THE OXFORD HANDBOOK OF
INTERNATIONAL
JNVESTMENT LAW
Edited by
PETER MUCHLINSKI
FEDERICO ORTINO
AND
CHRISTOPH SCHREUER
OXFORD
1N1\’FRS1f’ I’R1SS
CONTENTS
TableofCases
Ta ble oflnternational Treaties and Conventions
Ta ble ofRules and Resolutions
Ta ble ofLegislation
List ofContributors
xi
xxxiii
lvi
lix
lxiii
PART I FUNDAMENTAL ISSUES
.
Policy Issues
3
PETER MUCHLINSKI
2. Investment, Investor, Nationality, and Shareholders
ENGELA
C
49
SCHLEMMER
3. Applicable Law
89
OLE SPIERMANN
.
Multilateral Investment Rules Revisited
STEFAN D AMARASINHA AND JULIANE KOKOTT
5. Jnteractions between Investment and Non investment
Obligations
119
154
MOSHE HIRsCH
6. Trade and lnvestment
182
FRIEDI WE!SS
PART II SUBSTANTIVE ISSUES
Admission and Establishment
I(,NA( 10 GÔME7PALAC10 AND PETER MUCHLINSKI
22
Viii
CONTF\TS
8. Standards ofTreatment
Tonn
J
GRIERSON
Vri I
259
A
ER AND JAN
LAIRD
9. Coverage of Taxation under Modern Jnvestment Treaties
FI-TOMAS
W
WÅIDE AND ABBA
Km
0
363
io. Most- I-’avoured-Nation Treatment
PIA AccoNcl
fl,
305
407
Expropriation
AUGUST REINISCH
12.
Emergency Exceptions: State of Necessity and Force Majeure
ANDREA
13.
K
524
Investrnent Insurance
ANDREAS
459
BJORKLUND
R ZIEGLER AND LOUIS-PHILIPPE GRATTON
14. State Responsibility
and Attribution
549
KAJ HOBÉR
15.
584
Corruption
HILMAR RAESCHKE-KESSLER AND DOROTHEE GOTTWALD
i6.
617
Regulatory Transparency
AKIRA KOTERA
i.
Corporate
Social
637
Responsibility
PETER MUCHLINSKI
PART III PROCEDURAL ISSUES
i8.
69
Methods ofDispute Resolution
AUGUST REINISCK AND LORETTA MALINTOPPI
19.
721
Procedural Transparency
JOACHIM DELANEY AND DANILI BARSTOW MAGRAW
20. Independence Yrnpartialitv, and Dutv
Arbitrators
I,ORETTA MALINTOPPI
of I)isclosure of
89
i
21.
(Zonsent to Arbitratiun
\i
830
CHRIs1 0101 Sc11R1uI R
22,
Jurisdiction and Admissibilitv
DAvin AR Wir.i is QC
868
23.
‘Ihe Jurisdictional Threshold ofa Prima Facie Case
932
AUDLEY SFIEPPARD
24. The Relationship between International Tribunals and
962
Domestic Courts
JACOMIJN
ANNE
25.
K
Parallel
J
VAN HAF.RSOLTE-VAN Hou AND
IJOFFMANN
ioo8
Proceedings
KATIA YANNACA-SMALL
26. Compensation, Damages, and Valuation
THOMAS
W
1049
WÅLDE AND BORZU SABAITI
1125
27. ReviewofAwards
VLADIMfR BALA
28.
An Appellate System in
AS1F H QURESHI
29. Compliance
ALAN
3°. A
S
International Investment Arbitration?
and Enforcement
1154
117
ALEXANDROFF AND JAN A LAIRD
Doctrine ofPrecedent?
ii88
CIIRIsT0III SCHREUER AND MATTHEW WEINJGER
31.
Tribunal’s
Powers versus PartyAutonomy
GIUDITTA CORDERO
I7IdL’X
1207
Moss
124
C H A P T E R
31
TRIBUNAL’S
POWERS
VERSUS PARTY
AUTONOMY*
GIUDITTA CORDERO MOSS
(i)
The Tribunal as an Umpire or an Inquisitor?
(a) IGSID Arbitration
(b) Arbitration Laws Applicable to Non-ICSID Arbi ration
(i) An Adversarial System?
(ii) Foreign Law as a Fact?
(iii) Not a Pure Umpire
(2) Rules on the Tribunal’s Power
(a) Treaty Rules: Nature of Claim, Applicahie La
(i) Nature ofthe Clairn
(ii) Applicable Law
(h) Arbitration Law Rules: Decisions cx Bono et Aequo,
Arbitrability
(i Decisions cx Bonn et .4cquo
(ii) Arbitrabilitv
(c) Arbitration Agreements Rules- FaLtual Scope 01 the Dispule,
Exclusion ofSpecitic Relief. Applicahle 1.aw
i) Factual Scope ofthe Dipute
1209
1210
1210
1211
1212
1213
1214
1214
1214
1215
1217
1218
1219
1219
1220
1hi .haptcr w35 red and .ommentcd upon by Ms i ordta \iaIir.to pi Avocat 3 la (. OLT,
Protessor (irritnpI: Shreucr. and Pr Oessor i.)lc Spiermann, 1rom I ihank tor their sab1c
COifllllrr1t%.
12(8
GI t DI TTA C4)R DL RO MOSS
ii;
(iii)
I XLIUSIOH ot e1ict
Applicablc I aw
1221
() Rules on the Tribunal’s Cortduct
1221
Partys Default
Adverse Infcrcnces
Additional Information
BurdenofProof
Impartiality
Fair Hi.aring
1222
()
(h)
(c)
(d)
le)
(f)
() Rules on the Validity and Enforceability of the Award
(a)
(b)
(c)
(d)
(e)
No Review ofthe Merits
ExcessofPower
FairHearing
Procedural Irreguarity
Need for Guideline.s as to the Tribunal’s Role
() The Tribunal’s Power in Respect of Questions ofFact
(a) Can the Tribunal Request Additional Information to
tJndermine Uncontested Evidence?
(b) Is the Tribunal Bound to Decide only on Invoked Facts?
1222
1224
1224
1225
1225
1226
1227
1228
1229
1229
1230
1230
1230
1233
(6) The Tribunal’s Power in Respect ofQuestions ofLaw
(a) Can the Applicable Law be Disregarded ifthe Parties do not
Sufficiently Prove it?
(b) Can the Tribunal Develop its Own Legal Arguments?
(i) New Qualifications under Sources Al ready
Introduced inthe Proceedings
(ii) New Sources
(iii) New Remedies
(c) Distinction between Doniestic and International
Arbitration?
1234
() Inviting the Parties to Comment
1241
Concluding Remarks
1242
1234
1236
1236
1237
1238
1239
Tiris chapter analyses the relationship between the tribunal’s initiative and the argu
ments made by the parties. As a general rule, the parties’ submissions determine the
scope of the dispute and hence the tribunal’s mandate, The arbitral tribunal is not
supposed to exceed the powers thus conferred on it by the parties. ‘There are situ
ations, however, in which the argurnents made by one or more parties mav require
integration or further elaboration. The most evident example is the situation where
the defendant does not participate in the proceedings. Even the arguments made by
a participating party, however, may be insufficiently developed ibis chapter will
analyse to what etent a tribunal rnay or shall integrate or develop arguments that
should have been made b the parties, both in respect ofquestions of fact and in
respect of questions oflaw,
TR1iiU\1S I’OWFRS V i’\RTY Af00MY
1209
The qucstion ot how active the trihunal may be in respect ot the arguinents made
by thc parues is not approached unitormly in the various arbitratinn ‘ys1en1. as vill
be briefly explained in Section (i) helow.
ihe power of the trihunal is ultimately limited by the rules on jurisdiction
(Sect (2)) and any mandatory rules of procedure (Seci (i)) contained in the
applicable international investment treaty, the ICSID Convention or the applic
able arbitration law, as well as the applicable arbitration rules or the arbitration
agreement. The power of the tribunal is also limited, indirectly, by the criteria for
determining the validity and enforceahility of an arbitral award (Sect ()), and,
in particular, by the principles of excess of power, adversarial proceeding, and
procedural irregularity. These principles are fundamental in most arbitration
regulations that an investment dispute may be subject to, whether it is an JCSID
procedure, an ad hoc procedure under the UNCJTRAL Rules, or an institutional
arbitration as referred to in the relevant investment treaty, such as arhitration
under the Arbitration Rules ofthe Stockholm Chamber of Commerce. They are
generally to be found also in the national arbitration laws that become applicable
to investment arbitration ifthe proceedings are carried out not as ICSTD, but as
ad hoc or institutional arbitration.
Within the framework of these principles, the tribunal enjoys a certain freedom
in respect of the arguments rnade by the parties. This chapter argues that the tri
bunal is bound in respect ofits ,jurisdiction and ofthe factual scope ofthe dispute,
but enjoys considerable freedom in respect of the inferences that it draws from the
evidence (Sect (i)) and in respect of the legal consequences ofthe proven facts (Sect
(6)). Under certain circumstances, the tribunal’s own inferences and arguments
should be communicated to the parties, so as to give them the possibility to com
ment thereon (Sect (v)).
(i)
THE TRIBUNAL AS AN UMPIRE OR
AN INQUISITOR?
The role of the trihunal is not reguiated clearlyand uniforrnly. Sorne rules on the con
duct of arbitral proceedings are relevant to this question, as will be seen in Sections
awards
(2) and () below, and sorne miles on the validitv and enforceahi!ity of arhitral
Section
in
seen
be
constitute thc ultimate limits upon the tribunal’s initiative, as vill
( belosv, Vithin thc range of these priniples there seems to be a certain roorn for
the trihunal to decide its own role in respeci of the arguments made by the parties
‘ihe various arhitration svstems have differcnt approaches to the trihuzials role.
12Q
(,iUI)I1T- (()RDFRO MUSS
(a) I(2SID Arbitration
XVithin the frarncwork of ICSID arhitration, it seems to be undisputed that a
tribunal is not hound to base its award on the legal arguments that vere presented
to it by the parties. In nurnerous cases, tlie validity of an award was challenged by
alleging that the award was not hased on the parties’ argurnents, and ihe relevant
ad hoc Cornmjttees have alwavs concluded that the tribunals bad not committed a
procedural irregularity by founding the decision on legal arguments that were not
presented by the parties.’
11w only limitation on a tribunal’s initiative in this respect seems to have been
mentioried by the Klöckner I ad hoc committee, which, after having affirmed the
tribunal’s abilityto develop its own legal arguments, brieflyaffirnied that thelegal
framework established by the parties should not be exceeded. This limitation
should not be interpreted in the sense tbat the tribunal should disregard any legal
arguments applicable to the facts submitted in the proceeding, as long as these
arguments lead to a qualification different from those proposed bytbe parties; oth
erwise, the tribunal’s own initiative in respect of the legal arguments would be
reduced significantly. This would not be compatible with the tribunal’s duty itseif
2
to ascertain and apply the relevant Iaw in the given circumstance ofthe case.
(b) Arbitration Laws Applicable to Non-ICSID
Arbitration
Investment arbitration that takes place in the framework of an arbitration institu
tion or as ad hoc arbitration is subject to the arbitration law and rules that apply
also to commercial arbitration in the respective countries. In respect ofcommercial
arbitration, there does not seem to be a generally acknowledged understanding of
Klökner v Cameroon, Decision on Annulrnent, 2 IGSID Reports at 1214 f; ti YB Com Arb (1986)
at 173 f. (‘Klbckner I’); MINE v Guinea, Decision on Annulment, ICSID Reports 82, io6, 109, Wena
Ilotels i Egypt. Decision on Annulment, 41 ILM 933 (2002) at para 70; Cornpa6ia de Aguas del
Acnnquija, SA & Compagnie Générale des Eaua v Argentine Republic (the Viveridi case), Decision on
Annulment, 41 TLM 1135 (2002) atparas 825. SecC Schreuer, ‘Three Generations of ICSII) Annulment
Pruceedings’, in E Ga;llard, and Y Banifatrnii (eds), Anu?niet t[ICSFD Aoird (New York, Juri
Publishing, 2004) at 30 f. approving of ihis application oftheprinciple jura noi’?t curla.
As stated by the International Court ca Justice in the Frsheries Jurzsdictmo case, in IUI Reports
(19743, referred to and commented upon by J Paulsson, International Arbitration and thc Generation
oil egal Nur ms. Trratv Arbitration and International Law’ ifl 3 Tl)M 2006 at 13 f. Paulsson runstder
thr’ applicabilitv of this prinriple sko to investrntnt arhitration ss ohvious. and rcfers sko to thr
Bra:l:an I uu,o, Casr hrfore ilie Permanent (‘uurt ut Internattunal Justice PCIJ Serirs A, Nu ci in
r;oLs,
o thdt ‘5 tribunsi in
supurt ut Ii,s
n1 i nnt J1j’0ir tifiL
‘lZn: t’rlt u oh inrp
rat :mp1auihlr ut lIe twu’ Fur rett rero,e tu hr K.’,’tr I. ae Si’’ ab r 0 i
arid 5: mplv Up( .Id the 3
[ur a further ariaIvso ut ths s’ecitic apet, er heluw Seet 6,hiii
‘‘
YR! HU
A LS POWFRS V PA RTY AUTONOM V
1211
how active a role the tribunal may assurne: commentators range front encouraging
4 and nearly
3 to scepticism towards such a role
an active role for the arbitral trihunal,
5
exclusion thercof.
