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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
by Fabio Bortolotti
4.1 The Legal Framework
From the period following World War I1 and partly thanks to ICC, which promoted the first international conventions in this field, substantial efforts have been made to gradually establish a secure legal framework for international arbitration in order to provide the business world with a powerful tool for settling cross-border disputes.
In this context, the New York Convention of 1958 (hereafter “New York Convention”), which will be examined in the next paragraph, is the main instrument for ensuring that arbitration can be used safely and effectively in international trade.
Another very important convention is the Washington Convention of 18 March 1965 on international investment disputes. This Convention, promoted by the World Bank, has set up an international arbitration system managed by the International Centre for the Settlement of Investment Disputes (ICSID), with the aim of facilitating the resolution of international investment disputes and thereby promoting foreign investment.
Other international conventions in the field of arbitration having a regional character are:
In addition to the international conventions, the domestic laws of the various countries also play a substantial role, particularly with respect to the possible annulment or setting aside of arbitral awards (infra, § 4.5.4.1). The national laws on arbitration, some of which provide special rules for international arbitration submitted to their law, may differ substantially from country to country.2
The model law drafted by UNCITRAL3 is an important instrument favouring the harmonization of domestic legislations in this field, which constitutes at present the standard for a modern legislation on international commercial arbitration.
4.2 The New York Convention of 1958
The New York Convention of 1958, ratified by more than 130 states, is the main instrument for facilitating the resolution of cross-border disputes through arbitration.
The text of the Convention, together with the list of the states that have ratified it, can be found in the Appendices, § 8.2.
4.2.1 The fundamental principles of the Convention
By ratifying the New York Convention, a state mainly undertakes the two following obligations:
The two basic principles
This means that, when dealing with the counterpart of a country that has ratified the New York Convention, one may reasonably assume that:
The first point is very important when a party wishes to make sure it will not need to defend itself before the courts of the country of the other party. Where the country in question is a signatory of the New York Convention, a valid arbitration clause will prevent the other party from bringing an action before its courts or, if such action is brought, it will be easy to challenge the jurisdiction of the local court.
As to the second point, it is important to underline that the reasons that may justify the refusal to recognize and enforce a foreign award under the New York Convention are rather strict. On one side, there are a number of requirements principally concerning the observance of procedural rules5 (which will normally have been respected if the arbitration has been conducted by experienced arbitrators) and, on the other hand, situations in which the subject matter of the dispute is non-arbitrable or the recognition of the award would be contrary to public policy of the country where recognition is sought. This means that, except for the above situations, which are rather exceptional (see infra, §§ 4.2.2 and 4.2.3), there should be no particular obstacles to the recognition of arbitral awards in countries having ratified the New York Convention.
It should be emphasized, however, that not all countries having adhered to the New York Convention fully respect its provisions. Therefore, in some countries the provisions of the New York Convention may be partially ineffective because of the inadequacy of the law implementing them, or because of a restrictive attitude taken by the courts when applying the Convention or the law implementing the Convention. This is why it is advisable, particularly with respect to countries that have only recently accepted international arbitration, to verify to what extent the principles of the Convention are actually observed by local courts.
4.2.2 The arbitrability issue
A subject that needs to be examined with the greatest attention (also with respect to countries showing a positive approach towards arbitration) is whether the local law considers certain matters as non-arbitrable, i.e. as not capable of being settled through arbitration. Since the New York Convention does not limit the discretion of the states to decide that certain matters cannot be subjected to arbitration, it is important to accurately verify this, particularly when possible disputes may involve issues that can give rise to problems of arbitrability.
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When the subject matter of the dispute is non-arbitrable in a given country, the recourse to arbitration will be ineffective as regards two substantial issues:
The decision by a national legislator to reserve certain matters exclusively to its own courts and so to exclude their arbitrability normally has a close link to public policy. When certain issues involve fundamental principles of the legal system, or the “most basic notions of morality and justice”,8 the legislator may decide that any disputes concerning these matters must be dealt with exclusively by its own courts, in order to make sure that “private judges” chosen by the parties, such as arbitrators, are given no opportunity to take decisions which might violate public policy. When this extreme position is taken, even an arbitration award that complies with the public policy principles will be ineffective, merely because it has dealt with a matter that cannot be subject to arbitration.
Such an approach, which a priori denies the arbitrators the possibility of deciding in compliance with public policy, is justified for matters such as family law, for which it is reasonable that the jurisdiction should be reserved to the ordinary courts. However, as regards business law, it is normally preferable that the protection of public policy does not go so far as to exclude arbitrability of the subject matter. In fact, in most cases the fact that the courts may refuse recognition of (or may set aside) an award contrary to the public policy of their country should be sufficient to warrant the respect of public policy rules, without going so far as to prevent arbitrators from making any decision on a certain subject matter, including a decision that conforms with the public policy of that country.
