FREE ESSAY ON BUSINESS LAW

BUSINESS LAW

Dr. H. MANSOUR
BADM 403 Karim Sobh
Farida Khamis
INTERNATIONAL COMMERCIAL ARBITRATION
Outline
A. What is International Arbitration?
1. Defining Characteristics of Commercial Arbitration
2. Special Characteristics of International Commercial Arbitration
3. Legal Framework for International Commercial Arbitration
4. Institutional Arbitration Rules
5. International Arbitration Agreements
B. An Overview of the Advantages and Disadvantages of International 
Arbitration
C. An Overview of Leading International Arbitration Institutions and Rules
1. Institutional Arbitration
2. Ad Hoc Arbitration
3. Leading Arbitral Institutions:
a. International Chamber of Commerce International Court Of Arbitration
b. American Arbitration Association
c. London Court of International Arbitration
d. Other Arbitral Institutions
D. An Introduction to International Treaties and Conventions Concerning International
Commercial Arbitration
1. Geneva Protocol of 1923 and Geneva Convention of 1927
2. The New York Convention
3. The Inter-American Convention on International Commercial Arbitration
4. The ICSID Convention
5. Iran-United States Claims Tribunal
6. Bilateral Treaties
E. Choice Of Law in International Commercial Arbitration 
1. Importance of Choice of Law Issues in International Arbitration
2. Overview Of Law Applicable to the Substance of the Parties' Dispute
3. Overview of Law Applicable to the Arbitration Agreement
4. Overview of Law Applicable to the Arbitration Proceedings
5. Conflict of Law Rules
F. U.S. Legislation Concerning International Commercial Arbitration
1. Relevance of National Arbitration Legislation
2. Introduction to the Federal Arbitration Act and Other Sources
3. The Federal Arbitration Act
4. State Arbitration Laws
G. Overview of Foreign Arbitration Statutes
1. Less Supportive National Arbitration Legislation
2. Supportive National Arbitration Legislation
H. International Efforts at Harmonization of Arbitration Statutes and Rules
1. UNCITRAL Model Law on International Commercial Arbitration
2. UNCITRAL Arbitration Rules
3. IBA Supplementary Rules of Evidence
4. ABA/AAA and IBA Code of Arbitrations' Ethics
I. Sources of Information About International Arbitration
1. ICCA Yearbook of Commercial Arbitration
2. Mealey's International Arbitration Report
3. Arbitration International
4. Journal du Droit International (Clunet)
5. Collection of ICC Arbitral Awards
6. International Legal Materials
7. W. Craig, W. Park & J. Paulsson, International Chamber Arbitration
8. A. Redfern & M. Hunter, International Chamber Arbitration
9. Domke on Commercial Arbitration 
10. Van den Berg, The New York Convention of 1958 and G.Gaja, The New York Convention
11. Holtzmann & Neuhaus, Guide to the UNCITRAL Model Law on International Commercial
Arbitration
INTERNATIONAL COMMERCIAL ARBITRATION
International arbitration, like domestic arbitration, is a means by which a dispute can
be definitively resolved, pursuant to the parties' voluntary agreement, by a
disinterested, non-governmental decision-maker. Or, in the words of the U.S. Supreme
Court, an agreement to arbitrate before a specified tribunal [is], in effect, a
specialized kind of forum-selection clause that posits not only the situs of suit but
also the procedure to be used in resolving the dispute. (Scherk). There are as many other
definitions of arbitrations as there are commentators on the subject. (Redfern & Hunter)

Commercial arbitration has several defining characteristics. First, arbitration is
consensual-the parties must agree to arbitrate their differences. Second, arbitrations
are resolved by non-governmental decision-makers-arbitrators do not act as government
agents, but are private persons selected by the parties. Third, arbitration produces a
definitive and binding award, which is capable of enforcement through national courts.
Another defining characteristic of arbitration is its flexibility, which generally
permits parties to agree upon the procedures that will govern the resolution of their
dispute. As a consequence, the procedural conduct of arbitrations varies dramatically
across industrial sectors, arbitral institutions, and categories of disputes. In
particular fields, or individual cases, parties often agree upon procedural rules that
are tailor-made for their individual needs.
A side from specialized fields, commercial arbitration often bears significant
resemblances to commercial litigation: arbitration will usually involve the submission of
written pleadings and legal argument, the presentation of written evidence and (usually)
oral testimony, the application of law (in the form of judicial precedents and statutes),
and the rendition of a binding award. Nevertheless, arbitral procedures are usually less
formal than litigation, including on issues such as the amendment of pleadings, the
admissibility of evidence, and the mode of presenting legal argument and factual
material. Moreover, arbitration generally lacks various characteristics that are common
in U.S. litigation, including broad pre-trial discovery, summary judgment procedures, and
appellate review.
International commercial arbitration is similar in important respects to domestic
arbitration. As in domestic matters, international arbitration is a consensual means of
dispute-resolution, by a non-governmental decision-maker, that produces a legally binding
and enforceable ruling. In addition, however, international arbitration has several
characteristics that distinguish it from domestic arbitration.
Most importantly, international arbitration is often designed and accepted particularly
to assure parties from different jurisdiction that their disputes will be resolved
neutrally. Among other things, the parties seek a neutral decision-maker (detached from
the governmental institutions and cultural biases of either party) applying
internationally neutral procedural rules (rather than a particular national legal
regime). In addition, international arbitration is frequently regarded as a means of
mitigating the peculiar uncertainties of transnational litigation-which can include
protracted jurisdictional disputes and expensive parallel proceedings-by designating a
single, exclusive dispute resolution mechanism for the parties' disagreements. Moreover,
international arbitration is often seen as a means of obtaining an award that is
enforceable in diverse jurisdictions.
Although international arbitration is a consensual means of dispute resolution, it has
binding effect only by virtue of a complex framework of national and international law.
As we will see, international commercial arbitration is subject to a specialized legal
regime. International conventions, national arbitration legislation, and institutional
arbitration rules provide a sophisticated legal foundation for international
arbitrations.
On the most universal level, the United Nations Convention on Recognition and Enforcement
of Foreign Arbitral Awards (the New York Convention) has been ratified by virtually all
significant trading states. The Convention obliges member states to recognize and enforce
both international commercial arbitration agreements and awards, subject to limited
exceptions. Other international conventions impose comparable obligations on member
states.
In addition, most developed trading nations, and many other states, have enacted
legislation that permits enforcement of arbitration agreements and awards and judicial
support of the arbitration process. National laws in such states recognize the capacity
of parties to enter into binding agreements to arbitrate future commercial disputes,
provide mechanisms for the enforcement of such arbitration agreements (through orders to
stay litigation or to compel arbitration), and require the recognition and enforcement of
arbitration awards. In addition, modern arbitration legislation limits the power of
national courts to interfere in the arbitration process, either when proceedings are
pending or in reviewing ultimate awards. In some cases, arbitration statutes permit
limited judicial assistance to the arbitral process-such as selecting arbitrators and
arbitral forums or enforcing a tribunal's discovery orders or provisional relief.
In recent years, there have been efforts to harmonize national laws relating to
international arbitration. The UNCITRAL (infra 38-39) Model Law on International
Commercial Arbitration is the leading example; about ten nations (not including the
United States) have adopted the law to date, and others (including the United States) are
considering it. Similarly, national and international bar associations have produced
rules or codes of conduct dealing with subjects such as evidence-taking and the ethics of
arbitrators.
Much international commercial arbitration occurs pursuant to institutional arbitration
rules. The leading international arbitration institutions are the International Chamber
of Commerce, the American Arbitration Association, and the London Court of International
Arbitration, each of which has adopted its own set of rules governing the procedural
aspects of arbitration. All of these institutions, as well as another dozen or so
less-widely known bodies, supervise arbitrations when parties agree to dispute-resolution
under its auspices. In addition, the UNCITRAL Commercial Arbitration Rules are widely
used in so-called ad hoc arbitrations.
International commercial arbitration is consensual arbitration only occurs pursuant to an
arbitration agreement between the parties. Most arbitration agreements are included as
standard clauses in commercial contracts and provide for the arbitration of any dispute
that may arise in the future between the parties within a defined category. It is also
possible, although much less common, for parties to an existing dispute to agree to
settle their disagreement through arbitration.
