Introduction

International arbitration offers the advantage - amongst others - over court-of-law proceedings of allowing parties a greater choice of forum. The parties are not limited to the other party's place of residence, or the place where that party has assets, as they normally are in litigation, but are free to agree on practically any place that suits them to hold the arbitration. The parties' scope of choice is much wider than it is in litigation thanks to the existence of a number of conventions which make enforcement of arbitration awards easier to obtain abroad than court judgements.

It has not always been so. For instance, as far as the International Chamber of Commerce ("ICC") is concerned, Articles IX and XXIX of the first ICC Arbitration Rules of 1922 provided that "the arbitration shall take place in the country and town determined by the Court of Arbitration, after examination of the request for arbitration and before the appointment of arbitrators".1 It was thus the Court of Arbitration, not the parties, that had to fix the place of arbitration.

In practice, however, the Court of Arbitration (the "Court") used not to intervene except in cases of disagreement between parties.2 When exercising its duty under the ICC Rules, the Court more often decided the place of arbitration on the basis of the nationality of the sole arbitrator or the chairman. This had another consequence.3 Where the ICC Rules (the "Rules") did not cover a specific point that arose with respect to the procedure, the arbitrator applied the lex fori.4 This practice was confirmed when the Rules in 1939 were modified to state that where the Rules were silent those rules of law should be applied which "result from ... the provisions of the law of the country where the arbitration takes place".

As arbitration developed, the Rules were modified to take account of the international character of ICC arbitration. Thus, in the 1955 Rules, we find an option for the parties to choose the law of procedure. Only if they had failed to make such a choice did the "law of the country in which the arbitrator holds the proceedings" apply.5 At the same time, the Rules expressly authorized the parties to agree on the place of arbitration.6

The 1975 and the present 1988 Rules uphold the principle of the parties' freedom of choice. Only where the parties have not agreed shall the Court fix the place of arbitration.

I. The importance of the choice of the place of arbitration

The parties may choose the place of arbitration in the business agreement, or when a dispute has arisen. Or they may leave it to be made on their behalf by an arbitral institution or by the arbitral tribunal itself. At some stage, a choice must be made. [Page55:]

Where should an international arbitration be held? Should it be in Amsterdam, Buenos Aires, Cairo, Geneva, Kuala Lumpur, London, Moscow, New York, Paris, Stockholm or Vancouver (to name a few possibilities)? There are practical considerations to be made, such as availability of suitable hearing rooms, accommodations, secretarial assistance, communications and other infrastructure. Just as important to know is that a rapid development has taken place in many countries in recent years; the legislation and the practice have been changed to respond to the demands of international arbitration. But not everywhere. In some places the international movement towards accepting arbitration is still seen with hesitation, if not with suspicion. As a result, there exist great variations with respect to what matters are arbitrable, what form must be given to an arbitration agreement, the degree of judicial intervention in the arbitration process, the means of challenging an arbitrator, the freedom of choice of the law applicable to the merits, whether several arbitrations may be joined together into one single proceeding, whether discovery is possible, what conservatory measures are available, etc.

Although, in the absence of the parties' choice, the arbitrator has the power to deal with procedural questions without applying the procedural law of the forum, or any other specific national law, such power is limited. The public policy rules of law of lex fori must be respected by the arbitrator who is under an obligation to make sure that the award is enforceable at law.7

The different concepts of procedural and substantive law in different countries may cause some surprise to the unwary when choosing the place of arbitration. This is what the parties learnt in one ICC case regarding the question of the statute of limitation.8 The claimant asserted that Finnish substantive law applied and that there is no statute of limitation in Finnish law. The arbitrator applied the rules of lex fori, which stipulated that limitation is a matter of procedure and not of substance. Since he was sitting in England, the application of lex fori on the issue was mandatory, and the arbitrator came to the conclusion that the claim was statute-barred under English law and dismissed the case.9 The choice of place of arbitration decided the outcome of the case.

Once the place of arbitration has been fixed, it determines where the hearings shall take place. In two cases, recently, the ICC Court received terms of reference which provided that the arbitral tribunal was authorized to hold hearings at places other than the seat of arbitration. Because the terms of reference had not been signed by the defendant party, the Court refused to approve them. Thus, the arbitrators would not be in a position to hold hearings outside the place of arbitration, unless both parties subsequently agreed to it.