Many examples of domestic rules excluding arbitrability concern situations in which the national legislator wants to protect weaker parties (commercial agents, distributors, licensees) against foreign principals or suppliers: see, for example, the Belgian law of 1961 on distributorship agreements as well as the laws of several countries of Central America on agents-distributors of foreign companies. Another reason for reserving certain disputes to the courts of a country is their closeness to labour law. So, for example, under Italian law not only employees, but also self-employed agents acting as individuals (i.e. not companies) will be entitled to bring possible disputes before the labour courts, which have an exclusive jurisdiction that cannot be excluded by submitting the dispute to arbitration.
A further issue that may give rise to problems is competition (antitrust). Rules on competition are part of public policy and could, in principle, justify non-arbitrability of disputes involving such rules. However, although this approach has been followed in the past, at present the general trend is to consider such issues arbitrable.9 This “open” approach must be approved: if the possibility of an antitrust infringement were sufficient to make a dispute non-arbitrable, the functioning of international arbitration[Page70:]would be severely endangered. It is definitely preferable to permit arbitration involving antitrust issues, considering that state courts, in any case, have the right to review the contents of the arbitral award for compliance with the antitrust rules (infra, § 4.2.3).
Another critical issue is intellectual property, due to the fact that in many countries disputes about the existence of validity of patents or other industrial property rights are reserved to the courts. Nevertheless, the general trend is to consider as arbitrable issues concerning contracts dealing with these rights (such as licence agreements), except when they concern the existence or validity of the intellectual property right as such.
Finally, one should mention the issue of corruption (or illicit commissions), where the question of arbitrability has also been discussed. In a famous arbitral award10 of 1963, the Swedish judge, Gunnar Lagergren, acting as sole arbitrator, declined jurisdiction with respect to a contract involving payment of commissions that clearly had the purpose of bribing government officials, stating in particular that:
“Although these commissions were not to be used exclusively for bribes, a very substantial part of them must have been intended for such use. Whether one is taking the point of view of good government or that of commercial ethics, it is impossible to close one’s eyes to the probable destination of amounts of this magnitude, and to the destructive effect thereof on the business pattern with consequent impairment of industrial progress. Such corruption is an international evil; it is contrary to good morals and to an international public policy common to the community of nations…
“Thus, jurisdiction must be denied in this case. It follows from the foregoing, that in concluding that I have no jurisdiction, guidance has been sought from general principles denying arbitrators to entertain disputes of this nature rather than from any national rules on arbitrability. Parties who ally themselves in an enterprise of the present nature must realize that they have forfeited any right to ask for the assistance of the machinery of justice (national courts or arbitral tribunals) in settling their disputes.
This solution, although it may have been justified in this specific case, appears to be too extreme, considering that not all commission payments are made for illicit purposes and that it is consequently preferable to give the arbitrators the opportunity to deal with the case and to declare the nullity of the contract when it is found to be contrary to public policy. This position corresponds to the currently prevailing trend whereby the right of the intermediary to obtain the agreed commission is recognized, unless there is evidence of the illicit purpose of such payment.
As we have seen, there are several situations that may involve problems of arbitrability. Since this depends mainly upon the national law of the countries involved, it may be advisable to check before agreeing upon an arbitration clause when dealing with issues of the kind described above, whether the subject matter of possible future disputes is arbitrable according to the laws of the countries involved.
When this is the case, it is normally recommended to choose a different means for resolving future disputes.
Example 4-1 – Contract with an Italian agent
A Hungarian principal appoints Mr Paolo Rossi as his commercial agent for Italy. An arbitration clause submits possible disputes to arbitration under the rules of the Court of Arbitration attached to the Hungarian Chamber of Commerce and Industry.
When disagreements arise about the interpretation of certain clauses (particularly with respect to the agent’s exclusivity), Mr Rossi terminates the contract, invoking a substantial breach by the principal, and requests a goodwill indemnity and compensation of damages before the labour court (Tribunale del lavoro) of his domicile. The principal objects that the dispute should be decided by arbitration according to the contract, but the labour court nevertheless affirms its jurisdiction.
The above case is an interesting example of a situation in which the recourse to arbitration is not appropriate. Since in Italy agency contracts with individuals (although [Page71:]the agent is a “self-employed” intermediary) are submitted to the exclusive jurisdiction of labour courts, which makes the dispute non-arbitrable, the arbitral clause is ineffective and the jurisdiction of the labour courts cannot be excluded.
If the Hungarian principal wanted to make sure that a possible dispute would not be decided by the courts of the agent’s country, his choice of arbitration was the wrong one. Had he chosen the jurisdiction of Hungarian courts, such choice would have been valid because regulation No. 1215/2012, — which admits in Article 25 the validity of choice of forum clauses, — prevails over domestic rules providing for exclusive jurisdiction (infra, § 5.2.2.3).
