I. Introduction

Arbitration proceedings are very often aimed at obtaining monetary awards as a contractual remedy. However, other remedies may also be pursued in any such proceedings. 1 The objective of the 27th Annual Meeting of the ICC Institute of World Business Law was to pay attention to some of these other remedies.

The topic is to a large extent novel and raises difficult issues. Traditionally, remedies may substantially differ from one jurisdiction to another. For instance, specific performance meets much more resistance in common law jurisdictions than it does in civil law. 2 Also, some jurisdictions have remedies that are unfamiliar or unknown to others, such as the astreinte of French law and the law of the Benelux countries. 3 These differences not only create problems in international relations but also pose challenges as soon as international arbitration is involved. This book attempts to shed some light on some of these delicate issues. Rather than embark on a comprehensive overview of awards other than monetary awards providing direct relief for breach of contract, the editors have preferred to focus on some specific issues such as interest, 4 contractual remedies (such as liquidated damages clauses) and provisional and auxiliary remedies. In this regard, they could rely on the expertise of the contributors who also met demanding deadlines and without whom the publication of this volume in the Dossiers of the ICC Institute of World Business Law simply would not have been possible. [Page237:]

These concluding observations will not attempt to summarize the various contributions but will merely identify a number of threads that can be found throughout this book and which relate to party autonomy (Part II), the impact of the applicable law (Part III) and arbitrator autonomy (Part IV).

II. Party autonomy

Parties to a contract may already at the stages of negotiations and contract drafting provide for some contractual clauses dealing with remedies. This relates primarily to clauses providing for a predetermination of contractual damages in the case of liquidated damages or even, to the extent permitted by the applicable law, incentives to perform absent which penalties may become payable, as is the case with penalty clauses. 5 Other examples are interest clauses in international commercial contracts, in which the parties may regulate interest issues including the interest rate, simple or compound interest, a notification requirement or the dates from and until which interest will accrue. Any such clauses are manifestations of party autonomy regarding contractual remedies.

Remedies may not only stem directly from contractual clauses but may be incorporated into contracts by virtue of an arbitration clause referring disputes to institutional arbitration. To the extent that arbitration rules contain provisions regarding remedies (for instance, regarding interest, interim relief6 or the possibility for arbitrators to award a judicial penalty (astreinte), any such institutional rules have become contractual terms by reference and are indirect manifestations of party autonomy regarding remedies.

Party autonomy in relation to remedies has features of its own as well as limitations. As contractual terms, any such remedies may be subject to interpretation as is the case with liquidated damages clauses when the contractual clause does not explicitly state whether the contractual remedy is of an exclusive nature or when an interest clause is unclear as to whether interest is to be simple or compounded. As to its limitations, contractual remedies are subject to mandatory rules of the governing law as is the case with the prohibition on penalty clauses in most common law jurisdictions, the prohibition on excessive penalties in some civil law countries or the mandatory control over penalties in other civil law systems. 7[Page238:]

Moreover, limitations on party autonomy may follow from their characterization in accordance with the applicable law. Some remedies may pertain to procedural law bringing them outside the scope of party autonomy, which may imply that any contractual provisions regarding any such remedies may be considered to be null and void or unenforceable. The latter raises the question as to the impact of procedural law on remedies available in international commercial arbitration, which will be discussed in the following section.

III. Remedies and applicable law

The broad range of remedies discussed in this book raise questions as to their proper characterization, which may determine the law to be applied to any such remedy. Both aspects will be discussed below.

1. Characterization of remedies

Characterization has hardly been analyzed in relation to international commercial arbitration. If one were to makes a comparison with domestic courts, characterization may be operated in accordance with the lex fori, the lex causae or autonomously, with conflict of laws having a clear preference for characterization according to the local law of the court unless there is uniform law that may indicate a more autonomous approach. In his 1963 Hague lectures, Goldman already questioned this approach in relation to international commercial arbitration and advocated the opinion that domestic conceptions of characterization should not lead arbitrators, since there is no lex fori in international arbitration. 8

However, the proper approach to characterization in international arbitration is only relevant to the extent that the characterization in the legal systems involved differs. 9 Some remedies, such as liquidated damages or penalty clauses or the obligation to pay interest (as opposed to most other interest issues), are likely not to raise characterization questions as most legal systems will characterize them as contractual remedies. But many of the other remedies discussed in this volume might create true conflicts between competing rules of the law governing the contract, the procedural rules of the place of arbitration and - in relation to interest - the law of the contract currency. [Page239:]