Arbitration agreements can, and should, address a number of potentially significant
issues. These include the situs of the arbitration, the arbitration rules, the method of
appointing the arbitrators and an appointing authority, as well as the number of
arbitrators, the applicable law, and the language of the arbitration. (infra 44-45) A
carefully-drafted arbitration agreement can address each of these and other issues, and
provide the parties with a relatively efficient dispute resolution mechanism tailored to
their particular needs. A poorly-drafted arbitration agreement plants the seeds for
disputes over jurisdiction and procedure, and may be unenforceable.
Institutional arbitration rules and national law (including U.S. law) widely recognize
the principle that arbitration agreements are separable from the underlying contract in
which they appear. According to the reparability doc-trine, an arbitration clause is a
district and independent agreement, supported by the separate consideration of the
parties' exchange of promises to arbitrate. As a consequence, challenges to the
existence, validity, or legality of the underlying agreement generally do not affect the
validity of the arbitration agreement. The doctrine plays an important role in U.S. and
other courts in limiting judicial interference in the arbitration process.
Finally, under U.S. and most other national laws, certain categories of disputes or
claims are non-arbitrable - not capable of settlement by arbitration (as opposed to by
national courts). The categories of claims that are non-arbitrable vary from country to
country, but generally involve claims under statutory protections or concerning matters
of public policy.
An Overview of the Advantages and Disadvantages
of International Arbitration
By most appearances, the popularity of arbitration as a means for resolving international
commercial disputes has increased significantly over the past several decades. Despite
its apparent popularity, international arbitration has both strengths and shortcomings as
a method for resolving international commercial disputes.
First, international arbitration is often perceived as a means to obtain a genuinely
neutral decision-maker. International disputes inevitably involve the risk of litigation
before a national court, that may be biased, back-logged, or unattractive for some other
reason. Moreover, outside an unfortunately limited number of industrialized nations,
local court systems simply lack the competence, resources, and traditions of
evenhandedness to satisfactorily resolve many international commercial disputes.
International arbitration offers a theoretically competent decision-maker satisfactory to
the parties, who is, in principle, unattached to either party or any national or
international regulatory authority. On the other hand, private arbitrators can have
financial, personal, or professional relations with one party (or its counsel), which
can, in the eyes of some observers, pose the risk of even greater partiality than the
favoritism of local courts.
Second, a carefully drafted arbitration clause generally permits the consolidation of
disputes between the parties in a single forum pursuant to an agreement that most
national courts are bound by treaty to enforce. This avoids the expense and uncertainty
of multiple judicial proceedings in different national courts. (Kerr) On the other hand,
incomplete or otherwise defective arbitration clauses can result in multiple proceedings
in which the scope or enforceability of the provision, as well as the merits of the
parties' dispute, are litigated; the difficulties in constructing an effective
arbitration agreement and regime are particularly significant in multi-party disputes.
And even well-drafted arbitration agreements often cannot foreclose the expense and delay
of a litigant determined to confound the arbitral process. Moreover, a carefully-drafted
forum selection clause choosing a national court to resolve all the parties' disputes may
achieve many of the benefits of an arbitration clause.
Third, it is generally (but not always) true that arbitration agreements and arbitral
awards are more easily and reliably enforced in foreign states than forum selection
clauses or foreign court judgments. As described below, some 90 nations are signatories
to the New York Convention, which obliges contracting states to enforce arbitration
agreements and awards (subject to specified, limited exceptions). In contrast, there are
no world-wide treaties relating to either forum selection agreements or judicial
judgments-although bilateral treaties and regional agreements like the Brussels
Convention are significant. The perceived ease of enforceability of arbitral awards has
contributed to fairly substantial voluntary compliance with arbitral awards, although
there is no empirical data comparing such compliance to judicial judgments. In some
developing and other countries, there is a widespread perception that international
commercial arbitration has been developed by, and is biased towards, Western commercial
interests. (Kassis) As a consequence, national law in many countries (including much of
Latin America) has been hostile towards international arbitration, and can pose
significant obstacles to the effective enforcement of international arbitration
agreements and awards.
Fourth, arbitration tends to be procedurally less formal and rigid than litigation in
national courts. As a result, parties have greater freedom to agree on appropriate
procedural rules and timetables, select technically expert decision-makers, involve
corporate management in dispute-resolution, and the like. On the other hand, the lack of
a detailed procedural code and a sovereign decision-maker may permit party misconduct or
create opportunities for an even greater range of procedural disputes between the
parties. (Higgins, Brown & Roach)
Fifth, arbitration typically involves less extensive discovery than is common in
litigation in U.S. courts. This is generally attractive because of the attendant
reduction in expense, delay, and disclosure of business secrets. Of course, in particular
disputes, one party may desire broad discovery rights, rather than the customarily more
narrow rights available in arbitration. (infra 82)
Sixth, international arbitration is usually confidential-as to both evidentiary
proceedings and final award. This further protects business secrets and can facilitate
settlement by reducing opportunities and incentives for public posturing.
Seventh, the existence of an arbitration clause and a workable, predictable arbitral
tribunal may create incentives for settlement or amicable conciliation. The cooperative
elements that are required to constitute a tribunal, agree upon a procedural framework,
and the like can sometimes help foster a climate conducive to settlement. Indeed, parties
sometimes agree to conciliation (rather than binding arbitration) or to arbitration ex
aequo et bono (not based on the strict application of law), in a deliberate effort to
foster settlement. On the other hand, where relations are irrevocably soured, the need
for some measure of cooperation in conducting the arbitration can permit party misconduct
to greatly impede the arbitral proceedings.
Finally, arbitration has long been lauded as a prompt, inexpensive means of dispute
resolution. That can sometimes be the case, but international arbitration is also not
infrequently criticized as both slow and expensive. The difficulties in scheduling
hearing dates (with busy arbitrators, counsel, and clients in different countries), the
need to agree upon most procedural steps, and other factors often produce a fairly
stately pace. Likewise, even its proponents acknowledge that International arbitration is
an expensive process. (Wetter) Both private arbitrators (unlike judges) and arbitral
institutions (unlike courts) must be paid by the parties. And there is a wide-spread
perception that some institutional fees, charged for administrative services, are
unrealistically high and otherwise one-side.
Given (or perhaps despite) this background, it is not difficult to find enthusiastic
proponents of the arbitral process:
In the realm of international commercial transactions, arbitration has become the
preferred method of dispute resolution. Arbitration is preferred over judicial methods of
dispute resolution because the parties have considerable freedom and flexibility with
regard to choice of arbitrators, location of the arbitration, procedural rules for the
arbitration, and the substantive law that will govern the relationship and rights of the
parties. Equally vigorous are some critics, including those who regard arbitration as the
slower, more expensive alternative, (Lyons) or who conclude that arbitration sometimes
involves perils that even surpass the 'perils of the seas. (Layton)
In fact, the truth is less clear-cut and lies somewhere between these extremes: The more
enthusiastic of those sponsors have thought of arbitration as a universal panacea. We
doubt whether it will cure corns or bring general beatitude. Few panaceas work as well as
advertised. At bottom, if generalizations must be made, international arbitration is not
much different from democracy; it is nowhere close to ideal, but it is generally better
than the alternatives. To those who have experienced it, litigation of complex
international disputes in national courts is often distinctly unappealing. Despite the
frustrating procedural complexities and other uncertainties, arbitration often offers the
least ineffective way to finally settle the contentious disputes that inevitably arise
when international transactions go away.
An Overview of Leading International Arbitration
Institutions and Rules
I. Institutional Arbitration
International arbitration can be either institutional or ad boc. A number of
organizations, located in different countries, provide institutional arbitration
services. The best-known international arbitration institutions are the International
Chamber of Commerce (ICC), the American Arbitration Association (AAA), and the London
Court of International Arbitration (LCIA). Each of these organizations is described in
detail below.
These (and other) arbitral institutions have promulgated sets of procedural rules that
apply where parties have agreed to arbitration pursuant to such rules. In addition, each
arbitral institution has a staff (with the size varying significantly from one
institution to another) and a decision-making body (or appointing authority). Among other
things, institutional rules set out the basic procedural framework and timetable for the
arbitration process. In addition, such rules typically authorize the host arbitral
institution to select arbitrators in particular disputes, to resolve challenges to
arbitrators, to designate the place of arbitration, and (sometimes) to review the
arbitrator's awards to reduce the risk of un- enforceability on formal grounds. Of
course, arbitral institutions charge an administrative fee, which can sometimes be
substantial, for rendering these various services; this fee is in addition to
compensation paid by the parties to the arbitrators, which is often also set by
institutional rules.
