ESSENTIAL INTERNATIONAL ARBITRATION by Shaun H. Ajani

Introduction

The human society is getting more and more litigious. Litigation used to be used as a last resort, due its cost and the potential public exposure. This was mainly true in most western countries, like the United States and most of Western Europe. However, the complexities in laws and the intricacies of business deals have the leaders of these companies running to courts. But an interesting trend is taking place. Due to the increase in international business, and the complications and mysteries surrounding international law, companies are moving toward more non-governmental binding processes, such as arbitration. Arbitration often causes a lot less bad-blood and is less complex. Basically, a way for parties to reach an amicable resolution, regardless of the nation they are in, by a third-party negotiator. As an alternate way, mediation and conciliation are also deployed, as they are a bit less formal and non-binding. For this reason, many international agreements now contain provisions indicating the disputes to be specifically resolved by specific courts or by conciliation & mediation, and then arbitration (at least as the first choice).

Essential Arbitration

So, in general, international arbitration offers an effective and suitable means of resolving and addressing different international disputes and issues such as state-to-state disputes, international investments, and commercial investments. Fundamentally, arbitration is a procedure in which a dispute or conflict is submitted to an arbitrator with mutual consensus. The arbitrator then makes a binding decision on the conflict and dispute. When parties consider arbitration, they use a private procedure for dispute resolution instead of going to court.

Mediation, Conciliation, Arbitration

So, just to be clear I would like to air the general differences between mediation, conciliation, and arbitration. In mediation, a third party, who is chosen by the feuding parties, attempts to bring together the participants so an active negotiations for a possible solution can take place. This mediator has no legal rights to offer a binding solution. Whereas conciliation is a process to actually attempt to settle a dispute, often by suggesting a peaceful settlement for the parties to consider; this might be further advanced to another committee to examine and offer a more concrete proposal. Arbitration, as eluded earlier, is a process where issues are resolved with binding results. As we have seen it mentioned that this decision of the arbitration body is usually known as an award.

Some General Aspects of Arbitration:

Let’s consider some general aspects of arbitration:

· Arbitration is mutual and consensual. In my humble opinion, this is the best part. There is no doubt that arbitration can occur only if both parties have mutually agreed to it. If a dispute arises in the future, an arbitration clause might be inserted in the contract. Unlike mediation, it is not possible for parties to withdraw from arbitration unilaterally.

· An arbitrator is selected by the parties. Parties can identify and select an arbitrator together. If parties prefer going to a three-member tribunal, it is possible for each party to appoint one arbitrator.

· Arbitration is neutral; other than the selection of neutrals, it is also possible for parties to select a suitable venue, language, and even the applicable law for arbitration. Especially in international cases, It enables them to make sure that home court advantage is not enjoyed by any party.

· Arbitration is confidential; in arbitration, and unlike court litigation, confidential information is not released. It ensures that the information of each party remains secure and it is not disclosed to any other person. Many times, dealing with international businesses, in multiple nations, there might be some sensitivity to secret information, such as trade secrets. In arbitration, this kind of information is not released to public.

· The decision of the arbitral tribunal is simple and final. Hence, the recognized rules and guidelines, the parties give their consensus that the decision of the arbitral tribunal is to be carried out immediately. It must be noted though that courts tend to enforce international awards under regional laws and policies.

International Arbitration

In 1958, the United Nations came up with The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, making It possible for nations to make an effort in arbitration, and other nations to recognize these awards. It is not a surprise then that international arbitration is rather similar to domestic court litigation. However, rather than involving a domestic court, it involves arbitrators as private adjudicators. Basically, it is an enforceable, private, binding, neutral, and consensual means and method of international dispute resolution, which is mostly less expensive and faster than domestic court proceedings. In contrast with judgments of domestic courts, awards of international arbitration can be enforced in almost all nations around the world. It makes international arbitration an effective and leading mechanism for the resolution of international issues and disputes.

The United Nations Commission on International Trade Law

The United Nations Commission on International Trade Law (UNCITRAL), which is the principal component of the United Nations in the field of trade laws, introduced the Arbitral Proceedings (also more commonly known as New York Convention), in 1966 and the second in 2016. Over the years, international arbitration has evolved to enable parties from different cultural, linguistic, and legal frameworks to resolve and address their conflicts and disputes in a binding and final manner without the procedural rules and formalities of their own domestic legal systems.

