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International Commercial Arbitration
University of Illinois School of Law
Maggs, Peter B.

International Commercial Arbitration


Spring 2014

Chapter I. Introduction

· I.1. Approaches to Dispute Resolution

· Mediation

· WIPO Mediation

· Non-binding nature; unlike an arbitrator, the mediator is not a decision-maker; role: assist the parties in reaching their own decision on a settlement of the dispute; confidential procedure and cannot be used in subsequent litigation or arbitration

· Two types: facilitative mediation and evaluative mediation; it is up to parties to decide which type.

· Mediation v. Arbitration (in a mediation, the parties retain responsibility for and control over the dispute and do not transfer decision-making power to the mediator)

· Arbitration: the outcome is determined in accordance with an objective standard, the applicable law and is a rights-based procedure; Mediation: outcome is determined by the will of the parties and is an interest-based procedure.

· Arbitration: a party’s task is to convince the arbitral tribunal of its case and it addresses its arguments to the tribunal and not to the other side; Mediation: a party’s task is to convince, or to negotiate with, the other side and it addresses the other side and not the mediator.

· Mediation is a more informal procedure than arbitration.

· Mediation is not appropriate for which disputes and its advantages

· Bad-faith; clear-cut case and want to obtain a neutral opinion

· Advantages: minimize the cost-exposure; control; speedy; confidentiality; relationship

· Mediation can be used at which stages

· Any stage of a dispute; dispute prevention, such as course of negotiations for an agreement where the negotiations have reached an impasse

· The principal stages in a WIPO Mediation

· Rules of arbitration and conciliation of the international arbitral center of the federal economic chamber Vienna

· Swiss rules of commercial mediation of the Swiss chamber of commerce and industry of April 2007

· Adaptation of contracts

· Frydman v. Cosmair, inc. (US District Court, Southern District of New York, 1995)

· Facts:

· Plaintiffs filed this action in the Supreme Court of New York. Defendants removed the action to this Court pursuant to Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”). Plaintiffs now move to remand, arguing that this action does not relate to an arbitration falling under the Convention.

· The parties entered into a contract whereby L’Oreal agreed to buy plaintiffs’ Paravision holdings at a price to be determined by the same person who had been appointed for the arbitration.

· Issue: whether the final decision constituted an arbitral award or merely a price fixation conducted as part of a contract formation.

· Court: final decision is merely a price fixation and this Court lacks jurisdiction.

· Where there is a dispute as to whether the parties agreed to arbitrate, the court must look to the state law which governed the contract formation, here the French law.

· Differences between general arbitrations and Article 1592 price arbitrations.

· An Article 1592 price appraisal does not carry the status of a judgment, nor must an appraisal be conducted in the same manner as an arbitration.

· Article 1592 falls within the section of the French Civil Code relating to sales contracts, not within the section pertaining to arbitrations.

· The Article 1592 proceeding was conducted as part of a contract formation and not for the purpose of resolving a dispute. Here, there is no dispute between the parties.

· A price fixation pursuant to Article 1592 never obtains the status of a judgment and therefore lacks an important and necessary arbitral function.

· One party’s refusal to comply with that term would constitute nothing more than a breach of contract and such breach would not constitute a failure to comply with a court judgment, so no jurisdiction in this court.

· Litigation or Arbitration?

· Advantages of arbitration: the desire for predictability and avoidance of a potentially hostile foreign court is the largest incentive for choice of arbitration.

· Drawbacks of arbitration

· Litigation may be preferable because one party will not agree to arbitrate in a place or under terms the other will accept.

· Arbitration

· Institutional arbitration and Ad Hoc arbitration

· Definitions

· Institutional arbitration: in accordance with its own rules or arbitration

· Ad Hoc arbitration: parties have opted to create their own procedures for a given arbitration

· Drafting a set of ad hoc procedures in a contract

· By reference to the UNCITRAL Arbitration Rules

· By allowing the arbitration tribunal to fashion its own procedures after the dispute has arisen.

· Advantages of Ad Hoc Arbitration: flexibility, cost, speed; the most significant boot for ad hoc arbitration came from the United Nations Commission on International Trade Law in 1976 when it promulgated the UNCITRAL Arbitration Rules.

· Advantages of Institutional Arbitration

· Drafting the arbitration agreement

· Arbitrator selection

· Professional administration (fees and expenses are paid in advance)

· Judicial deference to institutional arbitration

· Default award

· Fast-track arbitration

· Several arbitral institutions have adopted fast-track proceedings as an option, such as AAA, WIPO, CIETAC, etc.

· Arbitral institutions

· The International Chamber of Comme

ntroversy and the names of the arbitrators

· I: which prevail? The art. 15 of parties’ policy or Art. 1003 and Art. 1006?

· H: Art. 1003 and Art. 1006 prevail.

· This case is overturned.

· Another glimpse back in history—a U.S. case

· Kulukundis Shipping Co., S.A. v. Amtorg Trading Corp.

· F: Appellee asserts: the defendant had repudiated the charter-party, and therefore, the arbitration clause must be wholly disregarded.

· H: arbitration clause should not be disregarded.

· Take into account the history of judicial attitude towards arbitration of England: hostility to arbitration.

· English courts refused to enforce specific agreements to arbitration on the ground that the courts were ousted from their jurisdiction. This was adopted by American courts.

· The bill declares that such agreements for arbitration shall be enforced and provides a procedure in the Federal courts for enforcement.

· So in a case like this, involving the federal Act, we should not follow English decisions.

· I.3. The Sources of Relevant Norms and Possible Conflicts Between Various Sources

· The sources

· Party autonomy: the freedom to shape the arbitral tribunal and arbitral process is very wide. Some limits are posed in mandatory procedural norms of particular countries and in a number of international agreements.

· Institutional rules of other than state origin:

· Institutional norms are usually rules of an organization offering services in arbitration, such as ICC, LCIA.

· Institutional rules only apply if the parties choose them or designate the institution that administers the rules.

· National arbitration law: the question of which national arbitration law governs in particular situations:

· Basic solution: where recognition of an award is sought, the laws of the recognizing country (or international agreements ratified by that country) apply; the law governing the arbitration proceedings (lex arbitri) is generally that of the country in which the arbitration tribunal has its seats.

· International agreements

· Two highly important global international conventions

· The 1958 New York Convention

· The 1965 Washington Convention