JAMIA MILLIA

ISLAMIA

FACULTY OF LAW
INTERNATIONAL TRADE &
FINANCE ASSIGNMENT
On

“INTERNATIONAL
COMMERCIAL ARBITRATION”

SUBMITTED TO: MISS HINA KAUSAR

SUBMITTED BY: SUMAIYA KHAN
CLASS: B.A.,L.L.B(H), Vth SEM.
SECTION: A
 TABLE OF CONTENTS

1. INTRODUCTION
2. FEATURES OF INTERNATIONAL COMMERCIAL ARBITRATION
3. CHOICE OF LAW IN INTERNATIONAL COMMERCIAL ARBITRATION
4. INTERNATIONAL COMMERCIAL ARBITRATION & CONCILIATION TEXTS
5. ADVANTAGES & DISADVANTAGES OF INTERNATIONAL COMMERCIAL
ARBITRATION
6. CONCLUSION
7. BIBLIOGRAPHY
 ACKNOWLEDGEMENT

I am feeling highly elated to work on the topic “INTERNATIONAL COMMERCIAL

ARBITRATION” under the guidance of MISS HINA KAUSAR. I am very grateful to her for
her exemplary guidance. I would like to enlighten my readers regarding this topic and I hope
I have tried my best to pave the way for bringing more luminosity to this topic.
 INTRODUCTION

International arbitration is arbitration between companies or individuals in different states,

usually by including a provision for future disputes in a contract.1
The predominant system of rules is the UNCITRAL Arbitration Rules, as well as the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958
(the "New York Convention")2. The International Centre for the Settlement of Investment
Disputes (ICSID) also handles arbitration, but it is particularly focused on investor-state
dispute settlement and hears relatively few cases.

The New York Convention was drafted under the auspices of the United Nations and has
been ratified by more than 150 countries, including most major countries involved in
significant international trade and economic transactions3. The New York Convention
requires the states that have ratified it to recognize and enforce international arbitration
agreements and foreign arbitral awards issued in other contracting states, subject to certain
limited exceptions4. These provisions of the New York Convention, together with the large
number of contracting states, have created an international legal regime that significantly
favors the enforcement of international arbitration agreements and awards5. It was preceded
by the 1927 Convention on the Execution of Foreign Arbitral Awards in Geneva.

1
Gary B. Born, International Commercial Arbitration, 187, 197, 217 (2009); Julian M. Lew, Loukas A. Mistelis
& Stefan M. Kröll, Comparative International Commercial Arbitration 1-10 to 1-11, 6-1 to 6-6 (2003)
2
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New
York Convention”), June 10, 1958,
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html
3
Jason Fry, Recognition And Enforcement Of Foreign Arbitral Awards: A Global Commentary On The New
York Convention Foreword (Herbert Kronke, Patricia Nacimiento, Dirk Otto & Nicola Christine Port eds.,
2010)
4
New York Convention, arts. II, III & V, June 10, 1958,
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html; Fouchard Gaillard
Goldman On International Commercial Arbitration ¶¶ 250-252 (Emmanuel Gaillard & John Savage
eds., 1999)
5
Gary B. Born, International Arbitration and Forum Selection Agreements: Drafting and Enforcing 10-11, 123-
124 (3rd ed. 2010)
 FEATURES OF INTERNATIONAL COMMERCIAL ARBITRATION

International arbitration allows the parties to avoid local court procedures. International
arbitration has different rules than domestic arbitration6, and has its own non-country-specific
standards of ethical conduct.7
The process may be more limited than typical litigation and forms a hybrid between the
common law and civil law legal systems.8 For example, the International Bar Association
(IBA)'s Rules on the Taking of Evidence in International Commercial Arbitration, revised in
2010,9 do not adopt common law broad disclosure procedures (discovery) or follow the civil
law in eliminating entirely the ability of engaging in some disclosure-related practices. The
IBA Rules blend common and civil systems so that parties may narrowly tailor disclosure to
the agreement's particular subject matter.
David Rivkin,10 who chaired the committee that drafted the rules, has noted that the wide
adoption of these rules in international arbitration has led in practice to an unexpected use by
common law practitioners to limit disclosure and by civil law practitioners to expand it.
The rules can be further impacted by arbitral rules that may be agreed between the parties.

Global enforcement
Most countries, especially in the developed world, are signatories of the New York
Convention. Consequently, judgements can be enforced across the world. The New York
Convention, more formally known as the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, provides for court recognition and enforcement of
foreign arbitration decisions, allowing arbitration proceedings to piggyback on the authority
of domestic jurisdictions across the world.11

