International Commercial Arbitration Outline

International Commercial Arbitration

Life Cycle of an International Arbitration
1.Pre-Drafting: litigate or arbitrate?
Advantages of arb:
– lower cost, greater efficiency, faster
– greater control over the process.
– can get arbs w/ more expertise
– don’t have to be in one party’s home court
– arb judgment more enforceable than for. ct judgment bc of NY Conv.
– maybe less adversarial (although more so than mediation/negotiation), preserves bus. relationships
– preserves confidentiality better
– renders a binding judgment (unlike mediation)
Disadvantages of arb.
– no appeal
– in multi-party suits, ct wld have the authority to bring all interested parties into one action.
2.Drafting the Arbitration Agreement: Agree to arbitrate, choose the “place” of arbitration, and rules of arbitration
– an ineffective dispute resolution clause will be less of a deterrent to breach of K.

Seat (usu. determines applicable arb. law and the nationality of the award).
– Neutral country oft. best, try to fix a town or city.
– consider practicality, convenience.
– how much nat’l cts will interfere in gen. (which cts to go to if there’s a prob).
– determines subj-matter arbitrability (whether antitrust e.g. can be subj to arb.)
– determines place of origin; other countries may not enforce if vacated (usu. under seat’s law) at seat
– other countries may not enforce if country is not NY Conv signatory
NYC I:3 – any K’ing party can say it will only recognize/enforce awards from other K’ing parties. It can also decide for itself what comm. relationships are.
– determines availability of interim measures.
– depending on country, there may be mandatory procedural rules.
– place of arb is becoming more and more of a legal fiction to determine the things mentioned above, w/o requiring physical presence in the particular country. However, if the seat follows the territorial theory, then you can’t choose another country’s law as the law of arbitration. This is inescapable. The freedom to modify arb law is granted by the arb law of the seat.
– If a seat is specified and no particular law of arbitration is specified, the law of arbitration is presumed to be the arb law of the seat.
– If no seat is specified, it may be fixed by the arbitral tribunal.

Applicable Law
– if you don’t determine beforehand, arb will decide, but will end up more costly, time-consuming and unpredictable and your arb may not be as knowledgeable.
– want law well-developed in the area where your issues are likely to arise.
– specify that you are choosing substantive law and not conflicts law (although there is a presumption to this effect somewhere).
– make sure subst. law considers your issue arbitrable.

Rules (principle of party autonomy)
– can select by incorporating by ref. in a K (e.g. UNCITRAL, ICC model rules)
– can select an administering authority, ICC e.g.

Language
– might want to specify what language arb will be in, if not, arb decides.
– consider practical aspects: look at lang of docs, correspondence, parties’ own lang capabilities. Don’t want to pay a lot for translation.
– tribunal may order that doc evidence by accompanied by a translation.

Formation of the Agreement to Arbitrate
– Arb requires an agrmt. Is v. contractual, requires consent of all parties.
– Although there is now supposed to be a presumption in favor of arb, this does not extend to the formation of the arb agrmt bc cts want to make sure that the parties intended to give up their right to litigat.
Nokia-Maillefer: Ct will not infer an agrmt to arbitrate/exclude ct. Means that poorly drafter arb clauses and confusion due to battle of the forms will lead to litigation.
– Since arb. agrmt is considered a material alteration, it will be knocked out if there is not explicit agrmt on it by both parties (knock out rule), although this might vary with trade practice, past conduct. Under CISG, if there is a material alteration, is a counteroffer, no K is formed at all (last shot rule). Seems to present a separability issue.
– int’l trend seems to be going towards the knock-out rule.
– If there are two clauses that both point to arb and they are not contradictory, try to finagle an arb clause that incorporates them both (liberal approach to arb), but if they are contradictory, you may not be able to have arb. Arb agrmts shld be construed in good faith and in a way that upholds their validity. Doubts about the intended scope shld be resolved in favor of arb (in favorem validitatus).
– if you incorp the arb clause by reference to another K, you have to have a specific reference to the arb clause, can’t just make a global reference to the K it is contained in. This is supposed to make sure parties are aware they are giving up their judicial rights.