Case Study: In Kabab-Ji SAL (Lebanon) v. Kout Food Group (Kuwait)

Now here is an interesting observation. What if all the ducks are in a row for a perfect international arbitration, but the domestic courts decide otherwise? In my research for this paper, I came across a case of two food distribution companies, both foreign, but operating in Europe. They submitted an arbitration request to both the English and French courts for the recognition of the enforcement of the process. Interestingly, the English and the French courts came to opposite decisions. The English Court of Appeal decided that the contract’s underlying law would obviously govern the arbitration agreement. This was not at random; this decision was predicated on the fact that the words of the arbitration clearly showed the intention of the parties that their contract would be administered by English law. The High Court of Justice of England & Wales determined that English law governed the validity of the arbitration and consequently would refuse any recognition of the award by any international tribunal. Conversely, the French courts had an equally forceful contrast to the English decision, arguing that since Paris was the seat of international arbitration, they would decide the validity of any arbitration award. The Paris Court of Appeal decided that it would not bind the decision to the English law. The validity of the conclusion of the binding arbitration would be only based on the will of the parties. And not to create a cliffhanger, but as of 2022, both the supreme courts are yet to issue a final judgement. It would be noteworthy to annotate here that cases like these just further enhance the need to make the international arbitration more mainstream and stronger, and in time, high courts like the aforementioned High Court of Justice of England & Wales’ opinion would give way to the decided international arbitration awards, more in line with the wishes of the feuding parties.

International Arbitration Agreements

International arbitration contracts are usually comprehensive instruments for enforcing international arbitration agreements, and most statutes of national arbitration and even the New York Convention are pro-arbitration. For instance, the convention’s Article II imposes obligations and responsibilities on contracting states to identify and recognize international agreements of arbitration and even enforce them by referring and directing the parties to the arbitration.

There are other arbitration statutes, such as Articles 16, 8, and 7 of the Model Law, which is created to help the nation reform their existing laws and modernize these laws on arbitral procedure; this allows the accommodation of certain features and needs of international commercial arbitration. Hence these statutes of the Model Law offer a parallel mechanism of enforcement for different international arbitration agreements. A fascinating part of this is that most governments of nations are now moving more toward encouraging international arbitration by being more flexible toward it. The domestic courts hold that the arbitration between international parties lean more toward the international law, then the domestic law, particularly the idiosyncratic virtues that are often displayed within the more provisional domestic laws. This helps in maximizing the enforceability and the credibility of international arbitration.

Jurisdictional Requirements

Full disclosure: I have a certification in Contract Law from Harvard University. It has been a great asset for me in my business ventures. In the many contracts and agreements that I have signed, I can scan through it and see if it meets some basic requirements, before it goes to my business lawyer. For example, all parties have to be serious about the deal, there has to be an actual exchange of considerations, and it must be legal. What it means is that all these requirements give the contract credibility. And so it is with international arbitration. It is important to note that both national arbitration statutes and international arbitration conventions include and contain different jurisdictional requirements that describe which arbitration agreements are specifically subject to the substantive rules and guidelines of those instruments. In addition to it, these jurisdictional requirements have quite critical consequences because they tend to identify and determine when the convention’s pro-enforcement elements are applicable. Therefore, there are many arbitration agreements to which the New York Convention does not really apply. Particularly, just as in contract law, it is necessary to meet and satisfy certain jurisdictional agreements. For instance, it must be shown that requirements of reciprocity are satisfied, be an international arbitration agreement, an agreement that is created and made with respect to a defined legal relationship, have an agreement to arbitrate disputes and differences, have a difference or dispute that may arise due to the commercial relationship, there must be a dispute, and the agreement must be arbitrated. These jurisdictional requirements have great significance as they indicate and identify just when the contemporary legislation’s pro-arbitration provisions apply to different arbitration agreements. And of course, the different national arbitration statutes’ jurisdictional requirements tend to vary from country to country.

Validity & Formation

As with any agreement, the actual contract foundation of any international arbitration requires certain standards for formation and validity of such agreements. An important role is played by these standards in making sure that the enforcement of international arbitration agreements is performed and carried out in an efficient and effective manner. Just like the other categories of contracts, arbitration agreements tend to raise several questions about the formation of contracts. There is no doubt that for an agreement to arbitrate, it cannot be enforced or recognized until it has been formed validly. Several other issues are raised by the creation of different arbitration agreements such as defects in agreements, terms needed for arbitration agreements, and consent to arbitration. As I mentioned in the above piece about contract law, for any arbitration agreement to be created it is necessary for the parties to have consented to it. In most legal systems, it is rather straightforward, as the question of whether different parties have consented validly to the arbitration agreement is considered by the government primarily and by contract law’s generally applicable guidelines and principles. An additional feature of the formation of the international arbitration is that some different approaches have been considered for the establishment of arbitration agreements. A standard of proof has been required by some authorities and there must exist an actual agreement to be arbitrated, and thus making it necessary to have a proper demonstration, hence the need for the arbitration to exist. And finally, for a valid and proper arbitration agreement to be created, it is necessary for parties to reach an agreement on several essential and particular issues. As for international arbitration to be valid and effective, there must be a valid agreement to arbitrate, as it should be considered and recognized both by international treaties and national law. For instance, under the Model Law and the New York Convention, enforcement and recognition of arbitral awards might be refused and declined if parties that agreed to arbitration were under some kind of an effect of incapacity, or if the agreement itself was invalid under its own specific governing law.