It is fundamental that arbitral institutions themselves do not arbitrate the merits of
the parties' dispute. This is the responsibility of the particular individuals selected
by the parties or by the institution as arbitrators. Arbitrators virtually never are
employees of the arbitral institution, but are qualified private persons selected by the
parties or the orbital institution. The arbitral institution confines itself to the task
of an appointing authority, which chooses the arbitrators if the parties cannot agree.
2. Ad Hoc Arbitration
Ad hoc arbitration is not conducted under the auspices or supervision of an arbitral
institution. Instead, private parties simply select an arbitrator or arbitrators, who
resolve the dispute without institutional supervision. The parties will sometimes also
select a preexisting set of procedural rules designed to govern ad hoc arbitrations. The
United Nations Commission on International Trade Law (UNCITRAL) has published a commonly
used set of such rules. Less frequently, the parties' arbitration agreement will attempt
to set forth the relevant procedural rules or the arbitral panel will independently
formulate a special set of procedural rules, tailored to the specific needs of the
parties and their dispute. In either ad hoc or institutional arbitration, parties usually
will (and certainly should) designate an appointing authority, that will select the
arbitrators(s) if the parties cannot agree.
Both institutional and ad hoc arbitration have strengths. Institutional arbitration is
conducted according to a standing set of procedural rules and supervised, to a greater or
lesser extent, by a professional staff. This reduces the risk of procedural breakdowns,
particularly at the beginning of the arbitral process, and technical defects in the
arbitral award. Similarly, the institution lends its standing to any award that is
rendered, which enhances the likelihood of voluntary compliance and judicial
enforcement.
On the other hand, ad hob arbitration is typically more flexible and less expensive
(since it avoids often substantial institutional fees). Moreover, the growing size and
sophistication of the international arbitration bar, and the international legal
framework for commercial arbitration, has reduced somewhat the benefits of institutional
arbitrations. Nonetheless, many experienced international practitioners prefer the more
structured, predictable character of institutional arbitration, at least in the absence
of unusual circumstances arguing for an ad hoc approach. (Von Mehren)
3. Leading Arbitral Institutions
Different arbitral institutions typically offer somewhat different products. The three
leading international arbitral institutions are the ICC, the AAA, and the LCIA. Each is
briefly described below.
a. International Chamber of Commerce International Court of Arbitration
The ICC's International Court of Arbitration was historically regarded as the world's
leading international arbitral institution. In recent years, the ICC's annual intake of
new cases has varied between 300 and 350 filings. For example, in 1991 and 1992,
respectively, the ICC received 333 and 337 requests for arbitration.
Based in Paris, and founded in 1919, the ICC is a broad-based, non-governmental
institution active in international issues affecting businesses. The ICC draws its
membership from business organizations and individual companies in more than 100 nations;
in approximately 60 nations, National Committees have been organized to coordinate
membership. Beginning with a European and North American focus, the ICC now includes
participants from Asia, the Middle East, Africa, and elsewhere. Among other things, the
ICC undertakes studies of particular business and legal issues (generally with the
objective of promoting world trade and harmonizing international trade practice) and
represents the business community's view in international organizations and other for a.
The ICC has issued significant studies on such topics as the extraterritorial application
of national laws, force majeure, letter of credit terms, and the like. The ICC also
offers a variety of dispute-resolution facilities, including technical experts,
conciliation and mediation, and emergency referees.
Most important for present purposes, the ICC also offers-under the auspices of its
International Court of Arbitration-supervised and binding dispute resolution through
arbitration. The International Court of Arbitration was established in 1923. It presently
consists of some 60 members, from nearly as many countries. It meets in plenary session
once each month, with smaller administrative committee meetings three times each months.
The Court is assisted in these functions by a Secretariat, with its own 32-person legal
and administrative staff, including a Secretary General, a General Counsel, and a number
of staff attorneys.
The International Court of Arbitration has promulgated the ICC Rules of Conciliation and
Arbitration, most recently revised in 1975 and in 1988. (Cohn, The current ICC Rules are
reproduced at Appendix J.) The Rules govern the conduct of arbitrations under the control
of individual arbitral tribunals.
The ICC's International Court of Arbitration is not in fact a court, and it does not
itself decide disputes or act as an arbitrator. Rather, the Court is an administrative
committee that acts in a supervisory and appointing capacity under the ICC Rules. The ICC
International Court of arbitration's four most significant functions under the Rules are
(a) to appoint arbitrators when the parties are not able to agree on the identity of an
arbitrator; (b) to resolve challenges to an arbitrator's independence or other
qualifications; (c) to-replace arbitrators who are prevented from fulfilling their
functions or who do not comply with the ICC Rules; (d) to review draft terms of reference
(described at infra pp. 80-81) and arbitral awards, prepared by individual ICC arbitral
tribunals, for defects and inconsistencies; (e) to fix the arbitrators' remuneration; and
(f) to decide challenges to the prima facie jurisdiction of an arbitral tribunal.
Under the ICC Rules, the International Court of Arbitration exercises a more detailed
supervisory function over ongoing arbitrations than other leading arbitral institutions.
In particular, the ICC's scrutiny of terms of reference and arbitral awards is unique, as
compared to the degree of supervision exercised by most other arbitral institutions,
which has been both praised and criticized. On the other hand, as compared to the
UNCITRAL, AAA International, and LCIA Rules, the procedural provisions of the ICC Rules
are comparatively general and abstract, omitting many of the specific provisions
contained in leading alternatives.
Each ICC arbitration is assigned to a particular ICC staff lawyer. Together, with an
administrative assistance, the staff attorney handles in the first instance the
supervisory and ministerial aspects of the Court of Arbitration's duties. Among other
things, the attorney assigned to a case is responsible for ensuring that notice of the
arbitration is received by the respondent, seeing to it that the parties pay their
administrative costs, and providing preliminary comments and recommendations to the Court
concerning issues such as prima facie jurisdiction, draft awards, or challenges to
arbitrators.
In appointing arbitrators, the Court typically will request the views of the relevant
National Committees of the ICC, although Article 2 (6) permits selection of arbitrators
from countries without a national chairman if no party objects. National Committees often
maintain lists of potential arbitrators, from which proposals will be made. Except where
a proposed candidate is unqualified or partial, the Court will typically adopt the
National Committee's proposal.
While enjoying a first-class reputation, the ICC has sometimes been criticized for
selecting arbitrators from a narrow circle of candidates and for having stagnated
somewhat in recent years. The ICC is also widely-regarded as charging unusually high
administrative fees, in order to support its centralized staff. The ICC's fees are
generally based primarily upon the amount in dispute and the number of arbitrators; the
currently applicable table of fees is excerpted in Appendix J. Moreover, the ICC demands
substantial advance payments of fees, which are held interest-free until disbursement.
Particularly in smaller disputes, the ICC's fees can be uneconomic. (Wetter)
b. American Arbitration Association
The American Arbitration Association, based in New York, was founded in 1926. In terms of
caseload and amounts in dispute, the AAA describes itself as the world's largest arbitral
institution. It administers more than 60,000 arbitrations or other forms of alternative
dispute resolution each year, with specialized rules for numerous different industries.
Outside the United States, however, the AAA is often seen as a national institution, and
it has encountered difficulties appealing to non U.S. companies and counsel. In 1991 and
1992, the AAA had international caseloads of 262 and 204 new filings respectively.
In recent years the AAA has sought to broaden its appeal, particularly among
non-Americans. Among other things, in 1991, the AAA promulgated a new set of rules
designed specifically for international arbitrations (reproduced in Appendix I). The AAA
International Arbitration Rules were based on extensive consultations with practicing
lawyers and others. The rules were based principally on the UNCITRAL Rules, and were
intended to permit a maximum of flexibility and a minimum of administrative supervision.
The AAA appoints a case administrators for each arbitration, who can play an important
role in early stages of an arbitration; in international cases, the AAA endeavors to
appoint administrators with prior international experience. In contrast to the ICC,
however, the AAA has a less substantial administrative/legal staff and it plays a much
less significant on-going supervisory role in the conduct of arbitrations. In particular,
there is no decision as to prima facie jurisdiction by the AAA and no review of terms of
reference, draft awards, or other decisions by arbitrators.
Parties are free to mutually agree upon arbitrators, or methods of selecting arbitrators,
in AAA arbitrations. If the parties cannot agree, the AAA will act as appointing
authority. After consultation with the parties, the AAA will select an arbitrator,
typically from existing lists of prospective arbitrators maintained by the AAA.
