Introduction

The amicable resolution of international business disputes has been important to ICC ever since its inception. If we look back to the early 1920s, when a scheme for resolving international business disputes was first discussed by ICC, we find that conciliation, far from being overshadowed by arbitration, was conceived as its equal and in practice was the more prominent of the two services. This is reflected on the one hand in the discussions surrounding the first dispute resolution rules promulgated by ICC and in the rules themselves, and on the other hand in the early cases submitted to ICC for settlement. The purpose of this brief article is to offer a glimpse into ICC's early initiatives in the field of conciliation based on a study of contemporary documents from ICC's archives.

ICC's first Conciliation Rules

At the very first ICC Congress held in London from 27 June to 1 July 1921, a proposal for a set of regulations for conciliation and arbitration was presented and discussed. A document entitled 'Proposed Plan for Conciliation and Arbitration between Traders of Different Countries' was submitted to the Congress.1 In the introduction to this document, equal weight is given to conciliation and arbitration:

In view of the advantages which would accrue to the business world from the creation of an international organization whereby commercial disputes between men of different countries may be settled by Conciliation or by Arbitration, the International Chamber of Commerce is of the belief that it should encourage the use of Conciliation and Arbitration.

It puts itself therefore freely at the disposal of financiers, manufacturers and business men of all countries,

to facilitate, in so far as possible through the exercise of its good offices, the settlement of disputes by conciliation;

and to facilitate, in every way, requests for arbitration under the regulations set forth below; these regulations have a double object: [Page24:]

1. To set up a procedure for Conciliation (Conciliation à l'amiable).

2. To unify and simplify the steps to be taken to reach a conclusion, primarily and essentially through the moral sanction of public opinion, as expressed by the Organization Members of the International Chamber of Commerce and of all the business organizations and federations associated with it; and also by virtue of legal sanctions in countries where such exist and in cases where the application of such sanctions is found necessary.

The International Chamber of Commerce recognizes the importance of distinguishing between the process of Conciliation through the exercise of its good offices, and Arbitration. Under its Statues (Article 7, Par. 3)2 the former process is entrusted to the Administrative Commission of the Chamber (of which the Secretary General is the Chairman) and the latter to Arbitrators, to be selected as provided in Section 2 of the present Plan.

In order to emphasize the distinction which it recognizes between Conciliation and Arbitration, the International Chamber of Commerce has separated the statements of procedure in the two cases, devoting a special section to each. The members of the Chamber and the several National Committees are thus in a position to employ one or the other of these procedures as they may prefer.

The moral force which the International Chamber of Commerce is in a position to exert by its many points of contact in all the countries of the world justifies the hope that the instances in which it is called upon to conciliate will become more and more frequent and that, in these cases, the effect of this moral influence will be great. (. . .)3

The London Congress approved in general the principles contained in the Plan and requested the ICC Council to draw up a definite scheme for the organization of international conciliation and arbitration. Meetings were held during 1921 and 1922,4 leading to a set of conciliation and arbitration rules5 that were officially approved by the ICC Council on 10 July 1922.

The definitive rules were in three sections, the first of which was devoted to conciliation and entitled 'Rules of Procedure for the Conciliation and Good Offices of the International Chamber of Commerce'. They were preceded by an introduction, in which the use of conciliation is strongly commended:

In view of the advantages which would accrue to the business world from the creation of an international organization whereby commercial disputes between residents of different countries may be settled without recourse to formal legal procedure, the International Chamber of Commerce believes that it should encourage the use of conciliation and arbitration. It therefore puts itself freely at the disposal of financiers, manufacturers and business men of all countries, for the purpose of facilitating, in so far as may be possible, through the exercise of its good offices, the settlement of disputes in this manner.

