INTERNATIONAL DISPUTE SETTLEMENT
2003-2004
THE ARBITRAL PROCESS: 6 THE LAW APPLICABLE TO THE MERITS
***See generally: Redfern
& Hunter, 3rd ed. (1999), ch. 2 (pp.
93-134)
Background reading:–
**
Delaume, ‘State Contracts and
Transnational Arbitration’, 75 AJIL 893 (1981)
Geiger, ‘The unilateral change of economic development agreements’, 23 ICLQ 73
(1974)
** Greenwood,
‘State Contracts in International Law -The Libyan Oil Arbitrations’, 53 BYIL 27
(1982)
Hill, Some Private International Law Aspects of the Arbitration Act 1996’, 46
ICLQ 274 (1997)
Lando, ‘The Law Applicable to the Merits of the Dispute,’ 2 Arb. Int. 104
(1986)
** von Mehren and
Kourides, ‘International Arbitrations Between States
and Foreign Private Parties: The Libyan Nationalization Cases’, 75 AJIL 476
(1981)
Weil, ‘Problèmes relatifs aux contrats passés entre un Etat et un
particulier’, Recueil des Cours (1969.iii), p. 95
**
Yu, ‘Choice of Laws for Arbitrators: Two Steps or Three?’ [2001]
Int. Arb. L. R. 151-163.
Note relationship between
delocalization of arbitration and internationalization of contract:
Mayer, ‘The Trend towards Delocalisation in the Last 100 Years,’ in Hunter,
Marriott and Veeder (eds), The Internationalisation
of Commercial Arbitration: the LCIA Centenary Conference (1995), 37
Inter-State
Disputes
1.
Disputes between States are governed by international law. See ICJ
Statute, art. 38(1). But the States may agree
that their relations shall be governed by some other set of rules: Tunisia-Libya
Continental Shelf case, (1982) ICJ Rep. 23, 38 (lex specialis).
They may agree that their relations shall be governed by some other legal
system, such as a system of municipal law: Denmark-Malawi Loans Agreement,
1966, 586 UNTS 3; Mann, ‘About the Proper Law of Contracts between States’, in
F.A. Mann, Studies in International Law, (1973), 241, 251-252
Mixed Disputes
where there is an express choice of law
2. In mixed disputes, where there is an express choice of law
this is in principle respected, in accordance with the principle of party
autonomy: see, e.g., European Convention, 1961, art. VII;
UNCITRAL Rules art. 33; ICC 1998 Rules art. 17 (compare art. 13(3) of the 1988 Rules); ICSID art. 42;
3.
The choice of a system of municipal law is much the most common. See, e.g., Serbian Loans, PCIJ Ser. A, No. 20; Alsing Trading
4.
The freedom to choose the applicable law may be limited by the obligation to
apply mandatory rules of the lex causae and of the lex arbitri
and possibly of the laws of other States: see Vita Food
Products Inc. v. Unus Shipping Co. [1939] AC 277; Rome
Convention on the Law Applicable to Contractual Obligations, arts. 3(3), 7. See also Maniruzzaman, ‘International Arbitrator
and Mandatory Public Law Rules’, 7 J. Int. Arb. 53
(1990); Chukwumerije, ‘Mandatory Rules of Law in International Commercial
Arbitration’, 5 African J. Int. & Comp. Law 561 (1993); Blessing,
‘Mandatory rules of law versus party autonomy in international arbitration’,
(1997) J. Int. Arb. 24
5.
An important question is whether and how private rights may be entrenched, and
protected from variation or abrogation by the State party. See, e.g., Sapphire
International Petroleum Ltd. v. National Iranian Oil Co. 35 ILR 136
(1963); Lalive, ‘Contracts between a State or a State Agency and a
Foreign Company’, 13 ICLQ 1011 (1964).
6.
Attempts are made to detach the governing law from any specific legal
system. There may be reference to general principles
(is that a choice of law, or incorporation or specific
principles?): ** McNair, ‘The General Principles of Law Recognized
by Civilised Nations’, 33 BYIL 1 (1957); Sheikh of Abu Dhabi v.
