International arbitration is arbitration between companies or individuals in different states, usually by including a provision for future disputes in a contract. [1]
Arbitration agreements and arbitral awards are enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention"). [2] The International Centre for the Settlement of Investment Disputes (ICSID) also handles arbitration, but it is limited to investor-state dispute settlement.
The New York Convention was drafted under the auspices of the United Nations and has been ratified by more than 150 countries, including most major countries involved in significant international trade and economic transactions. [3] The New York Convention requires the states that have ratified it to recognize and enforce international arbitration agreements and foreign arbitral awards issued in other contracting states, subject to certain limited exceptions. [4] These provisions of the New York Convention, together with the large number of contracting states, have created an international legal regime that significantly favors the enforcement of international arbitration agreements and awards. [5] It was preceded by the 1927 Convention on the Execution of Foreign Arbitral Awards in Geneva.
International arbitration is an alternative to local court procedures. International arbitration has different rules than domestic arbitration, [6] and has its own non-country-specific standards of ethical conduct. [7]
The process may be more limited than typical litigation and forms a hybrid between the common law and civil law legal systems. [8] For example, the International Bar Association (IBA)'s Rules on the Taking of Evidence in International Commercial Arbitration, revised in 2010, [9] do not adopt common law broad disclosure procedures (discovery) or follow the civil law in eliminating entirely the ability of engaging in some disclosure-related practices. The IBA Rules blend common and civil systems so that parties may narrowly tailor disclosure to the agreement's particular subject matter.
David Rivkin, [10] who chaired the committee that drafted the rules, has noted that the wide adoption of these rules in international arbitration has led in practice to an unexpected use by common law practitioners to limit disclosure and by civil law practitioners to expand it.
The rules can be further impacted by arbitral rules that may be agreed between the parties.
A presumption of confidentiality—whether implied or explicit—exists between the parties to an international commercial arbitration; however, there may be a disconnect between that presumption and the realities of disclosure and publicity imposed by the courts, arbitrators, and even the parties themselves. [11]
Most countries, especially in the developed world, are signatories of the New York Convention. Consequently, judgements can be enforced across the world. The New York Convention, more formally known as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, provides for court recognition and enforcement of foreign arbitration decisions, allowing arbitration proceedings to piggyback on the authority of domestic jurisdictions across the world. [12]
In contrast, there is no equivalent treaty for the international recognition of court decisions with a large membership although the Hague Convention of 30 June 2005 on Choice of Court Agreements entered into force in 2015 for the European Union and Mexico. Similarly, no equivalent treaty exists so far for the international recognition of settlements achieved in mediation or conciliation:so far, a meeting of the UNCITRAL Working Group II in New York has taken place in February 2015 subsequent to a US proposal for that working group to develop a convention on the enforcement of conciliated settlement agreements for international commercial disputes. [13] Within the EU, the enforceability of mediation agreements is ruled by Directive 2008/52/EC.
Under the New York Convention, if a party to arbitration files a lawsuit in breach of an arbitration agreement, the court is obligated to recognize an agreement in writing under which the parties undertake to submit to arbitration. Chapter 2 of the Federal Arbitration Act sets forth the statutory basis for an American court to direct that arbitration be held. [14]
Under the New York Convention, Article III requires courts in contracting states to recognize international arbitral awards as binding and enforce them. Article V provides for seven reasons that a court can use to refuse to enforce the award. [15]
Public information on overall and specific arbitration cases is quite limited as there is no need to involve the courts at all unless there is a dispute, and in most cases the loser pays voluntarily. [16] In China, a review of disputed cases in China found that from 2000 to 2011, in 17 cases the Supreme People's Court upheld the refusal to enforce the arbitration agreement due to a provision in Article V; China has an automatic appeal system to the highest court, so this includes all such refusals. [17]
A number of essential elements should be included in almost all international arbitration agreements, with model language available. [18] These include the agreement to arbitrate, a definition of the scope of disputes subject to arbitration, the means for selecting the arbitrator(s), a choice of the arbitral seat, and the adoption of institutional or ad hoc arbitration rules. [19] A number of other provisions can also be included in international arbitration clauses, including the language for the conduct of the arbitration, choice of applicable law, arbitrator qualifications, interim relief, costs, and procedural matters.