II. Exercise of parties' choice

It is the experience of the International Court of Arbitration that the parties themselves agree on the place of arbitration to an increasing extent, thus leaving less room for the Court to decide the issue. Statistics demonstrate that the ICC Court's role in determining the place of arbitration has constantly decreased in favour of the parties' agreement on this question.10 While the place of arbitration was fixed by the parties in 62% of the cases in 1982, this choice had grown to 88% in 1991,11 and to over 90% in 1995.12

The parties' first concern is certainly that the award be enforceable and the parties' choice will be dictated by the desire to find a place of arbitration to secure this objective. By making the choice themselves, the parties are, well positioned to take into account various other parameters that are important for the smooth and efficient running of the arbitration. One such factor is the cost of arbitration, the availability of foreign exchange and the freedom to transfer it. A second factor is the time and the costs of travelling. By choosing [Page56:] a place of arbitration in a third country, both parties to the contract will have the inconvenience of travelling and staying abroad; neither of the parties is therefore favoured at the expense of the other. A third factor for the parties to consider is lex causae and lex fori; where the choice of either of these laws has been made in the parties' contract, they can .fix the place of arbitration in the appropriate country. But where there is no agreement, and since the place of arbitration must be fixed before the arbitrators have decided the choice of lex causae and lex fori, it is convenient to fix the place of arbitration in a neutral country where international arbitration is accepted and developed; the chances of obtaining access to the necessary material and expert legal advice is thereby enhanced.

In 1994, ICC arbitrations took place in 32 different countries.13 Western Europe is still the preferred region when the place of arbitration is chosen by the parties. In 1995 the countries most often selected by the parties were, in decreasing order, Switzerland, France, the United Kingdom, the United States, Austria and Germany.14 Over the last decade, however, Europe's place has been reduced, relatively speaking, whereas other parts of the world, particularly the South Asia and Far East Asia region, have increased. In 1982, no ICC arbitrations were held in that region; in 1991, 17 arbitrations took place in Hong Kong, India, Indonesia, Nepal, the Philippines, Singapore, Sri Lanka and Taiwan.15

III. Guiding principles for the ICC Court

Where, in the absence. of the parties' choice, the International Court of Arbitration is called upon to fix the place of arbitration, the Court will be guided by the effectiveness that could be expected to be given to an award rendered at the place of arbitration and the convenience of the parties. What criteria do the ICC rules stipulate and what happens in practice, when the Court fixes the place of arbitration? Article 12 of the Court's Rules gives no indications as to how the choice should be made.

Where neither a chairman nor a sole arbitrator has been appointed by the parties - and this is the most frequent situation - the court would consider what nationality the arbitrator would likely have, and the choice of a place of arbitration and of the presiding arbitrator is then undertaken simultaneously, The Court then proceeds by eliminating various possible places of arbitration.

(i) Ostensible neutrality being one of the guiding principles in ICC arbitration, the place of arbitration will as a rule not be fixed in the country of one of the parties. Ostensible neutrality requires that no party shall have an advantage over the other because of the choice of place of arbitration. Justice must not only be done, but must be seen to be done, and felt to be done through an initial choice of neutral locale.

(ii) Secondly, the effectiveness of the ultimate award must be ascertained and possible places of arbitration are screened with respect to their adherence to bilateral, multilateral or international conventions recognizing commercial arbitration and enforcement of arbitral awards. Whenever possible, the Court will fix the place in a country adhering to the New York Convention of 1958.16

(iii) Thirdly, the Court's choice of place will be influenced by the attitude of local courts. Where such courts tend to intervene unnecessarily in the arbitration process and offer a party in bad faith an opportunity to obstruct the arbitration, the ICC Court is likely to go elsewhere when fixing the place of arbitration.

(iv) Fourthly, the availability of adequate support services (secretaries, conference rooms, hotels, libraries, etc..) are taken into account.

