ICC Articles

Introduction

1. International commercial arbitration bridges several disciplines. As reflected in the language it uses,² it comes up against and encompasses legal categories belonging to many branches of law and other areas of knowledge. As Oppetit put it:

The attraction that the study and practice of international commercial arbitration has for lawyers is due not only to the sometimes considerable material interests at stake. It is also due in large part to the intellectual appeal of a concept that lies at the crossroads of almost all areas of law, both substantive and methodological, defying the compartmentalization that nowadays all too often results from the excessive specialization and narrow technicalization that have become the dominant trends in modern scholarship. Indeed, the very problems international commercial arbitration has to deal with mean that the only way of resolving many of the difficulties with which it is confronted is by reflecting on the most fundamental questions likely to arise within the context of a legal system: justice, including its forms and aims; judiciality, including its sources and nature; the structure of the legal system and the purposes of law. ³ (emphasis added)

International commercial arbitration lies between international and national law, private and public law, substantive and procedural law, ⁴ and, in a wider perspective, between the science of law (the jurisprudentia of the Roman jurisconsults), economics and politics.

2. Law in general is often caught between varied or even divergent values and interests. Arbitration, for instance, may sometimes come up against the conflicting demands of due process and expeditiousness. Following Aristotle, we may say that justice lies midway between two or more opposite interests:

therefore corrective justice will be the intermediate between loss and gain. This is why, when people dispute, they take refuge in the judge; and to go to the judge is to go to justice; for the nature of the judge is to be a sort of animate justice; and they seek the judge as an intermediate, and in some States they call judges mediators, on the assumption that if they get what is intermediate they will get what is just. The just, then, is an intermediate, since the judge is so. Now the judge restores equality . . . ⁵[Page35:]

3. A perfect illustration of Aristotelian legal ontology and Oppetit's view of arbitration is to be found in the issues raised by the subject of international commercial arbitration and State contracts. ⁶ These issues are particularly important in those national legal systems which, like the French, distinguish between private and administrative law and have a separate system of courts for each. Indeed, in international commercial arbitration proceedings involving public law entities there are at least two conflicting interests, one economic, the other political. They give rise to two contrasting theoretical standpoints vis-à-vis State contract arbitration. ⁷

The economic standpoint: certainty in international commercial transactions

4. The proponents of international commercial arbitration, most of whom specialize in private law, argue that international commercial arbitration involving public law entities should be looked upon as being just like any other international commercial arbitration. They therefore assert that when States or their offshoots engage in international commerce, they forgo the prerogatives they enjoy under their national law and, from a legal point of view, should be regarded just like any international trader, meaning that they must comply fully with the legal rules governing relations between such traders, including the rules relating to international commercial arbitration. ⁸

5. Likewise, French and Swiss law and international arbitration case law⁹ now all recognize without exception what is known as subjective arbitrability, that is to say the possibility for States and their offshoots to agree to arbitration. The French Galakis¹⁰ decision clearly stated that French public law entities were prohibited from entering into arbitration agreements only in domestic, ¹¹ not international, relations. Article 177(2) of the Swiss Private International Law Statute of 1987 provides that if a State or an undertaking or organization under its control or domination is a party to an arbitration agreement, such party cannot rely on its own law to challenge the arbitrability of a dispute or its capacity to be party to an arbitration. ¹²

Legal language nowadays increasingly reflects economic realities and needs. Does it also reflect political values? [Page36:]

The political standpoint: pre-eminence of the public interest

6. On the other hand there are those, most of whom specialize in public law, who are more cautious when it comes to interests under State protection and pay greater heed to the purposes of the State and its offshoots. In their view, it should not be forgotten that States generally stand for what is referred to as the 'general', 'public' or 'common' interest. ¹³ While conceding that States and their offshoots occasionally engage in international trade, they do not accept that in so doing those entities act like genuine merchants, i.e. with a view to making a profit. For example, when entering into an international contract with a foreign firm for the construction of a motorway, the State's motive is not to reap a profit but to provide the population for which it is responsible with a better transport system. Any tolls that might be introduced on the motorway would be for the sole purpose of its upkeep. The proponents of the political standpoint conclude, in short, that public law entities and international traders cannot be treated alike as they pursue fundamentally different aims.

7. If taken to the extreme, the standpoint described above could lead to the contention that the public interest lying behind the action of States and their offshoots forbids the use of international commercial arbitration - a method of dispute resolution created by and for international traders - to resolve disputes involving public law entities. Those who take a more moderate political standpoint accept that States and their offshoots have the capacity to submit disputes to arbitration in international affairs, but argue that international commercial arbitration should be adjusted as far as they are concerned, so as to take account of the purpose of State machinery, which is to protect the public interest.

Thus, legal language reflects not only economic realities and needs but also - although less often nowadays - political directives from States and, sometimes, from the international community.

8. Fouchard, Gaillard and Goldman justify applying the concepts and rules of international commercial arbitration to State contract arbitration as follows:

First, because public law bodies are increasingly frequently involved in international trade. Second, because their public law status (of which the other contracting parties may be unaware) does not always affect the rules governing the contract and any international arbitration in which they participate. Where that status does give rise to a special regime, it is important to reconcile the application of that regime with the requirements of international trade, particularly the need for ensuring the respect of agreements freely entered into by the parties.¹⁴

The expression 'the respect of agreements freely entered into by the parties' could in our view be replaced with that of 'the protection of private investments'. The impact that a State's public law is likely to have on an international commercial arbitration should not be allowed to undermine the rights acquired by a foreign company upon entering into a State contract with such State or one of its offshoots.

The ICC system of arbitration: a combined approach

9. In theory at least, State contract arbitration thus lies between economic and political interests, i.e. between a world economic system based on capitalism and a [Page37:] world political system more or less inclined towards socialism, depending on the region, and in many cases still based on the idea of the welfare State. The question therefore is what is the just intermediate - to use Aristotle's language - between the economic and political standpoints? How can both respect of international commercial transactions and the public interest be taken into account? Neither of the standpoints described above fully covers the needs and issues arising from State contract arbitration. Admittedly, when a public law entity agrees to resort to international commercial arbitration, it must abide by the 'rules of the game'. Yet are these rules suited to all players, including those who are not seeking to make a profit? International commercial arbitration has a duty to take into account the political and legal concept of public interest, the purpose of which is the well-being of the world's populations.

10. Is the ICC arbitration system capable of reconciling respect of international commercial transactions and the public interest? In 1985, Sigvard Jarvin, then General Counsel at the ICC Court of Arbitration, as it was then called, described the special treatment that would be given to arbitration cases involving a State or public undertaking. ¹⁵ According to Sigvard Jarvin, the Court of Arbitration would have given special treatment to a State party's failure to participate at all in an arbitration, its unwilling participation in proceedings, its objection to the existence or validity of the arbitration agreement, and the independence of the arbitrators nominated by such party.

11. Eighty years of experience and reflection have enabled ICC arbitration to arrive at a 'just intermediate', when dealing with State contracts, between respect of international commercial transactions and the public interest protected by public law entities. This is proved by the fact that many public law bodies and the foreign private parties with which they contract have already put their trust in ICC arbitration, as testified by the statistics of the International Court of Arbitration. States or parastatal entities were parties in 67 of the 541 requests for arbitration filed with the ICC Court in 2000 and in 49 of the 566 requests filed in 2001. The parties involved in the cases registered in 2001 came mainly from Central and East Europe, South and East Asia, sub-Saharan Africa and Latin America. It would therefore appear that most of the public law bodies that take part in ICC arbitrations come from developing countries.

12. The universality and flexibility¹⁶ of the ICC Rules of Arbitration, especially those of 1998 (hereafter the 'Rules'), have allowed the International Court of Arbitration, ICC arbitrators and State courts to develop international commercial arbitration practice relating to State contracts that takes into account both the interests of international commercial arbitration, including the certainty of transactions, and the public interest, which States and their offshoots are supposed to embody and protect. We shall consider each of these requirements in turn.

Certainty of transactions in ICC arbitration relating to State contracts

13. The respect of transactions is claimed to be amongst the ingredients of lex mercatoria identified by arbitral case law, in particular that of ICC. ¹⁷ Eric Loquin¹⁸[Page38:] includes under this heading the presumption of an international commercial operator's competence, the ineffectiveness of a contract negotiator's lack of authorization, estoppel and - what is of particular interest in the present context - the efficacy of the arbitration clause. The proponents of international commercial arbitration indeed believe that there can be no certainty in international commercial transactions arising from contracts between public law entities and private companies from other countries if the arbitration clauses in such contracts are inoperative.

14. In order to uphold international commercial transactions, the International Court of Arbitration, ICC arbitrators and some State courts have developed practices and rules aimed at putting States and their offshoots on a similar legal footing to international traders when engaging in commercial activities. These rules and practices relate to subjective arbitrability, the fixing of the place of arbitration, and the effects of the arbitration agreement, particularly enforcement of the arbitral award.

Subjective arbitrability

15. According to a traditional analysis, subjective arbitrability refers to the capacity of States and their offshoots to submit disputes to arbitration. In other words, whether or not a public law entity may agree to arbitration is not strictly a question of arbitrability, according to traditional contract theorists, ¹⁹ but merely one of capacity.

16. The implication of considering this question as one of capacity is that any dispute over whether or not a State party can refer disputes to arbitration must be subject to the law applicable to its contractual capacity. In civil law countries, capacity is governed by the law of the country of which the person is a national. ²⁰ In common law countries capacity is governed by the law of the country where the person is domiciled or resident. Thus the capacity of a State party to agree to arbitration is necessarily governed by the law of the State to which it belongs or where it is domiciled, i.e. the law of that State party. What happens if the legislation or case law of the applicable system forbids the State and its offshoots to submit disputes to arbitration?

17. In order to avoid applying the law of the public body involved, French case law and Swiss legislation have preferred to treat the question as one of subjective arbitrability. By so doing, they ensure that, as far as international matters are concerned, whether or not a State can agree to arbitration is governed not by the law applicable to its contractual capacity but by the law applicable to the arbitration agreement. In France, subjective arbitrability is now governed by the substantive rules of French international commercial arbitration law as laid down in the decisions handed down by the Court of Cassation in the Galakis²¹ and Dalico²² cases. In Switzerland, Article 177(2) of the Private International Law Statute refers explicitly to arbitrability. ²³[Page39:]

18. When a State party objects that it has no capacity to agree to arbitration, international arbitrators - and especially those acting under the auspices of ICC - readily maintain that such a party cannot legitimately shirk the obligations resulting from the arbitration agreement to which it has freely consented. ICC arbitrators base this assertion, which is now well accepted in arbitral case law, on two grounds - international public policy²⁴ and good faith. ²⁵

19. It would seem that the above-mentioned principles laid down in French and Swiss law, together with the case law resulting from ICC awards, led the international commercial arbitration community to believe that subjective arbitrability was no longer a subject of discussion, but had been settled once and for all. The capacity of public law bodies to agree to arbitrate appeared to have been finally recognized and the certainty of international commercial transactions thereby guaranteed.