This book gives many such examples. 10 Are judicial penalties in Sweden to ensure compliance with procedural instructions or orders available when the place of arbitration is Stockholm (and, if so, is it further required that the dispute is somehow connected to Sweden other than as the place of arbitration?) or only when the law applicable to the contract is Swedish? Are judicial penalties available as to substantive remedies in France or the Benelux when the place of arbitration is in these countries (also if, but for the location, no other connections exist) or does it depend on the governing law? Is specific performance possible in England (eventually through the courts) on the basis that the seat is in London or on the basis of a governing law other than English law authorizing specific performance on terms more favourable than English law? Is the interest rate, the possibility of awarding compound interest or the calculation of the interest period to be derived from the law of the seat, from the law governing the merits of the case or from the law of the contract currency?

Furthermore, these questions may arise not only in arbitration proceedings on the merits but also in interim relief proceedings. This raises yet another question, namely: does interim relief warrant different answers?

An answer to these questions would exceed the scope of this concluding chapter but some general observations can be made. First, as Goldman already pointed out in 1963, the analogy between domestic courts and international arbitration fails for a number of reasons, certainly when the place of arbitration has been chosen for reasons of neutrality and is otherwise unconnected to the merits of the dispute. This implies that domestic notions of the law of the seat of the arbitration should not automatically be transposed to arbitration. Second, in view of the contractual origins of arbitration, the law applicable to the merits has a stronger claim to be applied to merits issues, while the choice of a seat may be interpreted as extending only to procedural (and not to merits) issues. This implies that contractual remedies and interest issues by and large fall outside the scope of the procedural law of the seat. Third, a preference for merits issues to be governed by the law applicable to the contract does not exclude the consideration of alternative characterizations, such as autonomous characterizations or, for interest issues, the law of the contract currency. [Page240:]

Fourth, an arbitrator should be cautious not to impose a remedy available under the governing law that would raise setting-aside problems at the place of arbitration. Fifth, in interim relief proceedings, time constraints may prevent an elaborate debate and deliberation on these issues. As a consequence, the discretionary nature of decisions in any such proceedings on the basis of balancing the interests of the parties and the preservation of the status quo between the parties will be decisive.

The most difficult characterization issues arise where a substantive remedy is sought that is available at the seat but not in the governing law. This is the case in relation to the French and Benelux judicial penalty (astreinte). In these countries, the judicial penalty has a mixed nature. First, it has a judicial function, as judges and arbitrators are authorized to award, by way of an auxiliary and ancillary order to an order for specific performance or an injunction, a certain monetary sum to be forfeited to the creditor in case of non-compliance with the order or the injunction. Second, the judicial penalty clearly has a merits aspect in that it provides an incentive for compliance with a contractual obligation. Under a purely procedural characterization, one may be tempted to accept this remedy in international arbitration since it is available at the seat. However, the judicial penalty also has a contractual function and thus conflicts with any such remedy not available under the law governing the merits. However, since the remedy is available at the seat and the parties may have chosen the seat, they may be deemed to have accepted this mixed remedy in addition to remedies available under the law governing the merits. The issue is thus primarily restricted to cases where the seat is not determined by the parties but, for instance, by the institution administering the case or by the arbitral tribunal and where the question arises whether any such determination of the seat also implies that remedies available there but not under the law governing the contract can be sought. This question remains unsolved and raises problems primarily at the enforcement stage if the judicial penalty contributes to enforcement in the country of the governing law. [Page241:]

2. Applicable law

After characterization, the arbitral tribunal will need to determine the applicable law. In this regard, the traditional conflict of laws method pointing to domestic law by virtue of a conflict rule has gradually lost its predominance and is competing with other methods that may equally provide the applicable rules.

First, uniform law is becoming increasingly relevant worldwide as well as at a regional level (such as in the European Union), and its influence is specifically felt on interest issues. 11 In the case of sales contracts, for instance, the 1980 Vienna Convention on the International Sale of Goods (CISG) may be applicable. The CISG entitles the seller to payment of interest under Article 78 but fails to deal with other interest issues that raise delicate questions relating to interest periods and rates. Similarly, under the laws of the member states of the European Union, commercial receivables are subject to the interest rate of the European Central Bank plus 7% by virtue of the EU Collection Directive. 12 For procedural issues, however, uniform law is by and large lacking, with the exception of the Benelux Uniform Act on Judicial Penalties, which was annexed to the Convention of November 26, 1973 between Belgium, The Netherlands and Luxembourg and has been incorporated into the codes of civil procedure of these countries. Regarding the future, it is worth mentioning the revision of the UNCITRAL Model Law on International Commercial Arbitration13 with regard to interim relief, as states adopting legislation based on this revision will provide a uniform basis for arbitral tribunals to grant interim relief.

