Robert Briner will long be remembered for the prominent role he has played in the development of international arbitration as a global adjudication system during the second half of the twentieth century. 1As a lawyer, arbitrator, President of the Iran-US Claims Tribunal and Chairman of the ICC International Court of Arbitration, Dr Briner has found himself at the center of the modern debate concerning issues of international arbitration law and practice.

Among the most essential and enduring such issues is the question of the relationship between an arbitration and the arbitration law at the place of the arbitration, the lex loci arbitri. For decades, academics and practitioners have discussed whether and, if so, to what extent an international arbitration proceeding may be detached from the arbitration law at the place of the arbitration, thus leaving in its place a 'stateless' procedure, subject only to the will of the parties and the control of courts called upon to recognize and enforce international arbitration awards. 2To a large extent, the debate between the proponents of localization (the 'territorialists') and delocalization (the 'transnationalists') has largely been settled by the arbitration laws and conventions adopted over the years. 3The mundane reality is that 'the de-localisation of arbitrations . . . is only possible if the local law (the lex arbitri) permits it'.44[Page795:]

And, for the most part, local laws, like the UNCITRAL Model Law, as well as the New York Convention, have a decidedly territorialist bent.

It is therefore today widely considered that, except possibly in the rare case where some other law may validly have been chosen by the parties, international arbitration proceedings are required to be conducted in accordance with the mandatory provisions of law in force at the place of the arbitration. 5As one author has commented: 6

States have been unwilling to accept the idea that there is no link between arbitral proceedings in their territory and the state's legal regime, and the idea that arbitral awards rendered in their territory should be considered a-national awards.

Nevertheless, the attitude of States concerning the applicability of their own laws to arbitrations taking place in their own territory has not completely put an end to the territorialist/transnationalist debate. In recent years, there has thus been abundant commentary, subsequent to the well-known cases of Hilmarton in France and Chromalloy in the United States, concerning the possibility and, if so, desirability of recognizing and enforcing in other countries international arbitral awards annulled by courts at the place of the arbitration. 7Those cases and their related issues have already received ample attention and will not be revisited here. This paper is concerned with a different issue that has more recently come to the fore: what position should arbitrators (rather than foreign courts) adopt in respect of orders of courts at the place of the arbitration that are intended to interrupt or curtail international arbitration proceedings that the arbitrators are conducting there?

Not so long ago, the position that arbitrators should adopt in such circumstances would not have given rise to much controversy. It would ordinarily have been regarded as self-evident that arbitrators sitting within a particular jurisdiction[Page796:]

not only should, but must, comply with decisions of courts exercising supervisory jurisdiction over the arbitration in that country. Such an obligation would follow not only from respect for the sovereign rights of the State and orders of its courts within its own borders8 (which arbitrators might, moreover, be constrained to comply with, under penalty of contempt of court, if physically present in the jurisdiction), but also from the widely-accepted imperative that arbitrators should endeavor to render an award that is enforceable at law (e.g. as indicated in Article 35 of the ICC Rules of Arbitration). 9

Recent arbitral decisions following in the wake of the Hilmarton and Chromalloy jurisprudence, however, have challenged such orthodoxy. This is the story of one such case, which has received substantial publicity. It tests the limits of the application of the lex loci arbitri to international arbitration and, hence, invites us to revisit an old debate in a different context.

The Award

The decision was rendered on 7 December 2001 in an ICC arbitration (no. 10623) in the form of a partial award made in Addis Ababa, Ethiopia, by an arbitral tribunal composed of Emmanuel Gaillard (chairman), Piero Bernardini and Nael Bunni, all eminent and highly-experienced international arbitrators. 10

The arbitration was commenced by a European contractor against an Ethiopian public authority (represented in the arbitration by the author) under an arbitration clause providing for arbitration in Addis Ababa. The arbitration clause was based on the standard clause contained in Clause 67 of the fourth edition of the FIDIC General Conditions of Contract, which provides for the final settlement of disputes by ICC arbitration 'unless otherwise specified in the Contract'. The parties supplemented the standard FIDIC provision by adding the following sub-clauses to Clause 67: [Page797:]

67.3.1 The place of arbitration shall be Addis Ababa, Ethiopia.

67.3.2 The language of arbitration shall be English.

67.3.3 The substantive law(s) applicable shall be the Ethiopian law.

67.3.4 The rules for arbitration shall be the Civil Code of Ethiopia under Article 3325 et seq. (Arbitral Submission).

Upon commencement of the ICC arbitration by the European party, the Ethiopian respondent immediately objected to the ICC's jurisdiction on the basis that, under Clause 67.3.4 above, the parties had agreed to substitute ad hoc arbitration under the Ethiopian Civil Code for ICC arbitration, as contained in the standard FIDIC clause. The ICC nevertheless constituted an arbitral tribunal and transferred the matter to the tribunal in accordance with Article 6(2) of the ICC Rules of Arbitration, which directs the arbitral tribunal to decide upon its jurisdiction. The tribunal refused to do so as a preliminary matter, however, and chose instead to join the determination of that issue to the merits. The Ethiopian respondent complied with the arbitral tribunal's related directions, while reserving all of its rights with respect to the matter of jurisdiction, which remained to be decided.

After receiving all of the parties' written submissions on the merits (and on jurisdiction), the tribunal invited the parties' views on the venue for the hearing to be held for the purpose of hearing oral arguments on all issues and examining the witnesses tendered by both parties.

