-
I NTERNAT IONAL COMMERC IAL
ARB I TRAT ION
Arbitration clauses in international commercial contracts are
often reused
from existing contracts. By so doing, the parties choose to
apply, for example,
either ad hoc or institutional arbitration and the UNCITRAL,
ICC, LCIA,
SCC, Swiss or other arbitration rules without necessarily being
aware of the
consequences. Moreover, parties often assume that an arbitration
clause has
the effect of excluding any kind of interference from a court of
law and of
rendering any but the chosen law redundant.
This book highlights the specific features of various forms of
arbitration
and enables lawyers to make informed choices when drafting
arbitration
clauses. Chapters explain the framework for arbitration, its
relationship with
national law, and the features of the main arbitration
institutions in Europe.
Attention is also paid to new trends in other parts of the world
that may have
repercussions on the theory of international arbitration.
giuditta cordero-moss is a professor at the Department for
Private Law at the University of Oslo, where she is in charge
of
International Commercial Law, International Commercial
Arbitration
and Private International Law.
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INTERNATIONAL
COMMERCIAL ARBITRATION
Different Forms and their Features
Edited by
GIUDITTA CORDERO-MOSS
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cambridge univers ity press
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Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK
Published in the United States of America by Cambridge
University Press, New York
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Information on this title: www.cambridge.org/9781107033481
Cambridge University Press 2013
This publication is in copyright. Subject to statutory
exception
and to the provisions of relevant collective licensing
agreements,
no reproduction of any part may take place without the
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permission of Cambridge University Press.
First published 2013
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Library of Congress Cataloguing in Publication data
International commercial arbitration : different forms and
their features / Edited by Giuditta Cordero-Moss.
p. cm.
Includes index.
ISBN 978-1-107-03348-1
1. International commercial arbitration. I. Cordero-Moss,
Giuditta.
K2400.I5926 2013
346.07dc23
2012032733
ISBN 978-1-107-03348-1 Hardback
Cambridge University Press has no responsibility for the
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accuracy of URLs for external or third-party internet websites
referred to
in this publication, and does not guarantee that any content on
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websites is, or will remain, accurate or appropriate.
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-
I NTERNAT IONAL COMMERC IAL
ARB I TRAT ION
Arbitration clauses in international commercial contracts are
often reused
from existing contracts. By so doing, the parties choose to
apply, for example,
either ad hoc or institutional arbitration and the UNCITRAL,
ICC, LCIA,
SCC, Swiss or other arbitration rules without necessarily being
aware of the
consequences. Moreover, parties often assume that an arbitration
clause has
the effect of excluding any kind of interference from a court of
law and of
rendering any but the chosen law redundant.
This book highlights the specific features of various forms of
arbitration
and enables lawyers to make informed choices when drafting
arbitration
clauses. Chapters explain the framework for arbitration, its
relationship with
national law, and the features of the main arbitration
institutions in Europe.
Attention is also paid to new trends in other parts of the world
that may have
repercussions on the theory of international arbitration.
giuditta cordero-moss is a professor at the Department for
Private Law at the University of Oslo, where she is in charge
of
International Commercial Law, International Commercial
Arbitration
and Private International Law.
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http:/www.cambridge.org/core. The University of Manchester Library,
on 03 Dec 2016 at 19:06:48, subject to the Cambridge
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INTERNATIONAL
COMMERCIAL ARBITRATION
Different Forms and their Features
Edited by
GIUDITTA CORDERO-MOSS
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cambridge univers ity press
Cambridge, New York, Melbourne, Madrid, Cape Town,
Singapore, So Paulo, Delhi, Mexico City
Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK
Published in the United States of America by Cambridge
University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9781107033481
Cambridge University Press 2013
This publication is in copyright. Subject to statutory
exception
and to the provisions of relevant collective licensing
agreements,
no reproduction of any part may take place without the
written
permission of Cambridge University Press.
First published 2013
Printed and bound in the United Kingdom by the MPG Books
Group
A catalogue record for this publication is available from the
British Library
Library of Congress Cataloguing in Publication data
International commercial arbitration : different forms and
their features / Edited by Giuditta Cordero-Moss.
p. cm.
Includes index.
ISBN 978-1-107-03348-1
1. International commercial arbitration. I. Cordero-Moss,
Giuditta.
K2400.I5926 2013
346.07dc23
2012032733
ISBN 978-1-107-03348-1 Hardback
Cambridge University Press has no responsibility for the
persistence or
accuracy of URLs for external or third-party internet websites
referred to
in this publication, and does not guarantee that any content on
such
websites is, or will remain, accurate or appropriate.
Core terms of use, available at
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on 03 Dec 2016 at 19:06:48, subject to the Cambridge
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-
I NTERNAT IONAL COMMERC IAL
ARB I TRAT ION
Arbitration clauses in international commercial contracts are
often reused
from existing contracts. By so doing, the parties choose to
apply, for example,
either ad hoc or institutional arbitration and the UNCITRAL,
ICC, LCIA,
SCC, Swiss or other arbitration rules without necessarily being
aware of the
consequences. Moreover, parties often assume that an arbitration
clause has
the effect of excluding any kind of interference from a court of
law and of
rendering any but the chosen law redundant.
This book highlights the specific features of various forms of
arbitration
and enables lawyers to make informed choices when drafting
arbitration
clauses. Chapters explain the framework for arbitration, its
relationship with
national law, and the features of the main arbitration
institutions in Europe.
Attention is also paid to new trends in other parts of the world
that may have
repercussions on the theory of international arbitration.
giuditta cordero-moss is a professor at the Department for
Private Law at the University of Oslo, where she is in charge
of
International Commercial Law, International Commercial
Arbitration
and Private International Law.
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INTERNATIONAL
COMMERCIAL ARBITRATION
Different Forms and their Features
Edited by
GIUDITTA CORDERO-MOSS
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cambridge univers ity press
Cambridge, New York, Melbourne, Madrid, Cape Town,
Singapore, So Paulo, Delhi, Mexico City
Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK
Published in the United States of America by Cambridge
University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9781107033481
Cambridge University Press 2013
This publication is in copyright. Subject to statutory
exception
and to the provisions of relevant collective licensing
agreements,
no reproduction of any part may take place without the
written
permission of Cambridge University Press.
First published 2013
Printed and bound in the United Kingdom by the MPG Books
Group
A catalogue record for this publication is available from the
British Library
Library of Congress Cataloguing in Publication data
International commercial arbitration : different forms and
their features / Edited by Giuditta Cordero-Moss.
p. cm.
Includes index.
ISBN 978-1-107-03348-1
1. International commercial arbitration. I. Cordero-Moss,
Giuditta.
K2400.I5926 2013
346.07dc23
2012032733
ISBN 978-1-107-03348-1 Hardback
Cambridge University Press has no responsibility for the
persistence or
accuracy of URLs for external or third-party internet websites
referred to
in this publication, and does not guarantee that any content on
such
websites is, or will remain, accurate or appropriate.