Particularly in international cases, every effort is made to identify an arbitrator with
appropriate experience.
The AAA also recently revised its fee schedule. Under the revision, a small advance
payment (filing fee) to the AAA is required. Subsequent payments are based on the number
of days of hearings (currently $150-200 per hearing day), plus processing fees payable
periodically (currently $150-200 for each 90 days). The fees for the arbitrators are left
to agreement between the parties and tribunal. They are generally based on hourly or
daily rates, rather than on the ICC's percentage of the amount in dispute.
c. London Court of International Arbitration
The London Court of International Arbitrations is, by a fairly substantial margin, the
second most popular European arbitration institution. Founded in 1892, and conscious of
its claim to be the world's oldest existing arbitral institution, the LCIA historically
had a distinctly English focus. In recent years, that has changed somewhat, in part
through a conscious effort commenced in 1985 to broaden its caseload and clientele. In
1993, the LCIA selected its first non-English president-Dr. Karl-Heinz Bockstiegel-and it
now limits the number of English members of its Arbitration Court.
Although the LCIA is formally independent, it is sponsored by the London-based Chartered
Institute of Arbitrators, the Chamber of Commerce and Industry, and the Corporation of
the City of London. The Chartered Institute provides training programs for arbitrators
and maintains more than 30 panels of arbitrators with particular specialties. More than
6,000 individuals are listed as qualified arbitrators by the Chartered Institute of
Arbitrators. LCIA arbitrators are frequently drawn from these lists. Historically, in
international commercial arbitrations, senior English lawyers (and particularly Queen's
Counsel and other barristers) constituted the majority of LCIA appointments. In recent
years, however, the LCIA's effort to internationalize its focus has been reflected in
more diverse appointments.
Like the ICC and AAA, the LCIA does not itself function as an arbitral tribunal, but
instead administers a set of arbitration rules (reproduced in Appendix K) and appoints
arbitrators. As with the AAA, the LCIA does not maintain a legal and administrative staff
comparable to that of the ICC. Rather, the President is more closely involved in
selecting arbitrators, who are then not subjected to the same sort of step-by-step
oversight that occurs under the ICC rules. Likewise, there is no LCIA review of draft
awards or terms of reference.
The LCIA's caseload is substantially smaller than that of either the ICC or the AAA and
it has more limited resources for promoting its services than either of those
competitors. In 1992, it had a new case intake of approximately 60 cases. The LCIA's
approach to administrative fees is similar to that of the AAA, with periodic payments
during the course of the arbitration, based on tasks actually performed, rather than the
ICC's requirement of substantial advance payments based largely upon the amount in
dispute.
d. Other Arbitral Institutions
In addition to the AAA, ICC, and LCIA, numerous small arbitral institutions exist. Among
the better known are the International Center for the Settlement of Investment Disputes
(ICSID), the Inter-American Commercial Arbitration Commission (IACAC), the Arbitration
Institute of the Stockholm Chamber of Commerce, the Arbitral Center of the Federal
Economic Chamber in Vienna, the Hong Kong International Arbitration Center, the German
Arbitration Institute, the Cairo Regional Center and the Regional Center for Arbitration
at Kuala Lumpur.
An Introduction to International Treaties and Conventions Concerning International
Commercial Arbitration
Industrialized trading nations have long sought to establish a stable, predictable legal
environment in which international commercial arbitration can occur. Because national
arbitration laws have varied, and still vary, considerably, substantial uncertainties
often attend the enforcement of international Arbitral agreements and awards. To reduce
these uncertainties, major trading nations have entered into international treaties and
conventions designed to facilitate the transnational enforcement of arbitration awards
and agreements.
International agreements concerning commercial arbitration originally took the form of
bilateral treaties. Later, multilateral conventions sought to facilitate international
arbitration by encouraging the recognition of arbitration agreements and awards. The
first such modern convention was the Montevideo Convention, signed in 1889 by various
Latin American states. Like other early efforts in the field, the Montevideo Convention
attracted few signatories and had little practical impact.
1. Geneva Protocol of 1923 & Geneva Convention of 1927
In 1923, at the behest of the International Chamber of Commerce, the Geneva Protocol of
1923 was adopted under the auspices of the League of Nations. The Protocol was ultimately
ratified by the United Kingdom, Germany, France, Japan, India, Brazil, and about a dozen
other nations. Although the United States did not ratify the Protocol, the nations that
did represented a very significant portion of the international trading community at the
time.
The Protocol's primary focus was to require the enforcement of arbitration agreements
(with respect to both existing and future disputes). In Addition, the Protocol also
sought to facilitate the enforceability of Arbitral awards, although it addressed only
the enforcement of awards within the state where they were made.
The Protocol was augmented by the Geneva Convention for the Execution of Foreign Arbitral
Awards of 1927. The Geneva Convention expanded the enforceability of arbitration awards
rendered pursuant to arbitration agreements subject to the Geneva Protocol. It did so by
requiring the enforcement of such awards within any contracting state (rather than only
within the state where they were made).
The Geneva Protocol and Convention were major early steps towards an effective
international framework for commercial arbitration. Nevertheless, in substantive terms,
both agreements were subject to significant limitations on their scope, and the
Convention was not widely ratified. More important, because of an apparent dearth of
international commercial arbitrations at the time, neither agreement received much
practical application nor had much practical effect.
2. The New York Convention
The successor to the Geneva Protocol and the Geneva Convention was the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Often referred
to as the New York Convention, the treaty is by far the most significant contemporary
international agreement relating to commercial arbitration. The Convention is reproduced
in Appendix B.
The Convention was signed in 1958 in New York after lengthy negotiations under U.N.
auspices. The Convention is widely regarded as the most important Convention in the field
of arbitration and ... the cornerstone of current international commercial arbitration.
It is set forth in English, French, Spanish, Russian, and Chinese texts, all of which are
equally authentic.
The Convention was designed to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed and Arbitral awards are enforced in the signatory
nations. (Scherk) In broad outline, the Convention: (a) requires national courts to
recognize and enforce foreign Arbitral awards, subject to specified exceptions. (b) not
with standing the Convention's more limited title, requires national courts to recognize
the validity of arbitration agreements (subject to specified exceptions), and (c)
requires national courts to refer parties to arbitration when they have entered into a
valid agreement to arbitrate that is subject to the Conventions.
The New York Convention made significant improvements in the regime of the Geneva
Convention of 1927. Particularly important was its shifting of the burden of proving the
validity of Arbitral awards and agreements. In the words of the President of the U.N.
Conference on the Convention:
It was already apparent that the document represented an improvement on the Geneva
Convention of 1927. It gave a wider definition of the awards to which the Convention
applied; it reduced and simplified the requirements with which the party seeking
recognition or enforcement of an award would have to comply; it placed the burden of
proof on the party against whom recognition or enforcement was invoked; it gave the
parties greater freedom in the choice of the Arbitral authority and of the arbitration
procedure, it gave the authority before which the award was sought to be relied upon the
right to order the party opposing the enforcement to give suitable security.
Equally important to the Convention's success was timeliness, becoming available in the
1960s and 1970's, as world trade began significantly to expand.
Despite its contemporary significance, the New York Convention initially attracted
relatively few signatories. The Convention was drafted at the United Nations Conference
on Commercial Arbitration held in New York in 1958. Twenty-six of the forty-five
countries participating in the Conference ratified the Convention, but the United States
did not, nor did it do so for some time. Many other nations, including the United
Kingdom, Sweden, and most Latin American and African states, also failed to ratify the
Convention for some time thereafter. In 1970, however, the United States reconsidered its
position and acceded to the Convention. Over time, other states took the same course, and
today some 90 nations have ratified ian threat and the Attalid kingdom. There were many
reasons for colonizing, yet hellenizing the world was not one of them. In some ways, it
did occur, however, it was not a Seleucid policy. However it was best to organize the
city, in the way that would pacify the region and allow everyone to live in peace, would
be the way that the Seleucids ran things. The organization into polis administration was
simply that; an effective way of organizing the politics of the settlement. 


                                                                                         
                                                                                         
                                                                                         
                                                                                         
                                                                                         
                                                                              onvention's
drafters was uniformity: they sought to establish a single, stable set of legal rules for
the enforcement of Arbitral agreements and awards. (Van den Berg) The fulfillment of that
aim is dependent upon the willingness of national legislatures and courts, in different
signatory states, to adopt uniform interpretations of the Convention. In general,
however, national courts have performed adequately, but no better, in arriving at uniform
interpretations of the Convention.
