In mankind's social order, all justice stems from the sovereign prerogative which for many centuries was the exclusive right of the monarch and which in democracies, is exercised in the name of the people. Satisfactory justice, moreover, is a precondition for a peaceful society, for maintaining public order, for punishing major or petty crimes or for settling civil cases and commercial or professional disputes. That is why modern states pay such great attention to their task of administering justice, the counterpart to their legislative task. However, because of the principle of the separation of powers it has to be entrusted to courts which are independent of political, financial or other forms of influence. Lastly, only state institutions have the power to render automatically enforceable decisions in other words decisions backed by the force of legal legitimacy and re jusdicata authority which can if necessary be implemented compulsorily by the public authorities.

In parallel with official justice organised by the sovereign, exercised in his name and sometimes even rendered by himself - as in the case of the king surrounded by his people under an oak tree - society has always made use of a variety of methods for settling private disputes; for example tribes, clans and families have demurred to the authority of an experienced of older person. The great religions have not simply allowed this, but have even sometimes extolled this form of patriarchal or customary justice. And, when it is equal to its task, the state ensures that private settlements of this kind do not call public policy rules into question.

In the field of trade, in particular, special methods for settling disputes have been developed, such as: commercial courts; resort to expertise procedures, although sometimes the courts refuse the expert the right to conciliate; consultation of professionals whose opinions the lawyers are bound to follow; hedging of finance; mediation, conciliation, amiable composition or arbitration independently assigned and organised by the parties themselves. Indeed, improvements in business and trade often call for special adaptation of litigation procedures to provide speed, confidentiality and technical expertise and from which parties expect speedy, equitable and enforceable decisions, or sometimes effective and enforceable decisions, or sometimes effective compromise agreements and satisfactory negotiated settlements rather than lengthy judgements based on the opinions of learned writers, pronounced formally in public.

In fact arbitration has always existed; it is a very widespread method of settling social problems. In ancient Rome, legal obligations resulted from the promise to arbitrate. In India, arbitration is as old as the countries' civilisation itself @ the arbitrator (Panch"), renders a decision which can neither be put in question nor revised even in criminal cases. In France, for example, Royal Ordinances governing this practice between traders were enacted in 1510, 1535, 1569 and 1673. Although the French Revolution introduced a form of arbitration which turned out to be an over generalised and ill-organised experiment (Law of 1624 August 1790) and soon produced a hostile reaction, in modern times it has developed under quite exceptional circumstances which have turned arbitration into a genuine social phenomenon. Thus, also, the American Arbitration Association deals with approximately 50.000 arbitration cases per year, owing to approximately 50.000 arbitrators listed throughout the territory.

There are increasing numbers of cases of arbitration both in the domestic situation and in international trade. International and national [Page12:] legislation, treaties, laws and rules are becoming more and more generalised in this field and are usually applied. The number of arbitral awards is continuing to grow. Although awards remain confidential in order to protect business secrecy, some of them are referred to in major revues. A considerable body of literature about arbitration, especially international arbitration, has built up, consisting of a whole crop of books in a variety of languages expressing viewpoints which are often diametrically opposed, but which are still of interest. In other words, the keynote to international arbitration from its beginning to the present day has been empiricism what has enabled it to evolve so as to meet the needs of changing commercial practices. To be dogmatic about it is difficult, or even premature.

Judicial System Undergoing a Period of Crisis

The statement that arbitration is a form of private justice calls for clarification, because of its underlying implication that there can be a form of secular justice which does not fall within the sovereign's prerogatives, or, in case of democracies, the people's power. It is essential to understand that in fact arbitration does not run counter to the state's power. Much to the contrary the latter benefits from arbitration which is an extension to the system necessary for administering cases. In a way, it is a method of providing a just and final settlement of disputes that supplements the official courts which express and underpins the state's power.

In fact today in many countries the judicial system is undergoing a period of crisis: this is true in the case of both criminal and civil courts and, where they exist, the administrative courts as well. The difficulties take the form of an increasing number of more and more complex cases, a virtually unacceptable overloading of court lists compared to the needs. From the present state of affairs there results several frustrations, in particular inevitable delays in the judicial machine, delays which sometimes generate a feeling of injustice, or even the denial of justice. Also, in many countries, though not all, the judicial institution itself is being called into question and is often being blamed for its inefficiency in settling technical and commercial disputes and its lack of adaptation to business requirements of speed, flexibility and confidentiality.

