Worldwide Forum on the Arbitration of Intellectual Property Disputes

March 3 - 4, 1994, Geneva, Switzerland

 

MANAGING AN INTERNATIONAL ARBITRATION: AN ARBITRATOR'S VIEW

Hans Smit
Director, Parker School of Foreign and Comparative Law, Columbia University
New York, United States of America


I. Introduction

International arbitration may take many forms. It may be conducted on an ad hoc basis, without the benefit of institutional guidance and assistance. Ad hoc arbitration remains the exception, although, since the adoption of the UNCITRAL Rules, it occurs more frequently (1). Most international arbitrations are conducted under institutional auspices. The ICC International Court of Arbitration continues to be the most prominent international arbitration institution. It is also the institution that inserts itself to the greatest extent into the actual arbitration proceedings. It provides for its prima facie determination of the tribunal's competence, for the exchange of the initial pleadings before it, and for its ruling on the appointment and challenge of arbitrators before the case is submitted to the tribunal. And, after the tribunal has started functioning, it requires submission of the terms of reference to it, as well as submission of the award for approval as to form (2). It also determines the fees to be paid to the arbitrators (3).

The role of other institutions is usually less invasive. For example, the American Arbitration Association does not make any preliminary determination on competence, requires no terms of reference, does not review the award, and leaves the determination of the arbitrators' fees to the arbitrators (4). The World Intellectual Property Organization now proposes its own rules (5), which are heavily influenced by the UNCITRAL and AAA International Arbitration Rules and follow the pattern of those Rules (6).

A person contemplating arbitration must therefore consider carefully what form of arbitration to select. No effort will be made here to analyze the differences between the various forms of arbitration (7). It must be stressed, however, that the extent to which the comments that follow are pertinent may depend on the particular arbitration rules that govern the process. Furthermore, these comments do not purport to be exhaustive. They relate only to a selection of problems that are likely to arise in the course of an international arbitration.

 

II. Composition of the Tribunal

a. Selecting the Arbitrators

It is a touted advantage of international arbitration that the parties can select the arbitrators they deem the most qualified to judge their case. To assure themselves of this advantage, the parties normally provide in their agreement that each party may select its arbitrator and that they, the arbitrators they select, or the institution shall appoint the chairperson. Most institutional rules contain provisions to the same effect (8).

Selecting the proper arbitrators is of crucial importance. However, it is fraught with difficulties. The first problem is to find out which persons have the requisite qualifications. The Parker School Guide to International Arbitration and Arbitrators may be of invaluable assistance in this regard (9). It has collected the names of over one thousand persons who are qualified to serve as an arbitrator. It lists their educational and professional qualifications, describes their experience, and details the subject areas and languages in which they are proficient. Once potential candidates have been identified, the question arises whether an attempt should be made to interview them. Some arbitrators refuse to be interviewed; others do not. But care must be taken lest the interview develop into an examination of the merits of the case to be arbitrated. For, if it does, the prospective arbitrator should disclose it when he is asked to reveal any circumstance that a reasonable person might regard as affecting his impartiality or neutrality. And when he does disclose it, it is likely that he will be challenged successfully. A proper interview of a prospective arbitrator is limited to an evaluation of his person and qualifications and his general experience in the subject matter of the case to be arbitrated.

A word about an arbitrator's qualifications. All too often, lawyers prefer to select someone whom they know professionally or socially and who, they hope, will favor their client's cause. However, an arbitrator who is connected in some fashion to a party is not likely to carry weight with the other members of the panel. The best arbitrator is the one who interacts well with the other members of the panel and is able to craft creative solutions that will commend themselves to the other members of the panel and the institution that appointed him (10). Some parties have shown a preference for judges as arbitrators. Their experience in adjudicating cases would appear to offer a distinct advantage. However, the ambiance on a panel of arbitrators is ordinarily quite different from that on a panel of judges. Arbitrators are brought together for only one case. Ordinarily, two have been appointed by the parties. The impersonal relations of arbitrators in such circumstances are different from those of judges on a panel. Judges may also have grown somewhat imperious. My own experience as an arbitrator lends me to be wary of too readily assuming that sitting or retired judges make for the best arbitrators.

b. Disclosure and Challenge

A prospective arbitrator is expected to disclose all circumstances that may, in the view of a reasonable objective person, affect their independence, impartiality, and neutrality. Institutional rules generally require this (11). However, a general inquiry into whether such circumstances exist is unlikely to be productive. Prospective arbitrators are naturally inclined to be less than receptive to suggestions that may lack the requisite qualifications and to answer a general inquiry in the negative. The better practice is to submit a questionnaire with specific questions. If the institution is unwilling to submit it, nothing prevents a party from doing so (12).