20. This was not so, however. In ICC proceedings and elsewhere, several developing States have contended that neither they nor the public entities under their control had the capacity to agree to domestic or international arbitration since their capacity to do so was limited through the concepts of administrative decision and administrative contract.

Limitation of subjective arbitrability through the notion of administrative decision

21. If we take Colombia as an example, the constitutional court and the supreme administrative court have handed down a number of decisions²⁶ recognizing that public law entities have the capacity to agree to domestic and international arbitration, with the reserve that no dispute arising from an administrative decision issued by a public body could be submitted to arbitration. Administrative courts therefore have exclusive jurisdiction over disputes arising from such decisions, especially those relating to their validity.

22. In Colombia, the notion of administrative decision is very broad. ²⁷ Generally speaking, any manifestation of a government body's will, even oral or de facto, constitutes an administrative decision. It follows that Colombian government bodies issue administrative decisions relating to all stages of a contract, from negotiation through to termination. Consequently, the concept of the administrative decision has precedence in Colombian law and severely limits that of subjective arbitrability.[Page40:]

23. No Colombian party to an ICC arbitration has so far objected to the arbitrability of a dispute on the ground that it results from a decision issued by a public body. An objection of this kind has however been made in an ad hoc international commercial arbitration subject to the UNCITRAL Arbitration Rules. The case concerned a dispute between the public law entity Empresa de Transporte Masivo del Valle de Aburrá Ltda and a Hispano-German consortium. The supreme administrative court accepted the objection.

Limitation of subjective arbitrability through the notion of administrative contract

24. In Mercosur countries, particularly Brazil and Argentina, subjective arbitrability is limited by the notion of administrative contract. In these countries, the State and its offshoots are not entitled to include arbitration clauses in administrative contracts. In Brazil and Argentina, however, when public law entities act as private operators, they may include an arbitration agreement in the private law contracts they sign. ²⁸

25. Arbitrability is therefore dependent on the definition of administrative contract in Mercosur countries. It is not always easy to distinguish between the contracts signed by government bodies in a public capacity and those they sign in a private capacity. ²⁹ Indeed, the breadth of the notion of administrative contract varies according to whether the developing country is more inclined towards protectionism or liberalism.

26. Similar difficulties are found in Lebanese law. In Etat libanais v. société FTML (Cellis) SAL and Etat libanais v. Libancell SAL, ³⁰ the Lebanese administrative court set aside ICC arbitration clauses in contracts it held to be concession agreements on the grounds that (i) they were administrative contracts and (ii) the prohibition of arbitration in administrative contracts is a principle firmly fixed in court decisions and literature relating to administrative law.

27. What is the attitude of the International Court of Arbitration when preliminary questions arise concerning the subjective arbitrability of a dispute? In a recent ICC case, a Latin American State party objected to the validity of the arbitration agreement in its answer to the claimant's request for arbitration. It argued that the main contract containing this agreement - which was a State contract with a private foreign company - was an administrative contract and that the constitution of the country in question prohibited the use of arbitration to settle disputes arising from administrative contracts. Under Article 6(2) of the Rules, ³¹ two options were open to the Court.

28. On the one hand, on the basis of its interpretation and application of the constitutional law of the State involved, the International Court of Arbitration could have inferred that the arbitration could not take place, as arbitration agreements involving the State and its offshoots were forbidden by the constitution. Such a decision would have been detrimental to international commercial arbitration and, in our view, would have infringed the Kompetenz-Kompetenz principle, since the Court's function is to apply the Rules, ³² not national law. The Court could have decided that the validity of an arbitration agreement between a private foreign company and a State [Page41:] whose constitution prevented it from agreeing to arbitration should be brought before the relevant State court.

This first option undermines the certainty of international commercial transactions. Neither good faith nor the honouring of promises would be upheld by referring the dispute to the relevant State court. It is hardly in keeping with international business ethics to enter into a contract and subsequently to maintain that one's own law, which may be unknown or little known to the other party, prevented one from doing so. Does the attitude of the Latin American State in our example uphold the fundamental principle of international trade reflected in the expression pacta sunt servanda?

29. The other option open to the International Court of Arbitration was to apply Article 6(2) positively by deciding that the arbitration should take place. In the event, this is what it did, being satisfied prima facie that an arbitration agreement under the Rules might exist. In so doing, it upheld the value and certainty of international commercial transactions.

30. When a party raises a plea relating to the validity of the arbitration agreement, the International Court of Arbitration confines itself to stating that this agreement may exist, in accordance with Article 6(2) of the Rules, and leaves it to the arbitral tribunal to settle the dispute over its validity. As already mentioned, according to the principle of Kompetenz-Kompetenz, the arbitral tribunal alone has jurisdiction to decide on the law applicable to the arbitration agreement and assess the evidence submitted by the parties concerning their capacity to agree to arbitration and their intention that any disputes between them should be submitted to ICC arbitration.

31. It may happen that when a State party claims, in ICC proceedings, that a dispute cannot be submitted to arbitration due to the nature of the person(s) involved, no agreement has been reached as to where the arbitration should be seated. In that case, the place of arbitration, which often determines the law applicable to the arbitration agreement³³ and, consequently, to the problem of the entitlement of States and their offshoots to agree to arbitration, will be fixed by the International Court of Arbitration, whose decision should aim to ensure that the resulting award will be enforceable at law.

Fixing of the place of arbitration

32. In one of ICC's cases, a Latin American State party and a French company had entered into a contract that included an arbitration clause referring to the Rules but without mentioning the place of arbitration. Pursuant to Article 14 of the Rules, it was therefore up to the International Court of Arbitration to decide where the arbitration should be seated. Invoking the legal guarantees provided by French arbitration law, the French claimant requested the International Court of Arbitration to fix Paris as the place of arbitration. The respondent referred to the fact that the contract had been signed in the capital city of the State to which it belonged and requested the court to designate this city as the place of arbitration. The respondent at the same time contended that the arbitration agreement was void on the ground that under the constitution of the State to which it belonged it was not entitled to agree to arbitration. [Page42:]

33. After considering the facts of the case and the positions of the parties, the International Court of Arbitration (i) decided, pursuant to Article 6(2) of the Rules, that the arbitration should take place (leaving the arbitral tribunal to make the final decision on the validity of the arbitration agreement) and - what is relevant here - (ii) fixed Geneva (Switzerland) as the place of arbitration. In fixing Geneva as the place of arbitration, the International Court of Arbitration implemented two fundamental principles of ICC arbitration. Firstly, it affirmed the principle of the neutrality of the place of arbitration by choosing a place that was neutral in relation to the States to which the parties belonged. ³⁴ Secondly, it made sure the arbitration would take effect and thereby protected the parties' transaction, as Article 177(2) of the Swiss Private International Law Statute³⁵ forbade the Latin American State party to argue in a setting aside action in the Federal Supreme Court that it was not entitled to agree to arbitration under its own law.

34. Locating the arbitration in Switzerland was an attempt to ensure that the commitment made by the State in agreeing to arbitration would be upheld. This was a matter of contractual good faith and the 'ethics' of international contracts - in short, the basic ingredients of lex mercatoria. It would clearly be contrary to good faith if, after entering into an arbitration agreement with a private foreign company unacquainted with the law of the other party to the contract, the public law entity were to seek to have the arbitration agreement declared void when a dispute arises, alleging that its own law prevented it from entering into such an agreement. Acting within the limits of its purely administrative role, the International Court of Arbitration helps to ensure the certainty of international commercial transactions by locating the arbitration in a place that is favourable to State contract arbitration.

35. Nevertheless, fixing the place of arbitration in Switzerland or another location that encourages State contract arbitration does not fully ensure that any award rendered will be legally enforceable. It may be expected that if the arbitral tribunal renders an award rejecting the objection to arbitral jurisdiction raised by the respondent and asserting its own jurisdiction to decide on the merits of the case, the respondent will not succeed in having the award set aside in Switzerland. Nor, on the other hand, will it be an easy matter to have the award on jurisdiction or the final award enforced in the Latin American State to which the defendant belongs.

Effects of the arbitration agreement

The purpose and one, if not the most important, of the effects of an arbitration agreement is to obtain a final decision on the dispute that is enforceable at law. A private company that has entered into a contract with a public law entity from another country may justifiably doubt whether it will be possible to have an award rendered in its favour enforced in that country. It might consider seeking provisional or conservatory measures to guard against the risk of non-enforcement. What are the chances of such measures being successful when imposed upon a public law entity? This highly political question, to which State courts in countries with liberal arbitration laws have given their attention, concerns State immunity from enforcement. It highlights the opposition between the interests of international commerce and the political values enshrined in the expression public interest. ³⁶[Page43:]

Conservatory and interim measures in State contract arbitration

37. Two paths are open to parties to ICC arbitrations who wish to request conservatory or interim measures: Article 23 of the Rules and the ICC pre-arbitral referee procedure.

38. Article 23 of the Rules allows parties to file an application for conservatory or interim measures with the arbitral tribunal or, if for instance no arbitral tribunal has yet been constituted or in the event of emergency, the competent State court.

39. A State that has adopted the French distinction between private and administrative law is in our view unlikely to allow an arbitral tribunal - in other words, a private authority - to grant conservatory or interim measures in favour of a foreign private company and against a public law entity belonging to the State in question. ³⁷ One could expect this to be all the more so when the conservatory measure entails the seizure of property in the territory of that State. In such situations, there would be reason to apply Article 23(2) of the Rules, which allows parties to apply to the relevant judicial authority for interim or conservatory measures 'in appropriate circumstances' after the file has been transmitted to the arbitral tribunal. Indeed, a request by a private company for interim or conservatory measures against a public law body may be considered to be one of the 'appropriate circumstances' referred to in this article, which further states that such a request to the competent judicial authority (usually the administrative courts of the State in question) may not be deemed to be an infringement of the arbitration agreement.

40. The private foreign company that seeks conservatory or interim measures against the public law entity with which it has contracted may face a twofold problem. On the one hand, these measures may need to be granted urgently, yet the arbitral tribunal may not have been constituted at that point. On the other hand, the private company may have reason to doubt the independence of the administrative court of the State to which the other party belongs and, hence, the likelihood of obtaining from such court the conservatory or interim measures it seeks. In this case, it could consider using ICC's pre-arbitral referee procedure.

