preferable if one party will not agree to arbitration in a place or under terms which the other will accept (a) but arbitration may be equally unwieldy if, for example, the transaction involves several parties or if related proceedings cannot be consolidated. (b) A party may require broader judicial discovery; for example, discovery in relation to non-parties. Factors to consider in selecting a dispute resolution mechanism: (a) who is the likely claimant?

3 (b) (c) (d) (e) (f) (g) (h) (i) who will be holding the money or goods? who will be holding records and other evidence? will there be other leverage at the time of dispute, such as dependence by one party on the other for spare parts or service? Where are the parties’ assets? Is there security in the form of guarantees or letters of credit? In which language will the parties be dealing? What will be the governing law of the contract? Does either party have a substantial base of operations in a third country and familiarity with its legal system?

Status of arbitration in western legal theory? Arbitration is a very old form of dispute resolution, which existed before national legal systems. On the other hand, over time, at various periods, there was the view that arbitration ousted the jurisdiction of the courts - that private individuals should not have the power to deprive the courts of the jurisdiction that the state gives it.

Federal Arbitration Act (1925) First signs of change. Before then, in most US jurisdictions, an arbitration clause was revocable at any time before the commencement of the arbitration – you could not bind yourself to submit the dispute to arbitrators. The federal legislation introduced the proposition that you could be challenged on the grounds available to any other ground of contract (s.2). 1924 was a period when many states were going through the same process and introducing arbitration after refusing it for a considerable period of time. We will see that the French system at the time of the revolution that the best way to resolve disputes was by arbitration. Consistent with revolution – revolt against complicated legal systems. This illustrates how political thinking impacted on arbitration. But then, curiously, there was a reaction against this. Cour de cassation held that it was contrary to principle that you could deprive yourself of the judge that society provided for you. There is still the feeling that the arbitration process can be abused by stronger parties – can enforce a certain dispute resolution process on parties which may not be well equipped to handle such a process. There is therefore the protection of employees in disputes between them and businesses. This will be discussed in further detail. The Act does, however, have a significant omission – it does not deal with the issues of recognition and enforcement.

-

-

-

as parties could also use the NY convention. Now. A single document regulates both exercise and recognition of this exercise. • Deals with the effects that other foreign institutions must give to the award of the tribunal. Change in national laws If you look back at history of national arbitration laws after the NY Convention. .Article V (procedural efficiencies): When it comes to recognition and enforcement of the award.1) Probably the most successful instrument in creation of law. . Something we will discuss at some length. there is a sharp distinction between commercial and non-commercial disputes – language not meant to deal with commercial in narrow sense. Certain expansion – NY Convention stimulated the American convention – for American continent – but this has not been as successful. . one notices that the national laws become more user friendly.4 New York Convention On the Recognition and Enforcement of Arbitral Awards (Supplement p. unless you are a state that has the right to set aside the award then you can only set it aside if there are severe procedural problems. you can allow the arbitrators to chose the laws to apply and to act as compositors.deals with both the adjudicatory authority and recognition and enforcement. This is not really a crucial point.Reservation by the US that it will only apply to commercial disputes. Problem is that in some legal systems. . for example. Remarkably effective document – ratified by more than 100 countries. It initiated a new idea in that it deals with issue of jurisdiction and authority of arbitrators (if it satisfies certain standards) and goes on to say that the resulting award is also enforceable elsewhere. • Established the adjudicatory authority of private tribunals set up by party agreement.A double convention. Case-stated – in an arbitration refer matter to the judge and suspend arbitration till the judge adjudicated – interfered greatly with what most arbitration users wanted.Convention says that certain legal orders have the right to set aside the award: • The state in which the order was handed down • The state whose law applied. There are considerable differences in views involving certain provisions – but still very effective regime. - - . English arbitration act Change of national rules dealing with arbitration – motivated by arbitration business going elsewhere.

Two Party dispute resolution. There is no problem if the parties agree. Parties have to agree and arrive at a decision. it will not be an offshoot of arbitration in the traditional sense. Based on principles of law. It is difficult for such a process to generate rules.5 Enforcement of awards in the US – governed by state law. but if the parties do not agree – can the state or institution appoint arbitrators or order consolidation of disputes? California. has statutes on this. One party imposes its will on the other (cannot create predictable law) ii. It is a different kind of situation – one which has not been very successful – but if it is successful. Will also be examined. Society needs standards that can justify impartial principles that govern the decision (Impartiality principle) Hybrid two/three party systems – give mediator a certain authority but parties retain control of the process. the party bringing an arbitration can each appoint one or they could nominate an arbitral institution to nominate the arbitrators. Difficult to generate rules of law or derive any principles from it. Patterns of problem solving – Thomas M. Third party dispute resolution. In certain matters. In multi-party cases. Frank “The Structure of impartiality: examining the riddle of one law in a fragmented world” (pg 2. One Party dispute resolution: Power. Based on consent and agreement (Compromise principle). iii. you have to arbitrate. In a standard two party case. or the court could do it.works within the legal system. . Basis of arbitration Arbitration lies in principle of consent – party to arbitration is entitled to name an arbitrator. it can be difficult to combine – separate arbitrations could have inconsistent results – also benefits of expediency and expense. Different animals – parties have no freedom to select arbitrators and does not allow them to establish their own choice of law rules etc.third party who is impartial who attempts to resolve disputes between parties.) Types of dispute resolution: i. for example.

Pressures on arbitrators . Problem that an arbitrator may. No result unless parties agree. Mediation can also be turned into arbitration if the parties want the arbitral tribunal to make an award based on the mediated agreement so it has the effect of an arbitral award. Facilitative vs.6 Difference between arbitration and other forms of dispute resolution Mediation: result is still consensual and not forced upon them. be bound to a particular view if he expresses a preliminary view early on. Some dispute resolutions combine both facilitative and evaluative processes. whereas arbitration is a rights-based procedure. Arbitration is the only one which can finally resolve the dispute – as it does not depend on the parties’ willingness to compromise. What can this achieve which you would not necessarily achieve in the case of arbitration. May be a sign of weakness but not necessarily so if this is suggested by the arbitral tribunal. In arbitration. the outcome is determined in accordance with an objective standard – the applicable law. In arbitration. Insofar as arbitration is concerned. Another difference is that the procedure and result need not be one mandated by law. in a sense. Mediation – when is this attractive? In case where there is parties wish to preserve strong business relationships.9) Facilitative approach tries to get both parties to reach their own conclusion whereas the evaluative process analyzes the situation and provides a non-binding opinion which the parties are then free to accept or reject as the settlement of the dispute. one attempts to convince the other side. is there any effort to conciliate generated in the course of an arbitration? Arbitral tribunal may express the view that they are inclined to decide in a certain way and to let the parties negotiate on this basis. Evaluative approaches to mediation: see Guide to WIPO mediation (p. Give each side a better understanding of the other side’s case. Mediation is an interests-based procedure. Zurich arbitration device High level executives participate in the proceedings and claims are explored by both sides.try to mediate a conclusion but provide an outlet for evaluation if that fails. one attempts to convince the tribunal. in mediation.

v. Role of mediator? Which is the most important purpose – facilitative or evaluative? Facilitation role – added value of attempting to bring the parties together. What nationality should the mediator have? To what extent should nationality of the mediator matter? It matters in some bits of the world – international arbitration – at least in part founded on mistrust of the courts – choosing someone from the country – but it’s because for govt contracts in particular. vi. exploring interests of parties. Main steps in mediation i. gathering information and identifying issues. What should the parties do or look for? Parties should consider the following matters when deciding who to appoint as mediator (as listed on pg 13): i. Do they want a single or more than one mediator? Esp in complex of specialized or highly technical disputes. Technical competence of mediator? Do they want a mediator with substantial training and experience in the subject matter of the dispute? Or do they want someone who is particularly skilled in mediation? This probably depends on how technical the dispute is.Arbitrators like to have a result which gives something to the losing party. training or areas of specialization should the mediators have? iii. developing options for settlement. iii. Selecting the mediator – WIPO Guide to mediation (pg 13) In the mediation process. it may be that they just do not want the courts of country X to decide a case involving the govt of country X. experience. even though it should not. This may suggest that fees do play a part in the decision making process. which the whole reason why they chose mediation to begin with. v. iv. or where the parties have different cultural or linguistic backgrounds. iv. the most important step is the selection of the mediator. This is perhaps to give a certain degree of compromise between the parties. Agreement to mediate Commencement: request for mediation Appointment of mediator Initial contacts between mediator and parties (setting up first meeting and agreeing any preliminary exchange of documents) First and subsequent meetings (agreeing ground rules for process. ii. they could have co-mediators. Are the potential mediators independent? What professional qualifications. ii. evaluating options) . A number of pressures operate on arbitrators .7 Fees – to what extent do they play a part? It is unusual for arbitrators to rule that the dispute is outside the scope of the dispute.

Technical Expertise International Chamber of Commerce Technical Expertise Rules adopted in 1993 (p. as to that the parties must decide in each instance. 18) Concluding - Quote from American Almond Products v Consolidated Pecan Sales (Learned Hand) (Pg 23) “Arbitration may or may not be a desirable substitute for trials in courts. International Commercial Arbitration (Pros and Cons) Why has there been an increase in the role of arbitration in modern commercial life? Neutrality of forum and enforceability of awards are the most 2 Emphasis added ! . But when they have adopted it. if parties choose to submit their expertise questions (if any) to the ICC Centre for expertise. the two should not be combined. when they resort to its machinery. in addition to the arbitration clause.8 vi. 8§3 of ICC Rules on expertise: “Unless otherwise agreed the findings or recommendations of the expert shall not be binding upon the parties”2. parties must have inserted a clause providing for ICC expertise. Med-Arb Should same person act as both mediator and arbitrator? Unless the parties approve. The benefit of such an approach is that the process continues and does not come to an end if mediation fails.” You can make up your own rules in arbitration and you cannot expect to have the same type of process or thinking in courts. but you just have to live with it. Attention!! Art. They must content themselves with looser approximations to the enforcement of their rights than those that the law accords them. p. The arbitrator in such cases will not have the same impartiality after seeing the evidence and hearing the arguments. 279 of the supplement). → Rules that provide for appointment of experts & for their basic functions. (Questions 1 & 2. Expertise & arbitral proceedings are different ⇒ In order for the ICC rules on expertise to apply. It maybe an advantage or disadvantage. they must be content with its informalities. they may not hedge it about with those procedural limitations which it is precisely its purpose to avoid. → But of course the parties CAN provide in their agreement that the findings will be binding.

The government perspective is that it would not want to be sued by the courts of another state and the private party would not want to be sued in the government’s court. iii) Speed. i) Impartiality.final decision reached faster iv) Confidentiality.Parties can choose the rule of the arbitration and the arbitrators. ii) Choice of Rules.choose arbitrators that are skilled in the area of the dispute and bring expertise to the tribunal.arbitration can be confidential (a) Less clear than it has been suggested. (a) Parties can shape the procedure according to their preferences and needs. It has been driven by the lack of predictability of procedures of national courts and the fear that certain courts are not reliable. Problems with arbitration A lot depends on the arbitrator. Especially true with courts of questionable impartiality.9 important advantages of arbitration.It is neutral. v) Selection of arbitrators.may or may not be less expensive Survey of advantages of arbitration (Text p. Other advantages: (1) forum has expertise (2) results are more predictable (3) greater degree of voluntary compliance (4) confidential procedure (5) limited discovery (6) no appeal (7) procedure is less costly (8) less time consuming (9) more amicable i. . vi) Treaties ensure enforcement of results abroad vii) Cost. 26) Two major advantages are that: (1) the forum is neutral and (2) treaties ensure enforcement of results abroad.The forum is international not domestic. (a) Important in some international transactions like when the government is one party and a private entity is another. (b) Can also solve this problem by having the parties agree to have the dispute submitted to a court system in which both parties have confidence.no developed law like a domestic court system.

Question is whether if you are going to arbitrate. ii. Stockholm etc. Tendency of the arbitrators to split the baby. b. .g.Institutional Arbitration (e. Institutional. Provides institutional support to the arbitration. If the fees of the arbitrators are not set beforehand then the arbitrators can set whatever they want. These institutions also select arbitrators for the parties – which is often the most difficult part of the process. Now less important because competition has lowered these charges. ICC. There is no appellate review within the system itself. the whole process has to be restarted. which isn’t always easy. v. parties are in a worse off position. iii. then litigation is again necessary.10 ii. iii. Most people think this is not useful.parties submit the dispute to an institution that uses its set of rules and processes. vi. v. If one party does not want to arbitrate on terms which the other will accept. Now. should go with institutions. .Are parties bound by arbitral precedents rendered by the same institution? .) (pg 27) a. UNCITRAL Rules do not provide for compensation. Allows the parties to have a third party make decisions about processes so they do not have to agree when they are in the dispute. Provides general known rules that parties can depend on. the ICC has capped its fees for arbitration at $75k. Unless parties are really experienced in setting up arbitrations. In order to enforce the award.ICC used to charge very exorbitant fees which were a percentage of the award. The possibility of long arbitration followed by long judicial proceedings in some cases.parties shape the process of the arbitration i. Requires the parties to set up rules and agree when they are in a dispute.Review of awards by ICC – supposed to be only a procedural review. iv. Some doubt as to whether that is true in practice. vii.Main advantage of institutional arbitration is that there is a well regarded system of rules and staff which can apply and facilitate these rules. V. Whatever is not decided beforehand can be decided by the institution. iv. . Ad Hoc. Can only seek to have the award set aside or should not be recognized under Art. litigation may be inevitable. If the arbitrators badly handle the matter. ii. If it is well-done it have the advantage of specific tailoring. Do not provide the setting of compensation. Ad Hoc –vs. Saves the administrative costs of the institutional arbitration. . The advantage of the UNCITRAL Rules provides the ad hoc arbitrations with rules that can be used. iv. iii. should you do ad hoc arbitration – not under the care of an established arbitration center? . If the arbitral process does not yield a result or the award is set aside. i. because of competition. London.

→The shareholders brought suit in state court and the corporation had the suit removed to federal court pursuant to 9 U. → Court underlined 2 major differences between arbitration & art. US District Court of NY.S. → Later on they entered into a contract where by D agreed to buy P’s holdings at a price to be determined by the same person who had been appointed for the arbitration.11 . If this is not an award but simply part of the contract formation.  The court concluded that the signing of the contract for price valuation changed the case from arbitration to a contract. 1592 procedure: i) General arbitrations: conducting as means of resolving disputes ≠ Art. The price determination was to be made pursuant to French Civil Code. 1995 o Facts: P & D entered into an agreement to arbitrate the value of P’s shares. 1592 price arbitrations: means of providing the price term for contracting parties. Several attempts to design special procedures for adaptation of contracts → Eg. the parties are free to choose the procedure applicable to the proceedings.C. so state court was the proper venue. Adaptation of Contracts “Frydman v. o Court’s holding:  Court granted the motion to remand. art.  It found that the price appraisal decision did not relate to arbitration falling under the NY Convention. ii) General arbitration awards: take status of a judgment ≠ Art. therefore. o Procedure: French court held that there was fraud in the valuation of the stock & the valuation was quashed. abrogated. ⇒ Art 1592 procedure was conducted as part of a contract formation and not for the purpose of resolving a dispute. ICC adopted “Rules for Adaptation of Contracts” BUT rules were not a success and.S. 1592. then it does not fall under NY Convention and US State Courts may very well be seized of the matter. → If it constituted an arbitral award. o Question at issue: Whether the decision on price value of the shares constituted an arbitral award OR a simple price fixation conducted as part of a contract formation. Inc”.Most important things are controlled by the parties. suit should be examined by federal courts because the action relates to arbitration & falls under NY Convention (pursuant to 9 USCS §205). Cosmair. → The action did not relate to an arbitration falling under the NY Convention & there was no other basis for federal subject matter jurisdiction. The shareholders filed a motion to remand the case to state court. For example. - . § 205 because the action related to arbitration. 1592 price appraisal: NEVER statute of a judgment.

LCIA. By drafting a set of ad hoc procedures OR by reference to Uncitral rules etc). o FOR institutional arbitration:  Drafting the arbitration agreement: • Ease of incorporating by reference the institution’s rules in an int’l contract. parties.  BUT for ad hoc arbitration to be effective. . Institutional arbitration” 1991: o Int’l comm. arbitration). Institutional & Ad Hoc Arbitration George AKSEN. counsels & arbitrators have to work together. arb.  Cost & Time saved when ad hoc arbitration (as opposed to instit. while avoiding inconveniences of institutional arbitration. p. AAA. o BUT Question whether to arbitrate under institutional OR ad hoc arbitration. it may not be an award but remains binding on the parties as a provision of the contract → It is binding just like any other provision of the contract.  Ad hoc arbitration: no formal administration by any established arbitral agency → The parties opt to create their own procedures for a given arbitration (eg. o Definitions of the 2 types of arbitration:  Institutional arbitration: proceedings administered by an organization (usually in accordance with its own rules of arbitration). • Use of ICC rules for example is valuable in preventing parties from successfully asserting in national courts that the claims are non-arbitrable. • ICC rules available in 7 major languages. 1020 of Dutch Arbitration Act also provides for adaptation of the contract by arbitration and the result of such arbitration seems to be binding upon the parties (Question n°3. ICC. eg. → All ready made rules which have proven to be effective in past arbitrations. 23). Art. (ICA) as the generally acceptable method of resolving disputes between transnational contracting parties. → Parties can even use institutional arbitration rules without being formally engaged in an institutional arbitration.12 When such adaptation of the contract is provided by means of arbitration. “Ad Hoc v. → ICA fortified by NY Convention.  Possibility to use Uncitral Rules (adopted in 1976): Sort of a substitute for the rules of arbitral institutions. o FOR ad hoc arbitration:  Flexibility: Ad hoc procedure can be shaped to meet the wishes of the parties & facts of the particular dispute.

 BUT prudent advice is to opt for institutional arbitration. under Italian law any award rendered by uneven number of arbitrators could not be enforced. there is a mandatory rule that the arbitration panel CAN NOT be constituted by 2 arbitrators. the party’s agreement will prevail ONLY if the other rule is not mandatory. why hold that the party’s agreement providing for appointment of 2 arbitrators is against public order? As long as the (national or institutional) rule for uneven panel is not mandatory. → Many more guaranties. → Judicial respect for the integrity of arbitral awards. • Institution will select the most appropriate arbitrator. BUT for ex. But Prof. • Arbitator’s fees are easier negotiable & more predictable in institutional arbitrations.  Professional Administration • Instit. arbitration has staff to guide parties through the arbitration process & provide a variety of routine services. V. Therefore. Von Mehren also recommends institutional arbitration for the fix & solid background it provides.  Prof.13 Arbitrator selection: • It is the most important service of an administrative agency. arbitration provides an administrative referee to ensure that all arbitrators are truly independent. • Helpful service when a losing party fails to honor an award. Question of conflict between party stipulations AND national rules OR Institutional Rules → Prof. In Italy. award should be valid & enforced. • Instit. o Example: Requirement of an uneven panel is basically for arbitrators to be able to reach a decision. • Thus. finds that if arbitrators manage to reach a decision.  Default award • Ability to proceed in the absence of a defaulting party (≠Ad hoc arbitration: more difficult to enforce a default award) o Conclusion:  Ad hoc arbitration is good choice when the parties are able to select experienced arbitrators & cooperation between counsel and parties. . problems deriving out of parties disagreement on arbitrators are avoided.M: If conflict between party’s agreement & other rules (institutional or national).  Judicial Deference to Institutional Arbitration • Arbitral awards receive the increasingly favourable recognition of national courts.

: Question if there really is an extensive use of these rules? NO. “Fast-Track Arbitration”. p. o Requirements for fast-track arbitration:  Find arbitrators fully available for a short period of time. Prof.  Tribunal should be granted general authority to modify the rules for processing the case when justice so requires. adopted by the Stockholm Chamber of Commerce..  Rules should allow extension of the contractual time limit for rendition of the award. Hans SMIT. 1991: o Fast-track arbitration was initially conceived for long-term contracts between international business enterprises → BUT – with efforts of ICC – it has a wider use. Stockholm rules for expedited arbitrations.  Rules should set out the procedure to be followed for submissions & hearings.  Rules should shorten the time limits & institution or the tribunal should be given authority to modify them (According to Prof. on the preparation of the case).  Parties & arbitrators willing to focus on the pre-arbitral phase (i.  Rules should specify for which issues fast-track treatment is possible. matters of limited importance.e. 270 supplement): o Fast-track reserved to minor disputes. o It is not a usual situation. → Parties normally opt (should opt) for fasttrack arbitration ONLY when time is an imperative. tribunal should be able to modify time limits for flexibility reasons – cf.14 Fast-Track Arbitration Prof. o Regime to be created for institutional fast-track arbitration must have the following features:  Regime should be set forth is separate rules dealing only with fasttrack. Von Mehren on Fast-Track Arbitration: o The whole procedure is speeded up. 40 case book). o An arbitration can be “fast-track” i) if the parties provided so in their agreement OR ii) if the institutional rules applicable to the arbitration provide for such a possibility.  Parties & arbitrators willing to rely more on documentation than on witnesses. thinks that these rules apply mostly for domestic arbitrations and not that - - . → Smit suggests that is preferable for fasttrack to be provided by institutional rules (as opposed to provided by the parties in their arbitration agreement). question 2. 1999 (p. o Prof.

On the evolution of the standing of arbitration within the legal system Tibor VARADY.15 much for international arbitrations. which was part of the contract signed in advance of the dispute. o Obviously none of the 2 requirements could have been satisfied by the arbitration clause since it was a “clause compromissoire” by which the . → Contract contained an arbitration clause (“clause compromissoire”. o BUT arbitration is the dominant method of settling int’l trade disputes & int’l commercial arbitration arbitration (here-in. 1995 o Arbitration is an exception to regular court litigation. ICSID Convention) → Arbitration agreements have become more reliable & arbitration awards more efficient and enforceable → Courts have become more supportive of arbitration. o Court’s holding : Court held the “clause compromissoire” to be invalid. NY Convention. BUT on p. Pro. It applied art. “ICA”) has become an almost completely self-sufficient institution. o Question at issue : Whether the « clause compromissoire » was valid even though it did not specify the subject matter to be arbitrated nor the names of the arbitrators. Art. o Increasing development of ICA: Network of int’l instruments pertaining to arbitration has emerged (ex. flexible & speedy procedure than courts do. “The standing of arbitration within the legal system”. Cour de cassation française. French code of civil procedure of the time had only provisions on the “compromis” and did not provide for arbitration agreement signed in advance (clause compromissoire). 1843 o Facts : Insurance contract between an insurance company & a private person (insured). that the arbitration clause was not valid. A glimpse back in history – A French Case “L’Alliance v. → Court found that neither requirement was satisfied in the present case & therefore. (which is on “compromis”) to the “clause compromissoire” in dispute. 1006 required i) that the arbitration agreement specify the subject matter to be arbitrated AND ii) the names of the arbitrators. o Procedure: Lower court found the arbitration clause void because the names of the arbitrators were not given. o ICA: follows a more simple. 41 of the case book. o ICA: founded on the autonomy of the parties will → Adaptability to party needs. proof of wide use of the fast-track rules. as opposed to “compromis” which is an arbitration agreement signed ONCE the dispute has already arisen). 1006 of French Code civ. Prunier”.

631 was amended in 1925 to provide that “parties may. o BUT question arose where the line lies between national & int’l arbitrations.”. → Probably Cour de cassation did not want to open the door to such arbitration clauses because feared that individual parties are not really aware of the existence of such arbitration clauses when signing such adhesion contracts → Cour de cassation wants to protect these weaker parties. o French Court of Appeal (“Migout v. → End of 19th century. o Separate & distinct legal regime for int’l arbitration began to emerge in French law. Von Mehren.→ French Code de commerce art. Case “Kulukundis Shipping Co v. o But later on French Statute & case law recognized the validity of “clauses compromissoires”. 1865) overturned the Prunier rule on the ground of choice-of-law rules. If subject to another law which considered such clauses valid.S. US Court of Appeals. French courts began creating a distinct legal regime for int’l arbitration (as opposed to internal arbitration) in order to avoid the Prunier rule. AND ii) rules that apply to int’l commerce need not be contained in any national law. then clause valid. 1986: o France: development of an acceptable regime for ICA was quicker that the comparable regime for internal commercial arbitration. 1942 (extract): . → Flagrant example of mistrust of arbitration. the arbitration clause was valid. A note on the relevance of the international dimension A. when they contract. then it was void. Another glimpse back in history – A U. agree to submit to arbitration when they arise “ the following cases of controversies (…)”. o Disastrous consequences of the Prunier rule on ICA. o Purnier rule (nullifying all arbitration clauses concluded before the dispute arose) had a disastrous effect on ICA. 1930): int’l arbitration if the situation involves the interests of int’l commerce o Cour de cassation no longer relied on choice-of-law analysis to escape the Prunier rule → As long as the situation had some connexion to int’l commerce.16 contracting parties in advance submit themselves to arbitrators for all the disputes not foreseen that may arise under their contract. → “Mardele” case (Cour de cassation. “ICA: The contribution of the French jurisprudence”. If arbitration agreement was subject to French law. Arguad”. Amtorg Trading Corp. o Conclusions drawn from French case law: i) Various aspects of the legal regime applicable to domestic arbitrations do not apply to arbitration which involve interest of int’l commerce.

→ The 1925 Act provides that arbitration agreements ought to be enforced & provides a procedure in the federal courts for their enforcement. A comparative historical survey on the standing of arbitration within the legal system Arthur VON MEHREN. o French law (Von Mehren repeats what was summarized previously) . 1982: o Standing of arbitration within a legal system depends on the status & efficiency of court litigation in that same legal system (example: if official tribunal are slow & costly. 19th century: Took over british hostile attitude towards arbitration & were in general unfriendly to executory arbitration agreements. o France: Beginning of 19th century. ⇒ Lord Campbell explained this british judicial hostility toward arbitration agreements as due to the desire of the judges to avoid loss of income. Coke held in a dictum that for a breach of an agreement to arbitrate the damages were only nominal ⇒ In all. → The 1925 act was mainly enacted to make injunctive relief possible in case of breach of an arbitration agreement. the ordinary arbitration agreement lost all real efficacy in the UK since it was not specifically enforceable in equity. → Midst of 18th cent. US Arbitration Act 1925 was enacted which placed arbitration agreement upon the same footing as other contracts. o Common Law Countries: Very restrictive position towards arbitration & arbitration clauses were in principle void.  English courts: Strong judiciail hostility to arbitration agreements → For a long-period beginning end of 17th century. → 78 years later. arbitration is favored). arbitration agreements were considered against public policy because they “oust the jurisdiction” of the courts. o Germany: During same period. Von Mehren added in class that today UK has an advanced system of arbitration). → Why? Because official courts in these countries were able to establish their supremacy relatively early & provided a tolerably efficient administration of justice. “A general view of contract”.17 o Court elaborates on history of the judicial attitude towards arbitration. (Prof. BUT the lower federal courts became critical of this judicial hostility & effective state arbitration acts started being enacted → Also. arbitration was at a low point in Germany & the very validity of arbitration clauses was disputed. English courts would do little or nothing for breaches of arbitration agreements.  US Courts. French legislator was very favourable to arbitration since at the time France was recovering from the Revolution and courts were not well organized.

rules more favourable to arbitration were first introduced by statutes providing for specific enforcement of arbitration agreements & for the enforcement of awards. o US law: 19th century: arbitration agreements were generally unenforceable. → Progressively.  1996: enactment of the UK arbitration act. That is connected with the growth of international commerce. 1979 act still allows judicial review of an arbitral award but in a more restricted form. Questions & Comments . agreements providing for arbitration of an already existing speicif dispute received earlier recognition than agreements submitting to arbitration possible future disputes.Comment n°1 (p. o ⇒ Steady march towards recognition & more user-friendly arbitration arrangements.  1998: German arbitration act. arbitration developed more on the international level than on the national. o Postscript: Trend towards acceptance & facilitation of arbitration as an essentially party-designed & controlled dispute resolution process still continues:  1981: reform of the French Code civ. → 1955: Uniform Arbitration Act which serves as a model of contemporary American legislation favourable to legislation. . ⇒ State (court) control has been declining. → Therefore. Von Mehren’s appreciations on the evolution of the standing of arbitration within the legal system (class notes): o Attraction of NY Convention favours status of arbitration (BUT possibility to set aside an award).18 o German law: German law moved from a restrictive approach to a position affording a very wide scope to private autonomy. However. while the readiness of the courts to enforce arbitration agreements has increased. o ICA has been reinforced as from the 70’s and on. o Arbitration conceived as a rival of national courts whereas on the international level jurisdiction is not that easily determined. German law is among the “legal orders most favourably disposed towards arbitration”.  1985: adoption of the UNCITRAL model law on int’l commercial arbitration. o English law: English law recognizes arbitration but still maintains a significant judicial control over the arbitral decision. → Convergence of arbitration through international instruments. o NY Statute 1920 & Federal Arbitration Act 1925: arbitration clauses shall be valid & enforceable UNLESS reasons to set it aside. Pro in a way that strengthens the position of int’l arbitration conducted in France. Prof. 61): ⇒ In all. → Today.

