International Commercial Arbitration Outline

International Commercial Arbitration

1. Overview of the Issues

   1. Where to arbitrate?

      1. Institutional arbitration versus ad hoc arbitration

      2. ICC, AAA, LCIA, ICSID

   2. What arbitration procedures?

   3. How to recognize international arbitration awards in domestic courts?

2. Institutional versus Ad Hoc Arbitration

   1. Institutional arbitration

      1. Umbrella institution offers some administrative support, rules of procedure and processes to overcome deadlocks

         1. Eg ICC Rules of Arbitration

      2. Reputation of the institution may help at the recognition phase

      3. Earlier awards may have interpreted or clarified the rules of procedure

   2. Ad hoc arbitration

      1. Parties must specify and agree to all practical and procedural aspects of the arbitration

3. Domestic Arbitration

   1. Federal Arbitration Act (FAA)

      1. Chapter 1 – General Provisions

         1. Sec. 1. "Maritime transactions" and "commerce" defined; exceptions to operation of title.

         2. Sec. 2. Validity, irrevocability, and enforcement of agreements to arbitrate.

            1. A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

         3. Sec. 3. Stay of proceedings where issue therein referable to arbitration.

            1. upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

4. Legal Framework for International Commercial Arbitration

   1. 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitration Awards (“1958 New York Convention”)

      1. 146 state parties

   2. Other multilateral treaties:

      1. Inter-American Convention on International Commercial Arbitration (“Panama Convention”, 1975)

      2. European Convention on International Commercial Arbitration of 1961

   3. Domestic law in the country of the seat of arbitration

      1. US: Federal Arbitration Act Chapter 1

5. New York Convention

   1. Presumptive validity of international arbitration agreements (Art. II.1)

      1. Clause in a commercial contract

      2. Submission agreement providing for the arbitration of an existing dispute

      3. “[S]o long as the prospective litigant effectively may vindicate his statutory causes of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent functions.” Mitsubishi Motors (CB 1291).

         1. “Where the parties have agreed that the arbitral body is to decide a defined set of claims . . . , the tribunal therefore should be bound to decide that dispute in accord with the national law giving rise to the claim.” Mitsubishi Motors (CB 1291).

         2. In Mitsubishi Motors, the Court held that the arbitration agreement should be enforced because of (1) concerns for international comity, (2) respect for the capacities of foreign and transnational tribunals, and (3) sensitivity to the need of the international commercial system for predictability in the resolution of disputes. Mitsubishi Motors (CB 1289).

            1. The Court determined that this was the proper result “even assuming that a contrary result would be forthcoming in a domestic context.” Mitsubishi Motors (CB 1289).

   2. Domestic courts must refer the parties to arbitration if there is a valid clause (Art. II.3)

   3. If a domestic court is reviewing an arbitral award rendered in that country or under the laws of that country, it is domestic law that governs whether the award can be vacated.

      1. In the U.S., this would be the FAA.

   4. If a domestic court is reviewing an arbitral award that was rendered by another signatory nation, or under the law of another signatory nation, then the New York Convention’s Article V governs the issue of vacating the foreign arbitral award.

   5. Presumptive finality of foreign arbitration awards (Art. III)

      1. Limited and exclusive set of exceptions (art. V)

      2. BUT: No limits on annulment of awards in the state of arbitral seat!

   6. Article V exceptions to recognition and enforcement of arbitral awards:

      1. In General

         1. The New York Convention shifts the burden of proof to the party defending against enforcement and limited his defenses to those set out in Article V.

      2. Article V Exceptions:

         1. Article V(2)(b): Public Policy

            1. The public policy exception allows the court in which enforcement of a foreign arbitral award is sought to refuse enforcement, on the defendant’s motion or sua sponte, if “enforcement of the award would be contrary to the public policy” of the forum country. Parsons and Whittemore (CB 1284).

               1. This exception is construed narrowly. Parsons and Whittemore (CB 1284).

               2. Enforcement of foreign arbitral awards may be denied under this exception only where enforcement would violate the forum state’s most basic notions of morality and justice. Parsons and Whittemore (CB 1284).

                  1. It is inappropriate to equate “national policy” with “public policy.” Parsons and Whittemore (CB 1284).

                  2. “Public policy” and “foreign policy” are not synonymous. Nat’l Oil Corp. (CB 1297).

                     1. To read the public policy defense as a parochial device protective of national political interests would seriously undermine the Convention’s utility. Nat’l Oil Corp. (CB 1297).

                     2. This provision was not meant to enshrine the vagaries of international politics under the rubric of “public policy.” Nat’l Oil Corp. (CB 1297).

         2. Article V(2)(a): Non-Arbitrability

            1. This non-arbitrability...

Buy the full version of these notes or essay plans and more in our International Law II Outlines.