The arbitration proceedings are also subject to legal rules. The law governing the Arbitral proceedings is referred to as the curial law, the lex arbitri or the loi de l’arbitrage. In virtually all cases, the curial law will be the law at the Arbitral situs-the place where the parties’ have agreed that the arbitration will be held.
Among other things, the curial law typically deals with such issues as the appointment and qualifications of arbitrators, the extent of judicial intervention in the Arbitral process, the procedural conduct of the arbitration, and the form of any award. Different national laws take significantly different approaches to these various issues. In some countries, national law imposes significant limits on the conduct of the arbitration and local courts have broad powers to supervise Arbitral proceeding. Elsewhere, local law may afford international arbitrators virtually unfettered freedom to conduct the Arbitral process-subject only to basic “due process” or “national justice” requirements of procedural regularity.
Conflict of Laws Rules
Selecting each of the bodies of law identified in the foregoing sections requires application of conflict of laws rules. In order to select the substantive law governing the parties’ dispute, for example, the Arbitral tribunal must apply a conflict of laws system. The actual practice of Arbitral tribunals varies significantly, and includes application of the Arbitral form’s conflict of laws rules, “international” conflict of laws rules, and successive application of the conflict of laws rules of all interested states.
U.S. Legislation Concerning International
Commercial Arbitration
Relevance of National Arbitration Legislation
International arbitration is facilitated by the New York Convention and other international agreements. Equally important, however, are national laws which must both implement the Convention and address the numerous issues not touched by it. These national laws often have vitally important impacts on the successful resolution of disputes by international arbitration, particularly where the parties disagree as to the enforceability or meaning of an arbitration agreement or award.
? Among other things, national arbitration laws typically address each of the topics identified below. Even in disputes involving U.S. parties, U.S. law is seldom more than part of the relevant legal authority in international arbitration. For example, while it is important-indeed, critical-to know how a U.S. court will interpret an arbitration agreement to which a U.S. company is party, it is also vital to know how other national courts, which might consider the matter, will respond. Likewise, understanding the enforceability of an award abroad is often as important as understanding its enforceability in the United States.
Except as briefly summarized below, we do not attempt to canvas the various positions of countries other than the United States on the foregoing issues. Indeed, doing so would require a treatise for each major trading nation. It does, however, attempt to identify those points at which the content of foreign law, and the attitude of foreign courts, is potentially significant. It is at those stages that it is vital that U.S. counsel (or any national counsel) consult with foreign counsel in the relevant countries. We also attempt, where space permits, to provide comparative examples of how particular foreign jurisdictions deal with issues that also arise under U.S. law.
Introduction to the Federal Arbitration Act and Other Sources of U.S. Law Concerning International Commercial Arbitration
In the United States, most important issues relating to the interpretation and enforcement of international arbitration agreements and Arbitral awards are governed primarily, but not exclusively, by federal (rather than state) law. Unfortunately, there are presently several distinct, but overlapping, sources of federal law that are potentially applicable to an international arbitration agreement or award. Similarly, although limited, the role of state law in the enforcement of international arbitration agreements is uncertain. In at least some cases, parties in U.S. courts are left with a procedural maze that is some distance removed from the promise that international arbitration provides a simple, efficient dispute-resolution mechanism. Moreover, the existence of numerous U.S. jurisdictions, with differing bodies of precedent and judicial experience with international arbitration, aggravates uncertainties.
One of the most important sources of U.S. law in the international arbitration context is the New York Convention. As described above, the Convention requires broadly that certain ‘foreign” arbitration awards, and certain international arbitration agreements, be enforced in U.S. courts, subject to specified exceptions. Of lesser importance, at least today, is the largely similar, but regional, Inter-American Convention on International Commercial Arbitration, ratified by the United States in 1990. As described below, both the New York Convention and the Inter-American Convention have been implemented by federal legislation.
The basic U.S. stature dealing with arbitration, including in the international context, is the Federal Arbitration Act (”FAA”). The Act, originally titled the “United States Arbitration Act,” was enacted in 1925. The FAA currently consists of three chapters: (a) the “domestic” FAA, 9 U.S.C 1-16, applicable to agreements and awards affecting either interstate of foreign commerce; (b) the New York Convention’s implementing legislation, 9 U.S.C. 201-210, applicable only to awards and agreements falling within the New York Convention; and (c) the Inter-American Arbitration Convention’s implementing legislation, 9 U.S.C. 301-07, applicable only to awards falling under the Inter-American Convention. The entire FAA is reproduced as Appendix D.
The Federal Arbitration Act
U.S. courts traditionally awarded nominal damages for breaches of arbitration agreements. Like English courts, American judges refused to grant specific enforcement of arbitration agreements, and permitted their revocation at any time. This grudging approach towards arbitration agreements reflected a variety of factors, including concern about private agreements “ousting” the courts of jurisdiction, skepticism about the adequacy and fairness of the Arbitral process, and suspicions that arbitration agreements were often the product of unequal bargaining power. By withholding specific enforcement, American courts substantial limited the efficacy of arbitration as a means of commercial dispute resolution.