3. The Inter-American Convention on International Commercial
Arbitration
After the pioneering Montevideo Convention in 1889, much of South America effectively
turned its back on international commercial arbitration. Only Brazil ratified the Geneva
Protocol of 1923, and even it did not adopt the Geneva Convention. South American states
were reluctant to ratify the New York Convention, for the most part only beginning to do
so in the 1980's.
Nevertheless, in 1975 the United States and most South American nations negotiated the
Inter-American Convention on International Commercial. Arbitration, also known as the
Panama Convention. The United States ratified the Convention in 1990; other parties
include Mexico, Venezuela, Columbia, Chile, Ecuador, Peru, Costa Rica, El Salvador,
Guatemala, Honduras, Panama, Paraguay and Uruguay. The Inter-American Convention is
similar to the New York Convention in many respects. Among other things, it provides for
the general enforceability of arbitration agreements, Arbitral awards, subject to
specified exceptions similar to those in the New York Convention.
The Inter-American Convention introduces a significant innovation, not present in the New
York Convention, by providing that where the parties have not expressly agreed to any
institutional or other arbitration rules, the rules of procedure of the Inter-American
Commercial Arbitration Commission (IACAC) will govern. In turn, the Commission has
adopted rules that are almost identical to the UNCITRAL Arbitration Rules. Less
desirably, the Convention also departs from the New York Convention by omitting
provisions dealing expressly with judicial proceedings brought in national courts in
breach of an arbitration agreement.
4. The ICSID Convention
The International Center for the Settlement of Investment Disputes (ICSID) is a
specialized arbitration institution, established pursuant to the so called Washington
Convention of 1965. ICSID was established at the initiative of the International Bank for
Reconstruction and Development, and is based at the World Bank's Washington bead
quarters.
The ICSID Convention is designed to facilitate the settlement of a limited range of
investment disputes that the parties have specifically agreed to submit to ICSID.
Investment disputes are defined as controversies that arise out of an investment and
arise between a signatory state or state entity (but not a private entity) and a national
of another signatory state. As to such disputes, the Convention provides both
conciliation and arbitration procedures.
The Convention contains a number of unusual provisions relating to international
arbitration. First, the Convention provides that, absent agreement by the parties, ICSID
Arbitrations are governed by the law of the state that is party to the dispute (including
its conflicts rules) and such rules of international law as may be applicable. Second,
ICSID Awards are theoretically directly enforceable in signatory states, without any
method of appeal in national courts. Third, when a party challenges an ICSID award, the
Convention empowers the Chairman of the Administrative Council of ICSID to appoint an ad
hoc committee to review, and possibly annual, awards; if an award is annulled it may be
resubmitted to a new Arbitral tribunal.
Nearly 100 countries, from all geographical regions of the world, have ratified the ICSID
Convention. Unfortunately, relatively few cases have been brought under the Convention.
Moreover, the practical value and future prospects for the Convention have been
significantly threatened by the annulment of several ICSID awards by ad hoc panels
assigned to review awards. In addition, uncertainty as to the jurisdictional scope of the
Convention and the appointment mechanism have led many to question ICSID's usefulness as
a means of dispute resolution.
5. Iran-United States Claims Tribunal
The Iran-United States Claims Tribunal is one of the most recent, and most ambitious,
international claims commissions. The Tribunal was established pursuant to the so-called
Algiers Accords, which resolved portions of the legal disputes arising from the Iranian
seizure of U.S. hostages during Jimmy Carter's administration. Pursuant to the Accords,
litigation in national courts concerning defined claims between U.S. and Iranian entities
was suspended. A nine person tribunal was established in the Hague, with define
jurisdiction over claims arising from U.S. Iran hostilities; three tribunal members were
appointed by the United States, three by Iran, and three from neutral states. The
tribunal adopted the UNCITRAL Arbitration Rules (with some modifications) and has issued
a substantial number of decisions (many of which are published).
6. Bilateral Treaties
A number of nations have entered into bilateral treaties dealing principally or
incidentally with international arbitration. They provide generally for the reciprocal
recognition of Arbitral awards made in the territory of the contracting states. The
United States has included an article relating to arbitration in many of its bilateral
Friendship, Commerce and Navigation treaties, including those with Belgium, Denmark,
France, Germany, Greece, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Netherlands,
Nicaragua, Pakistan, Thailand, and Togo.
The standard U.S. FCN provision is:
Contracts entered into between nationals or companies of either party and nationals or
companies of the other party that provide for settlement by arbitration of controversies
shall not be deemed unenforceable within the territories of such other party merely on
the grounds that the place designated for arbitration recordings is outside such
territories or that the nationality of one or more of the arbitrators is not that of such
other party. Awards duly rendered pursuant to any such contracts which are final and
enforceable under the laws of the place where rendered shall be deemed conclusive in
enforcement proceedings brought before the courts of competent jurisdiction of either
party, and shall be entitled to be declared enforceable by such courts, except where
found contrary to public policy.
U.S. courts have interpreted such provisions liberally.
Choice of Law in International Commercial
Arbitration
Parties frequently agree to arbitration to avoid the jurisdictional and choice of law
uncertainties that arise when international disputes are litigated in national courts.
(Scherk) Although arbitration often does avoid some of the difficulties of transnational
litigation, it gives rise to its own complex choice of law issues.
Importance of Choice of Law Issues in International Arbitration
It is important to distinguish four separate choice of law issues that can arise in
international commercial arbitration: (a) the substantive law governing the merits of the
parties' contract and other claims; (b) the substantive law governing the parties'
arbitration agreement; (c) the law applicable to the arbitration proceedings (often
called the curial law or the Lex arbitri); and (d) the conflict of law rules applicable
to select each of the foregoing laws. (infra 97-98) Although not common, it is possible
for each of these four issues to be governed by a different national law.
These choice of law issues often have a vital influence on international Arbitral
proceedings. Different national laws provide different-sometimes, dramatically
different-rules applicable at different stages of the Arbitral process. Understanding
which national rules will potentially be applicable at different stages of the Arbitral
process can be critical.
Overview of Law Applicable to the Substance of the Parties' Dispute
The parties' underlying dispute will ordinarily be resolved under some legal system's
rules of law. In the first instance, it will usually be the arbitrators who determine the
substantive law applicable to the parties' dispute. International arbitrators typically
give effect to the parties' agreements concerning applicable law. The principal exception
is where mandatory national laws or public policies purport to override private
contractual arrangements.
Where the parties have not agreed upon the law governing their dispute, the Arbitral
tribunal must select such a law. In so doing, the tribunal must in principle refer to a
conflict of laws rule. Although the historical practice was to apply the national
conflict of laws rules of the Arbitral situs, more recent practice appears to be moving
towards recognition of an international body of conflict of laws rules.
Overview of Law Applicable to the Arbitration Agreement
As noted above, arbitration agreements are regarded under most national laws and
institutional arbitration rules as separable from the underlying contract in which they
appear. One consequence of this is the possibility that the parties' arbitration
agreement will be governed by a different national law than that governing the parties'
underlying contract. Moreover, U.S. courts have generally insisted on applying U.S. law
to the interpretation and enforceability of international arbitration agreements in U.S.
courts.
Overview of the Law Applicable to the Arbitration Proceedings
The arbitration proceedings are also subject to legal rules. The law governing the
Arbitral proceedings is referred to as the curial law, the lex arbitri or the loi de
l'arbitrage. In virtually all cases, the curial law will be the law at the Arbitral
situs-the place where the parties' have agreed that the arbitration will be held.
Among other things, the curial law typically deals with such issues as the appointment
and qualifications of arbitrators, the extent of judicial intervention in the Arbitral
process, the procedural conduct of the arbitration, and the form of any award. Different
national laws take significantly different approaches to these various issues. In some
countries, national law imposes significant limits on the conduct of the arbitration and
local courts have broad powers to supervise Arbitral proceeding. Elsewhere, local law may
afford international arbitrators virtually unfettered freedom to conduct the Arbitral
process-subject only to basic due process or national justice requirements of procedural
regularity.
Conflict of Laws Rules
Selecting each of the bodies of law identified in the foregoing sections requires
application of conflict of laws rules. In order to select the substantive law governing
the parties' dispute, for example, the Arbitral tribunal must apply a conflict of laws
system. The actual practice of Arbitral tribunals varies significantly, and includes
application of the Arbitral form's conflict of laws rules, international conflict of laws
rules, and successive application of the conflict of laws rules of all interested
states.