Core terms of use, available at
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-
CONTENTS
List of contributors page vii
Introduction 1
giuditta cordero-moss
part i: Arbitration laws significance for internationaldisputes
5
1 International arbitration is not only international 7
giuditta cordero-moss
2 International arbitration and domestic law 40
luca radicati di brozolo
part ii: Ad hoc arbitration 59
3 Ad hoc arbitration v. institutional arbitration 61
carita wallgren-lindholm
4 The UNCITRAL Arbitration Rules and their use in ad
hocarbitration 82
corinne montineri
part iii: Institutional arbitration: Features of
selectedarbitration institutions in Europe 107
5 Arbitration in Austria: Features of the International
ArbitralCentre of the Austrian Federal Economic Chamber(VIAC)
109
werner melis
6 Arbitration in Denmark: Features 130
georg lett
v
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7 Arbitration in Germany: Features of the GermanInstitution of
Arbitration 144
jens bredow
8 Arbitration in Italy: Features of the Milan Chamber
ofArbitration 188
stefano azzali
9 Rules of Arbitration of the International Chamber ofCommerce
204
simon greenberg and anders ryssdal
10 Arbitration in London: Features of the London Court
ofInternational Arbitration 217
johannes koepp, dorine farah and peter
webster
11 Arbitration in Norway: Features of the Oslo Chamber
ofCommerce 271
stephen knudtzon
12 Arbitration in Russia: Features of the
InternationalCommercial Arbitration Court at the Chamber of
Commerceand Industry of the Russian Federation 299
alexander s. komarov
13 Arbitration in Sweden: Features of the Stockholm Rules
321
henrik fieber and eva storskrubb
14 Arbitration under the Swiss Rules 345
daniel wehrli and marco stacher
part iv: New trends in international arbitration 379
15 Domesticating the New York Convention: The impactof the US
Federal Arbitration Act 381
george a. bermann
16 New trends in international commercial arbitrationin Latin
America 398
diego p. fernandez arroyo
Index 427
vi contents
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CONTRIBUTORS
diego p. fernndez arroyo is professor at ComplutenseUniversity,
Madrid, and School of Law of Sciences Po, Paris. He ismember of The
Curatorium of The Hague Academy of InternationalLaw, former
President of the American Association of PrivateInternational Law
(2007/2010) and member of the InternationalArbitration Institute
(IAI).
stefano azzali is active in the area of international
arbitration and isa frequent speaker internationally within this
area. He is SecretaryGeneral of the Milan Chamber of Arbitration
and Secretary Treasurerof the International Federation of
Commercial Arbitration Institutions(IFCAI).
george a. bermann is Jean Monnet Professor of EU Law,
WalterGellhorn Professor of Law and Director of the European
Studies Centre,Columbia University, New York. He is a leading
figure in the study ofInternational and European law, both within
the United States andabroad. He is Chief Reporter on the ALI
Restatement of the US Law onInternational Commercial
Arbitration.
jens bredow , Rechtsanwalt (Cologne) is Secretary General of
theDeutsche Institution fr Schiedsgerichtsbarkeit. He publishes and
lecturesinternationally within the area of international
arbitration.
giuditta cordero-moss , is a professor and Director of
theDepartment for Private Law at the University of Oslo, and Head
of PrivateInternational Law, International Commercial Law and
InternationalCommercial Arbitration. Founder and manager of the
research projectArbitration and Party Autonomy, she is a former
international corporatelawyer and is active as an international
arbitrator.
dorine farah is an associate in the international dispute
resolutiongroup of Baker Botts and is based in London, her practice
focusing
vii
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-
exclusively on international arbitration work, both public and
private,with a particular emphasis on contractual disputes governed
by Englishlaw and LCIA arbitration.
henrik fieber is a partner in the Stockholm office of the law
firmRoschier. He regularly acts as counsel in domestic and
internationalarbitrations under the ICC, SCC, and CCCF rules as
well as in ad hocarbitrations in disputes spanning a range of
sectors. His previousexperience includes working for the Swedish
court system, as a judgein the District Court and the Court of
Appeal.
simon greenberg is counsel with the international arbitration
teamof Clifford Chance, Paris, where he advises clients and acts as
arbitratorin international arbitrations. From January 2008 to
January 2011 heserved as Deputy Secretary General of the ICC
International Court ofArbitration. He previously practised
international arbitration withanother leading law firm in Paris,
and before that with a leading firmin Australia. He is the author
or co-author of numerous articles oninternational arbitration, a
lecturer at Sciences Po in Paris and at HongKong University, and a
co-author of two books: InternationalCommercial Arbitration: An
Asia Pacific Perspective (2010) and TheSecretariats Guide to ICC
Arbitration (2012).
stephen knudtzon is a partner in the Thommessen law firm,
Oslo.He is active in arbitration, particularly in the fields of
insurance, shippingand construction. He is also the chairman of the
Arbitration Institute ofthe Oslo Chamber of Commerce.
johannes koepp is a partner in Baker Botts, London. He is
qualifiedin the jurisdictions of England and Wales and of Germany.
Hehas extensive experience in the substantive and procedural laws
ofboth common and other civil law jurisdictions and has
publishednumerous works in the field of international arbitration.
He sits as anarbitrator and was recently selected by Global
Arbitration Review as oneof their 45 under 45 leading international
arbitration practitioners.
alexander s. komarov is a leading expert in international
arbitra-tion in Russia and a member of numerous international
arbitrationinstitutions and international commissions. He is
Professor and Headof International Private Law at the Russian
Academy of Foreign Trade, amember of the Presidium of the
International Commercial Arbitration
viii contributors
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Court at the Chamber of Commerce and Industry of the
RussianFederation and acted as its president from 1993 to 2010.
georg lett is a partner in the Lett law firm, Copenhagen. He is
activein arbitration, particularly in the fields of insurance,
finance and EU law,and has various publications in his fields of
expertise. He is a member ofthe ICC Court of Arbitration.
werner melis was President of the International Arbitral Centre
ofthe Austrian Federal Economic Chamber, Vienna (VIAC) and has been
aVice-President of the London Court of International
Arbitration(LCIA). He is active as an international arbitrator and
is the author ofvarious contributions to professional journals and
textbooks on interna-tional arbitration.
corinne montineri is a legal officer in the International Trade
LawDivision of the United Nations Office of Legal Affairs, which
alsofunctions as the Secretariat of the United Nations Commission
onInternational Trade Law (UNCITRAL). She is the secretary to
theUNCITRAL Working Group II on Arbitration.
luca radicati di brozolo is a professor at the Catholic
University,Milan, where he is Head of Private International Law and
InternationalArbitration Law. He is also a partner in the law firm
Bonelli EredePappalardo, Milan, where he practises mainly in the
fields of arbitration,international law and competition
matters.
anders ryssdal is a partner in the law firm of Wiersholm, Oslo.
Ashead of its Litigation and Arbitration Law Practice Group, he
practiseswithin European law, international arbitration and
litigation. He has hadmany appointments as counsel, chairman, sole
arbitrator and co-arbitrator in domestic and international
arbitrations. He is theNorwegian member of the ICC Court of
Arbitration in Paris.
marco stacher is a senior associate in the litigation team of
the lawfirm Walder Wyss, Zurich. He practises mainly as counsel in
interna-tional commercial arbitration seated in Switzerland or
elsewhere.
eva storskrubb is a Senior Associate in the Stockholm office of
thelaw firm Roschier. She practises in the field of international
disputeresolution and has experience of multi-jurisdictional cases
involvingboth court litigation and arbitration in several
countries. She is also aninternationally recognised specialist in
EU procedural law.
contributors ix
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carita wallgren-lindholm is a partner in the LindholmWallgren
law firm, Helsinki. She practises in the areas of
arbitration,delivery contracts and as a corporate advisor. She is
active internation-ally and has published in her field of
expertise.
peter webster is a member of Essex Court Chambers, London. Hewas
previously a junior associate in Baker Botts London office.
daniel wehrli was a partner in the law firm of Gloor and
Sieger,Zurich. He practised mainly within arbitration and
commercial law. Hewas Vice President of the Swiss Arbitration
Association.
x contributors
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u
Introduction
giuditta cordero-moss
Arbitration is very common for disputes arising out of
internationalcommercial contracts. With an arbitration clause in
the contract, dis-putes between the parties are solved by an
arbitral tribunal chosen by theparties and outside of the ordinary
courts.