It is not unusual for legal doctrine on international commercial arhitration to
focus its attention on the consensual character of arhitration and ernphasize that
the arbitral procedure should be left totally to the parties. Party autonomy is, and
rightly so, deerned to be the clear fundament of commercial arbitration; as a conse
quence, the arbitral tribunal is deemed to have a rather restricted scope for its own
initiative. Ihis neutral role ofa tribunal that does not interfere with the autonornv
ofthe parties, that listens to their arguments, and confines its own role to deciding
which of the presented argurnents deserves to win, is sometirnes defined as the ‘role
of an umpire’. The opposing role, more judiciary and interventionist, inspired by the
maxim iura novit curia, would consist in the tribunal takingvarious measures on its
own initiative, rather than upon the request ofone of the parties, to develop a factual
and legal argumentation, as well as to identify the applicable law.
(i) An Adversarial System?
The alternative between an ‘umpire’ and an ‘inquisitor’ may be reminiscent ofthe
ciassical opposition between the adversarial common law systems and the inquisi
torial civil law systems. The usefulness of the ciassical divisjon into adversarial and
inquisitorial systems, however, may be questioned: while either of these forms is
rarely to be found in its pure form in any system of civil procedure nowadays, it is
6
dubious how rnuch it would be possible to apply it to international arbitration.
egwWiegand,’Iuranovitcuriavs.Ne-altrapetita—DieAnfechtharkeitvonSchiedsgerichtsurteilen
im Lichte der )üngsten Rechtsprechung del Bundesgerichts’, in MJ Greiner, B Berger, and A Güngerich
(eds), Rechtsetzung und Rechtsdurchsetzung: Festschriflfür Franz Kellerhals (Bern, Stämpfli Verlag,
2005) at 127 ff.
8iff;
eg C Kessedjian, ‘Principe dela contradiction et arhitrage’, in Revue dcl’arhitrage (1995) at 3
Stockholm
in
ofLatwa’,
(2)
Republxc
i
AB
Swemhalr
with
N Rubins, “Ohservations” in connection
Arb Rep (2004) at iz If, seems to justify an active role by the tribunal only in same contexts ofpublic
interest, such as investment arbitration; M Schneider, ‘Combining Arbitration with Conciliation’, in
1(2) Oil, Gas & Energy Law Intelligence (2003) at 4, has serious doubts about whether an international
arbitral tribunal should have the authority to identify on its own initiative the rules oflaw applicable
to the claims made before it, bot, in any case, deems it necessary for the tribunal to invite the parties
to clarify their rase
I
egKHoher, ArhitratiunlnvolvingStates’ in L’,VNewman andR Hill (eds, ?licIeadzng4rbitrators’
Guide to I,tteruational,4rbitration (New York, Juris Publishing, 2004) at i8, a1irming that in a pruce
dure ss consensual as arhitration, it mustbe up to the parties todetermine the scope of the dispute as to
both facts and Iaw; see also G Kaufrnann-Kohler, ‘The Arbitrator and the Law: Does He/She Know it?
Applylt? How? And a Few More Questions,’ !fl 21(4) Arblnt’l (2005) at 632 if: and G Kaufmann-Kohler,
‘lars novit arhiler—Estcebien raisnnnahle? Rellexions surlestastut du droit de fond devantI’arhtre
inlernallonai in A Heritiur and t Hrsch eds, Dc 1ci’e tercda—- Rt71exi’ns sur ic do’t deraHc e’
i !;o’;neu’ Ja pi-sseurAIa:n flsrsch Cencs a, Ed Siatkine, 2OC4
Ihe use üf tlu ciassihcat;un Is (learIV (onItsied by G Revmund, Zivii aW and (omrnufl IaW
Procedures: Which is the More Inquisitorial? A Civil Lawyers Response, «) Arh lot! (1959) at
1212
cTUI)Irr.\(ORI)1-RoMoss
An adversarial approach in the strtct sense is certaini not refieLted in thL arbi
tration Jaw that mostly represents the cornrnon law systems, Fnglish law. Ihe UK
A rbitration Act of 1996 does not seern, in m any respects relevant here, to be substan
tialiv different from the approach in civil law countries.’ ihe UK Arbitration Act
conters on the tribuna! the power to determine a series of rnatters on Os own miii
ative (provided that there is rio agreement to the contrary hetween the parties): for
exarnple, the decision ofprocedural and evidential rnatters, or the default power to
determine a series ofremedies, iftheparties have not specified the remedies thatmay
9 Also, in drawing inferences frorn the evidence produced by the parties
be awarded.
and in developing its reasoning, the tribunal is not bound bythe arguments made by
the parties’° All these powers speak for arbitrator autonomy, rather than for party
autonomy. This, however, does not mean that the tribunal faces no limits in assum
ing an inquisitorial role or taking over one party’s interests against the other party’s:
the overriding principle is that the proceeding is conducted fairly and impartially,”
and this mandatory requirement is deemed sufficierit to ensure a balance between
2
adversarial and inquisitorial proceedings.’
(ii) Foreign Law as a Fact?
A peculiar treatrnent is reserved, in the common law systems, for foreign law:
foreign law is considered as a fact and has therefore to be proved by the parties. Ihis
357ff. See also A Redfern, M Hunter, N Blackaby and C Partasides, Law and Practice oflnternaiional
CornmercialArbitration (London, Sweet & Maxwell, 4th edn, 2004) at 610 f. That international arbi
tration is not affected by the traditional contrast between adversarial and inquisitorial traditions is
confirmed also in connection with the drafting of the ICC Rules, see Y Derains and E Schwarz, A
1f. See
5
Guide to the New ICC Rules ofArbitration (Ihe Hague, Kluwer, 1998), comntent on Art ao(i) at 2
also Kaufmann-Kohler, ‘The Arhitration and the Law’, ibid. above n at 632 f, with further references
in footnote 4.
See also the ALI/Unidroit Pri nciples, Art 22,2,3, speci fying that the court may rely upon an inter
pretation ofthe facts or of the evidence that has not been advanced by a party. This article is actually
more lenient to party autonomy than English arbitration law, since it assumes that the court rnust give
the parties the possihihty to respond to such independent interpretation, whereas English case-law
does not assume the parties’ right to be heard on the trihunal ‘s own interpretation ofthe facts or ofthe
evidene: case-law in English law distinguishes hetween the fact-finding process, where the parties
have a right to be heard, and the drawing of,nferences from the evidence, where there is no need for the
tribunal to get back to the parties and present its ,nferences, even ifthey were not anticipated during
the proceeding: R Merkn, Arbitrat,i’n Iaw (I ondon, LI P Ltd, 2004) at 595 f. Traditionafly, Fngiish
arhitration law has restricted party autonomv even more than otber svstems, by allowing judcial
interference on questions et law ‘through consultative case procedures and judicial review ot error in
law),that in the civil law systems were unknown. It follows that, in Fnglish arhitral procedures the law
is not totally suhiect to party autonomv, at least as tung the law in questton is the Fnglish
“
534
548(1
u
Mcrkiri, abo en
at IZ, 86
If
TR1BU.1’S VOWERS V PARTY AUTONOMY
1213
is unknown in most civil law svstems, where not onlv domestic, hut also foreign
law has in principle to be applied cx ojficw b the trihunal, in accordance with the
rnaxim tura noi’zt cura. Hoxvever, even if foreign law is treated as a fact under
English arbitration law, which is examined here as representative of the common
law systems, it does not mean that in questions of foreign law party autonorny totally
prevails over the tribunal’s independent evaluation. First of all, as seen above, the
arbitral tribunal has extensive powers in procedural evidential matters and may
evaluate the evidence independently. If foreign law is treated as a fact, it will be
subject to the same powers as described above. Secondly, ifthe foreign Iaw is not
satisfactorily proved, the tribunal rnay apply the presumption that foreign Iaw is the
same as English law, and will apply (on its OWfl initiative) English law, thus avoiding
falling into the role of an umpire who would have to choose the arguments made
4
by the other party.’
(iii) Not a Pure Umpire
The role ofa pure umpire, therefore, is not to be found in the English arbitration
law any more than in the international or national civilian arbitration rules that
are discussed in more detail in Section () below. As wiIl be seen, tribunals have
considerable powers to act on their own initiative by requesting additional informa
tion, and they are not bound to decide in favour of the participating party in case of
default by thë other party (which implies that they have the power to make their own
independent evaluation ofthe arguments, rather than limiting themselves to choose
between the available argurnents).
See, in respect of arbitration, M Kurkela, ‘“Jura Novit Curia” and the Burden of Education in
International Arbitration—A Nordic Perspective’, ASA Bull (2003) at 485 if; GJ Wetter, ‘T1e Conduct
iegand, ahove fl 3 at 130 if. On Swedish arhitration
T
of thc Arbitration’, J Int’l Arb (1985) at 24 f, ‘A
law, sce L Heuman, Arbitration Law of Sweden: Practice and Procedure (Stockholm, Juris Publishing,
Court in
2003) at 323 if. See also the extensive comparative observations made by the Swiss Federal
f. The decision confirmed the principle of iura novit
its decision 4P.Ioo/2003, ATF 130 III 35, at
curfa in arbitration, but set aside an award as an exception to that principle, because ihe award was
hased on clements that did not relate to the argumcnts presented by the parties, and the tribunal bad
not granied the parties the opportunity to comment thereon. In doing so, the (ourt emphasized that
this exception to the iura novit curia principle bad to be applied only in extraordinary situations. See
,1 referred to by G Segesser, 3h) ITA Monthly Report
200
P
/
also the Swiss Federal Court decision 4
not invited
(2004), confirming an award applyingthe maxim iura novit curia even ifthe tribunal had
the parties to comment on the legal theorv upon which the decision was based. The principlc is also
codified in a series ofprivate internationailaw acts, see, eg Art 14 ofthe Italian, Art i6 ofthe Swiss. and
ofthe Åustrian private international laws, as weli asS 293 of thr German ZPO. A notable exccptior
until recently was represented by French Iaw, bot recent court decisions seem to have acceded to the
ISDCs Letter (2oo5 at i. Sce
civil law approach also in Franer: see E Cashin Ritaine. ‘Editorial,
also Ni JäntcräJarehorg, ‘Foreign Law in National Courts—A Comparative Pcrspective 304 Rccueil
des cours (2003) at 264 If, showing various ntcrnal nconslstencies in the varlous systems approah
to foreign law. Ihat the tribunal has the duty to apply the law ex ojftcio does not prevent the law (rom
bemg pleaded by ihe parties, see helow, Sect (6)(a)(ii).
Merkin, above 07 at 901 f.
1214
(,IUJ)IT’IACORI)IzROMOSS
(2) RULES ON THE TRIBUNAL’S POWER
‘ihe arbitral tribunal must exercise its mandate within the lirnits that have been
granted it by the applicahie source. ‘i1ese consist mainly of: (i) the rules iii the rel
evant treaty establishing the arhitration, the ICSID Convention, or the applicable
state arhitration law, (ii) arhitration rules applicahie to the chosen arhitration pro
ceeding, and (iii) the arbitration agreement. Below, there follows an examination
ofthe most important limitations on the tribunal’s power in rcspect ofthe parties’
arguments contained in these respective sources.
It is important, in this context, to distinguish between the situations where a
tribunal exercises powers that it does not have, and the situations where it wrongly
exercises powers that it has. Ihe distinction is of significant relevance to the
effectiveness of the award: while awards rendered as a consequence of an erro
neous exercise of existing powers may, generally, not be considered as invalid or
unenforceable, awards rendered as a consequence of the exercise ofpowers that
15
enforcement.’
were never conferred on the tribunal may be set aside and refused 6
Ihis distinction will be pursued in the following subsections.
(a) Treaty Rules: Nature of Claim, Applicable Law
Investment arbitration concerns disputes between a foreign investor and the host
state, and is carried out on the basis ofa Bilateral Investment Treaty (BIT) between
the host state and the investor’s state or ofa multilateral treaty such as the NAFTA
or the Energy Charter Treaty The treaty establishing arbitration may contain rules
that are relevant to the analysis of the tribunal’s power to act on its own motion in
respect of the parties’ arguments.
(i) Nature ofthe Clairn
Arbitral jurisdiction may be limited to claims relating to violations of the treaty or
7 These treaty provi
it rnay extend also to clairns relating to a breach ofcontract’
sions must be considered as limits on a tribunal’s power; atribunal may not exceed
lhevahdit ontrol on the awaid does, generaliv, not extend to review 01 the merils, more eXftn
sively see below, Seet (43
Tbis dist:ncticn was receritiv atiirrned alo by th- I- ng!ish House of I ords in conncj1nn ‘,citli
the hallenge to the I ec,tho Hiçhiands Dtvekprnent 4uth ruy v Impreg:1 Sjv4 award, 2005 UKHI 4
Cornmcnt on
t
yso’g ‘i’ po’r’ r’ W Pa4 ‘Th ‘ature o krbitral Autborit)
1
na
Juni’
if
at
les rh lIi,çh1ads 21 4 Arb mi i (20
More in grncial on ihe ditnction betwecn contrat clainis and treaty da’ms, see Schrcuu
‘(onsent to Arbitration h 21 above.
TRIBUNAL’S POWERS V PARTY AUTONOMY
1215
these lirnits while it is integrating or developing the parties’ arguments. Thus, a
trihunal that is ernpowered to decide only on a claim for violation oftreaty rnay not
extend or interpret the arguments by the parties aud award darnages for breach
ofcontract (unless the breach of contract also constitutes a violation ofthe treaty,
in which case, however, the basis of the award is the latter). The general principle
according to which an award may not be reviewed for error in law or for error in
the interpretation of the contract would not be applicable in this context. This is
because the error in question would be made in connection not with the decision
on the merits (which is beyond the scope of control that may be exercised on an
award), but with the exercise of the tribunal’s jurisdiction, as determined by the
applicable investment treaty (which is within the scope ofthe validity control).