Although Addis Ababa was the agreed place of the arbitration, the European claimant proposed that the hearing be held in Paris, as this would be more convenient for most of the participants (that is, all participants except the Ethiopian respondent and all but one of its witnesses). The Ethiopian respondent objected that Paris would be inconvenient for it and urged that the hearing be conducted in Addis Ababa, given that there were no obstacles to proceeding there.

Nevertheless, the arbitral tribunal decided that, as it was more convenient for it and the European claimant (but not the Ethiopian respondent) to hold the hearing in Paris, rather than at the place of the arbitration, the hearing would take place in Paris. Although the tribunal had yet to decide whether it had any jurisdiction under the ICC Rules of Arbitration, and one of the purposes of the hearing was to hear argument and witnesses on that issue, it sought to justify its decision by invoking Article 14(2) of the ICC Rules of Arbitration, which authorizes the tribunal 'after consultation with the parties' to 'conduct hearings and meetings at any location it considers appropriate unless otherwise agreed by the parties'. That provision was also incorporated in the Terms of Reference for the arbitration, which were signed by the respondent without prejudice to its objection to ICC jurisdiction.

As the Ethiopian party was inconvenienced by the arbitral tribunal's decision to move the hearing from the contractually-agreed place of the arbitration to Paris (and the arbitral tribunal's decision prevented the attendance at the hearing[Page798:] of one of the Ethiopian witnesses), it challenged all three arbitrators before the ICC Court under Article 11 of the ICC Rules of Arbitration. The Ethiopian party argued that the arbitrators had abused their discretion under Article 14(2) of the ICC Rules of Arbitration and had failed to act fairly and impartially in taking a decision that clearly advantaged one party, to the equally clear disadvantage of the other. The ICC Court nevertheless rejected the challenge, without, in accordance with the ICC Rules of Arbitration, giving any reasons. The Ethiopian party then immediately appealed the ICC Court's decision to an Ethiopian court, as permitted under Article 3342 of the Ethiopian Civil Code. The Ethiopian party at the same time requested the court to enjoin the arbitrators from proceeding, pending the determination of the appeal. In a separate action, the Ethiopian party also requested a different Ethiopian court to decide that the arbitrators were, in any event, not competent to proceed as the parties had agreed to ad hoc, and not ICC, arbitration and the arbitrators had not decided the issue. In that action as well, the Ethiopian party requested an order temporarily enjoining the conduct of the proceedings pending determination by the court of the jurisdictional issue. Both injunctions were granted.

The arbitral tribunal initially reacted to the injunctions by inviting the parties to a hearing in Paris to consider their effect on the arbitral proceedings. The Ethiopian party refused to attend. However, the claimant appeared at the hearing and urged the arbitral tribunal to continue with the proceedings and to decide the matter of its jurisdiction as a preliminary matter, even though the arbitral tribunal had refused to do so, more than a year earlier, when the request was made by the Ethiopian party.

The arbitral tribunal then proceeded to consider whether the arbitral proceedings should be suspended in conformity with the injunctions of the Ethiopian courts. By a partial award (the 'Award') rendered while the Ethiopian court proceedings were still pending and the injunctions still in place, the arbitral tribunal decided that the arbitration should not be suspended and that it had jurisdiction as an ICC tribunal properly constituted in accordance with the ICC Rules of Arbitration. Subsequently, the parties reached a settlement of their dispute, and the arbitration was withdrawn by the claimant without the arbitration, in fact, proceeding any further.

In its Award, the arbitral tribunal framed the issue concerning the suspension of the proceedings as follows: must the arbitral tribunal 'defer to a judicial order to halt the arbitral proceedings where that order has been issued in[Page799:] the country in which the parties have agreed to hold their arbitration'? 11The arbitral tribunal concluded that it had 'a discretion' as to whether or not it should comply with such an order, 12for the following reasons:

First, the arbitral tribunal found that: 13

An international arbitral tribunal is not an organ of the state in which it has its seat in the same way that a court of the seat would be. The primary source of the Tribunal's powers is the parties' agreement to arbitrate. An important consequence of this is that the Tribunal has a duty vis à vis the parties to ensure that their arbitration agreement is not frustrated. In certain circumstances, it may be necessary to decline to comply with an order issued by the court of the seat, in the fulfilment of the Tribunal's larger duty to the parties.

In proceeding then to analyze its duty to the parties, the tribunal stated that the parties' arbitration agreement is not 'anchored exclusively in the legal order of the seat of the arbitration', but is 'validated by a range of international sources and norms extending beyond the domestic seat itself'. 14Among those other sources, the tribunal referred to the New York Convention of 1958 (although Ethiopia is not a party to that convention) and the domestic laws of other countries and other multilateral or bilateral instruments recognizing the validity of international arbitration agreements.