41. The ICC Pre-Arbitral Referee Rules came into force on 1 January 1990. ³⁸ They instituted a procedure for taking quick decisions when difficulties arise in contractual relations. These decisions are taken by a third party empowered to order emergency interim measures.

42. Use of these Rules presupposes a written agreement between the parties either at the time they entered into their contract or subsequently. This perhaps explains why the procedure met with little success in its early years, as it was rare for contracts to include references to this procedure and even rarer for parties to agree to use it after a dispute had arisen. Recently, however, the procedure has been applied in three cases on the basis of the dispute resolution clauses the parties had included in their contracts. ³⁹

43. The ICC pre-arbitral referee procedure may prove to be particularly useful in relation to State contracts. ⁴⁰ It offers a way of overcoming fears about the lack of independence of State courts vis-à-vis the State to which the public law entity belongs. Private parties to State contracts that wish to protect the rights they have acquired and the certainty of international commercial transactions would therefore be well-advised [Page44:] to suggest that the standard clause recommended by ICC⁴¹ or a similar provision be included in the dispute resolution clause.

44. In our view, the validity of a contractual clause authorizing a third party to order urgent interim or conservatory measures with respect to a public law entity cannot be taken for granted however. In Lebanon, for instance, in light of the previously mentioned decisions of the administrative court, ⁴² it is unlikely that the seizure of the property of a public entity ordered by a third party whose powers derive from a contractual clause would be accepted. The conflict between the interests of international trade and the public interest means that considerable risk and uncertainty hover over the granting of conservatory or interim measures against a public entity by a private judge - be it arbitrator or third party with emergency powers - before the start of an arbitration relating to a State contract or during arbitration proceedings. Private companies contracting with foreign public law entities would be better served by ensuring the enforceability of a final award rendered in their favour against the public party to the contract.

State immunity from enforcement

⁴³

45. It is important, we believe, to salute the latest decision from a French court regarding immunity from enforcement in the context of ICC arbitration. In its judgment of 6 July 2000, the Court of Cassation held that 'the principles of international law governing the immunities of foreign States and Article 24 of the Rules of Arbitration of the International Chamber of Commerce are violated by the decision which, in ordering the release of seizures, held that it had not been established that the State in question had waived immunity from enforcement and that acceptance of an arbitration clause cannot lead to the assumption that this immunity, which is distinct from judicial immunity, has been waived, whereas the undertaking by the State that had signed the arbitration clause to carry out the award in accordance with Article 24 of the ICC Rules of Arbitration implied that said State waived immunity from enforcement'. ⁴⁴ This decision, which undoubtedly aims to ensure the certainty of international commercial transactions, raises what we believe to be two interesting legal questions. They concern the legal status of Article 24 of the 1988 Rules of Arbitration⁴⁵ and the true import of the principle laid down by the Court of Cassation in this judgment.

46. It could be considered that the French Court of Cassation raises article 24 of the 1988 Rules of Arbitration to the status of a general principle of international commercial law, that is to say one of the principles of lex mercatoria. One could even add that the Court of Cassation considers these Rules as forming part of lex mercatoria. The inclusion of Article 24 of the Rules amongst the instruments cited at the start of the judgment⁴⁶ bears out such an interpretation. We believe, however, that there are two different ways of interpreting this reference.

47. On the one hand, it is conceivable to think that, in referring to Article 24 of the 1988 Rules at the beginning of its judgment, the Court of Cassation regarded it as a principle of public international law relating to State immunity. This principle would consist in saying that whenever a State or one of its offshoots enters into an arbitration agreement that refers to a set of rules containing a provision equivalent to Article 24 of the 1988 ICC Rules or Article 28(6) of the 1998 ICC Rules, the State or public [Page45:] undertaking in question waives its immunity from enforcement. Hence, the aforementioned articles could be said to contain a principle of public international law. ⁴⁷ Were this interpretation correct, the reference to Article 24 of the 1988 version would be superfluous, as the Court of Cassation could have simply referred to international law governing the immunities of foreign States at the start of its judgment.

48. The alternative would be to consider the reference to Article 24 of the 1988 Rules from a purely contractual angle, as Philippe Leboulanger does in his commentary on the judgment: 'Given that the Rules of Arbitration are incorporated in the arbitration agreement, they share its contractual nature and are similarly binding. Thus, the reference to the Rules of Arbitration is simply the necessary consequence of Article 1134 of the Civil Code, to which the Court of Cassation did not have regard explicitly but which it necessarily did so implicitly. In so doing, it solemnly raised the provisions of a set of arbitration rules to which the parties referred in their arbitration agreement to the status of a legal rule. Is this to say that the principle of pacta sunt servanda is both the source of the waiver of immunity from enforcement and the limit of such immunity?' ⁴⁸ The answer to this question should be yes. In our view, it is clear that in putting the private and public legal entities Creighton and the State of Qatar on an equal footing, the Court of Cassation wished to uphold the certainty of transactions, the commitment made, 'contractual ethics', good faith and, furthermore, the efficacy of the arbitration agreement and international commercial arbitration as a method of resolving disputes arising from State contracts.

49. However, the Creighton judgment should not be considered as a panacea. Its significance has been considerably tempered and limited through the identification of the public property which the private company could ask to be seized in connection with the enforcement of an arbitral award against a public law entity. For instance, the Paris Court of Appeal indicated that the implicit waiver of immunity from enforcement affirmed by the Creighton judgment applies only to the property of a State or its offshoot that is not put to the use of a public service. ⁴⁹ The problem has therefore shifted, at least in French law, to that of determining the use to which State property is put. Our impression, however, is that most, if not all, of the property of States and their offshoots is intended sooner or later and more or less directly for a public service activity.

* * *

50. Are the certainty of international commercial transactions and the equality of the parties the sole reasons for neutralizing expressions such as subjective non-arbitrability, banning of public law bodies from agreeing to arbitration and State immunity from enforcement through the use of their antonyms subjective arbitrability and waiver of State immunity from enforcement? Such use of language would appear above all to reflect the intrusion of the public interest into arbitration proceedings relating to State contracts.

Public interest in ICC arbitration relating to State contracts

51. Should international commercial arbitration concentrate on international commerce and free trade to the neglect of the common good? The answer which the [Page46:] International Court of Arbitration and some State courts have given to this eminently political question is no, since they have taken account of the distinction between public and private law entities in the decisions they have rendered. In particular, consideration has been given to the purpose of State machinery when analysing the formation of the arbitration agreement, the constitution of the arbitral tribunal and the scrutiny of the draft award.

The formation of the arbitration agreement

52. Not enough stress is laid on the fact that the arbitration agreement is a contract as in the meaning of Article 1101 of the French Civil Code, according to which a contract is an agreement whereby one or more persons assume obligations towards one or more others to give, do or refrain from doing something. As a contract, an arbitration agreement creates an obligation to do (for instance, to submit to arbitration '[a]ll disputes arising out of or in connection with the present contract', to quote the terms of the standard ICC arbitration clause), to refrain from doing (for instance, not to bring an action in a State court in the event of a dispute arising out of or in connection with the contract), and to give (for instance, in the case of ICC arbitration, to pay the advance to cover the costs of the arbitration). Article 1108 of the French Civil Code lays down the conditions that are essential for agreements to be valid, on the basis of which French civil law scholars⁵⁰ have affirmed that four requirements must be satisfied for a contract to be legally made: the parties' consent must be unflawed, the parties must have the capacity to contract, the subject matter of the contract must be certain and lawful, and its cause must likewise be lawful.

53. To begin with, it is interesting to note that the leading scholars⁵¹ in the field of international commercial arbitration do not elaborate on the cause of arbitration agreements. ⁵² They could indeed be described as 'anti-causalist'. ⁵³ They have preferred to deal with consent to an arbitration agreement, the capacity to agree to arbitration, and the subject of arbitration agreements. As we have seen, ⁵⁴ legislation and case law favourable to international commercial arbitration consider capacity to agree to arbitration in terms of subjective arbitrability. As far as we know, the problem of the subject matter of arbitration agreements, i.e. objective arbitrability, very rarely arises in relation to State contracts. We shall therefore look at consent to an arbitration agreement relating to a State contract, followed by subjective arbitrability, both in the context of ICC arbitration.

Consent to an arbitration agreement relating to a State contract

54. Scholars of international commercial arbitration have given more attention to the formation, preciseness and, above all, the scope of such consent than to its validity. ⁵⁵ It is true that the validity of consent may be challenged in arbitral proceedings relating to a State contract. For instance, the State party could allege that it gave its consent to the international commercial arbitration agreement in the belief that it retained the right to refer certain disputes to an administrative court in its own State. ⁵⁶ More often than not, however, the question of consent to an arbitration agreement arises in connection with its scope, ratione personae and ratione materiae. [Page47:]

Ratione personae scope of consent to an arbitration agreement relating to a State contract

55. The question is whether privity⁵⁷ of contract is absolute in arbitration. Can the effects of an arbitration agreement be extended to a person who has not signed it? This question arises, for instance, when, in a request for arbitration, the claims are directed not only at the party with which the claimant has contracted but also the parent company of such party, if it is a private law company, or the State to which such party belongs, if it is a public law entity. If public bodies are concerned, the International Court of Arbitration would appear to be more stringent as regards the prima facie evidence the claimant should provide. The claimant will generally be expected to produce a document clearly showing that the State took part in the negotiation, conclusion, performance or termination of the contract. This leads us to make the following remarks.

56. The International Court of Arbitration adopted this more stringent practice vis-à-vis public law entities in the wake of the famous Westland and Pyramides cases, for which it had been criticized.

57. In the Westland case, ⁵⁸ the claimant filed an arbitration request directed not only at the party with which it had contracted, but also the four States that had created this party, i.e. Egypt, Qatar, Saudi Arabia and the United Arab Emirates. In its answer to the arbitration request, the Egyptian State objected to the jurisdiction of the International Court of Arbitration and, by way of consequence, that of the arbitral tribunal, alleging that it had not signed the contract containing the arbitration clause on the basis of which Westland had submitted its request for arbitration. The Court decided, prima facie, that the arbitration should take place against the four above-mentioned States and that, therefore, the final decision on whether or not there was an arbitration agreement between Westland and those States should be made by the arbitral tribunal. In accordance with the principle of Kompetenz-Kompetenz, the arbitral tribunal decided in an interim award that it had jurisdiction to hear the dispute and that, since the States might bear responsibility, the effects of the arbitration agreement should extend to them. At the request of the Egyptian State, the interim award was set aside in the Swiss courts.