Petroleum Development (Trucial Coast) Ltd. 18 ILR 144, 1 ICLQ
247 (1951); Sapphire International Petroleum Ltd. v. National
Iranian Oil Co. 35 ILR 136 (1963); Klöckner v. Republic
of Cameroon, 9 Y'bk Comm. Arb. 161 (1986); Orion
Campania [1962] 2 Lloyds Rep. 257; Deutsche Schachtbau- und
Tiefbohrgesellschaft mbH v. R’As al-Khaimah
National Oil Co (RAKOIL). [1990] 1 AC 295.
7.
Sometimes Public International Law is made (part of) the proper law: see, e.g.,
ICSID Convention, art. 42; ** B.P. v.
8.
Parties often draft ‘stabilization clauses’, which seek to preserve certain
entrenched rights from change: B.P. v.
9.
There is a notion of a Lex Mercatoria, suitable for selection by parties
wishing to detach the proper law from any municipal system. Its status is
controversial, and it is not always acknowledged by national courts:
Lando, ‘The Lex Mercatoria in International Commercial Law’, 34 ICLQ 747
(1985); NORSOLOR, in Lew (ed.), Contemporary
Problems in International Arbitration, (1986), 120; Deutsche
Schachtbau- und Tiefbohrgesellschaft mbH v. R’As al-Khaimah
National Oil Co. [1990] 1 AC 295; cf.,
Delaume, ‘Comparative Analysis as a Basis of Law in State Contracts: the Myth
of the Lex Mercatoria’, 63 Tulane L. R. 613 (1989); Rivkin,
‘Enforceability of Arbitral Awards based on Lex Mercatoria’, 9 Arb. Int. 67 (1993).
no express choice of law
10.
Where the parties have made no express choice of law, it is often possible to
discern an implied choice of law: Rome Convention, art. 3(1);
11.
Where no implied choice is discernible, the arbitration rules may authorise
arbitrator to choose the applicable law directly [but
note UNCITRAL art. 33(1) does not say exactly this: and compare ICC 1988 Rules
art. 13(3) with 1998 Rules art. 17] or may themselves dictate the
applicable law: ICSID art. 42.
12.
If the arbitration rules are silent, is the arbitrator bound by the private
international law choice of law rules of the lex arbitri? The
traditional view has been, yes:
13.
The arbitrator may cut straight through to the determination of the proper law,
without considering conflicts rules:
14.
Note the possibility of action in courts of forum to quash award for
misapplication of law: see, e.g., (
7 REMEDIES AND AWARDS
Gray, ‘Is there an
International Law of Remedies?’ 56 BYIL 25 (1985)
** --, Judicial Remedies
in International Law, (1987)
INTERIM MEASURES: THE
TRIBUNAL
1.
Arbitral tribunals are commonly given, in their own rules, the power to
indicate interim measures. Powers may also be implied (or the implication of
powers excluded) by the lex arbitri. See, e.g.,
UNCITRAL Rules, art. 26; ICSID art. 47; ICC 1998 Rules, art. 23:
**L. Collins,
‘Provisional and Protective Measures in International Litigation’, (1992) 111 Hague
Recueil 9 (and in Essays in International Litigation and the Conflict of
Laws (
INTERIM MEASURES: COURT
SUPPORT
2
The tribunal’s powers (a) may be limited and (b) can bind only the
parties. It may therefore be necessary to seek the assistance of the
local courts in making interim orders, or in enforcing orders made by the
tribunal. Such court orders deal typically with (1) measures to preserve status
quo, (2) measures to secure ultimate award, or (3) measures to assist the
procedure of the tribunal. The lex arbitri establishes the powers of the
court in this regard. See, e.g., (UK) Supreme Court Act 1981, s. 37(1); American
Cyanamid Co. v. Ethicon Ltd [1975] AC 396; UK Arbitration Act 1996,
ss. 42-44; UNCITRAL Model Law, arts 5, 9, 17, 27. Note the role of ITLOS in the
Southern Bluefin Tuna case: 38 ILM 1624 (1999).
