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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
A Summary of the Final Report of a Working Party of the ICC Commission on International Arbitration
This article presents an overview of the findings reported by the Working Party constituted under the chairmanship of Professor Jérôme Huet to examine issues relating to arbitration in the field of telecommunications and electronic commerce.
I. Arbitration and telecommunications
A. Arbitrability of telecommunications disputes
Following telecommunications deregulation in various parts of the world,1 notably in Europe 2 and the United States, there has been a significant increase in contractual relations between players in the liberalized market: operators, users and regulatory bodies. Several sorts of legal relations may be formed between such players. Some of them will be contractual, such as supply or distribution agreements between operators and equipment suppliers or distributors; others will be unilateral administrative decisions, such as licences granted by governments or penalties inflicted upon operators by national regulatory authorities.
Whereas relations between operators and distributors will be private in nature, allowing disputes between them to be submitted to arbitration without any difficulty, two other kinds of relations are likely to fall outside the scope of private arbitration, namely those arising from agreements relating to occupation of the public domain, which are subject to administrative law, and those resulting from interconnection agreements, which may be subject to the jurisdiction of the relevant regulatory authority. The statutory definition of the powers assigned to the regulatory authority may differ from one country to another.
In some countries (e.g. France), public legal entities are unable to submit disputes to arbitration in domestic matters, whereas in others no such restriction exists. In[Page21:] international matters, case law now reflects a general tendency towards acceptance of the arbitrability of disputes involving states and public legal entities.
It is not easy to decide whether disputes relating to interconnection are capable of being settled by arbitration, as the applicable legislation - whether national or from the European Union - neither clearly assigns jurisdiction for settling differences nor precisely defines the powers of the regulatory authorities. It nonetheless seems that national regulatory bodies are competent only with respect to the formation of the interconnection link and that disputes relating to the performance of agreements made for interconnection between operators lie outside their powers. Such disputes may thus be submitted to arbitration, if the parties so agree. As far as disputes relating to interconnection on an international scale are concerned, failing express assignment of jurisdiction to national regulatory authorities and in the absence of a supranational authority having jurisdiction in this matter, it should be considered possible for parties to choose to refer their disputes to state courts and, similarly, to provide for arbitration.3
B. The effectiveness of arbitration for resolving disputes
Arbitration is a fitting dispute resolution method for a high technology sector such as telecommunications. This sector has special requirements (speed, technical nature, confidentiality, independence of arbitrators) that arbitration should be able to satisfy. It is, moreover, quite widely accepted that arbitrators are able to decide disputes which involve competition law or other issues to which mandatory rules of law apply, provided such rules are correctly applied.
According to the well-established principle of party autonomy, the parties are free to choose in their contract or at the time the dispute arises the law which will govern the contract (lex contractus). Should the parties have stipulated contractual clauses contrary to national public policy principles, the arbitrators may implement such contractual clauses, unless the public policy principles in question are deemed to be part of international public policy too.
If the parties have not agreed in advance on the law governing the contract, the arbitrators must determine the applicable law through a choice of law rule or otherwise. In the telecommunications field, however, the determination of the applicable law may turn out to be difficult, especially if such determination is made by reference to the 'characteristic performance' standard,4 because contracts in this field are complex and the parties may provide reciprocal services. Furthermore, it may be difficult to localize interconnection contracts because of their international nature. Parties would therefore be well advised to specify in advance the law applicable to their contracts.[Page22:]
Conclusion
The Working Party finds there to be no need to develop arbitration mechanisms specific to the telecommunications sector, given the flexibility of the existing arbitration rules. It expects arbitration to develop considerably in the telecommunications field, despite the fact that the sector still remains to a certain extent under the control of specialized national authorities, and the fact that such disputes are often marked by their urgency and technical nature.
II. Arbitration and electronic commerce
A. The possibility of carrying out arbitration on-line
The question arises as to what is the simplest and quickest way of settling disputes relating to electronic commerce. The Working Party considered whether on-line dispute resolution methods, such as on-line arbitration or the use of electronic techniques in traditional arbitration, are able to provide a satisfactory answer. Some experiments have already been made. As far as on-line Internet domain name dispute resolution is concerned, expedited administrative proceedings are now offered by a number of bodies, including notably the World Intellectual Property Organization (WIPO).5
On-line arbitration would seem to have two main advantages as compared to ordinary arbitration procedures: parties would not have to travel to an arbitral tribunal sitting in a distant location, and proceedings should be speeded up as documents and evidence can be exchanged almost instantaneously through electronic mail. Whereas, technically, such arbitration can certainly be carried out, the important question is whether such arbitration is compatible with texts regulating international commercial arbitration.