An award rendered on matters outside the jurisdiction of the tribunal is an award
rendered without power, therefore invalid aud unenforceable, as will be seen in
Section () below.
(ii) Applicable Law
The treaty establishing arbitration may contain instructions in respect of the law to
be applied by the tribunal to the merits of the dispute.’
8 Violation of these rules does
not necessarily simply amount to an error in the merits ofthe award. Disregard of
treaty rules on applicable law is a violation ofthe duties established by the treaty in
respect ofthe conduct of the proceedings and, in particular, in respect of the legal
standard against which the disputed facts shall be measured. Given the significance
of the applicable law for the outcome of the dispute, such violation may be consid
ered as a serious procedural irregularity or an excess of the power conferred on the
tribunal, Both are grounds for invalidity and refusal of enforcernent of the award, as
will be seen in Section () below.
It is not easy, however, to draw the borderline between such a violation of the
tribunal’s duties and a simple error by the tribunal in interpreting or applying
the treaty: the tribunal’s wrong interpretation of the choice of law rule contained
in the treaty is not a ground for ineffectiveness of the award, just as the wrong
application of the law is not, If, however, the tribunal’s failure to apply this choice
oflaw rule is not due to an error in its interpretation or application, but is a viola
tion of the duty to take that rule into consideration, it may lead to ineffectiveness
of the award (just as the disregarding of a choice of law rule in the applicable
arbitration law or in the arbitration agreernent would, as wiil be seen in Sect 2(c)
(iii) belo).
9
On the applicable law, sec Spiermann, App1icahle Law’ ch 3 above,
For a more extensive discussion, particulariv from the poi..nt of view of the ch.oice of i.aw rule
contained in the arbitration agreement and in the applicable arhitration law, ser’ GC Moss, ‘Mav an
Arhitral Tribunal Disregard the Choice of Law Made by the Parties?, (i) Stockholm Inti Arb Report
(2005) at 6 if.
1216
GI UDITTA CORDERO MOSS
° illus
2
A criticism of a recent decision by the Svea (Zourt of Appeal in Sweden
trates tliis point. The decision was rtndered in connection with the chatlenge to an
SCC award betveen CME and the Czech Repuhlic issued in an investment arbitra
tion based on the BIT between the Netherlands and the Czech Repuhlic. One ofthe
questions that the (Zourt was called on to decide was whether the arhitral tribunal
bad disregarded the rule on the governing law contained in the BIT. Ihe BIT pro
vided for application ofthe law of the host couritry in combination with principles
of international Iaw; the tribunal did not consider the law of the host country bot
only principles of international law, and the validity ofthe award was therefore chal
lenged. The Swedish Court relied on the principle that error in the interpretation
or application ofthe law cannot be judicially reviewed, and limited itseif to prima—
facie verifying whether the tribunal seemed to have applied anylaw at all. The Court
seemed to consider a more detailed examination of the matter to be beyond the
scope of its ownjurisdiction.
This approach does not seem to be fully justified. It has been observed that, in
respect of techriical aspects such as those that were at issue in that particular case,
applying the principles of international law could be deemed equivalent to apply
’ Apart from this point
2
ing no law at all, because they do not contain relevant rules.
above remains: a tribu
mentioned
of
procedure
the
point
however,
of substance,
nal that fails to apply the choice of law clause contained in the BIT is a tribunal
that violates the treaty. According to Articie 34(6) ofthe Swedish Arbitration Act, a
procedural irregularity can be sanctioned with the invalidity of the award ifit has
probably influenced the outcome of the case. In order to verify whether Articie 34(6)
of the Swedish Arbitration Act was applicable, the Court should have examined
more accurately whether the tribunal, when it determined the applicable law had
taken into consideration the choice oflaw rule contained in the BIT. The examina
tion, however, should have been restricted to the question whether the rule had been
applied. Whether the rule had been applied erroneously is not within the scope of
22
judicial review.
CME v Czech Repubiic, T 8735-ol, RH 2003:55, (2) Stockholm Arb Rep (2003) at 167 ti
Z Douglas, ‘Nothing if not Critical for Jnvestment Treaty Arbitration: Occidental, Fureko and
Methanex, 22(1) Arb lnt’l (2006) at 43 If, makes this point and briefly mentions the CME decision,
arguing for the application ofstate law in addition to international law, each in its respective scope of
application.
Criticizing the Court’s decision see also S Soltysinski and M Olechowski, ‘On CME v Czech
Republic, ‘Observations’ (i) Stockholm Arh Rep (2003) at 224 If, and 240, and T Wiwen-Nilsson,
‘Observations’, (2) Stockholm Arh Rep (2003), at 254 f. In favour ofthe decision, sec Ruhins, ahove n 4
at 208 f. and Bagner. ibid at 250. More cxtensively on the matter see C Schreuer, ‘Failure to Applythe
Governing I.aw in International nvestment Arhitrat:on’, 7Austr!an Rev of Intl and Furopeari Law
(2002) ai i4 II, Criticizing th dccision commented on here on at 182 If. and C Schreuer, Vie JCSII)
iT dousg tlw
C’?:r elb;ry tzamhridge. Camlrdgt FniVersOV Press. 2001
Co?n’ent:
faiiurc to appiv ihe proper law as an excess of power). For tl>e sake of good order. it should be pointed
out that Wiv’er: ‘‘ilsson and Bagner aied before the Svea Court in this case as counsd, respectivelv,
to the Czeh Repuhlic and (‘.‘SIE. Sclireuer wrote a legal opinion for thc Czech Republic in thc same
.
TRIE1r\\1’S I’OWERS V PARTY AUTONOMY
121v
lhe opposite approach was taken by the Suprene Court of British Colurnhia
in its decision on a challenge to an award re ndered hetween the US company
Metalclad and the United Mexican States under the NAFT A One of the ques
tions that the Supreme Court exarnined was vhether the triburial had applied the
correct legal standard to assess the conduct ofthe state. Ihe tribunal bad measured
the state’s conduct against Articie 1105 of the NAFTA. Also the Supreme Court
considered Articie 1105 to represent the applicable rule. However, the Court disa
greed with the tribunal in the assessment of the content of Articie 11o5: while the
tribunal considered Articie 1105 to require transparency in the regulatory system
ofthe host country, the Court held that the ‘fair and equitable treatment’ and ‘full
protection and security’ granted by Articie 1105 do not extend to requiring a trans
parent regulatory system. The Court concluded that, by reading such a require
ment into Articie 11o5, the tribunal bad exceeded the scope ofthe submission to
a rbi t rat 1011
In its eagerness to ascertain thatthe properlegal standard was applied, the Court
seems here to have gone dangerously ciose to reviewing the tribunal’s interpret
24
ation ofthe law.
(b) Arbitration Law Rules: Decisions ex Bono
et Aequo, Arbitrability
If an investment dispute is subject to institutional or ad hoc arbitration, it is not
regulated by the ICSID instruments, but by the relevant arbitration rules and by
the arbitration law existing in the countrywhere the tribunal is located. Ihe Energy
Charter Treaty, for example, provides for investment disputes to be submitted to
arbitration according to the ICSID Rules, the UNCITRAL ad hoc Arbitration Rules,
5
or arbitration in the Arbitration Institute ofthe Stockholm Chamber ofCommerce.’
In case of ad hoc or institutional arbitration, therefore, the investment dispute will
be subject to the arbitration law of its venue, as ifit were a commercial dispute (with
out prejudice, however, to any additional rules applicable to investment disputes and
contained in the applicable investment treaty, such as those mentioned in Sect (2)(a)
ahove)
case, his p’iitt ofviw in this pai ticular case does not depart froni Ilie VIC
ICSID Commentar), as mentioned above.
previouss expressed in
he
Uoirr’d .Wexrca State$ v MctIckid Cm-p, !200i B(ZSC 664,
[he Supremc (Zourt decision has heen criticized for ths position. sce eg fl \Viiliarns. Chalienging
ctnicnt Tre,tv Arb:tration Awards— 1ssus onccrmn. the Forum Arme Corn he AIeac.id
(‘ase, in Al Van den Berg (ed;, JCC4 Imitcr’ni zo’ni! ( ecia!Arbflration; I. Jortan1 Crmiempoam i’
ç fl’.
Qnctn’n I ondon, Kiuwer Faw Internatiinai, ,uoU at 4
Energv Charter Treat Art 26
1218
GI IJ)ITrA CORI)ERO Moss
Arbitration law is quite heterogeneous, since it extends from the uniform regula
tion contained in international conventions (ofwhich, for non-JCSID disputes, the
most notable is the 1958 New York Convention on the Recognition and Enforcement
ofForeign Arbitral Awards), via the 1985 UNCITRAL Model Law on International
Comrnercial Arbitration, to the arbitration law in force in each country. While the
New York Convention uniformly regulates the enforcement ofarbitral awards in the
137 countries that have so for ratified i’ the UNCJTRAL Model Law is not a binding instrument. It has been adopted, literally ur with minor variations, in about 50
27 and has thus achieved a certain harmonization ofthose national arbi
countries,
tration laws. In the remaining countries (including Sweden), arbitration law is not
harmonized and mayvary considerably from system to system.
(i) Decisions ex Bono et Aequo
A rule that is often encountered in arbitration law and that might have relevance for
the question ofthe tribunal’s power in respect of the parties’ arguments is the rule
preventing the tribunal from deciding the merits as an arniable compositeur unless
it has been empowered by the parties to do so. Ihis provision, if contained in the
arbitration law ofthe country of origin ofthe award (or in the law of another country
that the parties may have chosen to govern the arbitral procedure), represents a limit
upon the tribunal’s discretion in evaluating the arguments rnade by the parties.
Thus, a tribunal that, going beyond the arguments made by the parties, renders an
award simply based on its own sense ofjustice and without applying the governing
Iaw, applicable treaties, or customarylaw, or that supplements its findings at law with
equitable principles, would violate the applicable rule on the tribunal’s duties, and
the award would be ineffective, as will be seen in Section () below.
A rule limiting the tribunal’s power to decide cx bono et aequo unless empow
ered to do so by the parties is generally present in national arbitration Iaws (see
the UNCITRAL Model Law Art 28(3)), but not without exception: the Swedish
Arbitration Act, for example, does not contain it (however, the SCC Rules contain a
similar rule, as will be seen immediately below).
The definition ofwhen a decision is taken as an arniable compositeur, or cx bono et
aequo, rather than at law, is not completely uncontroversial. A decision taken sim
ply on the basis of the tribunal’s sense ofjustice would undoubtedly be a decision
taken ex bono et aequo. Less clear is whether a decision made on the basis of soft
sources such as codes of conduct or private codications, generallv also defined as
lex niercatoria, could be deflned as a decision made at law or as a decision cx bono et
aequo. According to a widespread (but not uncontroversial) opinion in legal litera
ture, a decision hased on such sources would not be deemed to be taken at law, but
Ser <http://wwuncitraIorgIuncitraIfen/uncitraItexts/arhitration/NYConventionjaatu&htrnI>.
Sce
statushimi.>
I RIB
Al S POWIRS V PARTY
1ONOM
1219
neither in euity: it vou1d be deemed as a declsion uken aording to ‘rules ofiaw’,
as opposed to a dtcision taken ‘at Iaw Some arhitration laws and arbitration rules
make a distinetion among the three categories of decisions: those made in equity,
ihus, a trihunal
those made in acLordance with rules oflaw, and thnse taken at
ifthe arhitra
motion
own
its
would have the authority to apply the lex rnercatoria on
tinn rules or the applicable arbitration law provide that the tribunal has the power
to apply on its own motion ‘rules ofla’,v’. The SCC Rules, for example, contain this
terminology. If the arbitration rules, on the contrary, provide for the application of
a ‘Iaw’, then the tribunal would not be empowered to decide on its own motion on
the basis of soft sources, ihe UNCITRAL Rules, for example, use the word ‘law’,
According to this interpretation ofthe terminology, therefore, a tribunal rendering
an award on the basis of the soft law, even ifthe parties have not empowered it to do
so, would render an effective award if the procedure was subject to the SCC rules,
whereas it would violate the rules determining its powers ifthe procedure was sub
28
ject to the UNCITRAL Rules.
(ii) Arbitrability
Arbitration Iaws generally contain a rule specifying what disputes may be subject
to arbitration, such as, for example, Articie ofthe UNCTTRAL Model Law. Also
countries that have not adopted the UNCITRAL Model Law may contain a provi
sion on arbitrability, such as, for example, section 33(1) ofthe Swedish Arbitration
Act. An award on matters that may not be resolved by arbitration is invalid and
(2)(b)(i) ofthe UNCITRAL Model Law
unenforceable under, respectively, Articie 34
and Articie V(2)(a) of the New York Convention. Thus a tribunal that, irrespective
ofthe arguments made by the parties, renders an award on a matter that is not arbi
trable would render an ineffective award.