The tribunal then went on to express confidence that, in applying such principles, an Ethiopian court would, in the circumstances of this case, recognize that the tribunal would be capable of conducting the arbitration 'in an impartial and fair way, in a manner consistent with the legitimate expectations of the parties'. 15Even if a court were not to so find, then the tribunal reasoned that it 'owes a duty to the parties to ensure that their agreement to submit disputes to international arbitration is rendered effective even where that creates a conflict with the courts of the seat of the arbitration.' 16

To conclude otherwise, the tribunal continued, would 'entail a denial of justice and fairness to the parties and conflict with the legitimate expectations they created[Page800:]

by entering into the arbitration agreement. It would allow the courts of the seat to convert an international arbitration agreement into a dead letter, with intolerable consequences for the practice of international arbitration more generally.' 17

In the tribunal's view, these principles 'carry even more force in an arbitration between a state or a state entity and a private party, where the seat of the arbitration is in the country of the state involved in the dispute and it is the state party that is attempting to frustrate the arbitration agreement.' 18

The tribunal then proceeded to refer to well-accepted international arbitration decisional authority, according to which a State party to an arbitration cannot rely on its own law to renege on, or contest the validity of, an arbitration agreement into which it freely entered. The tribunal also emphasized, in the course of its Award, that the need to protect the arbitration agreement trumps any concerns that might be raised regarding the enforceability of the award at the place of the arbitration.

Comments on the Award

In a recent commentary on the Award in the above case, the chairman of the arbitral tribunal has reiterated that the tribunal's decision to proceed with the arbitration was founded on its own assessment of the justification for the Ethiopian court's actions. 19As indicated above, the tribunal considered that it drew the power to make such an assessment from the parties' arbitration agreement and the international character of the arbitrators' mandate. Why, it is asked by the chairman in his commentary, should decisions of the courts at the place of the arbitration be accorded more importance than those that might be issued in the various other jurisdictions where enforcement of an eventual award may be sought? All laws, he writes, are equally apt to decide upon the validity of an award. 20According a superior place to decisions of the courts at the seat of the arbitration, the chairman warns, encourages State parties to arbitrations taking place within their territory to commit abuses. 21[Page801:]

While the discouragement of abusive actions by State (as well as other) parties to international arbitrations is unquestionably a worthy goal-one that has helped to shape the form of modern arbitration laws, treaties and rules-it can nevertheless reasonably be asked whether the arbitral tribunal's approach in the above case constitutes a defensible means of doing so, grounded in law, rather than simply the arbitrators' well-intentioned desire to proceed with an arbitration. With all due respect to the eminent arbitrators in the case described above, their Award fails to provide an adequate basis for their decision to disregard the injunctions issued by the courts in that case. Does this mean that international arbitrators are completely helpless in the face of abusive attempts by courts at the place of the arbitration to derail the arbitral process? I think not. But appealing to the sanctity of the parties' arbitration agreement and the existence of legal sources beyond the seat of the arbitration does not suffice.

It needs to be emphasized, to begin with, that this was not a case in which anyone was calling into question the validity of the arbitration agreement. Although, as already noted, the arbitral tribunal referred in its Award to a number of authorities according to which a State party may not rely on its own law to argue that an arbitration agreement into which it freely entered is null or unenforceable, no such contentions were being made in this case. Nor was the Ethiopian party, who had been participating in the arbitration, refusing to arbitrate. Quite the contrary, its applications to the Ethiopian courts were intended to ensure that, firstly, the arbitration agreement that it believed that it had entered into-an agreement for ad hoc arbitration in Ethiopia-was given effect and, second, that, even if the agreement was for ICC arbitration, the arbitrators properly performed their duties.

The arbitral tribunal nevertheless characterized the Ethiopian court actions as having the effect of 'frustrating' the arbitration agreement and converting it into a 'dead letter'. 22Leaving aside the question of whether the temporary injunctions issued in this case could fairly be said to have the intended effect of 'frustrating' anything, a finding that an agreement may be 'frustrated' or converted into a 'dead letter'requires a prior determination of the requirements of that agreement. That the Ethiopian party was attempting in the above case to prevent the continued conduct of an ICC arbitration by the arbitral tribunal then in place cannot be doubted. But it does not follow from that fact alone that[Page802:]

it was attempting to 'frustrate' the parties' agreement. Quite the opposite, in the Ethiopian party's eyes, it was seeking to preserve and protect the proper performance of the parties' arbitration agreement.

In any event, in assessing whether the Ethiopian party's actions and the injunctions issued were contrary to the arbitration agreement, it was necessary for the arbitral tribunal to take account of the whole of the arbitration agreement. As indicated above, the parties had not only designated Addis Ababa as the place of the arbitration, but had expressly incorporated into the arbitration clause the arbitration rules of the Ethiopian Civil Code. Any assessment by the arbitral tribunal of its duties therefore required an analysis of the provisions of that Code and of the parties' rights and legitimate expectations in relation to those provisions and the designation of Addis Ababa as the seat. However, the Award contained no such analysis. While identifying the parties' agreement to arbitrate as the 'primary source' of its powers, the arbitral tribunal appears to have focused only on the part of the agreement providing for arbitration and not the part providing for the application to the arbitration of Ethiopian law. As stated by Professor Roy Goode in a similar context: 23

It seems that the principle of party autonomy is being used with a high degree of selectivity. The award derives its force from the agreement of the parties, but their decision to select a stated national law to govern the proceedings leading to the award is to be ignored!

Indeed, in the present case, there was no finding in the Award that, as a matter of Ethiopian law, the courts did not have the power to entertain an appeal of a challenge or to order that the proceedings be suspended pending the consideration of that challenge. Nor was there any finding that the courts had committed any infringement of Ethiopian law in ordering the suspension of the proceedings pending their determination of the arbitral tribunal's competence.