In order to bridge the gap when parties to an international agreement have difficulty in agreeing upon an arbitral institution, some international arbitration specialists recommend using an arbitration clause that authorizes two arbitral institutions in the same city. Those clauses generally empower the party commencing the arbitration to select the arbitral institution. [20]
A mnemonic device, "BLINC LLC", reflects some of the most important clauses: broad, law, institutional, number, costs, location, language, and carve-out. [21]
Several major international institutions and rule making bodies set out rules and appoint arbitrators. The most significant are: [22]
Institution | Acronym | Seat | Location | Operator | Established |
---|---|---|---|---|---|
London Court of International Arbitration | LCIA | London | United Kingdom | 1892 | |
Arbitration Institute of the Stockholm Chamber of Commerce | SCC | Stockholm | Sweden | Stockholm Chamber of Commerce | 1917 |
International Court of Arbitration | ICC | Paris | France | International Chamber of Commerce | 1923 |
American Arbitration Association (International Center for Dispute Resolution) | AAA (ICDR) | New York | United States | 1926 | |
International Centre for Settlement of Investment Disputes | ICSID (ICSID) | Washington DC | United States | 1966 | |
Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada | CAM-CCBC (CAM-CCBC) | São Paulo | Brazil | 1979 | |
Hong Kong International Arbitration Centre | HKIAC | Hong Kong | 1985 | ||
Singapore International Arbitration Centre | SIAC | Singapore | 1991 |
Other Important Institutions for Arbitration in North America are JAMS International, the British Columbia International Commercial Arbitration Centre (BCICAC, Canada).
Specialist ADR bodies also exist, such as the World Intellectual Property Organisation (WIPO), which has an arbitration and mediation center and a panel of international neutrals specialising in intellectual property and technology related disputes.
A number of arbitral institutions have adopted the UNCITRAL Rules for use in international cases. See for example, Australia's adoption of the UNCITRAL Rules in its 6 July 2010 amendment to the 'International Arbitration Act 1974' (Cth). [23] [24]
The most salient feature of the rules of the ICC is its use of the "terms of reference." The "terms of reference" is a summary of the claims and issues in dispute and the particulars of the procedure and is prepared by the tribunal and signed by the parties near the beginning of the proceedings. [25]
In a more recent development, the Swiss Chambers of Commerce and Industry of Basel, Berne, Geneva, Lausanne, Lugano, Neuchâtel and Zurich have adopted a new set of Swiss Rules of Commercial Mediation that are designed to integrate fully with the Swiss Rules of International Arbitration that were previously adopted by these chambers to harmonize international arbitration and mediation proceedings across Switzerland.
The International Arbitration Institute, until recently headed by the late Emmanuel Gaillard, was created in 2001, under the auspices of the Comité français de l’arbitrage (CFA), to promote exchanges and transparency in the international commercial arbitration community. The Association for International Arbitration is a non-profit organisation founded in Paris in 2001 by Johan Billiet which provides information, training and educational activities but does not appoint arbitrators.
ASA - Swiss Arbitration Association, a non-profit association since 1974, together with ASA Below 40, has over 1’200 members, practitioners and academics engaged and/or interested in domestic and international arbitration, from Switzerland and abroad. ASA contributes to the development of arbitration law and practice through regular conferences and workshops, including the Annual Conference; the Arbitration Practice Seminar; ASA Local Group meetings; ASA below 40 events for young practitioners, and the publication of the ASA Bulletin, an arbitration quarterly, and of the ASA Special Series.
