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Arbitration is one of the techniques of ADR
others are eg. mediation, conciliation, expert determination
Informal forms of contract governance in cross-border
contracts, creditors often do ot even try state courts (or not
even a arbitration), and use e.g. monitoring + reputation
management.
Sometimes dispute escalation clauses or multi-tier
(arbitration) clauses in which first negotiation, then
mediation/conciliation, then litigation (arbitration or courts)
E.g. in art. 20 FIDIC Red Book: first a Dispute Adjudication
Board (DAB), then ICC Arbitration.
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Types of arbitration:
Arbitration based on international public law, eg ICSID
Arbitration based on national law.
Double nature :
On the one hand on a contractual basis (more correctly 2
contracts: 1° between the parties and 2° with the arbitrator(s)
On the other hand jurisdictional as to:
its procedure (procedure is analogous to judicial procedure),
and
its effects:
1° impact: normal judge has lack of jurisdiction;
2° the arbitral decision is a jurisdictional decision (res
iudicata) and not merely a contractually binding decision even
if not enforceable yet (auctoritas, not yet potestas)
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Sometimes separate rules for domestic and transnational
arbitration (eg Switzerland; French case law identifying a
French substantive internatioanl law of arbitration)
Partial harmonisation of the arbitration statutes (successful
Uncitral model law ICL 1985, revised 2006, incorporated in
many national statutes)
National statutes e.g.: in Belgium in Judiciary Code (revised
2013); in France in CPC; UK Arbitration Act 1996; in US
Federal Arbitration Act (FAA) 1925, etc.
Treaties on recognition and enforcement abroad – see the NY
Convention 1958 (successful) (predecessor: Geneva
Convention 1923/1927)
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Reasons for arbitration – advantages and disadvantages
Flexibility of procedure however clubbed with uncertainty
Parties can choose seat, number of arbitrators, language,
division of costs
Confidentiality (no public character of procedure)
Higher costs for a single instance (arbitratrors to be paid), in
principle no appeal, usually quicker (not always)
Arbitrators usually more specialised than judges in the type
of dispute
Internationally easier to obtain recogition and enforcement
than for foreign judgments (success of NY Convention, infra)
Not every type of relief can be granted by arbitrators
Not automatically enforceable
Difficult to oblige third parties to join (but if linked contracts
also provide for arbitration, arbitration may be easier)
In jurisdictions with class actions: avoid class actions
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The arbitration agreement (agreement which obliges the
parties to use arbitration in case of dispute and makes the
future award binding for the parties):
- can be a separate agreement (ad hoc),
- or a clause in a wider agreement
Possible issues (on following slides)
Formation (offer & acceptance)
Validity and invalidity as a contract
Legal capacity of the parties to conclude such an agreement
Arbitrability of the issues to be settled (i.e.: can the issue be
settled by arbitration ?)
The formation and validity of the arbitration agreement are in
principle determined by the lex contractus (proper law) of the
arbitration agreement, also called lex arbitri
 Conflict rule for the lex arbitri? In most places of arbitration
(countries) the conflict rule is: 1° choice of law (express or
implied), 2° (subsidiary) place of arbitration (lex fori) or
closest connection (chosen seat being an important element –
EWCA in Sulamerica, 2012) (in Belgium Rome-I is applied
‘overshootingly’, except where national law has a special
conflict rule)
Q. whether a choice of law of the contract in general is also an
implied choice of law for tha arbitration agreement.
 The lex arbitri (lex contractus) of an arbitration clause in a
wider agreement is determined separately from the lex
contractus of the contract of which it is a part
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What do most applicable laws/statutes (lex arbitri) provide?
The formation and validity of the arbitration agreement must
be judged separately from that of the contract it is part of
(autonomy or separability of the arbitration clause) (cfr.
French Cass. 7 May 1963 Gosset or SC US 1967 in Prima Paint
v Flood & Conklin; in the UK S.6 Arbitration Act and E&WCA
2012 in Fiona Trust v. Privalov)
Effect: where the clause is valid, only the arbitrator decides
the validity of the rest of the contract
Where one element of the arbitration clause is invalid, the rest
of the clause remains valid (eg arbitration clause specifying
an arbitral forum that does not exist)
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What do most applicable statutes (lex arbitri) provide?
