13 October

International Arbitration

We were indebted to Geoffrey for stepping into the breach at very short notice, when the original speaker, Dr Michael Chapman, was unable to come, due to ill-health. We hope Michael has made a full and speedy recovery and thank him for the comprehensive set of lecture notes that he forwarded to the meeting. Geoffrey commending Michael's paper but thought it proper to leave it intact for delivery by Michael at another time.

Geoffrey posed the question, does the Arbitration Act 1996 adequately provides for international arbitration held in the United Kingdom and elsewhere? As an example, is evidence on oath necessary? Was this a question of procedural law, peculiar to Britain or something of wider international application? For Geoffrey, the first distinction is that the international arbitrator needs to look at the law of the place, of the arbitration and the law of the dispute. They may not all be the same and they may have different effects. However, just because the various laws appear different, that does not exclude the possibility that their effects may be largely the same.

Some topics which a domestic arbitrator may take for granted may need more careful consideration by an international tribunal. For instance, the capacity of parties to enter into contracts may vary between jurisdictions. The entitlement to interest may be contractual or procedural, but if only procedural, it may be discretionary (as here) or prohibited as in Islamic jurisdictions. Rules as to the recovery of costs vary, as well as the limitation of actions. Different jurisdictions have different rules for the steps necessary to make a contract or the event which brings the contract into being. What constitutes adequate proof of the matters alleged? All these bear on what the international arbitrator must decide. There is a sea of problems unknown in domestic arbitration.

The AA'96 permits the administration of the oath; however, the Act does not override foreign law and, in Switzerland, eg, the Arbitrator is limited to warning witnesses about the penalties for perjury. The Arbitrator has the power to resolve the conflict of laws and decide the applicable law. But researching law is daunting; there are usually lawyers on both sides in international cases who are prepared to assist the lay arbitrator on procedure. Geoffrey then asked whether a commercial arbitration is the creation of promise or the emanation of a State system? Whilst domestically both principles are recognised in part, there is no obvious international court from which the arbitration could have emanated. The Permanent Court of Arbitration at the Hague is mainly concerned with arbitrations in which one of the parties is a State, thus international arbitration is not an offshoot of that. The United Nations Committee on International Trade Law finalised the text of the Model Law in 1985 in an effort to harmonise the approach to arbitration internationally. But as the UN cannot dictate laws to states, to have effect, the Model law must be converted into state law.

Of more general application, the UNCITRAL Arbitration Rules, published in 1976, to provide a system of arbitration intended to be free of obvious state influence and capable of adoption internationally where there is an arbitration clause. Under the UNCITRAL Rules, the appointing authority deals with administration and quasi-judicial issues such as objections to the Arbitrator. If there is no appointing authority mentioned in the arbitration agreement, the parties may apply to the Secretary General of the Permanent Court of Arbitration in the Hague who will appoint an appointing authority.

Geoffrey described the International Court of Arbitration of the International Chamber of Commerce as the leading body involved in international arbitration world-wide. The constitution of the ICC was worked out some 75 years ago by combining aspects of the Common Law traditions of the New York Chamber of Commerce with features of the Latin American Civil Law code of the Buenos Aires Chamber to provide an international facility for businessmen and lawyers. The ICC Court takes responsibility to appoint international arbitrators and administer international arbitration. In the service of the ICC Court, lay arbitrators come predominantly from Common Law jurisdictions, but are only about twelve in number; small compared to lawyer arbitrators who number about two hundred.

It is usual in international arbitration for the tribunal to comprise three arbitrators. Often the parties each will have appointed one arbitrator, and those appointed will select a third to be chairman. In such cases the ICC will merely confirm the appointments of the parties once it has checked and been satisfied as to their independence, as required by Article 2.7 of the ICC Rules. Typically, the three-man tribunal will be representative of three different countries but, in Geoffrey's experience, they nonetheless tend to work as a team, and can all sign the Award.

One can distinguish between the methods of the ICC and practically all other bodies. Article 13 of the ICC Rules requires the arbitrators to draft their own terms of reference after they have received the parties' respective cases, on the basis of these documents. The parties and tribunal are then required to sign those terms of reference. The practice is not popular in the UK and USA, as being too early in the reference. Geoffrey's view was that it was the product of Buenos Aires influence and some Latin American jurisdictions, preventing parties entering into arbitration agreements before a dispute arose. Under Article 21, the Arbitrators are not permitted to issue the Award directly to the parties but through the ICC Court, for its scrutiny before signing. The ICC Court may lay down modifications to the form of the award and, without affecting the Arbitrator's liberty of decision, may also draw his attention to points of substance. The rule is not generally liked here, but Geoffrey thought it no bad thing for an independent review of the Award, if only to check that it deals with all issues.

The London Court of International Arbitration is becoming a leading player in the administration of international arbitrations and the appointment of arbitrators. Most developed countries, including China, now have their own international appointing body. The Chartered Institute, as co-sponsor of the LCIA with the Corporation of the City of London and the London Chamber of Commerce and Industry Council, did not set out to be an international appointing body, preferring to concentrate on training and accreditation.

Geoffrey concluded by asking why the form of the award matters? His answer was enforcement, which must take place within some nation State. The 1958 New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards provides that foreign awards will be recognised in all signatory countries on equal terms with domestic awards. Article V obliges courts to enforce foreign award without review. Nonetheless, the Award must be capable of withstanding the permitted defences to enforcement, of jurisdiction or failure to give the claimant an opportunity to present its case. And a court cannot enforce something contrary to its own public policy. However, coupled with Article II, which obliges courts of signatory states to defer to the arbitral jurisdiction whenever an action is brought under a contract containing an arbitration clause, the New York Convention is central to the success of international arbitration.

In discussion, David Parker raised the question of a global convention for the enforcement of court judgments. Geoffrey thought there is a trend in that direction, but felt that it has more to do with family abductions and copyright. System differences pose the greatest problem; for instance, the jury system in the USA is perceived here, to be unpre-dictable. Home courts may be reluctant to enforce such awards against its own nationals.

John Burgess introduced the topic of variations in the development and recognition of arbitration within different countries with particular reference to Egypt, where court enforcement of awards is relatively recent. Geoffrey agreed that there are wide national variations, eg, restrictions in Brazil and the procedure in some Islamic countries still somewhat unclear. Nonetheless, he felt that the use of arbitration is increasing world-wide.

Francis Miller alluded to the ICC's claim that only 10 of its awards are later challenged and asked if anyone could say what percentage of international awards are honoured. Geoffrey confessed that he had no idea how many of his own awards had been honoured and felt the ICC would not be any wiser. Dennis James agreed that international arbitration is more easily abused than in the UK, and advised caution in respect of arbitration clauses in contracts involving countries which neither subscribe to the New York Convention nor the ICC. Geoffrey concluded the discussion by restating that the fundamental requirement of an arbitral award is its capacity to be enforced where the losing party has assets. Thus, it is not uncommon, particularly with NY Convention states, for awards to be hawked from country to country in search of wealth to distrain.

Derek Ross