→ In August 2002. Question: What norms control the process of ICA? What is the hierarchical relationship among these rules? Party autonomy: Basic difference between arbitration & courts lies on the fact that the basis of the jurisdiction of an arbitral tribunal is the will of the parties. Int’l agreements: o Effect of int’l agreements on int’l arbitration: ICA needs an int’l framework which provides for recognition of the arbitration process & of the award beyond the boundaries of a particular country. → Parties may even combine pre-established institutional rules with solutions designed by themselves. ICA is backed up & guided by a unique network of int’l conventions which makes possible an almost worldwide recognition of arbitral awards. o Local procedural rules become very important when recognition of foreign awards is sought. legislation based on the Model law had been enacted in 38 jurisdictions and many other legislations enacted under the influence of the model law. - - - - . 182 of Swiss Private Int’l law act 1987 : (in substance) arbitration tribunals may freely follow procedural rules chosen by the parties as long as they observe basic requirements of due process. ⇒ Model Law has brought about a worldwide trend towards convergence in the domain of ICA. o Model Law on ICA adopted by Uncitral on 1985: Aim was to provide a set of rules which would be acceptable world-wide & which could be progressively adopted by national legislations. → Arbitration relies both i) on party autonomy AND ii) on court assistance (when party cooperation is lacking). the UNCITRAL arbitration rules (adopted by the UN General Assembly in 1976) are widely adopted by the parties. Art. → These rules apply only if i) parties designate the institution that administers the rules (in an institutional arbitration) OR ii) if parties choose them (in an ad hoc arbitration). → In ad hoc arbitrations. o ex. → Today. Institutional rules of other than state origin: Institutional rules offer a preestablished set of procedural rules & provide solutions of various typical problem patterns. → This wide freedom of the parties is limited by mandatory norms of certain countries AND by int’l agreements. Municipal Procedural Rules: ICA has become a self-contained & self-reliant decision making structure BUT has not entirely escaped from the control of certain municipal procedural rules.19 On the sources of relevant norms Arbitration has been regarded as a creation of the parties BUT such a creation can only function within the framework of a legal system. → Parties rely a lot on these prefabricated patterns.

→ Arbitrator was finally nominated by the ICC. 7. the arbitrator was validly appointed by the Court. o Question at issue: Question of the regularity of the nomination of the arbitrator by the ICC since the parties had stipulated for another appointing authority which refused. Arbitrator held that the present case qualified as failing agreement between the parties on the nomination of a sole arbitrator. Societe Gas del Estado”. o Preliminary award: Arbitrator held that he had validly been appointed by the ICC. 1990 (question n°7. French Cour de cassation. → So. the acceptance of int’l conventions led to new and improved standards in municipal procedural rules. he was to be appointed by the President of the ICJ. BUT the ICC applied its institutional rules & nominated all 3 arbitrators. BUT the arbitration clause stated that “the constitution of the arbitral tribunal as well as the applicable procedure” shall be governed by the ICC rules. 70-71): o Facts : ICC arbitration clause by which parties agreed on 3 arbitrators. the arbitrator shall be appointed by the Court”. the 2 arbitrators were to select the chairman & if ever they did not agree on the chairman. Institutional Rules Preliminary award in 1974 ICC case (p. He bases his decision on art. → Arbitrators confirmed their jurisdiction & rendered an award. o Examples of int’l conventions on arbitrations:  NY Convention 1958  ICSID Convention 1965  Inter-American Convention on ICA 1975 o Many bilateral agreements have also been contributing to the worldwide standing of ICA. “Ecofisa v. BUT annex to the contract provided that the appointment of the arbitrator should be made by an authority other than the Court of Arbitration of the ICC → This other authority refused & ICC Court of Arbitration considered that it was up to it to proceed to the nomination of the arbitrator.2. 68): o Facts: Dispute between i) 2 enterprises (claimants) & ii) a State other than their own & a public authority of this state (Defendants)→Contract between the parties provided for an ICC arbitration by one or more arbitrators appointed in accordance with ICC Rules. → According to the clause. p. → When dispute arose the claimants asked directly the President of the ICJ to constitute the tribunal. Party stipulation v. each side was to select 1 arbitrator. of the ICC Rules according to which “failing agreement between the parties (on the nomination of a sole arbitrator) within a period of 30 days (…). - .20 o Effects of int’l agreements on domestic / national arbitration: In many countries.

1986 (in substance): o Facts: Arbitral award rendered by an arbitral tribunal which was not composed in accordance w/ the alleged agreement. → In response. US District Court – Delaware. parties’ agreement overrides institutional rules. o Question at issue: Question whether a London arbitration award should be enforced when arbitral tribunal was not composed in accordance with the parties’ agreement but in accordance with the British arbitration statute. →Plaintiff sought to ignore the award and filed a motion to re-open the litigation in the US district court of Delaware. a sole arbitrator appointed by one of the parties may decide a dispute when the other party fails to appoint an arbitrator under the agreement. Party stipulation v. (2) Unless contrary agreement. → Notice of this appointment was sent to the plaintiff → Award was rendered in favour of defendant.21 o Procedure: Paris Court of Appeal refused to recognize the award on the grounds that the agreement of the parties regarding the constitution of the arbitral tribunal was not respected. defendant filed a counterclaim seeking to enforce the award. Defendant. o Court: The Cour de cassation confirmed the CA’s holding. Defendant nominated an arbitrator & plaintiff did not react. - . Italy. QBD. According to the agreement. • Section 9: If the agreement requires three arbitrators. The fact that the award was not rendered in accordance w/ the parties’ agreement does not invalidate the award. 1978 & “Tarmarea SRL v. Rederi Aktiebolaget Sally v. Rederiaktiebolaget Sally”. England. M/S Agapi”. umpire may decide the award if the two arbitrators cannot agree.. each party was to nominate an arbitrator. o Note: Von Mehren believes this interpretation is not necessarily the best one. agreement shall have effect as if it provided for the appointment of an umpire (and not of a 3d arbitrator). Court of Appeal of Florence. Under the British arbitration statute. presumption that the 2 shall appoint an umpire. → Award was recognized & enforced. Court holds that the law of the country where the arbitration took place overrides the parties’ agreement. The parties agreement should count more than that. • Section 8: (1) Unless contrary agreement. therefore. o Court: Court answers YES. → In other words. one to be appointed by each party & 3d to be appointed by the 2 appointed by the parties. → In other words. where two arbitrators are provided for. State Norms “Al Haddad Bros Entreprises v. SRL Termarea. asked his arbitrator to serve as a sole arbitrator. 1979: o Interpretation of Section 8 and 9 of the 1950 English Arbitration Act.

22 • These two situations seem very different. Abolished by the 1968 English Arbitration Act. o Facts: Dispute arose between the 2 parties → Their agreement contained an arbitration clause which provided for a panel of 3 arbitrators (one by each party & one by the two arbitrators chosen by the parties). 2 arbitrators were appointed and never a third one. The 2 arbitrators rendered their award. One party sought to enforce the award in Italy. o Question at issue: Can the award be enforced? o Holding of CA Florence: The award is not enforceable under NY Convention because the parties did not contemplate a two party but a 3-party arbitral tribunal. The arbitral tribunal was not in conformity with the parties’ desires so the award could not be enforced. → The UK arbitration act (under which the composition of the tribunal was valid) would apply – and thus validate the agreement – only if the parties had not provided for a different composition of the tribunal →Agreement of the parties prevails over the law of the country where the arbitration took place. o Holding of the English Court: The award rendered by only 2 arbitrators can be enforced under the UK arbitration act, even if the parties’ agreement provided for a tribunal of 3 arbitrators. →As long as the 2 arbitrators agreed, they had jurisdiction – under the UK arbitration act – to render an award without calling in an umpire. → The law of the country where the arbitration took place prevails over the parties’ agreement. o Result: there may not be a way to enforce the judgment because the courts have contrary holdings. It can be enforced in England and not in Italy so if there are no assets in England, then too bad. o Van den Berg says that the moral of the story is that parties should be very careful in drafting the arbitral clause. o Note: Under Art. V (1), d of the NY Convention, the law of the country where the arbitration took place should be examined with respect to the composition of the tribunal ONLY if the parties agreement did not provide for the composition of the tribunal. → So, Delaware Court & English court erred in the application of the NY Convention. Only the Italian court applied art. 5 correctly. → The Delaware & English court defeat the purpose of art. 5 which is to restrict the law of the country where the arbitration took place.

CHAPTER II ON THE AUTHORITY OF ARBITRATION TRIBUNALS

23 II.1. ARBITRATION AGREEMENT Variations of the arbitration agreement The authority of arbitration tribunals rests on an agreement between the parties. They can take two forms: - Clause comprimissoire – submits to arbitration disputes that may arrive in the future. It is much more frequent in practice. - Compromis – submits to arbitration an already existing dispute. After the dispute has arisen, it is difficult for the parties to agree about the site of arbitration, applicable law, etc… It happens only when there is a common interest in finding a quick solution. Referring the parties to arbitration After a valid agreement is signed, there are mechanisms for compelling arbitration. There are two situations in which courts refer cases to arbitration: - Independent suits – discuss only the validity of the arbitration agreement. - Embedded suits – issue of arbitration and effectiveness arises as a defense in an action. Ex: in a lawsuit for damages, the defendant contests the jurisdiction of the court based on the arbitration agreement. NY Convention, article II (3) – it undertake a clear commitment to refer the case to arbitration at the request of one of the parties, unless the agreement is null and void, inoperative or incapable of being performed. ⇒ Some national statutes go even further, and mandate a referral ex officio, without parties’ request (Hungary). Existence and validity issues before courts and arbitrators Arbitrators have competence to decide upon their own competence to arbitrate (competence-competence principle). However, courts can review this decision.  The NY Convention takes no position, leaving national legal systems do determine, whether a court should decide the issue of the existence and validity of the arbitration agreement or allow it to be solved in arbitration. There are two different approaches: - US approach – the court will just decide if the invalidating defect goes specifically to the arbitration clause itself. Thus, if the party alleges that the container contract is invalid, consequently the arbitration clause, the court will send this question to the arbitrators. However, before referring to arbitration, the court will analyze the existence of the whole contract (ex: the absence of a proper offer or acceptance). This is pro-arbitration response, because it is easier to ‘fabricate’ an invalidating complaint about the container contract than about the arbitration clause. - French approach – competence between judge and arbitrator is regulated in the French ‘New Code of Civil Procedure’, art. 1458. If an arbitration tribunal has already been established, the court will refuse jurisdiction and leave validity and

24 existence questions to the arbitrators. If the tribunal has NOT been seised, then the court will retain jurisdiction ONLY if the arbitration agreement is MANIFESTLY NULL. The expression ‘manifestly null’ is too subjective and the French courts don’t usually recognize an agreement as being null, referring the parties to arbitration. ⇒ Judicial review will be available in post-award enforcement proceeding. Different national approaches also exist concerning the conclusiveness of a decision by arbitrators declining jurisdiction. While some jurisdictions provide a plea against this decision, others do not accept this remedy. Formal requirements A widely established requirement is that there be a written arbitration agreement. This provision can be interpreted flexibly, for example, the condition can be fulfilled by an exchange of letters, telexes… NY Convention, article II (2) – has set to the contracting States a minimum and maximum international standards, national statutes cannot impose stricter requirements, nor can it accept flexible ones. ⇒ German courts have taken a completely different approach, not requiring the written clause, allowing a tacit agreement when arbitration is a trade usage within a particular branch of trade. ⇒ It is important to allow and facilitate arbitration when the parties really wanted and to disallow it when the expressed intention of the parties is not clear or when there is no operative structure for decision making. The maintenance of some border controls is prudent, since institutional structure of arbitration is malleable, giving a lot of liberty to the parties. ⇒ If there is no valid agreement, but both parties do not object to the arbitration, is it valid? The UNCITRAL Model Law, article 7 (2), determines that the exchange of statement of claims is equivalent to a written agreement. However, the NY Conventions does not recognize implicit submission. Scope Since litigation is the presumed method of settling disputes, it is essential for the agreement to determine what issues are going to be submitted to arbitration. It is important to avoid splitting related claims between arbitration and litigation. The scope can be problematic when the parties renew the contract without explicitly adopting its arbitration clause. Compelling the reluctant party to arbitrate - Tennessee v. PP Filippo and Prix Italia, US District Court, Tennessee, 1990 Facts: Prix appointed Tennessee its exclusive distributor for the US, Canada and Mexico. Prix notified to terminate the contract, but Tennessee wants two more

the arbitration clause was the price paid by Tennessee to become Prix’s exclusive distributor. . US District Court. thus. Tennessee suit Prix for breach of contract and for false and intentionally incorrect statements. and (b) all the disputes would be resolved by NY ICC. the parties were referred to arbitration. Since the clause was valid. ⇒ The clause did not mentioned the ICC but a Chamber of Commerce in Venice. 1995 . Menorah filed a suit against Inx. - . Menorah tried to seek arbitration but Inx responded that it would not arbitrate. Also the clause was not hidden. because he wasn’t a party to the agreement. US Court of Appeals. granting these companies the exclusive right to bottle Pepsi. Nevertheless.400. Menorah made a claim to Inx that the latter did not accept. The district court had to decide about the dismissal of the action. Consequently. The contract was negotiated at arm’s length. Tennessee failed to demonstrate that it would be inconvenienced and prejudiced so significantly as to overcome a valid arbitration clause. however.Menorah v. Oficina petitioned a civil court in Venezuela for a declaration that the amount of liquidated damages was much smaller (embedded suit). Pepsico demanded the payment of $118. according to which the disputes would be arbitrated in Tel Aviv and would be settled by equity.940 for liquidated damages. and Tennessee did not oppose this assertion. even the contract-based tort claim. it should have the initial opportunity to resolve the question of Venezuelan law before a non-Venezuelan court is called upon to do so.Holding: the Venezuelan court already had the issue of arbitrability before it.Facts: Pepsico contracted with Oficina. Pepsico answered by filling a formal request for arbitration with the ICC and a petition before the District Court to declare the validity of the arbitration clause (independent suit). . taking in consideration a previous lawsuit on the same matter. which represented the bottling Venezuelan companies. . Inx Reinsurance. international harmony and parties’ intentions.Pepsico v. First Circuit. his action was determined to wait the result of the arbitration. Prix affirmed that the clause referred to the ICC arbitration court. The laws of Venezuela governed the agreement. with the exception of PP Filippi.Facts: Menorah and Inx had seven reinsurance contracts. according to which the “Arbitration Court of the Chamber of Commerce in Venice (Italy)” would resolve the disputes. 1996 . operative and capable of being performed. Oficina terminated the contract. Such deference is consistent with considerations of legal economy. but suspended the proceedings for 60 days. New York. Holding: the language of the arbitration clause was very broad.25 years. once they chosen Venezuelan law to govern the contract. Legal issue: The parties had an arbitration agreement. in order to afford the Venezuelan court to decide. The Court decided to retain jurisdiction. .Legal issue: the district court had to decide about the validity of the arbitration clause in order to refer the parties to arbitration. The contract provided that: (a) any party prematurely terminating the contract would be liable for specified liquidated damages. Oficina Central. thus all claims were inside its scope.

Legal issue: whether a party can waive arbitration or not. Also. which found that Inx had waived arbitration. Test to determine when a party waives its right to arbitrate: (1) party was aware of its right to arbitration. preliminary award. as any other judge. The implicit waiver came from Inx’s entire course of conduct. Libya refuses to appoint their arbitrator and challenges the President of ICJ ‘s power to solve the problem. Inx moved to dismiss the claim affirming that the parties had an arbitration agreement. which continues to be operative.Holding: it is for the Sole Arbitrator to render a decision on his own jurisdiction. so INX would not waive by not doing anything. that the other side was adversely affected by not going to arbitration. arbitration clauses were not meant to be another weapon for imposing delay and costs. Inx removed the action to US federal court. would be unfair. despite their advance in court. since after three years of proceeding there was no attempt to go to arbitration. Kompetenz-Kompetenz and separability .Holding: the explicit waiver came when Inx was invited to arbitrate and expressly declined it. . . 1975 . . the arbitrator has the duty to state the law and. Libya. there is a paragraph that established that the Sole Arbitrator would determine the applicability of the clause and the procedure in the arbitration. (3) prejudiced the opposing party as a result. (2) acted in a manner inconsistent with the exercise of that right. Here. To require the parties to arbitrate. . it is important to show prejudice. Menorah filed an exequatur action in the Superior Court in San Juan to enforce the Tel Aviv judgment.Texaco and California Asiatic oil v. he is the judge of his own jurisdiction. the President of the International Court of Justice had the power to designate a Sole Arbitrator. Spanish definition of waiver requires explicit action taken indicating waiver. there was prejudice to Menorah in their litigation costs. answers to this kind of questions are typically derived from interpretation of applicable rule. . ⇒ Today. This preserves the involuntary loss of right. it would had waived arbitration under Spanish law. if it had participated in the judicial process without bring up arbitration. However. and would also give Inx a second chance in another forum. rather than from legal nature of arbitration. If one of the parties did not indicate his arbitrator.26 who chose not to respond or contest. Only during exequatur.Legal issue: Sole Arbitrator’s power to define his own jurisdiction. ⇒ In US law. unilateral cancellation of a contract has no effect on the arbitration clause. Most important of all. Menorah suffered prejudice from the incurred expenses as a direct result of Inx’s dilatory behavior. when the duty is found directly in the agreement of parties. In respect to the contractual nature of arbitration. ⇒ Party autonomy allows explicit waiver of arbitration.Facts: the parties signed a contract with an arbitration clause determining that each party should provide one arbitrator who would appoint a third. According to the jurisdictional nature of arbitration.

⇒ Fiat (p.Legal issue: should the formal validity requisites of the container contract be applied also to the arbitration agreement? Principle of separability. Arbitration must be separate from government intervention to maintain the integrity of the process. they will not intervene. in order to prevent unjust enrichment. . For the court to accept the award there must be clear and convincing evidence that the parties intended to arbitrate. 117) Arbitration held that a person that was not yet a party to the arbitration contract was nonetheless subject to the jurisdiction of the arbitrators. For arbitration to be effective.Legal issue: declaration that the civil court is competent to decide a compensation damage lawsuit. Bermuda. allowing the tribunal to declare a contract invalid and yet retain jurisdiction to decide a dispute. because if separability is accepted the arbitral tribunal will only be compelled to deny its own jurisdiction in few circumstances.American Bureau v. Court of appeal. when deciding about its own competence. Only when it is time to enforce a judgment should the arbitration tribunal turn to national courts.27 ⇒ Kompetenz-Kompetenz and Separability is designed to ensure the success of the arbitration. . The doctrine of separability has an effect on the practice of the competencecompetence. . However. Joc should pay SNE a substantial sum of money. SNE made 39 shipments of oil to Joc and the latter only paid 3 of them. the arbitral tribunal is the one competent to decide the existence. ruled that it had good jurisdiction to decide.Facts: the parties entered a long-term sale and purchase contract for oil and oil products. They take the position that unless the arbitrators authority is manifestly improper. it must be able to handle issues without turning to national courts. since the plaintiff is not a part of the arbitration agreement. SNE began proceedings at the FTAC against Joc.Holding: since there is no claim for manifest nullity. particularly if at any stage the . France. SNE began proceedings in Bermuda seeking to enforce the award. ⇒ How much deference should a national court show to what the arbitrators have done. The arbitrators also determined that.SNE v. there are two main exceptions to this principle: when the container contract is inexistent and when the arbitral clause itself is invalid. which had an arbitration agreement. The FTAC. (2) what weight should they give to the arbitrators determination? The French system gives the greatest weight to what the arbitrators have done. The US system does not go as far. Jules. There are two issues: (1) to what extent can the national court review the issue at all. 2001 . although the container contract was invalid.Holding: the doctrine of separability determines that the invalidity of the main contract does not entail the invalidity of the arbitral clause. The burden of demonstrating that there never was a contract will be a heavy one. This determination was challenged in court and the court held that non-party was not subject to the authority of the arbitrators. Joc Oil. consequently. . . the arbitration agreement was also invalid. Cour de cassation. who defended itself by saying that the container contract was invalid because the two obligatory representatives of SNE did not sign it. validity and scope of the arbitration agreement. 1990 .

thus. showing the importance of comparative law. and.28 parties acted as if there were a contract between them. leaving the arbitrators to decide whether a valid arbitration agreement existed. .Facts: the parties signed a memorandum of intent that had an arbitration clause with a non-existent arbitration institution. For this reason. . The district court rendered summary judgment affirming that the memorandum was not a biding contract and that the arbitration clause was just a provision declaring expectations.Republic of Nicaragua v. ⇒ Although the principle of separability is adopted by international law. . to decide the question we would have to use the contact law. The court made use of the scope rule — any doubts concerning the scope of arbitral issues should be resolved in favor of arbitration — to determine the existence of the clause itself.Holding: the court decided that the principle of separability gives power to the arbitrators to decide whether a contract is valid or invalid. in the hypothesis that the law of the contract does not recognize separability.Harbour Assurance v. it established that the most minimal indication of the parties’ intent to arbitrate must be given full effect. which puts the burden of the proof on the party seeking to refuse the enforcement of the award. The defendants appealed.Legal issue: it was contested if the Memorandum represented a biding contract and if the arbitration had enough information to be performed. Therefore. the arbitration clause is separable and does not require the same formality. Kansas General. The decision was also based on various decisions from different countries. Court of Appeal. is the arbitration clause void too? Is it possible top give jurisdiction to arbitrators to decide a dispute over the initial invalidity of a contract? . Nicaragua’s motion to compel arbitration was granted. Second. . the court decided that the clause of invalidity of a container contract had no effect on the arbitration clause. Since the contract existed. UK. Nicaragua appealed. the arbitration clause contained in it must also be void. under UK law.Facts: the orthodox view in English law has always been that if the contract is void. even when the ground of invalidity was initial illegality. article V (1). the lower court decided that the arbitrator couldn’t decide if the container contract was void ab initio.Legal issue: the container contract is void. ⇒ The lower court said that the burden was on SNE to prove the separability under Soviet law. the arbitration clause was valid. Nicaragua began an action in federal district court against Standard Fruit claiming breach of contract and moving to compel arbitration. therefore this problem would not easily occur. USA.Holding: first. 1993 . An arbitration clause has been held to be a selfcontained contract. collateral to the containing contract. at the same time. although the Memorandum was just an agreement to agree. the law applicable to the arbitration clause does. although it was invalid for the lack of the required signatures. The appeal court reverses this in order to enforce NY Convention. . 9th Circuit. . it is valid and enforceable. Standard Fruit. 1991 .

” 1991: Robobar suspended payment alleging that the units delivered by Finncold were defective and of a poor quality. II (2) sets out further requirements. Uncitral Model Law. who has the power to decide that? The form of the arbitration agreement – an agreement in writing As already seen. UNCITRAL Art. This is not merely a requirement that there be written evidence. Robobar Limited (UK) v. but both fail to provide solution to practical problems.29 ⇒ It was a clear that the parties had the intention to arbitrate. some countries are being more flexible in this matter. II (2) of the NY Convention. The UNICTRAL Model law tries to do this. one of them is that it must be in writing. Supreme Court of Italy 1993 . But Article IV of the NY Convention says that you need the original award or the original agreement or certified copies. each party have to declare in writing its consent to arbitration. ⇒ Neil Kaplan: Art. but the agreement itself must be in writing. France allows oral arbitration agreements. an arbitration clause should not have a higher degree of proof than the contract that it is inserted on. Upon answering client complaints. Ex. Facts: 1989-1991 Finncold supplied refrigerating units to Robobar for the manufacture of refrigerators for European and US hotels. In commercial practice. cautionary and channeling. ⇒ Various efforts have been made to loosen the provisions in the NY Convention without changing the Convention. Robobar mentioned the faulty performance of the Finncold units.Article II of the NY Convention specifies that the agreement must be in writing. Finncold initiated proceedings seeking payment of the purchase price plus damages for loss of reputation. Art. Finncold SAS (Italy). This requirement has three functions: evidentiary. So you need the written documents at the very least. there are formal requirements for an arbitral provision. article 7 (2) . The purchase confirmations sent by Robobar contained a clause (in Italian) stating the following: “any dispute arising out of this order shall be exclusively referred to arbitration by a person to be appointed by the President of the Law Society. ⇒ After the NY Convention many other means of communications arose. thus. 7 dilutes NY Convention Article II by expanding what is a valid arbitration agreement beyond mere writing. 7 of the UNICTRAL is slightly more extensive than Art. but is this enough? Is the agreement capable of being performed? To what arbitral tribunal should claimant go.

Court of Appeal reversed the Court of First Instance’s decision. finding that a valid arbitration clause had been concluded between the parties although the shipper had not signed the bill of lading. Facts: The matter concerns a maritime carriage contract. the French company filed a request with its insurance company for indemnification. Med. 1995 . The Supreme Court affirmed the appellate decision. before the Court of First Instance of Geneva. There is no doubt that none of these formalities has been met in this case. its validity and efficacy must be ascertained independently of the validity and efficacy of the contract. The court states “the agreement to arbitrate contained in an arbitral clause in a contract is an independent agreement.” Treating the formality of the underlying contract as enough to satisfy the arbitration clause ignores the concept of separability. Shipping Co. The insurance company commenced proceedings against Med. since the clause is only contained in Robobar’s confirmations. upon which Finncold does not seem to have agreed by letter or by telegram. since the formal requirement cannot be derogated from. SA (Switzerland). Shipping objected that the State court lacked jurisdiction because of the arbitration clause in the bill of lading. The Brussels convention does not apply to arbitration and the argument that the validity of the arbitral clause must be maintained on a good faith basis after having performed under the contract in which that clause is contained equally fails. You need to meet the independent formalities of each. Mediterranean Shipping Co. The general conditions (along with the arbitration clause – article 2 of the general conditions) were printed on the back of the bill of lading. Compagnie de Navigation et Transports SA (France) v.30 Robopar requested a preliminary ruling on jurisdiction by the Supreme Court which held that the Italian court had jurisdiction as the arbitration agreement was not valid. Court of First Instance found that it had jurisdiction. Upon discovery of the fact that packages were missing and damaged. II of the NY Convention “recognizes as valid an arbitral clause for foreign arbitration contained in a document signed by the parties or in an exchange of letters or telegrams. Issue: Holding: Does the clause satisfy the writing requirement? No. Reasoning: Art. Swiss Supreme Court.