The development of trade calls for a minimum of security from the time the contract is concluded until it has been finally performed. But it does not call public policy rules into question, apart from certain specific points, unlike the criminal law and public security. Accordingly a number of governments have decided to modernise their internal legislation with a view to facilitating arbitration, and to this end have limited the courts' right to intervene in the settlement of disputes, or more precisely have restricted or prohibited the re-examination of the substance of arbitral awards by the courts. Such is the purpose of the New York Multilateral Convention of 1958 which, having been ratified by over 80 countries makes arbitral awards in practice more effective than Court decisions in the absence of a bilateral treaty.

Extension of and Limits to International Commercial Arbitration

Commercial arbitration is a method of organising and resolving disputes based on the mutual will of the parties concerned. It has a contractual basis, which is both a limit on its scope and the foundation of its effectiveness since the clause implies the undertaking by the parties to comply with the award rendered. Even when it is entrusted to quite exceptional individuals, this kind of court" cannot lay claim to the prerogatives invested in the public authorities. The arbitration agreement is therefore subject to overriding stipulations laid down by the general principles of law, national legislation and rules or international conventions. Questions of public policy - the scope of which has become more restrictive at national and international levels - cannot be borne by the arbitration agreement. Awards cannot be enforced compulsorily without a decision by the state authorities. In addition, in a number of legal systems, the right of certain public authorities to resort to arbitration is restricted or excluded on the ground that they are trustees of higher interests which cannot be the subject of private negotiations. This limitation however, tends to shrink and even to disappear when the public authority has [Page13:] manifestly accepted to place the contract outside the realm of public policy, either directly or through a public agency.

Despite the above reservations, because of its flexibility and the ease of its adaptation to commercial needs, arbitration has expanded considerably. The courts have accepted this development which has resulted in lightening their overloaded lists. Therefore at the present time, in some countries very important industrial, technical or financial operations are settled by arbitration to the parties' mutual satisfaction. The same applies in international trade, the remarkable expansion of which has inevitably been accompanied by complex disputes, involving parties from different countries, posing tricky problems as to the applicable law and procedure. It is now difficult to conceive of a major multilateral project which does not contain an arbitration clause, and state authorities are well aware of this. Far from prohibiting international arbitration, they have encouraged it by regulating it by conventions. These ensure that awards will be enforced on terms that can sometimes be more effective than those applicable to court judgements in cases where the countries concerned have not signed or ratified a convention on the mutual enforcement of each others' judgements.

Although in many countries a lively domestic arbitration system has developed, often protected by legislation and situated within a precise and well-defined legal framework, it is essential not to confuse this with international commercial arbitration: its main attribute is that it brings together parties who are nationals of different countries, applying contrasting laws and cultures, wishing to be freed from the constraint of diverging national policies and legislations and seeking to override these difficulties in order to develop their cooperation and trade. National laws are gradually adapting to the new situation and the changing requirements of world trade by becoming increasingly favourable towards international arbitration. In other words, they are applying to it a legal framework at once more flexible and more open to the concurrent will of the parties, based on the premise that the parties' choice leans towards level systems where imperative rules are fewer in number.

International commercial arbitration, by its very nature, is exempt from the state monopoly in the dispensation of justice. The arbitration agreement excludes the direct jurisdiction of national courts, notable in the light of certain international conventions such as the New York Convention, but this does not mean that the award is not subject to legal supervision. In order to be effective, in fact, it has to fulfil certain conditions agreed to by the majority of governments and fixed by treaty. If the parties wish to ensure that it does not culminate in awards that are cancelled by a court or are unenforceable owing to the refusal of an enforcement order at a national level, arbitration also has to comply with certain general principles of law. These relate to its consensual foundation, its procedure the application of public policy - a notion that is difficult to define - and its impartiality. Lastly, it frequently has to take place under the supervision of a body specified by the parties who may place it under the aegis of an institution authorised to administer, facilitate, consolidate and regulate it. The ICC International Court of Arbitration is the best known of these institutions but there are others. Thus gradually a body of law and practice in international arbitration is building up.

Arbitration should not be compared with the justice meted out by the sovereign authority, that is the state. Although it results from the desire to avoid the procedures and rigours of the courts, especially when there are several parties, it does not provide a genuine alternative because its basis is contractual rather than constitutional. The point is of primordial importance when a national legal system does not make provision for the settlement of international commercial disputes. Increasingly the courts are coming to understand the need for accepting this, even when public bodies are involved, provided that the fundamental principles of justice are respected. Furthermore, while the arbitration procedure is in progress, the parties can continue with direct negotiation, and a successful outcome may even remove the root cause of the arbitration. It is useful to encourage this phenomenon which is often the result of good drafting of the terms of reference by the arbitrators.