Despite their obvious importance, arbitration clauses are not
alwaysgiven their deserved attention in international contract
practice. Mostcommercial parties know that it is advisable to
choose arbitration, butoften they have little specific knowledge
regarding the choice of arbitra-tion type that an arbitration
clause entails. The drafting of a disputeresolution clause may be
reduced to a copy and paste exercise usingcontracts that were used
in the past; by so doing, the parties choose adhoc arbitration or
institutional arbitration, the UNCITRAL, ICC, LCIA,SCC, Swiss or
other Arbitration Rules, without actually being aware ofthe
differences between them.
In addition, parties do not always have a precise understanding
ofwhat consequences an arbitration clause has. Often parties assume
thatan arbitration clause choosing a foreign venue, coupled with
the choiceof a foreign law to govern the contract, has the effect
of excluding anykind of interference from any court of law, and of
rendering any otherlaw but the chosen law fully redundant. Parties
may feel that by choosinginternational arbitration, they enter an
autonomous dimension com-pletely detached from the systems of law
to which their legal relationshipis connected. The parties may even
assume that the arbitration law of theplace of arbitration is
irrelevant.
In reality, arbitration is a complex system that deserves more
thor-ough evaluation than an automatic reproduction of an
arbitration clausefound in an old contract.
Arbitration depends on international conventions as well as on
thenational law of the place where the arbitral tribunal has its
seat.
1
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Moreover, the enforceability of an arbitral award depends on
internationalconventions as well as on the national law of the
place of enforcement.The interaction between the national law and
international arbitrationmay lead to results that come as a
surprise to those parties who relied onthe fully autonomous nature
of arbitration.
In addition to the local arbitration law, other factors may
influence anarbitral proceeding: the proceeding will be subject to
the arbitration rulesof the chosen institution, to harmonised
arbitration rules referred to bythe parties such as those issued by
the UNCITRAL or to the discretion ofthe tribunal, depending on
whether the arbitration clause provides forinstitutional or ad hoc
arbitration. National arbitration laws may differquite considerably
from each other, and there is a variety of arbitrationinstitutions
to choose from.
This renders it highly advisable to make an informed decision
whenwriting the arbitration clause in a contract. In turn, this
assumes anunderstanding of the specific features that characterise
the various arbi-tration forms, both in respect of the applicable
arbitration rules and inrespect of the applicable arbitration
law.
This book highlights the specific features of various forms of
arbitra-tion, thus enabling an informed choice. The focus of the
book is on thefeatures of the main arbitration institutions in
Europe as well as on adhoc arbitration.
In addition, the book also presents new trends in other parts of
theworld that cannot be ignored when dealing with international
arbitrationbecause of the repercussions that they may have on the
theory of interna-tional arbitration.
Part I gives an overview of the role played by national
arbitration lawin international arbitration. This part is intended
to give an understand-ing of the extent to which national law is
relevant in the context ofinternational arbitration.
Part II discusses the main differences between ad hoc and
institu-tional arbitration, and will analyse the UNCITRAL
Arbitration Rules,often used in ad hoc arbitration. This part is
intended to give an under-standing of the legal sources regulating
ad hoc arbitration, thus enablingto make an informed choice between
ad hoc and institutionalarbitration.
Part III examines the arbitration institutions in Europe that
are morecommonly used for international commercial disputes: the
ICC, LCIA,Swiss Rules, Arbitration Institutes in the Chambers of
Commerce inAustria, Denmark, France, Germany, Italy, Norway, Russia
and Sweden.
2 giuditta cordero-moss
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The authors present their respective topic by highlighting the
specificfeatures in respect of the following (having regard both to
the applicablearbitration rules and to the applicable arbitration
law):
1. Time frame for the proceeding2. Cost determination (including
security)3. Procedure for the appointment of the tribunal4.
Identity and role of the appointing authority5. Form of the
arbitration agreement6. Interference/support by the courts
(including the tribunals powers
to involve them)7. Tribunals powers ex officio8. Possibility of
interim measures and their enforceability9. Multiparty arbitration
(including joinder and consolidation)10. Conduct of arbitration
(terms of reference, number of briefs, dis-
closure, written or oral evidence, modality of hearings,
applicablelaw)
11. Confidentiality12. Institutions role13. Possibility of
excluding the courts review of the awards validity14. Grounds for
invalidity of the award15. Other specific features in the
arbitration rules or the arbitration
law.
Part IV examines trends in other parts of the world that should
not beignored when dealing with international arbitration
irrespective of thegeographical area. The American Law Institutes
first Restatement ofinternational commercial arbitration law is
presented, an unprecedentedwork that is in the course of being
issued and will certainly receiveattention even in Europe.
Moreover, trends in Latin America are pre-sented. Latin America has
often been considered as an arbitration-unfriendly environment and
its doctrines are sometimes referred to insupport of a restrictive
understanding of party autonomy in arbitration.An overview of the
trends will be relevant to the general discussion
onarbitration.
There are numerous publications on international arbitration.
Manyof these are a presentation of, or guidelines for the procedure
at a specificarbitration institution. There are also numerous
detailed analyses ofvarious legal aspects of arbitration. It is
entirely possible, on the basisof the existing literature, to
obtain the information necessary in order tomake an informed choice
of arbitration form.
introduction 3
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However, it may be quite demanding under the time pressure
ofcontract negotiations to identify from the wealth of information
thespecific features that under the given circumstances may justify
prefer-ring one form of arbitration to another.
The aim of this book is to present a reasoned comparison of
variousarbitration forms, so that it becomes apparent what
distinguishes onefrom the other.
4 giuditta cordero-moss
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PART I
Arbitration laws significance
for international disputes
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1
International arbitration is not only international
giuditta cordero-moss
Parties to international arbitration are sometimes under the
impressionthat they may draft arbitration agreements and prepare
arbitrationproceedings without taking national laws into
consideration. Nationallaws may seem to be irrelevant if
international arbitration is consideredto be an autonomous system
that depends on the will of the parties andon some international
instruments that are uniformly applied all overthe world. This,
however, is an oversimplification.
To a large extent, arbitrations autonomy is confirmed by
internationalinstruments primarily, the 1958 New York Convention on
theRecognition and Enforcement of Foreign Arbitral Awards. If
parties decideto submit a dispute to arbitration, according to
article II of the Convention,the courts of the nearly 150 states
which have ratified the Convention1mustdecline jurisdiction on that
dispute. If the arbitral tribunal chosen by theparties renders an
award based on the instructions given by the partiesand applies the
law chosen by the parties, according to article V of theConvention,
the courts of all those states have to enforce that award,
subjectto a few exceptions. This is certainly enhancing the
impression that arbi-tration is an autonomous system, where
national laws are allowed to havean impact only to the extent that
they have been chosen by the parties.
In addition, the UNCITRAL (United Nations Commission
onInternational Trade Law) Model Law on International
CommercialArbitration has been adopted in more than sixty
countries2 and is widelyused as a reference elsewhere. The Model
Law was intended as a source of
1 For an updated overview of the status of ratifications see the
Conventions official site
atwww.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html
2 Of the countries analysed in Part III of this book, the
following have adopted the ModelLaw: Austria, Denmark, Germany,
Norway and Russia. For an updated overview of thecountries that
have adopted the Model Law see
www.uncitral.org/uncitral/en/uncitral_-texts/arbitration/1985Model_arbitration_status.html
7
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-
harmonisation in international arbitration. To this end, and to
ensurecontinuity, it was deliberately aligned with the New York
Convention.3
This contributes greatly to the harmonisation of national
arbitration laws,thus enhancing the impression that arbitration law
is standardised and thatthere is no need to pay attention to the
peculiarities of national laws.
