The practice of arbitration as a means of dispute resolution has a long and storied history, with its roots tracing back centuries. In its evolution, arbitration has transitioned from informal community-based conflict resolution methods to the more structured and formalized processes we see today, reflecting broader societal and legal changes that emphasize efficiency and specialization in international trade disputes. This transformation has been fuelled by the increasing recognition of the need for efficient arbitral proceedings, prompting discussions among users, practitioners, and arbitrators about innovative solutions to expedite the resolution process and enhance the overall experience for those involved in arbitration. As parties seek to navigate the complexities of global commerce, the growing body of jurisprudence and the liberalization of national arbitration laws have granted them substantial freedoms in crafting their arbitral procedures, further illustrating the need for a robust framework that supports effective resolutions.
The increased usage of arbitration, particularly in the international commercial arena, has also been a key driver of its evolution. This surge has not only resulted in a significant number of arbitral awards being generated but has also fostered an increasingly sophisticated body of jurisprudence, which serves to illustrate and refine the procedural aspects of arbitration as it is practiced today.
The Origin of Arbitration
The origins of modern international arbitration can be traced back to the Jay Treaty of 1794 between the United States and Great Britain.[1] This treaty established mixed commissions to resolve unresolved disputes between the two nations, serving as an early form of arbitration. Though not strictly third-party adjudication, these commissions functioned similarly to tribunals and reignited interest in arbitration.[2]
A significant milestone in arbitration's history occurred with the Alabama Claims arbitration of 1872, where the United Kingdom and the United States agreed to submit a dispute to an arbitral tribunal. The tribunal, composed of representatives from five different countries, ruled in favour of the United States, leading to the UK's payment of compensation. This successful arbitration demonstrated the effectiveness of the process, leading to the widespread adoption of arbitration clauses in treaties, the establishment of general arbitration treaties, efforts to codify arbitration laws, and proposals for permanent international arbitral tribunals in the late 19th century.[3]
The Hague Peace Conference of 1899 & PCA
The Hague Peace Conference of 1899, initiated by Russian Czar Nicholas II, marked a significant phase in international arbitration history. It brought together not just European powers but also smaller states and non-European countries to discuss peace, disarmament, and the peaceful resolution of disputes. This conference led to the adoption of the 1899 Convention on the Pacific Settlement of International Disputes, which established the Permanent Court of Arbitration (PCA).[1] The PCA provided a framework for creating arbitral tribunals and offered procedural rules, although it was not a court in the conventional sense. The PCA institutionalized arbitration and laid a foundation for future international dispute resolution mechanisms.
A second Hague Peace Conference in 1907 aimed to refine these processes and even proposed the creation of a permanent tribunal with full-time judges, although this idea was not realized due to disagreements over judge selection. Despite this, the PCA contributed significantly to international law through landmark cases like the Island of Palmas and Sovereignty over Timor Frontiers. However, the voluntary nature of arbitration under the PCA and the lack of consistency across tribunals highlighted its limitations. The PCA has since evolved, offering new arbitration rules and services, reflecting its continued relevance in international law. The work of these conferences also influenced the establishment of the Permanent Court of International Justice (PCIJ) and the Central American Court of Justice.
International Arbitral Procedures
International arbitration is guided by rules set by institutions like the ICC, LCIA, and UNCITRAL, which provide broad frameworks covering aspects such as the place of arbitration, tribunal appointment, and procedural steps. However, these rules do not dictate detailed procedures, leaving many decisions up to the specifics of each case. Questions about written submissions, witness testimony, the role of legal representatives, expert appointments, and presentation of legal arguments are often addressed based on the general practices followed in international arbitration.
International arbitration has been most effectively shaped by international conventions and, more recently, the Model Law. These conventions create a network of national laws aimed at enforcing arbitration agreements and awards worldwide. The Montevideo Convention of 1889 was an early example, focusing on Latin American states, while the 1923 Geneva Protocol and the 1927 Geneva Convention, initiated by the ICC and the League of Nations, represent significant advancements in global arbitration law.