In any event, inadequate disclosure may entail serious consequences. An eventual discovery of disqualifying circumstances may occasion challenge and dismissal of an arbitrator in the middle of the arbitration (13). This may result in appointment of a replacement and repetition of proceedings already completed (14). It may also lead to personal liability of the challenged arbitrator for the cost of duplicate proceedings that resulted from his disqualification. And if the disqualifying circumstances are discovered after rendition of all the award, their discovery may lead to annulment of the award and the imposition of liability for the prejudice this may cause (15). The prospect of thus being relieved of an award may incline the losing party to try to find out after rendition of the award whether the arbitrator should have disqualified himself. In fact, it may be better not to become too inquisitive in that regard until after the award has been rendered, because if the disqualifying circumstances are discovered earlier, the challenge must normally be made promptly on penalty of its forfeiture. A party may therefore prefer to await the outcome of the arbitration before pursuing its inquiries energetically. In the United States, the disappointed party may seek to take the deposition of an arbitrator suspected of having failed to disclose disqualifying information. However, the courts have significantly limited its freedom in this regard. While depositions may generally be taken upon serving a subpoena and tendering an attendance fee, a party who wishes to depose an arbitrator for this purpose must obtain prior court permission detailing the basis for its suspicion, and the deposition of the arbitrator, unlike depositions generally, must be taken before a judge who will protect the arbitrator from being asked improper questions.

 

III. The Functioning of the Tribunal

a. No Ex Parte Communications with a Party

In the United States, unless a contrary agreement has been concluded, party-appointed arbitrators in domestic arbitrations may communicate with the parties that appointed them even after the tribunal has started functioning. This is generally not allowed in an international arbitration. But ex parte communications are permissible also in international arbitrations, as long as they relate to the appointment of the other arbitrators. Especially when the chairman is to be selected by the party-appointed arbitrators, it is thought proper that a party-appointed arbitrator consult with the party that appointed him on which chairman to select.

However, once all members of the tribunal have been selected and confirmed, ex parte communications with party-appointed arbitrators are no longer proper. Some think that the rule is often more honored in its breach than its observance. An effective deterrent may be a chairman's admonishing the members of the tribunal not to indulge in such communications. A party-appointed arbitrator who is guilty of forbidden ex parte communication must also consider the possibility of his being disqualified and held personally liable for the financial consequences of his offense.

Decisions by arbitral tribunals are normally taken by majority (16). The ICC Rules provide for an exception: Unless the other arbitrators agree, the chairman decides (17). This is a most desirable provision. It prevents a chairman from being forced to accede to the view of a co-arbitrator in order to obtain a majority. I regard it as easily the most attractive provision in the ICC Rules, by itself almost sufficient to render them preferable to others that require a majority.

Typically, the other members of a panel authorize the chairman to deal with procedural matters outside of the actual hearing. A provision to that effect is usually incorporated in the first procedural order issued by the tribunal.

 

IV. Procedural Order No. 1

a. Terms of Reference

The ICC rules require the tribunal and the parties to draft terms of reference defining the issues to be resolved and other procedural elements (18). Terms of reference may perform the useful function of forcing proper definition and consideration of the issues to be resolved. However, they also require the parties and the tribunal to define the issues at a time when the case has not yet been fully developed. This becomes an important drawback when, as provided in the ICC Rules, amendments are not allowed beyond the terms of reference except when agreed to by all parties (19). Knowledgeable arbitrators seek to avoid this drawback by drafting open-ended terms of reference (20).