Second, the question of the applicable law is also less relevant to the extent that issues relating to remedies or interest are governed by contractual provisions or by the incorporation of arbitration rules, which will often pre-empt the applicable law to the extent that any such law is of a non-mandatory character. This is highly relevant in relation to international commercial arbitration, since the arbitration laws in numerous countries - as well as international arbitration rules - provide that an arbitral tribunal should first apply the contractual provisions, which reduces the impact of the applicable law. [Page242:]

Its relevance is thus limited to situations where the contract is silent on remedies (for instance, on remedies in interim relief proceedings) or interest, where there is uncertainty as to the interpretation of contractual clauses or where mandatory law is involved.

Last but not least, questions regarding the applicable law are just different in international commercial arbitration than in domestic court litigation. Since the 1960s, international commercial arbitration in many jurisdictions has departed from the application of the conflict of laws of the place of arbitration in relation to merits issues (including, for the purposes of this discussion, interest). Arbitral tribunals are authorized to apply the conflict rules they consider appropriate (indirect approach) or, as in France and The Netherlands, the substantive rules they consider appropriate (direct approach). In relation to procedural issues, arbitration laws and rules often give arbitral tribunals large discretionary powers to conduct the proceedings, subject to minimal procedural safeguards such as due process, equality of arms and good administration of justice. This implies that domestic rules of civil procedure at the seat of arbitration that apply to domestic court proceedings do not automatically apply to international commercial arbitrations seated in any such country. Thus, procedural issues regarding remedies do not necessarily apply to arbitration, granting arbitrators a lot of autonomy in relation to various issues that will be discussed below.

IV. Arbitrator autonomy

Absent party autonomy, the question arises whether arbitral tribunals need to fall back on the applicable law as domestic courts would do or whether and to what extent they are authorized to exercise their own autonomy in framing remedies and awarding interest.

To answer this question, merits issues are clearly distinguishable from mere procedural issues, which will require a proper characterization by the arbitral tribunal as set forth in section III.1 above. If the characterization process leads to an issue being considered as a merits issue, the arbitral tribunal will be bound by a choice of law operated by the parties. [Page243:]

Absent any such choice of law provision in the contract or during the arbitral proceedings, the arbitral tribunal will, under many arbitration laws or arbitration rules, enjoy broad discretion to either determine the applicable law by virtue of a conflict rule or directly apply an appropriate substantive rule. Even if a conflict rule is to be applied under the indirect approach, this will not necessarily imply that domestic rules are to be applied, because the question will then arise whether any such domestic rule applies in an arbitration context. Even if domestic rules apply, they may still entrust an arbitral tribunal, like a domestic court, with broad discretionary powers, as for instance regarding quantum issues. These factors contribute to arbitrators having a lot of autonomy to decide merits issues, absent a choice of law or applicable mandatory rules. The contributions on interest in this volume confirm these propositions and argue for broad discretionary powers in deciding on interest issues, by and large irrespective of domestic law. 14 On the other hand, some contributions have drawn attention to the possible impact of mandatory rules prohibiting interest altogether or only compound interest. 15

A procedural characterization of remedies raises somewhat different questions, since arbitrator autonomy has not been explicitly recognized to the same extent as in relation to merits issues. Although arbitrator autonomy is generally recognized for case management purposes relating to the handling of the proceedings, it is still unclear whether this autonomy also extends to other issues, such as remedies, or whether a territorial approach is to be followed, under which remedies need to follow or be consistent with the curial law of the seat of the arbitration. Sometimes, the curial law provides the answer, as in the case of Articles 1051(1) and 1056 of the Dutch Code of Civil Procedure, which refer back to the powers of domestic courts in interim relief proceedings or with regard to awarding judicial penalties and thus determine the authority of arbitral tribunals in relation thereto by reference to the similar powers of domestic courts. In the absence of an explicit authorization by the curial law, the question remains whether and to what extent arbitrators have autonomy regarding remedies that are to be characterized as procedural. An answer needs to be found at different levels. First, the arbitral tribunal needs to have authority to grant a remedy requested by a party that would exclude remedies against third parties or imply some coercion on a party to the arbitration. 16[Page244:]