In contrast, there is no equivalent treaty for the international recognition of court decisions
with a large membership although the Hague Convention of 30 June 2005 on Choice of Court
Agreements entered into force in 2015 for the European Union and Mexico. Similarly, no
6
Yves Dezalay & Bryant G. Garth, Dealing In Virtue: International Commercial Arbitration And The
Construction Of A Transnational Legal Order 9-10, 124, 198 (1996)
7
http://www.ibanet.org/images/downloads/guidelines%20text.pdf
8
Sachs, Klaus. "CMS Guide to Arbitration: Foreword". CMS Legal. Retrieved 1 May 2012
9
https://www.ibanet.org/images/downloads/IBA%20rules%20on%20the%20taking%20of%20Evidence.pdf
10
https://www.debevoise.com/davidrivkin
11
Druzin, Bryan. "Anarchy, Order, and Trade: A structuralist Account of why a global Commercial Legal Order
is emerging". Vanderbilt Journal of Transnational Law. 47: 1057
equivalent treaty exists so far for the international recognition of settlements achieved in
mediation or conciliation: so far, a meeting of the UNCITRAL Working Group II in New
York has taken place in February 2015 subsequent to a US proposal for that working group to
develop a convention on the enforcement of conciliated settlement agreements for
international commercial disputes.12 Within the EU, the enforceability of mediation
agreements is ruled by Directive 2008/52/EC.
Protection from lawsuits
Under the New York Convention, if a party to arbitration files a lawsuit in breach of an
arbitration agreement, the court is obligated to stay the proceedings. Chapter 2 of the Federal
Arbitration Act sets forth the statutory basis for an American court to issue a stay in
connection with contracts falling within the ambit of the New York Convention.13
Appeals
Under the New York Convention, Article V provides for seven reasons that a court can use to
refuse to enforce an arbitration judgment.14

Agreement details
A number of essential elements should be included in almost all international arbitration
agreements, with model language available.15
These include the agreement to arbitrate, a definition of the scope of disputes subject to
arbitration, the means for selecting the arbitrator(s), a choice of the arbitral seat, and the
adoption of institutional or ad hoc arbitration rules.16 A number of other provisions can also
be included in international arbitration clauses, including the language for the conduct of the
arbitration, choice of applicable law, arbitrator qualifications, interim relief, costs, and
procedural matters.
In order to bridge the gap when parties to an international agreement have difficulty in
agreeing upon an arbitral institution, some international arbitration specialists recommend
using an arbitration clause that authorizes two arbitral institutions in the same city. Those
12
Lorraine Brennan: Do We Need a New York Convention for Mediation/Conciliation?, Mediate.com, February
2015
13
"Guide to Arbitration in New York" (PDF). CMS Legal. Retrieved 8 May 2012.
14
"Enforcement of Arbitral Awards under the New York Convention - Practic" by Joseph T. McLaughlin and
Laurie Genevro". scholarship.law.berkeley.edu. Retrieved 2016-03-21.
15
IBA Guidelines for Drafting International Arbitration Clauses,
http://www.ibanet.org/LPD/Dispute_Resolution_Section/Arbitration/Default.aspx; Gary B. Born, International
Arbitration And Forum Selection Agreements: Drafting And Enforcing (3d ed. 2010); Paul D. Friedland,
Arbitration Clauses For International Contracts (2nd ed. 2007)
16
G. Born, International Arbitration And Forum Selection Agreements: Drafting And Enforcing 38 (3d ed.
2010); Paul D. Friedland, Clauses For International Contracts 61-69 (2nd ed. 2007)
clauses generally empower the party commencing the arbitration to select the arbitral
institution.17
A mnemonic device, “BLINC LLC”, reflects some of the most important clauses: broad, law,
institutional, number, costs, location, language, and carve-out.18

Arbitration organizations
Several major international institutions and rule making bodies set out rules and appoint
arbitrators. The most significant are:19
Institution Acronym Seat Operator Established
International Court of International Chamber of
ICC Paris,  France 1923
Arbitration Commerce
Korean Commercial Seoul,  
KCAB 1966
Arbitration Board Republic of Korea
London Court of
London,  
International LCIA 1892
United Kingdom
Arbitration
American Arbitration
Association
AAA
New York,  
1926
(International Center United States
(ICDR)
for Dispute
Resolution)
Chambers of Commerce
Swiss Chamber's Geneva,   and Industry of Basel, Bern,
SCAI 2004
Arbitration Institution  Switzerland Geneva, Lausanne, Lugano,
Neuchâtel and Zurich
Vienna International Vienna,   Austrian Federal Economic
VIAC 1975
Arbitral Center Austria Chamber
Ljubljana Arbitration Ljubljana,   Chamber of Commerce and
LAC 1928
Centre Slovenia Industry of Slovenia
Arbitration Institute SCC Stockholm,   Stockholm Chamber of 1917
of the Stockholm Sweden Commerce
Chamber of
17
See Eric Sherby, “A Different Type of International Arbitration Clause,” Int’l Law News (American Bar
Association) Winter 2005 at 10.
18
See http://www.abanet.org/buslaw/blt/content/articles/2010/09/0001.shtml
19
See generally "Born’s Finest: 19 Leading Arbitral Institutions of the World". LinkedIn Pulse. 2015-03-18.
Retrieved 2016-12-03
Commerce
Singapore
Singapore,  
International SIAC 1991
Singapore
Arbitration Centre
Hong Kong
 Hong Kong,
International HKIAC 1985
 China
Arbitration Centre
Chinese International
China Chamber of
Economic and Trade CIETAC  ?,  China 1956
International Commerce
Arbitration Center