– Under Swiss arb law, the arb agrmt is valid if it conforms either to the law chosen by the parties or the law of the merits or Swiss law.
– Under NYC VI(2)a: parties may select the law applicable to the validity of the arb agreement. If they don’t, the law at the seat applies.
– formal requirements are intended to make parties aware they are ousting juris of the cts.

UN. ML 7(1): arb agrmt may be separate or incl in larger K.
UN. ML 7(2): arb agrmt must be in writing (doc signed by parties or exchange that provides a record where one party claims existence and other party doesn’t deny). It is ok to refer to another (written) doc where an arb clause is contained.
– relaxation of writing requirement due to technology.
NYC II:1 – K’ing states shall recognize arb agrmts
NYC II:2 – is like UN ML 7(2)
– bc of word “include” there is a possibility that it only sets the floor of what K’ing parties must do
NYC II:3 – K’ing states shld refer parties to arb if they have an arb agrmt, unless agrmt is null and void, inoperative or incapable of being performed.
DaPuzzo: Ct can refer parties to arb even if unable to enforce award in US (bc not signatory); parties might still be able to enforce the award in the seat.

Separability
Prima Paint: Fraud in the inducement of the overall K does not invalidate the arb agrmt bc it is separable, so arb sill decide whether there was fraud in the inducement of the overall K. To litigate, need to allege fraud of the arb. clause itself. (although you may be able to K around separabilty)
Harbour Assurance: Even though the K was illegal, the arb clause is still legitimate. The arb will decide whether the K is void due to illegality.
– Prima Paint and Harbor Assurance are going to apply to most probs. w/ Ks.
– Art. 16 UN ML: 2nd sentence says arb clause is ind. of the other terms of the K. Just bc the rest of the K is null and void doesn’t necessarily mean that the arb. clause is.
– only way to get out of arb agmt is if it wasn’t your deed (non est factum, sb was holding a gun to your head, maybe econ duress RLS Legal Solutions) or if you were induced to sign sthg other than what you thought, lack of capacity, according to Rau.
– might arb. clause need its own consideration since it is separate? Holm.
– one party’s repudiation of the general K does not relieve other party from performance of arb clause.
– Policies underlying separability: (1) party autonomy (2) one-stop adjudication
– maybe if it is a narrow arb clause, issue of fraud in the overall K may not be covered. Separability means that the invalidity of the main K does not automatically affect the arb clause, but there may still be cases where it does.

– A pathological arb clause may lead to neither a ct nor an arb tribunal deciding the case, bc the ct will refer the parties to arb and the arb will refer the parties to the ct.

Positive Effects of Agreement to Arbitrate
– obligation to submit all disputes under the agrmt to arb.
– vests arbitral tribunal w/ juris to decide the dispute
Negative Effects of Agreement to Arbitrate
– dom. cts no longer have juris to decide dispute.

– Although arb is contractual and party autonomy is imp., is limited by due process. The elements of due process are not waivable.
– Art. 18 UNCITRAL ML: (1) equality of parties (2) full opp to present case
– UNCITRAL decided that due process does not mean that the lang of each of the parties must be adopted as a lang of the arbitral proceedings.

3.Disputes arise
– arb requires a dispute. It has a winner and a loser. Is a zero-sum game. (is the difference btwn arb and mediation).

Interim Measures
Teradyne: Although there is a split in the circuits, Ct decided that Cong. desire wld be frustrated if cts were precluded from issuing preliminary injunctive relief to preserve status quo pending arb. Need (1) irreparable injury w/o it (2) the injury outweighs possible harm to other party (3) P has exhibited a likelihood of success on the merits. (Prob is that ct is not supposed to weigh in on merits. See AT&T Technologies).
– the arb tribunal does have the inherent authority to issue interim relief.
– types of interim relief an arb can issue is not usu. limited by the rules or law of the arb. (allows arb to tailor to the particular circumstances of the case, however, the law of the arb may limit whether the dom. cts can enforce the interim measures issued by the arb.
– the arb can only issue in