Rather, with respect to the matter of the challenge, the arbitral tribunal held that the Ethiopian party's appeal to the Ethiopian courts had 'clearly been made improperly' because, according to the tribunal, such an appeal is contrary to Article 7(4) of the ICC Rules of Arbitration, which provides that decisions of the[Page803:]

ICC Court as to challenges are 'final'. 24The arbitral tribunal cited no authority for its holding, however, which was unfounded. It suffices to refer to the chairman's own treatise on international arbitration, in which the meaning of Article 7(4) is correctly described: 25

As with the appointment, confirmation or replacement of an arbitrator, the Court's decision on a challenge is 'final' (Art. 7(4), replacing Art. 2(13) of the previous Rules). This provision must not be misunderstood. First, there is no doubt that it prohibits any form of appeal within the ICC arbitration system. Second, because the ICC Rules are merely contractual, the fact that the Court's decision is "final" simply means that by agreeing to submit disputes to arbitration under the ICC Rules the parties waive their right to bring any available appeal, to the extent that such a waiver is valid.

Prior to the entry into force of the Swiss Private International Law Statute, the Swiss courts did not consider this waiver to be valid.

Contrary to the Award, therefore, Article 7(4) does not preclude judicial recourse against a decision of the ICC Court rejecting a challenge, and nowhere in the Award did the arbitral tribunal find that, as a matter of Ethiopian law, the Ethiopian party had waived, or otherwise did not have, the right to bring the appeal that it did under Article 3342 of the Ethiopian Civil Code (or to apply for an injunction pending consideration of that appeal). Moreover, Ethiopian law is hardly alone in providing such a remedy. As recently as May 2000, the Court of Appeal of England (per Lord Woolf MR), in a highly-publicized decision, held that the 'finality provision' in Article 7(4) of the ICC Rules of Arbitration did not operate to exclude the English court's jurisdiction to remove an ICC arbitrator for misconduct under the Arbitration Act 1950. 26Under Article 13(3) of the UNCITRAL Model Law as well, a party to an ICC arbitration may apply to the courts for the removal of an arbitrator notwithstanding rejection of the challenge by the ICC.

Although the arbitral tribunal may have considered that the Ethiopian party's appeal to the Ethiopian courts was meritless and that any decision finding the tribunal to be less than impartial and fair would be 'misconceived', 27 the[Page804:]

Ethiopian Civil Code, which the parties expressly incorporated in their arbitration agreement, makes the Ethiopian court, rather than the arbitral tribunal, the final judge of this.

As in the case of the appeal of the challenge, the arbitral tribunal also failed in its Award to refer to any provision of Ethiopian law that precluded the Ethiopian party from submitting the question of the arbitral tribunal's jurisdiction to the Ethiopian courts in the manner that it did. Rather, the arbitral tribunal found that it was improper for the Ethiopian party to apply to the Ethiopian court because Article 6(2) of the ICC Rules of Arbitration authorizes the arbitral tribunal to decide upon the matter of its own jurisdiction. However, given that the very issue to be decided was whether the parties had, in fact, agreed to ICC arbitration, the question of whether the Ethiopian party had a right to apply to the court before, as in this case, the arbitral tribunal had made any such determination (which it had refused to do as a preliminary matter) depended upon Ethiopian law and not the ICC Rules. As the chairman of the arbitral tribunal has himself explained in his international arbitration treatise: 28

how can an arbitrator, solely on the basis of an arbitration agreement, declare that agreement to be void or even hear a claim to that effect? The answer is simple: the basis for the competence-competence principle lies not in the arbitration agreement, but in the arbitration laws of the country where the arbitration is held . . .

In the present case, however, the arbitral tribunal failed to examine whether, under Ethiopian law, the courts are required to await the conclusion of the arbitration or, as is the case in many jurisdictions, may intervene while the arbitration is still pending. 29Indeed, only recently, the Swiss Federal Tribunal reconfirmed that arbitrators sitting in Switzerland (a much-used venue for international arbitrations) are bound by court judgments denying their jurisdiction and do not have priority, as a matter of Swiss law, to rule on the same. 30Thus, the tribunal had no basis for stating in its Award, without even examining the position under Ethiopian law, that either the application to the court or the injunction was 'improper'. 31It should be added that the jurisdictional dispute in this case raised a bona fide issue of contract construction as to which reasonable minds could differ. [Page805:]

In the circumstances, it is difficult to see how the arbitral tribunal could legitimately claim to derive any power from the parties' arbitration agreement to disregard orders of the Ethiopian courts that were not shown to be improper in any way, particularly where the arbitration agreement itself expressly incorporated provisions of the Ethiopian Civil Code authorizing the intervention in the proceedings of the Ethiopian courts. It cannot possibly suffice for an international arbitral tribunal to disregard the order of a national court at the place of the arbitration having the authority to decide upon the matters in question simply because it disapproves of the decision. As one commentator has noted: 'it is in principle not for the arbitrators to judge the judges, but rather the other way round'. 32Although the arbitral tribunal may have been unhappy about the situation temporarily created by the injunctions, the parties' right to refer to the Ethiopian courts in the manner permitted by Ethiopian law nevertheless formed an integral part of the arbitration agreement that the arbitral tribunal considered it had a duty to defend. In refusing to defer to the orders of the Ethiopian courts, therefore, it was arguably the arbitral tribunal that was frustrating the effective application of the parties' arbitration agreement in this case.

It is, moreover, to be regretted that in its Award the arbitral tribunal failed to articulate any standards for the exercise of the discretion that it claimed to enjoy in deciding whether to comply with the order of the Ethiopian courts.

