Role of the State on Protecting the System of Arbitration

Transcription

1 1 Role of the State on Protecting the System of Arbitration Presentation by Karl-Heinz Böckstiegel at the CIArb Centenary Conference London 3 July 2015 When we consider the role states should play in protecting the system of arbitration, I suggest five aspects of the topic have to be distinguished: 1) Domestic national arbitration 2) International commercial arbitration 3) International investment arbitration 4) The role of arbitral institutions 5) The role of arbitrators The state s role for domestic arbitration is mainly defined by its national arbitration law. While in many states arbitration has a long tradition, almost all relevant states have recently modernized their arbitration laws in order to provide for the needs of the growth of arbitration as a preferred system for dispute settlement of the business community. While a number of differences remain at least for domestic arbitration if one compares for instance the English Arbitration Act and the arbitration laws in France, Switzerland and the United States, all of them have come a long way to accommodate the demands of modern dispute settlement. A specific impact in this context has been produced by the UNCITRAL Model Law, because it has been adopted in a large number of countries worldwide including Canada, Germany, and others, and even in countries where it was not adopted, the new legislation has been shaped taking into account the solutions provided in the Model Law. As we know, the Model Law was to some extent revised in The general approach I see in all modern arbitration law is that the legislator has tried to find a balance between providing as much freedom as possible to arbitration and as much regulation as is considered necessary for a fair and just resolution of disputes by the arbitral process. This indeed, seems to me to be the

2 2 correct formula to define the role of the state. And I see with pleasure that the first of the draft for London Principles 2015 submitted by the CIArb to this conference stresses this approach by the following wording: 1. Law A clear effective, modern international arbitration law which recognizes and respects the parties choice of arbitration as the method for settlement of their disputes by: (a) providing the necessary framework for facilitating fair and just resolution of disputes through the arbitration process; (b) limiting court intervention in disputes that parties have agreed to resolve by arbitration, subject to permitting appropriate court support for the arbitration process. In this context, I note that the Model Law provides a clear limit for the role of the domestic courts in its Art.5 as follows: In matters governed by this Law, no court shall intervene except where so provided in this Law. I would still find it preferable to have this clear cut line by the word shall rather than may in order not to open the door to further undefined interventions by the state courts one may have to fear in some jurisdictions. Then Article 6 of the Model Law refers to certain functions of arbitration assistance and supervision by a court or other authority, and leaves it to each state to designate the respective courts or other authority. This is indeed an important role of the state. Support by the state courts is particularly needed for certain scenarios where arbitral tribunals themselves cannot fully provide help to the parties such as in the fast ordering of and enforcement of provisional measures. The criteria for setting aside of arbitral awards are defined by the Model Law in its Art. 34 by adopting the same wording as we all know from Art. 5 of the New York Convention and expressly ruling that no other criteria may be used by the courts for setting aside. And further, Art. 36

3 3 provides the same criteria for the recognition and enforcement of foreign arbitral awards from the New York Convention. This to me still seems to be the best approach to court intervention as it is internationally harmonized and avoids any surprises for foreign parties and their counsel. However, I am, of course, aware that such legislation as well as the adoption of the New York Convention itself by a state can only be effective, if the domestic courts and judges are indeed sufficiently informed, educated and willing to apply such rulings in practice. This is a matter addressed by Neil in his intervention today. If I turn to international commercial arbitration, I note that some states provide different laws for domestic and international arbitration while other states such as Germany make one law applicable to both. There are obviously good reasons for both approaches, particularly for those countries where arbitration has a long tradition and particularities have developed which are unusual or not easily adaptable to international arbitration cases. But I still remember that, in the discussions in UNCITRAL when we negotiated Art. 1 of the Model Law, we had great difficulties in defining the distinction between domestic and international arbitration law. And with the development of arbitration in recent years these difficulties have increased. Therefore, I would think that it is preferable to have one single set of rules in one arbitration law for both domestic and international arbitrations. Similar difficulties arose in UNCITRAL when we discussed the definition of what was to be commercial arbitration. The compromise was the long footnote to Art. 1(1) in the official text of the Model Law. At the time of the UNCITRAL negotiations on the original Model Law in the 1980s, investment arbitration still had little relevance in practice. That, of course, has changed dramatically with the enormous growth of the number and relevance of investment arbitration cases and the many specific treaties and institutions dealing with investment arbitration today. The role of states for investment arbitration is mostly not a matter dealt with in their domestic law, but by the treaties of public international law to which they have adhered such as BITs, the ICSID