4.2.3 Problems arising in connection with public policy
As noted in the previous paragraph, when a state desires to ensure respect of principles inherent in its public policy, it may choose the extreme solution of reserving exclusively to its courts any dispute with regard to issues involving such principles, i.e. it may consider the respective issues to be non-arbitrable. In this case, parties should, in principle, refrain from choosing arbitration.
When the issues that may give rise to dispute involve questions relating to public policy, without, however, affecting their arbitrability, the situation is less critical. In fact, only when the arbitrators fail to respect the public policy rules, there is a risk that:
In this context, one should first consider that the notion of public policy, which should in any case be interpreted narrowly,12 is not the same in all jurisdictions. Rules considered to be part of public policy in one country may not be similarly considered in other countries. This is particularly the case with respect to rules protecting “weaker” parties, such as agents, distributors, licensees, etc.
However, there are also principles that are said to belong to a “transnational public policy”, such as the prohibition of corruption or the commerce of drugs, which would be considered to be against public policy whatever the applicable law.
While in the first case, where the contractual rules agreed by the parties conflict with the public policy of one country, but are not contrary to the public policy of other countries, it is possible to “bypass” the public policy rules through a choice of law and arbitration outside the country concerned,13 in the second case there will normally be no space for such a solution.
For example, in two cases where the parties submitted a contract with a Belgian distributor to the law of the supplier’s country, the arbitrators upheld this choice, although this implied a refusal to apply the public policy rules of the distributor’s country.14 In fact, the protection of distributors through the use of significant termination indemnities is not a generally recognized public policy principle but, on the contrary, a particularity of Belgian law.
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On the contrary, in cases implying the violation of antitrust rules15 or payment of illicit commissions, it is to be expected that arbitrators will consider the agreement null and void. For instance, the prohibition of corruption is generally recognized all around the world, unless it appears that the intermediary was paid for a lawful promotional activity (or that there is no evidence that the commission was paid for illicit purposes).
4.3 Different Types of Arbitration
When the recourse to arbitration appears suitable, the problem arises as to which type of arbitration to choose.
A first option is to make a choice between ad hoc and administered arbitration, and the compromise solution of an ad hoc arbitration under pre-established rules.
Where parties opt for institutional (administered) arbitration, they must choose the institution that will be most appropriate in the specific case.
These aspects will be examined in detail in the next paragraphs.
4.3.1 The distinction between ad hoc and institutional arbitration
When choosing arbitration as an alternative to the jurisdiction of ordinary state courts, parties can autonomously set out the rules governing the arbitration in the respective clause (ad hoc arbitration) or refer to an existing arbitral institution and to its rules.
In the first case, the parties will need to directly agree upon a number of issues: how to appoint the arbitrators; how to overcome possible obstacles (e.g. where a party refuses to appoint its arbitrator or it is impossible to agree on a chairman of the arbitral tribunal); what rules to apply to the procedure; possible time limits for rendering the award, etc.
In the second case, the parties will submit the arbitration to an institution specialized in managing arbitration procedures and refer to the rules established by such institution.
Ad hoc arbitration has the advantage of leaving the maximum flexibility to the parties, which can adapt the arbitration to their specific needs. However, in this case, the arbitration clause should be drafted by a lawyer having specific experience in international arbitration.
The recourse to institutional arbitration avoids the above problems, provided the parties choose a highly qualified institution.
The two main advantages of institutional arbitration are the following:
First, it provides a comprehensive and proven set of arbitration rules, tested over time, especially if the institution has a long-standing tradition, which will answer most questions that may arise during the procedure.
Second, it warrants a specialized assistance to the parties during the various stages of the arbitral procedure. The arbitral institution will assist the parties in setting up the arbitral tribunal and will monitor the procedure (e.g. by making sure that the arbitrators respect reasonable delays). In some cases, the institution may even make suggestions as to the contents of the award in order to prevent shortcomings that might weaken its effectiveness.
Another important issue is that arbitral institutions normally have pre-established criteria for determining the costs of arbitration. Although the respective rules leave substantial margins of flexibility to the institution, they make it possible to make a rough evaluation of the possible cost of the arbitration. Moreover, the institution will take care of the respective payments by requesting advance payments to the parties.
4.3.2 Arbitration under the UNCITRAL Rules
A possible compromise solution between ad hoc and institutional arbitration is to submit the arbitration to the UNCITRAL Arbitration Rules.
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These rules, adopted in 1976, revised in 2010, establish a procedural framework for international arbitrations acceptable all over the world.
If one chooses this solution, there will be no institution managing the arbitration, which will fully depend upon the parties’ initiative, but there will be a set of rules governing most of the problems likely to arise during the proceedings. In order to solve possible problems arising before or during the arbitration (e.g. if a party does not designate its arbitrator, or the parties cannot agree on the chairman), the Rules provide for an appointing authority, which can be designated by the parties in the arbitration clause. In the absence of such choice any party may request the Secretary-General of the Permanent Court of Arbitration to designate the appointing authority.