(c) Arbitration Agreements Rules: Factual Scope of the
Dispute, Exclusion of Specific Relief, Applicable Law
In the context ofinvestment arbitration, there is not necessarily always an arhitra
29 Where there is an arbitration agreement in
tinn agreernent in the traditional sense
For a more rxtensive analysIs of this questlon see Moss, above fl 19. at 17ff. 11w agenda for tlw
th scson ofthe WorkiTlg Group Il (September zoo6. ofthe UNCI1RAI bad the pnssil’!e changr
45
oftbr referene to ‘law made in Ille tNCTTRAL Arbitratinn Ruts mIn a rdcrence to rules ni laW
3’Add 1—e1tlen1ee1I of comnwn.iiI dn.putcs Revlsii’n of Ihe tXCITRAI
4
ser A CX 9 W(dl W[’ 1
a Art ,3
Alttfa:,l,
In a Lomlnerclal dispute, thr arhitral iurlsdktion Is established 1w tht arbitral agrecinent, see
thc 19511 Xess Yoik ( nvrnLlon on Reognitior. and I nforr ement ofi oreign Arbitral Asards, Art II
In invCstn,Lflt arbitration, the arhiteal agreement ts, generaliv, hasd on the applnable bihiteral nr
1220
(,UD1TIA(ORI)1-ROMOSS
addition to the provision on arhitration contained in the investrnent treatyor in the
host state’s legislation, ihis agreement might contain Brnitations on the tribunal’s
power in respect of the parties’ argurnents.
(i) Factual Scope ofthe Dispute
ihe rnost obvious lirnitation to the trihunal’s power lies in the restriction of the
factual scope ofthe dispute that rnight be contained in the arbitration agreernent.
Thus, ifthe arbitration agreement clearly restricts the dispute to differences arising
in connection with one specific contract, the tribunal will not be empowered to
extend its decision to differences arising out of other legal relationships between the
parties, A violation ofthis rule would represent an excess of power by the tribunal
and would render the award invalid and unenforceable under, respectively, Articie
4(2j(a)(iii) of the UNCITRAL Model Law and Articie V(i)(c) of the New York
3
Convent jon.
(ii) Exclusion ofRelief
Arbitration agreements sometimes specify that the arbitral tribunal shall be
empowered only to decide on a certain relief, for example reimbursement ofdam
ages, and not on others, for example termination of the contract. To this extent, the
tribunal’s power in respect of the parties’ arguments is clear: the tribunal would
clearly exceed its power, if it ordered a relief that the parties have excluded in the
arbitration agreement.
The question of the authority of the arbitral tribunal, however, has to be distin
guished from the question of the proper interpretation bythe tribunal of the contract
between the parties, as well as from the question ofthe proper application ofthe law.
In a contract regulating that the defaulting party shall be liable for indemnifying
only direct losses and not also consequential damages, the exclusion of consequen
tial damages is regulated as an obligation between the parties, and it is not a restric
tion of the trihunal’sjurisdiction (unless this restriction is reflected in the arbitration
clause). Ifthe arbitral tribunal determines that the defaulting partyhas to reimburse
consequential darnages, it rnay have based its decision on a wrong interpretation of
the contract or on a wrong application ofthe law’s definition ofdirect and consequen
°
3
tial losses. However, this vil1 not mean that the tribunal has exceeded its authority.
‘11e award, therefore, rnay be wrong on the merits, but is not rendered without juris
multilateral Investment treaty, which is deemed to contain an offer to arhitrate by the host state that
is deemed to be aceepted by the foreign inlestor by Inutiating the arhitration ser eg Art 26%) ofthe
Energ Charter J’reaty) Ser Schrcuer ( onsent to Arhitration Ch 21 ahove
and
hor simliar ob’,c tvaLons sce, in rcs( ccl o(ScdiçIi aw, Heurnan, ab vt fl 13 at O1’ t!and
In respeet off ngiish lass. Merk,n, ahove n at 14 f tor a CS detrson appIvIn, the sarnc prinuple. sce
Ferlih:er vmpaus i Judni. S’utheri Districi uf I ihro, 5i7FSUpp 948 1981 and ICI A Y’buuÅ if
(;omslercwi .4rb,trat:on VII (1982’ at 381 if
TRIHUNA L’S POWERS V PA RTY AUTOOMY
1221
diction. In terms ofconsequences for the effectiveness of the award, tbis means ihat
the award is valid and enforceahle. If, however, the exclusion ot consequential losses
had heen regulated as a limit on the arbitral tribunals authorit the award xvould
’ Generafly, arbitration agreements do not contain
3
be invalid and unenforceaHe
32 and they remain silent on the question otthe
limitations on the trihunal’s authoritv,
arbitral tribunal’s power bevond the arguments made by the parties.
,
(iii) Applica ble Law
Arbitration agreements often contain instructions in respect of the applicable law.
These instructions maybe considered as a delimitation ofthe tribunal’s authority.
A direct disregard by the tribunal of these parties’ instructions might be considered
as an excess ofthe tribunal’s power. Also here, however, excess ofauthority has to
be distinguished from error in the interpretation of the contract (more precisely,
error in the interpretation of the contract’s choice of law clause) and error in the
application of the law (more precisely, error in the application of the choice oflaw
rules contained in the applicable private international law, which rules may also
be applied to restrict or override the choice of law that was made by the parties in
the contract). In the latter two cases, the tribunal’s evaluation will not be subject to
any control, and any error ivill not have any consequences for the effectiveness of
the award. The difficult borderline between the tribunal’s disregard of the parties’
instructions on the one hand, and the wrong interpretation or application of the
contract or of the law, on the other hand, determines the difference between an inef
33
fective award and, respectively, a wrong but effective award.
()
RULES ON THE TRIBUNAL’S CONDUCT
Arbitral proceedings are subject to procedural rules; these may be set out in the
arbitration agreement, in the applicable arbitration law (including also, for ICSID
On the consequence ofthe excess ofpower, see below, Sect 4.
As an illustration, no lirnitations on the arbitral tribunal’s authority arr mentioned in the rnodel
arbitration clanses recommended by, for cxample, the Arbitration Institute ofthe Stockholm Chamber
of Commerce, the International Chamher of Commerce, nr the London Court of International
Arhitration, Often these standard clauscs arr applied as a model for arbitration clauses that arr mdi
vidualiv drafted; the numher ofciausrs that contain spcciflc limits on the iribunals authontv, therc
fore, is rather low iht 1CC Rules assume that the parties shall. at thc heginning of thc dis’ute. agrer
on tcrms of refrrrnr, spccifvin the qursions hat arr suhnittrd o tur tribunal. 11ics arr often
drafted as a poive hst ofquesPons to be solved ratber than a a list ofitems that arr rxduded from
thc scope ,,fthc dispute
Ser als(l Sett 2)!a1nj aud n 19 ab<ive
1222
GlImT
I
( ORL)LRO MOSS
arbitratton, the TCSID (ZonvLntion), and, most iinportantly, in the arbitration rules
applicahie to tlie choscii arhiti atien preceuding. Ihusu arhitratien rulc duurntine
the trihurial’s rele, and inight therefere coittain irtiportant guidelines relating to the
trihunal’s power in respect of the parties’ argurncnts.
Arbitration rules are issued in connection with treaty hased arbitration (such
at, the ICSJD Rules), by arbitration institutions (such as the Arbitration Institute
of the Stockl’iolm Chamher of Comrnerce (SCC), the International Chamher of
Comrnerce (ICC), and the London Court of International Arbitration (LCFA)),
or they are chosen by the parties to be used in ad hoc arbitration (such as the
UNCITRAL Arbitration Rules of 1976) Generally, the extent to which the arbitral
tribunalis boundbythe parties’ factual and legal arguments is not specifically reg
ulated in arbitration rules. Ihere are, however, several rules that could be deemed
relevant to the subject-matter.
(a) Party’s Default
Many arbitration rules provide that the arbitral proceeding n’iay be initiated and
34 once the arbitral
may continue in spite of the failure by one party to participate;
to contribute to it, prevent an
failing
not,
by
party
may
a
jurisdiction is established,
arbitral proceeding and the award from being rendered.
Ihis rule ciarifies that it is not necessary to receive the arguments from all parties
to the dispute in order to proceed with the arbitration. However, it does not ciarify
what role the tribunal shall have in respect ofthe arguments that were made by the
participating party: shall the arbitral tribunal accept all the evidence produced and
arguments and requests made by the participating party, or shall it evaluate them
critically and independently?
(b) Adverse Inferences
Some rules specifv that failure by one party to appear shall not be seen as an
3 Most arhitration rules, however, are
admission of the other party’s assertions.
ICSTL) Rules Art 42, SE C Rules Art 28, JC( Rules Arts 6(3), i8(, and 21(1) LE JA Rules
Art i(8), UNCITRAI Rules Art i8(i. Ser Goetz ii at v Dir RLpubIiL o[Burudi, 26 YB Lam Arb
(2001’ at 26 ti See also Gir reasoning and Gir relerenres containrd in I Butdiers and P Kimbrough,
‘ihe Arl’itral Trihunal’s Role in Default Pro.trdings’ 2212 Arl intI 2006 at 233 i!
1ii’. priniple does m t appiV otilv o In eSTflCfl
S,e the Ii. StO ‘\rhttrato’n Ruls -\i t 42
‘ult tiea’ i”o ut .‘mne’ :a a’h ra
p71 n.1p!: riav be i’ ‘:‘d to modurn
at nr i:
han 0w, sueh as German las ( ode at C tvil Prordure, iYl’(>) Io48 2’. ser eg M Martinek Dl
Mitwirkungsi weigerung d’ s Sdiitdsbeklagtrn in G Luke, I Mikami, ani II Prutt’ng eds
I’estsJlr:ttfur.4krra JshiIawa om 70 Geburttag Berlin and Nes York Walter de (,ruvtcr, 20 ii) at
TRt fl V NA
5 POWERS V PA RUY AUTONOM V
122
3 This does not usually prevcnt the tribunal from drawing
tlw matter.
inferences adverse to tbe defaulting party, if this is deerned appropriate under the
circunistances.
37
‘Ihis does not finally ciarify tbc role ofthe tribunal in respect ofthe argurnents:
the rule according to whieh the trihunal mav not consider a failure to appear as an
admission does not prevent the tribunal from accepting the arguments as they were
presented by the participating party ifthe tribunal is convinced of their soundness.
Conversely, the rule according to which the tribunal may draw adverse inferences
does not mean that the tribunal has to accept the presented arguments ifit is con
vinced that they are not sufficiently founded.
Both rules, therefore, seem to assume that the tribunal is free independently to
evaluate the arguments of the participating party. The former rule assumes a duty to
evaluate independently, whereas the latter only assumes the power to proceed to an
independent evaluation. That a tribunal shall not make use ofthis power, however, and
shall blindly accept the arguments ofthe participating party, does not seem to comply
with the expectations ofjustice connected with the institution ofarbitration.
The ALI/Unidroit Principles of Transnational Civil Procedure, a text issued
in 2004 by the American Law Institute and the International Institute for the
35 contain some guidelines in respect of the eventuality
Unification of Private Law,
that a default judgment is to be rendered, These principles are not binding rules,
but they maybe considered to reflect a certain international consensus on the main
aspects of some procedural questions. Article 15.3 requests the court that is render
ing a default judgment to determine on its own initiative the following aspects: its
jurisdiction, compliance with notice provisions, that the claim is reasonably sup
ported by available facts and evidence and is legally sufficient. In connection with
slent on
269
if, para X) and Swedish law, see Heuman, above n 13 at 396 f and
405.
See also Rubins, above n 4,
at 12)ff.
eg the ICC Rules. However, a highly autboritative cornmentary on Art 21(2) of thc JCC Rules
considers il to be a widely accepted principle that failure by one party to appear does not mean admis
slon ofthe arguments made by the other part). See Derains and Schwartz, above n 6 at 266,
Sec the International Bar Association (IBA) Rules on the Taking ofEvidence in International
99, affirming in Arts (4) and () that the tribunal rnay draw inferences
9
Commercial Arbitration of5
part)’ in case offajiure to produce a piece of evidence ihat was requested by
defaulting
adverse to the
the otberpartyandorderedbythe tribunal. See also the commentaryon the ICC Rules by Derainsand
and s 21(2) at 266: negative inferences are possible, but the trihunal
Schwarz, ahove n 6, Art 20(5) fl
Also, in the systems expressly excluding tbt faiiure to appear is
thcm,
drawing
in
cautious
be
should
an admission, the tribunal may evaluate the attitude ofthe parties and draw adverse infereoces, ifit
deems appropriate under ttw circumstances; sce. for Swedish law,Heuman, above n 13 at 397, 405. See
also Rubins, ahove 114 at 124ff.
The Principlcs aim at providing a standard set ot principles tor transnational disputes as the
basis for future initiatives in reforming .ivil proedure, and aspire at heing applicable alsoto arbitra
tion, See the introduction totbe Printiples’ text at <http’//www.unidroit.org!english/principles/civil
procedure!marnhtm’>; see also ‘Ali/UNJI)RCIT Prineiples of Transnational Civil procedure,
Uniform V Rtv (:oo4 at ç5 P, Cornmenl I”Ji on thc introdu,torv artode on seopi’ arid
Implernentation, at 759.
1224
GIUWTTACORDFROMOsS
the latter duty of the court, it is specified that the court is not expectcd to carry out
a full inquirv, hut it has to critically analyse thc evidence supporting the statement
ofclaims. ]iiis does not prevent the iribunal (rom drawing adverse inferences (rom
a partv’s failure to advance the proceeding or respond as required, in accordance
with Article 17.3
Frorn the foregoing, it seems possible to conclude that an arhitral tribunal is not
bound automatically to accept any argument made by one party in case offailure by
the other party to contest it. The question that remains open is how far the tribunal
can go in its independent evaluation ofa party’s argurnents.