The Interpretations

Take any substantial contact and show it six different people, and they will all see some differences. Now, think about the potential complications of an international agreement, with multi-national parties of different cultures and mix all this up with a reason big enough to actually seek international arbitration. We can appreciate what it takes for proper and satisfactory interpretations of international arbitrations. The key here is certain general assumptions that all parties have already agreed upon in the contract.

There is a significant variation in the agreements to arbitrate. Arbitration clauses, as a practical matter, can be either quite long or short. It is possible for them to be drafted in different languages and even with varying levels and degrees of linguistic proficiency and skill. Not to mention, it is possible for arbitration agreements to integrate model clauses, partially or fully, or may begin from scratch. They might even offer the arbitration of all contractual disputes, some specific contractual disputes, or even virtually all disputes associated with the relationship of parties.

It is the variety in arbitration agreements that often leads to questions about interpretation. For instance, questions about interpretation tend to often concern the arbitration clause’s scope. However, it can often involve some other topics as well like the treatment of different procedural provisions. Some general rules of presumptions and interpretation about the intent of parties play a critical role in specifically ascertaining the meaning and interpretation of different arbitration agreements. The beginning part or point for the interpretation, in most jurisdictions, is the applicable contract law and its guidelines and principles of contract interpretation. It is important to note that these principles involve trade usage of different terms, giving effect to all the parts of the agreement of parties, specific terms that generally prevail over and in more general terms.

Pro & Anti Arbitration

Other than these generally-applicable rules, rules of construction are also applied by some states to different international arbitration agreements. National law, in many jurisdictions, indicates that international arbitrations must be construed with respect to a pro-arbitration presumption. It is indicated by this presumption that an arbitration clause must be expansively interpreted and in case there is doubt, it must be extended to encompass different disputed claims. It is particularly true where an arbitration clause tends to encompass some disputes of parties and the question is about if the clause tends to apply to related disputes. As a matter of point, here in the United States, the Supreme Court has declared that any doubts and confusion about the scope of arbitrable problems should be resolved and addressed in favor of arbitration.

Although some more established governments have identified that arbitration clauses should be restrictively interpreted. Generally, the restrictive presumption is explained and described on the basis that arbitration is specifically a derogation from available access to the contract’s natural judge and civil justice. So, a certain anti international arbitration view is taken based on the idea that there might be relaxation of some civil laws to accommodate the international arbitration process. Thus, a small number of courts might force the arbitration tribunal to strictly follow the local law. However, this anti international arbitration focus is rare, and the trend is toward more positive view of international arbitration.

Non-Signatory

Normally, international arbitration is consensual. Therefore, only the parties of the agreement are bound and benefitted by the arbitration agreement. Still, there are situations in which non-signatories might be considered and recognized as parties to an arbitration agreement.

Different legal theories have specifically invoked a variety of legal systems for binding entities that have not really performed and created an arbitration agreement. They include assignment and assumption, ratification, guarantor, implied consent, party beneficiary, legal succession, and among others. Non-signatories, in each instance, can be bound by the arbitration clause of a contract.

Generally, these are the bases for subjecting non-signatories to different arbitration agreements:

Implied

Implied Consent: Assumes that a party consented to something by some action. An entity, under most developed legal systems, might become a party to a contract including an agreement to arbitration, either by non-explicit declarations or by conduct, and even expressing agreement to or executing an agreement formally.

Authority of Officers

Corporate Officers and Directors have been known to enter into an international arbitration, following a notion that the resulting award might benefit in the end. The directors and officers of a corporate party have been permitted by some national courts to invoke arbitration clauses in the underlying commercial contracts of that party, notwithstanding the idea and fact that directors and individual officers are not parties under the contractual principles.

Estoppel

In international arbitration estoppel is mostly used to prevent the inconsistencies of one party from hurting another. It has been recognized by different authorities that estoppel and even other related doctrines can be used as a basis for permitting non-signatories to eliminate and invoke an arbitration agreement. They can also be used to bind a non-signatory to an arbitration contract.