Some Important International rules, treaties, and conventions
(1) The Geneva Protocol of 1923 (the 1923 Geneva Protocol).
(2) The Geneva Convention of 1927 (the 1927 Geneva Convention).
(3) The New York Convention of 1958 (the New York Convention).
(4) The UNCITRAL Arbitration Rules (the UNCITRAL Rules) were adopted by resolution of the General Assembly of the United Nations in December 1976.
(5) The UNCITRAL Model Law (the Model Law) was adopted by the United Nations Commission on International Trade Law in June 1985.
(7) Revisions to the Model Law (the Revised Model Law) adopted in December 2006.
· The Geneva Protocol of 1923
The 1923 Geneva Protocol aimed to achieve two main objectives. The primary goal was to ensure that arbitration clauses were internationally enforceable, compelling parties to resolve disputes through arbitration rather than court proceedings.[1] This was accomplished by barring courts from entertaining cases where an arbitration agreement existed.
The secondary objective was to guarantee the enforcement of arbitration awards within the territories of the states where they were made. These objectives laid the groundwork for what would later be further developed in the New York Convention.
However, the Protocol had limitations. It applied only to arbitration agreements between parties from different contracting states and could be further restricted by the "commercial reservation" used by some states. Additionally, enforcement of arbitral awards was only guaranteed within the state where the award was made.[2]
· The Geneva Convention of 1927
On 26 September 1927, the Geneva Convention on the Execution of Foreign Arbitral Awards was established under the League of Nations.[3] Its purpose was to expand the scope of the 1923 Geneva Protocol by ensuring the recognition and enforcement of arbitration awards across all contracting states, not just within the state where the award was made.
However, the Geneva Treaties faced operational challenges. One significant issue under the 1927 Convention was the "double exequatur" problem, where a party seeking enforcement had to prove that the award was final in its country of origin.[4] This often required a court declaration in the country where the arbitration took place before the award could be enforced elsewhere. Despite these limitations, the Geneva treaties were pivotal in advancing the international recognition and enforcement of arbitration agreements and awards.
· The New York Convention of 1958
In 1953, the International Chamber of Commerce (ICC) initiated efforts for a new treaty to govern international commercial arbitration. This initiative led to the development of the New York Convention in 1958, facilitated by the United Nations Economic and Social Council (ECOSOC).[5] Today, the New York Convention stands as the most pivotal international treaty in the realm of commercial arbitration, with over 144 member countries, including major trading nations across Latin America and the Arab world.
The New York Convention significantly improved upon its predecessors, the 1923 Geneva Protocol and the 1927 Geneva Convention, by providing a more straightforward and effective framework for the recognition and enforcement of foreign arbitral awards.[6] It not only addresses the enforcement of awards but also enhances the validity of arbitration agreements more comprehensively than earlier treaties. The Convention mandates that courts in contracting states must refuse to entertain litigation over disputes that parties have agreed to resolve through arbitration if an objection is raised, thus reinforcing the authority of arbitration agreements.[7]
While the Convention was designed for international arbitration agreements and has been instrumental in standardizing arbitration practices globally, it has faced practical challenges. Differences in interpretation by national courts and the evolving nature of global trade have exposed some limitations of the Convention's provisions.[8] Despite these issues, the New York Convention remains a cornerstone of international arbitration law, with its application and enforcement mechanisms discussed in greater detail in subsequent chapters.
· Post-1958 Conventions in International Arbitration
The European Convention of 1961, established in Geneva under the United Nations Economic Commission for Europe, aimed to address international trade disputes through arbitration. It introduced valuable provisions, such as explicitly recognizing the ability of states or public entities to enter into arbitration agreements, though states could impose conditions on this capacity. Despite these innovations, the European Convention fell short of its goals, primarily because it focused on theoretical aspects and did not address the recognition and enforcement of awards, leaving that responsibility to the New York Convention.[9]
Another significant attempt to advance international arbitration was the Strasbourg Uniform Law of 1966, which sought to unify the national arbitration laws of Council of Europe member states.[10] However, this effort was largely unsuccessful, with only Austria and Belgium signing the convention, and it has been implemented solely in Belgium, rendering it of limited practical relevance.