Even when terms of reference are not required, a prudent tribunal regulates the procedure to be followed in arbitrating a case. The typical institutional rules provide that the procedure shall be that prescribed (1) by the law and the institutional rules, (2) by agreement of the parties, and (3) by the tribunal, in that order (21). This is not a desirable provision, for the parties should not be able to impose their will upon an unwilling tribunal (22). This problem may be avoided by including in Procedural Order No. 1 a provision to the effect that the tribunal shall regulate the procedure (23).

b. Procedure

There is developing among the international arbitrators a preferred mode of proceeding. That mode places great stress on the pleadings. These must contain not only all allegations of material facts, but also all arguments of law and all evidence upon which reliance is placed, and must be accompanied by written statements of all witnesses and copies of all documentary evidence relied on. There normally are a complaint, an answer, and a reply. The tribunal may authorize a rebuttal. No party may rely on facts or evidence not contained in the pleadings, except for good cause shown.

Once the pleading stage has been completed, the tribunal may be asked to order further disclosure and regulate its modalities. The advantage of this procedure is that it delays discovery until the fulsome pleadings have made clear exactly what discovery is needed. In this fashion, the free-ranging, wide-open form of American discovery is avoided. The tribunal can specify exactly what information may be discovered and from what sources it is to be obtained. Because a party may be disadvantaged in being compelled to make full disclosure of the information upon which it intends to rely without having all such information in its possession, international related tribunals also and increasingly order blanket disclosure by both parties, before the pleading stage, of all "relevant" documents. If a party claims that a relevant document need not be disclosed because of a privilege or similar excuse, it must identify he document and state the basis for its failure to produce it. If a party fails to produce a relevant document, it must suffer the consequences. These include that it may not later rely on it and, if it supports its opponent's case, that its failure to produce it will be accorded substantially more weight than it might have commanded if produced. The disobedient party may also be saddled with the cost of obtaining the document in another manner. In my experience, these blanket orders have worked well. They induce an openness from which the whole subsequent process benefits.

At the hearing, witnesses, if heard at all (24), are examined only on cross-examination and rebuttal (25). Both the parties and the arbitrators may pose questions. In international arbitrations in which American lawyers participate, they ordinarily request that a verbatim record of the hearings be made. American lawyers frequently bring their own court reports along for this purpose. When no such record is prepared, it normally falls to the chairman to prepare a procès-verbal of the hearing. In the nature of things, such a record is likely to be skimpy. The advantage of having a verbatim transcript of the proceedings was brought home to me in a case in which one of the parties claimed that a ruling by the tribunal about how to proceed was contrary to the agreement of the parties. The claim was made after the hearing and the other party contested that it had agreed to the procedure the tribunal allegedly disregarded. A verbatim transcript of the proceedings or even a tape recording would have been useful in that case.

The hybrid form of civil law and common law procedure, described here and adopted especially by tribunals with a mixed civil and common law membership has worked extremely well in practice. Specifically, it avoids the worst problems encountered in American pre-trial discovery, while making available an opportunity to obtain evidence from an opponent and third parties through discovery that is not generally afforded by civil law procedure.

c. Other Matters

Procedural Order No. 1 typically also sets a time schedule, fixes the place of the hearings, and deals with preliminary matters, such as challenges of arbitrators and the tribunal's competence. It also sets up an arrangement for paying the fees and expenses of the arbitrators in those cases in which this is not taken care of by an institution (26). Generally, arbitrators will require the parties to pay them advances against fees and expenses. An escrow account may be set up for this purpose.

 

V. Provisional Relief

a. Before The Tribunal Has Been Constituted

It is normally impossible to obtain provisional relief from an arbitral tribunal, because provisional relief typically must be obtained at an early stage and without undue delay before it has been possible to constitute the tribunal. As a result, a party in need of provisional relief can obtain it only in the regular courts. This may create at least two problems: First, at least some courts have ruled that provisional relief is not available from a court when the parties have provided for arbitration (27); and second, courts that do provide provisional relief in such cases have ruled that a party that seeks it in court waives its right to arbitrate (28). Both rulings are erroneous, but it may take some time to make the courts see straight. To avoid these problems as much a practicable, it is desirable to provide in the arbitration agreement both that an arbitration agreement does not preclude recourse to the courts for provisional relief and that recourse to the courts for this purpose does not constitute a waiver of the right to arbitrate.