UNCITRAL recommends the following clause for arbitration under the UNCITRAL rules:
“Clause 4-1 – UNCITRAL Model Arbitration Clause
“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules.
“Note. Parties should consider adding:
4.3.3 Institutional arbitration
As noted before, the recourse to institutional arbitration is the best choice for parties lacking specialized expertise in international arbitration, which is essential when it comes to drafting an ad hoc arbitration clause.
However, once the decision is taken in favour of institutional arbitration, the problem arises of how to select the most appropriate institution.
4.3.3.1 Criteria for the choice of the institution
As a general rule, arbitral institutions with a long-lasting tradition in administering international arbitration should be preferred. These institutions will have worked out appropriate rules and will be able to appoint experienced and highly qualified arbitrators when the parties are unable to agree.
As regards the choice of the arbitrators, institutions that leave a wide discretion to the parties should be preferred. All internationally accepted institutions provide that the parties may choose their arbitrators. Concerning the choice of the chairman of the arbitration tribunal (or the sole arbitrator if only one arbitrator is to be appointed), it is also preferable that the parties be given the opportunity to agree upon the name. For example, the ICC rules of arbitration provide that the chairman (or sole arbitrator) be appointed by the institution, but if the parties wish to make such choice jointly, ICC will accept such a request.
Some (mainly local) arbitral institutions provide that arbitrators should be chosen from pre-established lists. Such a limitation may be a disadvantage, especially when all or most arbitrators of the list belong to the same country. It is therefore recommended not to accept a local institution (particularly from the country of the other party) before having accurately checked this point. Since most arbitration institutions can be found on the internet, it is normally possible to verify the respective rules in advance.
Another important question is the language. Some arbitral institutions require the use of the language of the country where the institution is established, unless otherwise agreed. This may put the foreign party in a difficult situation if the other party insists on the use of its own language. Presenting a case through interpreters may, in fact, be a substantial handicap.
Often, counterparts use the argument of cost in order to support the choice of a local, less expensive arbitral institution. This argument is not always well founded. In many[Page74:]cases, the real reason is that the party making such a proposal wishes to have the arbitration managed by an institution which it is closer to (and which may consequently be less neutral). As regards the cost, it is true that a highly qualified international arbitral institution will normally have higher costs than a local institution, but it should be noted that a high-level international institution will normally warrant a quality of service and a qualification of the arbitrators appointed, a quality that may not always be guaranteed by less prestigious local organizations.
We can therefore conclude that, when choosing the arbitral institution, parties should, in principle, avoid institutions that are too close to the other party and prefer truly international institutions, or institutions which, although linked to a given country, are traditionally referred to for international arbitrations. In fact, an arbitral institution that is closer to one of the parties may put that party in a more advantageous situation when a conflict arises, e.g. when appointing the chairman of the arbitral tribunal if the parties cannot agree on a name, or when deciding upon the challenge of an arbitrator, simply because a local institution will better understand the position of a national than that of a foreigner.
Of course, this does not exclude that a “local” arbitral institution may also satisfy the requirements of neutrality and quality of service, but this should be carefully verified in advance.
4.3.3.2 Institutions dealing with international arbitration
Among the institutions most commonly referred to in international trade are the following: the ICC International Court of Arbitration (www.iccwbo.org), described in more detail in § 4.4 hereafter.
The American Arbitration Association (AAA), through its International Centre for Dispute Resolution (ICDR), has established a set of rules for international dispute resolution, the International Dispute Resolution Procedures, which comprise the International Mediation Rules and the International Arbitration Rules, with amendments in force from 1 June 2014, and which are published on the AAA website, www.adr.org.
The London Court of International Arbitration (LCIA), which has established the London Court of International Arbitration (LCIA) Arbitration Rules (2014), in force from 1 October 2014, which can be found on the website, www.lcia.org.
The Arbitration Institute of the Stockholm Chamber of Commerce (SCC Institute). Its arbitration rules, Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, as well as the Rules for Expedited Arbitration, in force as from 1 January 2010, are published on the website, www.sccinstitute.com.
The Vienna International Arbitral Centre. Its Rules of Arbitration (Vienna Rules) in the version in force from 1 July 2013, can be found on the website, www.viac.eu.
The Swiss Chambers’ Arbitration Institution (SCAI), established by the Chambers of Commerce of Basel, Bern, Geneva, Lausanne, Lugano, Neuchâtel and Zürich, which offers means of dispute under the Swiss Rules of International Arbitration 2012 /(Swiss Rules 2012), which can be found on the website www.swissarbitration.org.
