We can add that, even if a party cannot obtain agreement on its preferred juridiction, it can at least preclude litigation in highly undesirable forums. ICA can be ad hoc which involves selection by the parties of the arbitrators and rules governing the arbitration or institutional which involves selection of a specific arbitration center (International Chamber of Commerce, the American Arbitration Association, or the London Court of International Arbitration, ...) often accompanied by its own rules. Either course reduce the risk that one party would be required to defend in an undesirable forum and enhance a neutral resolution of the dispute.
Second, ICA brings flexibility in the resolution of a the dispute; flexibility under different forms. Indeed, as we mentionned it before, the parties are free to adopt specialized procedures, appropriate for their particular transactions, industry, and other needs. Even more conveniant is the choice of the arbitrator. Some national judiciaries include very talented judges with considerable experience in resolving international disputes. The courts of England, Switzerland, New York, and a few other jurisdictions are able to resolve complex transnational disputes. Nevertheless, the technical issues and trade customs involved are not always easily accessible to the non-specialist judges. Then an arbitrator who has substantial experience in the trade in question will appear as a better referee. Moreover, arbitration may also be utilized because the various national laws which might be relevant have not developed enough to treat problems raised in a pioneer industry.
Third, an arbitration agreement makes the parties´ contractual relationship more predictable concerning cost and speed. International commercial arbitration appears to be seldom cheap. The parties are required to pay the fees of the arbitrator(s) and, usually, an arbitral institution. The parties will also have to pay the logistical expenses of renting hearing rooms, travel to the arbitral situs, lodging, and the like. This entails expenses that do not exist in national court litigation. Nonetheless, the additional expenses of arbitration will usually pale in comparison with the costs of legal representation if there are parallel or multiplicitous proceedings in national courts. This can be the case where the parties have been unable to agree upon an exclusive juridiction clause, or where their clause is held unenforceable. The possibility of parallel judicial proceedings can be particularly costly where one party is obliged to commence multiple actions in different nations (for example, to deal with unauthorized use of intellectual property in several jurisdictions). Likewise, the expenses of arbitration will typically not approach those that are incurred if there is relitigation of factual issues in national trial and appellate courts. Arbitration also usually does not have the potential for costly procedural steps which may exist in some common law jurisdictions (notably the United States).
International commercial arbitration is also seldom speedy. Outside of some specialized contexts, disputes often require between 18 and 36 months to reach a final award, with only limited possibilities for earlier summary dispositions. Procedural mishaps, challenges to arbitrators, and litigation over jurisdictional issues in national courts can delay even these fairly stately timetables, as can crowded diaries of busy arbitrators and counsel. Nonetheless, in many jurisdictions, national court proceedings are subject to equally significant delays. The possibility of rigorous appellate review, and new trial proceedings, adds a significant risk of additional lengthy delays. Whereas arbitration typically does not involve appellate review, thereby reducing both this risk and the possibility of new trial proceedings as a potential source of delay.
On balance, therefore, international arbitration does not generically have either dramatic speed and cost advantages or significant disadvantages as compared to national court proceedings. Broadly speaking, the absence of appellate review means that arbitration is likely to be somewhat less slow than litigation, but there will be many exceptions to this generalization. It may be possible to compare more precisely the relative speed and cost of international arbitration and particular national courts with respect to a specific kind of contract or category of disputes. But, even here, the uncertainties of appellate review, summary dispositions, and other procedural developments will make predictions difficult.
Fourth, ICA facilitates a commercial resolution of the dispute which means that the reputation and the relationship between both parties tends to be preserved.
First, the parties may authorise the arbitrator to decide the substantive issues before him to the “internationally accepted principles of law governing contractual relations” which are referred to as the lex mercatoria or, if they leave the choice of the proper law to him, he may opt for the lex mercatoria.
Secondly, international arbitration is usually more confidential than national court proceedings. Arbitral hearings are virtually always closed to the press and public, and in practice both submissions and awards often remain confidential. The contrast with open public dockets and court proceedings is significant. Nonetheless, there is no clear duty of confidentiality in most international arbitrations and arbitral awards are sometimes made public, either in enforcement actions or otherwise. Both arbitration awards and submissions can in principle be obtained by governmental regulators in many countries. Although international enterprises often wisely prefer confidential dispute resolution mechanisms, parties sometimes affirmatively desire that certain disputes and their outcomes be made public. Where a company has a standard form contract, used with numerous counter-parties, it may want interpretations of the contract to become publicly-known, and binding through precedent, as widely as possible. Thus, financial institutions, intellectual property licensors, and franchisors may see litigation as a way to generate public awareness or case law that has an impact beyond the parties to a litigation. Arbitration does not offer the same possibilities.
Finally, arbitration is more likely than litigation to permit parties amicably to settle their differences. This hypothesis is attributed to the fact that arbitration is consensual from the outset, by virtue of the parties' arbitration agreement. Similarly, arbitral proceedings generally require some measure of procedural cooperation between the parties, as we saw before. There are no reliable empirical data on the subject, and anecdotal experiences vary. Nonetheless, the arbitral process does present parties with opportunities for both procedural cooperation and more general settlement discussions. Approached constructively, these opportunities can be used to pursue a negotiated resolution, at least where parties are so inclined.
Fifth, an arbitration agreement can seek to reduce the difficulties that are often encountered in enforcing national court judgments abroad. Thus, the parties' contractual commitment to a specified judicial forum reduces the risk of successful jurisdictional challenges during an enforcement action. Arbitration agreements provide particular advantages because of the favorable international legal framework for enforcing arbitral awards. The New York Convention, to which more than 100 countries are party, is particularly important in facilitating the enforceability of international arbitration agreements. International arbitral awards enjoy the protection of the New York Convention, as well as favorable national arbitration legislation in many countries. These instruments provide a “pro-enforcement” regime, with only limited grounds for denying recognition to an arbitral award. Particularly in developed trading states, there is substantial, successful experience with the enforcement of international arbitral awards.