Does it follow from the above criticisms that an international arbitral tribunal must in all circumstances defer to the orders of the courts at the place of the arbitration? As I have already indicated, it does not. But more than simple disagreement with the position of the courts must be required.

An alternative approach

As in the case of the Award discussed above, it is necessary to begin with an analysis of the parties' arbitration agreement. Regardless of whether one approaches international arbitration as a territorialist or as a transnationalist, the one thing as to which everyone concurs is that the arbitration agreement is, as the arbitral tribunal found, the 'primary source' of the arbitrator's power. It is the arbitration agreement that itself establishes, at least initially, the scope and limits of the arbitrator's authority and duties to the parties. 33[Page806:]

Taking this as a given, I do not propose to reconsider whether the agreement and the related arbitration proceeding and award are automatically anchored exclusively in the legal order of any particular jurisdiction. Rather, starting from the premise that it is an arbitral tribunal's duty to act in accordance with the agreement from which its authority derives, 34I propose instead to consider the extent to which an arbitrator's attitude in respect of a court order depends upon the nature of the parties' agreement. 35

In this regard, there are a number of different possible situations. First, as in the case discussed above, the parties may incorporate in their arbitration clause an explicit choice of the law that is to govern the arbitration proceeding. Ordinarily, although not necessarily always, that law will be the law of the place of the arbitration. 36More frequently, the parties will simply designate the place of the arbitration, without saying anything about the law governing the proceedings. Sometimes the parties will fail to agree on a venue for the arbitration, leaving the choice to an arbitral institution or to the arbitrators, once appointed.

In the first of the above cases-i.e. where the parties have explicitly agreed that the arbitration is to be governed by the law of the seat of the arbitration- it would appear difficult for an arbitral tribunal to conclude that the parties did not intend the proceedings to be subject to the oversight of the courts at the place of the arbitration, as mandated by that law. On the contrary, respect for the decisions of the courts at the place of the arbitration based on the law of that place would be mandated, in such case, by the parties' arbitration agreement itself. An arbitral tribunal that refuses to comply with such decisions is, thus, itself failing to respect the will of the parties.

The same may also be said to be the case where the parties have not expressly chosen a law to govern the arbitration proceedings, but have nevertheless agreed upon a place of arbitration without saying more. Although it has been argued that from 'a mere designation of the place of the arbitration it is impossible to conclude whether the parties intended submission to the law of that place, at least in the case where they agree to arbitrate under a set of international arbitration rules', 37it is nevertheless reasonable to presume that the parties' usual[Page807:]

expectation, when agreeing upon a place of arbitration, is that the arbitration will be subject to the mandatory law of arbitration of that place and the judicial supervision of the courts of that place. Indeed, in nearly all guides and treatises on international arbitration today parties are warned about the legal consequences of the selection of a seat. As Francis Mann wrote more than three decades ago: 'Such a choice is usually far from fortuitous, but made for good and well-understood reasons.' 38No one has stated this more clearly than Professor Claude Reymond, one of the great figures of modern Swiss arbitration: 39

When one says that London, Paris or Geneva is the place of the arbitration, one does not refer solely to a geographical location. One means that the arbitration is conducted within the framework of the law of arbitration of England, France or Switzerland or, to use an English expression, under the curial law of the relevant country. The geographical place of arbitration is the factual connecting factor between that arbitration law and the arbitration proper, considered as a nexus of contractual and procedural rights and obligations between the parties and the arbitrators.

Absent evidence that such considerations did not affect the parties' choice of the place, it should be assumed that the law of the place was one of the principal considerations that informed the parties' choice. And respect for that law and the extent of the judicial recourse permitted by that law, therefore, is no less important than respect for the parties' agreement to arbitrate. The two form an indissociable whole.

Indeed, it is perfectly normal and understandable that, when agreeing to arbitrate, parties should at the same time be allowed, through their selection of a venue, to agree upon the nature and extent of the judicial recourse desired in respect of the proceedings. One eminent authority has, thus, referred to 'the invaluable contribution of a variety of legal systems which provide recourse to the parties, allowing them to retain their precious freedom to determine to what degree a national court will have control over an award, with the legal concepts and style attributable to that court . . . ' 40

When international arbitrators refuse to abide by the decisions of the courts at the place of the arbitration chosen by the parties, they are therefore arguably depriving the parties' choice of a place of its intended effect and, thus, subverting[Page808:]

the parties' arbitration agreement, rather than honoring it. At a very minimum, international arbitrators should endeavor to determine the parties' intentions in this regard. Admittedly, the problem posed is of a different nature when the parties have not themselves chosen the place of the arbitration and the place is imposed upon them by an institution or an arbitral tribunal.

The mere fact therefore that an arbitral tribunal is not, as noted in the above Award, 'an organ of the state'41does not suffice, as the tribunal concluded in that case, to confer 'a discretion' upon the arbitral tribunal as to whether or not it should comply with a court order. This is because the duty that a tribunal may have to comply with such an order can be said to arise in many, if not most, cases from the parties' arbitration agreement itself.

It nevertheless does not necessarily follow that when a party agrees to international arbitration with a State party in the territory of that State, subject to the lex arbitri of that State and the supervisory authority of the courts of that State, the arbitral tribunal has an absolute duty to respect any and all orders of that State's courts, irrespective of the circumstances. Indeed, like all agreements, an arbitration agreement must be performed by both parties in good faith. There is ample international arbitral jurisprudence establishing that States cannot, in bad faith, negate an arbitration agreement that they have freely entered into based upon their own law. 42Similarly, when a State party agrees to arbitrate in its own country with a foreign party, it must be deemed to have undertaken that the foreign party will be accorded fair treatment by the courts of that State and that the position of the State party relative to its own courts will not be abused.