In practice, arbitral tribunals are aware of these limits to their powers, and problems will rarely occur in relation to these limitations. Second, the exercise of arbitrator autonomy, for reasons of efficiency, needs to be scrutinized against the arbitration law of the place of arbitration to see whether it prohibits any such exercise, 17 since the courts at the seat might be called upon to set aside the award granting certain remedies. If no explicit or implied prohibition stems from the arbitration law at the seat, it is submitted that arbitral tribunals enjoy autonomy to frame remedies based on their inherent powers to conduct the proceedings and to give appropriate relief at the outcome of these proceedings, provided certain minimal requirements are met. These requirements relate first to the parties' procedural autonomy, in that the arbitral tribunal should not order remedies that fall outside the scope of the submission to arbitration. Also, any remedy should not come as a surprise to the parties, since it might violate due process, and the arbitral tribunal may be advised to raise the remedies issue timely in the course of the proceedings. Finally, any remedy should not violate procedural public policy at the seat, although any such violation is not to be deduced from the mere fact that the remedy is unknown in court litigation at the seat. 18[Page245:]

1
M. Moses, The Principles and Practice of International Commercial Arbitration (Cambridge University Press, 2008) pp. 186-188.

2
For instance, Art. 10(2) of the 1980 Rome Convention on the Law Applicable to Contractual Obligations provides that, in relation to the manner of performance and the steps to be taken in the event of defective performance, regard shall be had to the law of the country in which performance takes place. This provision is to be replaced by identical wording in Art. 12(2) of the Rome I Regulation expected to be adopted in the spring of 2008 and to enter into effect in the fall of 2009.

3
For the position under Swiss law, see J.C. Landrove and J.J. Greuter, 'The civil astreinte as an incentive measure in litigation and international arbitration practice in Switzerland: is there a need for incorporation?', in C. Chappuis, B. Foëx and T.K. Graziano (eds.), L'harmonisation internationale du droit (Zurich, Schulthess, 2007) pp. 536-549; L. Lévy, 'Les astreintes et l'arbitrage international en Suisse', 21 ASA Bull. (2001) p. 21.

4
See also B. Chappuis, Le moment du dommage: Analyse du rôle du temps de la détermination et la réparation du dommage (Zurich, Schulthess, 2007) pp. 363-379.

5
See the contribution of Ms Dimolitsa in this volume.

6
For an overview of arbitration rules regarding interim relief, see the contribution of Messrs Beechey and Kenny in this volume.

7
M. Fontaine and F. De Ly., Drafting International Contracts: An Analysis of Contract Clauses (Ardsley, Transnational, 2006) pp. 342-346.

8
B. Goldman, 'Les conflits de lois dans l'arbitrage international de droit privé', Recueil des Cours, Vol. 109 (1963-II) p. 422.

9
Conflict scholars refer to this situation as a true conflict (as opposed to false conflicts).

10
For a more extensive discussion on judicial penalties, see the contribution of Mr Mourre in this volume.

11
See the contribution of Professor Giardina in this volume.

12
Art. 3 of Directive 2000/35/EC of 29 June 2000 on combating late payment in commercial transactions, OJ L 200, August 8, 2000, p. 35.

13
UN General Assembly Resolution 61/33 dated December 18, 2006, available at: <http:// www.uncitral.org>.

14
See the contributions of Professor Gotanda and Mr Sénéchal in this volume. In a joint publication published after the 27th Annual Meeting of the ICC World Business Law Institute, both argued for the determination of interest rates at a market rate of return with compound interest on an annual basis. See J. Gotanda and T. Sénéchal, 'Interest as damages', Villanova Public Law and Legal Theory Working Paper Series (April 2008), available at: <http://ssrn.com/ abstract=1116382>.

15
See the contributions of Messrs Riad and Arfazadeh in this volume.

16
See Landrove and Greuter, supra note 3, at pp. 537-539.

17
On the English position, see the contribution of Mr Veeder in this volume.

18
For a Swiss perspective, see Landrove and Greuter, supra note 3, at pp. 539-541. J.J., l.c., 539-541.