(c) Additional Information
Many arbitration rules permit the tribunal to request that the parties present add
itional documentation and c}arifications, to take the initiative to appoint an expert,
°
4
to proceed to inspections, etc.
This possibility to request additional ciarifications is consistent with the tribunal’s
independent evaluation ofthe participating party’s arguments as described in Section
)(b) above. However, access to requesting additional ciarifications is not limited to the
3
(
situations where one party fails to appear and the tribunal needs further information
to evaluate the other party’s arguments. Access applies in general, even if both parties
participate in the proceedings and have presented their respective cases in full.
The possibility to request additional information, therefore, may be used by the
tribunal to introduce new elements that were not at all or not sufficiently subrnitted
by the parties. It is, however, not clear how far the tribunal may go in introducing
new elements: can the tribunal ask for additional documentation and ciarification in
order to better convince itseif of the correctness or relevance of the statements made
by the parties, or also to investigate facts that were not mentioned by the parties, to
apply sources that the parties had not invoked, to order remedies that the parties
have not requested?
(d) Burden ofProof
Some rules state expressly the principle of burden of proof, a principle generally
valid in most procedural svstems: each party shall have the burden ofproving the
41
facts that il relies on.
Sce the Comment P-Æ mbid. at ‘92,
egthelCSlI) RutesAris 34(2 and 424:mheArbmtratmnn Rules (‘the SCCArs2m(3 aud 27(1, ICC
ad —(
t\(i 3JçA tsmJ
içI\Rukrm mm
and.
‘.
es\r
t
kL
Uruforrn
in
)
1
5
Pi
on
Art
comment
the
r’I
ser
Prindples;
the
AimuNIDRO
for
‘Ihe same s true
°‘
‘
LRev,ahoven38a785f.
UNCITRAI. Rules Art
z.(i).
i R1Bt\AI’S I’QWERS V PART\ At iO\OM\
I22
This princlple inav appear to contradict the two rules mentioned under Section
)(b) and (3,)(L) above, if the party having the burdcn ofproofdoes not prestut sut
3
(
ficient evidence (becaue it fails to appear or otherwise), the fats invoked b that
party rnay not be considered proven. lhe tribunal shall not take over and dischargc
that partv’s burden. This, however, does not necessarily mean that the arguments
made by the other party are sufiiciently proven or substantiated: the party failing to
provide sufficient evidence for its case will lose only if the other party has presented
argurnents that are sufficiently suhstantiated, Otherwise, the arbitral tribunal has
the possibility to investigate the matter on its own initiative. However, it is not corn
pletely clear how far a tribunal can go in its own investigation, before it takes over the
burden of proof of the defaulting party, thus violating the corresponding principle.
That the tribunal shall not on its own motion procure evidence, without involving
the parties, seems to be understood; but how far can the tribunal go in requesting
42
additional evidence in accordance with Section (3)(c) above?
(e) Impartiality
43 This
Many arbitration rules specify that the arbitral tribunal shall act impartially.
is a fundamental principle of due process that must be deemed to apply even if the
44
arbitration rules do not express it
Wou]d the tribunal act impartially when it, on its own initiative, verifies the
soundness of one party’s arguments or requests additional information as described
)(b) and (3)(c) above? If the tribunal, by so doing, is deemed to act on
3
in Sections (
behalf of the party that did not appear or that failed to properly contest the argu
ments, it couldbe deemed to be in breach of (the rule on burden ofproof, and) its duty
to act impartially. However, it seems legitimate to affirm that the tribunal, by acting
ex officio as described, does not act on behalf ofthe defaulting part); and rather acts
in order to achieve a logical and objective result. It is, however, not completely clear
to what extent the tribunal may stretch its role as investigator, before it in effect takes
over the role of the defaulting party and violates the principle ofimpartiality.
(f) Fair Hearing
Many arbitration rules provide that the arhitral tribunal shall grant a fair hearing
45 this assumes that all parties shall have heen given equal and real
to all parties;
Ser alsu ihe referrnces inn 6;’ beiow.
Ser eg Ileuman, ahove n n at
T(;SID Rules Art 6, SL( Rules Arts r’ and 20 3 i( C Rules Arts ;‘, 15(2 , and 20, (TA
Rules Art 14(Ij, UNCIRAI Rules Art 15(1 On the impartiality of the trihunal see Maltntoppi.
‘Tndepend’ nct, I mp’rttaiits’ and itutv of I)ictosurt ut Art iii ators’, Cii 20 above
1hr pr1njpic is to be Inund in arhitratton aws (ste eg tOr (. N Il RAI Modell au Art is ,md
and 21
titt Swcdisii At hutratton At Arts
SCC RulIs Art 20(31, I(( Rules Arts 152, and 20)4 LLLA Ruks Art 180(t) L’NCITR.’tl Rules
“
,
Artss5(i) and
27(3).
1226
GUDTTTA CORDERO MOSS
opportunilies topresent theirrespectivecasesand to respond to the argumentsmade
45
by the olher pariv. Aiso ths principle is a fundamental part of the due process
of the pOSSi
parties
IF the tribunal’s own evaluatiori has deprived one or more
bility to respond on certain matters, so that the tribunal decides on the basis of
elements on which the parties had no opportunitv to present their views, the adver
sarial principle may be deerned violated. Does the parties right to be heard relate
only to the facts that substantiate the various claims, or does it also extend to the
interpretation ofthese facts and the factual inferences therefrom made by the tribu
nal? Does the right to be heard extend also to the points of law and to the tribunal’s
assessment of the legal consequences of the facts in dispute? In certain systems, it is
uncontroversial that the tribunal enjoys the freedom to assess and apply the law on
47 To what extent this iura novit curia approach may collide with
its own initiative.
the adversarial principle is not claritied in the arbitration rules,
()
RULES ON THE VALIDITY AND
ENFORCEABILITY OF THE AWARD
While the arbitral procedure is, generally, not regulated in detail by arbitration
law, the validity and enforceability of arbitral awards are. Some of the principles
that were seen in Sections (2) and () above are so fundamental to arbitration that
arbitration law sanctions their violation. The sanctions will be: (i) the annulment
of the award by the courts in the country of origin of the award (regulated by the
respective state arbitratjon act in case of institutional or ad hoc arbitration), or by an
ad hoc Committee (according to Art 52 ofthe ICSID Convention in case ofICSID
48 and (ii) the possibility to refuse recognition or enforcement of the
arhitration),
award by the courts in the enforcement country (uniformly regulated by the New
York Convention in case of institutional or ad hoc arbitration, or, in case of ICSID
arbitration, by the ICSID Convention, which refers to the rules on enforcement for
domestic final court decisions as contained in the civil procedural law ofthe host
49
country).
National arbitration laws are not harmonized, and it is therefore impossible to
make statements having general validity in respect ofthe annulment of the award,
and ihe Swechsh Arhitranon Act Art
Sce the I.’NCITRAL Modei Law Art
ihe N&;vYork Convcntin Ait h
prinpie is exprcss!v refcrrcd to aiso
1ore extcnslve}y on this helow, see Seels (6 and
On the revlrw oi liv tment awards, ser BalaS, ‘Reew nI Awards, ch 2 above
See Alexandrotfand iaird, ‘Complianct’ and Enforeement. h 29 above
‘
24
1Ie
rRlBtIS 1’ORS V PAR1 V AIOOMY
1227
ilie focus here will be on the UNCITRAL Model Lawon International CommerLial
Arbitration, as wtll as on Sxsedish law. ihe desirability of a uniform intuprtation
of the annulment standards is underliiied by the Model Law’s LhoiLe of providing
for the annulnient of an award (Art 3. the same list ofgrounds that it provides for
the refusal to enforee an award (Art 6). In turn, this list corresponds to the list ot
grounds for refusing enforcement that is contained in the New York Convention
(Art V). ‘ihe New York Convention, being an international instrument, is subject to
autonomous interpretation. Ihis should be suflicient to ensure a uniform interpre
tation also ofthe annulment grounds modelled on it, at least as long as the national
arbitration law has adopted the Model Law or has a wording corresponding to its
Articie 34. It must also be pointed out that several of the annulment grounds con
tained in Articie 52 of the ICSID Convention and applicahie to the annullability of
ICSJD awards are similar to those that are to be found in the UNCITRAL Model
Law: for example, irregularity in the constitution ofthe arbitral tribunal, excess of
power, or procedural irregularity. In the interest of predictability and harmoniza
tion of arbitration law, it is desirable that these standards are, to the extent possible,
interpreted according to the same criteria irrespective of the legal framework in
which theyoperate. Thus, the observations made here in respect of the grounds for
annulrnent or for refusal ofenforcement may largely be deemed to correspond to
each other, irrespective ofwhether the applicable legal standard is Articies 34 or 36 of
the UNCITRAL Model Law (or rather, the corresponding provisions in the national
arbitration Iaws that have adopted il), Articie V of the New York Convention or
Articie 52 ofthe ICSID Convention.
To the extent that the applicable arbitration regulation, as seen in Sections (2)
and (,) above, leaves a certain room for the tribunal to choose its own role between
the two extremes ofa passive umpire and an active inquisitor, the ultimate border is
given by the remedies that mayaffect the validity or enforceability ofthe award. These
remedies are generally interpreted so restrictively that they are as a rule considered
° Nevertheless, they
5
not relevant to questions relating to the application of the law.
are relevant in several respects to the question of the tribunal’s powers in respect of
the parties’ arguments.
(a) No Review of the Merits
The most significant restriction on the scope oi applicability of the grounds for set
ting aside or refusing to enforce an award is that the court ur, as the case may be, the
ad hoe committee does not have the jurisdiction to review the award on the ments.
This means that error in the ti ibunal’s interrretation of the contract, evaluation of
‘
eg Kaunann Kohier Jhe Arhitrator and the I as ahov,: n 5 at (‘34
122
(, 11)1T TA CORI)FR() MOSS
the evidence, or applicaùon of the law nlay not lead to in alidity oi unenfort ahility
ofihe award:
(i) the validity ot an award rendered in an institutional or ad hoc arhitration is
regulated by national arbitration law; it cannot, therefore, be excluded that
some countries provide for review of the merits. In general, hovever, this possi
bility is excluded. In the UNCTTRAL Model Law, the exhaustive list ofgrounds
for invalidity is contained in Articie 34 and does not include error on the merits
or in the application of the law; the same is true for Swedish Iaw (Arbitration
’
5
Act, Arts 33 and 34) and English law;
Cii) ifthe investment arbitration is governed by the ICSID instrurnents, the award
is subject to the annulment mechanism regulated in Article 52 of the IGSID
Convention. Article 52 ofthe ICSID Convention does not list errors in the appli
cation ofthe law or on the merits as annulment grounds;
(iii) in respect ofenforcement ofan award subject to national arbitration law, there
is an exhaustive list of grounds for refusing enforcement in Article V of the
New York Convention. Articie V of the New York Convention does not contain
error in fact or in law;
(iv) enforcement of IGSID awards is subject to the same rules of enforcement that
apply to final court decisions of that state (ICSID Convention Art 54(1)). This
does not mean that ICSID awards rnay not be reviewed in connection with
enforcement: the respective national civil procedure law rnay still permit review
offinal court decisions Cand therefore of ICSID awards) in connection with, for
52 As a general
example, alleged violations of applicable fundamental principles.
ofthe decisions.
merits
the
rule, however, this does not extend to a review on
Duly taking into account the abovementioned restricted scope of application, the
following remedies seem to be relevant to the question of the tribunal’s powers in
respect of the parties’ arguments.
(b) Excess ofPower
Ifthe award goes beyond the factual scope ofthe dispute as agreed upon by the par
ties, it exceeds the power granted to the tribunal, An award that is rendered beyond
unenforceable.
53 and 54
the scope of authority of the tribunal is invalid
Arbitration Ad ss 67 and 68. Ihe posshif iv for an English court tO review an award for error tn
(Enghsh)lawhas been significantly hmited since the Arbitration Art ofi979
Ser, for a detai1d analvsis from the pomt of vicw parucularlv ofUS civd procedure, F Ba1dwn,
ff
M Kantor, and M Nolan, ‘tjrnts to F,nforemcnt of JCSJD Awards 2fi T Int’I Arb t2o06) at i tL 9
And mav thcreforr be set aside hythe courts ot the countryot fl gin, ser the UNCITRAI Mud1
Iaw Art 342 a ii sedish Aihitraton Art Art 342 [hr samc ruk applies to the annulment ot
I( SID awards, sec [hr ICSJD Conventon Art 5:(i (b
New York Convcntwn Art Vu-c
.
TRIBUNALS POWERS V PARTY AUTONOMY
1229
Jt is generallv recognized that tbe rute, as contained in the New tork Convention
and the UNCITRALModeI Law, is to be applied restrictively, ‘Tl3us the rule is deerned
to appiv to the factual scope ofthe dispute, and not also to the arguments made by
55 ihis does not mean, however, that the tribunal rnay totally disregard
the parties.
the parties’ instructions, for exarnple, in respect of choice of taw, as discussed above
in Section (2)(c)(iii).
An award rendered without power, for example in violation ofthe rules on juris
diction, as seen in Section 2(a)(i) above, might fall within the scope of this rute.
(c) Fair Hearing
Both parties must have been given the possibility to present their cases, otherwise
unenforceable.
56 and 57
the award is invalid
Also this rule is interpreted restrictively, so as to cover only fundamental prin
ciples of due process, such as failure to notify ofthe arbitral proceeding.