The International Centre for the Settlement of Investment Disputes (ICSID) is an ad hoc tribunal established pursuant to UNCITRAL Rules to arbitrate International Investment Agreements and provide foreign investors with a means for redress against states for breaches of contract. ICSID was designed so that it cannot be reviewed by domestic courts which in theory makes it more enforceable. [26] However, state immunity to lawsuits and judgments poses a barrier to collection. [26]
The legal protection of foreign direct investment is guaranteed by a network of more than 2750 Bilateral Investment Treaties (BITs), Multilateral Investment Treaties, most notably the Energy Charter Treaty and a number of free trade agreements containing chapter on investment protection through investor-state dispute settlement, such as NAFTA. The overall number of cases concluded reached 244. Of them, approximately 42% were decided in favour of the state and approximately 31% in favour of the investor. Approximately 27% of the cases were settled. [27]
Arbitration has been used for centuries, including in antiquity, for the resolution of disputes between states and state-like entities. [28] After a period of relative disuse, Jay's Treaty between the United States and Great Britain revived international arbitration as a means of resolving interstate disputes. [29] The 1899 and 1907 Hague Conferences addressed arbitration as a mechanism for resolving state-to-state disputes, leading to the adoption of the Hague Conventions for the Pacific Settlement of International Disputes. The Conventions established the Permanent Court of Arbitration and a rudimentary institutional framework for international arbitration of interstate disputes. [30] In recent years, international arbitration has been used to resolve a number of disputes between states or state-like entities, including Eritrea v. Yemen, [31] the Abyei Arbitration, [32] the OSPAR Arbitration, [33] and the Iron Rhine Arbitration. [34] An illustrative case that highlights the limitations and criticisms of early international arbitration is the Mosul dispute between Turkey and Britain in the 1920s. After the collapse of the Ottoman Empire, the oil-rich Mosul Vilayet became a contentious territory. The dispute was referred to the League of Nations for arbitration. Critics argue that the arbitration process was heavily influenced by British interests and did not adhere to principles of impartiality and fairness. The League's decision favored Britain's position, awarding Mosul to the British Mandate of Iraq, despite significant evidence suggesting that the local population, including Kurdish and Arab communities, preferred Turkish sovereignty. This outcome is cited as an example of "interim peace"—a temporary resolution imposed through coercive arbitration—rather than "sustainable peace," which requires just agreements free from the threat of force. The Mosul arbitration underscores how power dynamics and unequal treaties can undermine the effectiveness of international arbitration, leading to long-term instability and questioning the legitimacy of the arbitration process in such contexts. [35]
Arbitration, in the context of the law of the United States, is a form of alternative dispute resolution. Specifically, arbitration is an alternative to litigation through which the parties to a dispute agree to submit their respective evidence and legal arguments to a third party for resolution. In practice, arbitration is generally used as a substitute for litigation. In some contexts, an arbitrator has been described as an umpire. Arbitration is broadly authorized by the Federal Arbitration Act. State regulation of arbitration is significantly limited by federal legislation and judicial decisions applying that law.
The Permanent Court of Arbitration (PCA) is a non-UN intergovernmental organization headquartered at the Peace Palace, in The Hague, Netherlands. Unlike a judicial court in the traditional sense, the PCA provides administrative support in international arbitrations involving various combinations of States, State entities, international organizations and private parties. The cases span a range of legal issues involving territorial and maritime boundaries, sovereignty, human rights, international investment, and international and regional trade. The PCA is constituted through two separate multilateral conventions with a combined membership of 124 Contracting Parties. The PCA is not a United Nations agency, but has been a United Nations observer since 1993.
The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body of the U.N. General Assembly (UNGA) responsible for helping to facilitate international trade and investment.
The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. ICSID is part of and funded by the World Bank Group, headquartered in Washington, D.C., in the United States. It is an autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development's executive directors and signed by member countries. As of May 2016, 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with the ICSID Convention.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959. The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states. Widely considered the foundational instrument for international arbitration, it applies to arbitrations that are not considered as domestic awards in the state where recognition and enforcement is sought.
The Willem C. Vis International Commercial Arbitration Moot or Vis Moot is an international moot competition. Since 1994, it has been held annually in Vienna, Austria, attracting more than 300 law schools from all around the world and spurring the creation of more than 20 pre-moots each year before the actual rounds are held in Vienna. It is the largest arbitration moot competition, and second-largest moot overall, in the world; considered a grand slam or major moot. A sister moot, known as the Willem C. Vis (East) Moot, is held in Hong Kong just before the rounds in Vienna. It was established in 2003 and attracts around 150 teams every year, making it the second largest commercial arbitration moot and also a grand slam moot. It uses the same moot problem as the Vis Moot, as does the various pre-moot friendlies.
An arbitration award is a final determination on the jurisdiction, merits, costs or other aspect of a dispute by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. It is referred to as an 'award' even where all of the claimant's claims fail, or the award is of a non-monetary nature.