Other Important Institutions for Arbitration in North America are JAMS International, the
British Columbia International Commercial Arbitration Centre (BCICAC, Canada).
Specialist ADR bodies also exist, such as the World Intellectual Property Organisation
(WIPO), which has an arbitration and mediation center and a panel of international neutrals
specialising in intellectual property and technology related disputes.
A number of arbitral institutions have adopted the UNCITRAL Rules for use in international
cases. See for example, Australia's adoption of the UNCITRAL Rules in its 6 July 2010
amendment to the 'International Arbitration Act 1974' (Cth).20
The most salient feature of the rules of the ICC is its use of the "terms of reference." The
"terms of reference" is a summary of the claims and issues in dispute and the particulars of
the procedure and is prepared by the tribunal and signed by the parties near the beginning of
the proceedings.21
In a more recent development, the Swiss Chambers of Commerce and Industry of Basel,
Berne, Geneva, Lausanne, Lugano, Neuchâtel and Zurich have adopted a new set of Swiss
Rules of Commercial Mediation that are designed to integrate fully with the Swiss Rules of
International Arbitration that were previously adopted by these chambers to harmonize
international arbitration and mediation proceedings across Switzerland.[4]

Research and other organizations

20
http://www.austlii.edu.au/au/journals/AUIntLawJl/2012/10.pdf;
http://www.austlii.edu.au/au/legis/cth/consol_act/iaa1974276/

Barin, Babak; Little, Andrew; Pepper, Randy (2006). The Osler Guide to Commercial Arbitration in Canada.
21

The Netherlands: Kluwer Law International. p. 34. ISBN 90-411-2428-4.

The International Arbitration Institute, headed by Emmanuel Gaillard, was created in 2001,
under the auspices of the Comité français de l’arbitrage (CFA), to promote exchanges and
transparency in the international commercial arbitration community.
The Association for International Arbitration is a non-profit organisation founded in Paris in
2001 by Johan Billiet which provides information, training and educational activities but does
not appoint arbitrators.

International investment and ICSID

The International Centre for the Settlement of Investment Disputes (ICSID) is an ad hoc
tribunal established pursuant to UNCITRAL Rules to arbitrate International Investment
Agreements and provide foreign investors with a means for redress against states for breaches
of contract. The ICSID was designed so that it cannot be reviewed by domestic courts which
in theory makes it more enforceable.22 However, state immunity to lawsuits and judgments
poses a barrier to collection.
The legal protection of foreign direct investment is guaranteed by a network of more than
2750 Bilateral Investment Treaties (BITs), Multilateral Investment Treaties, most notably the
Energy Charter Treaty and a number of free trade agreements containing chapter on
investment protection through investor-state dispute settlement, such as NAFTA. The overall
number of cases concluded reached 244. Of them, approximately 42% were decided in favour
of the state and approximately 31% in favour of the investor. Approximately 27% of the
cases were settled.23

Interstate arbitration

Arbitration has been used for centuries, including in antiquity, for the resolution of disputes
between states and state-like entities.24 After a period of relative disuse, Jay's Treaty between
the United States and Great Britain revived international arbitration as a means of resolving
interstate disputes. The 1899 and 1907 Hague Conferences addressed arbitration as a
mechanism for resolving state-to-state disputes, leading to the adoption of the Hague
22
"State Immunity from Execution in the Collection of Awards Rendered in International Investment
Arbitration: the Achilles’ Heel of the Investor – State Arbitration System?". www.academia.edu. Retrieved
2016-03-21.
23
(PDF) http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d3_en.pdf.
24
Jackson H. Ralston, International Arbitration From Athens To Locarno 153-154; John L. Simpson & Hazel
Fox, International Arbitration: Law And Practice 1 (1959)
Conventions for the Pacific Settlement of International Disputes. The Conventions
established the Permanent Court of Arbitration and a rudimentary institutional framework for
international arbitration of interstate disputes.25

In recent years, international arbitration has been used to resolve a number of disputes
between states or state-like entities, including Eritrea v. Yemen,26 the Abyei Arbitration,27 the
OSPAR Arbitration,28 and the Iron Rhine Arbitration.29

CHOICE OF LAW IN INTERNATIONAL COMMERCIAL ARBITRATION

Applicable Law in International Commercial Arbitration

The determination of law in international commercial arbitration is difficult to judge.
Arbitration awards are often confidential and the published awards are often summarized or
heavily edited. This adds to the difficulties which exist in International Arbitration. The

25
Shabtai Rosenne, The Hague Peace Conferences Of 1899 And 1907 and International Arbitration: Reports and
Documents xxi (2001); Alan Redfern, Martin H. Hunter, Nigel Blackaby & Constantine Partasides, Redfern
And Hunter On International Arbitration 1.197 (2009)
26
Eritrea v. Yemen (Perm. Ct. Arb. 1999), http://www.pca-cpa.org/showpage.asp?pag_id=1160
27
Abyei Arbitration (The Government of Sudan v. The Sudan People’s Liberation Movement /Army) (Perm. Ct.
Arb. 2009), "Archived copy". Archived from the original on 2011-11-20. Retrieved 2009-07-22.
28
OSPAR Arbitration (Ireland v. United Kingdom) (Perm. Ct. Arb. 2003), http://www.pca-
cpa.org/showpage.asp?pag_id=1158
29
Iron Rhine Arbitration (Belgium v. Netherlands) (Perm. Ct. Arb. 2005), http://www.pca-
cpa.org/showpage.asp?pag_id=1155
question of choice of procedural law could be solved to a certain extent by the model Act or
any other procedural law but regarding the substantive law, complexities often arise.
Generally speaking, International arbitral rules allow parties to as agreement containing an
arbitration clause to choose the substantive law of any particular jurisdiction to govern
disputes. Even though the parties have such power they often specify "the general principles
of law”. Such a course is adopted because many circumstances reduce the benefits of
choosing a neutral forum on account of uncertainty of the substantial law of that forum.