Assignment & Succession

Assignment or Transfer contracts are transferred from one party to another party through assumption, novation, or assignment. The arbitration agreements are not generally capable of being transferred on the basis of the idea that they were personal obligations. However, these ideas have been superseded and it is now accepted universally that parties possess the contractual autonomy to assign or even transfer different arbitration agreements. Although by way of legal succession, it is possible for an entity that did not really execute and perform an arbitration agreement to be a part of it. It is important to note that the most common method of succession is through a combination or merger with the original party to that arbitrary agreement.

Group of Companies

An important yet contentious basis for the binding of non-signatory parties to the related clause of arbitration on the basis of factors that are comparable roughly to the ones relevant to the analysis of alter ego. This is an idea of veil piercing which we see in practically all domestic corporate law, around the world. Some national authorities rule that a party who has not really assented to a contract that might contain and include an arbitration clause might be bound nonetheless by the clause if that party is specifically an alter ego of the entity or party that did agree or execute to the agreement. The simplest circumstance and situation in which a non-signatory is typically bound by arbitration agreements is when a contract is executed by an agent for its principal. The application and use of arbitration agreements to different non-signatories always raise questions about the formal requirements for a formal arbitration agreement

Case Study: GE Power v. Outokumpu

ThyssenKrupp is a multi-national German conglomerate, operating all over the world. ThyssenKrupp entered into three contracts with Outokumpu Stainless, for the construction of cold rolling mills (machines to press steel into different sizes of cables), each requiring an international arbitration clause. ThyssenKrupp then formed additional contract with GE energy to provide motors for the cold rolling mills. Unfortunately, the motors failed, and Outokumpu Stainless sued GE in Alabama state court, even though GE was a non-signatory. Consequently, in another twist of the arbitration nature, due to the arbitration clause, GE was able to remove the case from the courts, citing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention or Convention). In yet another case twist, the case went all the way to the supreme court, and the Court held that the New York Convention does not conflict with domestic equitable estoppel doctrines that permit the enforcement of arbitration agreements by non-signatories. The point is that regardless of the outcome we can see that a non-signatory can become a material part of the case.

The Proceedings

The goal is to lead the parties to an agreement, resolving their disputes, and it is the procedural conduct of an international arbitration which can be instrumental in this goal. When it comes to the international arbitral process, a concept of great significance is that of the arbitral seat, or the place of arbitration; it is also sometimes recognized as an arbitral forum. Let’s keep in mind that the location or place of the arbitral seat is necessary to define the legal framework that might be used for international arbitral proceedings to be carried out and it can also have great practical and legal consequences and impacts in international arbitration. Actually, the place of arbitration or arbitral seat is not really a geographic location but a legal construct. It can be said that it is the country where a specific international arbitration has its judicial home or legal domicile. In virtually all cases, as a practical concern, the seat will be the nation that the parties have identified and are concerned about in their agreement for arbitration as the seat or place of the arbitration.

Regarding the arbitral seat, with most national legislations and even the New York Convention, there are some common traits:

· Provides the location or place of hearings in the arbitration, hence, ensuring the presence of technical and logistical resources for the proper conduct of arbitral hearings. This could also It affect the background and nationalities of arbitrators.

· Provides the arbitral proceeding’s domestic tone and tendencies, including information about the characteristics such as the nationality of arbitrators.

· Determines where the arbitral award is created. This could have implications on the presumptively to the arbitration agreement’s substantive validity. This also influences and affects the external relationship between national courts and arbitration and even the internal procedures and processes of arbitration

· Offers the arbitration law that will be applicable, and the applicable arbitration legislation that will be used and considered for the arbitration. Notwithstanding the specific language of the contract, and the influence of the local courts, the international arbitration proceedings could set the legal limits of the applicable laws affecting the arbitral award, and the propensity of the feuding parties to easily come to an agreement.

In the Model Law, Article 20(1), identifies and depicts the place of arbitration is typically located where the parties have shown consensus or agreed for the tribunal to be held. It is necessary to distinguish between the arbitration seat and the basic geographical location of meetings or hearings. As it has been explained above, the arbitral seat is the juridical or legal home of the arbitration. In addition, outside the arbitral seat, the conduct of hearings does not really influence the applicability of the legislation or the location of the seat.

The Selection

One striking aspect of international arbitration, for those who usually conduct business as usual in courts with their attorneys, is the conspicuous absence of the courts. This contrasts to a with the international and national courts as they have a strong permanent existence, in the history of commercial, especially international disputes. Although there is a pre-existing range of judges who are assigned randomly to different cases considering the different applicable procedural rules. As one can imagine, the more complex the business arrangements are, the more distant the national idiosyncrasies are, the more it is necessary for the parties to constitute a tribunal separately for every conflict and dispute.

