Arbitration - general
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Arbitration = one of the techniques of « ADR »
others are eg mediation, conciliation, expert determination
In the EU, access is simplified by the « ODR » Platform
Informal forms of « contract governance »: in cross-border
contracts, creditors often do not even try state courts (or not even
arbitration), and use e.g. monitoring + reputation management.
Sometimes « dispute escalation clauses » or « multi-tier
(arbitration) clauses »: first negotiation, then mediation/conciliation,
then litigation (arbitration or courts)
E.g. in art. 20 FIDIC Red Book: first determination by the Engineer,
then a « Dispute Adjudication Board » (DAB), then ICC Arbitration.
Arbitration - general
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Types of arbitration:
Arbitration based on international public law, eg ICSID (supra)
Arbitration based on national law, this chapter
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)
(National) arbitration statutes
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Where arbitration is «based» upon national law (esp. rules on
judicial organisation and procedure):
> the national law of the « place of arbitration » contains the
conflict rules
> which refer to the applicable national law on (aspects of)
arbitration (to be distinguished from the question of the law
applicable to the case itself)
(National) arbitration statutes
Topics of (national) arbitration statutes are:
1) the conflict of law rule and
2) substantive rules, such as rules concerning
- the arbitration agreement,
- the arbitrability (disputes capable of being settled by arbitration),
- the arbitral procedure,
- the supervision by (national) courts,
- the effects of the award (recognition, enforcement),
- the annulment of the award.
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Sometimes separate rules for domestic and transnational arbitration
(eg Switzerland; Australia: International Arbitration Act 2010;
French case law identifying a French substantive international law of
arbitration, Cass. 30 III 2004 in Unikod)
Harmonisation of arbitration
statutes ?
Partial
harmonisation of the arbitration statutes (successful Uncitral
model law ICL 1985, revised 2006, incorporated in many national
statutes, in 26 EU MS at least in part, in 13 in full, further i.a. Australia)
National
statutes e.g.: in Belgium in Judiciary Code (revised 2013); in
NL in the CCP (since 1-1-2015); in France in CPC; UK Arbitration Act
1996; in the US Federal Arbitration Act (FAA) 1925, OHADA uniform
Arbitration Act, etc.
Often inspired by the Uncitral model law
Treaties
on recognition and enforcement abroad – see the NY
Convention 1958 (successful) (predecessor: Geneva Convention
1923/1927)
Arbitration – (dis)advantages
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Reasons for arbitration – advantages and disadvantages
Flexibility of procedure >< 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) ><
Single instance, in principle no appeal, usually quicker (not always)
Arbitrators usually more specialised than judges in the type of
dispute
Internationally easier to obtain recognition 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
Arbitration –
questions of contract law
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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
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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 ?)
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Arbitration agreement
– formation & validity
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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
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but conflict law in CH & NL is more favorable: it is sufficient that it is
valid according to the law chosen or the law of the seat of
abritration or absent choice of law the lex causae (law regulating
the merits)
Arbitration agreement
– formation & validity
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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 that 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
Arbitration agreement
– formation & validity
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What do most applicable laws/statutes (lex arbitri) provide?
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Separability:
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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Arbitration agreement – formation &
validity
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What do most applicable statutes (lex arbitri) provide? Invalidities ?
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)
 Consumer law: next slide:
 Some specific rules, e.g. validity of agreement for arbitration of disputes
governed by « overriding mandatory provisions »: discussed after
arbitrability
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Arbitration agreement – formation &
validity
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Validity of arbitration agreement with a consumer ?
In EU in general arbitration clauses not per se invalid (in concreto
evaluation whether unfair or not)
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Belgium: as such not unfair
France: presumption of unfairness in domestic contracts, valid in international contracts
(Cass. 1997 in Renault/V2000)
England: unfair for small claims (below 5000 £)
Austria: only if concluded after dispute has arisen
New ADR Directive 11/2013 art.10: consumer has always the right to take
the initiative to go to Court; business must inform consumer about ADR
possibilities
 US consumer law: no invalidity of arbitration clauses (SC in 2011 and 2013)
 Some specific rules, e.g. validity of agreement for arbitration of disputes
governed by « overriding mandatory provisions »: discussed after
arbitrability
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Arbitration agreement - capacity
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 ? (also called arbitrability ratione
personae)
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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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Arbitration agreement – arbitrability
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Conflict rule as to the issue of arbitrability (ratione materiae):
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 (lex
causae)
- 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 and public policy
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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Arbitrability & overriding mandatory law
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Arbitration of disputes governed by «overriding mandatory
provisions »: ex ante control or ex post ? (comp. Discussion on
forum clauses) ?