58. In the Pyramides case, the claimant similarly filed a request for arbitration directed not only at the party with which it had contracted but also the Egyptian Arab Republic. The latter objected that the International Court of Arbitration and the arbitral tribunal that would be constituted had no jurisdiction over it since it had not signed the arbitration agreement on the basis of which the arbitration request had been entered. The claimant questioned this allegation, as the Egyptian Minister of Tourism had signed the contract and added the wording 'approved, accepted and ratified'. Satisfied, prima facie, that there might be an arbitration agreement between the claimant and the Egyptian State, the Court left the arbitral tribunal to decide on its own jurisdiction. The tribunal issued an award declaring that it had jurisdiction. The Court of Appeal of Paris, ⁵⁹ which was the place of arbitration, set aside the award and its decision was subsequently upheld by the Court of Cassation. ⁶⁰

59. The International Court of Arbitration's greater stringency over ratione personae consent when the party that did not sign the arbitration agreement is a State does not appear to result from the fact that the Westland and Pyramides awards were set aside but from the legal basis on which they were set aside and which explains [Page48:] why a distinction is made between straight international commercial arbitration and State contract arbitration. It is generally agreed that arbitrators are the natural judges of international commercial disputes between private parties and that State courts are an exception in such cases. On the other hand, when a public body is involved, arbitration becomes an exception to the State's judicial immunity rather than the natural means of dispute settlement. This explains the International Court of Arbitration's approach in each case. As international commercial arbitration is indisputably the natural method of resolving disputes between private parties of different nationalities, the Court will be more inclined to decide that an arbitration should proceed against a private company that has not signed an arbitration agreement, provided that the claimant brings before it, for example, a plausible allegation, unchallenged by the other party, that the party that did not sign took part in the negotiation, conclusion, performance or termination of the contract containing the arbitration agreement. However, when the party that did not sign the arbitration agreement is a public law entity, especially a State, the Court will undertake a more rigorous prima facie analysis of whether or not an arbitration agreement might exist with respect to this party. Strong supportive evidence will be required for a positive decision. The International Court of Arbitration thus takes account of the public interest underlying the activity of State machinery in the way it interprets and applies the ICC Rules of Arbitration.

60. The practice described above has been confirmed by the International Court of Arbitration in a recent case. The claimant, a private Italian company, filed a request for arbitration against the ministry of electricity of an African State and the African State in question itself. In its answer to the arbitration request, the African State objected to the jurisdiction of the International Court of Arbitration and the arbitral tribunal on the ground that it had not signed the contract containing the ICC arbitration clause. This contract had allegedly been signed by the claimant and the ministry alone. The Secretariat of the Court invited comments from the claimant, which pointed out that the State had itself approved the conclusion of the contract and that it had moreover participated in its negotiation, conclusion and performance. However, it did not provide any evidence - not even prima facie - to support its allegation. Given the lack of prima facie evidence of a possible arbitration agreement between the claimant and the State, the Court decided that the arbitration could proceed solely between the claimant and the ministry. This case shows that the International Court of Arbitration continues to be rigorous when considering whether, prima facie, there might be an arbitration agreement between a private company that has signed the arbitration agreement and a public law entity that has not. In our view, therefore, the public interest continues to have an impact on its practice.

61. A similar conclusion is reached when one looks at another kind of situation illustrated by four recent cases. In each case, the claimant, a private company, filed an arbitration request against a foreign State or an offshoot of a foreign State. In its answer to the request, the respondent asked for a third party to be joined in the arbitral proceedings, i.e. the State to which the public offshoot concerned belonged or a State offshoot.

62. The International Court of Arbitration adopts a rather conservative approach to requests for the joinder of third parties. In the past, it was thought that only claimants could identify the parties to arbitration proceedings and that the respondent(s) could under no circumstances have a third party joined in the proceedings. This practice [Page49:] has recently been moderated in two cases involving private parties only and in a third case involving a State party. It should be noted that in these cases the respondent submitted a counterclaim against both the claimant and the third party. Furthermore, the third party had signed the contract that contained the arbitration clause on the basis of which the request for arbitration was made. It may be inferred that, in order for the Court to accept the joinder of a third party requested by the respondent, two conditions must be satisfied. Firstly, the respondent must have made claims against the third party and, secondly, the third party must imperatively have signed the contract containing the arbitration clause on the basis of which the request for arbitration is made. In three of the four previously mentioned cases involving public bodies, the Court decided not to accept the joinder of the third party, as one or other of these conditions was not met.

63. So long as the public interest continues to be valued, the problem of ratione personae consent to an arbitration agreement relating to a State contract will remain a difficult and sensitive question, which the International Court of Arbitration can resolve only on a case-by-case basis. This is also true of ratione materiae consent.

Ratione materiae scope of consent to an arbitration agreement concerning a State contract

64. Here the question is that of identifying the disputes which, by entering into an arbitration agreement, the parties wish to submit to arbitration. Two types of situations in which State contracts may be at issue need to be considered. Firstly, when large infrastructure projects are being carried out, it will often happen that a private company and a public law entity from two different countries enter into several State contracts relating to the project. The question then arises as to whether several disputes arising from a group of State contracts can all be settled by a single arbitral tribunal in the same proceedings. Secondly, although contractual disputes can unquestionably be submitted to arbitration, what is the situation as far as extra-contractual disputes are concerned?

65. The International Court of Arbitration has so far had to deal with the first of these situations only in connection with disputes involving private parties. A typical scenario would be as follows. For the purpose of carrying out a project such as the construction of a power plant or a motorway two traders enter into three contracts, each of which imposes different obligations on the contracting parties. Firstly, the parties enter into a framework agreement setting out general obligations relating to liability during the implementation of the project. They then sign a construction agreement whereby one of them undertakes to carry out the work required to construct the power plant or motorway and the other agrees to pay a certain amount as fees in return. Lastly, the parties enter into a joint venture agreement, whereby a common company is created to administer project finances and engage subcontractors, if need be. These three contracts give rise to disputes. The project owner, acting as claimant, files a single arbitration request against the constructor with which it has contracted, asking for an arbitral tribunal to settle its claims relating to all three contracts. In its answer to the arbitration request, the respondent objects to the jurisdiction of the International Court of Arbitration and the arbitral tribunal, arguing that when the parties entered into the three contracts, they intended that the disputes arising from each contract should be settled by separate methods and that therefore, legally, the claims relating to the [Page50:] three contracts could not be grouped together in the same proceedings. The respondent concludes that, pursuant to Article 6(2) of the Rules, the Court should decide against a single arbitration covering all three contracts.

66. When faced with this kind of situation in relation to private parties, the International Court of Arbitration has decided, after conducting a prima facie analysis in accordance with Article 6(2) of the Rules, that the arbitration could proceed when three conditions are met, namely: (i) the parties to each of the contracts comprising the group of contracts must be identical, (ii) the contracts must be linked to the same economic project, and (iii) the arbitration agreements in these contracts must at the very least be consistent with each other. A number of remarks may be made about this practice.

67. Firstly, it could be considered that the issue does not come within the scope of Article 6(2) of the Rules, but is instead a complex procedural problem. ⁶¹ The question in that case would not be to know whether an arbitral tribunal has jurisdiction to decide all of the disputes arising from all of the contracts - if all the contracts contain an arbitration clause, an arbitral tribunal should in theory have jurisdiction over the disputes arising from them - but to know whether the claims relating to several contracts can be dealt with in the same arbitral proceedings.

68. The International Court of Arbitration has preferred to deal with this kind of situation as an objection based on the ratione materiae scope of consent to the arbitration agreement and thus relating to arbitral jurisdiction. ⁶² It consequently applies Article 6(2) of the Rules.

69. Can the International Court of Arbitration's practice in dealing with arbitration requests relating to groups of contracts between private parties also be applied when public law entities are involved? It would be difficult to give a general answer, as the Court's decisions are made on a case-by-case basis and each case has its particularities. However, given the Court's greater stringency in relation to ratione personae consent, it could be expected to adopt a stricter practice when faced with a group of State contracts too. In this case, its position might well be that claims relating to several contracts can be dealt with together in the same proceedings if the parties to the various contracts are strictly identical. If, in the scenario described above, the framework agreement has been signed by a State and the construction and joint-venture agreements by a national motorway company fully controlled by the State, would it be possible to consider the parties to the three agreements as identical? Would it be possible to join the disputes arising from the three State contracts in a single arbitration?

70. The International Court of Arbitration might be more stringent with regard to the third requirement too (i.e. that the arbitration agreements included in the group of contracts must be consistent with each other), when State contracts are involved. When the parties are all private, consistency means, for example, that a single arbitration could not take place if the arbitration agreements provided for different places of arbitration or different methods of constituting the arbitral tribunal. A clause which designates Paris as the place of arbitration and provides for a three-member tribunal would, for instance, be compatible with a clause that does not mention a place of arbitration and simply states that disputes may be submitted to one or more arbitrators. When it comes to a group of State contracts, will the Court require that the arbitration clauses are not merely consistent but identical? We would tend to [Page51:] think not. However, the International Court of Arbitration may be more inclined to decide in favour of a single arbitration if the various State contracts comprising the group refer to each other or include clauses providing for the consolidation of disputes arising from the contracts.

71. As regards the question of whether consent to arbitration covers extra-contractual disputes, the answer in theoretical terms is somewhat uncertain. ⁶³ By contrast, ICC arbitrators have adopted an extremely simple and pragmatic approach, as illustrated by the following examples.

72. In one case, a private Italian company and an African public entity had entered into a construction contract which gave rise to several disputes. An agreement was made to submit these disputes to ICC arbitration, on the basis of which the Italian company filed a request for arbitration with ICC. The arbitral tribunal was constituted and, in collaboration with the parties, it then drew up the Terms of Reference. In its initial pleadings the claimant presented new claims of an extra-contractual nature linked to the performance of the construction contract. The African company alleged in reply that the arbitral tribunal had no jurisdiction to hear these new claims as they had not been included in the Terms of Reference. It further alleged that the extra-contractual claims could not be submitted to arbitration which was exclusively and specifically conceived for the settlement of contractual disputes. The arbitral tribunal stated that its jurisdiction did not derive from the Terms of Reference, the main purpose of which was to organize the arbitral proceedings, but from the parties' agreement to submit the disputes to arbitration. This agreement provided that 'any dispute between [the parties] linked to the performance of the construction contract' should be submitted to arbitration. Taking the view that the Italian company's extra-contractual claims had a definite link with the performance of the construction contract, the arbitral tribunal held that it had jurisdiction to hear and decide the dispute between the parties relating to the extra-contractual misconduct of which the African State party was accused. It should be pointed out that in coming to this finding the arbitral tribunal confined itself to reading and interpreting the terms of the arbitration agreement and did not find it necessary to examine the rules of law applicable to that agreement.