The Singapore International Arbitration Centre (SIAC). The SIAC rules 2016, in force from 1 August 2016, can be found on the website www.siac.org.sg.
The Hong Kong International Arbitration Centre (HKIAC). Its 2013 Administered Arbitration rules, in force from 1 November 2013, can be found on the website www.hkiac.org.
The China International Economic and Trade Arbitration Commission. Its revised arbitration rules, revised on November 4, 2014, in force as of January 1, 2015, can be found on the CIETAC website, www.cietac.org.
The Cairo Regional Centre for International Commercial Arbitration (CRCICA). Its Arbitration Rules, as in force from 1 March 2011, can be found on the website www.crcica.org.eg. [Page75:]
4.4 ICC Arbitration
ICC arbitration is the most widely used arbitration in international trade. Since its creation in 1923, ICC has dealt with more than 20,000 arbitrations, involving parties and arbitrators from some 180 countries. In the year 2015 more than 800 arbitration requests from 133 countries and independent territories worldwide have been filed with the ICC Court.
Although the institution is based in Paris, ICC arbitration is truly international. ICC arbitrations take place all around the world16 and involve arbitrators of different nationalities.17
4.4.1 The ICC International Court of Arbitration and the Secretariat
ICC arbitration is managed under the control of the ICC International Court of Arbitration, a body composed of members from 80 countries and every continent.
The ICC Court is responsible inter alia for appointing and confirming arbitrators, deciding upon arbitrators’ challenges, scrutinizing and approving the arbitral awards, and fixing the arbitrators’ fees.
The Secretariat of the ICC Court, located at the ICC headquarters in Paris, with a staff of lawyers of different nationalities and divided into nine teams, (seven based in Paris and two based respectively in Hong Kong and New York), closely follows all pending cases and assists the Court in monitoring the arbitration process during all of its stages, from the initial request to the final award.
4.4.2 The ICC arbitration rules
The ICC rules of arbitration have been modified several times in order to constantly adapt them to the needs of the users and to the developments of the law and practice of international arbitration. The current version, which has been updated in 2016 is in force since 1 March 2017.
The 2017 Rules contain very few modifications with respect to the 2012 Rules which, on the contrary, introduced a number of important innovations with respect to the previous version of 1998. In particular, a serious attempt has been made to create the conditions for an expeditious and cost-effective conduct of the arbitration, by introducing a general duty for arbitral tribunals’ parties to control the time and cost of arbitration.
Another interesting innovation of the 2012 Rules is the introduction of the emergency arbitrator who can order, in case of extreme urgency, interim or conservative measures before the arbitral tribunal is in a position to act.
The main change introduced in the 2017 Rules regards the expedited procedure, a simplified “fast-track” procedure applicable where the amount in dispute does not exceed US$2 million.
I will briefly examine here some aspects that may be of importance when drafting a contract and making the appropriate choices with respect to arbitration.18
4.4.2.1 Choice and appointment of the arbitrators
One of the first things to consider concerns the number of arbitrators: Article 12(1) of the Rules says in this respect that:
… the disputes shall be decided by a sole arbitrator or by three arbitrators.
When the parties have not agreed upon the number of arbitrators, Article 12(2) of the Rules provides that the Court shall appoint a sole arbitrator, save where it appears that the dispute is such as to warrant the appointment of three arbitrators. The Court will[Page76:]decide in favour of an arbitral tribunal of three members in consideration of the amount in dispute19 and the complexity of the case. However, if one of the parties strongly insists on three arbitrators, it is not unlikely that the Court will accept such a request.
This should still be true under the 2017 Rules, except that in case the amount in dispute is less than US$2 million, the expedited procedure will automatically apply with a sole arbitrator.
When a tribunal of three members is to be appointed, each party will nominate an arbitrator (“party arbitrator”), who will be confirmed by the Court, provided he meets the independence requirements required by the Rules.
According to Article 12(5), the chairman is appointed by the Court,20unless the parties have agreed upon another procedure for such appointment. The parties may agree on an alternative procedure (e.g. joint nomination by the arbitrators or by the parties) even after the Request for arbitration in which case they will have a 30 days’ time limit (which can be extended on request of the parties) for such joint nomination.
This system is well balanced and effective: it leaves room to the parties while enabling the Court to prevent delaying tactics.
4.4.2.2 The arbitrator’s independence and impartiality
The issue of independence and impartiality of the arbitrators has acquired growing importance. While in the past, especially in certain countries, the existence of a close link between an arbitrator and the party appointing him, was considered acceptable, if not normal, the present trend is to require the strictest respect of the prerequisite of the arbitrator’s independence.