On this basis, sometimes arbitration is deemed to be detached
fromnational laws. According to an opinion that was quite
influential, espe-cially some decades ago, arbitration is
international, and as such it doesnot even have a forum.4 In
particular, no importance should be attachedto the legal system of
the place of arbitration; this opinion assumed thatthe mere
circumstance that an international arbitration happens to haveits
seat in a certain state should not create any link with the legal
systemof that state. The choice of place of arbitration, according
to this opinion,is based on considerations of practical
convenience, such as the relativevicinity to the states of both
parties, the possibility of having convenientflight connections or
the availability of modern and efficient meetingfacilities.
This chapter will show that the place of arbitration has a
significantimpact that may affect the validity and enforceability
of the arbitralaward, and that, therefore, the venue should be
chosen first of all outof legal considerations (Section 1
below).
Also, this chapter will show that not only the law of the place
ofarbitration, but also other national laws may have an impact on
arbi-tration, and that this is quite irrespective of whether the
parties havechosen them to apply or have even decided that they
shall not apply: thelaw of the place of enforcement (Section 2
below) and, to a certain extent,the law applicable to the substance
of the dispute (Section 3 below).
3 See the Explanatory Note by the UNCITRAL Secretariat on the
Model Law onInternational Commercial Arbitration, available at
www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html
4 See, for example, Marc Blessing, Choice of Substantive Law in
InternationalArbitration, Journal of International Arbitration,
14(1997), 39ff.; Marc Blessing,Keynotes on Arbitral
Decision-making: The New 1998 ICC Rules of Arbitration,
ICCInternational Court of Arbitration Bulletin, (1997), 44ff.; Ole
Lando, The New LexMercatoria in International Commercial
Arbitration, International and ComparativeLaw Quarterly, 34(1985),
747, 765ff.; Jan Paulsson, Arbitration Unbound: AwardDetached from
the Law of its State of Origin, International and Comparative
LawQuarterly, 30(1981), 358ff, 362ff and 381; Jan Paulsson,
Delocalisation of InternationalCommercial Arbitration: When and Why
It Matters, International and ComparativeLaw Quarterly 32(1983),
53ff.
8 giuditta cordero-moss
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1 International arbitration and the state law of the placeof
arbitration
The law of the place of arbitration (also known as the lex
arbitri) affectsvarious aspects of an arbitral proceeding: the
validity of the arbitrationagreement, the procedure of the
arbitration and the validity of thearbitral award.
1.1 The relevance of the lex arbitri to the validity of
thearbitration agreement
The jurisdiction of an arbitral tribunal on a certain dispute
and theconsequent exclusion of jurisdiction by courts of law on the
same disputeare based, for international arbitration, on the
already mentioned NewYork Convention. In article II the Convention
provides that: EachContracting State shall recognize an agreement
in writing under whichthe parties undertake to submit to
arbitration all or any differenceswhich have arisen or which may
arise between them in respect of adefined legal relationship,
whether contractual or not, concerning asubject matter capable of
settlement by arbitration. Article II does notmake reference to any
national law for the validity of the arbitrationagreement, and
seems, therefore, to be a provision that contains allapplicable
criteria for validity.
However, article V(1)(a) of the New York Convention, regulating
theenforcement of an arbitral award, states that enforcement may
berefused if [t]he . . . agreement referred to in article II . . .
is not validunder the law to which the parties have subjected it
or, failing anyindication thereon, under the law of the country
where the award wasmade. The latter the lex arbitri is more
commonly used: it is rare tosee an arbitration clause specifying
which law governs the arbitration,and the general choice of law
made by the parties to govern the con-tractual relationship does
not extend to the arbitration agreement, noteven if this latter
takes the form of a clause in the contract that containsthe choice
of law.5 Coordination of article II and article V of theConvention
may create some challenges, as will be seen immediatelybelow.
5 As a result of the separability doctrine that receives large
support internationally. See, forreferences to literature and case
law, Gary Born, International Commercial Arbitration(Kluwer Law
International, 2009), vol. 1, pp. 312408.
international arbitration is not only international 9
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1.1.1 The formal validity of the arbitration agreement
A large number of contracts contain arbitration clauses entered
intoelectronically, by reference to other documents or even
tacitly. Thisraises questions, particularly in relation to the
requirement laid downin the New York Convention that arbitration
agreements should be inwriting.
The UNCITRAL has recently recommended that the New
YorkConvention be interpreted broadly so that arbitration
agreementsentered into by electronic means of communication may be
consideredto comply with the writing requirement.6 Also, the
UNCITRAL ModelLaw on International Commercial Arbitration,
originally issued in 1985,has been amended in 2006 so as to exclude
any doubt regarding theadmissibility of arbitration agreements
entered into electronically emphasising, however, that the
clarification resulting from the amend-ment did not modify the
Model Law, but simply confirmed the liberalinterpretation that was
already adopted by various courts.7
National laws may vary considerably in the formal requirements
theylay down for arbitration agreements. Thus, article 807 of the
Italian Codeof Civil Procedure, article 178(1) of the Swiss Private
International LawAct, article 1031 of the German Code of Civil
Procedure and section 5 ofthe English Arbitration Act all require
the arbitration agreement to be inwriting, albeit with small
differences in the specification of how to meetthis requirement:
under German law, for example, it is sufficient that thearbitration
agreement was contained in a document sent by one party tothe
other, if such a party had not raised objections in good time;
underEnglish law, the criteria are also met by agreements that are
made otherthan in writing, so long as they refer to terms that are
in writing, andagreements that have been recorded in writing only
by one party. Somecountries, however, have abolished the writing
requirement altogether:article 1 of the Swedish Arbitration Act and
article 310 of theNorwegian Arbitration Act recognise any
arbitration agreement,
6 UNCITRAL Recommendation regarding the interpretation of
article II(2) and article VII,paragraph 1, of the Convention on the
Recognition and Enforcement of Foreign ArbitralAwards, done in New
York, 10 June 1958, adopted by the United Nations Commissionon
International Trade Lawon 7 July 2006 at its thirty-ninth session,
A/RES/61/33, available
atwww.uncitral.org/pdf/english/texts/arbitration/NY-conv/A2E.pdf.
For a more extensive com-ment see Giuditta Cordero-Moss, Form of
Arbitration Agreements: Current Developmentswithin UNCITRAL and the
Writing Requirement of the New York Convention, ICCInternational
Court of Arbitration Bulletin, 18(2007), 51.
7 See A/CN.9/WG.II/WP.118, para.11.
10 giuditta cordero-moss
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without laying down any particular form for that agreement,
providedthat the parties have reached a consensus.
A similar proposal has been adopted for the UNCITRAL Model Lawon
International Commercial Arbitration in 2006, but only as one of
twooptions that the states adopting the Model Law may choose.8 As
aconsequence, states that adopt the UNCITRAL Model Law
onInternational Commercial Arbitration will, in the future, have to
choosebetween one option requiring that the arbitration agreement
be in writ-ing, which clarifies that electronic communication meets
that require-ment, and one where there are no formal requirements
at all.
The abandoning of formal requirements for the arbitration
clauseraises various questions. In particular, is an arbitral award
enforceableunder the New York Convention if it has been rendered on
the basis ofan arbitration clause that, while valid under the
applicable national law,is not in writing as required by article II
of the New York Convention?Traditionally, despite the reference to
national law contained in article Vof the Convention, it was widely
considered that the formal require-ments of article II of the New
York Convention prevail over any formalrequirements also laid down
by applicable national law in the phase ofenforcement.9 This is
because the New York Convention was tradition-ally thought to
embody an approach more favourable to arbitration thanis found in
national laws. However, now that some national laws and theamended
UNCITRAL Model Law on International CommercialArbitration have
become more arbitration-friendly than the New YorkConvention in
respect of formal requirements for the arbitration agree-ment, it
may rightly be asked whether that view should change andnational
arbitration laws be given preference. This would be more inline
with the wording of article V(1)(a) and with the spirit of
theConvention.10
8 Article 7 has two versions in the Model Law as amended in
2006.9 For a survey of the various approaches taken by courts of
different states, see theUNCITRAL Secretariat note
A/CN.9/WG.II/WP.139, available at
http://daccess-ods.un.org/TMP/9440393.44787598.html, paras. 1215.