(v) The parties' choice of applicable law, where such a choice has been made, will normally be taken into account by the Court, and guide its choice of place of arbitration; this is, however, no imperative rule.

(vi) Lastly, the Court will consider the convenience of the parties and fix a place which is, as far as possible, equally convenient (or inconvenient) to both parties.

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When determining its choice the Court will opt for a "neutral" site unless strong, specific reasons favour the fixing of the place of arbitration in the country of one of the parties. Unfortunately, the Court's experience with confirming a choice made by the parties to fix the place of arbitration in the defendant's country is discouraging. In contracts between powerful organisations, mostly state-owned, often in developing countries, which have had a strong bargaining position in their contract negotiations with a private firm, it is not unusual to find the place of arbitration fixed by contract in the country of the state organization. In many such cases where the local party has been a defendant, it has used all kinds of procedures and devices to stop the arbitration from going forward. These may include efforts to exercise influence on local and national authorities in order to obtain refusal by competent authorities to issue visas to the arbitrators or the opposing party's counsel, court litigation against the other party, including sometimes the ICC and injunctions against the arbitrator. The International Court of Arbitration's task - to assure enforceable awards, delivered speedily and at reasonable costs - is not enhanced by such behaviour of the parties. It is not surprising, therefore, that the Court pursues the policy of not fixing the place of arbitration in a party's country.

One example may illustrate the practical application of the above principles. In a recent case between Austrian and Yugoslav parties, the arbitration clause provided that "Swiss Material Law" be applied. The Court fixed the place of arbitration in Zurich. By doing so, the Court opted for (i) a neutral place, (ii) adhering to international conventions, (iii) where local courts are mindful of the autonomy of arbitration, (iv) where adequate support services are available, (v) which was in the country of the applicable law chosen by the parties (vi) located halfway between the disputing parties.

IV. From the Court's practice

As far as it is possible and feasible, the Court respects any agreement of the parties. This principle applies both to the time when a decision regarding the place of arbitration shall be taken and to the choice of place itself.

A. Place to be fixed by the arbitrators

In several cases in recent years, the parties' agreement provided that the place of arbitration should be defined by the arbitrators. The Court did not take a decision then with respect to the place but left it to the arbitrators.

In one case, the arbitration clause provided that the arbitration should take place in Paris or London as agreed by the parties, the Claimant proposed Paris but, since there was no agreement hereon, the Court decided to delay the decision on the place until the defendant had proposed a co-arbitrator.

In another case the arbitration clause provided for Stockholm as place of arbitration, and an amended clause stipulated Gothenburg. The parties agreed to leave the selection to the chairman of the arbitral tribunal, and the Court fixed Gothenburg as the place of arbitration, subject to the power of the arbitrators to fix another place.

B. Place fixed according to the parties' agreement

This is a frequent situation. Where the place is unambiguously defined by the parties, the Court will follow.

One typical example can be quoted. The arbitration clause provided that disputes should be submitted to the "Court of Arbitration of the ICC in Paris and the hearings' shall take place in Vienna". The Court decided that Vienna should be the seat of the arbitral tribunal.

C. Place fixed taking into account difficulties of access

In a dispute involving German private companies, on the one hand, and the Ministry of Roads and Highways of the government of an African country, on the other, the Court fixed London as the place of arbitration because the African country is a common law country.

Cyprus, also a common law country, was considered a more neutral forum but not convenient for the parties because of difficulties of access. [Page58:]

D. Place chosen in a country with which defendant's country has an enforcement of judgements convention

In one recent case where the Court had to fix the place of arbitration, it turned out that the defendant's country was not a signatory to any convention, whether bilateral or multilateral, regarding the enforcement of arbitral awards.

The Court fixed the place in New York since the USA had concluded a treaty with the defendant's country on reciprocal enforcement of judgements and admitting the merger of an arbitral award into a judgement.

E. The so-called "ICC Paris" clauses

Numerous are the arbitration clauses which refer to "International Chamber of Commerce Paris", "la Chambre de Commerce Internationale de Paris", or simply "ICC Paris", "la CCI Paris", "the ICC of Paris", or "the Chamber of Commerce of Paris" (not mentioning the ICC).

