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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Alfredo Bullard Senior Partner at Bullard Falla Ezcurra +; professor of law and economics at Pontificia Universidad Catolica del Perú, Lima, Peru.
José María de la Jara Associate at Bullard Falla Ezcurra +; professor of law and psychology at Universidad del Pacífico, Lima, Peru.
By Gilles Cuniberti
Edward Elgar, Rethinking Law series, 2017; 256 pages; ISBN 978-1-78643-239-1
A paradigm shift is a fundamental change in our perception of how things work, allowing significant progress of human knowledge. It happened when the paradigm that the earth is the centre of the universe was replaced by the sun or when the Newton's gravitational theory was replaced by Einstein's theory of relativity.
A paradigm shift frees us from established ideas and opens the door to change. For example investment arbitration was born when we broke the paradigm that the sovereign acts of the State were not arbitrable.
The basic paradigm of arbitration is that it is a contractual creature. It is so basic that almost every jurisdictional defence argument in an arbitration is based on that statement. However, can we break that paradigm? That is the proposal of Gilles Cuniberti in the book that we are commenting (see also, G. Cuniberti, ‘Beyond Contract, The Case for Default Arbitration in International Commercial Disputes’, Fordham Int’l Law Journal, 2009, Vol. 32, p. 417, available at http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=2139&context=ilj).
The default rule is that, unless otherwise agreed, the parties should litigate and resolve their disputes before national courts. The purpose of the author (and of the book) is one and only one: ‘to challenge this default rule and propose a radical change. Arbitration should become the default mode of resolution of international commercial disputes’ (G. Cuniberti, Rethinking International Commercial Arbitration: Towards Default Arbitration, p. 2).
And he succeeds in doing so. If not directly by persuading the reader that arbitration, should be the default mode of dispute resolution in the international commercial context, at least in planting the question in our heads: is not the move towards default arbitration inevitable?
The move towards default arbitration builds on a more general tendency: the move towards non-consensual arbitration.
Dr Cuniberti’s proposal implies that the contractual basis of arbitration, considered one of its essential features, has ‘begun to appear … as an obstacle to the development of international arbitration’ (ibid. p. 7), as precisely that contractual nature can be used by any of the parties to delay and even avoid the arbitral process.
Is consent really so important? According to Dr Cuniberti, consent is not only not as important as traditionally presented, but ‘there are already instances where the decline of consent as a requirement is so strong that one may legitimately wonder whether the first stage of an evolution towards a model of default arbitration has not been reached’ (ibid. p. 31).
In his book, Dr Cuniberti cites foreign investment arbitration, domain name arbitration and the French experience – namely, the willingness of French courts to bypass the contractual nature of arbitration when it contradicts the efficacy of the arbitral process – as examples of the decline of consent in international arbitration, but plenty more could be given. These tendencies are mainly supported by the separability of the arbitration clause and an increasingly liberal approach in the assessment of an agreement to arbitrate.
One great example is the treatment given to non-signatory parties in international arbitration.
Although the general principle still is, as stated by G. Born, ‘that international arbitration agreements are, as consensual instruments, binding only on the parties to such agreements’ (Gary B. Born, International Commercial Arbitration, 2nd ed., Kluwer Law, 2014, p. 1406). The same author recognizes that ‘[n]otwithstanding their status as non-signatories, there are circumstances in which entities that have not signed or similarly assented to an arbitration agreement may be both bound and benefitted by its terms’ (ibid. p. 1411). In similar terms, B. Hanotiau notes that ‘[p]ersons other than the formal signatories may be parties to the arbitration agreement’ (Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-issue and Class Actions, Kluwer Law, 2006).
Even if the general rule remains that only signatory parties are bound to arbitration agreements, the possibility that non-signatories could be parties in an international arbitration implies that the interpretation of what consent means is a broad one.
Another example arises from the ICC 2017 Arbitration Rules where, in particular, a new expedited procedure will automatically apply to disputes below US$ 2 million in value. According to this new expedited procedure, the ICC has the discretion to appoint a sole arbitrator, even when the arbitration agreement states that the dispute should be heard by a tribunal of three arbitrators.
The practicality of such a rule is evident. But it is a derogation from party consent; it shows once again that what parties intend and what effectively occurs in an international arbitration can be (and quite often are) two very different things.