3
A typical example of court assistance is the application for a Mareva
injunction or their equivalents in other jurisdictions. (Mareva Compania Naviera SA v. International Bulk Carriers [1975] 2 Lloyd’s Reports 509. Such injunctions
operate in personam, so there is no need for the defendant to be within
jurisdiction of Court; and they may apply to assets both within and outside the
jurisdiction (Babanaft International Co SA v. Bassatne [1990] Ch
13; Derby & Co. Ltd v. Weldon (Nos. 3 & 4, & 6)
[1990] Ch 65, [1990] 1 WLR 1139; Republic of Haiti v. Duvalier
[1990] 1 QB 202]), and forbid dissipation within or outside jurisdiction: Nimenia
Maritime Corp. v. Trave Schiffahrtsegesellschaft mbH und Co KG
[1983] 1 WLR 1412. Third parties with knowledge of the court order are liable
in contempt if they assist in a breach of the order: Z Ltd v. A-Z
& AA-LL [1982] QB 558. There may be ancillary disclosure orders,
in order to determine what assets might be covered by the order: AJ Bekhor
& Co. Ltd v. Bilton [1981] QB 923; Bank of Crete SA v. Koskotas
[1991] Lloyd’s Rep. 587.
4
The court may lend procedural assistance to the tribunal
(and remember also the Court powers concerning appointment and removal
of arbitrators [UK Arbitration Act 1996, ss. 17, 18, 24, 25], time limits
[ss. 12, 79], and other matters: see handout on lex arbitri). See also The
Rena K [1979] QB 377; Channel Tunnel Group Ltd v. Balfour Beatty
Construction Ltd [1992] QB 656; (
5
Note that courts’ powers of
intervention are commonly discretionary, and not always exercised. See,
e.g., Bank Mellat v. Helliniki Techniki SA [1983] 3 All ER 428; République
Populaire Révolutionaire v. Société Atlantic Triton, 24 ILM 340
(1985) (Cour d'appel, Rennes), 26 ILM 375 (1987) (Cour de cassation); 3
ICSID Reports 3, 10 (ICSID art. 47); L Collins, Essays in International
Litigation and the Conflict of Laws,(1994), pp. 74-79.
FINAL REMEDIES
See Gray
6
Damages are much the most common form of award; but see ILC Draft Articles
on State Responsibility (1999), articles 41-46 and 47-50. [And note the
provisions on dispute settlement, in ILC articles 54-60 and Annexes I, II].
7
It is sometimes said that restitution is the primary remedy in international
law; but (with rare exceptions) this is true only in so far as the principle of
restitution is used as the basis for the calculation of monetary damages.
Texaco v.
Declaratory awards
8
It is not unusual for tribunals to be asked simply to make a declaration of the
rights and duties of the parties. Rainbow Warrior, 82
ILR 499, 547-551, 570; Aramco, 27 ILR 117 (1963); Texaco, 53 ILR
297.
Costs &
interest
9
In inter-State cases it is usual for each side to bear its own costs, and for
interest to be awarded (in principle, from the date at which the claim arose,
though practice is not altogether consistent). In international commercial
arbitration the tribunal is generally empowered by its Rules to award costs
against a party; and interest is payable on the award. The question of simple v
compound interest remains unsettled; but the principle is that full reparation
is to be secured: see ICSID: WenaHotels Ltd v Egypt, [2000], 41 ILM
896 at 919. See also, e.g., UNCITRAL
Rules, arts 38-41; UK Arbitration Act 1996, ss. 59-65 (costs), s. 49
(interest).
THE AWARD
10
On the making of the decision: see notes on ICC etc., above; UNCITRAL Rules,
art. 31; ICSID art. 48(1), and Rule
16; ICC 1998 Rules art. 25. Recall that of the major international
arbitral institutions only ICSID expressly gives the right to enter
separate/dissenting opinions. Separate and dissenting opinions are
usually discouraged (particularly in international commercial arbitrations);
but the general view is that they may be entered unless prohibited by the lex
arbitri.