Only the Italian Supreme Courtseems to have held that different
parameters were applied at the two stages with articleII not
applying at the enforcement stage: Supreme Court decision No. 637,
20 Jan. 1995,Rivista dellArbitrato (1995) at 449 and Yearbook
Commercial Arbitration XXI (1996) at602f.
10 Article VII of the New York Convention permits applying
national laws that are morearbitration-friendly than the Convention
itself. For a more extensive analysis seeCordero-Moss, Form of
Arbitration Agreements.
international arbitration is not only international 11
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1.1.2 The legal capacity of the parties to the
arbitrationagreement
According to article V(1)(a) of the New York Convention, one of
thegrounds for refusing recognition or enforcement of an award is
that oneof the parties of the arbitration agreement was under some
incapacity underits own law. The UNCITRAL Model Law has used this
article of the NewYorkConvention as a basis for its own rules on
annulment of awards and onthe possibility of being able to refuse
recognition or enforcement; respec-tively, articles 34(2)(a)(i) and
36(1)(a)(i). Similar references to the law ofeach of the parties
may be found in the arbitration law of countries that havenot
adopted the Model Law. Thus, two recent court decisions rendered
incountries that have not adopted theModel Law, one of the Swedish
Court ofAppeal11 and one of the English Supreme Court,12 have
established theineffectiveness of international arbitral awards on
the basis that the arbi-tration agreement was not binding on one of
the parties in accordance withthe law applicable to that party.
These decisions are a reminder that the lawchosen by the parties to
govern the contract does not cover all aspects of thelegal
relationship between the parties, and that other laws may
becomeapplicable in spite of the parties choice. The general
attitude amongpractitioners sometimes seems, on the contrary, to
rely fully and solely onthe law chosen by the parties and to
disregard any other laws on the basisthat an international arbitral
tribunal will be obliged to follow the will of theparties.
Decisions like those mentioned here, therefore, may come as
asurprise, although they simply give proper effect to the
applicable sourcesof law.
1.1.3 The scope of the arbitration agreement
In the past, drafters of arbitration agreements devoted
particular atten-tion to the wording used in defining the scope of
the arbitration
11 State of Ukraine v. Norsk Hydro ASA, Svea Hovrtt, 17 December
2007, T 310806, seeITA Monthly Report, KluwerArbitration, 6(5)
(2008). The losing party attempted toappeal the decision before the
Supreme Court, but the Supreme Court denied leave toappeal:
decision dated 2 June 2008, case no. T 33908.
12 Dallah Real Estate & Tourism Holding Co v.Ministry of
Religious Affairs, Government ofPakistan [2010] UKSC 46. This
decision was not based on the lack of legal capacity ofone of the
parties, but on the relevance that that partys law has to the
criteria for beingdeemed bound by an agreement. For a more
extensive analysis and a comparisonbetween the Swedish and the
English decision, see Giuditta Cordero-Moss, LegalCapacity,
Arbitration and Private International Law, in K. Boele-Woelki et
al. (eds.),Convergence and Divergence in Private International Law:
Liber Amicorum Kurt Siehr(The Hague: Eleven International
Publishing, 2010).
12 giuditta cordero-moss
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agreement. This seems to have been a reaction particularly to
someEnglish court decisions that placed considerable emphasis on
the lan-guage of the arbitration clause and drew (out of words that
actually werenot intended to restrict the scope of the arbitration
agreement) unex-pected conclusions on which disputes could be
deemed to have beenreferred to arbitration. To cite one example, a
court found that a clauserelating to arbitration of any disputes
arising under a certain contractcovers only those disputes in terms
of the rights and obligations createdby the contract itself,
whereas a clause referring to disputes in relationto the contract
or connected with the contract has a wider scope.13 Thisled to more
and more detailed formulations aiming at clarifying that
thearbitration agreement covers all possible disputes between the
parties.These fine verbal distinctions have now been abandoned by
Englishcourts: in the words of the House of Lords, these
distinctions reflectno credit upon English commercial law. It may
be a great disappoint-ment to the judges who explained so carefully
the effects of the variouslinguistic nuances if they could learn
that the draftsman [. . .] obviouslyregarded the expressions
arising under this charter [. . .] and arisenout of this charter [.
. .] as mutually interchangeable. [. . .][T]he timehas come to draw
a line under the authorities to date and make a freshstart.14 The
House of Lords affirmed that the parties are unlikely totrouble
themselves too much about [the clauses] precise language or towish
to explore the way it has been interpreted in the numerous
author-ities, not all of which speak with one voice. [. . .][I]f
the parties wish tohave issues as to the validity of their contract
decided by one tribunal andissues as to its meaning or performance
decided by another, they mustsay so expressly.15
In spite of the new approach by the English courts, the London
Courtof International Arbitration still determines the scope of its
modelarbitration clause by reference to any dispute arising out of
or inconnection with this contract, including any question
regarding itsexistence, validity or termination.16 This detailed
formulation hasspread even beyond the area of English law: the
model arbitration clause
13 Overseas Union Insurance Ltd v. AA Mutual International
Insurance Co Ltd [1988] 2Lloyds Rep 63.
14 Fiona Trust & Holding Corporation and others v. Privalov
and others [2008] 1 Lloyds LRep 254 at 257.
15 Ibid., at 259.16 Available at
www.lcia.org/Dispute_Resolution_Services/LCIA_Recommended_Clauses.aspx.
international arbitration is not only international 13
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-
recommended by the Arbitration Institute of the Swedish Chamber
ofCommerce refers to any dispute, controversy or claim arising out
of orin connection with this contract, or the breach, termination
or invaliditythereof .17 Similarly, the model clause of the Swiss
rules refers to Anydispute, controversy or claim arising out of or
in relation to this contract,including the validity, invalidity,
breach or termination thereof ,18 and themodel clause of the
UNCITRAL Arbitration Rules to Any dispute, con-troversy or claim
arising out of or relating to this contract, or the
breach,termination or invalidity thereof .19 Along the same lines,
although some-what more succinctly, the model clause of the
International Chamber ofCommerce refers to All disputes arising out
of or in connection with thepresent contract.20
A detailed arbitration clause is meant to counteract restrictive
inter-pretations that may be imposed by the applicable arbitration
law. Asimple clause may probably have the same effect in many
jurisdictions,including those considered above. What a detailed
arbitration clausemay not achieve, however, no matter how clear and
precise it is, is toextend the scope of what the applicable
arbitration law considers to bearbitrable. The matter of
arbitrability will be analysed in Section 1.3.1below.
1.2 The relevance of the lex arbitri to the procedureof the
arbitral proceeding
Generally, arbitration is governed by the arbitration law of the
placewhere the tribunal has its venue (territoriality principle).
The territor-iality principle is affirmed, for example, in article
46 of the SwedishArbitration Act, article 176 of the Swiss Private
International Law Act,section 2 of the English Arbitration Act and
article 1(2) of theUNCITRAL Model Law. The territoriality principle
applies only to thelaw governing the arbitration procedure and does
not extend to alsocover the law governing the merits of the dispute
(more on the lawgoverning the merits of the dispute in Section 3
below).
17 Available at http://sccinstitute.se/engelska-16.aspx.18
Available at www.sccam.org/sa/en/clause.php.19 Available at
www.uncitral.org/pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-
2010-e.pdf.20 Available at
www.iccwbo.org/court/english/arbitration/word_documents/model_clause/mc_
arb_english.txt.