The advantages of arbitration over other judicial remedies for settling commercial disputes
tempt the parties entering into economic agreements to include arbitration clauses in their
contracts. Neutral forums are chosen for arbitration for fear of judges being biased, if they are
judges in the national courts of the opposing party. This makes international arbitration, with
its age old antiquity, popular, that it even now exists with its full strength in the midst of
hostility with courts and choice of law becomes an unavoidable problem. International
Arbitration is called commercial so that it may be distinguished from an arbitration between
two sovereign states under the rules of public international law.

The Position where no Applicable Law is selected

A major problem arises when the parties fail to select an applicable law by agreement. Under
such circumstances, the Model law provides, “Failing any designation by the parties, the
arbitral tribunal shall apply the law determined by the conflict of law rules which it considers
applicable”. But, this provision and the policy embodied in it have been disputed. The
application of rules of lex fori is conventional in litigation, but international commercial
arbitration is confronted with the question whether the tribunal has a lex fori and if so where
it is located? Presuming, the legal system of the place where the arbitration is held to be the
lox fori, there is still a strong body of opinion that an arbitration tribunal is not bound to
apply, the conflict rules of the seat of arbitration. The next question that arises in this context
is how the arbitral tribunal should select the rules of law.
It was stated in the Saphire Arbitration that a tribunal “must look for common Intention of
the parties and use the connecting factors generally used in doctrine and in case law and must
disregard national peculiarities”. Thus, in rare situations where the parties have not provided
for an agreed choice of applicable law, it would be seen that an arbitrator may have
substantial freedom in the choice of rules of law. One would assume that in these situations a
system familiar to the arbitral tribunal will be used. If the parties made a choice of the law of
a country which included an international business law approach, the tribunal would give
effect to that choice, and would apply the rules of the sub area. If the parties do not agree, it
would still be opened to an arbitration tribunal to apply the law of a country which includes
an international business law approach.

Determination of Proper Law

The proper law of contract may be determined in three ways. (1) by express selection by the
parties (2) by inferred selection from the circumstances (3) or by judicial determination of the
system of law with which the transaction has the closest and most real connection. Where
express selection and closest connection are to a certain extent, free from confusion, the
inferred selection is a usual problem posed before arbitrators / judges.

Inferred Choice of Law

The complexity in an arbitration agreement arises when there is no express choice of the
proper law. Then the court will consider whether it can ascertain that there was an implied or
inferred choice of law by the parties. If the parties agree that the arbitration shall take place in
a particular country, an English court will usually, conclude that the parties have by
implication chosen the law of the country of arbitration as the proper law. Similarly, if the
parties agree that the courts of a particular country shall have jurisdiction over the contract,
there is a strong inference that the law of that country is to be the proper law.

Other factors from which the courts have preferred to infer the intention of the parties as to
the proper law are the legal terminology in which the contract is drafted, the form of
documents involved in the transaction, the currency in which the payment (if any) is to be
made, the use of a particular language, a connection with a preceding transaction, the nature
and location of the subject matter of the contract, the residence of the parties or the fact that
one of the parties is a government. Thus when express provision is missing, the arbitrator can
go through all these factors to find the intention of the parties.

Applicable Law is the Common Law Rule

Two issues arise whenever a contract has an international element; which country’s law shall
be the contract’s applicable law and if there is an arbitration clause, in which country, should
the arbitration be held. An international element could exist because parties are domiciled or
companies incorporated in different countries; or because the subject matter of the contract is
located in a country which is different from that of any of the parties. The common law rule
is that, in an action for damages for breach of contract, the applicable law determines
questions of remoteness of damage, whereas the quantification of damages which according
to the applicable law is not too remote is governed by the law of the country in which the
proceedings are brought.

The general rule is that legislation only discharges or modifies obligation under a contract if
passed under the contract applicable law. And the common law is that parties are free to
select the applicable law, provided that their choice is bonafide and legal and there is no
reason for setting aside the choice on the ground of public policy. The view strengthens when
they say that the parties’ choice will be conclusive. However, it has been doubted whether at
common law parties have absolute freedom of choice. In particular, there has not been any
clear authority that a choice of English Law would be valid where a contract has no
connection whatsoever with England, although the assumption underlying a wide range of
commercial and financial agreements have been that such a choice would be upheld.