In the systems that do not have a specific ground for annulment of the award
relating to the inability of one party to present its case, such a serious viola
tion of due process will be covered by the rules on ordre public or procedural
59
irregularity.
(d) Procedural Irregularity
The procedure followed by the tribunal must respect the fundamental principles of
due process and the mandatory rules ofthe applicable arbitration law (or applicable
unenforceable.
° and 61
6
treaty), otherwise the award is invalid
or unenforceability of an award
invalidity
to
lead
Procedural irregularities rnay
ifthev seriously affect the respect of due process. This rule may cover, as seen above
AJ Van den Berg, ‘Consolidated Commentary on New York Convention’, in a8 ICCA YB Com
Arh (2003) at 512C.
And mav therefore be st aside by the courts of the countrv of origin. ser the UNCJTRAL
Model Law Art 34(2)(a)(ii), Swedish Arhitration Ad Art 34(6). Ihe same rule applies to thc annul
,(t)(d),
ment ofICSID awards, see tbe ICSID Convention Art 5
New York Convention Art (i (h).
Sce Van den Berg, ahove n at o8 i aud sii 4
z(t)(d); see Schreurr, lhc
eg Swedish Arbitration Ad Art 34(6;, and thelCSlD Convention Art 5
ICSID Conuerition, above fl 22 at 970 if
Modt’]
And mav thrre(re be sel aside by ihe dourts ofihe countrvof urigin, ser the NC1TRAL
ut
aisnuindnt
he
to
apphs
4(6;
ruje
same
11w
Art
.-\dt
ration
Arbt
Swedish
342at(iV,
Law Art
ICSID awards, ses’ the ICSID Convention Art 52U)(d)
‘ New York Convention Art V(i)(d)
1230
(,11] I) IT TA C(JR DI RO MOSS
in SeLtions (2)(a)(il) and (2)(b)(]), disregard of the mandatory rules on the applicable
Iaw and, to a certain extent. violation of the procedural rules referred to in Seetinn
() above, as ve11 as situations where the trihunal has not acted ampartialiv; however,
2
its interpretatlon is vcry restrictive.
(e) Need for Guidelines as to the Tribunal’s Role
It rernains to be seen more specifically what kind ofex officio initiatives are com
patible with the ultimate borders of the arbitral authority described in this sec
tion: the principles ofexcess of power, of fair hearing, and ofimpartiality. While
63 and
it is only a breach of these principles that has consequences on the validity
enforceability ofthe award, it might be possible to identify certain guidelines for
64
the conduct of arbitration proceedings that might be useful as an indication ofa
proper procedure even ifviolation thereofdoes not lead to such dramatic conse
quences as invalidity or unenforceability. This will be the subject of the following
sections.
()
THE TRIBUNAL’S POWER IN
RESPECT o QUESTIONS or FACT
The question ofthe tribunal’s power in respect ofthe parties’ arguments may anse
relating to questions both of fact as well as oflaw. The matter will be first addressed
here in respect of questions offact, from the point of viewof two situations that may
often be encountered in practice.
(a) Can the Tribunal Request Additional Information to
Undermine Uncontested Evidence?
As seen in Section (3)(c) above, the tribunal may, under some arbitration rules,
draw adverse inferences from the failure ofone party to appear. Above, it was also
Sce Van den Berg. aboe fl 55 at 521 2 and 5234. For 1( SIF) arbatration sce Shreuer, lhc I( SID
(nnientaon, ahovt fl 22, at Q’2 fl
Assumang that the applacahie arhatranon law in thas re%pect c )rrLpOfldS to the L’NCI i kAi
Model Iaw, to Fngksh or Swcdish law, or to thc I( 511) rtgu]ataon
64
In accordance with Art V ofthe New York Conventi n
‘
POWFRS V P\R1V AtTONOM\
1231
pointed out that the tribunal is not bound to aept the uther party’s assLrtions
blindly. If thc evidence produced is not convincing because, for example, a wit
ness did not seeni credible or a doLurnent was evidently forged, the unsatisfaetory
character of the evidence is apparent at a mere examination thereof. Likewise, ifthe
produced evidence is intrinsic ally’ illogical, or if it contradicts other evidence that
was produced in the same dispute, i’. is sufficient to examine the evidence produced
to determine the weight that shall be attached to it. As long as the independent
evaluation of the produced evidence consists in this examination, no difliculties
seem to anse in connection with the tribunal’s role.
A question that might anse is to what extent the tribunal shall limit itseif to an
evaluation ofthe evidence as presented, or ifit is allowed to go further and, in order
to venify the soundness of the evidence, to develop arguments that should have been
presented by the other party. Can the tribunal avail itseif of its power to request add
itional information in order to substantiate these arguments?
Imagine a party wishes to prove that the value of the disputed goods has decreased
during a certain period of time. The party produces documentation showing that
equivalent goods have, during that period, been purchased at a certain price aud
then resold at a lower price. This is evidence of the decreased value not of the spe
cific goods in dispute, but of equivalent goods; however, the other party does not
appear and therefore the extension of this evidence to the disputed goods is not
contested. If the other party had appeared, it might have produced evidence that
that particular purchase/resale was not indicative of the value of that type ofgood,
for example because the purchaser/reseller did not act diligently, or was under a
conflict of interest; or it could have produced evidence that the disputed goods
were not affected by the same decrease in value because of special circumstances.
Assuming that there are no prima facie grounds for not applying the proven value
decrease also to the disputed goods, the burden would be on the other partyto con
test such applicability. If the other partydoes not appear, it does not discharge its
burden. In such a situation, the trihunal has two alternatives:
(a) The tribunal may consider the evidence produced as satisfactory, thus giving
effect to the general rute on burden ofproof.
(i) This does not create problems in those systems that permit inferences
adverse to a party to be drawn from that party’s defau1t.
(ii) Some systems, however, expressly state that failure to appear may not be
66 To avoid violating this rute, the trihurial should
deemed as an adrnission.
verify whether the produced evidence is capable of independently proving
t for an SCC Invesiment award that avaihd itsel of thi
eg Swedish !aw, set ahve, Set
possibilits sce Bogdanvu i Repubu 1 .‘vfldova, http. /ita lass uvicca decurnunis Bogdanov
sakc, il rnu,t be poin’cd ,ut ‘bat
i ofthe awird Fo fn
M,Id a :%Sq turnbr: o p11 i,
the presnt author is th& author of that award, having acted as sole arbitrator in the dispute
eg the IcIl), as seell as Gerrnan iaw, set ahove Sett (3 (t I er a drfaolt I( SIR award that
expli.itlv referred to ihe trihunal’s duts to arc1uI1y and indep ndently exarnine t)w submissions by
GI IJDITTA CORDERC
1232
MOSS
the point made by the party: this is ihe case when the evidence is relevant
and suiflcient even vithout interpreting the other partv’s default as an mdi
re:t adinission that it is not aNe to rehut it by producing contrarv evidence.
Should, however, the trihunal determine that the produced evidence does
not have an independeilt value, because its relevance or weight depend (also)
on the absence ofcontrarv evidence, the tribunal is under a dutv to raise the
matter aud request additional ciarifications.
(b) lhe tribunal may consider that the evidence produced is not satisfactory, and
may thus request additional evidence in order to substantiate or dismiss the
argurnents that can be made against its soundness.
(i) In the systems where a tribunal may draw adverse inferences from the
other party’s default, the tribunal remains free not to draw such inferences.
Therefore, if the evidence produced does not have independent value, and
the tribunal determines that it shall not be deemed to be admitted by the
other party, the tribunal may exercise its power to request additional infor
mation. However, if the evidence has relevance and weight irrespective of
whether il is deemed accepted by the other party or not, a request by the
tribunal for additional information may seem to violate the rule on the bur
den ofproof.
(ii) In those systems where the tribunal has a duty not to deern as an admis
sion the failure to appear, this alternative is not problematic; however, if
the evidence produced clearly has independent value, the request for addi
tional information is not based on the duty to avoid drawing negative infer
ences from the other party’s default. The tribunal remains free to evaluate
the evidence and to investigate further in accordance with the powers that
the applicable regulation confers on it; but it runs the risk of taking on the
burden of proof ofthe other part)’.
What are the consequences for the award of a violation of the rule on the burden
of proof? Of the three ultirnate limitations on the tribunal’s power examined in
Section 4 above, it seems that the rule on procedural irregularity, or due process,
might be considered. As seen in the explanation above, a violation ofthe rule on bur
den ofproofmaybe assessed by reviewing the tribunal’s evaluation ofthe arguments
and their capabilityofhaving an independentvalue; as known, this kind ofreview
is generally not allowed, either in the phase of validity challenge or in the phase of
enforcement of an award. It seems, therefore, that a violation ofthe burden ofproof
would have to be quite a clear violation of impartiality and cause a substantial injus
’
6
tice, before it can be sanctioned by invalidity or unenforceability of the award.
the partIIpatrng par Lv. ser I ri’crra’r Esir; TrmLcr CorpmatzLn ‘1 [ TCO;
S; at 6-6
9
Revob.’ tJrnczo, 2 Internatronal 1ega Matcrak6.r 1
i’
7 G’rLrn’ncn: cft)
Ihis docs not mean, however. that he trhunai 02’ totaliv drsr, ard ihi par tIt’ tnstru,
exampe, in respeet ofChokc of aw Ihe ICS!D ad hoe comrnittees have regulany rcte ted
ttons. nr
i RIBUNAIS POWFRS V I’\RTY AVTONOMY
I2
Nevertheless, a tribu nal should accurately comply with its duties and as oid act ing in
a way that miglit raise evem the %lightest supicion ofinipartialilv, even ifihe thresh
old for invaliditv and unenforeeabilitv ofthe award is not reached; otherwise, the
parties’ faith in arbitration rnight be undermined,
So far it has heen assuined that the evidence produced by one party was not con
tested, because the other part) did not appear. What if the other party appears and
presents its statenients, hut tails to contest that particular piece of evidence? It seems
that, in this situation, it would be difficult to apply the rule preventing the drawing
ofadverse inferences frorn failure to appear. The other party has actually presented
its argurnents, where il could have contested the evidence. and has decided not to
contest it. This seems to be very ciose to an implied admission of the assertions that
were meant to be proved by producing the evidence that remained uncontested.
‘Ihe tribunal rnay invite the other party to clarify whether the failure to contest the
evidence is to be interpreted as an agreement on the existence of that particular cir
cumstance or not; however, going further than that becomes dangerously ciose to
suggesting arguments to that party.
To the extent that the parties rnay be deemed to agree on the existence ofa certain
fact, there does not seem to be any room for the tribunal to make different assump
tions; however, the tribunal remains free to draw from the agreed facts the infer
ences that it deems appropriate, and to ask for the additional information that these
inferences might render relevant.
(b) Is the Tribunal Bound to Decide only on Invoked Facts?
The tribunal has to base its decision on the facts introduced and proven by the par
ties; otherwise, it will exceed its power. The general rule is, therefore, that an award
may not be based on a fact that was not invoked by a party, This does not mean that
the tribunal is bound by the argumentation made by the parties in respect of the
proven facts, As seen above, a tribunal is free to evaluate the evidence and to draw
from it the inferences that it decins appropriate. Does this extend to facts titat were
proved but not invoked by a party?
applications for annulment hased on the allegation that the tribunal had violated the rule on hurden
of proof: ser above, Seci f4)(a and Sebreuci, Jhe IC’SID Consent inn, aho e fl 22 at 981 f, ref rrng
in
1iitcr alia to the ad bor committee dLcision in the Klôck’er ITcase (unpuhlished), which aflirmed
proof,
hurden
Ol
the
ot
reversal
erroneous
of
because
an
awaid
annulling
ot
theory the possihility
but did not find ihe annulment ground applirable in the sprcific rase tn commercial arbitratton
reported derisions establisbing s vioatIon ot the impartialitv standard air few and dra] nisiniv ssith
e van den
the possihditv ol hoth pirties h ing h,ard ratber than wi:li thr rulr ofl’urden ut prul
Brrg. ahove fl s. at 511 2 and 52; 4 s an eamp]e ut la of in partialitv bys trihunal, ec ‘hr l)uLh
deusion ot 28 April 1998, i1 25 \ B ( ;in An 1998) an ‘i f rfusin ‘o enf mc ar award bed on
evidence that one party had pinsented after th haring, and that thc otlirr part) had not bad thr
pssiblit v to oni ment On
fl
1234
(tt)!Tr\c:oRI)noMoss
be assumed that an 1nstor eiaims damages from the host state as a
consequence of an aHeged breach ot an obligation to pay for sorne hars that
the investnietit agreetnent obliged the investor to seil to the state. ilie investor
oduces all the docuntentation relaling to its atternpts to obtain payment for
1
the assigned shares. As evidence of the state’s breach of obligation, Ihe investor
invokes the introduction by the state of certain regulatory measures restrictlng
the choice ofmeans ofpayineitt. ‘ihe tribunal observes that the breach ofobliga
tion is proved also by other circumstances that werc docurnented by the claimant
in the proceeding, but not invoked. Ifthe tribunal deems the invoked facts as not
sufficient evidence ofthe breach, whereas the proven, but not invoked, facts are
deemed sufficient to prove such breach, it does not seem reasonable to bind the
tribunal to consider only the insufficient arguments made by the clairnant. ihe
tribunal must be allowed to consider the consequences of a fact that was proved
before it, even ifthat fact was not invoked, as long as this does not modify the scope
68
ofthe dispute.