Hence, the removal and selection of arbitrators are generally one of the key aspects and parts of arbitral proceedings. The autonomy of the parties for the selection of arbitrators, whom they generally consider suitable for their case, is indubitably an important part of the arbitration. The New York Convention tends to recognize this autonomy and even gives effect to it; and is considered and recognized under most arbitration statutes.

Normally, when different parties are not able to agree upon arbitrators for their specific cases and disputes, both national laws and institutional rules provide for the identification and selection of arbitrators by the agreed national court of the parties. In the removal and selection of arbitrators, a critical and major problem is the impartiality and independence of arbitrators. As common sense would prevail, It is required by most institutional rules and arbitration legislations that arbitrators must be separate and independent from the parties and they should also be impartial. The procedures and the content of these requirements tend to play a critical role in the process of the arbitration itself.

The national arbitration legislation and the New York Convention asure the autonomy of the parties to select and identify the arbitrators who will resolve and address their disputes. The autonomy of the parties is generally subject to only some specific restrictions that are aimed at ensuring an independent and impartial tribunal and even securing a number of public policies.

As an arbitrator resigns or is removed, they are replaced promptly; and for this reason there are provisions in most arbitration agreements about vacancies. It is important to note that the normal approach is that different vacancies are filled in a similar manner to the selection of the original arbitrator, so if the co-arbitrator nominated by the party is removed, then, the party that selected or nominated the arbitrator originally nominates and selects a replacement for the arbitrator. Meanwhile, in case the presiding arbitrator is removed, the replacement is then nominated by the appointing authority. There are provisions that generally govern the procedure and if it becomes necessary, the national courts enforce these procedures.

Procedural

In international arbitration. The proceedings are predicated on the procedural law of the arbitration. This could be different then the underlying law of the contract. The law is frequently the same as the geographical location of the arbitral seat. The arbitrators closely follow a delicate balance and relationship of the arbitral process and the external laws governing the land. Different parties agree to arbitrate with the goal of acquiring neutral and fair procedures that are not only tailored to their disputes but are also efficient without any reference to the complexities and formalities of different procedural rules that are applicable in national courts. Some common elements of an international arbitration procedures are as follows:

· The procedural autonomy of parties.

· The procedural discretion of arbitrators.

· Judicial non-interference in different arbitral hearings and proceedings.

· The rule and principal of limited mandatory procedural requirements.

As I previously noted, different arbitral proceedings are subject to the arbitration’s procedural law. The procedural law of arbitration is often distinguished from the law that governs the underlying contract of the parties and the law that governs the clause of arbitration. Therefore, it usually differs from these laws. Furthermore, as far as procedure goes rules are offered by the procedural law of arbitration that tend to govern the relationship between the courts of the seat and the arbitral process. These also govern and influence the arbitration’s internal conduct.

And in the case of international arbitration, one of the key characteristics is the freedom of parties to agree upon the procedure of arbitration. In major international arbitration conventions and even the New York Convention, this principle is duly acknowledged aforehand.

Most legal systems, consistent with the Convention, do not really impose major mandatory limitations on the tribunal’s or the parties’ freedom to perform and conduct an arbitration. In addition, under deferential mandatory limits, it is possible for parties to agree to different arbitral procedures that are suitable for their interests. Not to mention, in case no agreement has been made by parties, arbitrators are encouraged and empowered to select different arbitral procedures.

Regardless, in many jurisdictions, judicial decisions or legislation require that minimal standards of equality and arbitral fairness should be satisfied by arbitral proceedings that take place on the local territory. It should be noted that these standards are often referred to as procedural regularity, natural justice, or even due process.

Evidence & Disclosure

Every international arbitration has its massive share of evidence and disclosure and are made by the parties themselves or the tribunal. The power of the arbitral tribunal to require the concerned parties to create and produce materials such as documentaries, relevant to the resolution of matters of dispute or conflict, is one of the most important fundamentals of the arbitral process. The scope and existence of the disclosure are problems and issues that emerge in different international arbitrations. Additionally, parties often disagree over both the proper exercise and the existence of disclosure authority.

And since nearly all decisions and matters about disclosure are made in the arbitration itself in international arbitration by the tribunal or parties; It is quite different from national courts process. Similar to other areas of taking evidence, disclosure is governed in international arbitration in the first instance by the arbitration agreement and the procedural law of arbitration. There is no doubt that these sources tend to define the scope and extent of the power of the arbitral tribunal to order disclosure.