Internationally accepted Principles of Law Governing Contractual Relations

The decision of the court of Appeal in Deutsche Schachtbau - Und Tiefbohrgesellschaftu v. R
Al-Khaimah National Oil Co., indicates that, where parties do not permit their contract to be
governed by the law of any particular country, a provision that the contract shall be governed
by - “Internationally accepted principles of law governing Contractual relations” - will not be
rejected by the English Court on the common law ground of uncertainty or public policy. An
oil exploration agreement contained an international chamber of commerce arbitration clause.
The ICC arbitration rules provided that the parties were free to determine the governing law
and that in the absence of any indication by the parties, the arbitrator shall apply the law
designated as proper law by the rule of conflict which he deemed appropriate. In pursuance of
that clause, the arbitrators determined that the proper law was internationally accepted
principles of law governing contractual relation.

It was held that the arbitration clause was governed by Swiss Law and uncontradicted expert
evidence was that the arbitration clause was valid under Swiss Laws. The arbitration was held
in Geneva, and the arbitral tribunal held that the defendant should pay 4.6 million dollars to
the plaintiff. The letter applied to the English Courts for leave to enforce the award as a
Judgment. The court of Appeal rejected the defendant's submission that it would be contrary
to English public policy to enforce an arbitration award which held that the rights and
obligation of the parties were to be determined, not on the basis of any particular national law
but upon some unspecified, and possibly ill defined, internationally accepted principles of
law. Sir John Donaldson described the internationally accepted principles of law governing
contractual relation which the arbitrator applied as a common denominator of principles
underlying the laws of the various nations governing contractual relation.

The position was reiterated in DST v. Raknoc. The same position was confirmed by the late
Professor Clive Schmitthoff who noted that the Supreme Courts of France and Italy had ruled
to the same effect. But these decisions have to be treated with caution as there is no specific
law prescribed. If a court were to decide that a clause providing for a contract to be governed
by internationally accepted principles of law governing contractual relation is not a valid
choice of proper law, the common law position is that it would apply as the proper law the
system of law with which it determines that the transaction has its closest and most real
connection.

General Principles of Choosing the Substantive Law

When the parties agree upon a substantive law of a particular jurisdiction, there is no scope
for the application of general principles of law. This is determined by the choice of Law
clause. This does not however confirm that national law is the best choice of substantive law
available, for national law too may have its own shortcomings. Hence parties may allow
arbitral tribunals to apply a substantial law not tied to any particular jurisdiction. Still in some
cases, reference to a non-national standard is fertile because of the political realities. The fact
that Calvo Doctrine traditionally argued for equal treatment only to foreigners, could not be
made applicable because International Arbitration often gives foreigners, but not citizens a
right to arbitrate disputes. Thus Calvo Doctrine opposes arbitration on the ground that it gives
preferential treatment to foreign investors.

Circumstances when Parties prefer a Non-National Standard

When parties prefer a national law, the arbitral tribunal has to follow that and when they
substitute it with some non-national standard such as general principles of law, lex
mercatoria, or the law of international trade, or with specification only to a non- national
standard without reference to any national law, then the arbitral tribunal gets a wider
discretion with respect to the applicable law. In such a case the arbitrator does not get the
benefit of any direct guidance.

Hence, the arbitrator is forced to make a broad inquiry into the nature of the general
principles invoked by the parties. He has to discover the principles from vacuum. So, during
the departure from a national conflict-of-laws system to the General Principles, the arbitrator
tries many other choices. He may apply a variety of other conflict-of-laws standards that have
only an indirect foundation in national law. The least significant departure from a national
conflict-of- laws system is the cumulative application of the conflict-of-laws system
connected with the dispute. This Knocking at the door’ of each choice is warranted because
the concept of general principles of law is very vague and not a clarified aspect. A more
substantive departure is the application of the conflict of laws system which the arbitrator
views as most appropriate and most responsive to international commerce. A third still
greater departure is the application of a basic conflict-of-laws rule derived from a comparison
of competing systems. And before reaching out to the last stage of fully non-national standard
such as lex mercatoria, or standard usages or general principles of law, they may go for a
substantive national law without reference to any conflict-of-laws system. And when finally
it happens to be general principles, the vagueness and uncertainty of it calls for a listing of the
same in an exhaustive manner which becomes highly necessary, to initiate a sustained effort
to achieve a consensus as to the content of the general principles of law in the international
arbitration context.

This consensus would lead to a greater consistency of results in international commercial

arbitration and to a corresponding increase in certainty for contracting parties. Ultimately, it
may also encourage greater reference to the general principles of law. This would serve the
interest of contracting parties by enabling them to establish a neutral forum in which they
control the language and proceedure and avoid the various difficulties that arise for handling
such disputes in a national court system. At the same time, a list of general principles will
help maintain the stability and certainty that exist in a system currently dominated by national
laws. The frequent invocation by arbitral tribunals and its recognition by scholars makes the
proposition take the shape of general principle. But as most of the principles are interrelated,
delineating a set of general principles of law becomes an uphill task. A proposition that a
sovereign government may make and be bounded by contractual agreement with foreign
private parties is generally recognized, thereby, giving it the colour of a general principle,
which is frequently used in international commercial arbitration with the total satisfaction of
parties.