Observation of the working of arbitration in countries where this method of procedure now exists, leads to the belief that a great many disputes could be settled by conciliation, without recourse either to the Courts or to arbitration properly so called. (. . .)6

The Conciliation Rules themselves are brief. They consist of merely four articles, as compared with eight in the Plan submitted to the London Congress. These four articles are as follows: [Page25:]

Article 1

In the event of a dispute as to the interpretation or execution of a contract or any controversy arising between business men of different countries, any one of the parties may request the good offices of the Administrative Commission of the International Chamber of Commerce, with a view to settlement by conciliation through mutual agreement based upon the friendly suggestions of such Commission, after an examination of the points at issue. In such a case, the party so desiring may request the intervention of the International Chamber of Commerce, in writing through his National Committee, submitting at the same time a copy of the contract in question together with copies of the complete documentary record of the transaction.

Article II

Upon receipt of such request and documents in support thereof, the Chairman of the Administrative Commission shall enter into correspondence with the other party through the National Committee concerned, requesting him, provided he accepts the good offices of the Chamber, to submit his statement of the case, supported by a complete documentary record.

Article III

The Chairman of the Administrative Commission shall associate with himself one or more other members of the Commission, depending upon the nature and importance of the case. After familiarizing himself with the documents submitted and collecting all possible information, the Chairman, on behalf of the Administrative Commission, shall communicate with the parties, through their National Committees, with a view to arriving at a basis of agreement acceptable to all of the parties.

Article IV

In the event of failure on the part of the Administrative Commission to bring about a conciliation of the parties, they shall be free to have recourse to arbitration or to submit the case to the proper Courts; and nothing that has been done, said or written in the attempt to reach a basis of conciliation as between the parties, shall affect their dispute in any manner whatsoever upon arbitration or before the Courts.7

The Administrative Commission, created pursuant to ICC's original Constitution, formed part of the International Headquarters. It was chaired by the Secretary General of the International Headquarters and otherwise consisted of members chosen by ICC's National Committees. The Administrative Commissioners were resident at the seat of the International Headquarters and their principal duty was to keep the ICC Secretary General informed as to questions and conditions of importance in the countries that appointed them. The panel of Administrative Commissioners that examined a conciliation case (referred to as the Commission of Conciliation) usually comprised three members: the Chairman of the Administrative Commission and two Commissioners each normally representing the countries from which the parties originated.

Early ICC conciliation was thus a procedure carried out by and with the help of certain of ICC's constituent bodies. It may be described as a scheme designed to achieve an informal settlement of a dispute or a difference through a recommendation made by an ICC authority. The parties did not choose their conciliator(s), but, by referring their case to ICC, automatically gave ICC a mandate freely to seek a solution to their problem. This blend of informality and authority is in many ways a reflection of the spirit in which ICC was established and undertook its objectives in the early 1920s. [Page26:]

ICC was created in the wake of the First World War by leading businessmen from different countries who saw such an international organization as the key to overcoming misunderstanding and jealousy in the business world and to achieving prosperity through harmonization and interrelationship. References to 'peace', 'cordial relations', 'personal acquaintanceship', and a 'common desire for understanding' set the tone of ICC's early initiatives. In the words of its first President, Etienne Clémentel, ICC was

not merely an institution of practical scope which aims at rendering easier the course of commercial transactions, but also a new manifestation of that international conscience which asserts itself in spite of the keenness of competition, and the good fellowship of economic interests of all the nations and the union of noble sentiments of human brotherhood.

The International Chamber, by grouping together the greatest elements of activity in the world and by creating among its members a vast network of friendships, will take its place in the community of international institutions which in every sphere, in the ideal as well as the material sphere, will help men to free themselves from all thoughts of national selfishness and prepare the future destiny of mankind.8

Early ICC conciliation is imbued with this belief in the power of international friendship to overcome differences.

The other equally important factor upon which early ICC conciliation relied was the moral authority which an organization such as ICC commanded. Earlier experience in the United States of America had shown that trade associations could be very effective in overcoming differences through emphasis on collective interests and the fear of censure and sanctions of a moral kind amongst their members. Thus it was noted by Roberto Pozzi at the time of drawing up the Plan for Conciliation and Arbitration that 'the mere intervention of the Chambers of Commerce concerned has been sufficient to settle disputes before the organization of a trial and before recourse to the procedure of arbitration, and this with the full and spontaneous consent of both parties'.9 ICC's broad representation and the sound and practical business knowledge it enshrined gave it moral influence and stature, which were likewise instrumental in bringing about many settlements in these early years, as will be seen below.