U.S. Legislation Concerning International
Commercial Arbitration
Relevance of National Arbitration Legislation
International arbitration is facilitated by the New York Convention and other
international agreements. Equally important, however, are national laws which must both
implement the Convention and address the numerous issues not touched by it. These
national laws often have vitally important impacts on the successful resolution of
disputes by international arbitration, particularly where the parties disagree as to the
enforceability or meaning of an arbitration agreement or award.
? Among other things, national arbitration laws typically address each of the topics
identified below. Even in disputes involving U.S. parties, U.S. law is seldom more than
part of the relevant legal authority in international arbitration. For example, while it
is important-indeed, critical-to know how a U.S. court will interpret an arbitration
agreement to which a U.S. company is party, it is also vital to know how other national
courts, which might consider the matter, will respond. Likewise, understanding the
enforceability of an award abroad is often as important as understanding its
enforceability in the United States.
Except as briefly summarized below, we do not attempt to canvas the various positions of
countries other than the United States on the foregoing issues. Indeed, doing so would
require a treatise for each major trading nation. It does, however, attempt to identify
those points at which the content of foreign law, and the attitude of foreign courts, is
potentially significant. It is at those stages that it is vital that U.S. counsel (or any
national counsel) consult with foreign counsel in the relevant countries. We also
attempt, where space permits, to provide comparative examples of how particular foreign
jurisdictions deal with issues that also arise under U.S. law.
Introduction to the Federal Arbitration Act and Other Sources of U.S. Law Concerning
International Commercial Arbitration
In the United States, most important issues relating to the interpretation and
enforcement of international arbitration agreements and Arbitral awards are governed
primarily, but not exclusively, by federal (rather than state) law. Unfortunately, there
are presently several distinct, but overlapping, sources of federal law that are
potentially applicable to an international arbitration agreement or award. Similarly,
although limited, the role of state law in the enforcement of international arbitration
agreements is uncertain. In at least some cases, parties in U.S. courts are left with a
procedural maze that is some distance removed from the promise that international
arbitration provides a simple, efficient dispute-resolution mechanism. Moreover, the
existence of numerous U.S. jurisdictions, with differing bodies of precedent and judicial
experience with international arbitration, aggravates uncertainties.
One of the most important sources of U.S. law in the international arbitration context is
the New York Convention. As described above, the Convention requires broadly that certain
'foreign arbitration awards, and certain international arbitration agreements, be
enforced in U.S. courts, subject to specified exceptions. Of lesser importance, at least
today, is the largely similar, but regional, Inter-American Convention on International
Commercial Arbitration, ratified by the United States in 1990. As described below, both
the New York Convention and the Inter-American Convention have been implemented by
federal legislation.
The basic U.S. stature dealing with arbitration, including in the international context,
is the Federal Arbitration Act (FAA). The Act, originally titled the United States
Arbitration Act, was enacted in 1925. The FAA currently consists of three chapters: (a)
the domestic FAA, 9 U.S.C 1-16, applicable to agreements and awards affecting either
interstate of foreign commerce; (b) the New York Convention's implementing legislation, 9
U.S.C. 201-210, applicable only to awards and agreements falling within the New York
Convention; and (c) the Inter-American Arbitration Convention's implementing legislation,
9 U.S.C. 301-07, applicable only to awards falling under the Inter-American Convention.
The entire FAA is reproduced as Appendix D.
The Federal Arbitration Act
U.S. courts traditionally awarded nominal damages for breaches of arbitration agreements.
Like English courts, American judges refused to grant specific enforcement of arbitration
agreements, and permitted their revocation at any time. This grudging approach towards
arbitration agreements reflected a variety of factors, including concern about private
agreements ousting the courts of jurisdiction, skepticism about the adequacy and fairness
of the Arbitral process, and suspicions that arbitration agreements were often the
product of unequal bargaining power. By withholding specific enforcement, American courts
substantial limited the efficacy of arbitration as a means of commercial dispute
resolution.
In 1920, New York enacted an arbitration statute designed to reverse common law hostility
to arbitration and to render arbitration agreements enforceable in New York courts. The
1920 New York arbitration statute provided a model for what became the FAA. An American
Bar Association Committee prepared the initial draft of a United States Arbitration Act,
and it was introduced in Congress in 1922. The Senate Judiciary Committee held hearings
on the bill in 1923, followed by joint congressional hearings in 1924. The FAA was
strongly supported by the business community, which saw litigation as increasing
expensive, slow, and unreliable. With virtually no over opposition or amendments, the
bill was unanimously passed by both the House and the Senate.
The FAA applies to arbitration agreements and awards affecting either interstate or
foreign commerce-a jurisdictional grant that U.S. courts have interpreted expansively.
The centerpiece of the EAA is 2, which provides that arbitration agreements involving
interstate and foreign commerce shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract. Section 3
and 4 of the Act provide the principal mechanism for enforcing 2's general rule that
arbitration agreements are valid: 3 requires any court of the United States so stay
proceedings before it, if they involve issues that are referable to arbitration, while 4
requires United States district court[s] to issue orders compelling arbitration of such
issues.
Other sections of the FAA address different aspects of the Arbitral process. Section 5
grants district courts the power to appoint arbitrators if the parties have neither done
so not agreed upon an appointing authority. Section 7 of the Act permits district courts
to issue compulsory process to assist Arbitral tribunals in taking evidence. In turn, 9,
10, and 11 of the FAA provide that, subject to specified exceptions, arbitration awards
shall be enforceable; these sections also set forth procedures for confirming, vacating,
or correcting Arbitral awards subject to the Act.
Notable are how many subjects are not addressed by the FAA-including such matters as
challenging arbitrators, provisional relief, selecting an Arbitral situs, the conduct of
Arbitral proceedings, and choice of law. As we will see below, the FAA for the most part
leaves it to the parties to address such issues (by agreeing to particular institutional
rules or otherwise) or to the arbitrators.
After U.S. ratification of the New York Convention, Congress enacted amendments to the
FAA, in a second chapter to the Act, implementing the Convention. In ratifying the New
York Convention, Congress was again motivated by a desire for more efficient dispute
resolution:
It is important to note that arbitration is generally a less costly method of resolving
disputes than is full-scale litigation in the courts. To the extent that arbitration
agreements avoid litigation in the courts, they produce savings not only with the parties
to the agreement but also for the taxpayers-who must bear the burden for maintaining our
court system.
In addition, Congress sought to facilitate the development of a stable and effectives
system of international commercial dispute-resolution, on which U.S. companies expanding
into global markers could rely.
Like the original domestic Act, the FAA's second chapter is remarkably brief. It provides
that arbitration agreements and awards shall be enforceable, and contains various
provisions assisting the international arbitration process. In addition, the amendments
expand federal subject matter jurisdictions, removal authority, and injunctive powers in
cases falling under the Convention.
In 1990 the United States enacted implementing legislation for the Inter-American
Convention on International Commercial Arbitration, codified as a third chapter to the
FAA. The chapter incorporates much of the New York Convention's implementing legislation,
adding provisions to deal with the Inter-American Commercial Arbitration Commission's
rules, and the relationship between the New York and Inter-American Conventions. Like the
domestic FAA, at the heart of third chapter, are provisions requiring the enforcement of
specified arbitration agreements and awards, together with procedures for doing so.
There is considerable overlap among the various sources of U.S. law affecting
international arbitration agreements and awards. Arbitral awards and agreements falling
under the New York Convention area of course governed by both the Convention and the
second chapter of the FAA (which implements the Convention). In addition, however, these
awards and agreements are also ordinarily governed by the first, domestic chapter of the
FAA, at least to the extent it is not in conflict with the Convention. In addition to
their express terms, the FAA and New York Convention have also provided the basis for a
fairly expansive federal common law of arbitration. That body of law extends to such
subjects, discussed below, as the interpretation of arbitration agreements and the
availability of provisional relief in connection with Arbitrations. As we will see below,
it is not always clear whether precedents developed under the domestic FAA are applicable
under the Act's second chapter.
State Arbitration Laws
In addition to the overlapping provisions of the New York and Inter-American Conventions
and the three chapters of the FAA, state laws also bears on international arbitration
issues in U.S. courts. As explored in detail below the Supreme Court has held that the
FAA does not occupy the entire field relating to arbitration. Nonetheless, the Convention
and the FAA expressly establish substantive federal law. They provide the basis for
federal common law rules, generally ensuring the enforceability of international
arbitration agreements and awards, that preempt inconsistent state law is applicable to
arbitration agreements and awards when-but only when-the Convention and FAA (and the
federal common law derived from both sources) are inapplicable. That may be the case, for
example, because the agreement or award does not affect interstate or foreign commerce.