b. By Arbitral Tribunal

The absence of adequate provisional relief in arbitration in the early stages of a dispute has moved the ICC International Court of Arbitration to adopt special rules that attempt to fill the void (29). Its Pre-Arbitral Referee Rules appear inadequate for at least two reasons: They do not apply unless the parties have specifically declared them to be applicable, and the procedure for getting a referee in place does not permit the appointment to be made on the appropriately short notice (30).

The usual institutional rules, as well as the UNCITRAL Rules, do not contain provisions that make provisional relief available in arbitration in an early stage of the dispute. However, such rules can be drafted. I have made an attempt to do this (31). The rules I have proposed may be incorporated by reference in any arbitration agreement.

Of course, arbitrators can never grant provisional relief directed at third parties who are not bound by the arbitration agreement. And even the kind of provisional relief they may be disposed to grant may need the compulsory powers that only the courts can possess. Nevertheless, arbitrators, by creative use of the powers they do have, may be able to provide most effective relief. In one case I arbitrated, the arbitrators ordered the parties to co-operate in the making of immediate repairs on penalty of being found delinquent in their duty to limit damages. In another case we directed one of the parties to purchase the remaining supplies of the other, again using the duty to mitigate damages as the stick behind the door.

 

VI. Incidents

a. Challenge of Arbitrators

An arbitrator may be challenged for lacking the requisite qualifications. Typically, the challenge is decided by an institution or a court at the place of arbitration. Often, arbitrators who are challenged withdraw or resign rather than go through the challenge procedure. Even when not objectionable (32), resignation creates problems when it occurs midstream or even at the end of the proceedings. In that case, a decision must be made as to whether and to what extent prior proceedings should be repeated (33). It may be argued that all procedural steps taken with the concurrence of the arbitrator who resigned after having been challenged are invalid. If the tribunal shrugs off this objection, it must face the prospect of a subsequent attack on the award it may render. Its problem is aggravated even more, because it normally does not have the authority to rule on whether the challenge was well-founded (34) and can therefore not find that, if the resignation had not occurred, the challenge would not have been upheld. The better practice would therefore appear to be for the challenge to be ruled upon rather than to approve of a resignation that seeks to avoid such a ruling. This may cause some discomfort to the challenged arbitrator, but aid the tribunal in making the correct

decision. The other solution is to revisit all measures in which the resigned arbitrator participated (35).

b. Challenge of the Tribunal's Competence

The rule that an arbitral tribunal has the competence to decide its own competence, the so-called competence-competence, is broadly accepted. Its authority in that regard may be confirmed by proper drafting of the arbitration agreement (36).

When the tribunal's competence is challenged, the tribunal may be inclined to rule on the challenge before proceeding with the adjudication of the merits. However, in most cases, the more prudent course is not to render an interim award on the issue when the tribunal concludes that it is competent. For this will prevent the disappointed party from attacking the award in court. Although such an attack does not mandate suspension of the actual proceeding under most of the applicable laws (37), the natural inclination may be to await the outcome of the court proceedings before going forward with the arbitration. In some instances, it may be desirable for the tribunal to render an interim decision on its competence, especially in an ad hoc arbitration (38). But generally the better practice would appear to be for the tribunal to consider the issue in limine, but to delay the issuance of a formal finding of competence until the rendition of the final award.

The same applies, mutatis mutandis, to the issue of arbitrability which is especially likely to be raised in disputes involving industrial and intellectual property (39).

 

VII. The Place of Arbitration and the Hearings

The place of arbitration is normally designated in the arbitration agreement or, in the absence of such designation, by the competent institution (40). Designation of the place of arbitration may have multiple effects. It will be the place at which court proceedings in relation to the arbitration are likely to be brought. It may be the place the arbitration laws of which are applied to the arbitration. However, the designation of the place of arbitration does not necessarily determine where the hearings and the deliberations of the arbitrators will take place (41). The tribunal's authority to conduct proceedings where it wishes adds another element of flexibility that distinguishes arbitration from court proceedings.