ICC's early caseload

The December 1925 Arbitration Report10 published in the Journal of the International Chamber of Commerce records that as of 19 November 1925, 100 international business disputes had been submitted to ICC's Arbitration Court for settlement. In 98 of these cases, the referral to ICC was not made on the basis of an arbitration clause in the underlying contract. In only two cases, therefore, did the contracts between the parties contain such a clause. More interesting for present purposes, however, is the way in which the disputes were settled. The table [below] shows the breakdown of these cases according to the method of settlement where a settlement was achieved, and the reasons for failing to achieve a settlement where this was the case.

[Page27:]

It is interesting to note that of the 40 cases that were settled, 82.5% were settled by informal means (including early ICC conciliation as described above). The statistics clearly show that ICC's moral authority was a great incentive to settlement. As observed in the April 1925 Arbitration Report11 of the Journal of the International Chamber of Commerce: 'The authority now acquired by the International Chamber of Commerce has proved very valuable in the friendly settlement of disputes, and the efforts of the Chamber have helped to promote that honesty and fairness in import and export business which alone can inspire the confidence and security required in commercial matters.'

Noteworthy too is the fact that the number of conciliation cases exceeded the number of arbitration cases. Indeed, the Executive Committee of the Court of Arbitration took the view that it should always propose to parties requesting arbitration 'the alternative of a settlement by friendly agreement'.12

Below are further details about some of these early conciliation cases.

Early conciliation cases

Conciliation appears to have been used in its early years above all to settle relatively simple differences. These often concerned payment problems.

The earliest decision in ICC's archives dates from 28 December 1922 and simply states that the Dutch and British parties agreed to the cancellation of the contract they had made and the payment of compensation to the British party by instalments, without interest.

On 22 June 1923, a conciliation was conducted between French and Belgian parties in respect of their difference over payment of a delivery of wood. A settlement was reached on the amount to be paid to the French seller by the Belgian purchaser, who undertook to pay the outstanding sum due upon his return to Belgium. [Page28:]

On 24 August 1923, a conciliation took place between French and Dutch parties over the payment of platinum watches delivered to partners of the Dutch party. A price was agreed for the sale of the watches, 10% less than that originally fixed, and the seller offered to take back the watches on consignment and attempt to resell them at the price agreed.

In the above three cases, the parties themselves, or senior members of their staff in the case of legal entities, were present before the Commission of Conciliation, enabling a settlement to be reached directly and rapidly. The case that came before the Administrative Commissioners on 6 December 1923 was decided on the basis of documents only. A Norwegian company claimed that a company based in Paris had unjustly deducted an amount as commission on the price of a sale of paper pulp. The Commission of Conciliation decided that no commission was due but that each party was entitled to half of the profit made. As the parties concerned were not present at the meeting of the Commission, it was decided that the Paris-based party would first be approached to see if it was prepared to accept the recommendation and that if it did, the Norwegian party could be requested to waive its claim to interest. These approaches were to be made by the National Committees concerned. This illustrates the role National Committees were called upon to play in bringing conciliation to a successful conclusion. A similar procedure was adopted in another case decided on the basis of documents only, referred to in the July 1924 Arbitration Report13 of the Journal of the International Chamber of Commerce. It involved a Dutch business and several Algerian firms and concerned the settlement of unpaid sums of money. The Commission of Conciliation conveyed its suggestions to the President of the Chamber of Commerce of Algiers, asking him to urge the parties to accept them.

A rather more complex case came before the Administrative Commissioners on 2 June 1924. It was between a French industrial inventor and an Italian company and concerned the payment of royalties for the assignment of an exclusive licence to exploit a patent. The inventor claimed unpaid sums allegedly due to him and an indemnity for the harm he had allegedly suffered due to the fact that the licence agreement had remained unperformed. The Italian company contended it did not have all the necessary information to exploit the patent and that it had been prevented from doing so by the First World War and subsequent disturbances in Italy. It also argued that the patent could not be exploited in its original form as improvements had since been made. Both parties were present at the 2 June conciliation meeting, the French inventor in person and the Italian company through the duly authorized manager of one of its plants. However, it was agreed that the matter could not be settled without the presence of the chairman of the Italian company. A second hearing was therefore arranged for 4 June, at which the company chairman was present. An agreement was reached whereby the licence agreement would be cancelled and the inventor would be paid a fixed amount, in return for which he would give up all other claims against the Italian company with respect to this matter.