· The UNCITRAL Arbitration Rules, 1976
The UNCITRAL Arbitration Rules, first adopted by the United Nations General Assembly in 1976, have undergone several revisions to stay current with the evolving field of arbitration. These Rules were developed through extensive discussions with governments, intergovernmental organizations, and international NGOs, with the UN Secretary-General responsible for their dissemination.
1976 Version
Adopted at the UN General Assembly’s 31st Session, the 1976 Rules were designed to harmonize international commercial arbitration by providing a framework acceptable to diverse legal systems. These Rules facilitated the resolution of private, commercial, and interstate disputes, marking an important step in international dispute resolution.
2010 Revision:
In 2010, the Rules were updated to reflect the changes in international arbitration since 1976. The revisions, adopted by the UN General Assembly at its 65th session, included provisions on party liability and objections to expert witnesses. These changes were intended to improve the efficiency of the arbitration process.
2013 Transparency Rules:
The 2013 version introduced Rules on Transparency in Treaty-based Investor-State Arbitration, emphasizing the importance of transparency in disputes involving public interest. These Rules, applicable to arbitrations initiated after April 1, 2014, ensure that key arbitration documents and hearings are accessible to the public, except when confidential information is involved.
2021 Expedited Rules:
The latest revision, recommended by the UN General Assembly in 2021, introduced Expedited Rules aimed at balancing the parties' right to fair treatment with the efficiency of the arbitration process. However, these Expedited Rules apply only when the parties expressly agree to their use.
Development of the UNCITRAL Model Law
The Model Law 1986-2006 is designed to assist States in reforming and modernizing their laws on arbitral procedure so as to take into account the particular features and needs of international commercial arbitration. It covers all stages of the arbitral process from the arbitration agreement, the composition and jurisdiction of the arbitral tribunal and the extent of court intervention through to the recognition and enforcement of the arbitral award. It reflects worldwide consensus on key aspects of international arbitration practice having been accepted by States of all regions and the different legal or economic systems of the world.
The Model Law, 1985
The UNCITRAL Model Law originated from a proposal to reform the New York Convention, leading to a report that suggested harmonizing international arbitration laws through a model or uniform law.[11] The final text of the Model Law was adopted by UNCITRAL in June 1985 and later endorsed by the UN General Assembly in December 1985.[12]
The Model Law has been highly successful, providing a clear and straightforward framework for the entire arbitration process. Over 40 countries have adopted it, either directly or with minor modifications, as their national arbitration law. Even countries like England, which did not adopt the Model Law, modernized their arbitration laws by closely following its structure and principles.[13]
The Revised Model Law
While the New York Convention established international arbitration's global presence, the Model Law made it a widely adopted standard. However, since its adoption in 1985, the Model Law has lagged behind the evolving field of international arbitration, particularly in two areas: the requirement for a written arbitration agreement and the provisions on interim measures of relief.
To address these issues, UNCITRAL formed a Working Group that met biannually from 2000. Despite the group's large size, it successfully proposed revisions, which were adopted by UNCITRAL in July 2006 and approved by the UN General Assembly in December 2006.[14]
The Revised Model Law broadened the "writing requirement" to include electronic communications and allowed states to either maintain this broad definition or dispense with the writing requirement altogether. Additionally, the Working Group tackled the contentious issue of whether arbitral tribunals should have the power to issue interim measures without notifying the other party (ex parte). They ultimately allowed such applications under strict conditions, balancing the need for interim relief with fairness in the arbitration process.[15]
ICSID Convention
ICSID is the world’s leading institution devoted to international investment dispute settlement. ICSID was established in 1966 by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the World Bank to further the Bank’s objective of promoting international investment. ICSID is an independent, depoliticized and effective dispute-settlement institution. Its availability to investors and States helps to promote international investment by providing confidence in the dispute resolution process. It is also available for state-state disputes under investment treaties and free trade agreements, and as an administrative registry.