State law may also be applicable to ancillary issues bearing on international arbitration
that federal statutory and common law do not directly or indirectly address. As discussed
in detail below, that may include the formation of arbitration agreements and the
availability of court-assisted discovery, provisional relief, or consolidation.
Even state except Vermont has adopted legislation dealing with commercial arbitration.
Many states have enacted some version of the Uniform Arbitration Act, reproduced as
Appendix E. First proposed in 1924 by the Conference of Commissioners on Uniform State
Laws, the current version of the Act was adopted by the Conference in 1955 and amended in
1956.
The Uniform Arbitration Act has been enacted in some 26 states, and has influenced other
arbitration legislation. The Uniform Arbitration Act is substantially similar to the FAA.
Among other things, it requires specific enforcement of arbitration agreements (as to
both existing and future disputes) and provides for the recognition and enforcement of
Arbitral awards with only limited judicial review.
Nevertheless, a number of states have not adopted the Uniform Act, nor followed its
generally pro-arbitration lead. Several states permit specific enforcement of arbitration
agreements only as to disputes existing when the arbitration agreement is made. Other
state statues do not permit arbitration of various categories of claims, such as tort
claims, real property claims, and insurance claims. And some state statues do not provide
for the same general rule of enforceability and limited review of Arbitral awards that
the FAA and Uniform Act require.
In addition, particularly in recent years, several states have enacted legislation
expressly designed to fill gaps left in the federal framework for international
arbitration. In particular, California, Colorado, Florida, Texas, Maryland, Hawaii,
Georgia, North Carolina, Ohio, Oregon, and Connecticut have adopted statutes purporting
to deal comprehensively with the subject of international arbitration. The extent to
which these statues are preempted by the FAA and federal common law principles remains
unclear although, to date, state law has played a distinctly secondary role in the
international Arbitral process.
There is, unfortunately, one potential and uncertain exception to this-the Supreme
Court's decision in Volt Information Sciences, Inc. v. Board of Trustees, discussed in
detail below. There, a choice of law clause was held, in vaguely-defined circumstances,
to incorporate state procedural rules relating to arbitration, and the FAA was held not
to preempt this result. Although lower court decisions to date suggest that the impact of
the Volt decision in international arbitration will be limited, it remains to be seen
whether this will continue.
Overview of Foreign Arbitration Statutes
As we have seen, national arbitration laws play a significant role in the international
Arbitral process. These laws, enforced in national courts, determine the enforceability
of arbitration agreements and awards, the extent of judicial interference in the Arbitral
process, and other important issues.
Less Supportive National Arbitration Legislation
Many nations have long regarded international commercial arbitration with a mixture of
suspicion and hostility. That has been particularly true of various parts of Latin
America and the Middle East, as well as developing and other countries elsewhere. This
hostility arises from perceptions concerning the fairness and neutrality of contemporary
international arbitration, especially institutional arbitration.
Against this background, arbitration legislation in some foreign states does not provide
effective enforcement of arbitration agreements; such provisions are either revocable at
will or unenforceable in wide ranges of disputes. Similarly, in a number of states,
international Arbitral awards are subject to either de novo judicial review or to
similarly rigorous scrutiny on other grounds. Finally, many national courts have
displayed a readiness to interfere in the international Arbitral process-for example, by
purporting to remove arbitrators, to resolve preliminary issues, or to enjoin the
arbitration.
Against this background, arbitration legislation in some foreign states does not provide
effective enforcement of arbitration agreements; such provisions are either revocable at
will or unenforceable in wide ranges of disputes. Similarly, in a number of states,
international arbitral awards are subject to either de novo judicial review or to
similarly rigorous scrutiny on other grounds. Finally, many national courts have
displayed a readiness to interfere in the international arbitral process-for example, by
purporting to remove arbitrators, to resolve preliminary issues, or to enjoin the
arbitration.
Supportive National Arbitration Legislation
Despite the hostility to international arbitration in many parts of the world, countries
in Europe, North America, parts of Asia, and elsewhere, have adopted legislation that
provides effective and stable support for the arbitral process. In particular, England,
Switzerland, France, and the Netherlands have enacted arbitration statutes that ensure
the basic enforceability of arbitration agreements and awards with minimal judicial
interference in the arbitral process.
Arbitration in England is presently governed primarily by three Arbitration Acts, enacted
in 1950, 1975, and 1979. The Arbitration Act, 1979, established a relatively effective
regime for international Arbitrations in English courts have imposed few
non-arbitrability constraints. Moreover, although not formally accepting the seprability
doctrine, English courts have in fact not permitted challenges to the parties' underlying
agreement to interfere unduly with the arbitral process.
English courts have the power to issue relief in support of arbitration at a variety of
stages. Among other things, provisional measures can be ordered (typically Mareva
injunctions, restricting the transfer of assets in the hands of third parties). In rare
cases, English courts also can order security for costs, although this discretion is
seldom exercised.
The Arbitration Act, 1979, significantly reformed English law relating to judicial review
of arbitral awards. Prior to 1979, English courts could set aside an award on the grounds
that it contained errors of fact or law. Moreover, under the former case stated
procedure, English courts could determine preliminary points of law. The 1979 Act altered
both of these features of English law, and replaced them with a limited right of appeal
to the High Court.
Like the United Kingdom, France has ratified the New York Convention and provides a
supportive regime for international Arbitrations. International arbitration in France is
governed by decrees promulgated on May 14, 1980 and May 12, 1981.
The 1981 Decree provides for the enforceability of arbitration agreements as to both
existing and future disputes. Non-arbitrability has not been invoked to any significant
extent by French courts (except in bankruptcy and labor matters). French courts generally
provide the parties to an arbitration agreement with substantial autonomy with respect to
choice of law, procedural rules, selection of arbitrators, and the like. In addition,
French law permits court ordered provisional measures in aid of arbitration.
The 1981 Decree reformed French law relating to judicial review of international
arbitration awards. Among other things, the decree permits actions to annual arbitral
awards made in France, but only on limited grounds (substantially similar to those in the
New York Convention).
International arbitration in Switzerland is governed primarily by the Swiss federal Law
on Private International Law, which entered into effect in 1989. Under the Swiss law,
international arbitration agreements are readily enforced; Swiss law expressly recognizes
the reparability doctrine, and generally permits arbitral tribunals to resolve
jurisdictional challenges in the first instance. Moreover, the parties' freedom to agree
upon procedural and substantive laws is recognized, and judicial interference in the
arbitration (other than regarding provisional measures and evidence-taking) is limited.
Swiss courts will enforce foreign arbitral awards without substantial judicial review,
subject only to the limits of the New York Convention. As to awards made is Switzerland,
actions to vacate the award are also limited, again to grounds paralleling those in the
New York Convention. Parties can agree to exclude even this review, provided that no
parties is domiciled in Switzerland.
International Efforts at Harmonization of Arbitration Statutes and Rules
1. UNCITRAL Model Law on International Commercial Arbitration
A leading effort towards harmonization in the field of international commercial
arbitration is the United Nations Commission on International Trade Law (UNCITRAL) Model
Law on International Commercial Arbitration. The UNCITRAL Model Law was adopted by a
resolution of UNCITRAL in Vienna in 1985 and by a U.N. General Assembly resolution later
the same year. The Model Law is designed to be implemented by national legislatures, with
the objective of further harmonizing the treatment of international commercial
arbitration in different countries. The Model Law is reproduced as Appendix F.
The Model Law, containing 36 articles, deals comprehensively with the issues that arise
in national courts in connection with arbitration. Among other things, the law contains
provisions concerning the enforcement of arbitration agreements (Articles 7-9),
appointment of and challenges to arbitrators (Articles 10-15), jurisdiction of
arbitrators (Article 16), provisional measures (Article 17), conduct of the arbitral
proceedings (including languages, situs, and procedures) (Article 18-26), awards
(Articles 29-33), setting aside or vacating awards (Article 34), and recognition and
enforcement of awards, including bases for non recognition (Article 35-36).