Also, the ICC Rules follow this trend by stating the following:
Article 11(1) and 11(2) of the ICC Rules
The decision whether certain circumstances may call into question the arbitrator’s independence is not at all easy: interesting guidelines to this effect can be found in the “Guidelines on Conflicts of Interest in International Arbitration,” adopted by the International Bar Association (IBA) in 2014.21
It is important to underline that the obligation to disclose in advance any circumstances which may be relevant in the eyes of the parties, has in practice the effect that the prospective arbitrator will disclose even irrelevant circumstances, in order to avoid the accusation of having hidden some information. This may give the other party a pretext for objecting to the confirmation of the arbitrator, but it is up to the Court to decide if such objection is founded.
4.4.2.3 Place of the arbitration, language, applicable rules of law
If the parties have not agreed upon the place of arbitration, the place shall be fixed by the Court. The place of arbitration is important, because the courts of the country of[Page77:]the seat will normally be competent for possible actions for annulment or setting aside of the award and may otherwise interfere in the procedure. This is why countries where courts have experience in dealing with international arbitration should, in principle, be preferred.
When the place has to be fixed by the ICC Court, the latter will take into account a number of criteria, amongst which are: the legal situation of the respective country,22 the neutrality with respect to the parties and the convenience of the site.
The place (seat) of the arbitration is to be distinguished from the place where hearings or meetings are actually held or where the award is deliberated. Articles 18(2) and 18(3) of the Rules expressly state that the hearings may take place in other locations and that the arbitral tribunal may deliberate at any location it considers appropriate.
As regards the language of the arbitration, Article 20 of the Rules states that, in the absence of an agreement between the parties, the language or languages of the arbitration shall be determined by the Arbitral Tribunal, with due regard being given to all relevant circumstances, including the language of the contract. Parties frequently agree on this matter in the terms of reference, especially if the arbitral tribunal brings the issue to their attention.
As regards the rules of law applicable to the merits of the case, Article 21(1) first confirms the principle of party autonomy by stating that:
… the parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute.
The use of the very general term, “rules of law”, means that the parties may also choose rules that are not domestic laws, such as lex mercatoria, general principles, etc. (see supra, § 2.8).
The second sentence of Article 21(1) continues and says that in the absence of any such choice by the parties, the Arbitral Tribunal shall apply those rules of law which it determines to be appropriate.
This means that the Arbitral Tribunal is free to directly choose the applicable law (using the so called voie directe) without the necessity to refer to any rule of private international law.23 Also, in this case, the reference to “rules of law” makes clear that the arbitrators need not refer to domestic legislations but may also, where appropriate, opt for the application of transnational rules, such as lex mercatoria, UNIDROIT Principles, etc.
Arbitrators will, in most cases, apply a domestic (national) law. However, when it appears that such choice would be contrary to the expectations of the parties (e.g. when it appears that the parties wanted to exclude the application of the law of the other party), arbitrators can make good use of the flexibility offered by the ICC Rules by choosing transnational rules such as the UNIDROIT Principles.
Example 4-2 – ICC arbitration case No. 1042224
In this case, a “pathological” arbitration clause (which can be found in example 2-1) clearly gave to understand that the parties wanted the contract to be governed by a neutral legislation other than the laws of the respective parties.
The sole arbitrator decided, on the basis of Article 17(1) of the ICC Rules of 1988, that since the parties wanted a neutral solution and since they did not expressly design the law of a third country, the most appropriate solution was to apply rules and principles generally recognized in international trade (lex mercatoria), and, in particular, the UNIDROIT Principles, given that they appear to be a true transposition of the rules that international traders recognize as being applicable to international contracts.
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Finally, Article 21(2) of the Rules states that in all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages.
This means that, whatever the applicable rules of law, the arbitrators must, in any case, take into due consideration the contractual rules agreed by the parties as well as the business practices of their trade. Of course, in case of conflict with mandatory rules of the applicable law, the latter will prevail, but if no such conflict arises (e.g. because the rules of the governing law are not mandatory), arbitrators should look at the contractual rules and usages before referring to the applicable rules of law.
4.4.2.4 The arbitral proceedings and the award
The arbitration starts with a request of arbitration, addressed to the Secretariat and notified by the latter to the respondent, who must file his answer within 30 days. On the basis of the positions expressed by the parties as to the number of arbitrators, place of arbitration, etc., the procedure for the appointment of the arbitrators will commence.
As soon as practicable, the Court shall fix the advance on costs25 in an amount likely to cover the fees and expenses of the arbitrators and the ICC administrative costs for the claims and counterclaims that have been referred to it by the parties, to be paid in equal shares by the claimant and the respondent.26 Such costs are calculated on the basis of the claims and counterclaims in accordance with the scale set out in Appendix III to the Rules.