The main principles in the 1969 Vienna Convention on the law of Treaties, requires that a
sovereign government honours any international commercial agreement into which it enters.
The conflict proposition of the government's domestic legislative power, which otherwise
would permit it to alter the law governing agreements with foreign investors would not come
in the way of its contractual commitments to foreign nationals. This helps the foreign
investors to invest without the fear of internal political changes.

Act of God could not be controlled and it justified non performance of a contract. Force
majeure constitutes non-performance and not breach of contract. When no such force plays,
and if beneficial owner tries to escape from contractual liability, the piercing of corporate veil
becomes a general principle. When damage is caused to anything and it could not be restored
to its original state, equitable compensation constitutes the primary remedy. This has become
a general principle of universal application. The proposition that parties in the international
commercial context can bring suit against unjust enrichment when a defendant has acquired
money or value from a plaintiff need not be a text book law. But as long as these principles
are not adequately articulated and documented, this could only produce uncertainty and
unpredictability. Therefore it is highly necessary that these principles have to be adequately
and precisely mentioned.

Standardizing the Choice of Law

Virtually all legal systems and arbitration rules permit the parties to choose the law governing
their contractual relationship. It is important that the parties do so in the arbitration agreement
or in a separate contractual provision for a number of reasons. First, the parties get a clear
picture as to the governing law from the moment the contract is concluded and this clarifies
the whole position. Thus, the loophole in contracts can be effectively plugged. Interpretation
becomes easy when the law is clear: Secondly, where the parties do not designate the
governing law, its determination can be difficult or uncertain. If it is with Model law, then
Art. 28 (2) vests power with the arbitral tribunal, to determine the law by the conflict of law
rules which it considers applicable. When law becomes clear, final offer of arbitration clears
the mist in spite of the conventional arbitration where usually players take extreme positions
in the anticipation that by doing so, they will skew the midpoint to their favour.
Clarity narrows an arbitrator’s choices of choosing either one side or the other. It never
permits a compromise position. If one side embraces an unreasonable position, that side
stands the risk that its offer will be discredited and the other side’s proposal favoured. Thus
theoretically, it causes disputing parties’ offers to converge and thereby enhance the
prospects of settlements. To uncover the truth, an illuminating process is needed, one that
would evoke elucidating responses from the disputants. Present day arbitration needs a
resolution which should come in the shape of a precise law, because then only neutrality
could be preserved.

INTERNATIONAL COMMERCIAL ARBITRATION & CONCILIATION TEXTS

Conventions

 United Nations Convention on Transparency in Treaty-based Investor-State

Arbitration (New York, 2014) (the "Mauritius Convention on Transparency")
 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
 York, 1958) (the "New York Convention")

Model laws

 UNCITRAL Model Law on International Commercial Arbitration (1985), with

amendments as adopted in 2006
 UNCITRAL Model Law on International Commercial Conciliation (2002)

Contractual texts

 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration

(effective date: 1 April 2014)
 UNCITRAL Arbitration Rules
 UNCITRAL Conciliation Rules (1980)

Explanatory texts

 UNCITRAL Secretariat Guide on the Convention on the Recognition and

Enforcement of Foreign Arbitral Awards (2016)
 UNCITRAL Notes on Organizing Arbitral Proceedings (2016)
 Recommendations to assist arbitral institutions and other interested bodies with regard
to arbitration under the UNCITRAL Arbitration Rules (as revised in 2010)
 Recommendation regarding the interpretation of article II, paragraph 2, and article
VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, done in New York, 10 June 1958 (2006)
 Recommendations to assist arbitral institutions and other interested bodies with regard
to arbitrations under the UNCITRAL Arbitration Rules

ADVANTAGES & DISADVANTAGES OF INTERNATIONAL COMMERCIAL

ARBITRATION

Until today, the enforceability of foreign arbitral awards is seen as one of the most crucial
advantages of arbitration over state court litigation in any international context. Other
features of arbitration, such as the confidentiality of the proceedings or the efficiency of time
and costs, are often named advantages of arbitration but remain controversial among
participants and commentators. In contrast to that, the flexibility provided by arbitration, the
neutrality of the forum and the enforceability of the award are normally perceived as clear
advantages of arbitration. The lack of possibility to appeal an award, on the other hand, is
often seen as a disadvantage of arbitration proceedings.

 I.                  Flexibility
As described before, party autonomy allows the parties to determine the composition of the
arbitral tribunal, the law applicable to the arbitral procedure and the substance of the dispute,
and whether an arbitral institution administers their proceedings. Accordingly, the flexibility
offered by arbitration is often seen as enabling the parties to tailor their proceedings
according to their own needs.
This flexibility of the parties can be a great advantage but it also entails its risks. For
example, party agreements unfortunately often leave room to different interpretations and
misunderstandings and therefore increase the risk for dilatory behavior. In particular tailoring
one’s own set of procedural rules requires a lot of foresight, experience and effort to provide
the ideal solution to any potential dispute between the parties. Likewise, the freedom enjoyed
by parties to an ad hoc arbitration is often outweighed in practice by the experience and
convenience of having an administering body of an arbitral institution overseeing the
procedure. Moreover, the appointment of a party-chosen arbitrator may backfire if the
arbitrator is less expert in his field than expected by the parties or an export in his field but
inexperienced in arbitration.
 