Interim Awards
11
It is usual to give the tribunal the power to make interim awards, and
tribunals almost certainly have an implied power to do so. These awards are
most commonly given on jurisdiction and applicable law; and there are sometimes
separate awards on liability and on the quantum of compensation. See, e.g., UNCITRAL Rules, art. 21; ICSID
Rules, art. 41;
Default awards
12
Tribunals are usually given the power to render an award even if one party
fails to participate in the proceedings. Such provisions apply the
principle of the non-frustration of the award. See, e.g.,
ICSID Rules, art. 42(4); ICC 1998 Rules art. 6, 21(2); UNCITRAL Model Law article 25; UK Arbitration Act 1996,
s. 41.
Consent awards
13
Tribunals may be empowered to record the terms of an agreed settlement as a
consent award, thus enabling the settlement to be enforced in the same manner
as any other arbitral award. See, e.g., UNCITRAL Rules,
art. 34.1; ICC 1998 Rules art. 26; UNCITRAL Model Law, article 30; UK Arbitration Act 1996, s. 51.
Great Belt, (1993) 32 ILM 101.
Rectification and
Interpretation
14
Many sets of arbitration rules provide for the rectification of minor errors in
the award, and for the tribunal (or a newly constituted tribunal) to give and
interpretation of the award, on the request of one or both parties. See, e.g., UNCITRAL Rules, arts. 35-37;
ICSID Rules, art. 51; UNCITRAL Model Law, art. 33;
Validity of Awards
15
The tribunal is under a duty to ensure, so far as possible, that the award is
enforceable. This demands, in particular, attention to any requirements imposed
by the tribunal’s own rules and by the lex arbitri. See, e.g., ICC Rules, art. 27; UNCITRAL
Rules, art. 32; ICSID Rules, art. 47; UNCITRAL Model Law, art. 31;
Effect of Awards
16
A final and binding award has the effect of res judicata. As
between the same parties, a right, question or fact distinctly put in issue and
distinctly determined by a tribunal cannot subsequently be disputed. There can
be no subsequent trial of the same claim. See, e.g., Amco v. Indonesia
(Resubmission: Jurisdiction), 89 ILR 552, 560; Pious Fund
arbitration, J.B. Scott, Hague Court Reports (1916), 1 at 5; Judge
Anzilotti, Chorzow Factory PCIJ Ser. A, No. 13, at 23-27; Trail
Smelter arbitration, 3 UNRIAA 1905 at 1952; Pyramids, 22 ILM 752
(1983), 23 ILM 1048 (1984); case C-310/97P, Commission of the EC v. AssiDomän
Kraft Products (1999); Cases C-238/99 etc, Limburgse Vinyl (2002);
UK Arbitration Act 1996, s. 58. See further Lowe, ‘Res Judicata
and the Rule of Law in International Arbitration’, 8 African Journal of
International Law 38-50 (1996).
17
The confidentiality of arbitral proceedings may impair the application of this
principle. See, e.g., Ali Shipping Corp. v. Shipyard Tragir
[1998] 2 All ER 136; Esso/BHP v. Plowman, (1995) 183 CLR 10;
(1995) 11 Arbitration International 231-340 (including the text of the
decision); P. Neill, ‘Confidentiality in arbitration’, (1996) 12 Arbitration
International 287; O Oakley-White, ‘Confidentiality revisited: is
international arbitration losing one of its major benefits?’,
6 Int’l Arb. Law Rev. 29-36 (2003).
Challenging Awards (‘Recourse against award’)
18
Awards which are materially affected by procedural or other deficiencies may be
challenged. Inter-State awards have been challenged in the International
Court of Justice. See further, e.g., Reisman, Nullity and Revision,
(1971); Arbitral Award of the King of Spain (1960) ICJ Rep. 192; North
Eastern Boundary, La Pradelle & Politis, Recueil des Arbitrages
Internationaux, I, 355; Guinea Bissau v. Senegal (1991) ICJ
Rep. 53; 83 ILR 1.