Although there is no uniform answer to the question of whether or not an arbitration agreement should be in writing, international texts - including the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards (Article II(2)) and the UNCITRAL Model Law on Arbitration of 21 June 1985 (Article 7(2)) - seem to require that an arbitration agreement be made in writing. This calls for reflection on what may constitute a written document, so as to determine whether or not an agreement made in electronic form may be considered a written document. The 1961 Geneva European Convention on International Commercial Arbitration (Article I(2)a) and the UNCITRAL Model Law on Arbitration (Article 7(2)) both seem to admit that an arbitration agreement may be made electronically, on condition, however, that evidence of the existence of such an agreement can be provided.
In order to avoid evidential problems regarding the question of whether or not parties have consented to arbitration on-line, it will be in the interest of parties to provide for [Page23:] confirmation of acceptance by a second click on an icon or by some other procedure. More particularly, when one of the parties is a consumer, it is likely that the validity of consent to an agreement to arbitrate will be assessed more rigorously, especially if the arbitration agreement is made by reference.6 When faced with consumers, sellers and suppliers would therefore be well advised to do their utmost to avert the risks of future disputes.
Provided public policy provisions are respected, the parties are at liberty to determine the law which will be applicable to the arbitration proceedings, as well as that applicable to the merits. The New York Convention leaves the parties entirely free in this respect. Should the procedural law and/or the arbitration rules chosen by the parties not cover certain issues (such as the validity of the arbitration agreement, constitution of the arbitral tribunal, or procedural matters), they may have to be considered under the law of the place of arbitration(lex loci arbitri) . Alternatively, reference may be made to the law of the geographical location of the server through which the arbitration takes place (lex loci 'server'). When the arbitration is conducted on-line, it will be difficult to determine the place of arbitration if the parties have not fixed this. Moreover, the connection underlying the choice of law may appear to be artificial, insofar as more than one server may be used in the arbitration, and each of them may be situated at any point on the globe. If on-line arbitration is to be considered as delocalized and denationalized in nature, as some advocate, it would no doubt be difficult for national courts to admit such a view, which hardly seems compatible with the New York Convention. The least artificial solution therefore seems to be to leave the parties entirely free to determine the place of arbitration, albeit fictitious.
Particular problems for on-line arbitration may arise in two areas, namely the proceedings themselves and the award.
Under the ICC Rules of Arbitration, it should be possible for a party to file a Request for Arbitration with the Secretariat electronically and for the latter likewise to notify such Request electronically to the Respondent, without infringing Article 3 of the Rules.7 As regards the Terms of Reference, the requirement of a signature, which traditionally means adding a handwritten sign, means that express agreement from the parties is necessary in order for Terms of Reference drawn up electronically to be used. The transmission by the parties of written submissions and supporting documents in accordance with Articles 20 and 22 of the Rules should be acceptable, given the broad wording of Article 3(2) regarding communications. The Arbitral Tribunal is not obliged to hold hearings and, with the parties' consent, may decide that discussions will take place in the form of electronic exchanges. When a hearing is to be held, the technical means exist to hold such hearings electronically through 'chat rooms'. Although there may be doubts as to whether such hearings are compatible with Article 21 of the Rules, courts may consider such proceedings to be in order, especially where, as is the case in some state courts, proceedings are entirely in writing.
The writing and signature requirements which exist with respect to arbitral awards in various national legal systems and international legal texts (New York Convention (Article IV), UNCITRAL Model Law on Arbitration (Article 31)) may also raise problems as, in information technology, no distinction is made between an original and a copy. [Page24:] However, this difficulty can be overcome by new legislation attaching the same value to a digitized signature as to a handwritten signature.8 As far as enforcement of arbitral awards is concerned, a problem might arise as a result of the requirement that an original or duly certified copy of the award and the arbitration agreement must be provided to courts where enforcement is sought. The UNCITRAL Model Law on Electronic Commerce may offer a solution to the problem in this respect,9 although it remains uncertain whether a state court would, on this basis, accept the document so transmitted as an original of the computer document. As far as the conservation of awards in electronic form is concerned, here too the UNCITRAL Model Law on Electronic Commerce may provide a solution.10
B. Special precautions called for by on-line arbitration
As, in information technology, the content and form of documents can be changed - fraudulently or accidentally - without leaving any marks, electronic documents have not yet been recognized as having evidential weight in the legislation or case law of the various countries faced with this problem. The UNCITRAL Model Law on Electronic Commerce attempts to provide a solution.11 It is not easy to ensure security, however, whether with respect to the integrity of electronic documents or the will of the originator.