Regional Conventions
Regional conventions, like the Panama Convention and the Amman Convention, are important for arbitration agreements and awards specific to those regions. For instance, the Panama Convention, which includes the US and many South American countries, is particularly significant for enforcing arbitral awards in those areas.
Bilateral Investment Treaties
Bilateral investment treaties (BITs) have replaced traditional "Treaties of Friendship, Commerce, and Navigation." While these older treaties offered favorable trading conditions and arbitration for disputes, BITs establish a "standing offer" by a state to arbitrate future disputes with foreign investors from the other treaty party.[16] When a dispute arises and the investor accepts this offer, an agreement to arbitrate is formed, a concept known as "arbitration without privity."[17] This system allows investors to access arbitration even without a prior agreement with the host state, accommodating a growing number of BITs globally.
Conclusion
International conventions on arbitration, alongside the Model Law, have significantly modernized and harmonized national arbitration laws worldwide, enhancing the resolution of trade, commerce, and investment disputes. While these conventions are implemented through national laws and may include reservations on reciprocity or commercial nature, they largely unify national arbitration frameworks.
Legal professionals involved in international arbitration must embrace a broad, international perspective rather than a narrow, national view. They should recognize the value of diverse legal systems and be open to integrating various procedural practices. International arbitration lacks a uniform practice or procedure; instead, it relies on adaptable procedures tailored to specific disputes. This flexibility is essential for effectively resolving international conflicts and is a key aspect of the ongoing evolution in arbitration law and practice.
[1] United Nations Treaty Collection- https://treaties.un.org/Pages/LONViewDetails.aspx?src=LON&id=555&chapter=30&clang=_en
[2] Geneva Protocol of 1923, Art 1
[3] Convention for the Execution of Foreign Arbitral Awards signed
at Geneva, 26 September 1927, League of Nations Treaty Series
(1929–30), Vol XCII, 302.
[4] https://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=10&menu=620&opac_view=-1
[5] https://www.newyorkconvention.org/text/travaux-preparatoires/history-1923-1958#:~:text=The%20New%20York%20Convention%20was,Foreign%20Arbitral%20Awards%20of%201927.
[6] New York Convention, Art VII(2)
[7] New York Convention, Art 11(3)
[8] The ICCA Yearbook of Commercial Arbitration reports each year court decisions made in different countries on the interpretation and application of the New York Convention.
[9] Van den Berg, above, para 1.18 ; (1984) IX Ybk Comm Arb 396.
[10] European Convention providing a Uniform Law on Arbitration, done at Strasbourg, 20 January 1966, European Treaty Series, No 56.
[11] This report was entitled ‘Study on the Application and Interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards’, UN Doc A/CN9/168.
[12] https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration
[13] The Departmental Advisory Report (DAC Report) on the Model Law stated, at para 4: ‘at every stage in preparing a new draft Bill, very close regard was paid to the Model Law, and it will be seen that both the structure and the content of the July draft bill, and the final bill, owe much to this model.’
[14] Castello, ‘Interim Measures under UNCITRAL's Model Law: New Proposals’, 2nd ITA-CANACO Workshop, Luncheon Address, Mexico City.
[15] New Zealand, Mauritius, Peru, and Slovenia have recently adopted legislation based on the Model Law as revised; See also Revised Model Law, Option 1.
[16] There has been what has been described as an ‘explosion’ in the number of BITs over the past years, a total of more than 2,608 having been recorded by the end of 2007, although there was a slight slowdown in 2007 itself. See UNCTAD, Recent Developments in International Investment Agreements (2008).
[17] Paulsson, ‘Arbitration without Privity’ (1995) 10 Foreign Investment LJ 232.