178 of the Swiss Private International Law Act (PILA) was inspired by Art 7(2) and by Article II(2) of the NY Convention. there was enough additional evidence to conclude that both parties were aware of the agreement and agreed to it. the court held that because the parties were experienced traders and had prior interactions. Analysis: There is no question that the NY Convention applies. the arbitration agreement was valid. Vessel sinks prior to insurance policy being received by the insured. The parties. always made use of the general conditions as printed on the back of the bill of lading. were sophisticated). Marine Towing – US Court of Appeals 1994 Facts: Marine Towing contacted an insurance company to “acquire protection and indemnity service for its vessels.” The Court goes on to state that Art. This can lead to ambiguity. Marine Towing sues Sphere Drake and another insurance company that Marine Towing had initially contacted (not relevant). But the carrier had not signed it so technically it does not satisfy the requirements of Art. The question remains however. the seat of the arbitration tribunal must be in Switzerland but it was in London (answer to question 3 on page 150). telegrams or other means of telecommunication which provide a record of the agreement.” A policy is eventually secured from Sphere Drake. . telex. Conclusion: The tribunal may look at who the parties are when deciding when the agreement is valid. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters.31 Issue: Was this a valid written arbitration agreement under Article II? Holding: There was a bill of lading so that counts for one party. Policy: What is the extent to which the arbitration tribunal is willing to read the text broadly. What is relevant is the fact that Marine Towing filed its suit in state court. II. Even though there wasn’t a formal written agreement. why did the Swiss Court even look at 178 – in order for this provision to apply. Nonetheless. It may be possible to lessen the formal requirements if there is evidence the parties intended for there to be an agreement (parties were repeat players. Sphere Drake Insurance v. The Swiss Court reasons that Article II(2) of the NY Convention must be interpreted in light of Art 7(2) of the Model Law [UNCITRAL Model Law] which provides that “[t]he arbitration agreement shall be in writing. Both France and Switzerland are signatories. The tribunal may be willing to lessen the formal requirements if there is evidence that the parties intended for there to be an agreement. for several years. which may appropriate because of the difficulty of changing the convention.

II. Dispute arose between the buyer and the supplier. Holding: The Court interprets Art. there is a contract for what is substantively similar. (question 8 – page 151) Note: bad holding because it removes the signature requirement from the arbitral clause. Nokia argued that the dispute should be referred to arbitration. A makes an offer to B. Nokia-Maillefer SA v. the Italian buyer accepted the modification. or (b) contained in an exchange of letters or telegrams. Marine Towing argued that the district court lacked jurisdiction under the Convention because Marine Drake and Sphere Towing had “no agreement in writing” to arbitrate. . Analysis: Does this reading make sense? It allows for a free-standing arbitration clause. the court affirmed the lower court’s decision. B replies by accepting the offer but under certain conditions.32 Sphere Drake removed the case to federal court and moved to compel arbitration and to stay the litigation pending arbitration. The Swiss company returned the purchase order and replaced Milan with the ICC. which allows the parties to circumvent the formal requirements. Issue: Interpretation of the language of the NY Convention Art. Issue: Was there an arbitration clause? Holding: Court of the First Instance refused on the grounds that there was no valid arbitration clause. B? Under the UCC. The initial contract was a purchase order that provided for a forum of Milan. Basically the judge read the writing requirements differently. On appeal. By telex. or (2) and arbitration agreement (a) signed by the parties. Can a battle of the forms yield an arbitration agreement? (page 151 of text) A battle of forms: The offer and acceptance do not match. There’s either an arbitration clause or a separate arbitration agreement that must be signed by the parties or contained in an exchange of letters or telegrams. Mazzer – Tribunal Cantonal – Swiss Court of Appeal. Seems to ignore the policy underlying the formal requirements. II of the Convention definition of “agreement in writing” to include either (1) the arbitral clause in a contract. Paris. What happens if A doesn’t respond? Is there a contract? Which contract governs A. Difference between the offer and acceptance at this stage was that it was a forum selection clause not an arbitration agreement. 1993 Facts: Battle of the forms began with Swiss confirmation of an Italian order which referred to Confirming party general conditions of sale. He read it disjunctively. and what is different is thrown out.

Guangzhov Ocean Shipping Co. v. which was a major one? Court states (page 153): there is no common intent on arbitration unless the final arbitration clause has “manifest and certain meaning”. In this case it was not possible to determine the possible intent of the parties.T. NOTE: There were several defects in the transaction. Associates.A. it is not possible “to ascertain the common intent of the parties. The site was the only element of the arbitration process that was specified. “appellant must bear the consequences of the ambiguity and obscurity… which it modified…”. NOTE: the case is bizarre according to vonMehren! What business does the court have to step in and decide that there should be arbitration because the parties wanted general arbitration. .33 ANALYSIS: No common intention of the parties was established. “the word arbitrator or arbitration does not appear and the ICC itself does not act as an arbitrator”. A dispute arose and NY company sued in US courts.D. Podar Brothers (notes section on page 154) Facts: Contract between the NY company and the Bombay Company. I. Lead to proliferation of cases from HK. An arbitration clause can only be validly concluded only where there is a common intention of the parties to refer a possible dispute to arbitration. v. This case carries the court’s desire to arbitration further than makes sense. The court concluded the parties did not have a valid arbitration agreement. in particular as to the arbitration agreement”. Both companies provided for arbitration but NY company for the arbitration in NY and Bombay Company for arbitration in Bombay. Inc. 1993 HISTORY: Many companies send commercial activity to HK not China because it has superior legal system. – High Court of Hong Kong. Jurisdiction by Virtue of Tacit or Post-Agreement Submission or Estoppel William Co.the parties didn’t have a complete arbitration agreement. Issue: Holding: was there a valid arbitration clause? The court compelled arbitration Analysis: Both parties wanted arbitration but there was no agreement on where the arbitration should be held. Was this a messy transaction? Another issue is to what extent should the courts make Herculean efforts to solve the problems created by the parties’ messiness.

it assumes the court gets adjudicatory authority. the plaintiff has the right to choose the forum. Formal Requirements: Model Law’s formal requirement could be satisfied only if (1) there were either letters that provided a record of the agreement or (2) an exchange of statements of claim and defense by which the existence of an agreement was alleged by one party and not denied by another. Issue is that after the arbitration agreement. In litigation. The plaintiff argued that the matter could not go to arbitration for two specific reasons: 1. the phrase “record of agreement” is wide enough to include correspondence which post-dates the arbitration agreement. HK Court reads Art. 7(2)) applied to courts as well as to arbitration proceedings. the clause was unenforceable because it was uncertain (it did not choose arbitration or litigation to the exclusion of the other) and 2. In this case the plaintiff did not choose a valid forum so it lost the choice.34 Facts: A cargo owner brought an action for damages to cargo against the defendant ship owner in HK. Therefore the proceedings were stayed and the case is sent to arbitration. Bill of lading issued in HK provided all disputes arising out of controversy shall in accordance with Chinese law shall be tried in Chinese courts or arbitrated there. Validity of the proceedings was governed by the UNCITRAL Model Law because HK had adopted the Model Law before the bill of lading was issued. even though the acknowledgement post-dated the arbitration clause. if a defendant appears and participates. NOTE: Raises problem of tacit submission. can be entered into by the party’s agent. Important: the plaintiff brought the action in the High Court of Hong Kong. The court also says that what is clear from this article 7 is that the agreement cannot be oral. this is a sufficient record of agreement. Analysis: Plaintiff argues that: the clause was too uncertain (provided for both arbitration and litigation) and that it was not formally valid (document signed by one party). Court does not get . Defendant seeks in HK courts to refer the dispute to arbitration in China. 7 very broadly. (bottom of page 157) Court accepted the defendant’s argument that “exchange of statements of claim and defense” (Art. The written agreement however. The court said that it was up to the defendant in the HK action to determine whether there should be adjudication or arbitration in China. Arbitration/Litigation: In general. Does this comply with the model law? Yes. the exchange was made. the arbitration was not formally valid because the defendant had signed the bill of lading but the plaintiff had not Issue: Was there a valid arbitration clause? Holding: Yes. Therefore there is a valid arbitration agreement.

The exchange of letters does not have to be between two parties. Problem: award from an arbitration tribunal that lacks jusrisdiction – what happens? What if there is an award from an arbitration tribunal that lacked jurisdiction? Since the authority of the arbitrator is based on party agreement. But this ignores the technical problem of having an agreement. In view of the fact that Sulanser insists on invoking the arbitration clause before the court. This is sufficient to the court for an exchange of letters. Application for enforcement of the award in HK court. even if a party participates.the other party wants to invoke the arbitration clause. The arbitrators determined that they had jurisdiction and that there was a valid arbitration agreement. Jiangxi agrees to file a request for arbitration. After both parties had appointed arbitrators. Von Mehren thinks the drafters of the NY Convention never thought about this kind of problem. Sometimes a party will participate in the arbitration so as to protect itself from an adverse award. 1995 Facts: Corporation concludes contract for sale of cement.35 jurisdiction if the defendant denies jurisdiction. Analysis: Even though the NY Convention formality requirement was not satisfied. then it is deemed to have consented. Supreme Court of HK. even though it does not recognize the authority of the tribunal. Jiangxi brings the dispute to court . Issue: was there a valid arbitration agreement? Holding: Yes there was a valid arbitration agreement. there is no authority when there is no agreement. Can be between the court also. Sulanser. Jiangxi Provincial Metal and Minerals Import/Export v. it seems. If defendant does not do so. then the court get jurisdiction. . The court declines jurisdiction and refers the parties to arbitration. the court could still recognize and enforce the award if the provisions of the Model Law Art. Losing party (Sulanser) wants the enforcement order set aside because there was no arbitration agreement and therefore no arbitration jurisdiction. Sulanser (the same party that had initially challenged the jurisdiction of the court on the basis of the existence of an arbitration clause) challenged jurisdiction because of the absence of a signed agreement. Agreement was reduced to writing but not signed by the parties. Copies of documents submitted between each party to the Wuhan Court and to CIETAC were received by the other. 7 were satisfied. Possible solution is that is the party participates in the tribunal without challenging the tribunal’s authority. There was an award for the claimant. Exchange of letters: Although there must be an exchange of letters to prove that both parties agreed to arbitration the exchange does not need to between two parties.

36 It should also be noted that the court relies on an argument of good faith when it states that “within a little less than three months, the respondent concluded three contracts with the claimant with essentially identical wording but never signed the acknowledgment of the orders together with the arbitration clause contained therein…” that did not prevent the respondent from relying on the clause in another two situations. Estoppel: Estoppel is not contained in the NY Convention, it’s a background provision that’s available in most legal systems. Note: It’s better to rely on the exchange of letters rationale because it will be more likely (than the estoppel argument) to be upheld when it comes to enforce the award. NOTE: Is Art. II Para. 2 of the NY Convention an exclusive provision? (p. 164) Different languages have different meanings. 1. Definition in English is not exclusive as it says “includes” 2. French definition is “means” which indicates exclusive. 3. Five authentic texts that are not in agreement which creates a problem of interpretation of the convention. 4. Strong argument is that there is no reason in policy on why Art II(2) should be exclusive. It seems appropriate to allow a legal system to enforce an agreement that does not satisfy the article if it is prepared to do so. Not impose the requirement on the arbitration clause, but simply mean that if you meet the requirement of Art. II(2) you are guaranteed enforcement, otherwise it is a matter of national law. Claimant (Austria) v. Respondent (Germany) – Federal Economic Chamber, Vienna – 1994. page 161

Facts: Austrian Company requested arbitration against German company. Claim was breach of contract (failing to deliver steel). The contract and the arbitration clause existed only in the acknowledgment of an order sent by the claimant to the respondent – the respondent never having countersigned (only one party signed it). It was submitted that the respondent had not fulfilled its “obligations of the basis of two contracts for the delivery of cold-rolled sheet concluded with the claimant, since it had either not taken delivery of or had not paid for part of the goods purchased”. Issue: Holding: Was arbitration clause valid? Yes the arbitration clause was valid.

37 Analysis: An agreement to arbitrate signed by the parties or contained in an exchange of their letters is sufficient. The requirement is also met if the addressee replies in writing to the acknowledgement of an order in such a way that need only conclusively show that he accepts acknowledgement of the order together with the arbitration clause mentioned therein. This is what happened in this case, therefore the arbitration agreement was valid. Court states that according to the NY Convention, “the agreement must be in writing” but this “does not mean that the arbitration clause must be contained in a contractual document signed by both parties”. “Though initially the respondent only tacitly accepted the two acknowledgments of the order by the claimant, it subsequently – to be precise in a letter to the claimant of January 1993 – expressly referred to the relevant contracts […] and thus satisfied the requirement as to the written form of the arbitration clause contained therein.” The court also relies on good faith and points to the fact that the respondent has also relied on the specific arbitration clause before the courts in other matters”. It looks that the court is really using estoppel to enforce the arbitration clause to prevent the claimant from both relying and denying the existence of the contract. UNICTRAL Proposal to Amend Model Law Article 7 ii. See p. 167 #3 should such an amendment be adopted? iii. If you simply adopt the interpretive, non-binding resolution, then you are simply confirming a situation exacerbate the problem of different interpretations. iv. Alternatively you could amend the NY Convention but that would open up the Convention to amendment in other areas which you would want to avoid. v. There is no authoritative tribunal which can provide interpretation of the various conventions. This it is difficult to gain judicial interpretation and control when you’re dealing with and international convention such as the NY Convention. Amendments may only make the situation worse. Practically, it sounds as though the best strategy is to simply deal with the provision (II(2)) of the NY Convention as it stands. Scope of the Arbitration Clause- Settlements and Renewals Mediterranean Enterprises Inc. v. Ssangyong Corp. – US Court of Appeals, Ninth Circuit, 1983 (page 168)

38 This dispute illustrates the importance of having a clear arbitration clause. Facts: MEI and Ssangyong essentially entered into a preliminary agreement for a joint venture. Arbitration clause was accounted for. The venture went sour and MEI alleged that Ssangyong used the venture in order to gain access to certain projects. Among the allegations raised by MEI is the allegation that Ssangyong fraudulently inserted the words “arising hereunder or” into the arbitration clause. District court ordered the action stayed pending receipt by the court of the arbitration between the two parties on certain issues – essentially, the court forced the parties to go to arbitration on certain issues by ruling that several arguments being raised by MEI were arbitrable. Ssangyong contends that the district court improperly interpreted the scope of the arbitration clause between the parties. Ssangyong wanted the matter stayed before the court on all issues and wanted arbitration to take place on all issues. Issue: What is the scope of the arbitration clause? The clause read “any dispute arising hereunder shall be settled by arbitration.” “Arising hereunder’ was read very narrowly and excludes peripheral matters that may emerge but may not technically arise under the contract (such as quantum meruit claim). The clause should have been written more broadly (“any dispute arising under or relating to the contract…”) Unjust enrichment and conspiracy to breach the contract were peripheral claims. Since the arbitration and the court proceedings would likely deal with the same issues then there are three possible ways to deal with it: 1. Stay the court proceeding and go with arbitration first a. This is the preferred order because the parties agreed to arbitrate, so that agreement should hold weight. b. Also, the issues to be adjudicated in court are dependant on the issues in arbitration. c. It also takes the cases off the docket. 2. Stay the arbitration and go with the court proceeding 3. Do both the arbitration and the litigation at the same time What would the scope of the arbitration clause have been if the joint venture had been formed? The court would likely have included only issues related in some way to the joint venture. Interesting to note the court’s comment mid-page 172: “the arbitrator’s award, if it clearly exceeds the scope of his authority by deciding a matter not within the ambit of the arbitration clause, will not be given effect by the court” – almost seems that the court is assuring parties that the arbitrator can only rule on the issues sent to it by the court Ermenegildo Zegna Corp v. Lanificio Mario Zegna – US District Court 1996

the court states “any doubts concerning the scope of arbitrable issues should be resolved in favour of arbitration”. Court points to a severability clause in the agreement and also states that the parties are sophisticated – if they wanted to preclude the exclusion of specific provisions. This is all about the subtleties of language. This is an issue to be decided by the courts unless the parties have made absolutely clear that they confer authority on the tribunal. which poses a Kompetenz-Kompetenz problem because it requires arbitrators to determine their authority. The dispute is within the scope of the arbitration clause because it is not excluded by the no-contest clause. The defendant claims that the dispute is within the scope if the arbitration provision. The parties must be explicit about what they intended. Analysis: What is the effect of a no-contest clause when it arises in connection with the arbitration? The parties had submitted to arbitration the issue on which there is supposed to be no-contest. The US branch of the family (defendant) took the position that recent changes in the Italian law made the provisions of the settlement unfair. Interesting comment by the court on page 175: when assessing whether or not the matter was arbitrable as a result of falling under the rights. duties and obligations of the parties as stipulated in the second clause of the arbitration provision. To take the same approach to the meaning of the no-contest provision in arbitration that is given to it in judicial decisions runs contrary to the first option principle that the court should decide whether the issue is submitted to arbitration. . In arbitration it is an issue that relates to whether the parties have conferred on the tribunal adjudicatory authority. The court only has the authority to look at the arbitration clause. The solution to the no-contest problem which emerges from litigation is different from what is appropriate in arbitration. plaintiff initiated an action in SDNY for trademark infringement. In mid-80’s. the parties negotiated a settlement that included an arbitration clause and a no-contest clause. In connection with the litigation.39 Facts: Companies broke up in 1941 and created an agreement in 1949 to determine the use of the name in Italy and US. the no-contest clause falls to the arbitrators to interpret. NOTE: What issues are arbitrable in the Ssangyong case if they adopted the language from Zegna? With the broader language the claim for quantum meruit would be included but the other issues would still be outside because they relate to the joint venture agreement but do not arise from it. The arbitration clause provided for arbitration in Milan under Italian Civil Code. The no contest clause prohibits the parties from contesting the agreement in its entirety but does not prohibit the parties from contesting certain provisions contained in the agreements. Provisions that exclude certain disputes from arbitration must be “clear and unambiguous” (page 175). (page 173) Issue: Is the arbitration clause negated by the no-contest clause? Holding: No. the plaintiff argues that the no-contest clause excludes the dispute from arbitration and that “this arbitration constitutes a violation of the Agreement’s no-contest clause”. they would have said so.

The original agreement said you must try to settle and if no settlement can be reached you go to arbitration. that agreement provided for the full rights under the original agreement. . The settlement agreement was merely the extension of the original agreement therefore incorporated some of the rights granted under the original agreement. Hart had signed the document that included the arbitration clause.) Issue: Was there recourse to arbitration? Had the plaintiff lost its right to arbitration because it entered into a settlement agreement. This is not a persuasive argument. Hart also raises “undue hardship”. The party disputing the application of arbitration did not sign the one document containing the arbitration clause. so there is still a right to arbitration. then there was a right to arbitration based on the original contract. Sues for damages for deficiencies of goods and breach of contract. Hart also argued that arbitration in China would provide undue hardship. Hart Enterprises International v. Further. Hart no argues that there was no recourse for arbitration because there was no arbitration clause in the settlement agreement and that the settlement agreement represents a contract distinct from the initial agreement.40 Court states that in the Zegna case. The motion is granted.Hart should have taken this into account in the first place. Hart resisted arbitration even though the settlement agreement said they should go to arbitration under previous contract. Defendant moves for a stay pending arbitration in China pursuant to an arbitration clause contained in the defendant’s confirmation of the sales. Even if the settlement agreement governed. (As an aside. they claimed the prerequisite for arbitration had not been met. there was recourse to arbitration. A settlement agreement was entered into. Hart failed to make the required payments. there were four documents and only one of the documents contained an arbitration agreement. Crt.US Dist. Anhui Provincial Import & Export . They reached a settlement that was subsequently breached by Hart. The settlement agreement and the original agreement are “inexorably linked”. Hart argues that the issue should go to litigation because there was a new and distinct contract. Basic problem: A settlement was reached but not carried through. If the settlement agreement did not govern. even though the settlement agreement turned out not to be performed? Holding: Yes. the court sent the matter to arbitration. He agreed to arbitrate and now he is stuck with it. Court draws a distinction between this case and another (First Options) – in that case. it is not clear and unambiguous that the parties wanted to exclude the underlying dispute from arbitration and when one considers the “strong policy favoring arbitration as an alternative means of dispute resolution”. 1995 (page 177) Facts: NY textile distributor buys goods from Chinese Supplier.

(page 181) NOTE: Why does Becker Germany want arbitration while Becker USA prefers court adjudication? Choice of law in federal court is determined by the court rather than by the parties.41 - Becker Autoradio v. In terms of policy. “In reaching its conclusions. there would need to be a complete formal renewal of the contract. In the absence of a tacit agreement provision. from cases in which the disputed transaction occurred after expiration. the contract will automatically be renewed? No. Contract terminated on June 30. without explicitly providing for a tacit agreement.the formal requirement under Art. The agreement said that to renew the agreement. Court of appeals granted this motion. 1978 (page 180) Facts: US firm entered into an exclusive distributorship agreement with German supplier. Becker Autoradiowerk – US Court of Appeals – 3rd circuit. Becker USA fought this action in federal district court alleging the German company had promised to renew the agreement provided that Becker USA fulfill certain conditions. Adjudication might include a jury trial (jury might be more willing to accept the story than the arbitrators would). is an oral agreement effective to renew the contract? No. in which the disputed transaction occurred prior to the expiration of the contract whose arbitration was invoked. it can be said that the dispute as to termination and renewal “arises out of” or is “about” the agreement that contains rge arbitration clause. 1976.” (page 180) In the former type (at least where a renewal would cause the entire agreement to be carried forward). In early 1977. the formal agreements must always be met with every contract. Becker Germany moved to stay judicial proceedings and compel arbitration. II? Generally. II of the NY Convention is not met for any arbitration clause to be in force. The initial arbitration agreement provided for arbitration of “all disputes arising out of and about this agreement”. Does Becker Germany have a strong argument as to why this matter should go to arbitration? Did the original agreement contain provisions that said that unless the parties indicate otherwise. To what extent is it significant whether the renewal occurred before the expiration of the contract? It depends on how you read the arbitration clause: If you read it as only applying to disputes that arose during the life of the agreement versus if you read it as . negotiations should begin 6 months prior to termination. the court distinguished cases. Can one say that when there is an existing contract that it can be completely renewed (along with the arbitration agreement) then there is no need for the formality under Art.

1996. Von Mehren thinks the court should be looking first at the formal requirements and only second at when the renewal occurred. the not signatory party.1. p. Von Mehren says district court was right.42 also applying to disputes that arise after the termination of the agreement. Arbitrators are not going to be as sympathetic as a jury to the implausible story. Is an oral agreement sufficient to renew a previous agreement. If the plaintiff really wanted to get into PA courts so as to have a jury trial. NOTE: Von Mehren thinks that the district court was right. The reasoning of the Court was the following: o The Federal Arbitration Act (FAA) does not apply to the plaintiff’s claims against the not signatory party. Holding: The Court did not accept to merge both proceedings. was bound by the arbitration agreement under agency . 3rd circuit says yes to protect the arbitration. The issue is whether the court can merge what was supposed to be submitted to arbitration into the court proceedings. II. because APSI (the not signatory party) cannot be compelled to arbitrate. Cosmotek Turkey argues having claims against both Cosmotek USA and APSI. then the 3rd circuit is really going to try to block this by providing arbitration. Issue: Cosmotek Turkey argues that both claims should be heard together in federal court. 183) Facts: Cosmotek USA and Cosmotek Turkey entered into an agreement (containing an arbitration clause) whereby Cosmotek Turkey became USA’s distributor for the sale of units. District of CT. It granted the motion for a stay of the court proceedings. notwithstanding the arbitration clause.g The Position of the Parties Who Are Not Signatories of the Arbitration Agreement a) Cosmotek Case (United States District Court. This issue does not relate to the formality requirements. o An arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement. the court has no discretion to merge both proceedings. o The Court rejected the plaintiff’s argument that APSI. but that the 3rd circuit has gone to extreme efforts to make the arbitration available. Cosmotek USA and APSI move to stay the proceeding before the District Court because of the arbitration clause. which were manufactured by APSI who was neither a signatory nor a party to the contract. Because there is a valid arbitration clause. District court says no. but 3rd circuit went too far. subject to the reporting to the court as to the progress of the arbitration proceedings and subject to the absence of any delay or hindrance in the arbitration proceedings.

the Court rejected the plaintiff’s agency theory (i. As to the first situation. Incorporation by reference: A nonsignatory may compel arbitration against a party to an arbitration agreement when that party has entered into a separate contractual relationship with the nonsignatory which incorporates the existing arbitration clause. The consolidation of both proceedings would have resulted in more difficulties (in particular at the enforcement stage) than advantages. Indeed. o Since the court decided not to bring the not signatory party into the arbitration proceedings. If the court had not stayed its proceedings. o If a party’s arbitration clause is expressly incorporated into a bill of lading. SA v. that the signatory contracted as APSI’s agent) on the ground that the agentprincipal relationship was not disclosed in the contract. nonsignatories who are linked to that bill through general principles of contract law or agency law may be bound. US case law has recognized the 5 following theories under which non-signatories may be bound to arbitration agreements of others (see in particular Thomson-CFS. Case law examples: o Separate agreement with nonsignatory expressly assuming all the obligations and privileges of signatory party under an agreement constitutes grounds for enforcement of the arbitration clause by nonsignatory. 2. the question of the sequence of both proceedings arose.e. American Arbitration Association): 1. • Situation where a nonsignatory wants to intervene in an arbitration against the objection of one or both parties. the first one being far more common than the second: • Situation where a signatory tries to force a nonsignatory to join the arbitration proceedings as a party (Cosmotek case). The court granted the stay of its proceedings because the not signatory party would not suffer any hindrance or obstruction in an expeditious determination of its claims by a stay and relegation to arbitration. a party may be bound by an arbitration clause if its subsequent conduct indicates that it is assuming the obligation to arbitrate. Assumption: In the absence of a signature. b) The theories for binding non-signatories to arbitration agreements The two following situations should be distinguished. . the Court stayed the litigation to wait the results of the arbitration and ordered safeguards in order to avoid undue delay. there could have been different decisions on the same issue. To sum up.43 law.

5. It should be noted however that veil piercing determinations are fact specific and differ with the circumstances of each case. Agency: (this argument was made in Cosmotek) Traditional principles of agency law may bind a nonsignatory to an arbitration agreement. von Mehren did not answer the question! • . Prof. the corporate relationship between a parent and its subsidiary is sufficiently close to justify piercing the corporate veil and holding one corporation legally accountable for the actions of the other. the agent is deemed to be acting on his own behalf. In several cases. Estoppel: Nonsignatories can also be bound to arbitration agreement under the estoppel theory: if a party does not sign the agreement but knowingly exploits it. When an agent signs a contract and does not indicate in the contract that he is signing on behalf of a disclosed principal. If the positions are not identical. as its agent. The following problems arise in connection with enlarging the arbitration to nonsignatories: • Arbitrators: the principle of arbitration that each party should have right to name an arbitrator can be violated. Courts generally pierce the corporate veil in two broad situations: to prevent fraud or other wrong and where a parent dominates and controls a subsidiary. If there are different parties that have the same interest. Enforceability: The legal order may not recognize and enforce an award rendered against someone who is not a party to the arbitration agreement. as well as the relationship of the alleged wrongs to the nonsignatory’s obligations and duties in the contract and the fact that the claims were intimately founded in and intertwined with the underlying contract obligations. then their position can be represented by one arbitrator.44 3. 4. An agent who signs a contract on behalf of a disclosed principal will not be individually bound absent explicit evidence of the agent’s intention to bind himself instead of or as well as the principal. Veil Piercing / Alter Ego: In some instances. Those theories developed in connection with a signatory’s effort to join a nonsignatory as a party in an arbitration are not decisive in case of a nonsignatory’s effort to intervene in an arbitration against the objection of one or both parties. then it may be bound to the arbitration clause. a signatory was bound to arbitrate with a nonsignatory at the latter’s insistence because of the close relationship between the entities involved. more arbitrators are needed. It is questionable whether the above discussed theories for binding not signatories are compatible with the “agreement in writing” requirement of Article II(2) NY Convention and of Article 7(2) Model Law.