4 4 Convention, the Energy Charter Treaty, and on the regional level NAFTA and CAFTA. As we all know, presently there is a wide ranging debate particularly in the European Union and the US, but also in other parts of the world on the role states should have in this context, and particularly by the Free Trade Agreements presently negotiated in various parts of the world. I will not address these issues since they are addressed in David s intervention. But, irrespective of what is going to be included in future free trade agreements, I would hope that states comply with the protection of the arbitral process they have accepted in the many BITs and multilateral treaties they have concluded and which are binding. Let me note in this context that distinguishing between commercial and investment arbitration may sometimes already be difficult or even misleading. Quite often disputes concern a contract between a corporation created by a foreign investor in a state on one side and on the other side a state enterprise. Such a contract will contain what one would consider a normal arbitration clause referring to an institution of commercial arbitration. However, a closer look shows that it is really an investment dispute. A recent example from my own practice is an ICC award between daughter companies of Exxon Mobil and PDVSA in Venezuela which was published shortly afterwards. I might add that in that case, we had a scenario which is also found frequently nowadays, namely that the investor starts additionally a parallel BIT arbitration to be on the safe side from its point of view. Let me now turn shortly to arbitral institutions. Here, of course, we are aware of the option which parties have between ad-hoc arbitration and institutional arbitration. For both, most modern arbitration laws for good reason provide very few mandatory rules such as for due process. But in addition to the rules on setting aside and enforcement, they provide rules which enable the arbitral process to proceed properly also in cases where the parties have not sufficiently agreed on particular issues such as the appointment or challenge of arbitrators or other aspects of the procedure. This role of the state by filling gaps is of particular relevance for ad-hoc arbitration. In institutional arbitration, the arbitration rules of the chosen institution fill most of such gaps. States normally do not provide any specific rules on arbitral institutions and this is the way it should be. Selecting

5 5 institutional rules is an important part of party autonomy. However, these arbitration rules, in turn, primarily leave many aspects of the conduct of the proceedings to party autonomy, and in so far as the parties have not made use of their autonomy, to the discretion of the arbitrators. To let arbitral institutions fulfill that function, states should accept the independence of the arbitral institutions in their jurisdiction. Sometimes the institutions receive express guaranties for their independence and protection from their state of registration by specific agreements. I remember that during my time as president of the Iran-United States Claims Tribunal at The Hague, I negotiated and concluded such an agreement with the Dutch government. Similar agreements have been concluded by the Permanent Court of Arbitration also at The Hague and probably by other institutions. The ICSID Convention itself provides in its Section 6 and Articles 18 to 24 a full set of provisions on the status, immunities and privileges of ICSID. Finally, I turn to the role of states for the protection of arbitrators. All modern arbitration laws provide that arbitrators have to be impartial and independent and can otherwise be challenged. This independence includes the independence from interference by the state. The limitations to court interference in most arbitration laws which I already mentioned form an important part of the independence of arbitrators. On the other hand, as far as I can see, arbitration laws usually do not provide for immunity from liability and suit for the arbitrators. This may nevertheless sometimes follow from more general legal provisions or from application by analogy of provisions providing such immunity to the judges of state courts. And many rules of arbitral institutions contain express provisions on such immunity as we find them in Art. 40 of the ICC Rules, section 44 of the DIS Rules, or Art. 16 of the new PCA Rules of States will have to respect such waivers by the parties by their consent to the respective institutional rules. However, it has been reported that in some states it happens that arbitrators are being sued before the domestic courts for their conduct of the proceedings or their awards, mostly by a party which did not prevail in the arbitration. This risk and the costs needed for their defense in a mostly foreign jurisdiction are obviously a major threat to the independence of arbitrators. A much more active protection is provided by Art. 21 of the ICSID Convention which provides expressly that arbitrators shall enjoy immunity from legal process with respect to acts performed by them in the exercise of their functions.

6 A similar protection by states for commercial and other investment arbitrations would in my view present an important progress in protecting the system of arbitration. In this context, I support the London Principle No. 10 presented to this conference which states: A clear right to arbitrator immunity from civil liability for anything done or omitted to be done by the arbitrator in good faith in his or her capacity as an arbitrator. 6