The national law gives effect to the agreements of different parties about disclosure. Moreover, in case the agreement is absent, the national law also recognizes the inherent authority of arbitrators to order the involved parties to produce and disclose different evidentiary materials. The national law even authorizes the arbitrators, in absent agreements, to request different third parties to offer disclosure and even acquire judicial assistance in some cases to enforce such requests.

As a practical matter, the actual exercise by a tribunal of its disclosure authority depends to a significant extent on several factors. Some of these factors are the practice and law of the seat, the arbitration agreement, the backgrounds of the parties and arbitrators, and even the needs and circumstances of specific cases. Characteristically, there are two contexts that questions about the extent and scope of the authority of arbitrators arise. 1) To arise in an arbitral proceeding when requests are made or resisted by parties for tribunal-ordered disclosures. 2) For a tribunal to enforce its disclosure orders by obtaining the direction and help of relevant national courts.

Transparency & Confidentiality

As in any dispute resolution, including international arbitration, confidentiality is an important benefit; unlike where in a court proceeding, the whole population is exposed. Confidentiality is often considered a great reason for international arbitration, as it reduces and prevents the damage that might be sustained and experienced by disclosing important and sensitive information to the parties involved, as they may also include competitors. Through confidentiality, the role of public posturing can also be minimized to a significant extent. In my opinion, just the fact that the parties can’t use the public opinion to take advantage of influencing the tribunal is a great equalizer.

Although we must distinguish between confidentiality and privacy in arbitration. For instance, privacy refers to the fact that only parties involved in the agreement will attend and take part in the proceedings. Meanwhile, as far as confidentiality is concerned, it is the responsibility of parties to not disclose any information about the arbitration itself to uninvolved, and third parties. The obligations to not disclose any information extend to involved parties and it also prohibits third parties from participating in arbitral hearings. Any evidence and material that might be related to the arbitration procedure are prohibited to be disclosed to any entity outside the international arbitration proceedings.

In international arbitration, proponents often present a very logical argument that the arbitral process’s uniformly accepted privacy requires that the process should also be confidential and secure. For instance, they often reason that it would not make any sense to treat and consider related aspects such as arbitral hearings private and then publicize the information about these hearings to the public. Nevertheless, the Inter-American Convention, the European Convention, and the New York Convention are all silent on arbitral proceedings’ confidentiality. National legal systems, in the absence of these international norms, have often taken varying approaches to the question of whether different international arbitrations are confidential, presumptively or not.

The implied and expressed confidentiality obligations are specifically binding on the disputing parties to the agreements of arbitration. They do not focus on and bind third parties. All the parties subject to obligations of confidentiality are not permitted and allowed to disclose materials related to arbitration to either the public or third parties, unless an exception is sanctioned by the confidentiality obligations.

Provisional Measures

We don’t really think of it, but the international arbitration process itself, and all its intricacies can actually damage a party. Hence, during international arbitration, there are often orders issued to defend against these measures. These orders or awards are involved in provision measures that are issued for the purpose and objective of securing a party from damage during the arbitral process’s course. Provision measures, most often, are aimed at preserving a situation for safeguarding rights. Their recognition is actually sought from the tribunal itself. Different provisional measures are available from both a national court and an arbitral tribunal.

Authority to Order. Tribunal & Judicial

The subject of provisional measures is not addressed by the New York Convention. Rather in international arbitration, the presence of provisional measures is dealt with and addressed mainly by national arbitration legislation and the arbitration agreement of the parties. It is worth noting that arbitral tribunals, in practice, possess broad authority for ordering different provisional measures that are exercised by arbitrators frequently.

Consequently, presence of provisional relief is impacted significantly by the national arbitration legislation. Provisional relief will be seldom granted by an arbitrator unless satisfied that the applicable law enables and permits the tribunal to do so. In a similar manner, provisional relief ordered by the tribunal will not be often enforceable and usable in the national court until and unless such relief is permitted by the laws that govern the proceedings of arbitration. I do find it odd that these provisional measures ordered by the tribunal and their judicial enforcement is not really addressed by many arbitration statutes. Therefore, it leaves the enforcement of these measures to different general provisions about the applicability of arbitral awards.

Multi-Party

As we have seen previously that international arbitration cases more often than not involve multiple parties by the nature of the complicated international business, and just the fact that the companies involved in international business often tend to be large international multi-national businesses and the projects are complex enough to need more then two parties. This is complicated by the fact that the other parties, then the two main entities, are often subcontractors, who might not have actually participated in the actual initial negotiations or might even be non-signatories, raising complex procedural problems are raised by these proceedings in international arbitration.