 

VIII. Applicable Law

a. Choice of Law in Arbitration

Many contracts containing arbitration clauses also contain choice of law clauses. Institutional rules frequently provide that the arbitrators must apply the law selected by the parties. Nevertheless, whether these choice of law clauses are to be honored depends on the law determining their validity and effect. Similarly, in the absence of a choice of law clause, the applicable conflict of laws rules determine what law is to be applied. It is therefore the choice of law rules to which the tribunal must ultimately turn in determining the applicable law, regardless of whether there is a choice of law clause (42).

In determining which conflict of laws rules to apply, courts look to the rules prevailing at the forum. Initially, arbitrators followed their example and applied the conflict of laws rules prevailing at the place of arbitration. But as international arbitration grew, the realization gained ground that there frequently was no meaningful relation between the place of arbitration and the parties and the subject matter of dispute. This was felt to be true especially in cases in which the place of arbitration was chosen for the very reason that it had no relation to the dispute and the parties and was therefore neutral. Many institutional rules therefore came to provide that the arbitrators should apply the conflicts of law they deemed most appropriate (43). More modern rules go even further and authorize the arbitrators to apply the law chosen by the parties or, in the absence of such choice, the law deemed appropriate by the arbitrators (44).

It is not clear whether this authorizes the arbitrators to choose a particular national law (45) or to formulate themselves what they deem to be appropriate law.

In any event, the great flexibility left arbitrators naturally led to the perception in some quarters that arbitrators were free to shape a new international private law (46), which came to be called the new lex mercatoria (47).

The debate about whether arbitration and awards can truly be a-national continues (48), but it does appear to have little real impact on what happens in actual international arbitration practice.

When arbitrators from different legal systems work together in an international arbitration, they unavoidably bring to the exercise their training and experience in, and knowledge of, their own law. And all of these factors will have an impact on the resolution of the dispute they are arbitrating, regardless of the solution that would be achieved by a court sitting in the country whose laws are applicable under the applicable choice of law clause or rule. An arbitrator's ability to craft a solution that somehow marries these different approaches is therefore the most important skill he can bring to the process. And the rules this process produces are likely to be an accommodation of the approaches and laws with which each of the individual arbitrators is familiar. These rules may become the new lex mercatoria.

Of course, this process would gain in consistency and rationality if international arbitral awards were published in regular fashion. Such publication would contribute greatly to the influence of arbitration on the development of the law and the confidence of the participants in the process. I would urge WIPO to publish periodically the awards that may be rendered under its auspices. It can do so while deleting references to the parties, so that their anonymity can be preserved. However, any publication should reproduce both the findings of facts and the rulings of law. The publication of ICC awards expurgated of facts thus far effectuated in Clunet and the ICCA Yearbook does not permit adequate evaluation.

 

IX. Procedural Orders and the Various Forms of Awards

In the course of the proceedings, the tribunal may issue various procedural orders. The first is normally the most important, because it sets out the blueprint for the proceedings. However, additional orders may be issued to deal with such procedural matters as the disclosure of documents, depositions of witnesses, and the like. The tribunal may also dispose of objections to competence, arbitrability, and the like, in the procedural order.

Matters relating to the merits are dealt with by awards. They may be partial or interim or final. It is normally up to the tribunal to decide whether to issue an interim or partial award. The problem the latter may cause is that a party may attack it in court and thus cause unnecessary delay. This is similar to the problem caused by an interlocutory order on competence described above (49).

It is not unusual for an arbitral tribunal to issue an interim award on liability before adjudicating the damages phase.

Different considerations may move the issuance of an award on liability only. It may be that damages cannot properly be determined until the parties are informed of the precise basis for liability. Another reason may be the anticipated complexity of the damage phase and the arbitral tribunal's hope that, once liability has been found, the parties will settle the damage phase. And, if the tribunal were to find that there was no liability, arbitrating the damage phase would be unnecessary. The preferable course would be not to issue a separate liability award, unless the tribunal finds no liability (in which case the award will be final) or it is necessary to make a separate liability finding in order to inform the parties of the basis on which the damages are to be computed.