14 giuditta cordero-moss
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-
Some states have opened up for the parties to choose the law
govern-ing the arbitration procedure. Therefore, in these states
the parties mayderogate the territoriality principle: see, for
example, article 182(1) of theSwiss Private International Law Act
and article 1494 of the French CivilProcedure Code. That the
parties have chosen a certain law to governtheir contract, however,
is not sufficient to make the chosen law appli-cable also to the
procedure. If the parties wish the arbitral proceeding tobe
regulated by a law different from the law of the place where
thearbitral tribunal is seated, they should make specific reference
to thearbitration procedure (assuming that the arbitration law of
the place ofarbitration permits them to make such a choice).
It has been authoritatively commented that the choice of a
foreignprocedural law is extremely unusual (and often ill-advised),
as well assubject to doubts as to its validity.21 In England, a
High Court decisioncommented that, in theory, it would be possible
to submit arbitration to aprocedural law different from the law of
the state where the arbitraltribunal has its venue, but the result
would be highly unsatisfactory orabsurd.22
Irrespective of whether the parties have chosen to submit their
disputeto an ad hoc or an institutional arbitration, the arbitral
proceeding willthus generally be subject to the arbitration law of
the state where thearbitral tribunal has its venue. If the parties
have provided for proceduralrules (in an ad hoc arbitration,
directly in the agreement or by referenceto the UNCITRAL
Arbitration Rules; in an institutional arbitration, viathe choice
of the institution), the rules provided by the parties will applyto
their proceeding and will prevail over the rules contained in
thenational arbitration law, if the latter permits to be derogated
from byagreement of the parties. In the case of mandatory
provisions of thenational arbitration law, however, the arbitration
law will override thearbitration rules chosen by the parties.
Examples of mandatory provi-sions are the rules on arbitrability
and on due process, such asthe necessity of giving both parties the
chance to be heard. In addition,the law of the place of arbitration
contains rules on the powers of thearbitrators to issue interim
measures, to summon witnesses and to
21 Born, International Commercial Arbitration, vol. 1, p. 1310.
On the adequacy of con-sidering that the law governing the arbitral
agreement is the law of the state where thetribunal is seated, see
Fritz Alexander Mann, Lex Facit Arbitrum, in Pieter Sanders(ed.),
International Arbitration: Liber Amicorum for Martin Domke (The
Hague:Martinus Nijhoff, 1967) at pp. 164ff.
22 Union of India v. McDonnell Douglas Corp. [1993] 3 Lloyds
Rep, 48.
international arbitration is not only international 15
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request assistance from the local courts in such operations.
Also, this lawcontains rules on the role of courts; for example, in
the case of a challengeto the impartiality of the arbitral
tribunal.
Arbitration laws are, usually, quite liberal in their regulation
of arbi-tration. The parties desire to have as much flexibility as
possible in theorganisation of a mechanism for dispute resolution
that is chosen pre-cisely because it leaves ample room for private
determination. If state lawstarted to regulate arbitration in
detail, this method of dispute resolutionwould probably lose much
of its appeal to commercial parties. However,if there were no
regulation at all, the parties might fear that
fundamentalprinciples of due process might be neglected. Therefore,
a successfularbitration law is an instrument that manages to ensure
a high degree offlexibility, though providing certain rules to
protect the principle of dueprocess.
1.3 The relevance of the lex arbitri to the challengeof an
arbitral award
The assumption that the legal system of the seat of arbitration
(lexarbitri) has no link with the arbitration itself is not correct
in otherrespects. The losing party may, in most jurisdictions,
challenge, beforenational courts, the validity of an arbitral award
that has been renderedin that state. This means that the courts of
the state of arbitration havethe chance of controlling the validity
of the award; and this is definitelyan important link between
international arbitration and the forum. Thejudicial control on the
arbitral award in the phase of the challenge isregulated by
national arbitration law. This means that courts apply theirown law
when they determine whether the award is valid or not.
In some states, awards rendered in disputes without any contact
withthat state enjoy a certain detachment from the system of the
forum.Swiss23 and Belgian24 law permit the parties to enter into an
exclusionagreement, thus excluding the courts jurisdiction to
challenge the vali-dity of the award. Also, Swedish25 law permits
the parties to exclude thecontrol by Swedish courts, but only in
respect of the so-called relativeinvalidity grounds, i.e. grounds
that have to be invoked by one of theparties. Exclusion agreements
are not allowed by Swedish law in respect
23 Article 192 of the Swiss Private International Law Act.24
Article 1717(4) of the Belgian Judicial Code.25 Article 51 of the
Swedish Arbitration Act.
16 giuditta cordero-moss
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of absolute invalidity grounds, upon which the judge can act on
his orher own motion. In most other states, as well as under the
UNCITRALModel Law, the control jurisdiction of the courts cannot be
excluded.
The list of grounds upon which a court may declare an award
invalidvaries, as mentioned, from state to state. In some states,
as in England,the judge has relatively wide powers. Among others,
an English judgemay verify the arbitral tribunals application of
law,26 although thepossibility of setting aside an award for error
in law has been signifi-cantly restricted in the English
Arbitration Act of 1996. In most otherEuropean states, the list of
invalidity grounds can broadly be said tocoincide with the list
contained in article 34 of the UNCITRAL ModelLaw which, in turn,
coincides with the list of grounds upon which anaward may be
refused enforcement under the New York Convention.These grounds may
be summarised as referring to invalidity or irregu-larity in the
following areas: the arbitration agreement (which is gov-erned
primarily by the law of the place of arbitration, as seen inSection
1.1 above); the composition of the arbitral tribunal (whichmay be
considered as part of the arbitral procedure and is
thereforegoverned by the agreement between the parties, the
procedural ruleschosen by the parties as well as by the law of the
place of arbitration, asseen in Section 1.2 above); the procedure
of the arbitration (also gov-erned by the agreement between the
parties, the procedural rules chosenby the parties as well as by
the law of the place of arbitration, as seen inSection 1.2 above);
and the scope of power exercised by the tribunal(which is
determined primarily by the agreement of the parties, but alsoby
the procedural rules chosen by the parties and by the law at the
placeof arbitration).27 In addition, the award can be declared
invalid if there isa contrast with that states rule on
arbitrability or with that states publicpolicy (ordre public), as
will be seen more in detail in Sections 1.3.1 and1.3.2 below.
1.3.1 Arbitrability
There are various rules of state law that restrict the parties
ability tosubmit to arbitration disputes between them. One of the
main effects of
26 Section 69 of the English Arbitration Act.27 More extensively
on the arbitral tribunals powers, see Giuditta Cordero-Moss,
Tribunals Powers versus Party Autonomy, in P. Muchlinski, F.
Ortino andC. Schreuer (eds.), Handbook of International Law on
Foreign Investment (OxfordUniversity Press, 2008).
international arbitration is not only international 17
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submitting a dispute to arbitration is, as is well known, that
the partiesexclude the jurisdiction of courts of law on the same
dispute. The otherimportant effect of arbitration is that the
winning party can present theaward for enforcement to any court in
a state where the losing party hasassets. Arbitration enjoys such a
significant recognition as long as thedisputed matters concern
areas that national legal systems considersuitable for
self-regulation by private parties. As soon as matters ofpublic
policy or of special economic or social interest are touched
on,however, it can seem less appropriate for a state to waive
jurisdiction orto lend its courts authority to enforce private
awards. In such areas withimportant policy implications, states
wish to preserve the jurisdiction oftheir own courts of law: this
preference is based on the assumption thatan arbitral tribunal
would not be able or willing to apply the law asaccurately as a
judicial court would.