Once appointed, the first task of the arbitrators is to draft the terms of reference (except when the expedited procedure applies: infra, § 4.4.2.5), to be agreed and signed by the Arbitral Tribunal and the parties within 30 days of the date on which the file has been transmitted to the Arbitral Tribunal.27 The terms of reference, which are a unique feature of ICC arbitration, have the advantage of bringing the arbitrators and parties together at an early stage, providing them with an opportunity to identify and possibly agree upon a number of issues — such as the determination of the applicable law, the language of the proceedings and the timetable for the arbitration — and to delimit the actual scope of the arbitration and, in particular, the claims and counterclaims of the parties.
After signing the terms of reference, the Arbitral Tribunal shall proceed to establish the facts of the case by asking the parties to submit written submissions, by hearing witnesses and experts, and/or by appointing experts or taking other means of evidence, according to the needs of each particular case.
The ICC Rules fix a time limit of six months from the signature of the terms of reference for rendering the award. This time limit, which is, in fact, too short for most arbitrations, may be extended, and will actually be extended, where necessary, by the Court for one or more successive periods. This system makes it possible to exert a reasonable pressure on the Arbitral Tribunal with respect to the observance of the time limits.
Finally, a very important characteristic of the ICC procedure is the scrutiny of the award by the Court. According to Article 27 of the Rules, the Court may in this context:
… lay down modifications as to the form of the award and, without affecting the Arbitral Tribunal’s liberty of decision, may also draw its attention to points of substance.
This type of “quality control” by the Court is very important because it enhances the likelihood that the award will be enforced and that it does not contain defects that might cause its annulment.
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4.4.2.5 The expedited procedure
Under the Expedited Procedure Rules, contained in Appendix VI to the Arbitration Rules) the ICC Court will normally appoint a sole arbitrator, irrespective of any contrary term of the arbitration agreement.
If parties wish that future disputes should in any case be decided by a panel of three arbitrators, they should expressly provide this in the arbitration clause and at the same time expressly exclude the expedited procedure provisions. This will of course not prevent them to opt for the expedited procedure when the dispute arises.
The sole arbitrator must convene the management conference no later than 15 days after the date on which the file was transmitted to him and the award must be made in six months from the case management conference, with extensions granted only in limited and justified circumstances.
Under the Expedited Procedure Rules there will be no terms of reference and the tribunal will have discretion to decide a number of important issues, after consulting the parties, such as to decide the dispute solely on the basis of the documents submitted by the parties, with no hearing and no examination of witnesses.28
The quality control on awards — performed by the ICC Court and its Secretariat through the scrutiny of the award — will however be maintained at its long-established highest level.
Finally, a scale providing for reduced fees will apply under the Expedited Procedure Rules (infra § 4.4.3).
4.4.3 The costs of ICC arbitration
One of the advantages of ICC arbitration is that the costs are fixed by the arbitral institution according to pre-established criteria contained in the scale of costs and fees of Appendix III of the Rules.
The costs of ICC arbitration are composed of two main parts: the administrative expenses of the institution and the fees of the arbitrators.
Both sums are calculated as a percentage of the amount in dispute, at decreasing rates according to different brackets. This means that the higher the amount in dispute, the lower the actual impact of the cost of arbitration. The amount in dispute is the aggregate amount of all claims and counterclaims submitted in arbitration.
Therefore, if we consider an amount in dispute of US$100,000, and assuming that a sole arbitrator will be appointed, the total cost (administrative expenses + arbitrator fee) will be between US$10,090 and US$21,159, making an average of US$15,825. And in case of expedited procedure (which should be the normal solution for such an amount, unless the parties have expressly excluded such procedure) the cost will be between US$9,225 and US$18,400 with an average of US$13,813.
In case of an amount in dispute of US$1 million, the total amount would be between US$37,962 and US$87,465 for a sole arbitrator and between US$67,216 and US$215,725 for an arbitral tribunal of three members.
Such amounts may be readjusted during the proceedings. The following figures show some examples of minimum and maximum costs for the aggregate amount of the administrative charges and the arbitrators’ fees. The average between these two figures provides a very rough indication of the likely advance fixed by the Court, but the actual amount will depend upon the particular situation of each case. The initial amount may be readjusted later according to possible changes in the claims and/or other reasons justifying it.
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If we compare the two schedules above, we can notice a slight reduction of costs for the expedited procedure.
It is in any case important to consider the cost issue before commencing an arbitration or when deciding how to react to a claim, especially when determining the amount of the claim (or counterclaim), since this will affect the cost of the arbitration.
As we have seen before, the advance payment fixed by the Court must be paid in equal parts by both parties. If one party refuses to pay, the other party can pay the advance owed by the other party or make available a bank guarantee for the unpaid amount. If the defendant refuses to pay his part, invoking that he cannot be forced to pay the expenses of a frivolous and unfounded claim, the claimant can nevertheless continue the proceedings, trusting that he will recover the costs with the award.
An important issue is the possibility of asking the Court to fix separate advances on costs for the claims and the counterclaims, provided by Article 30(2) of the rules. When the Court accepts to set separate advances, each party has to pay the advance on costs corresponding to its claim, and the claim of the defaulting party may be withdrawn.