No or only few specific rules; the rules of general contract law
on formation and validity normally apply (Implied consent by
a third party in Cass.Fr. 26 Oct. 2011 CMN / Fagerdala)
Sometimes invalidity of unilateral optional arbitration clauses
(eg Russia; California Appeal Court 19 March 2013 Compton;
comp. for forum clauses Cass.(Fr.) 26 Sep 2012; but deemed
valid in Belgium, UK, Germany, Italy, Spain)
Some specific rules, e.g. validity of agreement for arbitration
of disputes governed by « overriding mandatory provisions »:
discussed after arbitrability
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Conflict rule:
Often (but not in common law) a separate conflict rule as to the
law applicable to the legal capacity of the parties, referring to
the personal law of each party
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What do most applicable statutes decide as to the capacity
required for an arbitration agreement ?
In principle the same restrictions on capacity as in the case of
a settlement agreement (eg minors, insolvent party, ...)
Sometimes additional restrictions on the capacity for
arbitration agreements, such as restrictions to authority
granted to agents, directors, receivers (in bankruptcy), public
agencies, etc... to dispose of the rights at stake
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Conflict rule as to the issue of arbitrability:
often a cumulative conflict rule leading to more than one law
applicable. Enforcement may require:
- arbitrability under the law of the place of arbitration;
- arbitrability under the law applicable to the issue to be settled
- arbitrability under the law of the country of enforcement.
see art. V.2.a. NY Convention.
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E.g. Belgian conflict rule (as stated in Cass. 16 Nov 2006 Van
Hopplynus, and Cass. 14 Jan. 2010 Sebastian) refers to the
application of the Belgian law on arbitrability in all disputes
where the Belgian courts have jurisdiction
Arbitrability may be limited in matters governed by rules of
public order, but in general
1° a dispute is arbitrable even if rules of public policy apply;
2° the arbitrators may and must apply rules of public policy that
are relevant for the dispute (e.g. a party invokes that a
contract is void because contrary to competition law), and
3° the judicial control takes place a posteriori.
Comp.:
- Cass. B. 2 Feb. 1973
- ECJ in Eco Swiss / Benetton (1999): competition law is part of
the public policy exception in exequatur procedures (a
posteriori control)
- SC.US in Mitsubishi Motors v. Soler Chrysler-Plymouth (1985):
arbitrable
 However, the arbitration agreement may nevertheless be
invalid (see next slide) (better to tackle the problem not
merely a posteriori)
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Arbitration of disputes governed by overriding mandatory
provisions »: where parties can waiver their right only after
the dispute has arisen, they cannot on beforehand be bound
to arbitration, unless the arbitrators are required to apply
these mandatory provisions irrespective of the otherwise
applicable law.
Applications: labour law, some consumer contracts, rules
protecting distributors or commercial agents
Belgian case law: conditional arbitrability : disputes
concerning termination of distributorship or commercial
agency on Belgian territory (Belgian Distributorship Act 1961
and Commercial Agency Act 1995) are not arbitrable unless
requiring the arbitrators to apply these provisions of national
law (Cass. 28 June 1979 & Cass. 14 Jan 2010 distributorship;
Cass. 3 nov 2011 agency).
(continued)
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Arbitration of disputes governed by overriding mandatory
provisions :
Comp. German case law, OLG München 17 May 2006 (likely
danger that foreign tribunal will not apply the mandatory
provision; arbitration clause combined w/ choice of foreign
law is presumption of likeliness). BGH 5 Sep 2012 (forum
clause in agency contract)
Comp. English High Court in Accentuate (2009)
As within the EU, forum clauses cannot be set aside in eg
distribution contracts cases, a subsidiary forum clause could
help.
Who judges the validity and scope of the arbitration agreement ?
 The nominated arbitrator has in principle jurisdiction over the
questions of: validity of the arbitration agreement, legal capacity
to refer to arbitration, and arbitrability (‘provisional’
competence-competence - but subject to a possible annulment
of the award by the court of the place of arbitration)
 Also jurisdiction over the interpretation of the arbitration
agreement – whether the dispute or action is covered by the
arbitration agreement. Cfr. SCotUS 10th June 2013, Oxford v.
Sutter - The arbitrator's construction holds, however good, bad,
or ugly.
