Outline of International Arbitration

See Outline of International litigation

Subject-matter

The history of international arbitration is dealt with in the article Peace, where treaties of general arbitration are discussed, both those which embrace all future differences thereafter to arise between the contracting parties, and also those more limited conventions which aim at the settlement of all future differences in regard to particular subjects, e.g. commerce or navigation. The rapid growth of international arbitration in recent times may be gathered from the following figures. Between 1820 and 1840, there were eight such instances; between 1840 and 1860, there were thirty; between 1860 and 1880, forty-four; between 1880 and 1900, ninety.

Of the governments which were parties in these several cases Great Britain heads the list in point of numbers, the United States of America being a good second. France, Portugal, Spain and the Netherlands are the European states next in order. The present article is concerned exclusively with arbitration in regard to such existing differences as are capable of precise statement and of prompt adjustment. These differences may be arranged in two main groups:

• Those which have arisen between state and state in their sovereign capacities;
• Those in which one state has made a demand upon another state, ostensibly in its sovereign capacity, but really on behalf of some individual, or set of individuals, whose interests it was bound to protect.

To group (a) belong territorial differences in regard to ownership of land and rights of fishing at sea; to group (b) belong pecuniary claims in respect of acts wrongfully done to one or more subjects of one state by, or with the authority of, another state.

To enumerate even a tenth part of the successful arbitrations in recent times would occupy too much space. Some prominent examples (dealt with elsewhere under their appropriate titles) are the dispute between the United States and Great Britain respecting the “Alabama” and other vessels employed by the Confederate government during the American Civil War (award in 1872); that between the same powers respecting the fur-seal fishery in Bering Sea (award in 1893); that between Great Britain and Venezuela respecting the boundary of British Guiana (award in 1899); that between Great Britain, the United States and Portugal respecting the Delagoa railway (award in 1900); that between Great Britain and the United States respecting the boundary of Alaska (award in 1903). The long-standing Newfoundland fishery dispute with France (finally settled in 1904) is dealt with under Newfoundland. Other examples are shortly noticed in the tables on p. 329, which although by no means exhaustive, sufficiently indicate the scope and trend of arbitration during the years covered. The cases decided by the permanent tribunal at the Hague established in 1900 are not included in these tables. They are separately discussed later.

Source: Encyclopedia Britannica (1911)