In this context, I may also mention what I have done in a case in which I sat as the sole arbitrator and the proper determination of damages was unusually complex. In that case, I submitted to the parties a draft award with the request that they provide me with their comments on the accuracy of my computations. My good friend and classmate, Michael Hoellering, strongly advised me against this procedure (it was an AAA case and I had inquired whether this had been done before) and, moved by this advice, I asked the parties to stipulate on the record that they would not seek to obtain judicial redress against my draft award. They did so and, mirabile dictu, found errors in my computations which, of course, were corrected before I issued the final award. One of the parties subsequently attacked the award on other grounds and prudently settled before a court decision could issue.

 

X. The Final Award and Remedies

a. The Nature of Final Awards

In international arbitration, it is settled practice to issue reasoned awards. It is also generally accepted that dissention opinions may be issued. The drafting of the awards normally falls naturally to the arbitrator with the greatest facility with the language of the arbitration. This is a circumstance to be taken into account in selecting arbitrators.

The dissenting opinion plays a somewhat different role in arbitration from that played in judicial adjudication. In the first place, a draft dissenting opinion provides an effective vehicle for presenting the arbitrator's views in a structured and reasoned manner to the other arbitrators. This may lead them to adopting it as the tribunal's decision. Secondly, in many arbitrations there is no verbatim record of the proceedings. The dissenting opinion may supply some of the factual bases that would otherwise be missing.

As already indicated, the ICC International Court of Arbitration reviews awards on matters of form. The ICC Court gives the concept of form a rather elastic interpretation and may suggest changes that, in its view, would improve the quality and consistency of the award. I have found its role in that regard on the whole rather helpful, even though I have not always accepted its suggestions.

b. Remedies

A number of issues have arisen in relation to the remedies arbitral tribunals may grant. The normal award grants a sum of money as damages. Even in that regard, a problem may arise if the underlying obligation was contracted in a foreign currency. International arbitral tribunals normally are free to award a sum of money expressed in a foreign currency. However, they may wish to render the award in the currency of the place where it is likely to be enforced. The question then arises at what time the conversion is to be made. One of the reasons why the arbitrators may wish to do the conversion themselves is that the conversion rules applied by courts may be unduly rigid. For example, some courts do the conversion at the time of the breach of contract; others at the time of judgment. In a case I decided I applied a more flexible rule by providing that the conversion should be made at the time of breach or judgment or payment, at the option of the award creditor (50). Even if the court in which enforcement is to be sought would apply a different rule, it would not be free to refuse enforcement of the award on the ground that the arbitrators applied the wrong rule (51).

Another problem relates to interest. In the United States, the interest to be awarded by a judgment is fixed by statute. Some courts have applied the statutory rate even when the relevant contract provided for a higher one. Indeed, in one case, the courts even altered an arbitration award that had granted interest in excess of the statutory rate (52). This decision, in my opinion, is erroneous, but it would appear advisable for arbitrators to provide special reasoning for their award of whatever rate of interest they deem appropriate (53). This will decrease the likelihood of the court's refusing to enforce the award.

Stress should also be placed on the necessity of paying for costs and counsel fees. In the United States, counsel fees are normally not awarded, while costs are given even if not asked for. In international arbitration, however, counsel fees are awarded to the victorious party together with costs, but only if asked for. Counsel should be duly attentive to this circumstance.

In the United States, the right to specific performance is subordinated to that of damages. This has raised the question of whether an arbitral tribunal may grant specific performance when a court could not. The answer given by New York's highest court is in the affirmative. Another question is what form specific relief may take. Arbitrators do not have the power to hold a disobedient party in contempt of court. They must therefore limit themselves to directing specific performance and imposing sanctions for disobedience they can impose. An appropriate form of arbitral sanction would be the award of a sum of money for each day the party directed to perform fails to do so.

c. Compensation of Arbitrators

Under the ICC Rules, the International Court of Arbitration fixes the arbitrators' fees according to a schedule fixed in its Rules. This has created some dissatisfaction on the part of arbitrators who attach a greater value to their services. However, private arrangements to supplement the compensation awarded by the ICC Court should be viewed with circumspection. The ICC Court regards such arrangements as impermissible. Parties aware of this might therefore seek to attack awards on the ground that the arbitrators breached their obligations by accepting undue compensation.