 The otherwise competent* national court has also jurisdiction to
judge the validity of an arbitration agreement invoked by a party
to deny the jurisdiction of that court
 The party contesting the validity has no obligation to participate
in the proceedings (« Dallah »-principle, UKSC 2010)
* (to this competence, Brussels-I does not apply)
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Effects of a (valid) arbitration agreement:
- arbitrators have jurisdiction over the dispute referred to
arbitration
- every other judge lacks jurisdiction. This has to be
invoked in limine litis
- within the substantive scope of the arbitration agreement,
it’s up to a second arbitrator to judge whether an earlier
arbitral award has res iudicata concerning the new claim (in
the US: Belco-rule, 2d Cir 1996)
- the court of the place of jurisdiction has certain powers in
relation to arbitration proceedings in that place (infra). The
law of that place may provide the possibility of an anti-suit
injunction prohibiting the other party to pursue court
proceedings instead of arbitration (eg UK SC 2013 in UstKamenogorsk) (but not against proceedings before courts in
the EU, ECJ in West Tankers)
- provisional meausres: next slide
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Courts may still take provisional and protective
measures (summary proceedings)*,**
Parties may still take protective measures (e.g.
conservatory seizure) –after permission of the state
judge where such permission is required*
* Insofar as there is no Emergency Arbitrator
appointed with this task (New ICC rules);
** In the new Belgian Act: concurrent jurisdiction
arbitrator/courts
Possible content of an arbitration agreement:
Definition
of the disputes covered by arbitration
-often restrictive interpretation of arbitration clauses:
-Clarify whether arbitrator has authority to decide on
costs to be borne by the losing party
Possible reference to procedural rules (2)
-In case of ad hoc arbitration, parties have to regulate these
matters themselves in the agreement (supplemented by default
rules of the arbitration statute)
-Intermediate
solution: arbitration according to the UNCITRAL
Arbitration rules (version 1976 revised 2010): detailed rules, eg
also possibility of nominating ad hoc an « appointing authority ».
Since 2010, the PCA (Permanent Court of Arbitration) is the
indirect appointing authority by default, i.e. will appoint the
appointing authority if parties have not agreed upon one (art. 6
Uncitral)
-The PCA also has its own rules for cases where a state or
international organisation is involved (consolidated in the PCA
Arbitration rules 2012) (dealing more in detail also with issues of
international public law)
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Determination of the number of arbitrators (in
many countries must be uneven)
Possibly rules on challenging impartiality (unless
left to the court), eg in the ICC rules within 30 days
since obtaining the information
Choice of the language(s) of the procedure
(language of the submissions; may be relevant also
for evidence)
Choice of the law applicable to the arbitration
agreement (supra)
(NB. Choice of the substantive law to be applied to
the dispute, but this is strictly speaking not part of
the arbitration agreement itself)
Appointment of the arbitrators
 If 3 arbitrators, usually one nominated by each party, the 3rd
(« umpire ») is either nominated by both of them together or
by the arbitration institute
 Multi-party arbitration: Uncitral has specific rules on
appointment (also some national statutes do and some rules
of arbitration institutions)
 Acceptance by the arbitrator(s): requires independence and
impartiality; duty to disclose possible conflicts of interests*.
Possible « challenge » of an arbitrator.
* Art. 1686 Belgian Jud.C; esp. in case of « repeat arbitration:
Cass.Fr. 20 Oct. 2010 X v. Prodim & Logidis
* See IBA Guidelines on Conflict of Interest in Internat.
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Arbitration
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Agreement on fees & expensens arbitrators (in case of
institutional arbitration: under supervision of the Institution)
Possible
arrangements at the start of proceedings, often in
« terms of reference »:
- definition of the dispute and the claims of the parties
(esp. a « Statement of claim »)
- establishment of a timetable / calendar
- possible appointment of an administrative secretary
(see ICC note 1995/2012)
- manner in which parties will present their arguments,
disclose documents, present evidence*, etc.
* As to taking evidence, parties could refer to the IBA-Rules on
taking evidence (1999, revised 2010) (compromise between
continental and american traditions)
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not already in the terms of reference, possible « case
management conference » (required in new ICC rules)
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Procedural rules (incl. rules on supervision by state court)
Law applicable to the procedure ? (also called lex curia)
Law indicated by the conflict rule of the place of arbitration;
conflict rule usually refers to the lex fori, i.e. rules of the
place of arbitration. Arbitrator may deviate if not mandatory.
Some countries have separate procedural rules for
international arbitration or refer to such rules, eg when the
ECICA is ratified (European Convention on International
Commercial Arbitration 1961, 31 ratifications, paneuropean)
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Procedural rules determine:
the basic rules for the proceedings (classical rules such as
adversary character, possibility to decide in absentia (by
default), whether partial awards possible, whether dissenting
opinions may be made public, duty to motivate award,
notification of the award, ...)
the rules on taking evidence and on valuation of proof
in which cases the state court can help / intervene
E.g. parties can ask a court order where the arbitrator has no
authority, eg for an Actio ad exhibendum (order to produce
documents)
E.g. replacement of arbitrator(s)
In case of institutional arbitration, Institution may have the
power to check the award as to its form (scrutiny), not
substance (eg ICC rules art. 27)
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Determination of the place of arbitration (seat). The seat is a
legal notion: it links the arbitration procedure to a specific
country (but does not oblige the arbitrators to conduct
procedures there). Relevance:
- determines which court is competent to supervise the
arbitration, to decide an action for annulment of the award,
etc.