Thus, the role of consent in international arbitration is, if anything, lessened, and default arbitration appears as ‘arguably the final stage of a process which was already initiated, and which has indeed been going on for decades’ (G. Cuniberti, Rethinking International Commercial Arbitration: Towards Default Arbitration, p. 32).
In order to demonstrate his thesis, Dr Cuniberti dedicates the first part of his book to establish the main reasons to promote arbitration instead of court litigation. He does however clarify that his proposal only refers to international commercial arbitration and not arbitration as a whole as ‘[w]hether arbitration is better than litigation can be debated in a domestic context’ (ibid. p. 20).
According to Dr Cuniberti, arbitration presents a critical advantage for the resolution of international commercial disputes as it offers a fair process by being more neutral and ensuring equal treatment between the parties. An explanation for this would be that ‘[c]ourts are not perceived as neutral when they decide disputes between locals and foreigners’ and ‘[i]t is also well known that independence is not a luxury that many judiciaries can afford’ (ibid. p. 20). The only alternative for a truly neutral and independent third party for solving a given dispute is arbitration. In the same line, arbitration offers procedural equality as ‘[m]ost arbitral regimes expressly provide that arbitrators are under the obligation to treat the parties fairly and equally’ and as ‘arbitral awards can be challenged in violation of procedural fairness’ (ibid. p. 23), but also public funds saving, as it is entirely funded by the litigants, and greater flexibility, as parties have the power to design the arbitral process.
Building upon that, the author studies in Part II the decline of consent in modern arbitration. He analyses what foreign investment arbitration, domain name arbitration and the French experience can say about the role of consent in the modern context of international arbitration. He recognizes that even if none of those experiences exactly match his proposal, ‘they show that the idea of broadening the scope of arbitration and of severing the link between arbitration and consent is far from being revolutionary’ (ibid. pp. 31-32).
In Parts III and IV, he discusses what he considers to be the most important arguments against his thesis. In Part III, Dr Cuniberti refers to the problems that could arise from a policy perspective if arbitration were the default justice system. Can arbitrators be legitimate adjudicators in the absence of the parties to resort to their services? What would be the legitimacy of their power to impose their views in the resolution of the dispute? Would their ‘lack of democratic legitimacy’ be a serious concern (ibid. p. 68)? The author also studies whether compulsory arbitration would undermine the public function of courts. Not only its main function of resolving private disputes, but rather other functions such as lawmaking or making public that disputes are resolved according to rules of law (ibid. Chapter 6). In Part IV, Dr Cuniberti discusses whether a model of compulsory arbitration would raise issues from a constitutional perspective, both in European law and in United States constitutional law.
In Parts V and VI, the author presents the model of non-consensual arbitration he has built and the ways it could be implemented. In Part V, he presents both his main model as well as two variants to it. The first and main model is exposed in detail, in aspects such as its scope, grounds for review, scope of confidentiality, seat of arbitration, etc. The two variants build upon this main model and explore whether non-consensual arbitration could serve other purposes: in particular, if it can alleviate the burden of the civil justice system by outsourcing a range of disputes to arbitration. In Part VI, Dr Cuniberti studies both indirect and direct paths to implement his model, going from the interpretation of default arbitration as an implied or imposed clause, or as part of trade usages, to a direct unilateral of coordinated implementation by national states.
Dr Cuniberti’s work proves to be a unique and challenging one, as it not only provides arguments supporting his thesis, i.e. that default arbitration should be the rule in the international commercial context, but argues for a change of paradigm: to move from a contractual/consensual foundation of arbitration to a very different one, one where arbitration does not require any express agreement from the parties.
The implications of such a proposal are, from our point of view, of great extent. Not only does it imply that international commercial disputes will almost always be resolved by arbitration, as it is unlikely that parties would expressly agree to the jurisdiction of any given national court), but also that consent in arbitration will lose the importance it had in the past.
Furthermore, it is hard for us to imagine that upon acceptance of such a position and change of paradigm, the same would not apply to domestic commercial arbitration, and further, to arbitration as a whole. After all, the advantages of arbitration seem to be applicable in both international and domestic contexts and it seems to be only a matter of time until domestic arbitration follows the same path. Default arbitration seems inevitable.