The Outline

A. Advantages over judicial forum
i. Speed: faster, able to set own dates (in US, civil suits defer to criminal’s right to speedy trial), less evidentiary gamesmanship
a. Arbitration generally non-reviewable.
ii. Cost: not necessarily more cheaper although faster, need to pay the arbitrator
iii. Confidentiality: generally, arbitration confidential and parties can agree to be confidential if not; US courts are open to public.
a. If the losing party does not pay award, enforcing the award may eliminate confidentiality
b. And confidentiality only insofar as parties keep to agreement to be confidential
iv. Can chose arbitrators: judges are generalists, and parties can choose to sit before an expert arbitrator.
v. Neutrality: courts are generally in the jurisdiction of a party. Arbitrations are more inherently neutral not attached to country of either party. Has own familiar, unfamiliar laws. And if 3 arbitrators, each can appoint one arbitrator that you feel comfortable with.
B. Disadvantages
i. No precedential value. Only binding bw parties.
ii. May be more expensive
iii. Limited discovery powers
a. No power to compel testimony and send to jail for contempt of court.
b. But, have power to draw adverse inferences if do not comply with a discovery request
iv. Absence of appeals: sacrifices accuracy in favor of expediency.
v. Remedies
a. Arbitrators cannot award injunction relief (problem with licensing disputes)
C. NY Convention (142 countries, including US)
i. Imposes two obligations on signatories:
a. Enforce agreements to arbitrate (Article 2)
b. Recognize awards under arbitration agreements and enforce by proceedings not substantially more burdensome than those applicable to domestic awards (Article 5)
1. Since US not part of treaty that requires foreign court judgments may be easier to enforce arbitrator award than court judgment in the US.
ii. Requirements to come under Scope of NY Convention
a. Arbitration must be said to take place in member country
b. Arbitration award must be made outside enforcing state, or must not be considered as “domestic” by the law of that state
c. Each country can make following limitations (US made both declarations)
1. Arbitration award must be decided in a member state
A. US also limits enforcement of arbitration awards coming from “commercial relationships”
2. Arbitration disputes limited to “commercial” disputes only
iii. Required Terms When Drafting an Arbitration Clause:
a. Which disputes are going to be resolved through arbitration
b. Place of arbitration must be a member country
c. Method of appointing the arbitrators
iv. United States
a. NY Convention and US Federal Arbitration Act (FAA)
1. FAA implements the NY Convention
2. Section 202 limits enforcement of FAA to awards arising out of “commercial relationships”
A. Bw US citizens, awards must come out of property abroad, performance abroad, or reasonably relates to foreign state
3. Federal courts have jx over NY Convention cases; federal courts can order parties to arbitrate, even if place is outside US
v. Take into account the attitude towards arbitration of local courts where the dispute is being arbitrated. Party A loses, and takes to court to set aside judgment
a. Egyptian awards against the Egyptian government were set aside
vi. NY Convention does not apply to all disputes
a. Agreements to arbitrate and enforcements do not need to be enforced if the subject matter is un-arbitrable
D. Mitsubishi Motors (p. 41)
i. Facts
a. Solar (manufacturer) entered into distributorship K with Chrysler International (CISA, Swiss sub of US Company) to sell cars in Puerto Rico. Chrysler can fill Solar’s order with any one of its affiliates. At the same time, Solar, CISA, and Mitsubishi (a joint venture bw Mitsubishi Heavy Industries and CISA) entered into Sales Agreement with arbitration clause.
b. Dispute bw Solar and Mitsubishi.
1. Mitsubishi filed to arbitrate in Japan, and filed in US federal court in Puerto Rico to compel arbitration. Solar denied all claims.
2. Solar filed action in US federal court under Sherman Act, and other state and federal law.
c. Issue is whether parties intended to arbitrate the Sherman Act claim.
ii. Required Arbitration Terms in the K?
a. Which disputes are going to be resolved through arbitration
1. The clause does satisfy what needs to be submitted to arbitration, but does not necessarily resolve all of the disputes that might possible arise (p. 41).
2. The clause only applied to two parties.
b. Place of arbitration
1. Yes, Japan
c. Method of appointing the arbitrators
1. Specified by referring to a set of rules Japan Commercial Arbitration Association
iii. What Substantive law will be applied?
a. The Japan Commercial Arbitration Rules is not a choice of law clause. Substantive law to be applied is Swiss law. Even though Swiss K law governs, Mitsubishi concedes that US law will govern antitrust claims (p. 44 fn. 9).
iv. NY Convention requires enforcement of agreement to arbitration and awards
a. To enforce an award, two bases for the Convention to apply
1. The award is made in a foreign country; or
2. The award is NOT considered a domestic award, under the law of the country where it’s made.
A. The US would consider if the dispute has substantial foreign elements, then it’s still considered not to be a domestic award and within the NY Convention.
b. Must the enforcing country must be signatory?
1. Yes, they’ve got to be a stated party to the convention. It’s based on reciprocity. US by declaration enforces by reciprocity agreements if other party enforces, US enforces.
c. Proper subject matter under arbitration?
1. Convention leaves it up to parties to decide which subjects are under arbitration
2. US, by declaration, limits applicability to commercial disputes
d. Any defenses to arbitration clause?
1. You need not refer to arbitration if clause is null & void (for reasons like fraud, mistake, Duress ).
A. It’s got to be arbitration clause specifically as void.
E. Article II Enforcing Agreements to Arbitrate
i. Courts of signatory country will dismiss any lawsuit where parties agree to arbitrate
ii. 2 Exceptions
a. If the arbitration clause is null and void fraud, mistake, Duress
1. In US, must argue not that the entire agreement if void, but arbitration clause specifically is null and void for reasons of fraud, mistake, duress.
b. Subject matter not capable of enforcement.
2. Mitsubishi Motors (Blackmun)
A. Arbitration agreements for antitrust disputes not per se invalid. Blackmun says arbitrators can deal with this! In his view, the important thing is that you can bring a claim for damages, not necessarily where you can bring a claim.
B. Rejects core of American Safety Doctrine antitrust claims too important to leave to arbitration.
i. Although treble damages encourages private enforcement of public antitrust violations, not required to bring the suit and if not required, should be able to choose to vindicate claim through arbitration
ii. As long as can bring a claim for damages, does not matter where you bring the claim.
C. Blackmun said Congress has responsibility to decide which areas of law to arbitrate
i. Securities and antitrust are considered arbitrable
ii. Blackmun suggests will not arbitrate if Congress can specify what is not arbitrate (p 45 fn 10).
a. Incredibly pro-arbitration. Says the Congress could write a statute specifying what’s not arbitrable. But if Congress doesn’t court won’t. That’s an incredibly pro-arbitration stance. He is saying that court won’t independently make a determination that certain matters aren’t arbitrable.
D. What if arbitrator chooses not to apply US antitrust law, but Swiss law?

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