In contrast, there are only a few regional arrangements for the mutual enforcement of foreign judgments (in particular, the Brussels and Lugano Conventions in Europe), and there is no global counterpart to the New York Convention for foreign judgments. Many major trading states, including the United States, are party to no bilateral or multilateral agreement on the enforceability of foreign judgments. In the absence of international treaties, the recognition of foreign judgments in many nations is subject to local law, which often makes it difficult or impossible to obtain effective enforcement. As a consequence, there is generally a greater likelihood that an international arbitral award will actually put the parties’ dispute to rest than will a national court judgment. Of course, where a regional or other treaty for the mutual recognition of foreign court judgments is applicable, the advantages of arbitral awards may be smaller.
At this level of the discussion, it appears that the role of ICA cannot be called into question. In many appropriate cases, ICA as a contractual dispute resolution mechanism can be tailored to the parties´ specific needs and enhance the predictability and commercial value of dispute resolution procedures. However, the dispute resolution mechanism that a party can realistically obtain in a particular transaction often depends upon its own negotiating strength and its counter-party's interests. Like other contractual terms, the arbitration clause is a product of bargaining, compromise, and drafting ability, and the parties who want to enter into this alternative dispute settlement mechanism must always keep it in mind.
II The importance of ICA: is the enforceability sufficient to promote ICA ?
We have seen the main advantages of ICA in the first part, and one of the most attractive attributes is clearly the enforceability in national courts of arbitral awards under the New York Convention. Moreover, most international arbitration clauses are subject to a specialized legal regime which includes a number of treaties providing for the enforceability of international arbitration agreements and awards. It also includes legislation in many developed and some other states which is supportive of international arbitration agreements and awards. These instruments contribute significantly to the efficiency of arbitration as a means of resolving international disputes and enhance the importance of ICA in international trade today.
Nevertheless, there are lots of reasons why parties agreeing a contract keep on being reluctant to resort to ICA. As a consequence, the importance of ICA must not be overestimated. The following ideas must be pointed out:
To quote Judge Learned Hand: “ Arbitration may or may not be a desirable subsitute for trials in courts; as to that the parties must decide in each instance. But when they have adopted it, they must be content with its informalities; they may not hedge it about with those procedural limitations which it is precisely its purpose to avoid. They must content themselves with looser approximations to the enforcement of their rights than those that the law accords them, when they resort to its machinery".
It is true that ICA allows the parties to select and shape the procedures, and offers predictability and neutrality. Nevertheless, once the parties have agreed to set up the arbitration for the resolution of their dispute, their right to withdraw will be construed as a breach of the arbitration agreement. The parties must then accept some approximations, sometimes they may fear some lenient views which compromise the parties’ positions with little regard applicable law.
Moreover, a salient feature of international commercial arbitration is the absence, in most cases, of appellate review of arbitral awards. Judicial review of awards in most developed countries is narrowly confined to issues of procedural fairness, jurisdiction, and public policy. Where the proceedings are driven by English law, and if the applicant has first exhausted any available arbitral process of appeal and any available recourse under section 57 the award may be challenged by a party to the arbitration on failure of substantive juridiction (section 67), serious irregularity (section 68), or appeal on point of law (section 69).
At first sight, it appears as a high secure system for both parties involved in a dispute. But actually it contrasts markedly with the availability of appellate review of first instance judgments under national court systems, which may allow either de novo relitigation or fairly searching reconsideration of both factual and legal matters. Let’s examine these points further.
First, the question of substantive juridiction, for e.g. the case LG Caltex Gas Co. V. China National PetroleumCorporation ( january 2001). We can underline the difficuties a partie has sometimes to suffer to challenge against an award in spite of sections 67 & 68. In that case, the arbitrators’ decisions could naturally be challenged un der section 67 but that challenge is subject to the terms of section 73 that provides a party could lose his rights to raise an objection under sections 67 & 68 if he does not do so during proceedings before the arbitrator. But what if at the time of the proceedings the grounds for objection are not discovered yet ?
Second, we know section 69 refers to a question of law. This term is given a specific definition in the Arbitration Act 1996. It means for a court in England and Wales, a question of the law of England and Wales and for a court in Northern Ireland, a question of the law of Northern Ireland. This definition is very restrictive since it does not include questions of foreign law. In the case Sanghi Polyesters Ltd v. The international Investors in 2000, the Comercial Court was asked to decide an appeal on a point of law in pursuant to section 69 of the Arbitration Act 1996. The applicant argued that the arbitrator has misapplied the law. The arbitration agreement provided that the dispute was to be governed by the laws of England “except to the extent it may conflict with Islamic Shari’a which shall prevail”. The entire dispute was about the reach of Shari’a law and whether it might conflicy with English law. The court held that as the effect of English law on the contract was not in issue, the questions raised fell outside section 82 and leave would therefore be refused under section 69.
Through the examples above, ICA clearly has its pros and cons, some of which are more significant in given circumstances than others. The question of the importance must not be overvalued but examined from a case by case perspective. ICA probably produces outcomes that are somewhat less crisp and principled than those of a rigorous national court judge, but no more so than many other available national litigation processes (e.g., many national court judges or a jury trial).
On the whole, when entering an international business transaction, future litigation is a prospect that must be addressed by the parties when negotiating the underlying agreement. A well-planned contractual dispute resolution provision agreed as part of the parties’ underlying agreement could ultimately save the parties costs, time and the possible public exposure of their disagreements. More importantly, it could increase certainty of enforcement of an award in specific jurisdictions.
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