73. In another case, the arbitral tribunal took a similar approach. A private French company entered into a construction contract with an African public entity. During the performance of the contract, the French company came to the conclusion that the African party had not acted in good faith when negotiating the contract, since it had allegedly failed to disclose all the information that the French company needed to carry out the work. The French company filed an arbitration request, alleging pre-contractual misconduct on the part of the African public entity. In its answer, the latter objected to the jurisdiction of the arbitral tribunal on the ground that the French company's claim was of an extra-contractual nature and did not come within the scope of the ICC arbitration clause included in the construction contract. The arbitral tribunal noted that the arbitration clause contained the following expression 'any dispute arising out of or in connection with the present contract' and decided that the pre-contractual dispute was definitely connected with the construction contract and that it therefore had jurisdiction over the dispute.

74. We believe the pragmatism of ICC arbitrators when faced with pre-contractual misconduct to be entirely justified. It cannot be denied that misconduct committed [Page52:] in connection with the contract but before it is signed comes within the scope of the arbitration agreement. This conclusion is confirmed by the two fundamental principles underlying arbitration law: the autonomy of the arbitration agreement, which allows arbitrators to decide whether or not the main contract is void even if this is due to a cause that preceded the conclusion of the contract, and Kompetenz-Kompetenz, which allows arbitrators to hear a dispute over the validity of the arbitration agreement even if the defect it contains preceded the making of the agreement.

75. The pragmatism of ICC arbitrators is open to criticism, however, when they are faced with genuine extra-contractual misconduct on the part of a public entity. Indeed, legal systems which, like the French, distinguish between civil and administrative law, give administrative courts exclusive jurisdiction over disputes relating to the extra-contractual liability of the State or a State offshoot. ⁶⁴ Thus, the complex question arises of whether international arbitrators should automatically enquire if there are any mandatory rules giving the administrative courts of a State exclusive jurisdiction over disputes relating to the extra-contractual liability of that State or any of its offshoots. It is not our intention to go into the question of the application of public policy laws by international arbitrators. We would simply point out that, when confronted with a dispute arising from a State contract, international arbitrators should ask themselves whether or not there are any mandatory rules of the State involved that should be applied. In so doing they would safeguard the public interest that underlies the activity of State machinery. In our view, this alone will give developing States the necessary confidence to include arbitration agreements in the State contracts they sign and to take part in international arbitration proceedings.

76. The word confidence highlights the psychological element in State contract arbitration. Developing States are often wary of international commercial arbitration. This wariness is often seen in a State's executive authority, which refuses to take part in the arbitration or to fulfil the obligations arising from an award made against it. More serious, however, is the situation in which the administrative courts of the State in question display similar mistrust, for example in proceedings brought to enforce or set aside an award. Such mistrust has caused the concept of subjective arbitrability to be called into question.

The fate of subjective arbitrability

77. As we have seen, ⁶⁵ the use of language by the Colombian and Lebanese administrative courts has had the effect of neutralizing the concept of subjective arbitrability through those of administrative decision and administrative contract. We are of the opinion that the stance taken by these courts reflects an extreme political view, giving total supremacy to the public interest. If all other developing States that take part in international arbitration were to do likewise, the concept of subjective arbitrability would be doomed. However, we believe such neutralization to be ill-founded.

78. Colombian and Lebanese legislation expressly allows the State and its offshoots to agree to arbitration. ⁶⁶ The courts in these countries are wrong to have limited this possibility. As some commentators have pointed out, ⁶⁷ they appear to have forgotten that States and their offshoots often engage in international commerce. They [Page53:] furthermore overlook the distinction between State and government to which Pierre Mayer has drawn attention:

To assess the extent of a sovereign State's involvement in a relationship with a private person, it should be said that 'sovereign State' means an entity distinct from the 'State administration', which is the usual party to domestic administrative contracts . . .

The word 'State' does not have the same meaning when used internally and internationally.

When one refers to relations between a citizen and the State - be it the duty to pay taxes, the State's liability for the poor functioning of a public service such as justice or the police, or a civil servant's right to be paid a salary - the word State is used to mean 'State machinery' or administration. It constitutes the phenomenon of 'government' (in the broad sense of the word) which, together with those of population and territory, forms what is known as the State in public international law. It is significant that the word 'government' is used in English to refer to the former meaning as distinct from 'State' which has the second meaning. ⁶⁸

State and administration are nowadays confused with each other, as legal language uses the term State to refer to both. According to Pierre Mayer, ordinary language can help us to dispel this confusion:

The distinction [between State and administration], although not unknown, is hardly ever made. Almost always, reference is simply made to the 'State' without specifying in what sense the word is used. Besides, it is very difficult to analyse the difference between the two concepts. One can most easily acquire an intuitive view of this outside the legal field. It is clear that when a French businessman deplores what he believes to be the excessive role which the French State plays in the workings of the economy and on the other hand delights in the position France holds in the world economy, he is not talking about the same thing on each occasion. In the first case, he is speaking in a domestic context and sees the State as distinct from, or even in conflict with, himself: he is complaining about the State administration. In the second case, he has in mind the French State as opposed to other States, in an international context; he is a constituent part - albeit a small one - of such State, which he no longer considers as the administration that persecutes him but as the nation to which he belongs. ⁶⁹

We believe the distinction between State and administration to be crucial to determining the law applicable to administrative contracts and State contracts.

79. In the domestic sphere, government bodies contract with private parties of the same nationality as themselves. In those countries which distinguish between administrative and private law, such contracts are governed either by administrative law - in which case, the government body enjoys certain prerogatives of public authority -, or by private law - in which case, the government body and the private party are placed on an equal footing. The distinction between private and administrative law applies to both government bodies and private persons belonging to the same State because it derives from an authority - the State legislator - that has control over them all. ⁷⁰

80. In the international sphere, a State cannot plead for rules which it has made itself to be applied to a State contract with a foreign private company. Such rules are not heteronomous with respect to the two parties and therefore, strictly speaking, not legal. ⁷¹ In other words, in international matters, a State cannot plead against a foreign private party with which it has contracted that the legal categories applicable to relations between the administration and individuals of the same nationality as that administration be applied. In the words of Pierre Mayer, [Page54:]

the very concept of State contract (stricto sensu) excludes the application of the State's law to the contractual relation . . . As regards classification under private or public law, this is not in fact a problem at all. The State's presence rules out classification under private law, and classification under public law presupposes a relationship internal to the State. When a sovereign State is one of the subjects in a relationship, the concept of administration , with reference to which public law is distinguished from private law, is no longer involved; such a situation belongs to another field - the international sphere - in which the traditional distinctions have no place or at any rate do not have the same meaning. ⁷²

81. In Colombia, the supreme administrative court has imposed the domestic concept of administrative decision on foreign private companies. However, according to the above reasoning, a State cannot legitimately issue administrative decisions that produce effects with respect to foreign private companies. Such decisions, which can be issued only by a government body, produce legal effects solely with respect to those governed by that body, that is to say persons of the same nationality as itself. In Lebanon, the administrative court has imposed upon foreign private companies the domestic distinction between private law contracts signed by government bodies and administrative contracts. However, this distinction is valid only internally for contracts between the government body and persons of the same nationality as itself and hence subject to the same law. The only contracts the Lebanese State can make with foreign private companies are State contracts.

82. One may draw the conclusion that the concepts of administrative decision and administrative contract are part of the domestic legal language created by the Colombian and Lebanese States to allow government bodies, which protect the public interest in these two countries, to use prerogatives of public authority in their relations with those they govern. It would be inappropriate and misleading to use these concepts in relation to State contracts, as evidenced by the aforementioned decisions of the administrative courts in both countries.

83. These decisions would appear to have been aimed at protecting the public interest. The fact that this purpose was achieved may give the impression in the short term that they were sound political measures. We doubt this however. Given that the grip of globalization is now growing stronger and stronger and the survival of nations is increasingly linked to their exchanges with other nations, is it in the public interest to annul an arbitration agreement on questionable grounds and thereby undermine the certainty of transactions and discourage potential private foreign investors? It is more than likely that in the medium and long term the Colombian and Lebanese decisions will be contrary to the public interest due to the resulting legal uncertainty for international investment contracts in such countries.

84. Furthermore, the Colombian and Lebanese courts appear to have overlooked the advantage of international commercial arbitration's neutrality. In a situation such as this, where, for reasons of judicial immunity, the public law entity - and the State in particular - cannot submit a dispute arising from a State contract to a foreign court, and the foreign private company - rightly or wrongly - is unable to have complete trust in the courts of the State to which the public body with which it has contracted belongs, international commercial arbitration offers a way out of the stalemate.

85. Colombia and Lebanon would appear to be distrustful of arbitration, believing that private justice would favour the private interests of the private foreign company to the detriment of the public interest expressed and protected by the public law [Page55:] entity. This is why these nations prefer to submit disputes arising from State contracts to the administrative courts of the State in question rather than have them decided by an arbitral tribunal.

The constitution of the arbitral tribunal

86. Plato argues that the most sacred tribunals are those which the parties have created themselves and whose members are elected by mutual agreement. ⁷³ Indeed, it is highly likely that the parties will have greater confidence in a tribunal they have constituted themselves than, for instance, in one imposed upon them by the State or by a dispute resolution organization. The two expressions constitution of the arbitral tribunal and confidence are therefore closely linked to each other.

87. The practice of the International Court of Arbitration with regard to the constitution of an arbitral tribunal to decide a dispute arising from a State contract is therefore strongly marked by the notion of confidence. Given that the participation of the parties in arbitration proceedings is a key to their having confidence in such proceedings, the Court tries to win the confidence of public law bodies by ensuring (i) that State parties take part, despite their occasional hostility towards arbitration and their unwillingness to take part in arbitral proceedings initiated against them; and (ii) that State parties nominate at least one of the members of the arbitral tribunal who, although independent of this party, will nevertheless be able to ensure that the position of the public law entity will be duly analysed and taken into consideration when the tribunal deliberates and renders its award. The active involvement of a State party in arbitral proceedings will also increase the likelihood of its spontaneously performing any award rendered against it.

88. The International Court of Arbitration's practice in relation to the constitution of the arbitral tribunal further aims to uphold the public interest protected by public law entities. This can be seen at three stages of the procedure: when fixing the number of arbitrators, when considering the independence of arbitrators nominated by a State or one of its offshoots, and when appointing an arbitrator on behalf of a State party that has failed to nominate one.

Protection of the public interest through the determination of the number of arbitrators

89. The parties to a dispute arising from a State contract often decide themselves on the number of arbitrators who will hear the case, either in the arbitration clause or an agreement reached when the dispute arises. Parties more often than not prefer to submit this kind of dispute to a three-member tribunal, which gives the State party greater confidence in the proceedings, as it can nominate one of the arbitrators itself.