II.               Neutrality of the Forum
If parties to a contract come from different jurisdictions, they often fear that a judgment
before the foreign state court of the country of seat of the other party could be biased or
prejudiced. Since in international commercial arbitration the parties can select the seat of
their arbitration and thereby determine the state courts potentially involved in their arbitral
proceeding,30many parties in an international context opt for arbitration because of the option
to choose a seat of the arbitration located in a country unrelated to either of the parties.
30
The term “seat of the arbitration” refers to the place which determines the legal jurisdiction to which the
arbitration is tied. It is a purely legal term and needs to be distinguished from the venue of the arbitration which
refers to the actual place where meetings between the arbitral tribunal and the parties take place (e.g. for
hearings, the taking of evidence, etc.). In practice, however, the venue and the seat of the arbitration are often
congruent. The law of the country in which the seat of the arbitration is located is decisive for a number of
factors, such as which national courts may intervene during the arbitration to what extent, which law is
applicable to the arbitration proceedings and under what conditions an award may be set aside or refused
enforcement.
 
III.            Enforceability
As has been hinted at before, another clear advantage of arbitration over litigation is the
enhanced possibility to have a foreign arbitral award enforced. At present, arbitral awards are
thanks to the adoption of the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards by more than 150 countries enforceable at a global level. According
to Art. III New York Convention, each Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules of procedure of the territory where the
award is relied upon, under the conditions laid down in the following articles.” It continues to
read that the recognition and enforcement of foreign arbitral awards shall not be threatened
by more severe requirements as to conditions, fees or charges when compared to domestic
arbitral awards.
When it comes to state court proceedings, there is no comparable international agreement
guaranteeing the enforceability of a state court judgment in a foreign country. The judgment
of a state court must be recognized either on the grounds of a bilateral or multilateral treaty or
without an express international agreement. Consequently, the chances to have a court
judgment enforced in a foreign country are by far lower than to have a foreign arbitral award
enforced.

IV.            Confidentiality
The confidentiality immanent to most arbitration proceedings – be it by means of an express
or implied party agreement or by the recognition as a principle inherent to any arbitration
proceedings (see above) – can be a valuable instrument of protection of know-how, trade
secrets and the reputation of the parties. While it is in the context of investor-state arbitration
particularly criticized for a lack of transparency, it is more often criticized in the context of
international commercial arbitration for blocking the development of international
commercial arbitration law.

V.               No Level of Appeal

The lack of an appellate level in international commercial arbitration is often considered a
disadvantage of arbitration, at least from the perspective of the losing party. The chances for
setting aside an award or having its enforcement refused are narrow and hence a final award
most of the times remains binding on the parties; sometimes even if it is based on an error of
law or on a finding of facts that is not supported by the records. Yet, also the lack of appeal
may benefit the parties: Like any other proceeding, appellate proceedings can quickly
become costly and time-consuming. Hence, the lack of an appellate level often saves the
parties time and costs.

VI.            Time
At least some arbitral institutions and commentators are convinced that international
commercial arbitration is more time efficient than state court litigation. Nonetheless, a PWC
survey from 2013 found out that a significant percentage of companies considering to use
arbitration as an instrument of dispute resolution expressed concerns about delays in
arbitration proceedings, often linked to a lack of availability of arbitrators. 31 Due to the
confidentiality of most arbitrations, it is hard to tell the average time of international
commercial arbitration proceedings at a global and representative level. Yet, a survey
conducted in 2011 by the Centre for International Arbitration suggests that the average time
of arbitration proceedings takes about 17 - 20 months.32
Up to a certain level, most arbitral institutions leave it to the discretion of the parties to
influence the duration of their proceedings. According to many rules, the parties can agree to
shorten their proceedings by agreeing on documents-only arbitration (see for example Art.
19.1 LCIA Arbitration Rules 2014 or Art. 21.1 SIAC Arbitration Rules 2010), shortened time
limits (see for example Art. 38 of the ICC Rules of Arbitration 2012), or by agreeing on a
procedure in which witness and experts statements can only be submitted in writing (no oral
testimony, see for example Art. 28.3 of the Arbitration Rules 2010 of the Arbitration Institute
of the Stockholm Chamber of Commerce). Many institutions also offer to support their
clients’ wish for a shortened procedure by offering expedited proceedings, which for example
stipulate that the arbitration proceedings shall last no longer than nine months (in cases of
three arbitrators) or six months (in cases of a sole arbitrator) (see for example Section 1 1.2 of
the DIS-Supplementary Rules for Expedited Proceedings 08). Yet, even in cases where the
rules of the arbitral institution do not expressly provide for such time saving provisions,
parties can often derogate from the provisions contained in the institutional rules unless they
are of mandatory nature. As a more general matter, arbitration may be shorter than state court
litigation due to its lack of an appellate level.