Enforcement of the arbitral award will naturally remain dependent on assistance from the [Page14:] national courts, which, hopefully, are just as open to the needs of international society as to the needs of the nation itself. Certainly many arbitral awards are applied without any problem. However, the national court is responsible for the basic verification of the arbitration with a view to its enforcement: independence of the tribunal, application of the proper procedure, compliance with public policy and the general principles of law. The existence of good reliable national courts thus becomes an indispensible support to the arbitration institutions. That is why in the area of international trade, legal progress is dependent on cooperation between national courts and arbitration institutions.

Role of Institutional Arbitration

The success of arbitration is also dependent on the skills of business lawyers. The arbitrator's tasks call not only for scrupulous impartiality and availability over a considerable period but also solid commercial, legal, cultural or even political knowledge. Various institutions or associations have been founded to assist parties in appointing qualified, experienced and impartial arbitrators and ensuring that they fulfil their obligations and comply with ethical standards. The International Court of Arbitration does not draw up lists of arbitrators but appoints these upon proposals made by its National Committees; on the other hand it ensures that arbitrators are independent, notifies them and takes decisions in cases where they are challenged, need replacing or resign so as to ensure that the arbitration can continue without delay and without further long drawn-out objections. The quality of awards - a precondition for their effectiveness and enforcement - is directly dependent upon the individuals preparing and drafting them. They are expected to be as skilful and upright as national judges. Theirs is a duty even more difficult since less circumscribed by the law, procedural rules and an institutional framework.

The other professionals working in the arbitration field, such as lawyers, advisors and experts to public and private companies, are employed in a major growth area, owing to the number of cases and because of the increasingly ever more refined specialisation. International finance and business activity emphasizes the importance of business lawyers able to handle delicate questions such as: contract negotiation, complex regulations, interrelated contracts, anti-trust law, labour law, tax law, governmental authorisations, the assessing of companies, the restructuring of groups of companies, the shaping of complex contractual schemes. Some law firms have offices and partners in many countries, benefiting from documentation and auxiliary services, specialised departments in different types of cases, and industrial and financial strategies in a very competitive market. Development of arbitration has thus given a remarkable impetus to all legal professions.

A Service Offered in a Competing Environment

Unlike the courts which have the advantage of a state monopoly, arbitration has to be classed as a service activity set up in response to the parties' agreement, which therefore takes place within a competitive context ; competition as to quality, speed, technical qualifications and price, but also as to justice, effectiveness and responsibility. If the award is to be valid, the rules of justice have to be complied with. It is only under such circumstances that awards will be enforced in good faith and without compulsion. This already applies in the case of the ICC International Court of Arbitration, created in 1923 in response to the desire to provide international arbitration coupled with full assurance as to quality and effectiveness.

The International Court of Arbitration checks that the procedural rules applicable pursuant to the parties' agreement are applied. This consideration is one reason for the care taken in the selection of arbitrators at the level of independence, qualification, experience and also international reputation. They need the ability to apply the rules of law empirically by adapting them to the particular case and providing a solution to the dispute which accords with the contract and the law. Arbitrators should not be confused with attorneys, counsel or dependents: the Court verifies the neutrality and independence of the arbitrators, whether they are professors, magistrates, attorneys, or experts; if also takes care to widen its field of choice throughout the world.

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Competition with the official courts comes into play particularly in the area of rapidity, cost and technical qualification. But it is essential to bear in mind the obstructionist tactics of certain advocates; the International court seeks to override such obstacles by means of its rules which govern the parties' relationship and are interpreted as much as possible in a pragmatic way. In addition the court has to ensure that it provides a good turnover rate, compared to other arbitration institutions which have far fewer cases.

Arbitration results from the will of the parties concerned and takes place in accordance with their intention. It cannot be imposed by any party to another contracting party when there exists no provision to that effect, usually in a contract or in a separate document. Therefore the drafting of the arbitration clause is very important: choice of the place of arbitration, the language and the applicable law are all points checked by the Court. Because of the importance of preliminary discussions there is a need for accurate information on the legal rules of each country both domestic and international. The ICC is endeavouring to try to respond to the lack of organised information in this field. The success of arbitration indeed often depends on the stipulations in the agreement providing for it which has to organise the procedure, if only by reference to the rules of an existing organisation.