90. However, there are times when the parties have not agreed on the number of arbitrators. In this case, Article 8(2) of the Rules provides that 'the Court shall appoint a sole arbitrator, save where it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators'. The Court decides to submit a dispute to a three-member tribunal when, using the freedom it is given by Article 8(2) of the Rules, it considers the dispute to be complex. The International Court of [Page56:] Arbitration's case-by-case approach⁷⁴ shows the term complexity to have three different meanings in relation to determining the number of arbitrators.

91. Firstly, this term may refer to the size of the amount in dispute. The International Court of Arbitration infers the degree of complexity of a dispute from the amount at stake, on the basis of the assumption that the higher the sum in dispute the more likely it is that technical or legal difficulties will arise during the proceedings, and that such difficulties would be better settled by a three-member tribunal than by a sole arbitrator.

92. Secondly, the International Court of Arbitration generally considers a three-member arbitral to be justified when a dispute contains legal difficulties relating to substance or procedure. For instance, cases that raise difficult questions relating to the arbitral tribunal's jurisdiction or legally complex issues would be better decided by a three-member tribunal than by a sole arbitrator.

93. Combining these two criteria, the International Court of Arbitration is inclined to submit to a sole arbitrator a dispute where the amount at issue is sizeable but which proves to be fairly simple and therefore easy to settle, and to submit to a three-member arbitral tribunal a dispute involving a smaller amount but at the same time significant legal difficulties.

94. Thirdly, the International Court of Arbitration considers a dispute as potentially complex when it involves a State party. The complexity here arises from the fact that such disputes (i) raise complex problems relating to the arbitral tribunal's jurisdiction (subjective arbitrability), (ii) lead to the application of mandatory or other rules of the State to which the public law entity involved belongs, (iii) have important implications for entire populations⁷⁵ (as is the case, for example, when the subject of the dispute is the construction of a dam or a power station), and (iv) are subject to the influence of political interests and forces.

Protection of the public interest through the independence of arbitrators nominated by State parties

95. Pursuant to Articles 8(2) and 8(4) of the Rules, whenever a dispute is to be submitted to a three-member tribunal, on the basis of the parties' agreement or, failing this, a decision by the Court, each of the parties must nominate a co-arbitrator, who is required to be independent. ⁷⁶ In ICC arbitration, arbitrator independence is an objective quality that may be evaluated. It is a means of assuming an arbitrator's impartiality, which, by contrast, is a subjective quality lying deep within the human consciousness and impossible to evaluate. Conversely, an arbitrator's lack of independence is a means of assuming his or her possible lack of impartiality, that is to say his or her partiality. ⁷⁷

96. Article V(1) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards states as follows:

Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that . . . d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of [Page57:] the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place . . .

Given that the provisions of the Rules, including Article 7(1) relating to arbitrator independence, are part of the arbitration agreement between the parties, an application could be made for an award to be set aside if, at the end of the proceedings, the party against which enforcement of the award is sought provides the court with proof that one of the members of the arbitral tribunal was not independent.

97. The Rules do not define independence. However, its meaning in ICC arbitration would more often than not appear to be above all economic. Unless otherwise agreed by the parties, arbitrators should have no economic or financial links with either the parties or their counsel. If it transpires that an arbitrator nominated by one of the parties has economic or financial ties with one of the parties (it will generally be with the party that nominated the arbitrator) and the other party objects to confirmation of the arbitrator by the International Court of Arbitration or its Secretary General, the Court must examine this objection and decide whether or not the nominated arbitrator should be confirmed. ⁷⁸ When one of the parties to the arbitration is a public law entity and the objection relates to the arbitrator it has nominated, the Court displays flexibility.

98. In a recent case, an Asian State nominated a civil servant in one of its ministries as co-arbitrator. There was clearly an economic relationship between the Asian State and its nominee. Accordingly, the other party, a foreign private company, objected to the confirmation of the arbitrator nominated by the Asian State on grounds of lack of independence. The Court nonetheless decided to confirm the nomination, in light of the following circumstances: (i) most of the nationals of the State involved who were likely arbitrators for the case in question had economic links of one kind or another with the State, (ii) it was therefore very difficult for the Asian State involved to find amongst people who had no economic links with it a person with the necessary attributes to act as co-arbitrator in the case, and (iii) the nominated arbitrator had not been involved in the project which was the subject of the dispute. ⁷⁹

99. This example once again shows the efforts made by the International Court of Arbitration to win the confidence of public law entities by encouraging their participation at all stages of the proceedings. With regard to the designation of arbitrators, it would appear that the Court will refuse to confirm an arbitrator nominated by a State party only if the arbitrator works for the State entity responsible for the project to which the dispute relates or has been involved in that project. In one ICC case, the Court at first confirmed a State party's nomination of a civil servant from the same State as itself as co-arbitrator. Later on, the other party, a private foreign company, discovered that this arbitrator had in fact been involved in the project that was the subject of the dispute and had concealed this fact from the Court. It thus challenged the arbitrator pursuant to Article 11 of the Rules. The Court accepted the challenge and duly replaced the arbitrator.

100. Despite the International Court of Arbitration's efforts to win the confidence of State parties by taking advantage of the flexibility offered by the Rules, State parties often choose not to take part in arbitral proceedings. In such cases, the Court will make a final attempt to win their confidence by appointing an arbitrator from a similar background on their behalf. [Page58:]

Protection of the public interest through the appointment of an arbitrator on behalf of a State party that has failed to nominate one

101. When the arbitration clause provides that the dispute shall be submitted to a three-member arbitral tribunal, each of the two parties should normally nominate a co-arbitrator. What happens if the State party does not take part in the arbitration at all? Articles 8(4) and 9(6) of the Rules provide the answer. The former provides that '[i]f a party fails to nominate an arbitrator, the appointment shall be made by the Court'. The latter states that '[w]here the Court is to appoint an arbitrator on behalf of a party which has failed to nominate one, it shall make the appointment upon a proposal of the National Committee of the country of which that party is a national. If the Court does not accept the proposal made, or if the National Committee fails to make the proposal requested within the time limit fixed by the Court, or if the country of which the said party is a national has no National Committee, the Court shall be at liberty to choose any person whom it regards as suitable.' This latter rule calls for three remarks in relation to State contract arbitration.

102. Firstly, the appointment of an arbitrator on the basis of a proposal from an ICC National Committee in the State to which the State party belongs ensures that at least one of the members of the arbitral tribunal will have the same background as the State party and will be able to make sure that its position is heard and carefully considered. This provision is therefore aimed at winning the confidence of the State party involved and thereby encouraging it to take part in the arbitration proceedings and perform any award that might be rendered against it. The appointment of an arbitrator of the same nationality as the recalcitrant State party also aims to uphold the public interest underlying the activity of State machinery.

103. In a recent case, the respondent - a Latin-American State party - failed to submit an answer to the arbitration request within the 30-day period laid down in Article 5(1) of the Rules and thus chose not to take part in the initial stages of the arbitration proceedings. The arbitration agreement provided for the constitution of a three-member tribunal. In accordance with Article 9(6) of the Rules, the Court appointed an arbitrator of the same nationality as the recalcitrant State party on the latter's behalf. The Secretariat of the Court notified the parties of the appointment made by the Court and immediately afterwards the Latin American State party decided to take part in the proceedings and sent a letter stating its position.

104. Secondly, if there is no National Committee in the country from which the State party originates or if such National Committee is not in a position to make a proposal or its proposal is not accepted by the International Court of Arbitration, ⁸⁰ the Rules authorize the Court directly to appoint the person it considers suitable. It will usually try to appoint an arbitrator of the same nationality as the State party in question, in order to win the latter's confidence and safeguard the public interest.

105. Thirdly, if the International Court of Arbitration fails to find a suitable candidate of the same nationality as the State party involved, it chooses a person from a country in the same region as the State party and having a similar background. This allows the tribunal to give consideration to the political interests and human consequences of the dispute it is required to settle, although it must of course hear and decide the case in accordance with law. [Page59:]

Scrutiny of arbitral awards

106. The International Court of Arbitration's scrutiny of arbitral awards is one of the most noted features of ICC arbitration. Most draft awards are examined by the Court in Committee form. ⁸¹ However, given the importance of disputes arising from State contracts and the frequently sensitive nature of the questions such cases raise, the awards to which they give rise are generally scrutinized at a plenary session.

107. Scrutiny of an award at a plenary session of the International Court of Arbitration means (i) that the number of Court members who will scrutinize the draft and may take part in discussions relating to its approval will be far greater than three, which is the number of members comprising a Committee; (ii) that some of these members will have the same background as the State party in question and, if need be, can draw the Court's attention to the political, economic and human implications of the dispute ; and (iii) that, in accordance with Court custom, one of the Court members will be appointed as rapporteur with the task of describing the facts of the case, analysing the draft award and recommending to the other members of the Court that it be approved, approved subject to qualification or not approved. In our opinion, this arrangement allows some protection to be given to the public interest represented by the State party in a dispute relating to a State contract.

Conclusion

108. Legal language relating to international commercial arbitration contains many expressions that are used in such a way as to overcome the hostility shown by public law bodies, especially from developing countries, towards international arbitration. Subjective arbitrability and implicit waiver of immunity from enforcement are the most significant expressions currently used notably to prevent public law entities that have consented to an international commercial arbitration agreement in relation to a State contract from escaping their duty to submit any dispute arising from that contract to arbitration.

109. These two expressions have been neutralized, however, in certain countries which have a limited view of the public interest and have overlooked the distinction between State and government. On the one hand, the concept of subjective arbitrability has been limited by those of administrative decision and administrative contract. In some countries, it is not possible to settle by arbitration disputes linked to decisions issued by government bodies, especially concerning the legality of such decisions, and disputes relating to administrative contracts. On the other hand, the expression implicit waiver of immunity from enforcement has been neutralized by certain decisions in which the concept of public service and the expression public property intended for a public service activity have been used to render certain items of property belonging to public bodies exempt from seizure.

110. The approach to State contracts in international commercial arbitration is characterized by its oscillation between two contrasting tendencies, one economic, [Page60:] the other political. This contrast is reflected in the use of legal language. The imperatives of the global economy have given rise to expressions intended to ensure that State parties take part in arbitration and uphold the commitment they have made when consenting to an international commercial arbitration agreement. Conversely, decisions in some countries have neutralized this tendency by using opposite expressions reflecting the suspicion many developing States still show towards international commercial arbitration. In this oscillation, the pendulum would currently appear to have swung in the political direction. It can be expected that the proponents of the economic standpoint will not be slow to react.