In the past, a clear trend could be observed towards reducing
the areasin which disputes are not deemed arbitrable. In the past
decades, forexample, the US legal system has undergone a clear
shift from anexpressed suspicion against arbitration, to an
arbitration-friendly atti-tude;28 the same evolution can be
observed in other legal systems, suchas, for example, the Swedish
system.29 Notwithstanding this trend infavour of arbitrability,
however, various areas of law are still deemed tobe exclusively in
the hands of the courts of law. The areas wherearbitrability is
excluded vary from state to state: as a general rule,arbitration is
usually permitted in all matters that fall within the boun-daries
of private law. This would exclude from the scope of
arbitrationmatters such as taxation, import and export regulations,
concession ofrights by administrative authorities, bankruptcy or
the protection ofintellectual property. These matters are mostly
regulated by mandatoryrules from which the parties cannot derogate.
Disputes concerningaspects of commercial transactions falling
within the scope of the
28 The first Supreme Court judgment recognising the
arbitrability of matters that previ-ously were deemed to be for the
exclusive competence of courts of law, was Scherk v.Alberto-Culver,
417 US 506 (1974). See, for further references, Paul Carrington
andPaul Haagen, Contract and Jurisdiction, Supreme Court Review,
8(1997), 331, 362f.,and Jean Sternlight, Panacea or Corporate Tool?
Debunking the Supreme CourtsPreference for Binding Arbitration,
Washington University Law Quarterly, 74(1996),637, 652.
29 See, for example, the evolution regarding the validity of
arbitration clauses entered intoin the framework of general
conditions of contract, as appears from the comparison ofthree
Swedish Supreme Court decisions rendered in 1949, 1969 and 1980:
Lars Heuman,Current Issues in Swedish Arbitration (Stockholm:
Juristforlaget, 1990), pp. 22ff.
18 giuditta cordero-moss
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freedom to contract, however, should be arbitrable, even if the
solutionof the dispute assumes that the tribunal takes into
consideration thesemandatory rules. As long as the tribunal is
requested to decide upon theprivate-law consequences of these rules
existence and is not required toapply or enforce any of these
rules, there should be no obstacles toarbitrability.
Recently, the arbitrability exception is being used more
frequently,particularly in disputes involving mandatory regulation
protecting theweaker party, when this regulation belongs to the
system of the courtwhere the dispute would be heard if it had not
been for the arbitrationclause.30
Since the arbitrability rule may have a different scope
according to thelaw it belongs to, it is necessary to find out
which law determines whetherthe subject of the dispute is
arbitrable or not. As already mentioned,under the New York
Convention and the UNCITRAL Model Law, acourt always applies its
own rules on arbitrability. Hence, the arbitrabil-ity of the
dispute will be evaluated under the law of the seat of thetribunal
if a court of that country is judging the validity of the award,and
under the law of the place of enforcement if a court of
anothercountry is asked to enforce the award.
This may lead to a situation where a court applies its own rule
onarbitrability in a dispute that has no connection with that legal
systemapart from it being the seat of the tribunal or where the
presence of assetspermits enforcement. In this context, it may be
useful to remember therationale of the arbitrability rule: the
arbitrability rule is meant topreserve the jurisdiction of the
courts of law in certain areas of lawthat are deemed to deserve a
particularly accurate application of thelaw. This particularly
affects areas of law with public policy implications,where the
public interest is deemed to prevail over the freedom of theparties
to regulate their own interests. The legal system does not
considerprivate mechanisms of dispute resolution as sufficiently
reliable in thiscontext and wishes to maintain the jurisdiction of
its own national courtsof law. This rationale does not necessarily
apply when the dispute has noconnection with that courts legal
system, because in the absence of anarbitration agreement the court
would not have jurisdiction over thedispute.
30 See Accentuate Ltd v. Asigra Inc [2009] EWHC 2655 (QB),
regarding a distributionagreement. See also, in Belgium, Cass.,
16.11.06; in Germany, OLGMnchen, 17.5.06; inEngland, High Court
30.10.09.
international arbitration is not only international 19
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If a dispute has no connection with the legal system of the
arbitral seat,therefore, the arbitrability rule should be
applicable to set aside an awardor refuse enforcement only if the
annulment of the award is necessary toavoid an unacceptable result
reached by the arbitral tribunal.31 In itself,the fact that the
arbitral tribunal has resolved a dispute that is notarbitrable
under the law of the arbitral seat or of the place of
enforcementwould not be unacceptable: the courts would have neither
the interestnor the competence to apply their own law to that
dispute. What wouldbe unacceptable is a decision made in a specific
case; for example,because it has given effect to an agreement that
violated a UN embargo.In short, what should be an annulment ground
or ground to refuseenforcement in this situation is not the fact
that the tribunal has exer-cised jurisdiction on the dispute, but
the fact that the result of thedecision conflicts with the
fundamental principles of the courts law. Insituations where the
dispute does not have any links with the legal systemof the
arbitral seat, therefore, the arbitrability clause would overlap
withthe public policy rule, which will be discussed below. The
evaluation ofthe awards validity or enforceability, in other words,
cannot be made inadvance, automatically applying an abstract
measure of arbitrability. Theevaluation of the awards validity or
enforceability has to be made on thebasis of the specific decision
rendered in the particular case, and bymeasuring the actual
decision against fundamental principles of thecourts law.
1.3.2 Public policy
The rule of public policy has the purpose of permitting the
judge not togive effect to an award that would contradict the
fundamental principlesof the judges social system. It is, in the
context of international arbi-tration, universally interpreted in a
very narrow manner.32
31 For a more extensive analysis of the matter see Giuditta
Cordero-Moss, National Ruleson Arbitrability and the Validity of an
International Arbitral Award: The Example ofDisputes regarding
Russian Petroleum Investments, Stockholm Arbitration Report(2001),
7.
32 See Born, International Commercial Arbitration, vol. 2, pp.
2841 ff., with extensive refer-ences, and Alan Redfern, Martin
Hunter, Nigel Blackaby and Constantine Partasides,Redfern and
Hunter on International Arbitration (Oxford University Press,
2009), para.11.110. See also, for a confirmation of this approach
and further references, the InternationalCommercial Arbitration
Committee, International Law Association Final Report on
PublicPolicy as a Bar to Enforcement of International Arbitral
Awards (paper presented at theInternational Law Association
Conference, New Delhi, 2002). See also the International
20 giuditta cordero-moss
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-
In particular, it does not have the same function as ensuring
fullcompliance with rules and principles of the judges legal
system; publicpolicy is usually defined by reference not to the
legal system, but to basicnotions of morality and justice,33
features essential to the moral, politicalor economic order of the
country34 or to fundamental notions of mor-ality and justice.35 In
a similar vein, the European Court of Justice found,regarding the
applicability of the public policy exception containedin the then
applicable Brussels Convention on Jurisdiction andEnforcement of
Judgments, that a court cannot refuse enforcement ofa judgment
solely on the ground that it considers that national orCommunity
law was misapplied in that decision.36 The EuropeanCourt of Justice
found that the fact that an alleged error in applyingthe law
concerns rules of Community law does not alter the conditionsfor
being able to rely on the clause on public policy.37 In particular,
acourt cannot review the accuracy of the findings of law made in
thejudgment when the enforcement of that judgment is being
sought.38
Moreover, the judgment must be at variance, to an unacceptable
degree,with the legal order of the enforcing state in as much as it
infringes afundamental principle, and the infringement must
constitute a manifestbreach of a rule of law regarded as essential
or of a right recognised asbeing fundamental.39 This European Court
of Justice decision was notrendered under the New York Convention,
but there is no reason whythe reasoning made in respect of public
policy as a ground for refusingrecognition and enforcement of
judgments under the BrusselsConvention (or its successor, the
Brussels I Regulation) should not alsoapply to public policy as a
ground for refusing recognition and
Commercial Arbitration Committee, International Law Association
Interim Report onPublic Policy as a Bar to Enforcement of
International Arbitral Awards (paper presentedat the International
Law Association Conference, London, 2000). This is often defined
asthe pro-enforcement bias of the New York Convention, which, in
turn, is considered toconstitute a principle of public policy: see
Redfern et al.,Redfern andHunter on InternationalArbitration, para.