It can
(6) THE TRIBUNAL’S POWER IN
RESPECT oi QUESTIONS OF LAW
(a) Can the Applicable Law be Disregarded ifthe
Parties do not Sufficiently Prove it?
Sometimes tribunals do not consider the applicable iaw because it was not suffi
9 This approach has been subject to criticism, and with
ciently proven by the parties.
°
7
good reason.
Coming to the same conclusion see, under Swedish law, Heuman. ahove fl 16 at 6o6 f, 634. 640
and, under Engltsh law, Merkin, ahove fl 7 at 592. 1he exampie made in the text Is inspired by the case
referred to in n 65 abovt in ihat case, however, the facts that were invoked bvt be clainiant wert Von
sidered as sufiicient to prove thc hreach, and therefore it was not necessary to consider also the proven.
bul not rnvoked facts
eg Swe ni ba/i AB v Republic of I at via, (z) Stockholm Arb Rep (2004) at 97 fL and ( ME v Czech
Repubiic, ahove n 20
tor a cr1tiism ol Sismba1t AB v Repuhltc at I at ta sec Rubins ahove n 4 at 326, and F Yala,
Observatioris’ on Swtrnbait i i atvia (2) Stockholm Arh Rep 20o4 at 128 if 633 if I ut a crIticism
t A9 aud
5 I ass ahou I 0
o (MI (:eh Rep
hlz, sce Selirener, ‘latlure to App1 th (n riilrl
4
a oniparatti a na)vst ot In on sequen e’ ol an in sult,. tent prout ut ereigri lass. st e
o 1)
arcbirg. al’,vc ri i; at 324 fl
laritera t
68
,
IRIBNIS POWFRS V PARFY AUfOMY
125
‘llie apph.ahle law shaN be çonsidered, even if it has not been uthcient1y proven
by the parties, rrespective of whether the Iaw is deemed to be a fact (as the common
Iaw systems assurne (see above, Sect (i)(b)(ii) in respect ofEnglish law) ) or not:
(a) If foreign law is treated as fact, it has to be proved bythe parties. As just seen in
Sections (i)(b(i) and (i)(b)(ii), under English law the arguments niade by the par
ties in respect ofthe facts do not bind the tribunal in its independent evaluation
ofthe evidence and in the inferences that are hased on those facts. It follows that
a tribunal suhject to English arbitration law is not bound by the presentation of
the foreign Iaw made by the parties, that it inay request additional information
and may build its own argumentation thereon. In case of insufficient evidence
offoreign law, therefore, a tribunal governed by English arbitration lawwillbe
entitled to ask for additional evidence. Ifthe evidence is still not satisfactory, the
tribunal wiIl apply the presumption that foreign Iaw is the same as English law;
and English law is applied ex ofJicio by the tribunal.
(b) If the law is not treated as a fact, insufficient evidence does not excuse the tri
’ This does not mean that the
7
bunal from its duty to investigate it ex officio.
72 it certainly
tribunal may not ask the parties to provide evidence of the law:
is in the interest of the parties to provide as exhaustive and convincing evi
dence of the Iaw as possible, so as to substantiate their respective arguments.
This approach is very common in practice, and is even codified in some private
73 The duty of the arbitral tribunal to investigate the law
international law acts.
seems to consist in asking the parties to produce additional evidence ofthe law
74
or appointing legal experts, rather than in directly investigating the Iaw.
‘Ihis approach is consistent with the ALI/Unidroit Principles: according to
Articie 22.1, the court is responsible for determining the correct legal basis for its
decision, including matters determined on the basis of foreign law.
To what extent the award may be set aside as invalid or deemed unenforceable
because the tribunal disregarded the applicable law on the ground that it was insuf
ficiently proved, depends on whether the failure to apply the law falis into the cate
gory of error of law (in which case it will not have consequences for the effectiveness
Seeabovenu,
See, however, the commerit on Art 20(4) of the TCC Rules by Derains and Schwarz, above n 6 at
n 582, afhrming that in international arbitration the appointment ofiegal exprts to testify on for
eign law should not be necessar, hecause an international tribunal should not consider anv law as
oreign, and is assumed to know the law ihat it is supposed to apply For a comparatlvc analysis of
thc questlon ofwhcre duty to prove toreign law lies. whether with the parties, the tudge. or hoth, sce
Janterä-jarehorg. ahove fl 13 at 286ff
Sce, eg t 23 In the Geirnan ZP() arid t 6 in thc Austrian Private Tnternationa La Act
Kaufrnann Kohler, ‘bra novit arbiter ahove fl 5 at 74 f, analvses how Sss ss arbitration lass gises thc
trihunal the power, bot not the obligation, to lncstiCate flie Ias’ ex ofio Alse the Swdish sstLfl1 Is
based on the principbe tha the parties ha e to prose the hus sce Heur ïan, aho e 013 at s,6 esen if ihe
1 1ts oWn argunsents of law il id at 3’9
Swedish arhitrawr Isas the autbority to devclo
See also the AT I Unidroit Pr iriiples Art 22 4.
1236
G tI) DITTA CORDERO MOSS
ofthe a’.vard) or into one of the principles that were detined in Section (4) ahove as
the ultimate limits of the tribuna1s powers. If the disregard of the applicable Iaw
is based siinplv on the insufficiency of the evidence thereof, aud if it is not cor
roborated by reasons that show [hat tbe tribunal bas made some considerations
on the choice, interpretation, or application of the law, tbere is a basis to consider
it as excess of power (because the tribunal made its decision on [be basis ofa legal
standard different from that which it is obliged to apply) or procedural irregularity
(ifthe applicable Iaw is mandatorily determined in the applicable arbitration law or
investment treaty).
(b) Can the Tribunal Develop its Own Legal Arguments?
As seen in Section (i) above, the tribunal is empowered to develop its own reason
ing in respcct of the evidence and ofthe facts that the parties have introduced in
the proceeding. Also, it was pointed out that the tribunal has the ultimate respon
sibility to apply the law, whether the law is deerned to be a question offact or a
question of Iaw (however, within the limits ofthe choice oflaw made in the applic
able treaty, as scen in Section (2)(a)(ii) above, in the applicable arbitration regula
tion, as seen in Section (2)(b)(i) above, and in the arbitration agreement, as seen in
Section (2) (c) (iii) above). It follows that the tribunal is entitled to develop its own
reasoning also in respect of the Iaw, the more so ifthe law is within the sphere of
the tribunal rather than that of the parties. Ihis is recognized also in the ALl!
Unidroit Principles, which state in Articie 22.2.3 that a court may rely upon a legal
theory that has not been advanced by a party. This articie requires, however, that
the court must give the parties the opportunity to respond to such new theory; this
requirement wiIl be reverted to in Section () below.
Under the power to develop an independent legal reasoning, it is possible to
distinguish at least the three following categories.
(i) New Qualfications under Sources Already In troduced in the
Proceedings
Let us assume that an investor has initiated arbitration under a BIT (mentioning the
BIT as the basis for the claim). Ihe investor proves that its investment was subject
to some regulatory measures that have negatively affected it, and claims compensa
tjon for its damages. As a basis for the host country’s liability, the investor alleges a
violation ofthe local law on foreign investment. The tribunal grants compensation
for the damages, though not on the basis ofviolation ofthe law on foreign invest
t Is the tribunal exceeding its power
ment, hut on the basis ofa violation of the BIT.’
i be exariple s inspired 1’v onc ut the qucstions dvah wth tn tbe case Bodancv v Repubitc
Molduva, ahove n 6 at ss i and 42.2 at the award.
et
RIH ‘A1S PO%LRS V PARI
AUTOOM
1237
in respect of the legal argumentation? ihe tribunal is free to qualify the proven
fat. t tn aanrdanc with ihe legal sourLts that t dLems app1iahle. epeiaI1v if
these legal sources have heen introduced in to the proceedings by the parties’ The
qualitication and subsumption of a fact belong to the evaluation of the legal Cofi—
suquences ofthat faLt, and are part of the legal reasoning that the tribunal has the
power and the duty to carry out independently”
(ii)
j\Tel.
Sources
In a case where the investor claims darnages for the allegedly illegal revocation of
a concession by the host state, it can be assumed that the tribunal raises on its own
motion the question ofwhether the revocation ofthe concession can be qualified as
a nationalization, and, ifso, as a lawful nationalization. Let us assurne that the ques
tion ofnationalization and the relating rules and principles bad not been introduced
by an’ of the parties: the claimant submitted that the host state was in breach ofits
contractual obligations, while the respondent is not participating in the proceed
78 Is the tribunal exceeding the scope ofthe dispute?
ings.
although clearly
The decision of the ICSID ad hoc committee in Klöckner
affirming the tribunal’s freedom to develop its own legal theory and arguments,
proposes also a restriction: such freedorn is restricted by the ‘legal framework’
established by the parties. As an example ofa hypothetical violation of the limits
set by such a legal framework, the ad hoc committee mentions a decision ren
dered on a tort ground, whereas the parties’ submissions were based on contract. A
reading that the ‘legal framework’ would prevent the introduction by the tribunal
of the rules on nationalization under the circumstances mentioned above would
appear to be unjustified, particularly in view of the tribunal’s duty to independ
ently examine the factual and legal issues in dispute when the respondent is not
participating in the proceeding. Assuming that a violation has the same conse
quences both for the sources introduced by the tribunal and for those invoked by
Immediatekbe!ow, ihe isue ofto what extent the tribunal may apply newsourccs ihat have not
heen pleaded by ihe parties wiIl be addressed.
In the same sense, see ihe decisions by the Swiss Federal Court referred to in ahove n 6i, and
Wiegand, ahove fl 3 at 140. for Swedish law, see Fleuman, ahove fl 13 at 39 arid the decision 8090—99
by the Svea Court of Appeal, published in Fnglish in (i) Stockholm Arb Rep (2003> at 251 tL and
coinmented upon by Wallin, ibid at 263 if, for Frtnch law see the judiual practice referred to by
Kessedjian above fl 4 at 404, In the different context of establishing ihe tribunal’s own jurisdiction
see Douglas, aho c fl 21 at 39 L criticizing the trihunal in Eureko v Repuhln ofFoland for not having
cunducted it men anaivsis ofihe essential basis ut the claim and havinit simplu relied on ihe cla:m
111 qulihcat ie,n €0 thc CIaIIO
‘Ih ir-unislarct’s dr rihed crrepnd to ih’e fl I i 7 ( s 7bc (,iv’ ‘iineut ‘ tiie Reruli u’
I iheria ahove n66 Ihe trihunal, aher ha ing raocd the qucsnon ruled ihat thc irunitanes ut tht
ase c otid not qualitv as nationaliiation
I1ockner 1, abosc fl i.
1238
GiIiTTA (‘ORDFRO MOSS
thL parties,° and assuming that the trihunal is acting on the basis of faets that
have bcen proved by the parties, it is vithin the seope of the trihunal’s power to
investigate the applicable iaw and appiv it as it deems appropriate, even ifthe par
ties have faiied to make the relevant arguinent. A problem might anse in respeet
ofthe opportunity for the parties to respond to ehe new legal sources introduced
by the tribunal. ihe possible implications relating to the adversanial principle wiil
be reverted to in Section 7 beiow.
(iii) New Remedies
Let us assume that a buyer is requesting compensation for damages for breach of
contract by the seiler; the tribunal, however, determines that the contract is to be
deciared invalid because it contained unfair terms such as a clause on exclusion of
the seiler’s liability. Can the tribunal deciare the contract invalid and terminate it
(assuming that the applicable law provides for termination in case of unfair terms),
even ifthe claimant had requested reimbursement ofdamages?
There does not seem to be a unitary treatment of this situation in the various
countries. In common iaw systerns the request for remedies made by the parties is
82 In many civil law
deenied to constitute a limitation on the tribunal’s junisdiction.
systems, the limitations of the tribunal’s ;urisdiction seem to be set by the parties’
presentation of the facts, whereas the legal consequences of those facts are left to
the tribunal to determine according to its own identification ofthe applicable law,
interpretation. This latter approach seems to be more consist
subsumption, and 83
ent with the powers of the tribunal, shown in the foregoing, to develop its own legal
argumentation and to apply the law ex ojficio. In other words, the tribunal would
not exceed its power if it grants remedies that were not requested by the parties,
provided that these remedies are based on the facts proved in the proceeding and
that they have not expressly been excluded from the authority of the tribunal by
agreement of the parties (in the arbitration agreement, under the proceeding or in
other manner expressly meant to regulate the jurisdiction of the tnibunal). As seen
above, the tribunal is not expected simply to act as an umpire and choose between
the parties’ arguments; ifit is entitled to develop its own legal argumentation, it must
Immediatelv belol%’, the ssue at to what extent the trihunal rnay apply remedies that were not
requcsted will be addressed.
i, and
‘ In the samt sense, see the derisions by ihe ICSII) ad hoc committees referred to, abovt n
the ICJ and PCJJ decisions referred to, and approved of, by Paulsson, ahove fl 2.
82 Sce. for England, Merkin, ahove n at 714(a.
See, for Sweden, Heuman. ahove fl i at 6i1, 736 i. for Swit7crland, ser Wiegand, abnve n 3 at
R5 f, 140 if, extrnsivdy ai guing how thr icg.* onsequene arr within ihe sphere at i hr trihunal and
sh’uld be deterrnined c atfi io n accorda nrewttli tEr maxlrn da mihi ta.tum, dalu’ itbt ‘us l1at
an independent subsunipton by thr trihunal d ses not lead to exess at pos er is 1fldIret1} ronfiroed
by the lark ofreported ourt decision reusing enturrernent under the New York ( onvention on ihis
ground ser van den Beeg, ahovt fl ,5 at iac
I R FN U
\ I S P 0W F R S V 0 R i
A U TO N 0 M
i
29
also be entitled to draw the legal consequences of this arguinentatioll, and thee at
times rnight entail remedius that veic not requtsted by the parties.