Split Arbitration Clauses a) Astra Footwear Industry v. For example.45 Often. an award rendered by an ICC tribunal which asserted jurisdiction over 4 states when the party signing the arbitration agreement was an organization created by these states was set aside by Swiss Courts.C. 193) Facts: The sale contract entered into between the two parties contained the following split arbitration clause: “For all claims of disputes arising out of this agreement which could not be amicably settled between the parties. It ordered arbitration before an ad hoc tribunal and asked the parties to submit the names of possible alternate arbitrators.S. the court had to set the details of the arbitration. In view of the federal policy to construe liberally arbitration clause and to resolve doubts in favor of arbitration. the court relied on section 5 of the 9 U. In the case that the buyer is accused. The reasoning of the Court was the following: o An arbitration agreement was made and the making of such agreement was not in issue in the present case. saying that in the event the parties fail to agree on one arbitrator. which provides for assistance when the arbitrator selected by the parties cannot or will not perform. which at the time of the conclusion of the contract provided arbitration services but had ceased doing so? Holding: The Court granted the petitioner motion to arbitrate. o Since the New York Chamber of New York no longer operates as an arbitral institution.. 1978. persons who are the real debtors tend to remain behind the scene and the temptation has grown quite unsuccessfully to reach for the real personae dramatis. . o The parties intended the New York Chamber of Commerce (and not the ICC office in New York). the Chamber of Commerce in New York is competent. in particular regarding the appointment of the arbitrators. the Court would designate one. Southern District of NY.” A dispute arose between the parties and Astra sought to compel arbitration before the International Chamber of Commerce in New York. Issue: The issue was the identification of the arbitration institution chosen by the parties: did they agreed upon the New York branch of the ICC or upon the New York Chamber of Commerce. This rule was extended to a situation in which the institution selected by the parties cannot perform arbitration functions. p. Harwin International Inc (United States District Court. is competent the arbitrage for export trade at the Federal Chamber of Commerce in Beograd (sic).

The Defendants argues that the parties agreed upon a “twostep procedures. Other distinguishing criteria are also used. in Poland or in Germany (those countries had state arbitration courts): “If no mutual consent is reached the arbitration of People’s Republic of China. He mentioned that it had filed the same petition with the Polish Arbitration Court before. 197) Facts: The arbitration clause provided for arbitration in China. i.” The Plaintiff filed a petition with the Arbitration Court of the GDR. In this situation you get an ad hoc (not an institutional) arbitration and you get one arbitrator instead of three.S. 1982. As Defendant refused to participate in the arbitration proceedings. p.C. section 5 does not really apply to this case (the situation where an institution disappears is quite different from the situation where a party fails to appoint an arbitrator). legal or non-technical disputes). the Plaintiff moved for the issue of an interim award concerning the competence of the Arbitration Court. von Mehren. A split arbitration clause is a clause providing that different institutions have jurisdictions over different issues of the case. PDR Korea CO (Arbitration Court of the GDR. b) YugoslaviaCo v. that the clause is a preliminary agreement to arbitrate. The case shows the court’s willingness to save arbitration if it is reasonable. Issue: The issue is whether the arbitration clause may be regarded as an effective arbitration agreement and thereby as a basis for the competence of the arbitration court.g. technical v. Holding: The Court found the arbitration clause as being valid and effective and interpreted it as an optional one which allows the Plaintiff the choice of applying to any arbitration court of the three mentioned countries.e. the People’s Republic of Poland and the GDR will be adopted. but that it required a further agreement in order to be effective. Difficulties also arise in case of counterclaims. The allocation criterion in split arbitration clauses is typically the position of the parties in the lawsuit or the nature of the dispute (e. which had declared himself incompetent after the Defendant had challenged its competence. Changed Circumstances . c) Comments Split arbitration clauses were often used in the CMEA.46 According to Prof. One of the main problems in connection with split arbitration clauses is the inherent difficulty in drawing the dividing line. 9 U.

II. 34(2)(b) and 36(1)(b)) both acknowledge that non arbitrability may defeat an arbitration agreement or prevent enforcement of an award.2 • LIMITS ON ARBITRABILITY National decision-makers (legislatures or courts) have essentially been left to their own discretion in defining the disputes that can be settled by arbitration. The Court did not accept Respondent’s argument that the arbitration agreement lost its validity after Croatia became a separate state. At the same time. The court’s reasoning was the following: o Should an arbitration agreement become – for whatever reason – practically unfulfillable.47 a) Partial decision of April 2. so that the Claimant decided not to file its claim before the arbitration tribunal in Belgrade but before the German Court. By the time the dispute arose between the parties. an effective legal protection from arbitration can no longer be expected because of the totally changed circumstances (all telephone and postal communications with Belgrade were interrupted. however. o In the present case. a renunciation of legal protection of state courts in the event the arbitration clause becomes impossible to carry out. each party shall have the right to terminate it for cause. The Claimant sought recognition and enforcement in Germany. Although by concluding an arbitration agreement a party renounces to a large extent the legally guarantied judge. Holding: The Court found that claimant had the right to terminate the contract because of the changed circumstances. it was almost impossible for claimant to get to Belgrade. the Socialist Federal Republic of Yugoslavia (SFRY) had broken up and war turmoil made it impossible to get to Belgrade. the NY Convention (see articles II(1). SFRY was in a state of war). . this does not yield. 1992 (Landgericht Kassel) Facts: The contract provided for arbitration in Belgrade. but they do not attempt to define the concept. Issue: The question is whether the Claimant can terminate the arbitration agreement because of the changed circumstances. Claimant informed the defendant that it terminated the arbitration agreement for cause. It should be noted that another German Court was also faced with the impact of the breakup of Yugoslavia on arbitration. Indeed. The Belgrade Tribunal rendered an arbitral award in favor of a Croatian Claimant against the German Respondent after the breakup. II(3) and V(2)) and the UNCITRAL Model Law (see articles 8(1).

in an action to set aside the award o Before a court asked to recognize and enforce the award.2. The trend in most legal systems is in the direction of sharply limiting the nonarbitrability doctrine. 210-212 for examples of statutory definitions of arbitrability. within the free disposition of the parties (see the French Code Civil: “rights of which one can dispose freely”. Swiss Private International Law Act: “any dispute involving an economic interest”). Ministry of Defense of Iraq (Court of Appeal of Genoa. The arbitrability issue can arise at 4 points in the life of an arbitrated dispute: o Before a national court deliberating whether to enforce an arbitration agreement o Before the arbitrators as they try to decide the scope of their competence o Before a court.48 • Countries have traditionally been reluctant to allow arbitration in spheres where there is a strong public interest at stake. i. 1994) . and those that are not. • • • • • II. The touchstone in this legislation is often the distinction between claims that are. a) Fincantieri-Cantieri v. generally in the country where the arbitration has taken place. Common-law countries rely largely on case law to delimit arbitrability (see the US cases discussed below). which are generally regulated by mandatory rules of law designed to protect important public interest.e. have sometimes been found nonarbitrable: o Antitrust o Securities law o Intellectual property o Damage from unilateral termination of exclusive distributorship agreements o Political embargoes o Damage to cargo carried under a bill of lading (COGSA claims) o Bankruptcy o Administrative contracts. In both civil-law and common-law countries court disputes in the following areas. Civil-law countries rely largely on legislation to mark the borderline between what is – and what is not – arbitrable. in areas regulated by mandatory rules of law designed to protect important public interest.b Statutory Definitions of Arbitrability and Their Interpretation See pp.

as this question directly affects jurisdiction. 1993. is the dispute arbitrable? Holding: The Court hold that the dispute was not arbitrable due to Italian embargo legislation. b) Covem SpA v. an hypothetical arbitral award against the claimants. referral of the dispute to arbitrators could have affected rights which international and national embargo legislation had made indisponibili. thereby affecting dritti indisponibili. o The court found that under Italian law the dispute was not arbitrable. and the court can only deny jurisdiction on the basis of its own legal system. 219) Facts: In Covem an exclusive distribution contract barred the distributor in Italy from selling similar products for a period of 2 years after the termination of the contract. The Iraqi ministry objected to the court’s jurisdiction arguing that the dispute should have been referred to arbitration. Also. . which does not lead to a decision on diritti indisponibility (rights of which the parties may not freely dispose) cannot be deemed to fall outside the jurisdiction of the arbitrators.49 Facts: This case involved a number of contracts concluded between the Republic of Iraq and Italian shipbuilders for the supply of corvettes (ships). Compagnie Française des Isolants (Court of Appeal of Bologna. p. The court did not agree with the lower court’s reasoning that any dispute on the validity or the termination of the contract. In this case. denying termination of the contract. But is this dispute arbitrable in the circumstances of this case? o The answer to the question whether the arbitral clause contained in the contracts was “null and void. inoperative or incapable of being performed” under article II(3) of the NY Convention must be sought in Italian Law (article 806 Code of Civil Procedure). Issue: In light of the newly adopted Italian embargo legislation. It provided for ICC arbitration in Paris under French substantive law. The court’s reasoning was the following: o It is beyond doubt that the rights deriving from those contracts could be freely disposed at the time when the arbitral clause was stipulated. would have recognized the continuing validity of the contracts. The Italian parties commenced proceedings against Iraq in the Court of Italy. alleging frustration of contract and seeking termination and damages. Embargo legislation against Iraq was then issued by the European Union and Italy. It seems that the court says that Italian law invalidates any arbitration clause under which arbitrator might reach a result inconsistent with Italian mandatory law. All contracts contained a standard ICC arbitration clause. It is equally beyond doubt that they could not when this action was commenced because of the embargo legislation.

The arbitral tribunal. noted that European antitrust law is mandatory and found that Italian law barred arbitration. Epargne asked for execution of the contract and payment of royalties. including know-how and an important trademark. Quarker sought to avoid performance under the agreement. rendered an award in favor of Epargne ordering the payment of royalties.50 After termination of the distribution contract. On appeal however. but because the French party had not shown that French law differed form Italian Law. 220) Facts: Epargne had agreed to sell its business to Quarker. are arbitrable – just as are arbitrable all other disputes concerning the contract’s validity. but without challenging the validity of the agreement under Italian Law. it is forbidden to sell a trademark without also selling the firm that make the product to which the trademark attaches. all other disputes. 1989 (p. The agreement was not carried out and the parties went to arbitration. the Italian distributor sued before the Court of first instance in Bologna to have the non-competition clause declared invalid. The Covem and Fincantieri decisions both discussed the following Italian Supreme Court decision: c) Italian Supreme Court Decision of May 19. the Court of Appeal reversed and referred the parties to arbitration. for the arbitral clause concerning disputes on diritti indisponibili to be null and void . thereby disposing of them in violation of the law. The reasoning was similar to that in Fincantieri. Therefore. In return. Issue: Is this antitrust dispute arbitrable? Holding: The Court of first Instance applied Italian Law to the question of arbitrability (following the lex fori principle). considering the validity of the agreement not in question.insofar as they do not affect diritti indisponibili. o Since the arbitral clause is autonomous with respect to the contract. including those disputes concerning the validity of a contract having as its object diritti indisponibility. waiving them etc. The reasoning was the following: o The court applied Italian Law not based on a lex fori principle. o The court said that according to a recent Supreme Court decision.it is necessary that the contract containing the arbitration clause affect the diritti indisponibili by transferring. Quarker had agreed to pay royalties to Epargne. the court hold that the disputes concerning the contract’s validity (more specifically the validity of the non-competition clause) were arbitrable. . Under Italian mandatory law. Quarker sought to set aside the award.and consequently for the contract to be null and void. arguing that it violated European antitrust law.

o Because the award in that case only ordered the payment of royalties and because the arbitration clause was of a generic. non-specific nature. Under the rule of reason. the arbitration would be invalid . actually transferred rights that the law prohibited to be transferred and (ii) any party settlement or arbitral award concerning the contract actually transferred a non-disposable right. a . o Second.51 Issue: Should the arbitral award be set aside on the ground that the dispute was not arbitrable and that the arbitration agreement was invalid? Holding: The court did not set aside the award for the following reasons: o First. general arbitration clause and in that proceeding a party raises a claim of invalidity because a non-disposal right has been transferred.2. It alleged that Mitsubishi and CISA had conspired to divide markets in 3 Under the Sherman Act. 221) Facts: Soler entered into an exclusive distributor and sales agreement with CISA. seems more consistent with this Italian Supreme Court decision? II. A dispute arose that led Mitsubishi to file a request for arbitration before the Japan Commercial Arbitration Association. if two conditions were met: (i) the container contract. o The court also noted that if arbitration proceeds under a valid. Soler Chrysler-Plymouth (US Supreme Court. p.c Arbitrability Tested in Court Practice The following case is the leading United States decision on arbitrability. 1985. Soler responded by making antitrust counterclaims under that the Sherman Act3. Mitsubishi also brought an action before the US Courts seeking an order to compel arbitration. the court found the arbitration agreement valid. the arbitration clause would be invalid if it expressly authorized the arbitrators to decide whether the container contract transferred a non-disposable right and hence was invalid. a) Mitsubishi Motors Corporation v. The agreement contained a choice-of-law clause providing for application of Swiss law. as provided in the arbitration clause contained in the agreement. the validity of territorial restrictions in exclusive distribution agreements is governed by what is called the “rule of reason”. then the award will be annulled if the arbitrators do not apply the mandatory law correctly. a Swiss company wholly owned by Mitsubishi and Chrysler. Coveme or Fincantieri. in which it was found. Which court of appeal decision.

It further said that the tribunal is bound effectuate the court must weight the anticompetitive tendencies of a given agreement against the procompetitive and other welfare-enhancing aspects of the transaction. 4. In American Safety Equipment. Antitrust issues tend to be complicated and require sophisticated legal and economic analysis and thus are illadapted to strengths of the arbitration process (i. Holding: The Supreme Court considered Soler’s antitrust claims arbitrable. equity). based its decision on the American Safety Equipment case. The antitrust law is too important to be decided by private arbitrators. the Sherman Act provides for two kinds of enforcement: private enforcement (by parties) and public enforcement (by judicial system). If there is any merit to the antitrust action. minimum requirements. pursuant to the Federal Arbitration Act and the NY Convention. of claims arising under the Sherman Act and encompassed within a valid arbitration clause in an agreement embodying an international commercial arbitration. especially if they are foreign. common sense. which found that the antitrust claims were nonarbitrable.52 restraint of trade by refusing to permit Soler to resell cars to buyers in other areas4. Indeed. o The court of appeal.e. which involved domestic arbitration. 3. Antitrust law is violated only if on balance the anticompetitive aspects predominate. In other words. expedition. saying that there is no reason to assume at the outset of the dispute that international arbitration will not provide an adequate mechanism. the proceedings in the courts could potentially result in large damages. simplicity. The District Court ordered the parties to arbitrate. Review should proceed before the courts rather than the arbitrators. Private parties play a pivotal role in aiding the government enforcement of antitrust law by means of the private action for treble damages (the Sherman Act provides that damages are 3 times the amount that the fact-finder determines is owed). 2. the arbitrators’ skills may not be sufficient to deal with antitrust issues. The strong possibility that the contracts which generate antitrust disputes may be contracts of adhesion militates against automatic arbitration. Issue: The Issue is the arbitrability. 4 Soler did this to improve its bargaining position by increasing pressure on the other side to settle. the 2nd District Court found that antitrust claims are nonarbitrable for the 4 following reasons: 1. The Court of Appeal hold the antitrust counterclaims nonarbitrable. o The Supreme Court expressed skepticism regarding the American Safety doctrine. .

In the present case. according to the parties’ clear will. the distributor would have to pursue further litigation which is unlikely to happen. Some commentators said after Mitsubishi that it was likely that litigants in international arbitration would be tempted by the Court’s reference to the possible invalidation of awards that improperly resolve antitrust claims to raise antitrust claims and defenses with the intention of using them in later attacks upon the award.53 intentions of the parties. there is a growing tendency of international arbitrators to take into account the antitrust laws and other mandatory legal rules expressing public policy enacted by a state. even though that state’s law does not govern the contract by virtue of the parties’ choice or applicable conflicts rules”. the tribunal therefore should be bound to decide that dispute in accord with the national law giving rise to the claim. apply US laws to such claims. held that a Dutch court was required to annul an award (and in a relevant case to refuse to recognize or enforce such an award) where it violated European Union antitrust law. in Benetton. it is not likely that the US courts will have a “second look” at the stage of the enforcement of the award. by Swiss law. Commenting the Mitsubishi decision. no matter what the law chosen by the parties for governing their dispute says. Werner said that it is very unlikely that arbitrators would accept to apply US antitrust law to claims to be ruled. J. The ICC said however that it is more likely (but not sure) that arbitrators would consider the antitrust claims under US law because “according to leading German and French authorities. Otherwise enforcement of the award may well be denied. and even though under Dutch law an award’s . which includes claims arising from the application of American antitrust law. the parties’ agreement also included a choice-of-law clause providing for application of Swiss law. Once there is an arbitral award. Where the parties have decided that the arbitral body is to decide a definite set of claims. von Mehren notes however that. as a practical matter. the national courts of the US will have the opportunity at the awards-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed (see article V(2)(b) of the NY Convention. which reserves public policy of the country where enforcement is sought). But apparently there has been no particular increase in the assertion of antitrust claims. o The Supreme Court noted that having permitted the arbitration to go forward. This is the socalled “Second-look doctrine”: We will let these issues go to arbitration. It should also be noted that the Court of Justice of the European Communities (ECJ). but we reserve the right to review the award if they don’t respect the public policy of the national law. The Supreme Court is in fact saying that it is perfectly permissible to arbitrate foreign antitrust claims so long as the arbitrators will. Prof. even though the parties and the arbitrators did no raise antitrust issues during the arbitration proceedings.

.54 inconsistency with Dutch antitrust law would not have risen to the level of public policy needed to annul the award.

i. in Belgium and containing an arbitration clause and a choice-of-law clause saying that Swiss law applies. Issue: Is this dispute arbitrable? Holding: The Court held that the dispute was arbitrable and that Swiss law applied to this question. Belgian Court are competent and Belgian Law applies). o According to the NY Convention. Thus.d Law Applicable to Arbitrability a) MSA (Belgium) v. depending on whether the question arises when deciding on the validity of the arbitration agreement or when deciding on the recognition and enforcement of the arbitral award.to ascertain whether the law of autonomy authorizes the submission of the dispute to arbitration. inter alia. arbitrability can only be decided under Belgian law.55 II. the arbitrability of the dispute under the law of the forum must be taken into consideration only at the stage of recognition and enforcement of the award and not when examining the validity of the arbitration agreement (article II(1)). NOTE: The Cour de Cassation has overruled the decision of the Court of Appeal. o When the arbitrability of the dispute is considered only from the point of view of the validity of the arbitration agreement.2. The Swiss party appealed and the lower court decision was reversed. The Tribunal de Commerce found the arbitration clause invalid under Art. on the ground that under mandatory Belgian law the matter was not arbitrable (under the Statute on Unilateral Termination of Concessions for Exclusive Distributorship agreement. An issue can not be found arbitrable unless the parties agree that the issue be governed by Belgian law (Maude). Company M (Switzerland) (Court of Appeal of Brussels. 247) Facts: This case involved an exclusive distributorship agreement having its effects. o In casu. The Belgian party stated court proceedings in Belgium. 1985) (p. the parties have agreed that the contract is governed by Swiss Law. II(1) of the NY Convention. The Swiss party objected to the Court’s jurisdiction on the basis of the arbitration clause. when the issue arises before the arbitral tribunal or before a court requested to decide only on this issue (and hence independently from any enforcement proceedings). The court’s reasoning was the following: o The arbitrability of a dispute must be ascertained according to different criteria. it is sufficient – for the arbitrator or the court . Swiss law therefore applies to the question of arbitrability.e. .

i. For the enforcement of the arbitration agreement. Applying Article 177(2) Swiss Private International Law Act. The Belgium Supreme Court relied on Article V(2)(a) to refuse to recognize the award on the ground that under Belgian Law the matter was not capable of settlement by agreement and that Belgian law was mandatory. the arbitrator concluded that it was not possible to invoke Egyptian Law to contest the arbitrability of the dispute. the dispute being therefore non-arbitrable. CHAPTER III : THE ARBITRATORS III. rights and responsibilities .56 Would the Belgian courts be required under the NY Convention to recognize an award rendered in such a case? No.e. it is must be presumed that for the enforcement of the arbitration agreement also the lex fori governs the question of arbitrability. Notwithstanding this silence. the arbitrator concluded that because the seat of the arbitration was Geneva. the NY Convention refers in Article V(2)(a) to the law of the country where the enforcement is sought. Van den Berg has criticized the solution adopted in MSA v. In a case with facts similar to those of the above-mentioned case.1 The Arbitators . a German manufacturer sought recognition of a Swiss arbitral award to bar a Belgian distributor’s court action in Belgium based on mandatory Belgium Law. The contract provided for arbitration in Geneva under the ICC Rules and for Egyptian Law to be applicable. Wihtout determining whether the parties’ contract was an administrative contract. Company. b) Consultant (France) v. The Egyptian authority argued that the contract was an administrative contract and that the administrative courts well exclusively competent. His position is the following: For the enforcement of the arbitral award. 1990) Facts: The parties entered into a contract according to which the consultant had to make technical and financial studies to prepare the book of a tender for a construction project in Egypt. Egyptian Local Authority (ICC arbitral award. the lex fori. the Convention is silent to this point: Article II (2) merely states that the agreement must concern a subject matter capable of settlement by arbitration.Qualifications. Issue: Is this dispute arbitrable? Holding: The Arbitral Tribunal held that the dispute was arbitrable. it is necessary to determine to which extent the Swiss rules governing international arbitration apply to decide the issue of arbitrability and enable an arbitral tribunal to refuse to apply foreign legal provisions according to which the dispute would not be arbitrable.

potential arbitrators are expected to help the parties in their choice by disclosing any circumstances which may give rise to justifiable doubts as to their impartiality (see on p. Legislators have generally refrained from posing requirements based on groupaffiliation.1. According to Redfern/Hunter. Nationality. 270. the arbitrators enjoy rather wide powers. The ICC Rules give a certain priority to the sole arbitrator (see article 8(2)). and a limited number of grounds for setting aside or refusing recognition of the award. an award can only rarely and with difficulty be vacated on the ground of improper or unskilled behavior of the arbitrators (note that the NY Convention does not govern vacation of an award). Once selected. it may take longer. There are 2 dimensions in the neutrality: the personal level (the absence of family and business ties) and the general level (based on the group of affiliation. arbitrations are usually most effective when the arbitral tribunal is composed by 3 arbitrators. 1 or 3 arbitrators? The relative merits of these 2 options are still debated. contrary to the UNCITRAL Rules (see article 5). which are not limited by appellate level scrutiny. aricle 11(1) UNCITRAL Model Law: no person shall be precluded by reason of his nationality from acting as arbitrator).g. • • • • • • • • • . If 3 arbitrators are to be appointed. Under many national laws. the number of arbitrators must be uneven.a Note • Arbitration can provide a truly neutral ground for the settlement of dispute. Often. ethnic background).57 III. The Cour d’appel the Paris held that an arrangement of the parties to submit the dispute to 2 arbitrators and to engage a third one (an umpire) only in the event that the 2 arbitrators could not agree is contrary to French mandatory law. Guidelines may also be found in the lex arbitri. The parties can choose their arbitrators and in doing so may combine or choose between the two main types of fairness in third-party decision making: impartiality or balance. Institutional rules have shown more sensitivity to appearance of bias on the ground of nationality (e. challenge procedure. but a tribunal of 3 arbitrators is likely to prove more satisfactory to the parties and the ultimate award is likely to be more acceptable to them. Article 9(5) ICC Rules provides that the sole arbitrator or the third arbitrator shall be chosen from a country other than those which parties are nationals). Arbitral institutions often discuss those issues in practical guidelines. religion. the predominant practice it that each party appoints one of the three and that the 2 appointed arbitrators select the presiding arbitrator. in particular nationality (see e. One of the most important elements of this neutrality is the arbitrators.g. It may be more expensive. an example of the statement of independence arbitrators often have to sign). The safeguards are: scrutiny before choice. e. Neutrality is not synonymous with impartiality. It is an exterior sign or an indication of likely impartiality. The number of arbitrators: In the majority of countries.g.

which is an objective status. unless the parties have agreed otherwise beforehand.58 • Some questions emerging in the context of standards of expected behavior. independence. In other words. But should the requirements of neutrality. Examples touching on independence: • • • . the likelihood for the arbitrator to be and remain wholly equidistant in thought an action during the whole process. Thus. This can only happen as the outcome of some conduct carried in bad faith. Impartiality and Independence” • Independence is the result of the two following basic features. traditionally referred to the arbitrators. it’s appropriate for a certain amount of favorable consideration on the part of party appointed arbitrator toward the appointing party. It is acceptable that one party seek. one can be impartial without being neutral. in the light of the existing practices. Lacking such perquisites. impartiality is expected from both the partyappointed arbitrators and the presiding arbitrator. as well as rights and responsibilities of the arbitrators have an answer in the lex arbitri. in terms of legal and cultural extraction. conversely.c Considerations on neutrality. while other are beyond the legal norms. As to neutrality however. impartiality and independence also be referred to party-appointed arbitrators? According to Bernini. the arbitrators are strictly duty-bound to comply with this choice and remain fully independent. Codes of Ethics also play an important role. Unless the parties have agreed otherwise.1. the parties are free to set their rules and can choose that the arbitrators may not be neutral and therefore may not be expected to remain totally impartial and independent of the appointing party. no arbitrator may be deemed neutral if he is behaving partially. the arbitrators should decline the appointment as arbitrator. which is a subjective status to be actually tested on the context of the concrete relations existing between the arbitrators and each party. if the parties elect not to depart from the classic criteria of neutrality and impartiality. and disclosure a) Bernini: “Report on Neutrality. and Impartiality. However. which are not univocally appraised in different arbitral environments : Neutrality. greater intellectual propinquity with its appointed arbitrator. Note that the US position is that the party-appointed arbitrators are not fully neutral. III. a margin of discretion in allowing departure from the basic canon of neutrality is possible.

so long as it is limited in time and in subject matter (e.g. without possible variables concerning special factual details or circumstances. one of their first tasks it to select the presiding arbitrator. While the selection of the president is in the first instance for the party-appointed arbitrators. Lowenfeld suggests that it would be helpful if the various rule-making authorities would provide expressly a) that contacts concerning the selection of a chairman are permissible and b) that contacts after the tribunal is finally constituted are not permissible except as directed by the presiding arbitrator. the arbitrator shall also have to refrain from expressing opinions on issues which are before him for decision. The duty of impartiality demands that all arbitrators and parties enjoy the same opportunity to participate in all procedural activities. Written communications should be sent in copies to all arbitrators who should also be privy to any oral exchanges between the arbitrator(s) the party/parties. the presiding arbitrator is to be deemed a “primus inter pares”. If the arbitrator has rendered a prior opinion on specific points. they should not discuss how a candidate would react to a specific argument of the case). Once the party-appointed arbitrators are chosen.59 Generally speaking. which may lead the chairman to rely on the analysis and advice of the other party-appointed arbitrator who is trying to sort out the facts and the law fairly. it is proper that the designated arbitrator decline the appointment. The presiding arbitrator should not be a so-called arbitrator-dictator. The need for impartiality reaches its peak at the moment of the decision (arbitrators should resist any pressure from external sources. 263) • • An arbitrator is a judge. and therefore implies a minimum of prior consultation and agreement. an arbitrator who tends to act alone without prior consultation with the parties and the other co-arbitrators. affective or financial interests and ties with one party. not a member of a party’s team. attention should focus on the existence of personal. without the delegation of special powers. - • • • c) Lowenfeld. The sole subjective conviction of the arbitrator that a given circumstance is not going to alter his independence is not sufficient. The mere negative appearance may also be harmful. he looses credibility with the chairman. Communications with the parties: No arbitrator should entertain direct relations with the parties. there seems to be an unwritten rule saying that consultation between counsel and arbitrator concerning a prospective chairman is permissible. an arbitrator should not slow down the decision by adopting dilatory tactics). Pending the proceedings. “The party-appointed arbitrator in international controversies: some reflections” (p. i. an arbitrator is not supposed to approach a controversy with mind made up. when a party-appointed arbitrator seems too zealous in the defense of the party that nominated him.e. the award should remain secret before it is handed down. and such points are clearly the object of the award to be rendered. • . As a rule. While he is expected to be receptive to the position of the party that appointed him. Often.

art.1 LCIA). Moreover. There is a lack of knowledge about the personal qualities of the prospective arbitrator (does he have good management skills. is technical expertise needed). the Secretariat of the AAA. the party-appointed arbitrator can serve as a “translator” of legal culture. ICC. Some of the difficulties arise out of the different ways institutions select the arbitrators: The ICC works through national committees: for example. 9. when a French arbitrator is requested. the institutions go trough a similar process on the line of: Is the appointee neutral and independent? Does he have the right linguistic skills? Does he have the right knowledge for applying the governing law of the arbitration? Does he have the right professional expertise in the subject matter of the arbitration? Most arbitration institutions rules provide also that the appointee shall be suitable for being appointed in the arbitration in question (art.4 AAA.g.) As to the AAA. 6. “Well. When appointing arbitrators. they don’t know as much as the parties about the dispute (e. other not. in particular because the ICC appoints the arbitrators without really knowing the facts of the case. There is insufficient information known about the availability of the arbitrators for conducting the arbitration on a reasonable timetable. did you get the right arbitrator?” (p.60 • The role of the party-appointed arbitrator: The presence of a party-appointed arbitrator gives some confidence to the party (and its counsel) who appointed him that at least one of the members of the arbitral tribunal will listen to his case carefully and sympathetically. arbitrators are either appointed by the parties or by one of the international arbitration institutions (e. LCIA. III.g. provides a list to the parties from which they are invited to select their preferences (a • • • . when matters that are self-evident to lawyers from one country are puzzling to lawyers from another. (Von Mehren does not like this system. is he sound in judgment. But according to the author.1 ICC. is he up to the job of being arbitrator in this arbitration?). after having consulted the parties on the qualities they are seeking in the arbitrator. 7. art. the ICC national committee of France makes the recommendation.c How to get (or not to get) the right arbitrator (p. is he good on procedural issues. 273) • In international arbitrations. 273) a) Hacking. Some national committees are good. there is a dissatisfaction in the appointment of arbitrators by arbitration institutions for the following reasons: While the arbitration institutions know more than the parties about the arbitrators. AAA).1.