The proposed WIPO rules provide for a better solution. They require the fees of the arbitrators to be fixed in consultation with the arbitrators at the time of their appointment. This accords with the practice of the American Arbitration Association.

A prudent arbitrator will require that an adequate advance be deposited with the institution. To avoid undue loss of interest, provision may be made for additions to the deposit as the case progresses. Arbitrators may refuse to proceed with a case if their fees are not adequately covered. However, they should not refuse to render an award that is ready to be issued on the condition that they be paid first. This has been ruled not permissible.

 

XI. Conclusions

International arbitration affords a unique opportunity to resolve a dispute quickly and expeditiously. However, the extent to which these goals can be achieved depends very much on the manner in which arbitrators discharge the duties of their office, the rules under which they function, be they institutional or other, and the spirit in which the parties participate in the process.

International arbitrations also opens entirely new frontiers. It enables arbitrators from different countries to be selected for the purpose of adjudicating a particular case. This is not possible in any national court. It also permits lawyers to practice internationally and to plead their client's cases before tribunals anywhere in the world. This is an opportunity national courts normally do not afford. Arbitration is thus leading the way towards the practice of law on a truly international scale. WIPO is to be applauded for making its contribution to the more perfect development of this system.


Notes

1. For the text of the UNCITRAL Arbitration Rules, see Guide to International Arbitration and Arbitrators 9 (1992). The UNCITRAL Rules are designed to operate largely without the intervention of an institution and are therefore frequently incorporated in ad hoc arbitration clauses. They provide for designation of an appointing authority to appoint, and rule on challenges of, arbitrators: Articles 6-8, 12.

2. International Chamber of Commerce Rules of Conciliation and Arbitration (effective as of January 1, 1988) [hereinafter ICC Rules]: Articles 3-7, 9, 13 and 21.

3. ICC Rules, Article 20(2) and (3).

4. American Arbitration Association International Arbitration Rules (effective March 1, 1991) [hereinafter AAA International Rules].

5. WIPO Arbitration Center, Draft WIPO Arbitration Rules (ARB/DR/2, October 18, 1994) [hereinafter WIPO Draft Rules].

6. On the AAA International Rules, see Smit, "The New International Arbitration Rules of the AAA," 2 Am. Rev. Int. Arb. 1 (1991).

7. On these differences, see Graving, "The International Commercial Arbitration Institutions: How Good a Job Are They Doing," 4 Am. U. J. Int'l L. Pol. 319 (1989).

8. See, e.g. ICC Rules Article 2(4); UNCITRAL Rules Article 7(1).

9. The Guide is now in its second edition. It is published by Transnational Juris Publishers.

10. The best way for judging an arbitrator's qualifications is to read his decisions. Unfortunately, the opportunity to do so remains very limited. See also text following note 47 infra.

11. See, e.g., ICC Rules Article 2(7); AAA International Rules Article 7; UNCITRAL Rules Article 10(1).

12. A forthcoming issue of The American Review of International Arbitration will publish an example of such a questionnaire.

13. This may occur when an arbitrator does not become aware of the disqualifying circumstances until after he has started functioning. An example is that of an arbitrator who learns of his law firm partner's affiliation with one of the parties to the case he is arbitrating. When this occurs, the question arises to what extent a prospective arbitrator is under an affirmative duty to investigate. The appropriate rule would appear to be that a prospective arbitrator should extend his investigation as far as reasonable in the circumstances.

14. Institutional rules typically provide that the arbitrators, after hearing the parties, shall determine to what extent prior proceedings shall be repeated. See, e.g. ICC Rules, Article 2(12).

15. Arbitrators should not be too confident about their being shielded from liability by a provision such as that of Article 36 of the AAA International Rules excluding their liability for consequences other than those occasioned by their "conscious and deliberate wrongdoing." Courts may not enforce this provision.