In one recent case, the arbitration clause in the agreement between Italian and Spanish parties stipulated arbitration "at the International Chamber of Commerce in Paris". The arbitrators were to decide "according to International Chamber of Paris regulations". This clause was not interpreted as an unambiguous agreement between the parties to have the arbitration in Paris. In the absence of a clear choice, it is the Court's practice to fix the place of arbitration in Paris in a case like the previous one, since the wording could mean that the parties intended the place to be Paris unless they merely added "in Paris" to avoid any doubt as to the institution that would administer the arbitration. This is not necessary for parties to do, because there exists only one International Chamber of Commerce in the world and it has its seat in Paris and because the choice of Paris would not contravene any of the general principles referred to above (neutrality, adherence to international conventions etc.).

A variation of the "ICC Paris" clause is a clause referring to "ICC Geneva", or "ICC Zurich',' or indicating another place where the ICC is alleged to exist. Such clauses are usually interpreted its meaning that the parties have agreed to arbitration under the ICC Rules and that they have agreed - or would not disagree - to the fixing of the place of arbitration at the situs indicated.

F. Request to change the arbitration place

1) Owing to difficulties of enforcement

One principle applied by the Court is to reconsider a decision only when new facts, as opposed to new agreements, are presented by a party. In one recent case, the Court had initially fixed Bangkok as the place of arbitration in a dispute between parties from a Far Eastern country. Following advice as to the impossibility of enforcing in the Far Eastern country an award rendered in Thailand (lack of legislation enabling application of the New York Convention), the Court changed the place of arbitration to Kuala Lumpur.

2) Political unrest and insecurity

In another case, the chairman of the arbitral tribunal considered the place of arbitration - which had been fixed in the contract - too dangerous (political unrest and insecurity) and requested it to be changed. The parties refused to agree to a change and the chairman resigned, receiving only a nominal fee.

3) Once agreed, the place can only be modified by new agreement

After the Court had fixed the place of arbitration in Zurich, it rejected a subsequent request by one of the parties to move it to the United States as there was no agreement of the parties to change the venue of the arbitration.

In another case, the parties had agreed to Paris, a choice the Court had confirmed. The defendant thereafter requested the Court to change the place of arbitration to Tunis. The claimant would consent only on two conditions: (1) the agreement of all arbitrators, and (2) the firm undertaking by the defendant to waive any further challenge or obstruction. The defendant stated that the acceptance by the claimant of the place of arbitration cannot be made conditional on the defendant's waiver to challenge an arbitrator.

The Court did not modify the place of arbitration.

1
ICC publication No. 21, Rules of Conciliation and Arbitration, 2nd edition, October 21, 1922, Secrétariat Général, 33, rue Jean-Goujon, Paris.

2
Frederic Eisemann: "The Court of Arbitration: Outline of its changes from inception to the present day" in 60 years on; a look at the future, ICC publication No. 412, Paris, May, 1984, page 395.

3
Eisemann, ibidem.

4
Eisemann, ibidem.

5
Article 16, Rules of Conciliation and Arbitration, in force on 1st June 1955.

6
Article 18 or the rules referred to under the preceding note.

7
ICC Rules, 1988 edition, Article 26,

8
Extracts of the award have been published and commented by Sigvard Jarvin in Journal of International Arbitration, vol. 2, No. I, 1985, page 75.

9
The English law has since changed. Under the Foreign Limitation Periods Act (1984), where a foreign law applies, the rules of that foreign law relating to limitation should apply.

10
Jean-Francois Bourque in the ICC International Court of Arbitration Bulletin (the "Bulletin") Vol. 4, No. 1, May 1993, page 7.

11
Bulletin Vol. 3, No. 1, May 1992, page 7.

12
Bulletin Vol. 7, No. 1, May 1996, page 8.

13
Chronique des sentences arbitrales de la CCI, Journal du Droit International, 1995, p. 984.

14
Bulletin, Vol 7, No. 1, p. 7.

15
Jean-François Bourque, op. cit. ibidem.

16
Nearly all the major wading nations are parties to the New York Convention. But there are some notable exceptions, such as Brazil, Iran, Iraq and Taiwan.