19
ICSID has an internal procedure for reviewing awards. See ICSID Convention,
arts. 50-52 (see ICSID notes); ICSID: Wena Hotels Ltd v
20
International commercial awards are challenged before municipal courts. See, e.g., UNCITRAL Model Law, article 34; UK Arbitration Act 1996,
ss. 67-73. ICC rules are scrutinised in order to minimise the risk
of successful challenge. See ICC 1998 Rules, art. 27. Cf., the notes by
Shackleton: ‘Challenging arbitration awards,’ New Law Journal
Grounds for
Challenge
21
The grounds on which awards may be challenged are limited; and the tendency is
towards making them even more limited (e.g., UK Arbitration Act 1996, s. 69).
Strict and short time limits are usually imposed, under arbitration rules or
under the lex arbitri, upon challenges. See, e.g.,
UNCITRAL Model Law, article 34; ILC Model Rules, art. 35. The most important grounds are:-
-lack
of jurisdiction: e.g., UK Arbitration Act 1996, s. 67; UNCITRAL Model Law,
art. 34 (cf., NY Convention art. V(1)(c)); Pyramids arbitration, 22 ILM 752 (1983), 23 ILM 1048
(1984)
-procedural
defects: e.g., UK Arbitration Act 1996, s. 68. Bahman Irvani v. Ali
Irvani (1999 Lawtel Document No.: Case Law - C8600635)
-(international) public policy:
e.g., France, Decree Law 81-500 1981 [Art. 1502, Code Civ. Proc.]. See also Soleimany
v. Soleimany [1998] 3 WLR 811; Westacre Investments Inc. v. Jugoimport
–SDRP Holding Co. Ltd. [1999] 3 All ER 864; Kennett, , 48 ICLQ 975 (1999);
Case C-126/97, Eco Swiss China Time Ltd. v. Benetton International NV
(1999)
22
The consequence of a successful challenge is that the award is a nullity,
although courts may have the power under the lex arbitri to remit the award
to the tribunal for modification. The parties may nonetheless remain
bound by the original agreement to arbitrate, so that they may be obliged to
recommence the arbitral proceedings. WW Park, ‘Duty and discretion in
commercial arbitration’, 93 AJIL 805-823 (1999); G. Petrochilos, ‘Enforcing
awards annulled in their State of
THE ARBITRAL PROCESS: 8
RECOGNITION AND ENFORCEMENT
Redfern
and Hunter, International Commercial Arbitration (1999), ch. 10.
Lew (ed.), Contemporary
Problems in International Arbitration, (1986)
Park and Paulsson, ‘The
Binding Force of International Arbitral Awards’, 23
Born, International
Commercial Arbitration in the United States, (1994), chapter 5
1
The enforcement of ICJ judgments is provided for in the UN Charter, though the
powers are rarely invoked. See ICJ Statute, art. 60; UN
Charter, art. 94;
2
Arbitration awards are plainly binding, and most (both inter-State and mixed)
are implemented voluntarily. Diplomatic pressure may be applied to induce
implementation (see, e.g., Lena Goldfields); but the UN Charter does not
provide for the enforcement of arbitral awards: compare art. 94 Charter with art. 13(4)
3
In the case of mixed arbitrations enforcement through municipal courts is of
great importance. Courts can only enforce within the limits of the award (not,
e.g., interest on an award):
4
The most important international agreement in practice is the
5
The grounds for refusal of recognition or enforcement are strictly limited, under
art. V.
(a) incapacity of parties; invalidity of arbitration
agreement under proper law or law of country where award made.
(b) no proper notice
(c) excess of jurisdiction (though courts may
enforce those parts of an award within the tribunal’s jurisdiction: see Redfern
& Hunter, p. 464-6; VII Yearbook Commercial Arbitration 386).
(d) improperly constituted tribunal
(e) award not yet binding / set aside (and the
court may adjourn proceedings if an application has been made to have the award
set aside. See UNCITRAL Model Law, art. 36(2)). Norsolor, (1985) 24 ILM 360; (1985) 2 J. Int. Arb.