But the meeting should take place in a neutral place. The basic problem in the selection process of the arbitrators is that there is not enough information available to the parties and their advisers. Can the parties ask if the arbitrator believes in a strict interpretation of the statutes? Arbitrators generally refrain from answering such questions. the AAA has no power to refuse to make the appointment of the “party-chosen arbitrator” even if it knows that he is a lousy arbitrator. the merits of the case should not be argued and the arbitrator should. In ad hoc arbitrations. previous experience in arbitration etc). which Hacking considers as a lacuna of the AAA Rules. 2nd. The arbitrator should avoid answering hypothetical questions related to the case. but the qualities and characteristics that make an arbitrator acceptable are essentially the same. because it may be considered as a kind of psychological commitment to take such position in the arbitration.61 list of 10 arbitrators if a sole arbitrator must be appointed and a list of 15 arbitrators if a three person arbitral tribunal must be set up). Parties should consider the written publications of a potential arbitrator. the drawback in such a system is that. the parties must select in order of preference their preferred arbitrators (1st. The arbitrator with the lowest count is selected. but the community of arbitrators can provide more help in the following ways: all potential arbitrators should be willing to be interviewed by the parties wanting to appoint them. after the interview. it can end up by selecting them on the lowest common denominator. make a note and disclose it to his fellow arbitrators. Also. but no questions about the facts of the case. rather than selecting the arbitrators on the basis of the highest common denominator. Each party is given the opportunity to strike out 3 (or 5 in the case of a 3 person panel) without giving reasons. Von Mehren’s comments about the possibility to interview potential arbitrators: You can certainly ask general questions (education. According to the author. Von Merhen says that it is now a universal practice for prospective arbitrators to be willing to meet with and be interviewed by the parties who whish to select them. etc). The LCIA runs its selection on a consultation process in which the Secretariat proposes to its Board its preferred choice and the Board then decides. Parties can ask to see examples of awards written by the potential arbitrator. There are directories. methods of appointment may be different. Parties should ask for references. This make it hard for new younger and more innovative arbitrators to be selected. it is possible to ask for resumes. The same problem prevails when the parties must appoint a sole arbitrator or a third arbitrator. because this would involve a kind of psychological commitment toward such position. . • Note: Lord Hacking views the selection process in an institutional setting. Then.

For example US parties tend to be skeptical about the impartiality of party appointed arbitrators. 284) a) The IBA Rules of ethics for international arbitrators. . competent. with consequent loss of entitlement to remuneration. except in cases of willful or reckless disregard of their legal obligations. “Well. Titles should not be used at all in an international arbitral context because the recognition of these titles places both arbitrators and counsels from developing countries in a disadvantaged position. These rules seek to establish the manner in which these abstract qualities may be assessed in practice. What makes a successful arbitration is not the fact that arbitration proceedings and deliberations went smoothly because all were from the same club.1. diligent and discreet. Listening. “An American Critique of the IBA Ethics for int’l arbitrators” (p. 278) • Nathan criticizes the fact that arbitrators from developing countries and women are underrepresented in the arbitration world. independent. Introductory note (p. The IBA takes the position that international arbitrators should in principle be granted immunity from suit under national laws. observing and writing skills are far more important to an arbitrator than oral skills.e Codes of Ethics (p. The normal sanction for breach of an ethical duty is removal from office. 284) • • • • International arbitrators should be impartial. What are the right linguistic skills to qualify as arbitrator? The ability to address rally with clarity and precision and in perfect grammar. did you get the right arbitrator?” (p. but that justice was done although the deliberations were rough an bumpy. b) Coulson. The Rules reflect internationally acceptable guidelines developed by practicing lawyers from all continents. what an arbitrator needs is good inter-personal skills. Rather than management skills.62 b) Nathan. arbitrators from Academia are better qualified to be arbitrators. The Rules cannot be binding either on arbitrators or on the parties. • • • • III. but one should not confuse advocacy skills with judicial skills. 285) • The IBA Rules of Ethics state that they reflect internationally acceptable guidelines developed by practicing lawyers from all continents. Coulson says however that some of the IBA rules are in conflict with US practice and the AAAABA Code of Ethics. Often. unless they are adopted by agreement.

If such unilateral communications continue. family or social relationships which are likely to affect impartiality or which might reasonably create an appearance of bias. the remaining arbitrators may inform the innocent party. They are not strictly neutral. the AAA-ABA code allows party-appointed arbitrators to negotiate compensation with their party. reflects a more pragmatic approach. Neutral arbitrators should be independent and impartial. with integrity and fairness. In case of violation of this rule. Facts that might lead to reasonable doubts about their impartiality should be disclosed. It can therefore be costly and time-consuming. business. the court held upheld an award in a case in which the arbitrator was an attorney for the party. According to von Mehren. but it states a general presumption of non-neutrality for partyappointed arbitrators unless other specified. if there is no provision for the fees. The AAA-ABA code goes further. If such communications occur. some party-appointed arbitrators are expected to favor their appointing party’s point of view. The AAA-ABA code states that when all parties request an arbitrator to resign. unless the parties agreement provide for challenge procedure or the arbitrator decides that reason for the challenge is not substantial and that withdrawal would cause unfair delay or expense to another party and would be contrary to the end of justice.63 • • The AAA-ABA code provides for neutral and non-neutral party appointed arbitrators. with its non-neutral arbitrators.. The IBA rules require disclosures about past or present business relationships with a party or with potentially important witnesses. The IBA Rules instruct a potential arbitrator who is approached by one of the parties to make sufficient enquiries in order to determine whether there may be any justifiable doubts about his impartiality or independence. the arbitrator should do so. Note: If an arbitrator withdraws. A party-appointed arbitrator can be predisposed towards a party. in the US. But would not such a conversation oblige a prospective arbitrator to discuss the merits of the case? The IBA Rules instruct the party-appointed arbitrator to avoid unilateral communications about the case with the parties. he must inform the other arbitrators and parties of its substance. Note: In case of institutional arbitration. The IBA Rules contain no such procedures. Where one party makes such a request. Where the IBA rules state that no unilateral arrangements should be made for arbitrators’ fees. it is necessary to start the proceedings over again with the new arbitrator if a party so wishes. But is it an accurate picture of current practice? How many party-appointed arbitrators have resigned because of unilateral communications? The AAA-ABA code. In Vantage v. Thus. Commerce Tanker Corp. the arbitrator should withdraw. The partyappointed arbitrator’s disclosures need be sufficient only to describe the general nature and scope of any interest or relationship. The AAA-ABA code does not impose certain minimum obligations upon nonneutral arbitrators. including existing or past financial. The same applies in case an arbitrator dies. fees should be discussed by the • • • • • • . the appropriate initial course of action is to request the arbitrator to refrain form making such communications. a stockholder for the party. institutional rules generally provide for rules regarding fees. related to the president of the corporation and had advised on the contract. but he is obliged to act in good faith.

still in draft form. but it states a general presumption of non-neutrality for partyappointed arbitrators unless other specified. on the other hand. allowing an arbitrator to act as an advocate for the party that appoints him has adverse practical solution because it directly conflicts with the international trend against bias in commercial arbitration Holding all arbitrators to the same standard of neutrality helps to ensure the fairness of the process and at the validity of arbitral awards. unless the parties agree otherwise. • • • • b) Lutz. The revision of the AAA-ABA code. He also thinks that allowing separate fee arrangements between a party and that party’s appointed arbitrator is not appropriate. • . It will also be interesting to see whether the fiction that party-appointed arbitrators are totally impartial will survive in practice. he should normally be disqualified from any further participation in the arbitration. The IBA Rules provide that the arbitrators can make proposals for settlement. The continued sanctioning of non-neutral arbitrators creates both practical and ethical problems. Both the IBA Rules and the AAA-ABA code impose a duty of confidentiality upon the arbitrators. are free to discuss possible settlements with their party. Will these rules encourage litigation against the arbitrators? The question will be answered through experience. Another difference concerns arbitrators’ participation in settlement discussion. “Partisan arbitrators and the case against bias in int’l arbitration” (p. during and after the arbitration. and enhances confidence in the system The proposed revision would create different standards for arbitrators in domestic commercial arbitration than for those in international ones Permitting party-appointed arbitrators to act as non-neutral advocates for one side is contrary to the established and respected ethical norms of fair and impartial decision making. Arbitrators are directed not to assist in post-arbitration proceedings. discuss settlement with one party in the absence of another. recognizes and allows the existence of non-neutral arbitrators in commercial arbitration. but may act as mediator or conciliator if asked to do so by the parties.64 parties before the appointment of the arbitrators. A neutral arbitrator under the AAA-ABA code should not initiate proposals for settlement. 291) • The current AAA-ABA code provides for neutral and non-neutral party appointed arbitrators. If an arbitrator discusses settlement terms unilaterally with one party. Party-appointed arbitrators.

Responsibilities of the arbitrator towards the parties i. (pecuniary obligation). Fundamental principle: prohibition of any unilateral financial arrangement between the arbitrator and the party who nominated him. other times it can be the actual institution that has rules regarding fees – schedule of fees. 2003 Rights and Responsibilities of the arbitrators Fouchard – article: Relationships between the arbitrator and the parties and the arbitral institution . ii. The parties have three main responsibilities to the arbitrator v. The arbitrator must respect the confidentiality of the arbitration. b. This includes both expenses and fees. He must ensure that they have the opportunity to plead the case. it is worth noting that most institutions use a scale of fees that take into account the commercial amount in dispute and possibly.Fouchard describes it as a triangular relationship – btwn all three parties a. If the parties agree that they would like to have a matter dealt with in a certain period of time – does that mean that the arbitrators must carry this out even if it is not convenient for their schedule? No. The arbitrator assumes obligations to the parties and is bound to behave equitably and impartially throughout the proceeding. Equality & Impartiality: When the parties appoint arbitrators there’s a contract.assesses the relationship btwn the parties and the arbitrator – says that the arbitrator is really a judge by virtue of a contract . The arbitrator has the duty to fulfill his responsibilities with due diligence (ie reasonable time limits . In this regard. iii. Text states that the parties would have . reduce the amount of the arbitrator’s fees (page 298). if requested by the parties. the chairman of the panel is the one that really has the most control over the schedule. be regulated under National laws. iv. Less certain whether. the difficulty of the case and the time spent by the arbitrators in deciding it (page 297). and where applicable. a national judge could check.page 295 – this does not require that the arbitrator be available for an indefinite time in the future – it is not simply there for the convenience of the parties but nonetheless. must be done within a reasonable time period) VM says that in practice. This can at times. The arbitrators must carry out his task until completion unless some grave excuse (for example: he dies!). The parties must pay the arbitrator’s fees.65 October 16.

it should not be perceived as a problem at all). and to pay the arbitrator’s fees. For certain kinds of special problems. this has become less of a possible way in which to define the relationship between the parties and the arbitrator. The arbitrator has the right to continue the work until completion. The parties acting alone may not dismiss the arbitrators. it has been interpreted as a contractual relationship between the center and the arbitrator in which both are bound by the applicable arbitration rules. VM states that it would have to truly be a clear case of error – a party cannot simply allege error because they don’t like the ultimate decision. When there’s an institution involved. the parties and the institution. It must treat the arbitrator accordingly and respect the arbitrator’s distinct provisions – ie. this seems incompatible with the arbitrator’s role as adjudicator. i. The party who appoints the arbitrator does not continue to have control over the arbitrator. administration. This is a consequence of the bilateral nature of the arbitration agreement and there are several French and Italian decisions to this effect. and supervision of the arbitration. this may be done in practice but as arbitration has developed. Errors: arbitrator’s fees may be reduced or refunded in whole or in part.66 to maintain that the pre-established provisions of standard form contract were imposed on them by economic abuse. the institution should allow the arbitrator to rule on all matters – there would be an inherent interest for the ICC to get involved in matters of competence/kompetenz as the ICC has a clear interest in seeing the matter arbitrated. provide technical assistance and provide technical support (there are questions as to how far these obligations go – he notes that even if the institute goes quite far in assisting in these matters. . There is a question as to whether this relationship is actually a contractual one – can be interpreted as the center being the agent of the parties charged with the simple mandate of naming the arbitrator – OR – in other circumstances. then there is a relationship among the arbitrators. b. vii. Institution/Arbitrator: The institution is bound to carry out its obligations of organization. Agency theory: VM does not seem to like this theory – he states that there is a question as to whether the relationship between the parties and the arbitrator is contractual – certain systems assume that the relationship is really one of agency but VM says that unless the arbitrator is really performing nothing more than administrative tasks. vi.

they may not be obligated to set aside time to arbitrate the case two years later. Hyundai Heavy Industries – Queen’s Bench Commercial Court 1991 ii. Such an arrangement would be enforceable. The arbitrators seek commitment fee. HOLDING: There wasn’t a provision for a commitment fee in the agreement. We accept that the institution does not perform any acts in the adjudicative sense (and he at this point refers to article 27 of the ICC whereby the decision must be reviewed before the ICA for purposes of control that article 27 provides – can only review the decision with respect to the form and not the substance – ICA is only competent as to modifications to the form). arbitrators ask for a payment regardless of whether the parties settle. FACTS: Contract between Korean company to build a drilling rig for the Norwegian limited partnership. Arbitrators are upset by this (they have to keep their schedule open. Norwegian limited partnership rejected the rig. and the arbitrators are appointed but the parties settle. On the other hand. iii. they have to turn down other opportunities because of the expectation they would be arbitrating this case). Fouchard goes on to describe it as an innominate contract in which party. What about the arbitrator? He guarantees that he will remain impartial and that he will perform all of his duties and see the matter through to the end. VM states that this review is not judicial but more of an administrative review and it is permissible as long as the review does not go to the merits.this is a commitment fee (a fee for agreeing to be available for the arbitration. Therefore it is difficult to make a claim for a commitment fee. Arbitrator’s Fees K/S Norjarl v. Commitment fee: Assume there is an arbitration contract.67 VM says remember: the institute does not actually arbitrate. separately “undertakes to provide and does provide the other with intellectual services” (page 302). ISSUE: Are the arbitrators entitled to a commitment fee? v. He states that it is based on twofold consent: consent of the institution that names the arbitrator and sends him the rules and the consent of the arbitrator when he reads the rules and agrees to fulfill his task. whether or not the case actually goes to arbitration). iv. The parties go to arbitration. Fouchard discusses the manner in which the relationship btwn the arbitrator and the institution is contractual. To protect themselves. They simply . The arbitrators who were appointed don’t have any claim for compensation unless it was specified in the agreement. At the end of the article.

NOTE: the judge applies the principles of contract to the case at hand. viii. the arbitrators usually announce their fees to the parties but they do so after the agreement has been concluded. The issue of renumeration usually is not addressed openly. then there are no fee scales. Therefore the arbitration could not go forward. Von Mehren thinks there might be another framework to apply. but they probably do not want to object out of fear that it will anger the . HOLDING 2: No obligation to pay a commitment fee. But it would be appropriate for the arbitrators to ask for a commitment fee to set aside a specific amount of time for the parties (this goes above and beyond the original terms). they must rely on the language of the UNCITRAL rules and they might prevail. So they are not entitled to a commitment fee under the original contract. but the judge doesn’t say what it is (p. It would probably be acceptable for the Norwegian party to pay the commitment fee. the other party is not. The judge releases the arbitrators from the agreement and approves of what the arbitrators are saying. NOTE: Judge says that more precise contractual arrangements are needed for the service contracts with the arbitrators. then there are clear rules on compensation. 1. In reality. but it is not wrong for them to ask for a commitment fee now. There’s a suggestion that fees should be reasonable taking several factors into account. especially if the other party objects.68 have to do the best they can do to accommodate the parties (the original terms). Once an arbitrator has been appointed it is highly undesirable to negotiate fees or anything that affects him personally with one party. ISSUE 2: One party is prepared to pay a commitment fee. there is usually no discussion of fees at this stage. Note on Arbitrator’s fees (Varady) a. 305) VM states that the judge is emphatic about one thing: (bottom of page 308 and top pf page 309) – an arbitrator should not agree with one party re his fees and not with the other. The Norwegian party is willing to pay the commitment fee upfront. The arbitrators decided they would not accept the commitment fee from Norwegian party unless Korean party agrees so as not to expose themselves to the perception of bias. If it is an ad hoc arbitration under the UNCITRAL Rules. When the party representative or the arbitration institution approaches the potential arbitrator. but that is not what is requested. b. If it’s an institutional arbitration. 2. c. Is it permissible for one party to pay the commitment fee vii. vi. This is problematic for the parties. ix. Court says that this is not desirable before the arbitrator is nominated and it is even less desirable once he has been nominated. the Korean party objects out of fear that the arbitrators will be biased in favor of the Norwegian party.if they object.

It does not have the qualities of the adjudication. f. 197) requires the ICA to scrutinize the award and point out elements of substance. The alternative it to allow the unwilling party to stop the arbitration. States that the fundamental principle of separating the administrative and judicial tasks have been violated. They cannot decide if there is a dispute over the fees as they are one party to the dispute. ICC requires deposits be made to cover the costs of the tribunal. the task was performed mechanically. Cubic appealed on a number of grounds. e. d. The purpose is to avoid having a technical defect render the award void. 1998 (page 317) i. The French Court of first instance concluded that there was no liability on the part of the ICC and that the ICC had fulfilled all of its obligations. Provisions in the tribunal say that where one party refuses to make a payment the other party may put up the advance so the arbitration can go forward. Cubic argues that the ICC did not show promptness in resolving the dispute (it took 5 years to arbitrate the case). This may cause potential prejudice of the arbitrators. In this case. Cubic states that article 27 breaches this separation. iii. so the issue cannot go to the arbitrators. iv. Rights and Responsibilities of the Arbitral Institution Cubic Defense Systems v. The applicable law for the arbitration may provide for the adjustment of the arbitral fees. ISSUE: Is it appropriate for the ICA to review the award? Yes. Is this inconsistent with Hyundai? No because it has been accepted by the parties before hand so it is part of the original contract if they agree to abide by the ICC provisions. ICC – Court of Appeal of Paris. 27 mandates that the administrative functions be kept separate from the adjudicatory tasks. . There is a similar problem as that of Hyundai with respect to the practices of the arbitral tribunals of institutions.there is no neutral third party.69 arbitrators.the ICA is not a “court” and they are not determining the substance of the award so they are not adjudicating. ii. There is also an argument that Art. Negotiation is allowed but the authority cannot be delegated to them to make a binding decision. Article 27 of the ICC Rules (Supplement p. The arbitrators can decide their own fees and what is appropriate according to the award. v. FACTS: Parties agreed on ICC arbitration. The ICA is supposed to extend the time limits when it is appropriate to do so. which is what dragged out the arbitration. As a result. vi. parties are stuck paying whatever the arbitrators demand (and fees seem to be higher than they would be under the ICC pay scale).

Ivan Milutinovic v. The decision required an arbitration tribunal composed of three arbitrators.cannot sue the court for bad decisions. Therefore they did not carry out the arrangement that was contemplated by the arbitration agreement. 2003 Begins class by asking what is a truncated tribunal? Situation in which one of the arbitrators does not complete his functions. Cannot impose liability on the arbitrators because they did not handle the arbitration well. There are 2 situations in which we seem to have universal rules: A . ii. Now there is a provision in the ICC Rules that provides there should be no liability on the part of the arbitrators or the ICC for issues relating to the conduct of the arbitration. A few recent cases have overcome this presumption which is why the rules now contain the provision. the refusal does not go to the substance of the matter – in other words. 2-1. ISSUE: What should happen now? iii. Deutsche Babcock i. HOLDING: The Swiss Federal Court held that the matter had not been decided pursuant to the agreement of the parties.at the very end of the arbitration – once the award has been taken – we are then in a situation as above B – before evidence has been taken 1.70 vii. A new tribunal was . The dissenting arbitrator withdrew from the arbitration. This can happen for a valid reason or for an invalid reason – by invalid. FACTS: Arbitration that was scheduled to be in the final hearing. The arbitrators decided. October 23. Once the award has been taken and then – one of the arbitrators refuses to sign the award. this would not “put the award in question”. Can Arbitrators Abandon their function? a. The Yugoslavian professor felt that the majority had sacrificed truth for simplicity in light of the fact that new evidence had come to light. that this additional information should not come in before the arbitrators rendered their award. One of the parties moved to re-introduce some testimony and present some new evidence. The award is not valid. we mean a situation in which the arbitrator steps down or refuses to sign the award (as we will see herein) because he does not agree with the decision taken by the other arbitrators. In most countries arbitration is like a court proceeding. the actual decision was only made by two arbitrators.

2. 4. 3. you couldn’t proceed immediately to an award. VM – what consideration should we give due process in this case? iv. In determining whether to continue the arbitration. 1. What solution do the ICC and Schwebel propose in this situation? VM . It’s a nasty problem which parties and institutions have failed to address. Article 12: leaves it in the hands of the reconstituted tribunal to replace the arbitrator or decide to what extent the arbitration can continue.includes a specific provision on truncated tribunals.You can’t say that Schwebel’s argument of estoppel really fits anywhere here. Art 13 1998 London Court of Arbitration. RULES ABOUT THIS PROBLEM – VM asks the question whether there are any rules that regulate the matter? – there are rules in the ICC that deal with the resignation of an arbitrator but there are no rules that deal with the situation in which an arbitrator refuses to sign an award. Why isn’t this kind of problem (truncated tribunals) regulated in the arbitration agreement? It’s impossible to recreate a comparable arbitral tribunal. NOTE: Generally. No comparable provisions in the ICC Rules. Two remaining arbitrators have the right to continue and make decisions and awards. what can you say was their conduct in this matter that would favor estoppel? The fact that the party did not challenge the resignation? . one arbitrators’ refusal to sign an award is not ground for saying that the arbitration was not concluded.71 therefore established under the ICC and they had to begin over again. the resigning arbitrator either had to reconsider or he had to be replaced. the arbitration is to be considered valid. they provided for a three person tribunal. you have to start over. the two other arbitrators should consider the stage of arbitration and the reigning arbitrator’s reason for resigning. then the two arbitrators should inform the parties and the London Court of Arbitration. After all. The parties would either have to start over or they would have to agree on a way for the new arbitrators to catch up. VM asks the question as to whether the arbitrator could be forced to continue? Specific performance seems to be an impossibility in this type of a situation. If you replaced the arbitrator. REMEDY: To get an enforceable award. If the two remaining arbitrators determine not to continue the arbitration. vi. v. This case is different because a two-person tribunal was never contemplated by the parties.

the President of the ICC. Judge can intervene where there is a denial of justice as long as there is some connection with France. #5) a. Appointment and Appointing Arbitrators (p. and since the ICC has its seat in Paris. 2. COMMENT: Von Mehren thinks that the links to France through ICC does not satisfy the requirement of Article 1493 of French law. The conditions are: (1) arbitration is taking place in France or (2) French Code applies. No consideration is made of the fact that he may the arbitrator that ultimately walks out. a . VM – says that it is worthwhile looking at the Swedish attempts to deal with the problem. to only have the authority for the third arbitrator. It was not considered feasible to ask the Iranian court to make an appointment. So Israel could nominate its arbitrator and the court would make the appointment if Israel failed to do so. the French Court made the appointment on the grounds that a “denial of justice” had taken place in another country and there were ties to France. FACTS: There was an arbitration in which neither the seat was in France nor was it governed by French procedural law. May the French organization appoint an arbitrator? The arbitration clause provided for the appointing authority. The problem (according to VM) is the use of the terms “without valid cause”. d. (page 341): the new (1999) Swedish Arbitration act directly deals with with the issue of truncated tribunals at section 30. (These are the two conditions for a court to deal with an arbitration). The parties were to appoint the other two arbitrators. They sought a remedy in Israel. a link to France was established. ISSUE: Does the Paris court have the power to appoint the second arbitrator? c. if a party fails to nominate an arbitrator. The right of a party to submit their dispute to arbitration is a matter of public policy. court intervention is allowed if there is difficulty in constituting and arbitral tribunal. e. but that court refused to exercise its authority and make an appointment. HOLDING: French court can make the appointment. VM – states that there are numerous differences between the various national laws regarding the manner in which appointment is dealt with.72 How can you argue the application of the New York convention in this case? Article 5 (1)(d) – you can argue that it was not constituted pursuant to the agreement of the parties once the arbitrator stepped down. Nonetheless. Analysis: Under Article 1493 of the French Code. since they designated the ICC as the authority for the third arbitrator. b. 188). The right of arbitration is a matter of public policy and using ICC creates the link with France. the decision will then rest with the chairman. The other problem arises in the situation of the chairman walking out – section 30 states that if one of the arbitrators walks out and no clear majority has been attained. Could the ICC make the default appointment? Under Article 8(4) of the ICC Rules (See Supplement p. 357.