There are hints of such an approach in the Award discussed above. The arbitral tribunal specifically stated: 43

the arbitral tribunal should [not] simply abdicate to the courts of the seat the tribunal's own judgment about what is fair and right in the arbitral proceedings. In the event that the arbitral tribunal considers that to follow a decision of a court would conflict fundamentally with the tribunal's understanding of its duty to the parties, derived from the parties' arbitration agreement, the tribunal must follow its own judgment ... To conclude otherwise would entail a denial of justice and fairness to the parties . . . [Page809:]

A problem with the above passage, however, is its failure to articulate, or to apply to the facts of the case, any standard of 'denial of justice' other than the arbitral tribunal's own 'judgment about what is fair and right'. The mere existence of a 'fundamental conflict' between the arbitral tribunal's and the court's respective conceptions of what is 'fair and right in the arbitral proceedings' does not suffice to provide the parties with any guarantee that an arbitration that they have agreed should be subject to the control of the local courts will not simply be hijacked by a runaway arbitral tribunal.

The question that naturally arises in such circumstances is: what is the standard by which the actions (or inactions) of State courts should be measured? The appropriate standard, it can reasonably be posited, is the standard developed to measure the legality of State court actions as a matter of customary international law. This is not only because, as it has been contended, the existence of a contract involving a State or State party may be sufficient to bring the resultant relationship 'within the sphere of protection of international law', 44but also because, in assessing a State party's good or bad faith in relation to an action before its courts concerning an arbitration to which it has agreed, there would not appear to be any reason why the State party should be found to have any greater or lesser responsibility for the conduct of its courts than is accepted in international law. Indeed, an order interfering with an agreement to arbitrate may be inconsistent with the international obligations of the State under the New York Convention of 1958 (or another treaty), where applicable. 45

As a matter of customary international law, the obligation of States is to 'maintain and make available to aliens, a fair and effective system of justice'. 46Thus, the decision of a national court may be impugned if it fails to meet the minimum standard compatible with the 'fair and effective' administration of justice. Such a decision constitutes, in international legal parlance, a 'denial of justice.' Although the concept of 'denial of justice' originally developed in respect of acts frustrating a party's access to fair and effective judicial process, it today appears to be widely accepted, as stated by Stephen Schwebel, that: 47[Page810:]

In modern international law, a State denies justice no less when it refuses or fails to arbitrate with a foreign national when it is legally bound to do so, or when it, whether by executive, legislative or judicial action, frustrates or endeavors to frustrate international arbitral processes in which it is bound to participate.

While the precise contours of the doctrine of 'denial of justice' may not be entirely settled in international law, 48it is nevertheless ordinarily considered that: 49

what is required is 'manifest injustice' or 'gross unfairness' (Garner, 'International Responsibility of States for Judgments of Courts and Verdicts of Juries amounting to Denial of Justice' 10 BYIL (1929), p 181 at p 183), 'flagrant and inexcusable violation' (Arechaga, ['International Law in the Past Third of a Century' 159 'Recueil des Cours' (1978) at p 282]) or 'palpable violation' in which 'bad faith not judicial error seems to be the heart of the matter' (O'Connell, International Law, 2nd ed, 1970) p 498).

Thus, the denial must ordinarily be 'manifest' or 'flagrant'. It must be 'clearly improper and discreditable' insofar as it is 'arbitrary' and 'shocks, or at least surprises, a sense of judicial propriety'. 50It can be argued that an international arbitral tribunal would, for its part, consecrate a denial of justice, contrary to the legitimate expectations of the parties when entering into their arbitration agreement, if, without being constrained to do so, it were to acquiesce in a judicial order that failed to comport with minimum international standards. 51

It does not follow, however, that a State denies justice in respect of an arbitration agreement or fails to implement its New York Convention (or possible other treaty) obligations whenever one of its courts issues an order enjoining or otherwise interfering with an international arbitration proceeding taking place on its soil. 52[Page811:]

To begin with, the New York Convention (Article II(3)) itself expressly recognizes the right of national courts to refuse to refer to arbitration disputes where the court, on the basis of its own domestic law, finds that the arbitration agreement is 'null and void, inoperative or incapable of being performed'. Moreover, insofar as the Convention is intended to protect the parties' agreement to arbitrate, this at the same time mandates protection of the agreement in its entirety, including the parties' agreement on the law applicable to the arbitration agreement and compliance with the provisions of that law, no matter how unusual or out of step with modern arbitration legislation or practice. (In this regard, I cannot conceive that, subject only to the limitations on a State's right to invoke its own law to contest the validity of an arbitration agreement into which it has freely entered, a State court denies justice, in an international legal sense, when it properly applies provisions of its own law to an arbitration, even though such provisions may be regarded as anachronistic by international practitioners. Quite the contrary, a denial of justice may arise when the courts fail to apply their own law.)