67; Hilmarton, (1995) XX Ybk Comm. Arb. 663, XXI Ybk Comm. Arb. 524, (1997) XXII Ybk
Comm.Arb.696.;
Chromalloy, (1997) XXII Ybk Comm. Arb. 691; Baker Marine
(Nig.) Ltd v Chrevron (Nig.) Ltd, 191 F 3d 194 (2nd Cir
1999); Martin I Spier v Calzaturificio Tecnica SpA, 71 F. Supp.
2d 279 (SDNY,1999). E Gaillard & J Edelstein, ‘Baker
Marine and Spier strike a blow to the enforceability in the
and
(2)(a) dispute non-arbitrable in enforcing State See,
e.g., the Liamco v.
(2)(b) recognition or enforcement contrary to
[‘international’] public policy of enforcing State. See, e.g., Parsons
& Whittemore Overseas Co. Inc. v. Société Générale de l'Industrie du
Papier, 508 F. 2d 969 (1974); Deutsche Schachtbau- und
Tiefbohrgesellschaft mbH v. R’As al-Khaimah National Oil Co.[1990] 1
AC 295; Westacre Investments Inc v. Jugoimport-SPDR Holding Co. Ltd
[1998] 3 WLR 770, [1998] 4 All ER 570. See further the papers in P.
Sanders (ed.), Comparative Arbitration Practice and Public Policy in
Arbitration: International Council for Commercial Arbitration Congress series
no. 3, (Deventer, 1987), 177-362; D. Miller, ‘Public policy in international
commercial arbitration in Australia’, (1993) 9 Arbitration International
167; E. H. Bouzari, ‘The public policy exception to the enforcement of
international arbitral awards: implications for NAFTA jurisprudence’, (1995) 30
Texas International Law Journal 205; G. Born, International Civil
Litigation in the United States (The Hague, 1996), 1040-1052; and R. B. von
Mehren, ‘Enforcement of Foreign Arbitral Awards in the United States’, [1998] Int.
A. L. R. 198. **Interim Report on Public Policy as a Bar to Enforcement
of International Arbitral Awards, International Law Association, Report
of the Sixty-Ninth Conference (2000), 340, and http://www.ila-hq.org/html/layout_committee.htm
6
Note also that other conventions may prescribe different obligations. For
example, : ICSID art. 54 appears
to impose an absolute obligation to recognise and enforce awards. Cf., European Convention, art. IX:
7
There may be further provisions concerning recognition and enforcement under
the relevant local law or bilateral or other multilateral agreements, even if
the award is not entitled to recognition or enforcement under the New York
Convention. See, e.g., the NORSOLOR saga, Redfern & Hunter,
p. 484; Dalloz 1985, 101
State Immunity
H. Fox, The Law of State Immunity, (OUP, 2002)
H. Fox, ‘Sovereign Immunity
and Arbitration,’ in J.D.M. Lew (ed.), Contemporary Problems in
International Arbitration, (London, 1986), p. 323, and in the same volume
papers by G. Delaume (p. 313) and G. Bernini and A.J. van den Berg (p. 359) ;
J. R. Crawford, ‘Execution
of Judgments and Foreign Sovereign Immunity,’ (1981) 75 AJIL 820;
A. van Blankenstein,
‘Enforcement of an arbitral award against a State: with whom are you dealing’,
in S. Muller and
C. Schreuer, State
Immunity: Some Recent Developments, (1989) (includes useful bibliography)
8
The agreement to arbitrate precludes invocation of State immunity as a reason
for refusing to arbitrate. The dominant trend in State practice is to
regard the agreement to arbitrate as amounting to a waiver of immunity in court
proceedings where recognition of the award or the making of an order for
enforcement (as distinct from the execution of an order) is concerned.
However, the precise position depends upon the law on State immunity in each
jurisdiction.
9
The actual execution of award by the taking of measures of attachment or
restraint is much more difficult. In many jurisdictions the law on State
immunity precludes the taking of such measures against States. See, e.g., the Liamco
saga: Procureur v. Liamco 65 ILR 78; 106 Clunet 857 (
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