But Article 9(6) provides that when this comes about. The Belgian Code requires that there be formal validity and that the arrangement cannot provide a privileged position in the appointment process for the arbitration agreement. The Yugoslav requirement insists that one member of the arbitral tribunal should be from Yugoslavia. this approach would avoid the criticism that what was done in this case puts in the hands of the French an issue which should have bee regulated under the law of the seat of arbitration or under the law which governs arbitration proceedings (which in this case was not covered by international law). a. Appointing Arbitrators Chosen by the Parties. . 3. NIOC did not appoint an arbitrator. which in this case would have been the Israeli committee.73 nomination shall be made by the ICC. f. See p. A problem arose and they went to arbitration. i. So the provision providing for the appointment of the sole arbitrator should not have come into play. NIOC was supposed to appoint one arbitrator and Sapphire was supposed to appoint one. But in reality. COMMENT 2: The Belgian Code imposes certain conditions with respect to the substantive provisions of their procedural devices. the appointment should be made by the national committee. Using the ICC would take the matter back to Israel . Sapphire International Petroleum v. Sapphire appointed an arbitrator. Nonetheless. usually there is no special requirement with respect to substantive validity. But a problem arose with the request to the selection of arbitrators. ii. National Iranian Oil Company (page 358) What we have here is a decision made by a sole arbitrator. ISSUE: What should the sole arbitrator have done? Did he have the power to examine the issue himself. Sapphire withdrew its arbitration the grounds that that the default mechanism had been invoked. Does this place one of the parties (the foreign party) in a privileged position? This is an unusual requirement. 358 #7. but Israel has already to cooperate. and the two were supposed to agree on a chair. He asks what is the problem that arises here: we have a request to the Swiss federal court FACTS: There had been a contract of development and production between Sapphire and NIOC. After the President made the appointment NIOC was supposed to appoint an arbitrator but they argued that there was a problem because there wasn’t proper notice given for the time delay due to the replacement of one party by another. The default mechanism was that the President of the Swiss Federal Court should appoint a sole arbitrator. So the solution provided by the ICC Rules is not satisfactory.

although it could potentially become available. It was convenient for him to avoid the issue. It may still be appropriate for the arbitrators to address the issue of whether they have authority under the arbitration clause. shouldn’t he have to analyze whether the use of the provision was in accordance with the parties’ agreement)? Von Mehren thinks that yes. Why didn’t the sole arbitrator to decide whether he had the power or whether the default provision was applied prematurely.74 iii. then when the arbitration agreement spoke of the appointment by the President. and since he is also bound to decide the merits of the plaintiff’s claim. The stronger argument is that the provision has not yet come into force. HOLDING: The sole arbitrator has no authority to review an order of the court. This decision did not have the nature and character of a judicial decision because it was made by a judge not in his official authority but in his individual authority. then it is ambiguous if the appointment is being made in his judicial or private capacity. the law was unclear as to whether the arbitrators had the kompetenzkompetenz power to question his authority. vi. then one of the important obligations has not been satisfied and therefore is not res judicata. v. JUDICIAL v. So didn’t the sole arbitrator have a duty to evaluate the competence? Von Mehren thinks one answer is in 1967. QUESTION: Why didn’t the sole arbitrator have the ability to answer the question of whether the default provision was correctly applied? The NIOC position is that the time sequence is such that the default provision was applied prematurely. should the arbitrator rule on his authority under the arbitration agreement if the appointer did not address the issue? Aren’t arbitrators authorized to determine their adjudicatory authority? Just because a case is referred to arbitration. If he makes the appointment in his judicial capacity. iv. whose correctness it is not for him to question. Another possible answer (the one Von Mehren believes is accurate) is that the sole arbitrator really wanted to be the arbitrator so he glossed over the issue of his competence. . PRIVATE CAPACITY: If the arbitration seat had been in France and the President of the Chamber of Cassation has been asked to make the appointment. Even if the judge was in an official capacity. If his appointment will be binding. He has received the authority as a result of a binding judicial decision. would he have a duty to make a determination with respect to the validity of the appointment (ie. he does have a duty to make this determination If he doesn’t make this determination. although he shouldn’t have used this technique to avoid the issue of whether under the facts of the case the appointment provision was operative. that doesn't mean the arbitration should go ahead.

is it framed in such a manner as to make it alternative? If not. HOLDING: The Danish judge said it was not up to him to decide whether the arbitration clause was void. Hyundai Electronics (HK) He begins by asking what is the peculiarity in this case? States that there are 2 appointing authorities – this can raise a problem depending on the manner in which it is framed. . Von Mehren thinks the analysis in the Sapphire case is incomplete and unsatisfactory. the underlying contract has been set aside so the question is whether the arbitration clause must also be set aside. Von Mehren thinks that decision was based more on the idea that the arbitration wanted to arbitrate the case than on the relevant law. he was just appointing the arbitrator. NIOC objected on various grounds to the sole arbitrator’s competence. b. v. The underlying had been declared void. In Elf. determine whether he has the authority to arbitrate. The difference between the two cases. or should he just appoint someone. An appointing authority no relied upon a. NOTE: The arbitrator then rejected NIOC’s objections and declared himself competent to decide the issue. In other words. iv. and the arbitrator will then.75 vii. Conclusion: So the issue is whether the judge is supposed to assess the validity of the arbitration agreement or whether he is just supposed to appoint someone. which one will have precedence over the other? He says that this case is somewhat unusual because there are questions that arise regarding how long they should wait prior to requesting for the assistance of the ICC. the court held that if judge appoints an arbitrator. Under Sapphire. there was no attack on the validity of the contract or the arbitration clause. under the principle of KompetenzKompetenz. Philips Hong Kong (HK) v. the President of the Danish Supreme Court appointed a sole arbitrator. In Sapphire. so NIOC claimed the arbitration clause was also void. FACTS: When NIOC refused to appoint its arbitrator. ISSUE: Is it up to the judge to determine whether the arbitration clause was valid. Elf Aquitane Iran v. ii. iii. that implies that the arbitrator has the authority and the arbitrator should not analyze whether in fact he does have the authority. 4. NIOC – (page 364) i. it’s simply a question of whether the clause on default appointments had been properly carried out.

Instead. Gatoil International (Panama) v. i. v. But if the default mechanisms can be used then they must be exhausted. FACTS: Contract with an arbitration clause that provides that if a dispute arose. But the court does not have to decide this because the ICC rules provide that the ICC can appoint arbitrators without the ICC rules applying. An appointing authority that ceased to exist a. but it does examine the operative provisions as far as the ICC is concerned. then the court might have been willing to step in to appoint an arbitrator. The court does not look at the validity of the agreement to arbitrate. Probably be the HK Court because it is first in the agreement. The parties had to turn to the ICC before they could come to court. Also Gatoil says that there are no . one party has gone before the HK Court and asked the court to step in as a default mechanism for the appointment of the arbitrator. vi.76 There are complications that arise based on the payment of the fees. What id the ICC was requested to make an appointment but it hasn’t done so because it hasn’t received its fee? Court will not step in because the parties should have known about the fee when they contracted. What if one party goes to one and the other party goes to another? Might create difficulties about who has primacy in the appointing process. HOLDING: The court did not have the authority to make the appointment. NOTE: If the ICC did not have the provisions for appointment outside the rules. One party challenges the default ICC because its provisions are inconsistent with the provisions agreed to by the parties. iv. FACTS: Contract between Gatoil and NIOC with contract providing that if the two party appointed arbitrators would agree on a third arbitrator. ISSUE: Does the court have the authority to make an appointment? Should the ICC have made the appointment? iii. Then there was a discussion about the ICC. One party requested that the local HK institution make the appointment. but the ICC was never asked to make an appointment. and the institution failed to do so. ii. Either the HK Court or the ICC can make appointments. 5. but they cannot agree. This is a split default provision. NIOC (Iran) i. The President of the Appeal Court of Tehran supposed to be the default arbitrator but that court has not existed since the revolution. there are two default procedures: (1) HK institution makes an appointment of (2) ICC makes an appointment. Gatoil argues that the arbitration clause has been null and void since it was written (since the Appeal Court no longer existed) therefore the arbitration should be in England.

(the standard form contract worked into their files and they were not careful about adapting the technical provisions of the arbitration clause). Court feels Gatoil did not try hard enough to find someone. the parties seem to agree to three arbitrators under the ICC rules. In the arbitration clause. HOLDING: Yes iv. iii. Multi-Party Arbitration and the Selection of Arbitrators. . 6. Siemans AG and BKMI v. Two parties who are respondents were forced to share a single arbitrator even though their positions were not exactly the same. ii. ANALYSIS: Parties can agree to situation by expressing agreement that relates to the multi-party context. Dutco Construction i. so the agreement of the other context did not carry over. a. but it is not open to the arbitrators to reach the conclusion that by agreeing to one context you are also agreeing to another. The parties’ mutual intentions was to arbitrate.Gatoil has not exhausted its attempts to find acceptable arbitrators who are willing to go to Tehran. ANALYSIS: The argument that Gatoil cannot find arbitrators to go to Tehran is premature. The clause did not contemplate the situation in which they found themselves. ISSUE: Must the respondents share an arbitrator? iv. ii. HOLDING: No. Only after all feasible opportunities have been exhausted will the court allow the arbitration in London. Set aside the decision of the Paris Court of Appeals.77 appropriate arbitrators that are willing to go to Tehran to do the arbitration. ISSUE: was the arbitration clause valid? iii.

Exception: the ICSID system stands outside the general rules. Advantages: delay in the arbitration proceeding is minimized. ⇒ The law of the place of arbitration governs the challenge procedure. The challenge of an arbitrator can be a powerful delaying tactic. when one party seeks to set aside the award. International arbitration became more litigious in procedural aspects. van den Berg (p. 2. 1. . a party may bring a challenge before the arbitral tribunal itself and that if the arbitral tribunal rejects the challenge. It is preferable to avoid direct confrontation between the arbitral tribunal and one of the parties.78 III. modern arbitration laws provide that the court decision on the challenge is not subject to appeal. 379) ⇒ The arbitrator should always try to avoid the challenge: first. 2. he must decline the invitation to be an arbitrator if there is any objective ground to question his impartiality or independence. The Court Control: Most arbitration laws provide that a party can challenge an arbitrator during the arbitration before a court. In practice. It seeks to disconnect the process from national law and national courts. Also. if he plans to accept. although they have an inherent power to do so. the impartiality or independence of the arbitrator can be questioned before a court only after the award. since no further proceeding will take place. if there is a serious challenge. ICSID is an international convention dealing with investment by private companies in a state system. Second.3 CHALLENGES Reports on the Challenge Procedure. Once the process has concluded a final award. then the award is enforceable everywhere. therefore. ⇒ A. Interpretation of what constitutes impartiality and independence has become stricter. the challenge procedure is provided by the arbitral agreement and the governing institution. a court may have a different view. may misconceive the requirements of impartiality and independence. who are not used to arbitrate. Especially if the arbitral tribunal accepts the challenge. However. There can be no challenge to the award at the level of recognition. ⇒ The reasons for the increase of challenge procedures: 1. in accordance with the law governing the procedure of the arbitration (law of the place of arbitration). Investment can be submitted to arbitration under ICSID as it is designed to provide a neutral international form of dispute resolution for these prospects because ordinary arbitration doesn’t give the same degree of protection. it is better if a third party judges the question. Parties. he must then resign. when there is an institution involved. resulting in a refusal to enforce it. 3. in the US. Disadvantages: if the arbitral tribunal rejects the challenge. And also may influence the further conduct of the challenged arbitrator. or even a setting aside of the award. judicial review of the qualifications of arbitrators usually occurs after an award has been rendered. courts generally do not remove arbitrators before or during the arbitration proceeding. In Sweden. he must disclose all relevant information to the parties and institutions involved. To avoid delaying tactics. 4.

unless information is discovered after the appointment is made.The challenge process is important to maintain the integrity of the tribunal and the confidence in its neutrality and impartiality.79 The control of such issue is not confined to the courts of the country where the arbitration is taking place. 3. V (2)(b)). The author prefers this system. a court from one country can have different views on the impartibility compared to a court of a different country. 13). The disadvantage is that there will be delay due to the two instances decision. . due to the importance of the topic. If the challenge could be made at any time and should be decided by the courts. Exclusively by arbitral institutions: (French law) the same advantage of a oneinstance decision. The disadvantage is that. art. If more countries adopted this rule. after the court has decided this issue will no longer arise during arbitration and after the award. Also. it can also be analyzed by the foreign courts where the enforcement is attempted (NY Convention. there is no account of a decision that refused enforcement based on lack of independence or impartiality of an arbitrator. The advantage is that in case of respectable institution it is likely that the court will follow the decision. The disadvantage is that the legal status of the institution’s decision may be uncertain. 2. The court will be able to do its own examination. then a recalcitrant party could challenge. ⇒ C. . Other Procedural Aspects Some arbitration acts contain a time limit for bringing a challenge against an arbitrator. Others allow this constrain to be decided by the parties. The author believes that the State court should have a final word after the award is made. the proceedings would have to be stayed and the process would be extended indefinitely. since the examination cannot be excluded by agreement of the parties (UNCITRAL. Institutional Challenge Procedures Most arbitral institution provide for a challenge procedure within the framework of the institution. Pros and cons of the timing issue: . art. especially if enforcement is going to be in a different country. uniformity could be obtained more easily. Exclusively by a court: (Swiss Concordat Court) the advantage is that it will not have two instances.But the challenge process can be used as a delaying tactic. ⇒ B. Party appointed arbitrators: 1. in international arbitration. which must be compatible with the applicable arbitration law (law of the place of arbitration). There will be no uniformity. Challenges can be decided: 1. However. Arbitral institution with possibility of an appeal to a court: usually the challenge can be brought before the court. There are limits on parties challenging the arbitrators that they appointed.

2. The best solution would be to have the arbitral tribunal have the right to determine whether or not a proceeding should be stayed during the challenge. 3. should the proceeding be stayed or not. Usually the court reviews the challenge de novo. if you take the position that the arbitrator has no connection to the party that appointed. or whether there is a significant basis for the conclusion that there should have been a challenge. The French Act is also silent on the issue. Courts can control the exercise not only by the state where the arbitration is conducted. then you have to start the arbitration over again. that institution would naturally be based in favor . though. making the process costly. When are the challenges to arbitrators permitted and where? 1. Should be treated no different that third party arbitrator. Most arbitration laws allow for control during the arbitration. This is because this is an important issue. 13(3): is it de novo. If the arbitration goes on. Location of the Challenge: where the arbitration is located. But if the arbitration continues and the challenge is valid. a. If you leave the issue in the hands of the arbitral institution. where the award is sought to be enforced: 1. If the challenge fails. 2. then the issue remains and the model law provides for control by the court. This is rare in practice. but it is viewed as an inherent power of the court so a statutory provision is not necessary. the tactical delay is avoided. 2. Standard of Review in Challenge 1. The arbitral tribunal has a discretionary power to suspend the proceedings in the case of a challenge. The FAA does not explicitly provide for judicial control. The ICC rules are silent on the issue. but also where the recognition of the award is sought. If court control is exercised during the arbitration proceeding.80 2. what is the nature of the review that the court will conduct under Art. If such control is exercised. This view might be theoretically wrong. The basic issue is whether the control should be exercised during the arbitral proceeding.

or could the French Courts address the issue of bias? . the court had only to reassure if all the ICC rules were followed to remove the arbitrator. When you accept a challenge. Perhaps the ICC rule was not properly followed. France. The challenge failed. The party filed a suit to annul the ICC decision and claimed for damages. ⇒ The French Court gives a lot of deference to the ICC. V(2)(b): public policy objection could also be involved. which is very influential in the French legal system. there is no prejudice to the party by a decision by a biased arbitrator. Art. But that is a question of the ICC institutional arguments. which provided for settlement of all disputes by arbitration following Qatar law. Need to be strict on theses issues because they go to the integrity and the reason for the process. Qattar sought to prevent enforcement because of the bias of the arbitrator appointed by Creighton.81 of continuing the arbitration. Grounds for the challenge procedure in Art. There were three awards in Creighton’s favor. Dispute and ICC arbitration. 1999 . Creighton sought to enforce the awards in France and US. US refused on jurisdiction. 2. The Court will likely accept decisions as long as they are not unreasonable. The reason for the challenge was that the arbitrator helped Creighton’s lawyer and Creighton appointed the . The only issue that remains is whether we should fault the ICC because it leads to this result. . not of the bias of the arbitrators.Facts: There was a construction contract between Qatar and Creighton. but the objective does not go to the question whether there was bias that affected the rights of the party. 389) . In France. * State of Qatar v. ICC. The NY Convention 1. Supreme Court. Creighton LTD. ⇒ The result is not a final answer to whether or not a court must respect the determination that the tribunal can reach a verdict that the court cannot then analyze.Facts: The ICC granted a request for the removal of the party nominated arbitrator. the parties agreed to the rules so the decision is binding. Therefore.Legal issue: whether the rules of the ICC were properly observed. Paris.Decision: The court determined that the parties chose to have the ICC to decide their arbitration controversies. Would that determination be binding on the courts. then you can argue that the arbitral tribunal was not constituted according to the agreement of the parties (to have an unbiased tribunal). Challenges and Court Control * Refineries of Homs and Banias v. Court of Appeal. Courts should have greater objectivity. The ICC provides for final determination of the challenge by the arbitrators. The rules were followed. V(1)d: if an arbitration was biased by an arbitrator’s lack of impartiality. Most systems use de novo b. 1986 (p.

various laws come into play. McDonnell Douglas. There’s the law applicable to the arbitration proceeding. Therefore. The governing principle with respect to the nature of the arbitral process depends on party autonomy. in the end.Facts: Arbitration between India and McDonnell Douglas. a. the actual conduct of the arbitrator was not questioned.82 arbitrator in another arbitration and that these contacts constituted at least a basis for the appearance of bias.1. Lex Arbitri is the law that governs the procedure of the arbitration. There could be internal procedure (internal deadlines. Does this suggest that national courts are hesitant to intervene in regards to a decision made by the ICC? CHAPTER IV FOCAL POINTS IN THE ARBITRATION PROCESS IV. b. There’s the law applicable to the contract (basic choice of law with respect to substantive issues). the place of arbitration was London. ⇒ To the extent that you choose the law. hearings. The only analysis was if the. award. The Scope and Relative Importance of Lex Arbitri * India v. the award had any trace of lack of independence or impartiality. how to deal with evidence — everything procedural in the sense that a procedural code would specify - . ⇒ When dealing with the law regulating the arbitral procedure. Legal issue: Was the arbitrator bias in his decision? Decision: The French court took jurisdiction to review the issue but it was. However. There’s the law applicable to the external proceeding.Decision: The lex arbitri should be the law of the seat of the arbitration. 412) . but these are generally less important. again. But usually the parties’ choice is not made through the pre-existing norms such as the rules of arbitral institutions or rules such as UNCITRAL. There are also provisions of municipal law. Lex arbitri can also be relevant. The parties chose the law of India to govern the contract and affirmed that the arbitration shall be conducted in accordance with the procedure provided by the Indian Arbitration Act. ⇒ It is normal for the substantive law to differ from the law of the proceedings (which are usually based on the seat of the arbitration).Legal issue: What law governed the arbitration proceedings? . more than one law could be involved. . 1992 (p. which is most of the time the law of the place of arbitration. very deferential towards the ICC determination that the arbitrator was sufficiently neutral and objective to withstand the challenge that was made. PROCEDURE BEFORE ARBITRATION TRIBUNALS Selected Elements of Procedure before arbitration tribunals. Indian law would apply when it is not inconsistent with English law.

⇒ There are three kinds of law: 1. You’d have to stop the proceedings in London so you could go to India and argue there. It needs to be done with the approval of the English Court. unless the parties have agreed otherwise. The one that governs the procedure of arbitration. determined in art.83 who had to do what and the admissibility and weight of the evidence) and the external procedure (i. The one that governs the arbitration 3. Absent such an agreement. the arbitral tribunal may conduct the arbitration as it considers appropriate. the court will like to go against the agreement. which allows the parties to choose the substantive law that will govern the dispute. which are divided into two: a) internal – which can be chosen by the party. subject to the mandatory provisions of the Model Law. It contains 3 rules: 1. 418) Article 19 establishes the principle of the autonomy of the parties and the arbitrators in governing the procedural conduct of arbitration. During the deliberations of article 19. 2. In the case was the Indian Act.e. ⇒ The internal law chosen by the parties cannot go against the public policy of the external law of the place of the arbitration. relevance materiality and weigh of evidence. it was pointed out that the Article might be thought to conflict with Article 28. The question was if the tribunal would be bound to follow the substantive rules of evidence or could it decide differently. The administrability of such a decision would be so inconvenient and impractical. therefore. It was decided that the discretion of the arbitrators. 19 (2). It is the supervision enforced by the courts. In this case. The parties could refuse to arbitrate in the event the Lex Arbitri can’t be chosen. it would be very impractical. should not be affected by the choice of law applicable to the substance of the dispute under art. Guide to the UNCITRAL Model Law – H. ⇒ The contract can import certain things into English law (supervisory law) by party agreement. Holtzmann & J. where the arbitration is in London. should be avoided. the external controls/monitoring on the arbitration). . The arbitral tribunal power includes the power to determine the admissibility. The parties are free to agree on the arbitral procedure to be followed. If there is a conflict between party choice of law and public policy convenience by the court. if the parties agree that certain evidence should be inadmissible. 3. Under some legal systems. it should be respected. and the b) external – which is the national law of the place where the arbitration is being held. 28. Neuhaus (p. 2. the issues regarding evidence are considered substantive law. if you say that the law of India governs the external proceedings. but otherwise it would just be considered a defect on the contract. The one that governs the contract. As a result. and there could be conflicting local rules on party agreement.

so they might not even understand all the issues that are going to arise. Art. 18 has a description of what the terms of reference covers. 2. It depends on how the parties deal with each other and how the tribunal exercises its discretion. or immediately thereafter. 6. The differences are the following: 1. especially if the parties are not fully cooperative. less amount of knowledge. The tribunal discusses the proposals and then drafts the official terms of reference for the parties to sign. you needed a compromis to establish the authority of the arbitrator. 7. This raises a significant problem: the third party arbitrator only has a very general idea of what the dispute is about. Of course. How did the ICC come to develop the terms of reference procedure? In the days before the clause compromisoire was enforceable. The term of reference was the contract of the specific dispute that gave the arbitrator authority. In arbitration it becomes difficult to impose strict time limits. Art. even the parties haven’t gone through the full process. Also the process could take a long time. . the tribunal should establish a timetable. How the terms of reference are drawn up: they’re supposed to be drawn up by the tribunal (by the third party arbitrator). Limits the flexibility of the arbitration to deal with new issues as they come up. 5. which gives the tribunal the ability to provide for more claims. 2. 4. The terms of reference also serve the function of getting the claims and attaching amounts to then to determine the costs and charges of the ICC for the parties. 428) International trade dispute arbitration uses the civilian procedures in the admission of evidence. The analogue in other institutional arbitration is pre-trial meetings to the extent that you shape the procedure and organize the case. 1. Unless the tribunal considers it to be inappropriate. Terms of Reference A particularity of the ICC procedure: the institution is proud of having them. Timetable: 1998 Rules contain an innovation (compared to the 1988 Rules): the procedural timetable. While drawing up the terms. 19. Help in terms of compliance and enforcing the award. there should be a list of the issues to be determined. Inquisitorial nature of the proceedings – the judges are not passive. The disadvantages of the terms of reference: a. Having the parties to propose the terms of reference to the tribunal solves this problem. Today. which can make things quite difficult for American-trained lawyers.84 The Flexibility of Evidentiary Rules – Roger Ward (p. The relative absence of discovery. This problem has been removed by the 1998 ICC Rules. it requires a summary of the claims and the relief sought. such as interrogatories and depositions. So the provisional timetable becomes a hope rather than a reality. but rather an active participant in the proceedings. 3. One of the problems of arbitration is the problem of blame.

But under the old rules. b. what pieces of evidence were submitted.gives a record of what happened and who was present. 443) . what business was accomplished. 450) ICC Comparative Arbitration Practice and Public Policy in Arbitration (extract from project discussing the different legal systems) 1. If you are not in the common law arena and the parties do not have the money for stenographers. If the terms of reference broaden the scope of the arbitration it is enforceable because the parties agreed to it. P.Facts: Carte Blanche Singapore could have asked the tribunal to admit a new claim for consequential damages. But it turned out to be a good thing for Carte Blanche Singapore. . England: mainly a question of expenses. If the tribunal had done that. which is governing? Probably the terms of reference govern because they are agreed to by the parties after the arbitration clause. It could be very expensive and a skilled group of specialists. Under the ’98 Rules. the arbitrators can accept claims that fall outside the terms of reference. Countries have various approaches: a. ICC: No stenographic record in the majority of the cases. a. 449. If the terms of reference are broader than the scope of the arbitration clause. NY (1998) (p. d. So the new claim could be determined to fit in the terms of reference. P. 449. c. Records and Minutes of the Hearing (p. US: there tends to be a stenographic record. it would have been easier to include a new claim because it wouldn’t have required the consent of the other party. #2. What record would be most useful? a. Poland: Minutes kept by the proceeding arbitrator which indicate who was present. . Will not work very well. even if the parties had initially signed the terms of reference. But if the ’98 Rules had been in force. it would have been ok and the tribunal could have made an award on the claim. Minutes. or is the ’88 system better? b.Decision: The new claim did fall under the terms of reference. ⇒ The decision does not raise the question formally may have been based on the desire to save the parties money. Is this good. . the tribunal could only add claims if the parties agreed to add them. This produces a transcript. #3. ⇒ The terms of reference were very general. Far from a record of the proceedings. Carte Blanche International. 2. Unrealistic in a location outside of NY or London that does not have the conditions available in major centers. Only evidence would likely get a transcript. They interpret the terms of reference as especially broad so as to accommodate this claim of consequential damages (damages were provided for in the terms of reference).85 * Carte Blanche (Singapore) v. The terms of reference have the effect of amending the parts of the arbitration agreement that are extended. or whether one can interpret the terms of reference to encompass one particular claim.Legal issue: Has a new claim been made by Carte Blanche Singapore.

That will be looked at by the arbitrators and the parties who suggest changes. discovery would be initiated by the judges. shouldn’t it follow that the court should be prepared to give judicial assistance to a request by the arbitrator. . Presentation of the Case — Problems with Discovery (p. d. then that should be respected. This procedure is consistent with a party-driven system for getting evidence.Facts: Russian seller petitioned SDNY with respect to discovery that the party wants for use in arbitration proceedings pending in Russia and Sweden. The German court system is similar. . The parties would have to get an order from the court in order to get evidence. There would be no need to go to court because each party could go out and do discovery. Until the tribunal requests judicial assistance. Types of systems . Self-help is not appropriate.Legal issue: In arbitration. Rejected the Malev decision. In some respects it is more manageable than transcripts but it might have some defects. It would be appropriate for the arbitral tribunal to determine the contact between the party and its counsel and witnesses. the arbitral tribunal should determine whether discovery is available and the form and extent of the discovery. 462) The use of experts in regular court proceedings 1. Lawyers and judges can also comment before it is finalized. c. evidence would be arbitrator driven. self-help by the parties is not appropriate.86 b. Using this as the background. To go without an order of the arbitral tribunal and to take testimony). If there were discovery proceeding in US court. 455) Application of Technostroyexport.need to go through the appropriate channels. Experts (p. the discover proceeding would be initiated by each party. If the particular system in question says that there should not be direct contact between the counsel and the witnesses. This is a court-driven system for getting evidence.tape recording provided and a summarized minutes dictated by the arbitrators of what the witness says. The Cairo Approach. If this were in a continental European court. in the continental European system.judge gives summary of what the witness says which is showed to the witness who makes the appropriate changes. Discover is regulated by the rules of the arbitral tribunal. a foreign economic association under the laws of the Russian Federation. When it comes to arbitration. it is not permissible to do what the claimant would like (ie. Once that is done you have a statement signed by the parties that gives a good summary of what was said and done. Lawyers cannot talk to witnesses for the other side.

22) ii. 3. 4. inquisitorial system. 26. Thus we see an international standard emerging that makes the role of the tribunal vis-à-vis experts much more significant than the role of the court in expert proceedings in the US. Conclusion: the version of the continental European approach to experts has become the norm in ICA. the parties choose the experts who present their findings and opinions through written reports and testimony (direct and crossexamination). But this is not the case for arbitration. 26. protection of the public. The question remains whether the parties’ requests are honored.87 a. It is a less adversarial process. i. To represent someone in court. c. Practices in arbitration used to mirror the practices in litigation. The parties can ask them additional questions if needed. You need special legislation to establish such a situation. Representation in the proceedings: Is local counsel required? (p. The existence of the jury The same arguments for ordinary evidence (that it should be presented by direct and cross-examination when a jury is present) applies for experts. In the US system the losing party does not have to pay the expenses of the winner. 3. b. After the tribunal appointed experts have testified. i. the losing party pays for the experts called by the court. The local bar seeks to deny the right of lawyers who have not been admitted to the local bar to proceed before the local court. . Generally. In continental Europe it is the court that chooses the experts and asks them different questions. AAA Art. 2. But this is no longer the case. 22) b. The difference between arbitration and court proceedings a.27. Court in the US cannot name experts and charge the parties. 486) 1. (UNCITRAL Art. you do not have to be a member of the local bar. AAA Art. possible incompetence. These different approaches derive from the adversarial system vs. Common law: shift from party appointed experts to where the tribunal will appoint the experts and the parties would split the costs. to represent someone in an arbitration. 2. Paying the experts a. not subject to disciplinary control. you must be a member of the bar of that country (although this is breaking down in the EU). Each party bears their own costs. economic (local bar wants a monopoly). b. the parties have the option of questioning this expert and appointing their own experts. Policy for this: lack of legal background. In continental Europe. In the US. (UNCITRAL Art.