Intervention, Joinder, & Consolidation

There are different types of mechanisms in national court litigations for the consolidation of disputes and conflicts between different or same parties in a single and individual proceeding. They also exist for permitting a joinder or intervention that might be applicable to the case.

Let’s suppose that A, B, and C consider and enter into contracts that are related to each other. Conceivably, separate actions between B versus A and C versus B can be consolidated often into an individual and single action. In an alternative manner, C can be joined in or intervene in an existing action between B and A. There is no requirement, in these instances, that all parties should consent and agree to such intervention, joinder, or consolidation. On the basis of considerations of efficiency and fairness, broad discretion is possessed by courts to order joinder or consolidation, or to even permit intervention.

The consolidation of separate and individual international arbitrations, and even permitting an intervention or joinder of additional parties can offer some benefits. For instance, similar to litigations, it is possible for an individual arbitration to be more effective and efficient in some circumstances than two or more than two arbitrations. A single proceeding tends to enable and permit the same savings of the expenses, efforts, and time of witnesses, parties, and arbitrators.

Although, intervention, joinder, and consolidation also have some drawbacks that might outweigh their advantages and might even favor one party while adversely influencing others. Permitting joinders or consolidating arbitrations can result in some serious problems associated with the appointment of arbitrators. For instance, most arbitrations include three-person tribunals. In case there exist three or more than three parties in the arbitration process, the model does not really work as the parties would have their own distinct interests.

Moreover, just the environment of the consolidation and joinder of multiple parties result in a loss of confidentiality. Thus, it raises concerns about the disclosure of confidential information. Just as an additional note I find it interesting that even though multi-party proceedings might be more efficient, the savings in time and costs will is not distributed equally among the parties.

In my research, I came across a case in the Cornell Law archives, which demonstrates the peculiarities of the multi-party international arbitration.

Case Study: Vigo Steamship Corp. v. Marship Corp. of Monrovia

This is a charterparty dispute, where the shipowner claimed some structural vessel harm. The shipowner asserted that the ship was chartered, but it was damaged, while it was in the possession of a sub-charterer. The original agreement, between the shipowner and the charterer, provided for an international arbitration clause. There was also an agreement, between the charterer and the sub-charterer, for an international arbitration clause, but alas not between the shipowner and the sub-charterer. The owner and the sub-charterer could not come to an agreement for an international arbitration, since the sub-charterer cited a lack of privity (a relation between two parties that is recognized by law). In effect to all this, the charterer petitioned to the courts for an international arbitration proceeding, with an order of consolidation. The sub-charterer opposed this arguing that this would force an arbitration between them and the owner, and that the international arbitration was overseen by the Federal Arbitration Act (usually created by the domestic legislative body for the facilitation of private dispute resolution through arbitration) and thus not disposed to consolidation. In the end, the consolidation was ordered, and the multi-party arbitration took place. This case underscores that even such a simple, minimum multi-party dispute, can foster a number of complicated procedural issues in international arbitration.

Substantive Law

International arbitration is a good choice for businesses in international environments, engaged in international business, because the bet is in their favor that the process will be fair; that the “substance” of the case will be considered, perhaps even more then the domestic and indigenous rule and culture. Parties, among other things, desire a neutral procedural framework and a substantive and stable legal regime. Particularly, these objectives are critical in different international contexts where differences between different procedures and national laws can be great and where the requirements or needs for predictability are acute. The international arbitration often aims to offer predictability in terms of both procedural and substantive law. It often combines an arbitration agreement with a choice-of-law clause. Just to be clear, we hear about procedural law as well; procedural law is the law that guides how the substantive law will be applied, hence the proceedings of arbitration. The substantive law can be relevant to the arbitration agreement of the parties including its interpretation, validity, and even the reasons behind the parties to have chosen international arbitration. This also includes the dispute’s merits including the non-contractual and contractual claims.

There might even be circumstances where there is an absence of choice-of-law agreement and the substantial law must be selected by the tribunal solely through the application of conflict of law rules or by selecting a specific applicable law directly. In most cases the parties might have the opportunity to have the substantive identified and agreed upon. And since the UNCITRAL Model determines that the choice and identification of the substantive law by the arbitrators, in most jurisdictions, is subject only limited judicial review.