111. Our analysis shows that, as far as State contracts are concerned, legal language is but an instrument reflecting political and economic values. Neither positive law nor legal scholarship has in our view found a balance between the economic and the political standpoints. Arbitral practice, on the other hand, and especially that of ICC, has succeeded in reconciling these two tendencies and inspiring party confidence. The decisions of ICC arbitrators on the arbitrability of disputes and the rules and practices of the Court concerning the prima facie examination of arbitration agreements, the fixing of the place of arbitration, conservatory and interim measures, the scope of consent to the arbitration agreement, the constitution of the arbitral tribunal and the scrutiny of arbitral awards constitute a legal framework in which private interests and the public interest both have a place.

112. The International Court of Arbitration's success in this field would appear to be due to the fact that it has been able to embrace the eclecticism shunned by theoreticians. Reality, including all legal practices, is naturally and essentially eclectic. It would be utopian to argue the opposite, as does Kelsen. ⁸² Legal science does not exist in a vacuum. In our view, an analysis of economic theory and political philosophy is an indispensable part of understanding the issues involved in State contract arbitration and finding the answers to the problems it raises.

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1
The views expressed in this article are those of the author alone, who makes no claim whatesoever to be expressing the position of the International Court of Arbitration or its Secretariat. The author wishes to thank Virginia Hamilton for her editorial assistance.

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2
On the use of legal language see E. Silva-Romero, Wittgenstein et la philosophie du droit - les jeux du langage juridique (Paris: PUF, 2002).

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3
B. Oppetit, Théorie de l'arbitrage (Paris: PUF, 1998) at 109. [Quotation translated from the French, emphasis added.]

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4
Despite tradition, these longstanding legal distinctions would appear to be disappearing however. cf. M.-A. Frison-Roche, 'Le droit reconnaît désormais l'activité professionnelle - Le législateur repense la distinction entre le civil et le commercial' Le Monde (26 February 2002) 20.

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5
Aristotle, Nichomachean Ethics, trans. W.D. Ross (Oxford: Clarendon, 1908) bk 5, c. 4.

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6
Much has been written on the subject of international commercial arbitration and State contracts. See e.g. K.-H. Böckstiegel, 'The Legal Rules Applicable in International Commercial Arbitration Involving States or State-Controlled Enterprises' in International Arbitration 60 Years On: A Look at the Future (Paris: ICC Publishing, 1984 (ICC Publication No. 412)) 117; id., Arbitration and State Enterprises (The Hague: Kluwer Law International, 1984); the reports presented at the colloquium on States and international arbitration organized by the French Arbitration Committee on 11 October 1985, [1985] Rev. arb. 489; and J.D.M. Lew, ed., Contemporary Problems in International Arbitration (Centre for Commercial Law Studies, Queen Mary College, University of London, 1986). We do not intend to deal here with the highly interesting subject of the legal rules applicable to State contracts, which we believe deserves an article of its own.

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7
'State contract. A contract between a sovereign State and a private person. See Internationalization (3d meaning)' (G. Cornu ed., Vocabulaire juridique, 3d ed. (Paris: PUF, 2002) at 223). 'Internationalization . . . 3 Submission of a State contract to (public) international law for the purpose of withdrawing the contract from the domestic legal system of the State in question' (ibid. at 485). P. Mayer, 'La neutralisation du pouvoir normatif de l'Etat en matière de contrats d'Etat' [1986] J.D.I. 5, distinguishes between a narrow and a broad meaning of State contract. The former covers contracts between a sovereign State and a foreign private company, whilst the latter covers contracts between a State offshoot and a foreign private company. In the present article, we adopt the broader of these two meanings.

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8
cf. E. Gaillard & J. Savage, eds., Fouchard, Gaillard, Goldman On International Commercial Arbitration (The Hague: Kluwer Law International, 1999) [hereinafter Fouchard, Gaillard, Goldman] at 41.

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9
The expression 'arbitration case law' is strictly speaking a misnomer, as arbitrators are by no means bound to apply or follow the general principles asserted by other arbitrators in their awards. However, it is a particularly descriptive expression and for this reason we shall use it throughout this article.

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10
Cass., civ. 1re, 2 May 1966, [1966] Rev. arb. 99.

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11
Articles 83 and 1004 of the former French Code of Civil Procedure have been replaced by Article 2060 of the Civil Code as amended by Laws 72-626 of 5 July 1972 and 75-596 of 9 July 1975. According to the latter, '(L. 72-626 of 5 July 1972) Arbitration agreements may not be made with respect to a person's status and capacity, or with respect to divorce and separation, or with respect to disputes involving public bodies and undertakings, and, more generally, in all areas relating to public policy. (L. 75-596 of 9 July 1975) However, authorization may be given by government order for categories of industrial and commercial public undertakings to submit disputes to arbitration.' [Translation from the French, emphasis added.]

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12
For a commentary on article 177(2) of the Swiss Private International Law Statute, see P. Lalive, J.F. Poudret & C. Reymond, Le droit de l'arbitrage interne et international en Suisse (Lausanne: Payot, 1989) at 303ff.

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13
For instance, Article 1 of the Colombian Constitution of 1991 refers expressly to the general interest: 'Colombia es un Estado social de derecho organizado en forma de República unitaria, descentralizada, con autonomía de sus entidades territoriales, democrática, participativa y pluralista, fundada en el respeto de la diginidad humana, en el trabajo y la solidaridad de las personas que la integran y en la prevalencia del interés general.' [Emphasis added. Translation: Colombia is a legal social State organized in the form of a unitary republic, decentralized, with autonomous territorial units, democratic, participatory and pluralistic, based on respect of human dignity, on the work and solidarity of the individuals who belong to it, and on the predominance of the general interest.]

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14
Fouchard, Gaillard, Goldman, supra note 8 at 41. [Emphasis added.]

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15
'Débats' [1985] Rev. arb. 585.

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16
cf. Y. Derains & E.A. Schwartz, A Guide to the New ICC Rules of Arbitration (The Hague: Kluwer Law International, 1998) at 3.

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17
On the contribution of ICC case law, see e.g. Y. Derains, 'Les tendances de la jurisprudence arbitrale internationale' [1993] J.D.I. 829.

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18
E. Loquin, 'La réalité des usages du commerce international' [1989] Revue internationale de droit économique 163. On the content of lex mercatoria, see also Lord Mustill, 'The New Lex Mercatoria: The First Twenty-Five Years' in Liber Amoricum for the Rt Hon. Lord Wilberforce (Oxford: Clarendon, 1987) 149.

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19
An arbitration agreement is a contract.

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20
e.g. French Civil Code (C. civ.), Art. 3, in fine: 'The laws relating to a person's status and capacity govern French citizens, even those resident in foreign countries.' [Translation from the French.]

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21
Cass., civ. 1re, 2 May 1966, [1966] Rev. arb. 99-100: 'the prohibition deriving from Articles 83 and 1004 of the French Code of Civil Procedure does not raise a question of capacity in the meaning of Article 3 of the Civil Code; the Court of Appeal had simply to decide whether this rule, laid down for domestic contracts, should also apply to an international contract made for the purposes and in keeping with the usages of maritime trade; the contested judgment rightly decides that the above-mentioned prohibition is not applicable to such a contract and subsequently, by finding the arbitration clause to which the public law entity has subscribed to be valid, the Court of Appeal . . . has legally justified its decision.' [Translated from the French.]

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22
Cass., civ. 1re, 20 December 1993, (1994) 83 Rev. cri. dr. internat. privé 663 (Annot. P. Mayer): 'by virtue of a substantive rule of international arbitration law, an arbitration clause is legally independent of the main contract in which it is contained directly or by reference and, subject to the mandatory rules of French law and international public policy, its existence and efficacy are assessed according to the common will of the parties without any need to refer to a State law . . .' [Translation from the French.]

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23
See above, § 5.

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24
See Y. Derains, supra note 17 at 851-852: 'In the award rendered in 1971 in case 1939 (J.D.I. 1975, 919), an award stated: "International public policy would be strongly against allowing a State body, in its dealings with foreign entities, openly, knowingly and intentionally to enter into an arbitration agreement that reassures the other party and then, whether it be in the arbitration proceedings or in an enforcement action, claim that its commitment was worthless." An award rendered in 1986, in case 4381 (J.D.I. 1986, 1103), used this formulation as reflecting arbitration case law. A State's entitlement to agree to arbitration is one of the areas where transnational public policy most frequently comes into play. It is not a State's or a public undertaking's lack of entitlement to agree to arbitration that is contrary to transnational public policy, for it is difficult to see in the name of what superior principle national legislation should be required to authorize States and public law entities to resort to arbitration. What is contrary to transnational public policy is the attitude of a State or public undertaking whereby it enters into an arbitration agreement without disclosing that it is not entitled to do so and then relies on this lack of entitlement in order to escape its undertaking. As pointed out by Pierre Lalive . . . such behaviour offends transnational public policy in that it undermines the confidence necessary to ensure certainty in international trade, of which arbitrators are the natural protectors.' [Translation from the French.]

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25
Ibid. at 852.

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26
e.g. decision of the constitutional court of 25 October 2000, C-1436/00, 'Demanda de inconstitucionalidad en contra de los artículos 70 y 71 de la Ley 80 de 1993 - Por la cual se expide el Estatuto de Contratación de la Administración Pública' (judge: Alfredo Beltrán Sierra); decision of supreme administrative court, 3d sect., of 23 February 2000.

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27
For instance, the above-mentioned decision of the Colombian constitutional court defines an administrative decision as follows: 'El acto administrativo [es] la manifestación de la voluntad de la administración, tendiente a producir efectos jurídicos ya sea creando, modificando o extinguiendo derechos para los administrados o en contra de éstos.' [Translation: An administrative decision is a manifestation of the will of government, aimed at producing legal effects, i.e. by creating, modifying or extinguishing rights in favour of subjects or against them.] Colombian administrative law closely follows French administrative law, however. In France, a decision is described as administrative when it emanates from a government authority in the course of exercising a prerogative of public power or through the use prerogatives of public power (cf. R. Chapus, Droit administratif général, vol. 1, 15th ed. (Paris: Montchrestien, 2001) esp. at 543). In French administrative law, only decisions issued by government in the course of exercising prerogatives of public power or through the use of such prerogatives are administrative decisions. In Colombia, an arbitrary change to the original meaning of administrative decision as defined in French administrative case law has apparently been made through the use of legal language. On arbitrary changes to the original meaning of legal expressions, see E. Silva-Romero, supra note 2 esp. at 113ff.

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28
See e.g. J.-B. Lee, L'arbitrage commercial international dans les pays du Mercosud (Thesis, University of Paris II (Panthéon-Assas), 2000) at 37ff. [unpublished]; H. Grigera-Naón, 'Arbitration in Latin America: Overcoming Traditional Hostility' (1989) 5 Arbitration International 137.

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29
cf. Chapus, supra note 27 at 544ff.