The course of the procedure is governed by the unequivocal will of the parties. The principle of hearing all sides gives each parties an equal right to a fair hearing, provided they are situated in the legal system applicable. However, they can orientate the arbitration towards negotiated settlements and agreement if they so wish. Many disputes end up with awards agreed by the parties, often owing to the good offices of the arbitrators. Their steps are protected by confidentiality, in particular when public bodies or authorities are involved. The International Court of Arbitration is very strict about the secret nature of arbitration, unlike the national courts where this does not apply. It also wishes to avoid exaggerated formalism in the procedure, in particular through the excess load of documents to be transported, studies and discussed; this depends on the methods and authority of the arbitrators.

A Service Which Must Be in Compliance with the Law

Although arbitration is a method of settling disputes, it is nonetheless a secondary route when compared to the national courts, for an arbitrator chosen by the parties is not vested with any state authority. However, he still has the duty to respect the law. At the arbitration proceedings, he has to ascertain the parties' intentions, and even their actual identity since the arbitration clause is binding on them. The procedure has to be equitable; this point is subject to verification, as is the question whether the dispute is arbitrable or not, for not every dispute is arbitrable: it is generally considered that any dispute related to property or of a pecuniary nature which is quantifiable in financial terms can be submitted to commercial arbitration, except criminal law cases, matters pertaining to Family law or state security. One problem is compliance with what can be termed rules of "public policy", whether domestic or international. It must be borne in mind that the scope of arbitration is limited, in that the only questions that can be submitted to it are ones relating to international trade in the widest sense of the term. These include problems of construction and public works, intellectual or artistic property rights or various supplies of services, but do not include questions of civil status or criminal law. On the other hand an arbitral tribunal should not, in its award, violate principles of public policy as determined by the courts: principles of due process and good faith, illegality of provisions contrary to human rights, refusal or corruption and racketing, etc. This type of public policy is now being consolidated while national public policy is constantly shrinking due to the diminishing role of the states' sovereign autonomy in a world encircling economy and because states are competing between themselves to obtain funds from the private finance sector.

Arbitration is a difficult activity at the international level and is constantly becoming more complex and specialised, more frequent, more extensive and more sensitive. It can have very substantial consequences for companies and they accordingly pay close attention to the conditions under which it operates. The role of the [Page16:] ICC International Court of Arbitration is to respond to these requirements without exercising the prerogatives of a court of appeal and without passing judgement on the case a second time. It has to ensure that justice has indeed been done whilst respecting the arbitrators' right to assess the merits of the case. Accordingly arbitral awards rendered under its aegis are usually correctly enforced.

Both national authorities and business law specialists are award that disparities in the interpretation and performance of international contracts are inevitable. It is their duty to seek out a way to prevent these and settle them as satisfactorily as possible in the mutual interest of parties. It is up to them to ensure that, provide the legal conditions are fulfilled, the awards are fully enforced. This is an essential guarantee of the performance and renewal of international contracts and one which is extremely important for all countries wishing to take part in world trade. The dynamic thrust in international commerce, the increase of which has been officially evaluated at a rate of 7% in 1989, a percentage much higher than the rate of progress of each nation's national product, sheds new significance on this consideration.

It is clear that the national courts are not as yet fully prepared for the remarkable developments that have taken place in world trade, in international insurance, major investment projects, problems resulting from transfer of technology, industrial property, trademarks, technical knowhow, patents, and disputes arising in the field of copyright, data issues, television and communications. The same comment applies in the financial sector, where markets and financial products are for varied and complex that there are very few people who know how to master them and they sometimes even escape government authority. Modern states are confronted with an international society with which they cannot effectively cope, in a thorough and coordinated manner.

In circles which have to respond to business developments, the question of the national law can also lead to uncertainty; too often the law changes depending on the political regime, the majority in power and the people in positions of responsibility. Sometimes a government may even change its law when it wishes to get out of obligations it has entered into of its own free will. In every country, and in all sorts of circumstances, businessmen fear the arrival of unknown political factors. There is a feeling that recourse to the tried and tested systems of negotiation, conciliation and arbitration offers them a way that is well worth exploring or at least worth keeping open. The same applies to states which are reluctant to accept judgements by international courts. The need to negotiate is an expression of the extraordinary diversity of cultures, languages and laws in the world.

In the face of the increasing need to fight against uncertainty and insecurity, international trade has come to regard arbitration and its legal corollaries as major activities. These activities have become autonomous and diversified with a view to meeting the specific needs of a world which is constantly growing more closely knit. In a highly competitive world, the development of trade and investments will be dependent on the recognition of this specific legal recourse and the quality of its results, the awards rendered.

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