Responsibility & Representation

Although the parties should be guaranteed by the Convention to select a representative of their choice in international arbitration, in international proceedings, the standards of professional conduct and parties’ rights to legal representation are recurrent problems and issues. In fact, these problems are of great significance and have even acquired increasing attention over the years. Many international arbitration conventions including the New York Convention generally lack detailed and comprehensive provisions that guarantee the right to representation of their specific choice to parties. There have been deviations from the understanding and recognition of the freedom of parties to be represented by the individuals of their choice in different international arbitrations. For instance, at different times, Nigeria, Thailand, Portugal, and Turkey, among others, have forbidden and restricted foreign lawyers from appealing and representing parties in arbitrations that are seated locally.

Sometimes, these restrictions were defended on the basis that they were a part of the local regulations that were aimed at securing the quality and integrity of legal advice. The restrictions, in reality, were the product and result of protectionist lobbies that have been aimed primarily at excluding and limiting foreign competition. In addition, these restrictions, in virtually all cases, have been abandoned and relaxed in the face of domestic and international criticism.

Arbitral Awards

Okay, so we have come a long way. After determining that the parties can move forward with international arbitration, and meeting all the intricacies of the legal, procedural, and even in some cases political necessities, it is time for the arbitral award! A comprehensive legal framework of national and international sources is used for giving effect to international arbitral awards. Several international conventions including the New York Convention, on the international level, address different forum selection and substantive aspects and areas of the enforcement, recognition, and annulment of arbitral awards. The arbitration statutes, on the national level, offer substantive criteria and procedural mechanisms for enforcing, recognizing, annulling, confirming, and even making awards. The tribunal makes the award, and delivers it to the parties, at which point the tribunal becomes FUNCTUS OFFICIO (no further official authority or legal effect). The compliance and the enforcement of the award is then a matter for the parties, and in some cases, the courts. One of the main intents of the New York Convention is concerned with facilitating the enforcement of arbitral awards in different countries. Through the Convention’s provisions, the awards satisfy the jurisdictional requirements of the individual nations’ requirements.

Usually the award-debtors comply with awards willingly that are made against them. But as one can imagine that there might be circumstances where a party would claim that an award against it is incorrect and fundamentally wrong. Unsuccessful parties, in these cases, might aim and attempt to annul the award. There are limited circumstances, under most arbitration legislation, in which such challenges might be made. In most jurisdictions globally, the rule is that an award is binding and final with preclusive effects and impacts on the parties, and even broadly comparable to a national court judgment’s preclusive effect. In most jurisdictions, arbitration legislation offers limited avenues through which an award can be challenged. And awards are treated by most arbitration legislations as final.

Conclusions

In my humble opinion, the discussion around international arbitration is too long overdue. In almost every conflict, the feuding parties gear to battle it out in the courts. Thankfully, most contracts now have an arbitration clause, which forces the parties to look within and work things out. Normally, I would even suggest mediation first, but given the large scale of some of these international projects, the non-binding mediation might seem like a stretch, at the risk of disclosing information which might be more valuable as a “need to know basis”. At an international arbitration level, given the privacy that the process brings, versus a potential court circus, international arbitration is worth the consideration.

The international scale brings some challenges. it is true that some effort is needed to bring together a team of tribunal to arbitrate within a certain framework, while satisfying all parties, as well as any local ancillary requirements; paying particular attention to the selection (and sometimes removal) of the tribunal, keeping confidentiality in check, and ensuring that substantive law is fairly applied. The good news is that once the arbitral award is applied, and the tribunal has become functus officio, most parties accept the outcome.

As with any commercial dispute, there always will be the likely complications that a multi-faceted business structure brings. In cases where there are many companies conducting business ventures, multi contracts dealing with multiple parties may exist. These companies might even be interconnected, and not even be aware of it, till disputes arise. And as with any multi-party discombobulation, where so many elements of international business collide, there could be just as many issues, such as non-signatories, difficult parties opposed to any co-arbitration, and even dealings, where not enough legal agreements exist. The point is that these conditions are the ecosystem that the multi-national conglomerate businesses play in, and in the absence of international arbitration the cost and the emotional toll would be great, and even curtail progress. We are grateful that for many years, international law, with the help of organizations like the United Nations have presented the international business environment with conventions and best practices, which helps the international business civilization move forward.

END

Author Shaun Hasan Ajani has over a decade of consulting experience with fortune 50 companies. He has written many books and articles on business theories & global change, and has appeared in all the major television networks, including CBS, NBC, FOX, and ABC. Shaun has many professional certifications from institutions like Gartner Institute, Harvard University, and Sloan School of Business, and holds degrees in business from University of Houston, and in International Law from Bircham International University (BIU). He has years of experience in creating courses, curriculum, Technical Writing, Project Management, and Business Analysis. Currently, Shaun Ajani lives in Miami with his family.