11is s, however, a dangerous area for the trihunal since, as we have just seen, the
power of the trihunal to grant remedies beyond the requests of the parties is not
completely unontroversial in all legal svstems. 11e systems that the trihunal should
be concerned with are the law of the arbitral venue and the law or laws of the enforce
ment court(s). While the law of the place of arbitration is known to the tribunal,
the law of the place(s) ofenforcement is not. Since an award may be enforced in any
country where the losing party has assets (assuming that it has ratified the New York
Convention), and this may include any country where that party has assets in tran
sit, it is unpredictable for the tribunal which interpretation of the excess ofpower
clause the enforcement court wiIl apply. Therefore, it is in the interest of the effect
iveness of the award to avoid rendering a decision that, even ifvalid under the law of
the place ofarbitration, might be deemed to be in excess ofpower in other systems.
It seems advisable that the tribunal informs the parties of its evaluation ofthe legal
consequences of the evidence produced, and gives them the possibility to comment
thereon. Should the parties agree that the remedies suggested by the tribunal shall
not be applied, this would ciarify that the tribunal does not have the authority to
grant them. Should the parties not reach an agreement thereon, they would still have
the opportunity to make their cases on the points introduced by the tribunal. In this
way, the adversarial principle would not be violated.
Section () will revert to the necessity or opportunity that the tribunal invites the
parties to comment on new elements upon which the decision is going to be based,
This should not be considered as if the tribunal was acting partially, suggesting to
one party what legal arguments it should make and what legal remedies it should
request. The invitation by the tribunal to comment is only a consequence of the tri
bunal’s power to develop its own independent legal argumentation, and is meant to
preserve the adversarial principle.
(c) Distinction between Domestic and International
Arbitration?
In respect of the trihunal’s ability to develop its own legal argurnentation and to
apply the law ex officio, a distinction Is sometimes drawn between domestic arbitra
tion and international arbitration, and it is suggested bysome authors in connection
therewith that the principle jura noi’it curta should have more limited application
internat1onal,
when the dispute is 4
73 f,
SeL eg 1-teuman, ahove
fl i
Kessedjian, abot n at
403
at 523. 3”9 682 1; Kautmann Kohier, ‘lura no’fit arlntr’ ahove n 5 at
f; and P Ma3er, I e pouvoir des arhitres de regkr la procedure Une
1240
(,iDiITA CORflLRO MOSS
One ot the reasons tor this suggestion is based on the international charaeter
of arbitration: it is assurned that foreign parties rnight be used to a different pro
cedure and inight not expect the tribunal to take an active role. i1e overview of
the arhitration rules made in Section () ahove. however, seems to show a certain
correspondence among the ditferent institutions’ rules, as well as the UNCJTRAL
rules, in respect ofthe trihunal’s powers. It might, ofcourse, not be excluded that
other arbitration rules provide for much more passive trihunals; however, the rules
analysed here are quite representative of tbe modern standard, at least within
85
European arbitration rules.
Furthermore, it might be difficult to assume total ignorance by the parties ofthe
local arbitration law, let alone of the arbitration rules of the institution that the par
ties have chosen. That the venue for the arbitration shall be chosen out ofiogistical
or other practical reasons and without taking into consideration the legal frame
work for the proceeding, does not seem to comply with the important role that
local arbitration law has in respect ofthe validity and enforceability ofthe award,
ofthe tribunal’s power to order interim measures, or of the local court’s powers to
intervene in or assist the arbitral procedure. Such an undervaluation of the local
arbitration law’s significance might have been encountered more often some dcc
ades ago, when arbitration was a relatively new phenomenon. Nowadays arbitration
has become a settied branch within international dispute resolution and seems even
to have passed the definition as alternative’ method of dispute resolution over to
newer forrns, such as mediation and conciliation. In this context, not knowing the
tribunal’s powers under the chosen arbitration law seems to be rather unjustified;
therefore, the role of the tribunal should not be restricted to accommodating the
interests of negligent parties. Should, however, the venue of the tribunal not have
been chosen by or known to the parties prior to the initiation ofthe proceeding, this
reasoning might be more flexible.
Another reason for distinguishing between domestic and international disputes
in respect of the principle iura novit curia is based on the observation that, in an
international dispute, the tribunal might tend to apply to the merits transnational
sources (such as lex mercatoria) that are more difficult to determine conipared to
86 An invitation to comment on these sources, therefore, might pre
national law.
serve the predictahility of the result. It is certainlv a commendable aini to preserve
predictability, and it is true that the application oftransnational sources might cre
ate problems in terms ofpredictabilitv. From the point of view ofthe validity and
enforceahility of the award, however, the diseinction hetween application of lex
Analyse comparative des svstemes de civil lass et de common law, (2) Revue de l’arhitrage 163 (i
at 176ff
Kautmann Kohier. Ihe Arbitrator and the I as above fl I at (n2 sith furiher bil hographic
referenees in fl 4, evn stak of a tran national arbitral prxcdure ihat is deelopiirg on an iriter
nat i rial lcvd. po.siHv wrth hr trp:ron :15 arhitratiorr
Kessednari, above n at
‘
.
.
rR1BU\1S POWERS V P\RTY At’TONOMV
1241
nicrcatoria aud national law becornes relevant onlv ifthe soues applied by the trt
bunal do not qualifv as sourcts ut law. As seen in SeLtiun (2)(h i) ahove. an award
that is not rendered at law is invalid, if the parties have not requested the tribunal
to act. as an iniiabl’ compositL’ur. ihe lack ot power to render an award cx bunn et
acquo would not be remedied by an invitation to comment (unless the parties in
their comments agree thereon). Ifapplication of the lex rnercatoria does not prevent
the award frorn being considered at law, invitation to cornment is not required for
the effectiveness of the award (although it might be highly recommendable because
of the above—mentioned question ofthe predictahility).
()
INVITING THE PARTIES
TO COMMENT
The invitation to the parties to comment on the tribunal’s consideration of legal
87 recom
positions that were not argued by the parties is required in some systems,
89 Also legal scholars seem
88 not considered necessary in others.
mended in others,
°
9
to be divided between these positions.
Ihis invitation seems necessary ifthe tribunal’s legal reasoning leads to new facts
or evidence becoming relevant. If one or both of the parties may develop their cases
by presenting new evidence that was not relevant in the context of the original argu
eg in France, sce Kessedjian, ibid at 399. A recent Norwegian Supreme Court decision dcli ned
the adversarial principle as the fundamental principle of due process in Norwegian law, and set aside
an award that bad radically reduced the arnount ofdamages requested by the claimant without the
tribunal having advised the parties that it was contemplating doing so: Rt 2005 5 1590. See also the
Swiss decision 4P.loo/2003, above fl 13, which, however, underlines that Ihis requirement applies oni)
to extraordinary cases. See also the ALI/UNIDROIT Principles Art 22.2.3.
Ser, for Sweden, Heuman, ahove n 13 at 634, 683,734, who considers il an open question whether
at 260 if
this rule is mandatory See the Svea Court of Appeal decision No 8090—99, above n
rejecting the existence of such a rule, commcnted upon by Wailin in (i) Stockholm Arb Rep (2003)
at 266 if (considcring it to be recommended that parties’ comments be invited, bot deeming it not a
serious procedural irregularity ifit is not done, at least in respect of domestic arbitrationi
In respcct ofICSID arbitration, see Schreuer, Vie ICSID Convention, above fl 22 at 976 ff show
ing ihat ICSID awards consistently arr not deemed invahd even ifthe reasons upon which thrv are
hased come as surprise to the parties Sce, in particular, ihe decison of the ad hoc commlttre in the
casc relerred in in n i ahove at a para s.. (in Swiss law see zhe udicial practict referred to in
in ASA
fl 6i atiove and. more ex’li,,iCy on thi matter, thc I ederal Court decion N’ 41’ in 1994
‘n FngI:s. law ee 1’rki at”,v n 7 a ssc n rcpr-t ot errrar 7w
ci— ifat para
Bui 1995
Martinek ahose n 3, para XI
( onsidu ing the is vitati n necessar ser eg Kessedjian, ahove il 4 at 599 ti, and Sehncidcr aboc
fl 4 at
( onsidring st not neeessary: sce Wiegand, ahove fl at 137 fl, and Merkin, ahose is at 592
‘
.
1242
GI 1
I) TI A CORDE RO MOSS
ments, hut becoines relevant in ihu LOntt\t of the tribunal i jonin. a i ra’un
able to expecl the trihunal to give the parties the opportunity to do so, even in the
’
9
systems that do not as a general rule require an invitation to comment
evideni.
ifthe tribunal s reason
less
is
ihe necessitv for this invitatjon to cornment
ing remains on a purelv legal levd: as long as the parties’ coninients are limited to the
legal qualification of some factual circumstances or the subsurnption under a cer
tain rule, they are a contribution to the tribunal ‘s reasoning, but they are not binding
on the tribunal and do not add anything to the sphere of authority of the tribunal,
If the tribunal introduces new sourees of law, however, it might be advisahie to
request the parties to comment on the new sources, so that the parties are given the
opportunity to evaluate the new legal dimensjon of the dispute. The tribunal might
not be in a position to evaluate whether the parties can produce new evidence in
light of the new sources, and therefore it seems advisahie to leave this evaluation to
the parties themselves, by advising them ofthe trihunal’s intention to apply a cer
‘
tain source.
CONCLUDING REMARKS
ample room for independently
It was already pointed out that the tribunal
evaluating the presented evidence, legal arguments, and sources, and for requesting
2 The
additional information and thus introducing new elements in the proceedingY
tribunal, therefore, is not bound by the arguments made by the parties. The only
limitation that the tribunal seems to have is the factual scope ofthe dispute, as well as
any restrictions on the tribunal’sjurisdiction and power to conduct the proceedings
that might be contained in the arbitration agreement or the applicable arbitration
law, including also an investment treaty Ihere are, however, some discrepancies in
respect of introducing remedies that were not requested by the parties.
It is, therefore, advisable to invite the parties to comment on the tribunal’s infer
ences oflaw or new sources that the tribunal intends to apply, so as to ensure that
the adversarial principle is not violated. Invitation to comment is, as seen above,
requested in some systems on all the elements upon which the award is going to be
based. whether thcy are elements of fact or oflaw.
The sanetions against a misuse of such powers are few and their scope ofapplica
tion is ratber restricted while the rule on exLess of power mainly onl sanctions
enjoys
i4 tI
,.ud, i. :d
5
XVic
Undur j.e ICMI) RiIcs, tlw ar}Ira1ioi rult, ut illu Sr r J ( I
under thc Ai i Dndru:t prInies
‘:n tius sns .ds
r
JA. aud
r\(
I R II
TRIBt’NALS 1’WFkS V PARTY AU1ONOMY
1243
declslons made outside the factual sub}etmatter of the dispute, the rues on pro
cedural irregularity, fair hearing, and impartiality are not meant to permit a rcview
ofthe tribunal’s evaluation ofthe evidence or ofthe law, Therefore, only gross viola
tions of the trihunal’s duties mav lead to application ofthese sanctions.
ihis dees not mean, however, that a tribunal should feel free fron any constraint
in administering the proceeding: impartiality and due process, as well as accuracy
in the interpretation of the contract and the application of the las, are ilnportant
principles and should always be the inspiration for the trihunal’s conduct, irrespect
ive of whether a violation thereofmight be considered ‘only’ as a wrong decision on
the merits and as such not leading to invalidity and unenforceability ofthe award.
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Int’l
Baldwin, E, Kantor, M, and Nolan, M, ‘Limits to Enforcement of IGSID Awards’, 23(1) J
Arb 1 (2006)
Butchers, J, and Kimbrough, P, ‘The Arbitral Tribunal’s Role in Default Proceedings’, 22(2)
Arb Int’l 223 (2006)
Derains, Y, and Schwarz, E, A Guide to the New ICC Rules ofArbitration (Ihe Hague, Kluwer,
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Douglas, Z, ‘Nothing if not Critical for Investment TreatyArbitration: Occidental, Eureko
and Methanex’, 22(1) Arb Int’l 27 (2006)
Heuman, L, Arbitration Law of Sweden: Practice aud Procedure (Stockholm, Juris
Publishing, 2003)
Hober, K, Arbitration Involving States’, in Newman and Hill (eds), Ille LeadingArhitrators’
Guide to International Arbitration (New York, Juris Publishing, 2004)
Jänterä-Jareborg, M, ‘Foreign Law in National Courts—A Comparative Perspective’, 304
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‘The Arbitrator and the Law: Does He/She Know it? Apply It? How? And a Few More
Questions’, 21(4) Arb lnt’l 632 (2005)
381
Kessedjian. C, Principe de la contradiction et arhitrage’, 1995 Revue de l’arhitrage
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Kurkela, M, “Jura Novit Curia” and the Burden ofEducation in International
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1244
Olt Dii lA CORI)FRO MOSS
i
Lard 1i (l,,L t La; MadL lv:h T’dr:)
Ntos, GC, ‘Mav n Ai )Itra) Trihuna
Stockholm mil Arb Report i (2005)
Paik, \V, Ihe Nature of Arhitral Authority: A Coniment on I LSotho llighlands’, 21(4) Arh
1 48 (2005)
lot’
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