Certain technical or legal solutions may be applied in order to evidence and protect computer documents. Technically, cryptography, or encryption, allows secret codes to be applied. Legally, parties may take the precaution of signing a contract in which they forgo the benefit of statutory means of proof and recognize the evidential value of a certain form of computer signature, namely, a confidential code. Also, a system for acknowledgement of receipt of electronic mail exchanged during arbitration proceedings may be organized. It could, for example, be provided that such acknowledgement be systematically sent via the arbitral institution, which would thus have the role of an authenticating third party.
The Internet raises a confidentiality problem as it is an open network. Information exchanged over the network may be intercepted by other Internet users, whether intentionally or otherwise. This problem, however, is neither new nor peculiar to on-line arbitration; it has appeared also in connection with payment operations in electronic commerce.
Although real, the risks existing on the Internet need to be put into perspective, as other traditional means of communication are not in fact always better protected, despite seeming to be so: telephone communications and fax transmissions may also be intercepted by third persons.
Arbitration is currently faced with a situation in which legal texts lag behind technical developments. The Working Party therefore recommends that consideration be given to amending the fundamental texts of international arbitration, so as to allow on-line arbitration to develop. Another option is also available: courts in states which have [Page25:] adhered to such international instruments may interpret them in such a way as to give the same legal weight to electronic documents and signatures as to those on paper.
It is likely that use of on-line arbitration will really develop only when set up and supervised by experienced arbitral institutions whose structure enables them to follow through the procedure and conserve electronic records of its major stages. Such institutions have considerable authority, which should allow on-line arbitration to be more readily recognized as having the necessary legal security and reliability in the eyes of both users and state courts.
1 On 15 April 1997 the World Trade Organization (WTO) adopted the Fourth Protocol to the General Agreement on Trade in Services concerning basic telecommunications services.
2 See Commission Directive 90/338/EEC of 28 June 1990 on competition in the markets for telecommunications services; Commission Directive 96/19/EC of 13 March 1996 amending Directive 90/388/EEC with regard to the implementation of full competition in telecommunications markets; Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in Telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP).
3 The agreement made at European level for GSM (Global System for Mobile Communications Memorandum of Understanding Association) between the various GSM operators contains an ICC arbitration clause for the settlement of disputes.
4 The standard provided by the European Convention on the Law Applicable to Contractual Obligations, concluded at Rome on 19 June 1980 (Article 4(2)).
5 Such proceedings give effect to the framework implemented by the Internet Corporation for Assigned Names and Numbers (ICANN, URL: www.icann.org) for dealing with disputes connected with the registration and use of Internet domain names. ICANN has so far approved three domain name dispute resolution service providers: WIPO (approved as of 1 December 1999, URL: arbiter.wipo.int), the National Arbitration Forum (approved as of 23 December 1999, URL: www.arbforum.com), and eResolution (approved as of 1 January 2000, URL: www.eresolution.ca).
6 In the European Union special attention should be given to the following Directives: Council Directive 93/13/3EEC of 5 April 1993 on unfair terms in consumer contracts and Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts.
7 Article 3(2) of the ICC Rules of Arbitration provides that notifications or communications may be made 'by delivery against receipt, registered post, courier, facsimile transmission, telex, telegram or any other means of telecommunication that provides a record of the sending thereof'.
8 Such legislation has been in existence in Germany since 1997. In the European Union, Directive 1999/93/EC of the European Parliament and of the Council on a Community framework for electronic signatures was adopted on 13 December 1999.
9 Article 8 provides that a document may be considered as an original if two conditions are met, namely that 'there exists a reliable assurance as to the integrity of the information' and that 'that information is capable of being displayed to the person to whom it is to be presented'.
10 Article 10 provides that a document is retained if 'the information contained therein is . . . usable for subsequent reference', if 'the data message is retained in the format in which it was generated, sent or received', and if 'such information, if any, is retained as enables the identification of the origin and destination of a data message and the date and time when it was sent or received'.
11 Article 9(2).