At the end of 1924 a dispute came before ICC for conciliation that had already been the subject of arbitration in London. The case concerned the sale of peanuts by a Chinese seller to a Dutch purchaser via a French intermediary. The purchaser objected to having been sold an old crop of peanuts, whereas this was not stated in the sales contract. The seller accused the intermediary of concluding the sales contract before the seller's offer had been confirmed. In the preceding arbitration in London, the purchaser had been awarded a rebate, which the seller refused to pay as he attributed responsibility to the intermediary. The purchaser brought the [Page29:] matter to ICC for conciliation. The Commission of Conciliation urged the seller to agree to the rebate and the buyer to be satisfied with 75% of the sum claimed. Although maintaining its objections, the seller complied with this recommendation, which illustrates the authority enjoyed by Commission of Conciliation, as is reflected in its words to the seller:

Such is the solution which the Administrative Commission considered as fair and which it strongly urges you to accept. The Commission appeals to the honourability of your company and is sure that you will accede to the request of Mr. (. . .), bearing in mind that an arbitral award has been duly rendered by the Incorporated Oil Seed Association, which we would be obliged to advise of the failure to perform its award, and that, apart from this, Mr. (. . .) has been requested to forego a quarter of his claims in a spirit of conciliation.

A letter is being sent at the same time to the Chairman of the French Chamber of Commerce in China, whom the Conciliation Committee of the International Chamber of Commerce has requested to make a friendly approach to you as described above.

Commenting on this case, the April 1925 Arbitration Report14 of the Journal of the International Chamber of Commerce concludes: 'The Administrative Commission has frequently solicited the aid of local chambers of commerce, requesting them to make friendly suggestions to the parties concerned, and this moral action has always had the most happy results, as the proposals submitted to the two parties by the Commission of Conciliation have nearly always been accepted. This friendly and inexpensive procedure can therefore be of great use to commerce in general.'

During the ensuing years there would appear to be a move away from the emphasis on friendship as a fundamental factor in ICC conciliation. If, by comparison, we consider the record of a settlement reached on 9 April 1929, we find a somewhat different tone and approach. In this case, the Italian and French parties sought to put an end to their differences and liquidate all the rights and obligations arising from a contract they had made in 1923. The Commission of Conciliation comprised five Commissioners and its decision is altogether more formal.15 Following references to payment, the restitution of documents, the delivery of material and the waiver of all alternative legal actions already initiated, there is a clause covering the payment of ICC costs and another stipulating that any future objection regarding the interpretation of the settlement agreement should be submitted to ICC arbitration, in which the arbitrators would act as amiables compositeurs. The greater technical and legal detail reflects a shift away from moral to legal considerations.

A conciliation decision dated 16 December 1930 similarly contains provisions on costs and on possible future difficulties arising in connection with the application of the settlement agreement. In this instance, such difficulties were to be submitted again to ICC conciliation. The inclusion of such a provision would seem to suggest that moral authority alone was no longer a sufficient basis to ensure compliance with the agreement reached. Legal provisions needed to be envisaged too and stated in the record of the settlement.16

Conclusion

Conciliation has always been a part of ICC's dispute resolution services. At the outset, in the early 1920s, it was indeed a highly important part, giving rise to more cases than arbitration. In those days it was very much a product of its time, rooted in the will to achieve international understanding through friendship. Its [Page30:] success relied upon this conviction. However, as arbitration gradually increased its influence and acquired a stronger foothold in law,17 ICC conciliation shed something of its original inspiration and yielded to legal considerations. The way was thus opened for the rise of arbitration, supported by an increasingly developed legal framework, and the concomitant decline of conciliation, which appealed to loyalty rather than law. Could the introduction of ICC's new ADR Rules herald a reversal of this trend and the re-emergence of the belief in friendly settlements reached on the basis of common understanding?