16. See, e.g. UNCITRAL Rules, Article 31(1).

17. ICC Rules, Article 19.

18. ICC Rules, Article 13.

19. ICC Rules, Article 16.

20. The following is an example: "May the Claimant recover from the Defendant and, if so, how much?"

21. ICC Rules, Article 11; Rules of London Court of International Arbitration [hereinafter London Rules], Article 5.

22. No other procedural system permits this. A provision to this effect makes it impossible for an arbitral tribunal to preclude delays that it judges to be improper.

23. A provision to this effect raises the question of whether it can supersede an institutional rule to a different effect. This is part of the more general question of whether the parties, having chosen institutional arbitration, can opt out of selected elements of the institutional regime.

24. A party may forego cross-examination of a witness whose statement has been submitted by way of direct examination.

25. The normal rule is that the written statement takes the place of the direct examination.

26. The ICC Rules do fix the arbitrators' fees and expenses: Article 20.

27. For case law, see Smit, "Provisional Relief in International Arbitration: The ICC and Other Proposed Rules," 1 Am. Rev. Int. Arb. 388 (1990).

28. See Smit, note 27 supra.

29. The ICC Rules for a Pre-Arbitral Referee Procedure, in effect as of January 1, 1990.

30. See generally Smit, note 27 supra.

31. See Appendix II to Smit, note 27 supra, at 409.

32. An arbitrator may resign, not because he is unable or unqualified to serve, but because the party that appointed him, having learned of the identity of the other arbitrators appointed, judges a substitute to be preferable. This may be resignation for an improper reason.

33. See note 14 supra.

34. This authority is normally given to the institution. See, e.g. ICC Rules, Article 2(8-11).

35. Of course, this revisitation may be summary and be largely formal.

36. The agreement may be drawn to provide specifically that the tribunal shall have the authority to determine its competence.

37. Even the new French arbitration law, which provides that an attack upon an award shall have "suspensive effect," has been construed not to require suspensions of the arbitral proceedings, but only of the execution of the award. Perrot, "Les Recours devant la cour d'appel empechent - ils l'arbitre de poursuivre sa mission?," 1987 Revue de l'arbitrage 107, 112-113.

38. In an ad hoc arbitration, the tribunal may wish to put beyond doubt its competence in order to ensure that the parties will respect the very broad authority it normally has.

39. For example, there may be a question as to whether the issue of the validity of a patent or the existence of a copyright is arbitrable.

40. See, e.g. ICC Rules, Article 12.

41. For example, the tribunal may decide to hear witnesses in the place where they reside, to hear argument where the chairman resides, and to deliberate in a place convenient to all arbitrators.

42. The same is true of institutional rules relating to choice of law clauses. The typical institutional rule, providing without qualification that choice of law rules must be honored, is far too broad. Parties may not seek to escape by a choice of law clause the otherwise applicable mandatory law. See Restatement of Conflicts (Second) § 187.

43. See, e.g., ICC Rules, Article 13(3).

44. See, e.g. AAA International Rules, Article 2g.

45. See Smit, "The New International Arbitration Rules of the AAA," 2 Am. Rev. Int. Arb. 1, 26-27 (1991).

46. This is to be distinguished from both public international law and private international law (conflicts of law).

47. On the lex mercatoria, see generally Carbonneau (ed)., Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant (Ardsley-on-Hudson, N.Y. 1990); Smit, "A-National Arbitration," 63 Tul. L. Rev. 629 (1989).

48. Questions or arbitrability can properly be regarded as pertaining to subject matter competence.

49. See text at notes 37-39 supra.

50. See Smit, GTE v. Thomson CSF, 1 Am. Rev. Int. Arb. 315 (1990).

51. In the United States, the Supreme Court has stated that manifest disregard of the law might be cause for vacating an award. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). This ground may not be available under the 1958 New York Convention, 330 U.N.T.S. 38 (1959), no. 4739, Article V.

52. On this case, see Smit, the Carte Blanche case, 1 Am. Rev. Int. Arb. 172 (1989).

53. This would provide further support for the view that the court may not amend an award merely because it disagrees with it. See Smit, note 52 supra.

 

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