In order to establish the illegality of a local court's order, it therefore cannot suffice to observe that the order has the effect of blocking or interfering with an arbitration. It is not the blocking of an arbitration that in and of itself constitutes a 'denial of justice', but rather the blocking of an arbitration in a manner that is manifestly arbitrary and improper. This might be the case where there is manifestly no factual or legal basis for a court's action, i.e. purporting to revoke an arbitral tribunal's authority on the basis of a statute that permits this in cases involving allegations of fraud when no questions of fraud are actually before the arbitrators.

No such manifest impropriety was shown by the arbitral tribunal to have occurred in the case of the Ethiopian court orders considered above. Those orders were not intended to negate or frustrate the parties' arbitration agreement. Nor were they shown to be contrary to Ethiopian law. Rather, they were issued pending consideration by the courts of the Ethiopian party's claim that the parties' arbitration agreement, upon which the Ethiopian party itself relied, was not being respected.

Conclusion

It has been suggested that international arbitrators should be free to disregard the orders of State courts at the seat of the arbitration whenever they consider this to be 'justified'. 53However, this broad statement of principle begs a funda[Page812:]

mental question: what are the rules that are to guide an international arbitral tribunal in deciding whether disobedience is appropriate, assuming that it is feasible (where, for example, the arbitrators are not physically present in the country in question)?

Proponents of the arbitrators' liberty of decision in respect of such matters argue that international arbitral tribunals derive their powers from all of the different legal orders that are capable of recognizing and enforcing the arbitrators' award, and not just the legal order of the place of the arbitration. The arbitrators should therefore be able to do as they please, so the argument goes, and it will then be for enforcing courts to decide whether to enforce the arbitrators' decision.

Although that broad liberty of decision, detached from the lex loci arbitri, is claimed to spring from the parties' arbitration agreement, I see little basis for such a sweeping affirmation concerning the parties' supposed intentions and a very real danger that their legitimate expectations, and their arbitration agreement, will be subverted if such a position is adopted by international arbitrators. As already noted, when parties agree to arbitration, their selection of a seat generally takes account of the arbitration law of that seat and the degree and nature of the judicial recourse that is available there and its possible impact on the arbitration process. The choice that parties have made in respect of the venue is thus entitled to as much respect as their agreement to arbitrate in the first place.

In so agreeing, however, the parties must also be deemed to have agreed that the State party to any such agreement will not take advantage of the arbitration being situated in its own country to obtain from its courts decisions that deny the other party justice, as that concept is understood in customary international law. The lex loci arbitri, in other words, should be required to be applied by the State party's courts in a manner that comports with minimum international standards.

It is international law, therefore, and not the 'discretion' of international arbitrators, that should serve as the ultimate guardian of the parties' arbitration agreement. If international arbitration is to continue to prosper in the twenty-first century as a means of resolving disputes with State parties, in particular, it is important that it always be seen as promoting the rule of law, rather than being above the law to which the parties have agreed. [Page813:]

1
The term 'global adjudication system' is borrowed from an article co-authored by Charles Brower, who served as a judge on the Iran-US Claims Tribunal with Dr Briner: see C. Brower, C. Brower II & J. Sharpe, 'The Coming Crisis in the Global Adjudication System' (2003) 19 Arbitration International 415.

2
See e.g. J. Paulsson, 'The extent of independence of international arbitration from the law of the situs' in J.D.M. Lew, ed., Contemporary Problems in International Arbitration (Queen Mary College, University of London: Centre for Commercial Studies, 1986) 141.

3
The debate has been summarized in G. Petrochilos, Procedural Law in International Arbitration (Oxford: Oxford University Press, 2004) at 19ff.

4
A. Redfern & M. Hunter, with N. Blackaby & C. Partasides, Law and Practice of International Commercial Arbitration, 4th ed. (London: Sweet & Maxwell 2004) at 91.

5
Thus, for example, the Internal Rules of the ICC Court provide (Article 6) that, when scrutinizing arbitral awards, the Court considers 'to the extent practicable, the requirements of mandatory law at the place of the arbitration'. It is also commonplace in the Terms of Reference prepared by ICC arbitrators to stipulate that the arbitration will be subject to the mandatory provisions of law at the place of the arbitration.

6
L. Craig, 'Some Trends and Developments in the Laws and Practice of International Commercial Arbitration' (1995) 30 Texas International Law Journal 1 at 23.

7
See e.g. the commentaries on this subject at the ICCA Congress in Paris in 1998, as published in ICCA Congress Series No. 9 (The Hague: Kluwer Law International, 1999) at 505ff.; H. Gharavi, The International Effectiveness of the Annulment of an Arbitral Award (The Hague: Kluwer Law International, 2002).

8
See F. Mann, 'Lex Facit Arbitrum', as reprinted in (1986) 2 Arbitration International 241 at 246.

9
See L. Craig, supra note 6 at 17.

10
Extracts from the tribunal's Award of 7 December 2001 and a summary by A. Crivellaro appear in (2003) 21 ASA Bulletin 59.

11
'Extracts from Award' (2003) 21 ASA Bulletin 82 at 83.

12
Ibid. at 83.

13
Ibid. at 83.

14
Ibid. at 83.

15
Ibid. at 85.

16
Ibid. at 86.

17
Ibid. at 87.

18
Ibid. at 91.

19
E. Gaillard, 'L'interférence des juridictions du siège dans le déroulement de l'arbitrage' in Liber Amicorum Claude Reymond : Autour de l'arbitrage (Paris: Litec, 2004) 83.