1
This Plan was drawn up by the International Committee on Arbitration under the chairmanship of Mr Lyon-Caen, Permanent Secretary of the French Académie des sciences morales et politiques and former Dean of the Paris Faculty of Law. Lawyers and business representatives from Belgium, Great Britain, Italy, the Netherlands, and the United States of America took part in the meetings that led up to the Plan.

2
Article 7(3) of the Constitution adopted by the International Chamber of Commerce at its Organization Meeting held in Paris on 24 June 1920 reads: 'When the parties to a contract bearing on international commerce agree to submit to arbitration a difference of opinion arising from the execution of such contract, they may choose one or several of the members of the Administrative Commission, who shall act as an arbitration board. The decision of the arbitration board shall be submitted to the General Secretary who shall forthwith transmit it to the parties concerned.' It should be pointed out that arbitration as subsequently developed differed from this original conception.

3
International Chamber of Commerce First Congress London (June 27 to July 1, 1921), Brochure No. 13, Commercial Arbitration at 23.

4
These meetings were held under the chairmanship of Mr von Hemert, President of the Dutch Chamber of Commerce in Paris, with representatives from France, Great Britain, Italy, the Netherlands, Poland, Sweden and the United States of America.

5
The rules were drafted by the following members of the Committee on Commercial Arbitration: Mr S. G. Archibald (USA), Mr T. Carlander (Sweden), Mr R. Pozzi (Italy) and Mr R. Streat (Great Britain).

6
International Chamber of Commerce, Brochure No. 21, Rules of Procedure for Conciliation and Arbitration at 21. It should be recalled that the regulation of international arbitration through national and international instruments was at this time only just beginning. See infra note 17.

7
International Chamber of Commerce, Brochure No. 21, Rules of Procedure for Conciliation and Arbitration at 23-25.

8
Message from Etienne Clémentel, The Record of the International Chamber of Commerce, No. 1, 1 March 1921, 1 at 1-2.

9
'Conciliation and Arbitration Between Merchants of Different Countries', memorandum submitted by M. Roberto Pozzi, First Congress London (June 27, to July 1, 1921) in International Chamber of Commerce, Brochure No. 13, Commercial Arbitration 5 at 17

10
Page 1.

11
Page 2.

12
Arbitration Report No. 3, July 1924 (Supplement to Journal of the International Chamber of Commerce, No. 1) at 8.

13
Page 8.

14
Page 2.

15
It is interesting to note that the settlement reached is referred to as a 'formule de conciliation' (conciliation formula) in both this case and the case discussed in the paragraph that follows.

16
It is not insignificant that the conciliation procedures of 1929 and 1930 discussed above were initiated by parties who were already engaged in ICC arbitral proceedings relating to the same disputes. Further evidence of the increasing formalization of conciliation is found in the suggestion made at the Stockholm Congress of 1927 that the record of the settlement reached in an ICC conciliation should have the same effect as an award.

17
In 1923, the Geneva Protocol was signed. It required each Contracting State to recognize the validity of agreements providing for existing or future disputes between parties to be submitted to arbitration, and to ensure the enforcement of awards made in its own territory. It also required courts in Contracting States to refer to arbitrators disputes brought before them by parties who had agreed to submit their differences to arbitration. The Geneva Convention of 1927 went a step further by providing for the international enforcement of arbitral awards made pursuant to agreements coming within the scope of the 1923 Geneva Protocol. The International Chamber of Commerce was the initiator of the move that led to the adoption of the Geneva Protocol and, subsequently, the Geneva Convention, under the auspices of the League of Nations. (See Albert Jan van den Berg, The New York Arbitration Convention of 1958 (The Hague: T.M.C. Asser Institute, 1981) esp. at 6ff.; Gary Born, International Commercial Arbitration in the United States (Deventer: Kluwer, 1994) at 17.) At the same time, national jurisdictions were beginning to equip themselves with legislation dealing with international arbitration (e.g. the United States Arbitration Act, which was enacted in 1925 and took effect on 1 January 1926), which in itself raised the status of arbitration as a method of dispute settlement.