This has been legislated out to allow foreign lawyers. The arbitration hearing is confidential and must be conducted in private (this has been clearly established). disclosed documents in the arbitration and transcripts should remain private.88 a. BUT exception to the duty of confidentiality: If reasonably necessary for the protection of an arbitrating party’s rights vis-à-vis a third party that the award should be disclosed to that third party. pleadings. iv. HOLDING: In general. wanted to disclose the interim award and its reasons as well as proceedings transcripts of witness statements. Hassneh Insurance v. Mew. ANALYSIS: 1. witness statements. Singapore was trying to become an arbitration center and this shut it down before legislation was passed. Award is an identification of the parties respective rights & obligations. c. → Plaintiff sought an injunction to restrain disclosures on the grounds that it would be a breach of confidence by the defendant. The court wants to have an easily administered rule that deals with the most common needs with respect to relaxing the confidentiality. For awards to be enforced there has to be a judgment. 2. . → Limited exception to the principle of confidentiality. Otherwise. and other documents from the arbitration. therefore. But in Singapore. you have to be a member of the local bar (Turner Case) This case created quite an international uproar because it went against the common view and could influence other countries. ii.e. FACTS: An arbitral tribunal rendered an interim award in which the def. → Thus courts reproduce contents of the award in the judgment which will be public.495) i. General proposition that arbitrations are confidential. BUT Pleadings. 2003 Privacy and Confidentiality (p. was substantially unsuccessful → Defendant wanted to continue its claim against a third party and. when necessary for the protection of a party’s rights) but keeps the rest of the arbitration private? 1. i. arbitration is conducted in private based on an implied obligation (implied term of the contract). breach of duty of confidence. The award and the reasoning for the award are the only two aspects of the arbitration that justify breaking the confidentiality principle. QBD 1992 (p. 495) b. d. NOTE: Why does the court set the line where it does? Why does it allow the reasoning of the award to be public (in such circumstances. so disclosure is possible (including its reasons). iii. November 7 and 13.

where the Australian analysis seems .501) i. The Australian concern is that it is hard to draw the line between what ought to be confidential and what not. Lower court: The law doesn’t provide that disclosure of information arising in an arbitration is restricted. 1993 (p. arbitrators may be obliged to respect confidentiality under institutional or ethical rules). Confidentiality should be observed where it is compatible with the needs of real life. iii.→ Australian court rejects the “implied obligation” analysis of confidentiality. Plowman.89 2. Some countries keep confidential the facts of court cases that are not legal issues or omit the names of the parties (ex. v. → So idea of privacy is one that has application also in the field of judicial adjudication. Supreme Court of Victoria. Australian Analysis 1. Australian analysis is different from the English system. BUT arbitrators and third parties are normally not bound (However. Esso Australia v. The line drawing is purely efficiency. vi. English analysis seems more stringent & extends the scope of confidentiality. in Germany). v. As a result of the confidentiality. English vs. Supreme Court HOLDING: Australian court takes a different approach than the English court did (in the Hasnneh case). a. vii. NOTE: Von Mehren finds that this English theory is not solid enough because puts too much weight on the idea of implied obligation. Both courts agree that the issue of confidentiality is determined in part by the customs of the country. Both agree that the hearing is confidential. This standard is not clearly defined and too vague (objection that Australian court makes to the English court). → Appeal. iv. → Question to what extent the arbitration proceedings are confidential? ii. NOTE: Published awards often delete identifying information of the parties because of the confidentiality principle. Australian court doesn’t base this on an implied obligation but on Australian customs clearly established. The hearing is confidential but the confidentiality requirement does not extend further unless it can be clearly defined and it is thought by the community that the disclosure is confidential. FACTS-ISSUE: Question whether information disclosed by a party in the course of an arbitration is subject to an obligation of confidence. 1. e. there is no satisfactory official collection of arbitral awards. NOTE: Who is bound by the obligation of confidentiality? The parties in the arbitration & other people participating in the arbitration proceeding.

→ Nowadays. usually courts & arbitrators apply the lex arbitri of the place of arbitration (as a vestige of the jurisdictional theory of international arbitration). d. other than the hearing. Choice of law issues before the arbitrators (p.90 more circumstantial (based on community standards. 550) 1. Arbitrators assume obligation not to disclose confidentiality because they made a contract. does that provide the parties with a more solid ground if violation of this obligation by the arbitrators? Not really. Von Mehren thinks confidentiality problem is overblown. • Role of the lex arbitri: Facilitates & supervises the arbitration proceedings.e. → In principle. V. How would these damages be quantified? ⇒ Realistically. parties are free to choose the lex arbitri but rarely do. → If we were talking about this 75 years ago. a of NY Convention). 2. based on facts of each case) and reluctant to confidentiality (as long as no clearly defined standard). Von Mehren thinks UK position is idiosyncratic. WHY? I) Cause this violation wouldn’t prevent the award to be enforced under the NY Convention. → WHY? → Because of the anational character of international arbitration (i. we would say that ICA DOES have a forum (jurisdictional theory). I. the violation of such an obligation would have as an effect to affect the arbitrator’s reputation. Issue of jurisdiction over the parties) BUT the choice of law problems may be more complicated in arbitration. Most national courts take position of Australian court. ii) Cause it would be difficult to obtain damages under general contract law for breach of the confidentiality obligation. But of course. Party will be able to disclose if it wants to. Focus on applicable substantive law → Basically. there reputation will be wounded (real sanction for breach of confidentiality). all the rest is not really confidential. Choice of arbitration simplifies some of the problems of private international law that arise in disputes before courts (eg. because of the absence of a specific forum). • Applicable law to the agreement: Mainly problems are solved through private autonomy. So. b. . the parties are given possibility to choose substantive applicable law. c. • Applicable procedural law: Most problems solved through party autonomy (or institutional arbitration rules) → Party procedural arrangements are usually subject to the basic standards of due process. If parties sign special agreement with arbitrators on obligation of confidentiality. • The problem of mandatory law of country A (when parties have chosen law of country B). • Applicable substantive law: Mainly party autonomy. BUT question of the validity of the agreement is usually resolved by application of the law of the country were the award was made (under influence of art. and that forum would be the place of the arbitration. if arbitrators run around giving out all the information on a specific arbitration.

2. which in turn command application of a law. → Why limit the parties’ choice? To ensure that the rules chosen are reasonably ascertainable by the arbitral tribunal. c. → That’s why §1 uses term “rules of law” (as opposed to simply “laws”). 3. If no such agreement. If no such agreement. Uncitral Model Law. 1998 ICC Rules of arbitration. arbitrators apply the law under the choice-of-law rules that the arbitrators deem appropriate. Article 28: Freedom of the parties to agree on applicable substantive law. 1. Holtzmann Commentary on Model Law: Problem of selecting the rules applicable to the substance of the dispute is more complicated in ICA than it is for a domestic court or for an arbitral tribunal in a purely domestic arbitration (because in the latter case there is generally a single set of choice of law rules that govern the choice). 1961 European Geneva Convention on ICA. →Parties may give power to arbitrators to act as amiables compositeurs or to decide ex aequo et bono. Article 7: Freedom of the parties to agree on applicable substantive law. b. → Model Law (like other international conventions on ICA) provide guidelines on determination of applicable substantive law. Paragraph 2: Arbitral tribunal’s power to choose the applicable law in the absence of a designation by the parties. Expression “rules of law” covers: national law(s) of one or many States. → This approach was chosen to provide greater predictability & certainty & help ensure that the arbitral tribunal gave reasons for its choice of law. → Working group decided that arbitrators have to have recourse to choice of law rules. → Parties may give power to arbitrators to act as amiables compositeurs or to decide ex aequo et bono. Article 17: Freedom of the parties to agree on applicable substantive law.91 a. If no such agreement. rules embodied in a convention (even if not in force) BUT expression doesn’t extend to general legal principles or law developed in arbitration awards. arbitrators apply the law designated by the choice-of-law rules that the arbitrators deem applicable. Paragraph 3: Gives effect to the parties’ agreement to have the arbitral tribunal decide ex aequo et bono or as . Paragraph 1: Allows the parties to make a binding choice of law to govern the dispute. → Arbitrators may also act as amiables compositeurs under certain conditions. arbitrators apply the law under the choice-of-law rules that the arbitrators deem applicable. The working group adopted view that under this provision the parties could choose not only the body of law in force in a particular jurisdiction but also parts of other legal codes or sets of rules not in force as such elsewhere. i.

→ Occasionally reservations raised about the appropriateness of having a provision to this effect ( i) because reference to contract terms might be misleading when they are conflicting with mandatory provisions & ii) because reference to trade usage considered redundant and dangerous). ii) Provision which appears also in the Geneva Convention & iii) provision that ensures that the parties’ expectations were fulfilled. to they act as amiables compositeurs? c. → Court of Appeal of Vienna set aside the award & therefore the Court of Appeal of Paris rescinded the order for leave to enforce the award. FACTS: Norsolor.574) Norsolor (France) v. 4. French corporation. the action for leave to enforce would be deprived of its purpose.92 amiables compositeurs. In this award. . 13 ICC because allegedly arbitrators had acted as amiables compositeurs without the agreement of the parties. Therefore. By doing so they do not act as amiables compositeurs. p. 3. Pabalk (Turkey). 13 ICC has not been violated. b. ISSUE: Can the arbitrators apply the lex mercatoria as substantive law to an arbitration? If yes. The role of Lex Mercatoria (p. d. arbitrators did not apply the law of a particular country but they based their award on the lex mercatoria and relied on equity for certain issues. → Pabalk started arbitration against Norsolor in Vienna under the ICC rules & won an award for damages. provision seemed appropriate in the Model Law for several reasons. when they choose so. → Pabalk sought enforcement of the award in France by the Tribunal de Grande Instance de Paris. 574 a. → But Working Group finally decided to keep this provision. 1982): Norsolor appealed & also sought a a stay of the French proceedings pending the outcome of the decision of the Court of Appeal of Vienna (where Norsolor had instituted a parallel proceeding to set the award aside). Court of Appeal of Paris Holding (1981. → Why? i) Because provision well known. Paragraph 4: Arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. Norsolor argued violation of art. Tribunal de Grande Instance Holding (1981) : Arbitrators can apply the lex mercatoria as substantive law to an arbitration. art. → Court of Appeal of Paris granted Norsolor’s request for a stay on the ground that if the award were annulled by the Court in Vienna. → Even if this type of arbitration is not known in all legal systems. terminated an agency agreement with Pabalk.

→ Arbitration → The award is given by a arbitral tribunal sitting in Germany. Is there anything illogical with the theory that the parties can exclude the application of mandatory law of states. 1990 (p. YES. Halbout et societe Matenec v. even if the states have a connection with the underlying transaction? 1. This is not an exceptional circumstance. ANALYSIS: The parties provided that the controlling law is that of the seat of the manufacturer. Here we are talking about the application of a mandatory rule in an arbitration when the choice of law does not include the mandatory law. 2001).e. . v. Belgian law does not prevail. Distributor (Belgium). f. A mandatory rule will be observed by the court even if the parties agree otherwise. ii. HOLDING: Arbitrator held that Italian law applied to the contract & that he should disregard mandatory Belgian law provisions. NOTE: French courts have ruled that in the inverse situation (i. c. 585) i. 4. iv. When third country law involves strong public policy issues. → Question if the idea that there has to be a connection with a sovereign still persists. The Problem of Mandatory Law a. FACTS: Exclusive distributorship agreement between an Italian & a Belgian party containing an arbitration clause. French Court says NO. Epoux Hanin. (c. According to the Vienna Court (in this same case). → But then.f. According to Italian law. ICC Award. ISSUE: Should Belgian mandatory law be applied even though the contract provided for application of Italian law? iii. The contract provided for application of Italian law and jurisdiction clause refers to rules of ICC and recourse to court is excluded. g. Therefore the arbitration clause is valid. Principal (Italy) v. further question if such setting aside of the award prevents other courts from enforcing the award. then those laws should be applied along with the appropriate law of the contract. but they instead apply a national law) the award should be set aside. it was very controversial to apply rules that did not derive from a sovereign legal system of rules. NOTE: At the time the case was decided. Should arbitrators ever apply the mandatory laws of a country other than the proper law of the contract? b. Cour de cassation (1984) Holding : Reversed the decision of the Court of Appeal of Paris on the ground that –under NY Convention & French procedural law – the Court of Appeal had to determine whether French law would allow enforcement of the award independently of the Austrian ruling.93 e. where the arbitration agreement expressly grants the power to the arbitrators to decide as amiables compositeurs. The common intention of the parties cannot be disregarded except in exceptional circumstances.

it’s pretty flexible. The results of this will be case-specific. The question then becomes whether the award is enforceable. which puts the arbitrators in the position of the parties (selecting the rule of law). Lando (Ole). OR to have an approach whereby the arbitrators must follow a rule that governs how to choose the applicable law? 1. This (1) prescribes a methodology and (2) takes from the arbitral tribunal the ability to directly choose the applicable rules of law (which the ICC allows). and the arbitrator knows it. the arbitrators would determine the applicable law. e. There are some cases where there is actual fraud or offense against the law that the parties are trying to reach by their choice of the applicable law. Von Mehren thinks it’s an advantage to have the most significant connection test (proposed art. otherwise the tribunal would choose it with a provision that governs how it would select the law. or where public policy has been violated by this award. ii. Conflict-of-laws rules for arbitrators. iii. It will avoid a lot of discussion as to what system should be used. Is it preferable to have the ICC version of the rules. It would also change the result under the ICC rules whereby the arbitrators can determine directly the rules of law. When there is a conflict between what you think is morally right and proper and enforcing the clause. 1981 → Proposal on the Law Applicable to Int’l Contracts prepared by the ICC Working group. and it’s an approach that’s used by a lot . however. The arbitrators apply the law that the parties have chosen. 602. 1. What should he do? The appropriate thing would be for the arbitrator to resign.2. This proposed change would make the arbitrators more like judges. (p. d. Art. 9): Arbitrators have a right to go beyond the designation of applicable law made by the parties when there is a serious policy objection on the ground of a legal order that has not be chosen by the parties but that arises in connection with the case. Award introduces as dictum the “Lando” approach (theory exposed on p. then it would be appropriate to withdraw.600) a. By analyzing through the general approach. 5. p. It may not be enforceable in countries where mandatory law has not been applied. Lando suggests that the parties choose the applicable law. First proposal → Question raised: Should arbitrators act like parties and have the autonomy to choose the applicable law OR should they be governed by rules on how to choose the applicable law? i. iv. This. would change the UNCITRAL Rules because the arbitrators would not fill in the rules determining the applicable law.94 vi. 601).

In Europe there is a prevailing rule that the parties should not be as in control of the situation. requirements of confirmation are very rare nowadays) BUT not the second one (awards can always be set aside or refused enforcement) although the more you see judicial review to be deferential to arbitrators. Chapter V: The effects and limits of awards rendered in ICA 1. → Today. 608). If this time-limit has expired. Second proposal i. There would be self-contained finality of arbitral awards if i) award in principle enforced AND ii) award not able to be set aside or refused enforcement by any court. Question if ICA will ever become independent of national courts? Not likely. p. 9 is essentially another version of Article 7 of the Rome convention. Lando’s Article 9 is controversial because it says that the arbitrator can give effect on mandatory rules of the country if the contract or the parties have close contact to that country. → Arbitration might suffer if it becomes known that it is being used as a device for evading the public policy of states which have a governmental interest in regulating certain business transactions. the more we advance towards a full status of self-contained finality of arbitral awards. 3. tendency to defer more and more to arbitrators but national courts are still careful with matters of strong public policy & jurisdictional issues (of the arbitral tribunal). → The real question is that of the depth & degree of control that national courts exercise over awards. → But the lex arbitri may pose a timelimit within which confirmation can be sought. App. v. b.95 of court systems. Standard that is very much advocated for independence of the arbitration is: “the award is enforceable and has preclusive effects without court scrutiny”. ii. which makes it more likely that the results will be accepted by the courts. 2. awards must be confirmed to be enforceable but have preclusive effects without court scrutiny. iii. Div. This proposal permits the arbitrator to take into account and give effect to the mandatory rules of the applicable law as determined by the most significant connection test and also give effect to laws of other legal orders that have a direct and real concern with a particular situation. “In Protocom Devices Inc. (standard c. 4. Von Mehren dislikes this idea. 5. In most countries. . he thinks it is important to maintain discipline over arbitrators.1991). holder of the unconfirmed (and unconfirmable) award may not even be able to restart an arbitration proceeding upon the same claim (cf. Antonio Figueroa. ⇒ The present status of ICA satisfies in general the 1st requirement (awards have in principle effects from the moment they are rendered. → Von Mehren: Art. Recognition & enforcement can take place in all contracting states of the NY Convention without prior confirmation in the country of origin.

Domestic award OR award’s home country: Each national law has different criteria for determining whether an award is domestic or not. NY Convention steps in & provides authority that the arbitration process can claim. Domesticity of Arbitral Awards a. At the time NY Convention was adopted. judicial control over the award occurs in 2 settings: i) opposition to recognition & enforcement in a country in which the winner chooses to rely on the award. ⇒ 2ble exequatur. V of NY Convention & have practically become world law. One part of the NY Convention supports the idea that the award can be set aside: privilege the courts of the situs of the arbitration. 5 (I. → These grounds for setting aside are more or less the same as the grounds for refusing recognition & enforcement set out in art. d.1 of the NY Convention excludes domestic awards from its scope of application). home’s country award is that where award was handed down OR that under whose lex arbitri the award was rendered. In general. & ii) claim for setting aside in a country in which the award was made or that considers the award to be domestic. Since NY Convention. national legal systems may be very severe with the qualification of “home country” and. → Question if other states can recognize an award which has been set aside in another country: Art. In most countries. an award may have no home country at all.e) says that the recognition and enforcement may be refused if there is proof that the award has been set aside. → Setting aside is not regulated by the NY Convention but by national law. → But standards for setting aside are not regulated by NY Convention. award can be set aside under art. f. Judicial control over the award: setting aside i. Should awards be considered domestic.96 6. b. Grounds for challenge in recognition & enforcement proceedings are specified in art. ii) recognition of this foreign judgment that emerged from the arbitration award. I. Grounds for setting aside: no international treaty exists but strong trend toward convergence anchored in the Uncitral Model Law (Art. V of NY Convention (for recognition and enforcement). V.I. → But. 34). thus. e. → But even if there is no home country. 2. Problems pertaining to setting aside (p. 645).e by the court of which law was applied. or not? If the award is domestic then it is judged according to the laws of the state not the NY Convention (because art. there was a 2ble exequatur of arbitral awards: i) recognition of the award in the country were it was made (based on jurisdictional theory). 1. c. We continue to recognize setting aside jurisdiction : because it is desirable to have one legal order to determine whether award can be recognized & enforced. . we do not look at arbitral awards as if they exercise a sovereign’s power.

iii. → Most national laws have opted for the territorial criterion. 2. The Model Law stresses “the place of the arbitration” whereas the NY Convention refers to “the country in which the award was made”. 2. → Tendency towards permission of waiver. does “under the law of which” refer to substantive or procedural law or to the law applicable to the arbitration agreement?). Belgian & Swedish acts allow for such a waiver (under different conditions). V-I-e seems to indicate that an award may be domestic in the country where award made OR under the law of which the award was rendered (but the NY Convention doesn’t provide for grounds for setting aside an award). v. The issue of standard of review 1. 4. I-1). 675) Although both NY Convention & the Model Law use the territorial criterion. these implicit criteria for domesticity lack clarity (eg. → However. By its nature. → But the country where arbitration takes place and the country where the award may need not be the same. such as that of jurisdiction. iv. setting aside applies to awards with respect to which the arbitration process has been completed (i. ii. → National Arbitration Acts deal with the problem differently. Which awards are domestic awards? 1. Question whether the parties are allowed to broaden options of recourse → French courts have been hostile to such an expansion. p. Problem with interim awards that settle a preliminary question. This is a question of national law. . scrutiny is restricted essentially to a listed number of procedural issues. Tunisian.97 i. The Swiss. 4. If the award is domestic then it is judged according to the national laws of that country. (added from note n. as long as the process is completed with regards to that particular subject). 3. in which country is an award exactly “made”. But the question is whether a court is free to substitute its own view of the facts – and of the law – for those of the arbitrators. Usually. Model Law: opts for the territorial criterion (place of arbitration) for defining domestic awards. Is the right to seek setting aside expandable ? 1. final awards even if partial. 2. What decisions may be subject to setting aside? 1. NY Convention doesn’t apply (Art. Is the right to seek setting aside waivable ? 1.e. they formulate it differently. NY Convention indicates only indirectly the criteria for determining “domesticity”→ Art.

or under the law of which. In rare cases. Is there of setting aside to judicial decisions? Perhaps. The consequences of setting aside 1. 7. But now that the arbitration may not have any connection in the law of the place where the arbitration takes place it doesn’t make any sense to say that you can explain the phenomenon of setting aside in the same way we explain reversal in judicial proceedings. courts have invoked the norms embodied in human rights convention sin connection with arbitration proceedings. Its argument was that under the NY Convention.98 vi. This is not what has developed under the NY Convention however. iii. → Historically. US District Court. i. not within the national courts. → Different national solutions. NY Convention allows for setting aside. →The reversal would have to be within the arbitral system itself. is it appropriate to recognize and enforce. Von Mehren thinks that the issue should not be whether an award should be set aside but whether there is enforcement and recognition. One possible solution is to eliminate the setting aside mechanism (except in very rare situations. 3. International Standard Electric Corp v. An award set aside has no effects in the country where it was vacated. when there is an appellate arbitral tribunal who can review the work of the arbitral tribunal of the first instance) and rely solely on the recognition and enforcement mechanism. ii.Von Mehren thinks it is bad. p. Bridas. when there was a territorial notion of arbitration. g. Question whether the arbitrators are functus officio after the setting aside is pronounced or whether they retain jurisdiction to rehear the case. 651 i. Once the arbitration is seen as independent and self-sufficient. 2. 1990. vii. the award was made. → But not very clear analogy. then it was logical to say that there was a hierarchy with respect to the work of the arbitral tribunal. Are there relevant procedural standards superior to those of national courts? 1. the court of the place where the . iv. which consisted of the arbitrators as well as the courts of the seat of arbitration. The award may not have effect in all State-Members of NY Convention if setting aside occurred in a country in which. FACTS: ISEC petitioned to have the award (arbitration took place in Mexico and award rendered in Paris) set aside by the US courts & to refuse recognition & enforcement. Analogy for setting aside would be judicial review. the question becomes not reversal but simply.

The whole point of arbitration is that the merits of the dispute will not be reviewed in the courts. iv. what would have happened? If that third state had set aside the award. 3. the situs of the arbitration is Mexico & the governing procedural law is that of Mexico. NOTE: If they had held that the curial law that could be applied was that of another state. HOLDING: The phrase in the NY Convention “the country under the laws of which that award was made” refers to procedural law and not to substantive law. So. → Here. those non-domestic awards could still be set aside by the domestic courts. The Convention does not give priority to either jurisdiction 2. The general view is that the setting aside need not be recognized. Your courts can set aside the award).e. And since US law applied. wherever they be located. even if the other state has set the award aside. but the state where the award was made had not set aside the award. If you are either the territorial situs (ie the seat of the arbitral tribunal) or the curial situs (ie the country whose procedural law has been applied. If an award is not considered a domestic award (ex: rendered in the US but not domestic because French law applied to the arbitration). V (i. Standard of Review . NOTE: The tendency to use setting aside as a way to avoid recognition of the award is a problem that occurs more frequently in emerging countries. ISSUE: Whether the phrase in the NY Convention “the country under the laws of which that award was made” refers to procedural law or to substantive law? iii. US courts can set aside the award → Bridas: cross-petitioned to dismiss ISEC’s petition to vacate on the grounds that this Court lacks subject matter jurisdiction to grant such relief under the Convention. then what? Can the award be enforced by the US courts or not under the NY Convention? Does one of these jurisdictions have priority? 1. b. ii. c. It’s left to the discretion of the court.99 substantive law has been applied can set aside the award. This leads to tow issues: are these complications all the heritage of a different philosophy of arbitration? Does one really need setting aside or is it just a burden on the international system? 8. The state that chooses to enforce the award may do so. ii. only Mexican Courts have jurisdiction under the Convention to vacate the award. under Art. then you can use your own national law to trump Art. SUMMARY i. → Court adds that any suggestion that this phrase refers to the substantive law defies the logic both of the Convention debates & of the final text. V(1)e.