In 1920, New York enacted an arbitration statute designed to reverse common law hostility to arbitration and to render arbitration agreements enforceable in New York courts. The 1920 New York arbitration statute provided a model for what became the FAA. An American Bar Association Committee prepared the initial draft of a “United States Arbitration Act,” and it was introduced in Congress in 1922. The Senate Judiciary Committee held hearings on the bill in 1923, followed by joint congressional hearings in 1924. The FAA was strongly supported by the business community, which saw litigation as increasing expensive, slow, and unreliable. With virtually no over opposition or amendments, the bill was unanimously passed by both the House and the Senate.
The FAA applies to arbitration agreements and awards affecting either interstate or foreign commerce-a jurisdictional grant that U.S. courts have interpreted expansively. The centerpiece of the EAA is 2, which provides that arbitration agreements involving interstate and foreign commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Section 3 and 4 of the Act provide the principal mechanism for enforcing 2’s general rule that arbitration agreements are valid: 3 requires “any court of the United States” so stay proceedings before it, if they involve issues that are “referable to arbitration,” while 4 requires “United States district court[s]” to issue orders compelling arbitration of such issues.
Other sections of the FAA address different aspects of the Arbitral process. Section 5 grants district courts the power to appoint arbitrators if the parties have neither done so not agreed upon an appointing authority. Section 7 of the Act permits district courts to issue compulsory process to assist Arbitral tribunals in taking evidence. In turn, 9, 10, and 11 of the FAA provide that, subject to specified exceptions, arbitration awards shall be enforceable; these sections also set forth procedures for confirming, vacating, or correcting Arbitral awards subject to the Act.
Notable are how many subjects are not addressed by the FAA-including such matters as challenging arbitrators, provisional relief, selecting an Arbitral situs, the conduct of Arbitral proceedings, and choice of law. As we will see below, the FAA for the most part leaves it to the parties to address such issues (by agreeing to particular institutional rules or otherwise) or to the arbitrators.
After U.S. ratification of the New York Convention, Congress enacted amendments to the FAA, in a second chapter to the Act, implementing the Convention. In ratifying the New York Convention, Congress was again motivated by a desire for more efficient dispute resolution:
It is important to note that arbitration is generally a less costly method of resolving disputes than is full-scale litigation in the courts. To the extent that arbitration agreements avoid litigation in the courts, they produce savings not only with the parties to the agreement but also for the taxpayers-who must bear the burden for maintaining our court system.
In addition, Congress sought to facilitate the development of a stable and effectives system of international commercial dispute-resolution, on which U.S. companies expanding into global markers could rely.
Like the original domestic Act, the FAA’s second chapter is remarkably brief. It provides that arbitration agreements and awards shall be enforceable, and contains various provisions assisting the international arbitration process. In addition, the amendments expand federal subject matter jurisdictions, removal authority, and injunctive powers in cases falling under the Convention.
In 1990 the United States enacted implementing legislation for the Inter-American Convention on International Commercial Arbitration, codified as a third chapter to the FAA. The chapter incorporates much of the New York Convention’s implementing legislation, adding provisions to deal with the Inter-American Commercial Arbitration Commission’s rules, and the relationship between the New York and Inter-American Conventions. Like the domestic FAA, at the heart of third chapter, are provisions requiring the enforcement of specified arbitration agreements and awards, together with procedures for doing so.
There is considerable “overlap” among the various sources of U.S. law affecting international arbitration agreements and awards. Arbitral awards and agreements falling under the New York Convention area of course governed by both the Convention and the second chapter of the FAA (which implements the Convention). In addition, however, these awards and agreements are also ordinarily governed by the first, “domestic” chapter of the FAA, at least to the extent it is not “in conflict” with the Convention. In addition to their express terms, the FAA and New York Convention have also provided the basis for a fairly expansive federal common law of arbitration. That body of law extends to such subjects, discussed below, as the interpretation of arbitration agreements and the availability of provisional relief in connection with Arbitrations. As we will see below, it is not always clear whether precedents developed under the domestic FAA are applicable under the Act’s second chapter.
State Arbitration Laws
In addition to the overlapping provisions of the New York and Inter-American Conventions and the three chapters of the FAA, state laws also bears on international arbitration issues in U.S. courts. As explored in detail below the Supreme Court has held that the FAA does not “occupy the entire field” relating to arbitration. Nonetheless, the Convention and the FAA expressly establish substantive federal law. They provide the basis for federal common law rules, generally ensuring the enforceability of international arbitration agreements and awards, that preempt inconsistent state law is applicable to arbitration agreements and awards when-but only when-the Convention and FAA (and the federal common law derived from both sources) are inapplicable. That may be the case, for example, because t
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& Work Cited
1. A. Redfern & Q. M. Hunter, Law & Practice of International Commercial Arbitration 3, (2nd ed., 1991).
2. Alberto-Culver Scherk, Article 417-506, International Arbitration. (Internet)
3. Higgins, Brown, & Roach, “Pitfalls of International Commercial Arbitration,” (1980).
4. J. Cohn, International Chamber of Commerce Arbitration, (2nd ed., 1990).
5. L. Kassis, International Arbitration, (1989).
6. Layton, “The Noose Draws tighter,” International Law, (1979).
7. M. Lyons, “The slower, more expensive alternative,” (3rd ed., 1985).
8. Van den berg, The New York convention of 1958, (1-6, 1981).
9. Von Mehren, “Rules of Arbitral bodies,” (1992).
10. Wetter, “The present status of International Court of Arbitration of the ICC,” (1990).