- determines the conflict of law rules indicating the law
applicable to the arbitration;
- provides the default procedural rules (infra); but arbitrator
not bound if not imperative;
- localises the arbitral award (this will eg determine whether
it is localised in a country that has ratified a Treaty on
recognition and enforcement of arbitral awards).
Possible reference to procedural rules (1) of an Arbitration Institute:
-Specialised (sector specific) international arbitration institutions
(e.g. commodity arbitrations (eg by GAFTA, Grain and Feed
Trade Association), WIPO arbitration center (IP), T.A.S. = C.A.S
Lausanne for Sports; ARIAS (Insurance and Reinsurance
arbitration society UK)
-General
international arbitration institute: ICC has a Court of
Arbitration that supervises arbitral proceedings (intervenes in
nominations, payment of costs, control of formal validity of
award, respect for time schedule)
-National
arbitration institutions and similar: next slide
-the PCA (Permanent Court of Arbitration) in The Hague (NL),
specialised in disputes of public international law (s. infra)
National arbitration institutions and similar, main institutions:
 LCIA (London Court of international arbitration)(an English company)
 CIETAC (China international Economic and Trade Arbitration
Commission)
 Swiss Chambers’ Arbitration Institution (Swiss rules)
 SCC (Stockholm Chamber of Commerce)
 Paris Arbitration Rules
 VIAC (Vienna International Arbitral Centre)
 Cepina (Belgium)
 AAA (American Arbitration Association) and its International Centre
for Dispute Resolution (ICDR)
 DIAC (Dubai International Arbitration Centre)
 DIS (German Institution of Arbitration)
 KLRCA (Kuala Lumpur Regional Centre for Arbitration)
 MKAS (Moscow International Commercial Arbitration Court)
 SIAC (Singapore International Arbitration Centre)
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In principle no appeal (unless agreed); some arbitration rules
provide an optional appellate procedure (eg new AAA rules)
Challenging in court – action for annulment according to the
rules of the place of arbitration (seat)
In most countries only limited grounds for annulment (no
valid arbitration agreement, no fair trial (incl. arbitrator not
independent*), award ultra petita) (for Belgium, see art. 1717
§ 3 Jud.C (version 2013))
* Eg Cassation (Fr) 20 Oct. 2010, Somoclest v. DV
construction.
However, where the arbitration rules themselves contain a
procedure to challenge impartiality, that must be followed
first: Cass.F. 25 June 2014 in Avax/Tecnimont
In some countries annulment can be excluded contractually if
none of the parties is domestic (CH, B, Sweden) (rare in
practice)
Effect of setting aside : same arbitrators, new arbitrators,
state court ?
Enforcement in the country of the award: exequatur can be
obtained in simplified proceedings:
- on unilateral request (without notice procedure)
- merely a marginal control of the substance
E.g. S. 66 Arbitration Act (Engl & W)
 Third party involvement can simplify enforcement
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Enforcement on the basis of the NY Convention 1958 in
member states of that Convention (149 in 2013)
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Sphere of application: territorial or non-domestic test in art.
1
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Simplified proceedings (exequatur of the state of the place of
arbitration is not required, only in state of enforcement)
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National law determines whether appeal is possible against
de decision on exequatur, and if appeal suspends
enforceability or not.
NB. Cases on NY Convention published in Yearbooks
Commercial Arbitration.
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NY Convention
Art. 5 - only limited grounds for refusal (exceptions), esp.:
(1a) Lack of capacity of a party
(1a) Invalidity of the arbitration agreement according to the
lex contractus)
(2a) Arbitrability of the dispute is excluded by the lex
contractus, the lex fori of the place of arbitration or the lex
fori of the place of enforcement
(2b) Contrary to public policy of receiving country
(1c) Jurisdiction exceeded (ultra petita)
Esp. the public policy exception is widely used by some
countries, eg Russia – practice statements of the Supreme
Arbitrazh Court (new version 2013, Information Letter no.
156)
Enforcement in other countries (than the place of arbitration)
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Enforcement can also take place on the basis of :
- ECICA,
- other multilateral conventions,
- bilateral conventions,
- possibly national law
 Enforcement despite annulment in the country fo the seat ?
Execpetionally accepted by English Court in Yukos / Rosneft
(2014)
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