This is more than mere factual determination. once again.100 a. 2. p. v. 1984. Swiss Federal Court. 1995. FACTS: Contract signed by the Minister of Tourism of Egypt. → Question before the Paris Court of Appeals.accepted the facts and determined the law. It was a mixed question of law and fact. → ICC Award held that the Egyptian state WAS bound by the arbitration clause contained in the contract between SPP & EGOTH. iv. Southern Pacific Properties. Did the Swiss tribunal exceed its power of review? Is this an issue of law under the authority of the Swiss tribunal or is it a question of fact so that the factual finding made by the arbitrators is to be respected? iii. i. 698. The best arbitration clauses are those that eliminate all ambiguities. ISSUE: Was the state a party to the arbitration? If Egypt is a party in the arbitration. FACTS: Language of the arbitration agreement said that dispute “may be referred to arbitration” This suggests that the arbitration is a possible (with a certain time limit of 30 days after end of settlement attempts) but not obligatory. ii. Egypt v. The court adopted all the facts of the arbitration tribunal. ISSUE: Question whether the arbitration was time barred and therefore ought to be set aside. suggests the importance of clear drafting. Paris Court of Appeals. i. NOTE: Was what the court did correct? Is the court re-examining objective facts or is the court evaluating the meaning of these events? 1. Von Mehren: What one could say in favor of Swiss approach is that the court wants to be sure that the parties had agreed upon arbitration. Maran Coal (USA). Question whether the Egyptian state was a party to the arbitration. Transport Vekoma (Netherlands) v. p. But at what point has the time limit for arbitrating expired? Seller petitioned the Swiss Federal Court to set aside the award on several grounds. → Paul Friedland criticized the Swiss Supreme court for doing a sort of “second guessing” since it disagreed with the arbitrators (on the question of whether the arbitration was time barred) without having heard the testimonies. they simply gave them a different meaning. b. mainly claiming that the arbitration was time barred because the buyer had not met the 30 day contractual deadline for resorting to arbitration. NOTE: This case. does it lose the right to deny the arbitral . 694. ii. HOLDING: the 30-day time limit for arbitration starts running as soon as it becomes obvious to the parties from an objective point of view that no amicable settlement can be reached.

v. . Basically. the parties agreement on heightened standard of review doesn’t invalidate the arbitration provision because the part of it dealing with the heightened standard of review was separable of the rest. Making the analogy to judicial proceedings. but it did participate. York.101 tribunal’s jurisdiction on the basis of its State immunity jurisdiction? iii. ISSUE: Is federal court review of the arbitration agreement necessarily limited to the grounds set forth in the FAA OR can it apply greater scrutiny if the parties have so agreed? iii. you had to submit to general jurisdiction. NOTE: This is a de novo determination of the jurisdictional issue. HOLDING: Court of Appeals ruled that the minister’s signature did not express a commitment by the State to enter into the contract but rather a simple approval by the supervising authority. Texas held that if you wanted to object. Lapine Technology v.if you participate without objections then you lose the right to state immunity jurisdiction. there was no arbitration agreement binding on the State. v. → Court confirmed the award. Egypt objected all along. Dutch courts were also seized of the matter & followed the arbitrator’s judgment finding that Egypt was bound by the agreement signed by its minister (≠ French Court). Therefore. The court didn’t feel bound by any finding of the arbitration tribunal & absolutely no deference to the arbitrators. Here. 2. Part of the argument is based on the participation of Egypt in the arbitration. 1997. iv. ANALYSIS: 1. US Court of Appeals. → Sets aside the award. i. the parties provide for control by the confirming court that goes beyond what is required by the FAA. FACTS: Parties entered into an agreement that provided for arbitration and that the courts should apply a heightened judicial scrutiny in reviewing the award (review for errors of fact or law). 9. Current law: no state in the US that takes this position. NOTE: However. even the parties had provided for a heightened judicial scrutiny standard. 706. → However. You can simultaneously object to jurisdiction and defend against the claim. District Court: Held that its review of the award is necessarily limited to the grounds set forth in the FAA. vi. Kyocera Corp. ii. Can the parties provide for heightened judicial scrutiny of arbitral awards? a. p. The issue of whether the parties agreed to arbitrate is so crucial that unless the parties agreed otherwise it should be decided by the courts not by the arbitrators. If you participated you were taken to have waived your jurisdictional immunity.

vii. → This decision leads to great complications & doesn’t fit into pre-established patterns. so it can apply greater scrutiny if the parties have so agreed. And would go against the general tendency to defer to arbitration & limit review. not coercion and parties are generally free to structure their arbitration agreement as they see fit. → Arbitration under the FAA is a matter of consent. Court of appeal’s HOLDING: The court is not bound by the FAA. But they can not dictate how a court may review an arbitration decision. how and when to arbitrate. This arrangement came around because some of the European Countries had tradition that applicable law wasn’t place of arbitration but a different one. 1. vi. what. Judicial control over the award: Recognition and Enforcement Awards subject to the NY Convention Awards have practical value only if they are recognized & enforced in national courts. French Case law: Agreements seeking to expand the grounds for judicial review would be rejected in France as against public policy. → 2 standards of applicability of the Convention. NOTE: If we accept the majority’s opinion. → So. Germany & France didn’t want to give up that situation. Dissenting opinion: Parties can decide whether. Model Law: precludes use of such a clause in an arbitration agreement. The standard is known to the court (it’s the same as for bankruptcy courts) Given the policy behind the FAA (to ensure enforcement of private agreements in accordance with the agreement’s terms). Convention adopted both criteria. Question: Which awards are governed by the NY Convention? Under art. Major purpose of the NY Convention: to ensure the efficacy of awards by limiting the grounds upon which a national court could refuse to recognize or enforce an award. v. two types of awards: i) those made in the territory of a State other than the State where the recognition & enforcement of such awards are sought & ii) those not considered as domestic awards in the State where their recognition and enforcement are sought. . → The effect of that is to expand the scope of the NY Convention. result would be that the process of arbitration wouldn’t have an effective result. Party autonomy should govern 2. 1. Court should not object to this agreement. ANALYSIS: Three different views expressed in the opinion. 3. which don’t necessarily coincide. viii.102 iv.

p. 1983. o ISSUE: Whether the NY Convention is applicable before a US Court with regards to an award rendered in the US but involving two foreign entities. o US Court of Appeals: Examines whether the NY Convention covers the enforcement of the award under art. 8. German Supreme Court. Joseph Muller Corporation. So. The Court held that awards “not considered as domestic” denotes awards which are subject to the Convention not because made abroad but because made within the legal framework of another country. ii) But this award is not domestic. produce only - . I: i) Since the award was rendered in the US and enforcement was sought in the US. Here. I-3.103 NY Convention is a Universal Convention: No reciprocity requirement in principle. o Supreme Court: Denied recognition because an award rendered in an arbitrato irrituale is not an arbitral award for the purposes of the NY Convention. Sigval Bergesen v. pursuant to the NY Convention. 1981. o District Court: Held that the NY Convention applies to arbitration awards rendered in the US involving foreign interests. → The other party contends that the NY Convention doesn’t cover enforcement of an award made in the US because neither territorially a foreign award nor a non domestic award. the award is not domestic. o NOTE: Party sought enforcement under the NY Convention because longer statute of limitations (3 years to bring an action) than the FAA ( 2years). Dec. o Court of 1st instance: Denied recognition of the award. → Court adds that the fact that this award could also have been enforced under the FAA is not significant because there is no reason to assume that Congress did not intend to provide overlapping coverage between the Convention & the FAA. the case involves 2 foreign entities. therefore. o German Act 1961 which implemented the NY Convention (no longer in force) dealt with the issue of 2ble criteria → But new act uses only the territorial standard. o Facts: Action brought before German Courts under the NY Convention to enforce an award rendered in Italy in an arbitrato irrituale. 734. effort to enforce the award within the US. of Oct. now. → The language of the Convention supports not applying its provisions to proceedings that. the award doesn’t meet the territorial criterion → The award was not rendered outside the country where enforcement is sought. US Court of Appeals. o Court of Appeals: Recognized the award. p. o FACTS: Dispute between two contracting parties (one Norwegian & one Swiss). Arbitration takes place in NY & the award is in favor of Norwegian party. which seeks to enforce the award in the US. and therefore Convention applies. unless if a contracting state chooses to make the reservation of reciprocity allowed under art. o NOTE: Court extends scope of NY Convention. 741. →Party had been trying to enforce the award for over 2 years outside the US. though similar to arbitration.

ii. RAKTA. 1. iv. a. → Applying the Convention to an irrituale award would jeopardize uniformity. US District Court: Confirmed the award holding Parsons liable for breach of contract.b): The public policy exception should be read very narrowly. → Award recognized breach of contract & held Parsons liable to Egyptian corporation. 744) But if we hold such awards to be within the scope of the NY Convention. Parsons & Whittemore v. → Egyptian company claims breach of contract. → (note n°4. → Appeal. → Very theoretical exposition with no practical benefits. → Parties went to arbitration. The war ended quickly. since the award would be recognized under the NY Convention but under Italian law the irrituale award engenders only obligational effects. US Court of Appeals: Affirms lower court’s decision. Grounds under the Convention for refusing recognition and enforcement a. 18.e which speaks of the need for a binding award would still serve as a ground for not recognizing & not enforcing the award. V. o NOTE: These arbitrato irrituale awards are different than mediation. Because in mediation the parties are not obliged to accept the result whereas here they are. Most Parsons employees returned to the US rather than get the special visas necessary to stay in Egypt.2. o NOTE: Arbitrato irrituale: Provides for a procedure which is arbitral in nature but doesn’t result in an award but in a contract. 2003 1. iii. 1974 i. p. They were well along on the work when the 6-day war broke out.104 the effects of an obligation. → Parsons argued that the force majeure clause allowed them to leave and not remain on the job. if binding in the NY Convention denotes a “judgment-effect” rather than just a “contractual effect”. then art. Nov. US Court of Appeals. 14. Public Policy (Art. 1978) held that irrituale awards DO fall under the NY Convention. NOTE: Italian Supreme Court (decision of Sept. FACTS: Parsons had entered into a contract with Egyptian company. ANALYSIS: 1. One could say that there is room to accommodate the first stage of this process under the NY Convention (the process of ordering the arbitration to proceed but not the process of the award rendering). V. → BUT Von Mehren thinks that these awards can not benefit at all of the NY Convention. Bases on which enforcement could be denied (but it is finally granted). given the general pro-enforcement aim of the NY . and the award in question has only such effects. → The Convention can not go beyond the national laws & create additional arbitral awards which are incapable of execution in their state of origin.

→ Violation of national policy (not reason to deny enforcement) ≠ violation of public policy (reason to deny enforcement). Arbitration in excess of jurisdiction (V.1. NOTE: One of the 1st awards handed down by a US court after ratification by the US of the NY Convention. Court takes a favorable position towards the enforcement of the award. v. b.1. Inadequate opportunity to present a defense (i. District court properly refused to second guess the arbitrator’s decision that it had subject matter jurisdiction.2. Further. d. is available under the NY Convention. which had been developed under the FAA. Non-arbitrability (V. But the court here says that this is clearly not a case of manifest disregard for the law so it doesn’t address the decision of whether the NY Convention allows for this defense. there are other ways that evidence could have been made available. This was a question of interpretation of the contract which is the domain of the arbitrator. i. You must recognize the difficulty of scheduling a hearing that everyone will be able to attend. . Award in “manifest disregard” of the law: Raises the issue whether the defense. Court says that this is a weak argument.e.→ Very proarbitration decision. c. → Court construes very narrowly all the grounds for non-enforcement claimed by the plaintiff.c): This defense should also be narrowly interpreted.b): Argument rested on the availability of a major witness for the construction company due to a conflicting engagement. Enforcement should only be denied when it violates the state’s most basic notions of morality and justice. due process) (V. → Indicates that clearly the direction of thinking of the US judiciary was and is pro-arbitration. NOTE on “manifest disregard of the law” argument: Court rejects a close scrutiny for errors of fact or law.105 Convention. vi. e. Note: if the US had ordered Parsons not to return to Egypt.a): The concept of nonarbitrability is different in international agreements than in domestic agreements. In the context of the FAA. perhaps then the public policy exception would have applied. The court should not have to change the scheduling decisions once they have been made. manifest disregard of the law is a grounds for setting aside.

First Options case: de novo with no weight assigned to the decision)? iii. FACTS: Motion to confirm a foreign arbitration award. How much deference should be given to the arbitrator’s decision? d. → Party challenging the award raised several grounds for refusal of recognition or enforcement of the award. → The enforcing court is to apply its own law on these questions – regardless of the law the arbitrators applied in rendering their award – one might conclude that the enforcing court will be forced to consider these issues de novo.106 2. or is this the type of issue that should be left to the arbitrators? Basically. NOTE: “Manifest disregard” goes to issue of validity of arbitration agreement and not to a q of substantive law (as it did in PArsosn’s case). ANALYSIS: Is the court justified in using a deferential standard with respect to the issue of the applicability of the effects of the agreement on the authority of the tribunal? Should there be judicial de novo review of this issue.o. Mechanized Construction of Pakistan. Art. ii. V2: → De novo review. HOLDING: Court chooses to use a deferential standard → It confirms the award. Procedural Grounds under the Convention for refusing enforcement and recognition a. e. w. then courts . 1987 i. American Construction Machinery v. → But question what standard of review should be applied. arbitrators will be upheld unless manifestly wrong. These grounds are listed in Art. b. deferential to the arbitrators. v. ISSUE: What degree of weight does the court assign to the arbitrator’s determination for purposes of the action to refuse recognition and enforcement? What standard of review does the court apply (arbitrators will not be reviewed at all. V 1 & 2. Basic change btw Geneva Convention 1927 & NY Convention 1958: While the Geneva Convention placed the burden of proof on the party seeking enforcement of a foreign arbitral award & did not circumscribe the range of available defenses to those enumerated in the Convention. c. Is the arbitrator passing on the tribunal’s authority to deal with the issues? Should the court determine this issue. Highly deferential standard in substantive law issues BUT less deferential when q whether parties agreed to arbitration. US District Court. iv. it’s a jurisdictional issue (our opinion). If it is established that the parties did agree to arbitration. V1: No de novo review. or should the arbitrator be able to speak with considerable weight? This is really a jurisdictional issue. Art. the 1958 Convention clearly shifts the burden of proof to the party defending against enforcement & limited his defenses to 7 set forth in article V. deference to the arbitrator’s decision.

NOTE: On jurisdictional cases. If the court is involved in setting aside an award.1. you cannot challenge it. An example of the middle ground approach by the court towards the tribunal.it’s more difficult to challenge a de novo review in the setting aside. Egypt claims that the award is not yet binding & that it’s enforcement is suspended within the meaning of art. but they don’t say that it is de novo review either. ⇒ Matters that depend from one system to another. does that affect the standard of review? To the extent that the standard is derived from the NY Convention. V. Scope of Parties’ Submissions to Arbitration . ≠ Dutch Court found that there was an arbitration agreement binding the Egyptian State.e. the court has a higher standard of review (i. 1984 i.107 should defer more to arbitrators (since u know that parties wanted their issue to be decided by arbitration). It’s a matter for national law of the court. Dutch court takes a halfway / middle-way position: They don’t say that the burden of persuasion falls on the party that wants to establish that the authority of the tribunal included authority over the Egyptian government.e of the Convention because an action for setting aside the award was intitiated before French courts → Court answers that the mere initiation of an action for setting aside doesn’t have as a consequence that the award be considered as not binding. Court of Appeals of Paris had set aside the award in question on the basis that there was no arbitration agreement binding the Egyptian State (the minister’s signature was not binding on the Egyptian State). → Question whether Egypt is justified in invoking the grounds for refusal mentioned in art. f. V of NY Convention. Southern Pacific Properties v. g. v. Egypt has asked for refusal to enforce. iii. ii.a → Court holds that such a contention is not proven but the contrary seems to be proven by the use of the 3 verbs. Egypt. NOTE: The French CA clearly had a de novo determination of the issue. Egypt claims that there is no valid agreement. 2.even thought he NY Convention does not apply to setting aside except perhaps by analogy. If the national law is more permissive than the NY Convention. then so it goes. District Court of Amsterdam. Did not defer at all to the arbitrators. They consider a middle range whether it’s a plausible case for saying there wasn’t jurisdiction. Scale of different degrees of control.1. iv. → French court shows little deference to the arbitrators. 3. so refusal on basis of V. de novo) h. 1.

HOLDING 1: 1. In this case. ii. of whether there had been $350 million in sales & by using such broad language (“any dispute”) in the letter agreement. iii. Defendant contends that the arbitrators lacked authority to make the award in that they decided subject matter not within the scope of the agreement to arbitrate. iv. the parties had conferred arbitral authority to determine the amount of additional compensation. . iii. Kaplan. because the Kaplans did not clearly agree to submit the question of arbitrability to arbitration. If the parties submitted the arbitrability questions to arbitration. the Court of Appeals was correct in finding that the arbitrability of the dispute was subject to independent review by the courts.e. US Court of Appeals. Management & Technical Consultants SA v. 1987 i. independently c. 2. UC Court of Appeals: Affirms & enforces the award. US Supreme Court. Who has the primary power to determine arbitrability depends on what the parties decided. → Parties agree that the arbitrators had authority to determine whether the gross billings exceeded $350 million BUT they disagree on whether the arbitrators had the further authority to determine the amount of additional compensation due. ii. b. → Court finds that by agreeing to arbitrate the dec. b. then the court should give considerable leeway to the arbitrator. Courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so. a. FACTS: Petition to enforce a foreign arbitral award. then the court should decide the question just as it would decide any other question that the parties did not submit to arbitration. i. ISSUE 1: How should a district court review an arbitrator’s decision that the parties agreed to arbitrate a dispute. District Court : Enforced the foreign award. ISSUE 2: How a court of appeal should review a district court’s decision confirming or refusing to vacate an arbitration award. If the parties did not agree to submit the arbitration question itself to arbitration. NOTE: Here court doesn’t defer to the arbitrators? → Court stated that they reviewed de novo the contention that the subject matter of the arbitration lies outside the scope of the contract. First Options v. 1995 i.108 a. Parsons-Jurden Int’l. But they announce that they construe arbitral authority broadly to comport with the enforcement facilitating thrust of the Convention and the policy favoring arbitration.

→ However. Award rendered in Belgrade. If you can get a setting aside. Supreme Court of Austria 1993 i. Party might prefer to have the award set aside rather than to ask for recognition and enforcement (see p. more chances to avoid enforcement if award is set aside. → Stimulates arbitrators to think about this problem. BUT for ex. → Award was set aside by the Supreme Court of Slovenia. 1. iv. requested the Court to refuse enforcement. or Under the Law of Which. d. you will have the advantage of not being vulnerable to the enforcement acts. (There’s no review to the facts. → But no guarantee. e. A requested enforcement of the award in Austria. → So. One of the circuits wanted the appellate court to apply a looser standard when the district court upheld the arbitration because of the pro-arbitration stance of the law. 787). c.clear and makes sense. That Award was Made” a. HOLDING 2: Courts of appeal should apply ordinary standards when reviewing district court decisions upholding arbitration awards. But this is not the case. but a de novo review on the law). → NY Convention only allows (and doesn’t require) a Convention country to refuse to enforce an award that has been set aside BUT doesn’t allow a Convention country to refuse to enforce an award on the basis that another Convention country has refused to enforce it. less deference to the arbitrators & standard of review should be de novo w/ regards to the q of arbitrability. But all the other circuits rejected this idea. 4. b.109 iv. NOTE: Need to strike balance btw i) integrity of the arbitration process & ii) assure that they do their job. relying on the decision of the Slovene Supreme Court. even though award had been set aside in Slovenia. → The French statute on enforcement of foreign awards does not include the award’s . Article V-1-e so that it doesn’t operate as a separate ground for refusing to enforce a foreign arbitral award. Austrian court of 1st instance granted enforcement → CA refused enforcement → Supreme Court granted enforcement. NOTE: Arbitrators tend to want to decide the issue & tend to look to ways to do this. ii. Von Mehren likes this case. France has found a way to bypass the NY Convention. → B. Company b (Slovenia). → Court makes fundamental distinction btw jurisdictional issue & substantive law issue. An award set aside in “the Country in Which. iii. Company A v. Van den Berg argues that setting aside has the advantage of erasing the award completely. Therefore.

7 of the Convention. V is that they import grounds that are not recognized by the NY Convention but that comes from the recognition and enforcement language in Art. → Here.2 & from the fact that NY Convention has chosen not to regulate the setting aside grounds (but to defer to national law). d.1. → Egypt terminated the ct & CAS rejected the cancellation of the contract → Arbitration → Award in favor of CAS → CAS petitioned the court to recognize & enforce an arbitral award. US District Court. it can apply national law and go beyond the laws of the convention. i. award was nullified in Egypt. ii. the denial of recognition and enforcement is a matter of the discretion of the court (“recognition & enforcement may be refused”). CAS maintains all rights to the . One of the objections of setting aside procedures in Art. Relevance of enforcing State’s national arbitration law a. 2003 5. The 1961 Geneva European Convention endeavors to identify & limit the grounds on which an award can be set aside (since no unified grounds for setting aside in a treaty). V. The complexity of applying the setting aside provisions when there are political and territorial changes such as those that have occurred in Eastern Europe at the end of the last century. Note (p. It requires that a state limits its setting aside procedures to grounds that are recognized in Art. → The NY Convention requires recognition and enforcement unless there it is proven that a ground for denying recognition & enforcement under the Convention is met. what should happen? e. c. so US Court may deny recognition & enforcement. What is the law under which the award is rendered? If it is one law when the parties entered into the contract but subsequently changes. Chromalloy v. V of the NY Convention (if you had taken the recognition and enforcement route). the second state can only accept the setting aside if it was done under Art. If it is a domestic case. 1996 i. The award can only be set aside if it is a domestic case.a-d. 20 & 21. V. The advantage may also be that the award will be set aside on grounds that are not recognized by Art. Holding: Court granted the petition. v. Egypt. It says that if another state has set aside an award.1 of the NY Convention.110 having been set aside in a foreign court as a ground for nonenforcement. V. FACTS: Ct btw Air Force of Egypt & Chromalloy (US Corporation). Finally. 798): Another approach through the national arbitration clauses (ie French clause) Nov. But under art. This allows control of the setting aside procedures.

2 objections to Van der Berg’s argument: i) BUT art.111 enforcement of the award that it would have in the absence of the NY Convention → If Convention didn’t exist. ii. This court refused to follow the Chromalloy approach. But. V. vi. #9 Baker Marine i. 1. Court agreed with van den Berg’s argument that the setting aside process protects the loser from the risk of enforcement in some court → The loosing party must be afforded the right to have the validity of the award finally adjudicated in one jurisdiction → So. Q what law should decide this q. It’s likely that you could bring an action under either one. including the public policy of that country. v. FOR keeping art. so this interpretation of art. 1. e in the NY Convention. V. the grounds for refusal of enforcement under the Convention may indirectly be extended to include all kinds of particularities of the arbitration law of the country of origin). 814. ⇒ Award valid. you could still bring the other. V (cause as an award can be set aside in the country of origin on all grounds contained in the arbitration law of that country. NOTE: Arbitration clause provided that the award is final & binding & cannot be made subject to any appeal or other recourse → Q if the parties have the right to waive this right. the FAA would provide CAS w/ a legitimate claim to enforcement of the award. → Plus. P. e undermines the limited character of the grounds for refusal of art. FAA has a 4 year statute of limitations. so if one is time-barred. But on this test. b. iii. 7 of the NY Convention the same way. NOTE: Could the party with the award bring an enforcement action either under the FAA OR under the NY Convention? NY Convention has 3 year statute of limitations. V is incorporated in substance into their national laws. 7 can no longer stand. NOTE: Fce & Netherlands interpret art. NOTE: Court cites US public policy in favor of final & binding arbitration of commercial disputes as one of its justifications for refusing to recognize & give res judicata effect to the Egyptian set aside judgment. The court refused recognition and enforcement of an award because the award had been set aside where it had been made (in Nigeria). in Italy & Switzerland. ii) But does the setting aside process actually put an end to the risk of enforcement of the award against the losing party? No because the Convention provides that enforcement could still be made in some countries (see V(e). art. it may never be possible to give res judiciata effect to a foreign court judgment setting aside an award. a decision to recognize the decision of the Egyptian court would violate the clear US policy in favor of final & binding arbitration of disputes. iii. “may . iv.

On the theory of common law breach. on the award isn’t persuasive. so the arbitrator could decide on the damages according to what happened. then the court cannot review it. unenforceable under Art. Doctrine of fundamental breach: it’s as though the contract has disappeared so the limitation of damages clause (to those other than consequential) no longer applied. 821 i. iv. Review of the merits under the Convention Art. so consequential damages should be applied). Van den Berg’s argument of convenience for the loser to have one final dec. At the stade of discussion this issue arose. it was too late to negotiate. US District Court. → The Court found that the arbitrators did not exceed their authority in granting consequential damages. So long as the theory that the arbitrators chose was reasonable. therefore. 1981. . 1.1.1 Standards a. Court says that in the present case Baker Marine is not a US citizen and that therefore US court has less interest in refusing to enforce the award. → Is the award awarding consequential damages. contract was dissolved. 9: Makes setting aside limited to grounds V. it is as if the whole contract was annulled.c? iii. → So. e is a compromise. In this case the arbitrators interpreted the contract in a certain way (fundamental breach. The standard of review is extremely narrow. → French treat national & int’l awards under the same standards. V. Plus. Plus. vi. V. HOLDING: 1. FACTS: Action brought under the NY Convention for recognition and enforcement of arbitral award rendered in India. The court cannot second-guess that. at the time very much under the influence of the jurisdictional theory. 4. art.112 be”) & several cases prove that discretion of the courts. already. NY Convention: Doesn’t regulate grounds for setting aside. ISSUE: Whether the arbitral tribunal exceeds its authority in awarding consequential damages? The parties’ ct expressly excluded from damages any amount for loss profits BUT the Q of consequential damages was included in the Terms of Reference. a-d of the NY Convention. 2. vii. 6. ii. The arbitrators were supposed to interpret the contract. 1. IDI. Fertilizer Corp of India v. v. p. V. Geneva Convention – Art. Is this within the interpretation of the arbitrator? 3. Another solution to the problem: French system → 1981 legislative reform: same -standards of non enforcement for domestic awards as in NY Convention for non domestic awards.

if under Indian law.→ If parties wanted to exclude from arbitration the issue of consequential damages. they should have inserted the following in the arbitration clause: “The issue of consequential damages is not submitted to the arbitrators”. → Von Mehren: Court decides to defer to the Indian Court and await to see if they will not defer as much to the arbitrators. . Calabrian Chemicals. how one interprets the contract. Brandeis Intsel v. & Indian court sets aside the award. But they haven’t given a reasonable explanation then maybe they are acting outside the arbitration agreement and the court wouldn’t give them deference. → If it did. Manifest disregard of the law does not rise to the level of contravening public policy. US Court will defer to the Indian court. ii. iii. US District. ISSUE: Was the award made in manifest disregard for the law? 1. What if the arbitral tribunal simply said that it was appropriate to give consequential damages (without explaining that the contract has been dissolved)? a. Question here is of substantive law. 7. then the court should give deference to the arbitrators. → So this shows that although we have been talking of a strong deferral policy to the arbitrators for issues of substantive law (and NY Convention provides very limited grounds for the courts to examine substantive issues). Review of the merits for manifest disregard for the law. Can you read into the FAA (manifest disregard) a ground for refusing recognition and enforcement from Art. i. the arbitrators in this case did not act in manifest disregard of the law. V (public policy)? They are trying to equate the two. here court seems to accept that the Indian Court might not defer as much. 7.e. → Court concluded that Indian law applied to the arbitration so. 6. → Petition to confirm the award was granted. 1987 i. substantive law of a foreign nation by which the parties agreed in their contract to be bound → Even if it were available.113 5. ANALYSIS: The judge refused to read the manifest disregard language into the NY Convention. it would require a US Court to consider whether foreign arbitrators manifestly disregarded the internal. →BUT under the NY Convention courts can not examine substantive law issues. b. If their reasoning is plausible. a. FACTS: Petition to confirm an arbitral award. The court suspended the proceedings until the Indian court reached its decision. the theory of fundamental breach is erroneous.

Von Mehren on a previous exam question on the distinction between setting aside & recognition and enforcement procedure. should not be subject to review (ex. HOLDING: There are no public policy grounds on which enforcement of the award could be refused (since Swiss law applicable to the arbitration & under swiss law. ii. ⇒ Question to Prof. This illustrates the tendency to prevent the courts from invalidating the realm of the arbitral decisions. v. Review of the Merits under Art.b. c.114 b. now the question is answered. In the Parsons case. FACTS: Agreement between the parties that compensation would be paid to one party for the party’s assistance in obtaining contacts in Algeria. V. Lando would probably reach a different result: he thinks that arbitrators should take into account the mandatory laws of the other countries involved in the arbitration.2. → Von Mehren thinks the English Court would have reached a different result if the contract provided for instance bribery or smuggling for obtaining contract. this issue was left open. Hilmarton. vi. V(2)b as requiring a violation of international public policy.Public Policy Standard a. 832 i.Setting aside: simply permitted by the NY Convention but Convention doesn’t regulate the grounds for setting aside. There was no suggestion of fraud or criminal behavior but it was contrary to the fraud of Algeria. award valid).→ But here the English Court says that this situation from the point of view of England doesn’t rise to the dignity of int’l public policy. p. unless there is procedural flaw. Manifest disregard of the law is not a ground for non enforcement 8. Court seems to imply that the result might have been different if the award was a domestic award (a UK award) since in that case the Court would apply the internal public policy which is stricter. if arbitrators were behaving in a despotic fashion). QBD 1999. → So. Omnium de Traitement/Valorisation v. Von Mehren: basic philosophy of the NY Convention is that conclusions of law and fact by the arbitrators. Manifest disregard can only be a basis for non-recognition if it is brought in as a procedural flaw in the arbitration process (and not as a public policy ground). French commentators speak of the standard under NY Convention – Art. iv. .→ Arbitrator made award valid under Swiss law by not valid under Algerian law (where ct was performed). → Court applies it’s International public policy and not it’s internal public policy. ISSUE: Was such a compensation improper under the public policy ground of NY Convention? iii. .

if we eliminate this article courts will not be able any more to refuse enforcement of an award because this award would have been set aside somewhere else). 5) Should we eliminate this distinction: In other words. which has to be done by national courts.Enforcement: the special procedure of art. 1. should we amend the Convention to eliminate art. . V.115 Recognition & enforcement: Convention does regulate the grounds for refusing recognition & enforcement (Art.Recognition: can be obtained incidentally. e (i. 1. ⇒ Question if ICA has really become anational ? Arbitral process is being more and more removed from the connection w/ national systems except for the very last stage (enforcement). e should be eliminated because the ground provided for setting aside (court of situs of arbitration) is no longer as relevant. ⇒ Question on distinction between recognition & enforcement . 5 has to be followed . → Von Mehren thinks that art. V.e.

Sign up to vote on this title
UsefulNot useful