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30
17 July 2001, [2001] Rev. arb. (Annot. M. Sfeir-Slim & H. Slim).

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31
Rules, Art. 6(2): 'If the Respondent does not file an Answer, as provided by Article 5, or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement, the Court may decide, without prejudice to the admissibility or merits of the plea or pleas, that the arbitration shall proceed if it is prima facie satisfied that an arbitration agreement under the Rules may exist. In such a case, any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself. If the Court is not so satisfied, the parties shall be notified that the arbitration cannot proceed. In such a case, any party retains the right to ask any court having jurisdiction whether or not there is a binding arbitration agreement.'

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32
Rules, Art. 1(2): 'The Court does not itself settle disputes. It has the function of ensuring the application of these Rules.'

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33
e.g. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958, Art. V(1)(a): '1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the [arbitration agreement] were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made . . .' [Emphasis added.]

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34
In the case in question, the parties' counsel were resident in Europe.

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35
See above, § 5.

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36
cf. Cass, civ. 1re, 6 July 2000, Société Creighton v. Ministère des Finances de l'Etat du Qatar and Paris, 1re chamber A, 10 August 2000, Ambassade de la Fédération de Russie en France et a. v. Compagnie Noga d'importation et d'exportation, [2001] Rev. arb. 114 (Annot. Ph. Leboulanger, who notes at 123: 'Within the space of a month, the Court of Cassation (Civil Division No. 1) and the Paris Court of Appeal (Division No. 1 A) handed down two major decisions relating to international arbitration and immunity from enforcement. These two fields, one of which is characterized by the liberalism necessary to international contractual relations whilst the other reflects State sovereignty in international law, are largely antinomic by nature.' [Translation from the French.]

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37
Under Colombian law, for instance, solely the administrative courts have jurisdiction to grant conservatory and interim measures against a public law entity.

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38
The ICC Pre-Arbitral Referee Rules have been published in the form of a booklet (ICC Publication No. 482) and are also available on the web site of the ICC International Court of Arbitration (www.iccarbitration.org).

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39
E. Gaillard, 'First International Chamber of Commerce Pre-Arbitral Referee Decision' New York Law Journal, International Arbitration Law (7 February 2002) 3, 6.

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40
Ibid. at 3: 'This pre-arbitral mechanism can . . . be very useful when dealing with State contracts. Where a contract is entered into between a State and a private party, the latter invariably runs the risk that any application for provisional measures will be heard before the court of the State party to the contract. The inclusion in the relevant contract of a clause granting exclusive jurisdiction to a pre-arbitral referee to decide on any provisional measures, overcomes this perceived imbalance. With this provision, court jurisdiction is completely excluded in favor of the jurisdiction of the pre-arbitral referee.'

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41
'Any party to this contract shall have the right to have recourse to and shall be bound by the Pre-arbitral Referee Procedure of the International Chamber of Commerce in accordance with its Rules.'

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42
See above, § 26.

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43
Much has been written on the subject of immunity from enforcement. See e.g. I. Pingel, Les immunités des Etats en droit international, Doctoral Thesis, Paris I University, 1993 ; B. Oppetit, 'La pratique française en matière d'immunité internationale' in L'immunité d'exécution de l'Etat étranger, report on the 4th international round table, 22 April 1988, Nanterre Centre for International Law (1990) 49.

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44
Cass., civ 1re, 6 July 2000, Société Creighton v. Ministère des Finances de l'Etat du Qatar et a., [2001] Rev. arb. 114 (Annot. Leboulanger). [Translated from the French.]

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45
1988 Rules, Art. 24: 'Finality and enforceability of award. (1) The arbitral award shall be final. (2) By submitting the dispute to arbitration by the International Chamber of Commerce, the parties shall be deemed to have undertaken to carry out the resulting award without delay and to have waived their right to any form of appeal insofar as such waiver can validly be made.' This provision has been succeeded by Art. 28(6) of the 1998 version of the Rules, which states: 'Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.'

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46
'Having regard to the principles of international law governing the immunities of foreign States, together with Article 24 of the Rules of Arbitration of the International Chamber of Commerce . . .'

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47
Ph. Leboulanger, supra note 44, argues at 125 that 'the ICC Rules of Arbitration thus acquire the status of a true rule of law and the Court of Cassation finds in the provisions of Article 24 (in the 1988 version, which, in a slightly changed form, has become Article 29(6) [sic] of the Rules in force since 1 January 1998) one of the sources of the law on immunity from enforcement in international commercial arbitration. As far as we know, this is the first time that a set of arbitration rules, admittedly those most in use, is given such recognition.' [Translation from the French.]

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48
Ibid. at 125-26.

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49
Paris 1re chambre A, 10 August 2000, Ambassade de la Fédération de Russie en France et a. v. Compagnie Noga d'importation et d'exportation, [2001] Rev. arb. 114.

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50
e.g. F. Terré, Ph. Simler & Y. Lequette, Droit civil - Les obligations, 7th ed. (Paris: Dalloz, 1999) esp. at 85ff.

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51
e.g. Ph. Fouchard, E. Gaillard & B. Goldman, supra note 8, esp. at 261ff.

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52
C. civ., Art. 1131: 'An obligation without a cause, or based on a wrong cause, or on an unlawful cause, can have no effect.' C. civ., Art. 1133: 'A cause is unlawful when it is forbidden by the law or when it is not in keeping with good moral standards or public policy.' [Translation from the French. Cause: the advantage a party seeks to obtain by entering into a contract, the reason for entering into the contract.]

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53
cf. F. Terré, Ph. Simler & Y. Lequette, supra note 50 at 312ff.

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54
See above, § 17ff.

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55
C. civ., Art. 1109: 'Consent is not valid if it has been given merely by mistake or if it has been obtained by violent means or through wilful deception.'

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56
In Colombia, for example, a public law entity could allege - and the supreme Colombian administrative court would support it - that the consent it had given to an arbitration agreement of unlimited scope was void because it did not mean to waive the right to refer disputes arising from decisions issued by public bodies to the Colombian administrative courts (cf. above, § 21ff.).

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57
In French law this principle is enshrined in Article 1165 of the Civil Code: 'Agreements produce effect solely between the contracting parties; they do not harm third parties and benefit them only in the case provided for by Article 1121.' [Translation from the French.] (Article 1121 relates to provision in favour of a third party.)

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58
This case has been much commented upon. See e.g. Y. Derains & E.A. Schwartz, supra note 16 at 94ff; Ph. Leboulanger, 'Groupes d'Etat(s) et arbitrage' [1989] Rev. arb. 415; P. Cahier, 'The strengths and weaknesses of international arbitration involving a State as a party' in J.D.M. Lew supra note 6, 241; P. Lalive, 'Arbitration with foreign States or State-controlled entities: some practical questions' ibid., 289.

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59
Paris, 1re chambre suppl., 12 July 1984, [1986] Rev. arb. 75.

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60
Cass., civ. 1re, 6 January 1987, [1987] Rev. arb. 469.

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61
cf. P. Mayer, 'L'autonomie de l'arbitre international dans l'appréciation de sa propre compétence' in Recueil des cours de l'Académie de droit international de La Haye, vol. 217 (Dordrecht: Martinus Nijhoff, 1990) 319 at 332-33.

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62
This is also the position adopted by Ph. Fouchard, E. Gaillard & B. Goldman, supra note 8 at 314ff.

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63
Only one study has been made of the issues involved in extra-contractual disputes and it raises more questions than it answers. See C. Reymond, 'Conflits de lois en matière de responsabilité délictuelle devant l'arbitre international' in Travaux du Comité français de droit international privé, 1988-89/1989-90(Paris: CNRS, 1991) 97.

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64
This is the case in Colombian law, for instance.

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65
See above, § 21ff.

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66
Arts. 70 and 71 of Colombian Law No. 80 of 1993 on the general status of administrative contracts; Art. 809 of the Lebanese Code of Civil Procedure.

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67
'The construction [of the administrative court], although seemingly coherent, fails to take account of the development of arbitration law, current practices in international trade and, above all, the spirit in which the Lebanese arbitration law was conceived. In refusing to accept that the wording of Article 809 of the New Code of Civil Procedure is general in scope and thus transcends the distinction between private law and public law contracts, the court overlooks the fact that States engage in international trade like private persons. Besides, applying the same rules on arbitration to domestic and international public law contracts does not appear to take account of the increasing internationalization in this field and the place this method of dispute resolution now has in international commercial relations. Lastly, the court's interpretation of Article 809 appears completely to overlook the distinction between domestic arbitration and international arbitration which is nonetheless clearly laid down in Lebanese law . . .' M. Sfeir-Slim & H. Slim, Annot. on the decisions in Etat libanais v. société FTML (Cellis) SAL and Etat libanais v. Libancell SAL, [2001] Rev. arb. 855 at 875. [Translation from the French.]

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68
P. Mayer, supra note 7 at 8-9. [This and the following quotations have been translated from the French.]

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69
Ibid. at 9.

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70
Ibid. at 10.

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71
Ibid.: 'The law governing relations between the administration and private persons cannot be made by the former. Indeed, a rule can be said to be legal only if it is heteronomous with respect to those to whom it applies. Yet the administration is subject, like private persons, to the law made by the State.'

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72
Ibid. at 13-14.

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73
Plato, Laws, Books VI and XII.

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74
It is thus misleading to refer to 'Court practice'. Far from developing strict criteria according to which it applies the Rules and from which it never departs, the Court judiciously studies the characteristics of each case so as to make the most appropriate decision within the flexibility offered by the Rules.

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75
cf. P. Mayer, supra note 7 at 5: 'The performance of contracts between States and foreign undertakings contain dangers which are equally great for each party. For the State, the major risk is that of defective performance by the private party. When the purpose of the contract is to carry out a project that is crucial to the economy of the State, the consequences of misconduct by the private party can be catastrophic.'

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76
See Rules, Art. 7.

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77
See e.g. Y. Derains & E.A. Schwartz, supra note 16 at 108ff.

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78
See Rules, Art. 9(2).

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79
See e.g. Y. Derains & E.A. Schwartz, supra note 16 at 119.

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80
The Court may, for example, reject the proposal if it considers that the proposed arbitrator is not independent of the project to which the dispute relates.

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81
'The members of the Committee consist of a Chairman and at least two other members. The Chairman of the Court acts as the Chairman of the Committee.' (Internal Rules of the International Court of Arbitration of the ICC, Art. 4(2)) The Committee usually comprises the Chairman of the Court and two of its members. The Court meets weekly in Committee form and once a month in a plenary session open to all its members. The Court currently has 116 members from 77 countries.

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82
H. Kelsen, Pure Theory of Law, 2d ed., trans. M. Knight (Berkeley: University of California Press, 1967; reprint Lawbook Exchange, 2002).

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