The Model Law represents a significant further step, beyond the New York Convention,
towards the development of a stable and predictable international legal framework for
commercial arbitration. Like the New York Convention, the Model Law's efficacy is
ultimately dependent upon its interpretation and application by national courts. But the
law goes beyond the Convention by prescribing in significantly greater detail the legal
framework for international arbitration, by clarifying points of ambiguity or
disagreement under the Convention, and by establishing directly applicable national
legislation. In particular, the Model Law makes clear the grounds for vacating
international arbitral awards and defines the scope of national court interference in,
and assistance to, the arbitral process. At least as important, the Model Law has set the
agenda for reform of arbitration statutes, in nations like England and Germany, even
where it has not been adopted.
The Model Law has been adopted by approximately ten nations, including Australia,
Bermuda, Bulgaria, Canada, Cyprus, Hong Kong, Mexico, Nigeria, the Russian Federation,
Scotland, and Tunisia. It has also been adopted by several U.S. states, including
California, Connecticut, Oregon, and Texas. Other nations, including the United States,
Germany, and New Zealand are actively considering its adoption.
2. UNCITRAL Arbitration Rules
Even more significant to the development of the international arbitral regime than the
UNCITRAL Model Law are the UNCITRAL Arbitration Rules. The UNCITRAL Rules were
promulgated by Resolution 31/98, adopted by the General Assembly of the United Nations on
December 15, 1976.
They are excerpted in appendix G.
The UNCITRAL Arbitration Rules were specifically designed for use in ad hoc arbitrations.
When they were adopted in 1976 the UNCITRAL Rules were the only set of rules available
specifically for that purpose, although alternatives now exist. Under the Rules, the
Secretary General of the Permanent Court of Arbitration serves as appointing authority,
unless the parties agree to the contrary.
The objective of the UNCITRAL Rules was to create a relatively predictable and stable
procedural framework for international arbitrations without stifling the informal and
flexible character of such dispute resolution mechanisms. The Rules aimed to satisfy by
common law and civil law jurisdictions, as well as capital-importing, capital exporting
and other nations'. Foreign states, which generally will have supported the Rules in the
United Nations, often find it difficult to object to their use.
The UNCITRAL Rules have contributed significantly to the harmonization of international
arbitration procedures. That is reflected in party by the readiness of the AAA and the
IACAC to base the AAA International Rules and IACAC Rules substantially on the UNCITRAL
Rules. Other institutional rules, including the LCIA Rules, have also drawn heavily on
the UNCITRAL Rules.
3. IBA Supplementary Rules of Evidence
The International Bar Association has adopted the Supplementary Rules Governing the
Presentation and Reception of Evidence in International Commercial Arbitration. The Rules
attempt to provide a blend of civil law and common law approaches to the subjects of
discovery and evidentiary presentations in arbitration. They are excerpted in Appendix L,
and discussed elsewhere. The Rules are intended principally for contractual incorporation
into the parties' arbitration agreement, but they are also sometimes the basis for an
arbitral tribunal's procedural directions.
4. ABA/AAA and IBA Code of Arbitrators' Ethics
In 1980, a joint committee of the American Bar Association and American Arbitration
Association adopted the ABA/AAA Code of Ethics. The Code sought to provide ethical
guidelines, focussing particularly on issues of bias and partiality, for arbitrators.
Consistent with historic practice in the United States, the Code set different ethical
standards for party-appointed and neutral arbitrators. In 1990, however, the American Bar
Association recommended amendment of the Code of Ethics to provide for the neutrality and
impartiality of all members of the arbitral panel (unless otherwise agreed).
In 1987, the International Bar Association adopted Ethics for International Arbitration,
excepted in Appendix M. Derived in substantial part from the ABA/AAA Code, the IBA effort
sought to establish uniform ethical standards for application to international
arbitrators. Unlike the original ABA/AAA Code, the IBA Ethics applied the same standards
to party-appointed and neutral arbitrators. The IBA Ethics are influential guidelines in
international practice, although reform efforts are underway in Europe.
Sources also viewed for Information About International Arbitration
1. ICCA Yearbook of Commercial Arbitration
The Yearbook of Commercial Arbitration is published annually by the International Council
for Commercial Arbitration. The Yearbook contains excerpts of arbitration awards,
national legislative developments, judicial decisions, and other materials relevant to
international arbitration. The Yearbook is available from Kluwer Law and Taxation
Publishers and is an invaluable reference tool. In addition to its role as an important
source of otherwise confidential arbitral awards, the yearbook catalogues materials under
the various articles of the New York Convention and reports on significant national
legislative developments.
2. Mealey's International Arbitration Report
Since 1986, Mealey Publications has published a monthly collection of recent judicial
decisions and arbitral awards. The International Arbitration Report is a source of timely
information and provides full-text copies of some significant arbitral awards and
judicial decisions.
3. Arbitration International
Arbitration International is a quarterly journal, published since 1985 by the Chartered
Institute of Arbitrators in London. It provides sophisticated commentary on international
commercial arbitration, with a particular focus on Europe.
4. Journal du Droil International (Clunet)
Published in French, the journal du Droir International publishes excerpts and summaries
of arbitral awards. The Journal is a significant source of extracts of otherwise
unavailable arbitral awards.
5. Collection of ICC Arbitral Awards
A collection of ICC arbitral awards rendered between 1974 and 1985 was recently published
by two leading practitioners and academics, Sigvard Jarvin and Yves Derains. The
collection includes excerpts and summaries of approximately 150 ICC arbitral awards, in
both French and English. Most of the awards were previously published in the yearbook of
Commercial Arbitration or Journal du Droit International (Clunet), but the collection is
a convenient reference source. A second collection of awards was published in 1993.
6. International Legal Materials
Published by the American Society of International Law, the International Legal Materials
are published six times each year. They contain a wide range of international legal
documents, and do not focus specifically on arbitration. They are, however, a useful
source of significant developments-legislative, judicial, and otherwise-in the
arbitration field.
7. We Craig, W. Park Q. J. Paulsson, International Chamber of
Commerce Arbitration
Authored by three leading practitioners, International Chamber of Commerce Arbitration is
a comprehensive work on ICC arbitration. First published in 1984, a significantly revised
and updated second edition, released in 1990, is useful to any practitioner in an ICC
arbitration. The work contains commentary on the ICC rules, with shrewd practical
observations.
8. A. Redfern Q. M. hunter, International Commercial Arbitration
The leading European commentary on international commercial arbitration, Law and Practice
of International Commercial Arbitration, is in its second edition. Authored by two
respected English practitioners, and published by Sweet & Maxwell, the book is required
reading for any lawyer involved in international arbitration.
9. Domke on Commercial Arbitration
The leading U.S. work on arbitration has been Domke on Commercial arbitration. First
published in 1968, with a predominantly domestic focus, the work has been updated, with
efforts to look beyond U.S. shores, in recent years. For U.S. practitioners, it can be a
useful reference source.
10. Van den Berg, The New York Convention of 1958 and G. Gaja, The
New York Convention
Dr. Albert van den Berg's The New York Convention of 1958 is the definitive work on the
New York Convention (of 1958). The author is a distinguished Dutch academic and
practitioner, and his work assembles in a single source detailed commentary and materials
relating to the New York Convention. Although the book's effort to annotate the
Convention's various articles with judicial decisions is now dated, it remains the
standard text on the subject.
Gaja's work on The New York Conventions is an exhaustive compilation of the materials
relevant to the negotiation and drafting of the Convention. For detailed research on
particular aspects of the Convention, the book provides the successive drafts of the
Convention, the comments and questions of participating states, and various interim
reports.
11. Holtzmann Q Neuhaus, Guide to the UNCITRAL Model Law on
International Commercial Arbitration
Howard Holtzmann and Joseph Neuhaus have contributed a painstaking study of the UNCITRAL
Model Law and its history. Particularly as the Model Law gains in adherents, the Guide
will become a standard reference source for practitioners and courts.
Bibliography
Bibliography & Work Cited
1. A. Redfern & Q. M. Hunter, Law & Practice of International Commercial Arbitration 3,
(2nd ed., 1991).
2. Alberto-Culver Scherk, Article 417-506, International Arbitration. (Internet)
3. Higgins, Brown, & Roach, Pitfalls of International Commercial Arbitration, (1980).
4. J. Cohn, International Chamber of Commerce Arbitration, (2nd ed., 1990).
5. L. Kassis, International Arbitration, (1989).
6. Layton, The Noose Draws tighter, International Law, (1979).
7. M. Lyons, The slower, more expensive alternative, (3rd ed., 1985).
8. Van den berg, The New York convention of 1958, (1-6, 1981).
9. Von Mehren, Rules of Arbitral bodies, (1992).
10. Wetter, The present status of International Court of Arbitration of the ICC, (1990).