Ex aequo et bono is a Latin phrase that is used as a legal term of art. In the context of arbitration, it refers to the power of arbitrators to dispense with application of the law, if appropriate, and decide solely on what they consider to be fair and equitable in the case at hand. However, a decision ex aequo et bono is distinguished from a decision on the basis of equity and even tribunals with ex aequo et bono powers generally consider the law too. "Whereas an authorisation to decide a question ex aequo et bono is an authorisation to decide without deference to the rules of law, an authorisation to decide on a basis of equity does not dispense the judge from giving a decision based upon law, even though the law be modified".
Arbitration is a formal method of dispute resolution involving a third party neutral who makes a binding decision. The third party neutral renders the decision in the form of an 'arbitration award'. An arbitration award is legally binding on both sides and enforceable in local courts, unless all parties stipulate that the arbitration process and decision are non-binding.
An arbitral tribunal or arbitration tribunal, also arbitration commission, arbitration committee or arbitration council is a panel of unbiased adjudicators which is convened and sits to resolve a dispute by way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more arbitrators, which might include a chairperson or an umpire. The tribunal usually consists of an odd number of arbitrators. Members selected to serve on an arbitration panel are typically professionals with expertise in both law and in friendly dispute resolution (mediation). Some scholars have suggested that the ideal composition of an arbitration commission should include at least also one professional in the field of the disputed situation, in cases that involve questions of asset or damages valuation for instance an economist.
Emmanuel Gaillard was a prominent practicing attorney, a leading authority on international commercial arbitration, and a law professor. He founded the international arbitration practice of the international law firm Shearman & Sterling before launching Gaillard Banifatemi Shelbaya Disputes, a global law firm dedicated to international arbitration, in 2021. He frequently acted as an arbitrator in international commercial or investment disputes.
Thomas W. Wälde, former United Nations (UN) Inter-regional Adviser on Petroleum and Mineral Legislation, was Professor & Jean-Monnet Chair at the Centre for Energy, Petroleum and Mineral Law and Policy (CEPMLP), Dundee.
The Israeli Institute of Commercial Arbitration was founded in 1991 by the Federation of Israeli Chambers of Commerce. The IICA is generally considered the leading arbitration institution in Israel.
Justice Jean-Paul Beraudo is a lawyer, academic and author of legal works. He was Justice at the French Supreme Court and vice-chairman of the International Court of Arbitration. He lectures on International Private Law and International Trade Law at Panthéon-Sorbonne University and on Company law at Sciences-Po, Paris. The International Institute for the Unification of Private Law (UNIDROIT) appointed him correspondent for France and a member of the scientific committee.
Investor–state dispute settlement (ISDS), or an investment court system (ICS), is a set of rules through which states can be sued by foreign investors for certain state actions affecting the foreign direct investments (FDI) of that investor. This most often takes the form of international arbitration between the foreign investor and the state. As of June 2024, over US$113 billion has been paid by states to investors under ISDS, the vast majority of the money going to fossil fuel interests.
Albert Jan van den Berg is a founding partner of Hanotiau & van den Berg in Brussels, an emeritus Professor of Law at the Erasmus University, Rotterdam, a visiting professor at Georgetown University Law Center, Washington DC and at the University of TsinghuaArchived 2018-08-10 at the Wayback Machine School of Law, Beijing and a member of the advisory board and Faculty of the Geneva Master of Laws in International Dispute Settlement (MIDS), Geneva.
The Arbitration Act 1996 is an act of the Parliament of the United Kingdom which regulates arbitration proceedings within the jurisdiction of England and Wales and Northern Ireland.
Arbitration in the British Virgin Islands is regulated principally by the Arbitration Act, 2013 which came into force on 1 October 2014. Prior to that date, arbitration was regulated by the Arbitration Cap, 1976.
Singapore International Mediation Centre (SIMC) is an independent not-for-profit organisation in Singapore providing mediation services, through its panel of international mediators, to parties wishing to resolve their cross-border commercial disputes amicably. The centre is housed at Maxwell Chambers.
Markiyan Markiyanovych Malsky is a Ukrainian lawyer and politician. He was Governor of Lviv Oblast.
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