11.105.
33 Redfern et al., Redfern and Hunter on International
Arbitration, paras. 11.109, 11.111and 11.112.
34 Dirk Otto and Omaia Elwan, Article V(2), in Herbert Kronke
and Patricia Nacimiento(eds.), Recognition and Enforcement of
Foreign Arbitral Awards: A Global Commentaryon the New York
Convention (Kluwer Law International, 2010), p. 365.
35 Ibid., p. 366.36 Regie nationale des usines Renault SA v.
Maxicar SpA and Orazio Formento, C.38/98,
para 33.37 Ibid., para. 32. 38 Ibid., para. 29. 39 Ibid., para.
30.
international arbitration is not only international 21
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enforcement of awards under the New York Convention or as a
groundto set aside an award under the UNCITRAL Model Law.
We have established that it is not the national rules that must
beapplied through the public policy clause, but it is their
inspiring princi-ples that have to be given effect to. It remains
to attempt to define whatinspiring principles can be deemed to be
those of public policy. Not everyprinciple inspiring a mandatory
rule can be considered a public policyprinciple. Not even every
principle inspiring an overriding mandatoryrule (i.e. one of those
mandatory rules that is deemed to be so importantthat it requires
to be applied even in international situations and withouttaking
into consideration the general choice of law rules, also known
aslois de police) can be considered as a public policy principle.40
It is onlythe fundamental principles those that constitute the
basis of thesociety that can be deemed as public policy. But how
can theseprinciples be identified?
There is no absolute rule to determine public policy: what is
funda-mental may vary from state to state, and, even within the
same state, theconceptions develop, and what was deemed public
policy a decadeearlier, may not be deemed so any more.41
Court decisions in the various states annulling an award or
refusing toenforce it because the award is in contrast with the
courts public policyare reported in the ICCA Yearbook, Commercial
Arbitration, also avail-able at www.kluwerarbitration.com. A survey
of these decisions, fromthe first volume in the mid-seventies to
the present time, shows that suchdecisions are not numerous. A
decision that originated a wide debate inlegal literature was
rendered by the EU Court of Justice in the Eco Swisscase:42 here
the Court affirmed that European rules of competition law
40 Luca Radicati Di Brozolo, Arbitration and Competition Law:
The Position of the Courts andof Arbitrators, Arbitration
International, 27(2011), 1, 6. See also Born,
InternationalCommercial Arbitration, vol. 2, pp. 2843ff.
41 The example of swap agreements and other financial derivate
instruments is quitedescriptive: this kind of contract developed
into a recognised financial activity in thecourse of the 1980s, and
is not considered as being against fundamental principles.However,
up to as late as the 1980s, courts in Germany and in Austria were
consideringthem against the basic moral principles of the system
that forbid gambling (so-calledDifferenzeinwand). See, for example,
the decision of the Austrian Supreme Court no. 3Ob 30/83 of 1983,
and of the German Supreme Court (Bundesgerichtshof) of 15 June1987.
Only a few years later, the Bundesgerichtshof did not consider
these agreements asviolating any fundamental principles of the
German legal system, see the decision dated26.2.1991, XI ZR
349/89.
42 Eco Swiss China Time Ltd v. Benetton International N.V.
C-126/97.
22 giuditta cordero-moss
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must be considered to belong to public policy. The wide debate
thatfollowed this decision related, among other things, to the
scope andeffects of the Courts findings.43 In judicial practice, at
least twoapproaches have been taken to the question of the courts
power regard-ing arbitral awards: the so-called maximalist and
minimalist approaches.According to the former approach, the court
has the power to make, inaddition to the evaluation made by the
arbitral tribunal, an independentevaluation of the application of
the competition law in order to ensureaccurate application of
competition law. This approach is criticised andis deemed not to
express the mainstream position on the subject.44 Theminimalist
approach is held to prevail in court practice both in theUSA45 and
in Europe, and legal literature affirms that the courts shallnot
make a full review of the arbitral tribunals application of
competi-tion law but shall accept the arbitral tribunals
evaluation.46 That theEuropean Court of Justice has defined
European competition law as partof public policy does not mean that
any violation of every Europeancompetition rule will be a breach of
public policy. It is only the mostserious violations that qualify,
and the breach must be concrete andeffective, so that it truly
jeopardises the goals of competition policy.47
Another situation where arbitral awards are traditionally deemed
toconflict with public policy is where the award gives effect to an
agree-ment that violates applicable rules on bribery.48
Arbitral awards rendered in commercial disputes may run the risk
ofconflicting with public policy where contracts are also legal
under the lawchosen by the parties, but violate, in certain areas,
the law that would beapplicable if the parties had not made a
choice of law. If the violated ruleswere meant to protect
third-parties interests or to ensure the properfunctioning of
systems such as banking and financing, an award givingeffect to
those agreements may have implications in terms of
publicpolicy.
43 For an overview and a summary of the debate so far, see
Radicati Di Brozolo,Arbitration and Competition Law.
44 Ibid., p. 10.45 Baxter Intl v. Abbott Laboratories, 315 F.
3rd 829 (7th Cir. 2003) and American Central
Eastern Texas Gas Co. v Union Pacific Resources Group, 2004 U.S.
App. LEXIS 1216 (5thCir. 2004).
46 Radicati Di Brozolo, Arbitration and Competition Law, pp.
9f.47 Ibid., pp. 6 and 11.48 For a recent critical review of the
relationship between bribery and public policy in
international arbitration see James Barratt and Hayley Ichilcik,
Bribery, European &Middle Eastern Arbitration Review
(2011).
international arbitration is not only international 23
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Many commercial agreements have implications that may affect
theinterests of third parties: for example, an agreement creating a
securityinterest on the assets of one party for the benefit of the
other party hasimplications for the other creditors of that party,
who may not count onthose assets in the case of the insolvency of
the debtor. In order to givefull effect to the security interest,
legal systems have various rules, such asimposing public
registration of the security so that the potential creditorsare
aware of the patrimonial situation of the debtor. Let us assume
thatthe parties created a security interest under a law of their
choice that doesnot require public registration, and that the
contract contained anarbitration clause. If a dispute arises and
the secured creditor obtainsan award in its favour, it will try to
enforce it in the country where theassets are located and where the
law actually requires registration. Theenforcement court will thus
be expected to enforce an award giving effectto a contract that
violates rules ensuring the proper functioning of theeconomic
system. Will that award be considered as violating
publicpolicy?
Another example is a shareholders agreement with provisions
thatviolate the applicable company law on the competence of
corporatebodies, for example, with the purpose of favouring a group
of share-holders against the interests of the minority
shareholders. Assuming thatan arbitral award gives effect to the
agreement of the parties, thusviolating the applicable company law,
will the award be valid andenforceable in the country to which the
applicable company law belongs?
The nature of the public policy principle prevents us making
generalassertions as to the quality of public policy for a whole
area of the law:while some rules of property law or company law may
protect intereststhat are deemed to be so fundamental that their
disregard may contradictpublic policy, it will depend on the
circumstances of the case as to whatextent the result of a specific
violation actually contrasts with suchfundamental principles. On a
general basis, however, it seems legitimateto affirm that the
policy upon which various rules of property andcompany law are
based may be deemed so strong, that a serious breachof those rules
may represent a violation of public policy.49
49 This matter is the object of research in a project that I run
at the University of Osloon Arbitration and Party Autonomy (APA,
www.jus.uio.no/ifp/english/research/projects/choice-of-law/). For a
more extensive analysis see Giuditta Cordero-Moss,International
Arbitration and the Quest for the Applicable Law, Global
Jurist(Advances), 8(2008), 1.
24 giuditta cordero-moss
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