Applications: labour law, some consumer contracts, rules protecting
distributors or commercial agents
Belgian & German case law: ex ante control: 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.
> 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)
Arbitrability & overriding mandatory law
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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.
Arbitration – who judges the validity ?
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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»; Swiss BG 9 Nov 2015 (not questioning
decision on the facts of the arbitrator).
 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, but not always to question an arbitral decision on
the facts on which it bases jurisdiction
 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
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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 Ust-Kamenogorsk) (but not against proceedings
before courts in the EU, ECJ in West Tankers)
- provisional measures: next slide
Effects of a valid arbitration agreement
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Effects of a (valid) arbitration agreement (cont.)
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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*
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* Insofar as there is no Emergency Arbitrator appointed
with this task (cfr. New ICC rules);
** Eg art. 44 UK Arbitration Act; In the new Belgian Act,
art. 1691 Jud.C.: concurrent jurisdiction arbitrator/courts
Effects of a valid arbitration agreement
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Effects of a (valid) arbitration agreement (cont.)
Effects for successors ?
- assignee will normally be bound (see Ch. assignment)
- administrator in bankruptcy in principle bound (eg
Belgium), but not necessarily always (eg a case under
Polish law accepted by the Swiss SBG 31 March 2009)
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Arbitration agreement - content
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
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Possible reference to the procedural rules of an
Arbitration Institute:
(next slides)
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Arbitration institutions
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)
- Common Court of OHADA at Abidjan is also a « Court of Arbitration »
in the same sense as the ICC
- 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)
Arbitration institutions
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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)
Arbitration agreement - content
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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Place of arbitration
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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,
for challenges to arbitrators, 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 mandatory;
- 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). Art. V(1)(A) NY Convention
requires the award to comply with the law of the country where it
was made
Arbitration agreement – content
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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)
Arbitration – appointment arbitrators
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); also specific rules in the LCIA Rules;
 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. Arbitration
(revised 2014), and the broader approach of the ICC Guidance on
Conflict Disclosure by Arbitrators (2016)
 Agreement on fees & expensens arbitrators (in case of institutional
arbitration: under supervision of the Institution)
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Arbitration – conduct of proceedings
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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If not already in the terms of reference, possible « case
management conference » (required in new ICC rules)
Arbitration
law applicable to the procedure
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Procedural rules (incl. rules on supervision by state court)
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Law applicable to the procedure ? (also called lex curiae)
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 incl. 11 EU member states, paneuropean)
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Some Institutions have in their rules also detailed guidelines on the
conduct of the parties’ representatives (e.g. LCIA rules 2014)
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Arbitration
–
procedural
rules
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. If expert
examination is required, the ICC Rules for Experts may help (deal
with proposal of experts by ICC, appointment rules, administration
rules)
Whether curia novit ius or law has to be invoked (and possibly
proven) by the parties
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)
Arbitration
– the award
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In case of institutional arbitration, the 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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Some countries require the award to be filed (deposited) in court
Challenging the arbitral award
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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); for the UK S. 67 Arbitration Act, etc.)
* 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
?
Arbitration – enforcement
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)
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Third party involvement can simplify enforcement (third party
holding the money in dispute)
Arbitration – enforcement
NY Convention (156)
Arbitration – enforcement
abroad
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Enforcement on the basis of the NY Convention 1958 in member
states of that Convention (153 in 2014)
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Sphere of application: territorial or non-domestic test in art. 1
Eg Chinese Supreme Court 18 Dec 2013 refused Korea arbitral
award between 2 Chinese companies related to a joint venture in
China
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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.
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NB. Cases on NY Convention published in Yearbooks Commercial
Arbitration.
Arbitration enforcement abroad
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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)
(1c) Jurisdiction exceeded (ultra petita)
(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
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)
The ILA issued a recommendation to restrict the public policy
exception (ILA recommendation on public policy 2002)
Arbitration – enforcement
abroad
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Enforcement in other countries (than the place of arbitration) –
Enforcement can also take place on the basis of :
ECICA,
other multilateral conventions,
bilateral conventions,
possibly national law
Enforcement despite annulment in the country of the seat ?
Exceptionally accepted by English Court in Yukos / Rosneft (2014)
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