20
Ibid. at 88.

21
Ibid. at 92.

22
Supra note 11 at 83 and 87.

23
R. Goode, 'The Role of the Lex Loci Arbitri in Commercial Arbitration' (2001) 17 Arbitration International 19 at 31. See also C. Partasides, 'Solutions offered by Transnational Rules in Case of Interference by the Courts of the place of arbitration' (2003) 1:4 Oil, Gas & Energy Law Intelligence <www.gasandoil.com/ogel/>.

24
Supra note 11 at 91-92.

25
E. Gaillard & J. Savage, eds., Fouchard Gaillard Goldman On International Commercial Arbitration (The Hague: Kluwer Law International 1999) [hereafter Fouchard Gaillard Goldman] at 549 (emphasis added). See also Y. Derains & E.A. Schwartz, A Guide to the New ICC Rules of Arbitration (The Hague: Kluwer Law International 1998) at 126: 'The statement in Article 7(4) that decisions of the Court "shall be final" . . . does not mean that a party is deprived of such judicial recourse as it may also enjoy as a matter of law.'

26
AT&T Corp. and another v. Saudi Cable Co. [2000] 2 All E.R. (Comm) 625.

27
Supra note 11 at 85-86.

28
Supra note 25 at 400.

29
This is a matter as to which national laws differ. See Fouchard Gaillard Goldman, supra note 25 at 406-415; See also W.W. Park, 'The Arbitrability Dicta in First Options v. Kaplan: What Sort of Kompetenz-Kompetenz Has Crossed the Atlantic?' (1996) 12 Arbitration International 137.

30
Fomento de Construcciónes y Contratas S.A. v. Colón Container Terminal S.A., Swiss Federal Tribunal, 14 May 2001, ATF 127 III 279 [2001].

31
Supra note 11 at 92.

32
M. Scherer 'The Place or "Seat" of Arbitration (Possibility, and/or Sometimes Necessity of its Transfer?) - Some Remarks on the Award in ICC Arbitration n° 10'623' (2003) 21 ASA Bulletin 112 at 113-114.

33
See e.g. Article 1 of the 1989 Resolution on Arbitration between States, State Enterprises, or State Entities, and Foreign Enterprises of the Institute of International Law (Institut de Droit international) ('IDI Resolution') <www.idi-iil.org/idiE/resolutionsE/1989_comp_01_en.PDF>. See also S. Jarvin, 'The sources and limits of the arbitrator's powers' in J.D.M. Lew, ed., Contemporary Problems in International Arbitration (Queen Mary College, University of London: Centre for Commercial Studies, 1986) 50; T. Clay, L'arbitre (Paris: Dalloz, 2001).

34
IDI Resolution, supra note 33, preamble.

35
It is also assumed, for the purpose of all that follows, that the arbitrators are not required to be physically present within the jurisdiction of the court in the event of an order that requires compliance under penalty of contempt of court.

36
The role to be accorded to the local law and courts in the rare case where the parties have expressly chosen a foreign arbitration law raises other issues beyond the scope of this paper.

37
G. Petrochilos, supra note 3 at 42.

38
F. Mann, supra note 8 at 247.

39
C. Reymond, 'Where is an Arbitral Award Made?' (1992) 108 Law Quarterly Review 1 at 3 (emphasis added).

40
M. de Boisséson, 'Enforcement in Action: Harmonization Versus Unification' in ICCA Congress Series No. 9, supra note 7 at 597.

41
Supra note 11 at 83.

42
See e.g. the cases cited in the 'Extracts from Award', supra note 11 at 92-99; see also, more recently, the extracts from the awards rendered in the case of Himpurna California Energy Ltd. v. Republic of Indonesia, (2000) XXV Y.B. Comm. Arb. 109.

43
Supra note 11 at 87.

44
S. Schwebel, International Arbitration: Three Salient Problems (Cambridge: Grotius, 1987) at 65; see also the extracts from the awards in Himpurna, supra note 42.

45
Remarks of Stephen Schwebel in Paris on 21 November 2003 at a seminar of the Institut pour l'Arbitrage International, as reproduced in N. Kaplan, 'The Good, the Bad and the Ugly' (2004) 70 Arbitration 183 at 187.

46
Award of 26 June 2003 in Loewen Group, Inc. v. United States of America, ICSID case ARB(AF)/ 98/3 at para. 129.

47
S. Schwebel, 'Injunction of Arbitral Proceedings and Truncation of Tribunal' (2003) 18:4 Mealey's International Arbitration Report 33 at 38.

48
For a recent study of the subject, see J. Paulsson, Denial of Justice in International Law (Cambridge: Cambridge University Press, 2005).

49
Expert Opinion of C. Greenwood QC, as cited in Loewen, supra note 46 at para. 130.

50
See decisions cited in Loewen, supra note 46 at paras. 131-133.

51
Where arbitrators are physically present within the jurisdiction, however, and subject to possible punishment for contempt of court, they may have no reasonable alternative but to comply with such an order.

52
cf. N. Kaplan, supra note 45 at 187: 'The issue . . . arises as to whether a State can be said to be implementing its New York Convention obligations if one of its courts issues an anti-suit injunction of an international arbitration. It has been my view that the State would not be implementing its obligations in those circumstances . . . ' For the reasons stated herein, such a view appears unjustifiably broad.

53
E. Gaillard, 'Il est interdit d'interdire: réflexions sur l'utilisation des anti-suit injunctions dans l'arbitrage commercial international' Rev. arb. 2004.47 at 62; see also E. Gaillard, supra note 19.