VII.         Costs

31
http://www.pwc.com/gx/en/arbitration-dispute-resolution/assets/pwc-international-arbitration-study.pdf
32
CIArb Costs of International Arbitration Survey 2011 p. 12 (available online).
Although it is sometimes said that arbitration is more cost efficient than litigation, it strikes
that most arbitral institutions refrain from claiming that arbitration is cheaper than litigation
at a general level. Instead, many of them highlight the predictability of the costs (so do for
example SIAC, SCC and CEPANI on their homepages). Others, like the ICC, point out that
arbitration can be faster and cheaper than litigation if the parties agree on appropriate
procedures.33
Yet, according to a PWC survey from 2013, a significant percentage of companies is
concerned about the costs in arbitration proceedings.34 Corresponding to that, some surveys
suggest that arbitration was more expensive than litigation. 35 Other articles, on the other hand,
reported that according to the experiences made by their authors, arbitration can in general be
cheaper than litigation.36
Concluding on the issue of costs, the only general rule most probably is that like most of the
times when a lawyer is asked a question, the only true answer is “it depends”

CONCLUSION

The nature of the debate about the possibility of delocalizing arbitration procedure and
awards often conceals the real concerns that underlie the debate. The cardinal issue is not
whether or not arbitrations are jurisdictional or contractual in nature, but to what extent and
according to what standards international arbitrations should be regulated and administered.
Most legal systems accord parties considerable freedom in determining arbitral procedure,
while reserving the right to ensure the fairness and integrity of the process. The controversy
regarding the independence of arbitration from national law actually addresses concerns

33
http://www.iccwbo.org/Products-and-Services/Arbitration-and-ADR/Arbitration/Introduction-to-ICC-
Arbitration/Ten-good-reasons-to-choose-ICC-arbitration/
34
http://www.pwc.com/gx/en/arbitration-dispute-resolution/assets/pwc-international-arbitration-study.pdf
35
the small scale survey commented on in 2012 by Dabdoub and Cox on the website of the magazine Inside
Counsel at http://www.insidecounsel.com/2012/12/06/which-costs-less-arbitration-or-litigation
36
for example with regard to securities disputes the article published by Libner on the Forbes website in 2009 at
http://www.forbes.com/2009/07/14/lipner-arbitration-litigation-intelligent-investing-cost.html
regarding the standards by which the fairness and integrity of the process should be governed,
domestic or international standards?

To be sure, there is much to be said for setting an international standard by which

international arbitrations should be superintended, as opposed to leaving each State to enact
its own individual standard, which may run contrary to the aspirations of foreign arbitrating
parties. International conventions on arbitration are designed to provide an effective
international regime for the conduct of arbitrations. These conventions are aimed at
conflating and modernizing national arbitration practices relating to international arbitration,
thus obviating the need for States to establish their own domestically influenced regimes.

Recommendations:

- Arbitrators should also ensure that disputes before them conform to the requirements of
truly transnational public policy.
- The enforcement of appropriate mandatory rules by arbitrators would send a signal to
prospective arbitrating parties that the arbitral process is certainly not a device for
circumventing imperative laws of States with which their transaction is substantially
connected.
- This attitude will justify the confidence of those States that believe arbitrators are well
suited to adjudicate claims involving sensitive matters of State policy.

BIBLIOGRAPHY

BOOKS REFERRED:

1. Alex Lando, The Law Applicable to the Merits of The Dispute, in Contemporary
problems in International Arbitration, 15 Arb. Int'l 22. (1998) p. 86
2. A Redfern and M. Hunter, Law and Practice of International Commercial
Arbitration, 4th edn. (2004) p. 66
3. Arthur Taylor Vou Mehren, Special Substantive Rules for Multistate Problems : Their
Role and Significance in Contemporary Choice of Law Methodology, 88 Harv. L.
Rev. 182 (1975).
4. B. Brown, General Principles of Law in International Commercial Arbitration, 101
 Harv. L. Rev. 1824 (1988).
5. B. Jones, Three Centuries of Commercial Arbitration in New York - A Brief summary,
72 ICLQ 18 (1988) pp. 169-172
6. Clive Schmitthoff, Choice of Law in International Commercial Law, 6 J.B.L. 169
(1987)
7. Compagnie d’ Armement Maritime SA V. Compagnie Tunnisienne de Navigation SA.,
3 All E.R. 71 (1970)
8. Deutsche Schachtbau - Und Tiefbohrgesellschaftu v. R Al-Khaimah National Oil Co.
1 AC 295 (1990)
9. F.G. Baxter, International Business Disputes, 39 I.C.L.Q. 288 (1990)
10. Giovanni B. Longo, "Towards a Common Core of Legal Rules on Commercial
Arbitration,”59 A. L. J. 407(1985), wherein he deals with the Tug- of-war between
courts and Arbitration Milieus
11. International Commercial Arbitration between parties of different countries has long
been recognized by the business community and the legal profession as a Suitable
means of setting trade controversies out of court. Encyclopaedia Britannica,
Macropedia (15th edn.) Vol. 1 p. 1074
12. M. C. Clelland, Toward a More Natural System of International Commercial
Arbitration. The Establishment of Uniform Rules of Procedure and the Elimination of
the Conflict of Laws Question, 5 J. Int'l L. 169. (1980) p11
13. Ole Lando. The Lex Mercatoria in International Commercial Arbitration, 34 J.Int'l.
Art. 28 (1985) p. 110
14. S.K. Chawla, Law of Arbitration and Conciliation: Practice and Procedure, 2nd
Edn., Eastern Law House (2004) at p. 7

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