In normal situations, this solution will not be suitable, because the sum of the two advance payments will be higher than one advance for the whole amount due to the regressive nature of the scales of costs. However, this provision may be very useful when a party needs to defend against the excessive claims of the other party.
Example 4-3 – Excessive counterclaim by purchaser
A Czech seller supplies products to an Italian purchaser, who does not pay them, invoking alleged (but unproven) defects. The seller, after having invited the purchaser to pay several times, starts an ICC arbitration for the unpaid amount of US$100,000 under the expedited procedure.
The purchaser then makes a counterclaim for US$1 million, invoking damages he claims to have suffered as a consequence of the defects.
If ICC determines the advance payment on the basis of the value of the dispute (US$100,000 + US$1 million = US$1.1 million), the average amount (administrative expenses + fee of a sole arbitrator + likely expenses) could be about US$60,000, while the advance payment based on the amount of the claim (US$100,000) could be about US$14,000.
Based on this consideration, the seller can ask ICC to fix separate advance payments. If the ICC Court accepts to do so, the seller will make an advance payment of US$14,000 (which is in any case less than 50% of US$65,000), and the purchaser will be forced to pay an amount close to US$65,000. If the purchaser does not pay, the arbitration can go on for the seller’s claim only. If no separate advance payments are fixed, the seller will also be obliged to pay the purchaser’s part (if the latter refuses to pay), if he wants to continue the arbitration. [Page81:]
The above example shows how important it can be to follow the right strategy in this respect. The following example shows what may happen in the opposite case, when the defendant needs to react to an excessive request by the claimant.
Example 4-4 – Unfounded and excessive claim
A French supplier appoints a distributor in Egypt, which makes a yearly turnover of about US$400,000. The contract provides for ICC arbitration by an arbitration tribunal of three members.
A dispute arises about an alleged breach by the supplier of the distributor’s exclusivity, the supplier having sold certain products, which it said did not fall under the distribution contract, to one of the distributor’s competitors. As a result, the distributor refuses to pay the products that are still to be paid (worth approximately US$300,000) and starts arbitration, claiming damages for US$5 million.
The defendant answers that the claim for damages is unfounded because he did not breach the agreement, and that the amount claimed is, in any case, excessive, and then brings a counterclaim for the unpaid goods for US$300,000.
In this case, it would certainly be more advantageous for the defendant to have the advance payments separated, since the advance payment on the claim of US$300,000 would be much lower than 50% of the advance payment calculated on the whole amount (US$5 million + US$300,000).
4.5 Drafting the Arbitration Clause
Before drafting the arbitration clause, the parties should make a final evaluation of the various issues to be considered when choosing arbitration: arbitrability of the subject matter of possible disputes in the relevant countries; enforceability of a possible award in the interested countries; neutrality and quality of the arbitral institution considered; possible costs of the arbitration, etc.
Once the above decision has been taken, such choice must be incorporated in an arbitral clause which must be clear, simple and, above all, effective.
The easiest way to draft a good arbitration clause is to copy a standard clause proposed by well-established arbitral institutions, without making additions or modifications, except for those proposed in the standard clause itself. See, hereunder, some standard clauses recommended by arbitration institutions.
Standard arbitration clauses: ICC, Swiss rules, ICDR, LCIA, SIAC
ICC: All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.
Swiss rules: Any dispute, controversy or claim arising out of, or in relation to, this contract, including the validity, invalidity, breach, or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution in force on the date on which the Notice of Arbitration is submitted in accordance with these Rules.
The number of arbitrators shall be (“one”, “three”, “one or three”);
The seat of the arbitration shall be (name in Switzerland, unless the parties agree on a city in another country);
The arbitral proceedings shall be conducted in … (insert desired language).
ICDR: Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be determined by arbitration administered by the International Centre for Dispute Resolution in accordance with its International Arbitration Rules.
LCIA: Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause.
The number of arbitrators shall be [one/three].
The seat, or legal place, of arbitration shall be [City and/or Country].
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The language to be used in the arbitral proceedings shall be [ ].
The governing law of the contract shall be the substantive law of [ ].
SIAC: Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for the time being in force, which rules are deemed to be incorporated by reference in this clause.
The seat of the arbitration shall be [Singapore].*
The Tribunal shall consist of………… ** arbitrator(s).
The language of the arbitration shall be…………………………………………. .
APPLICABLE LAW
Parties should also include an applicable law clause. The following is recommended:
This contract is governed by the laws of……………………………………………...***
* Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace “[Singapore]” with the city and country of choice (e.g., “[City, Country]”).
** State an odd number. Either state one, or state three.
*** State the country or jurisdiction
In practice, this indication is not always followed. Arbitration clauses contained in commercial contracts are very often of dubious quality (and validity). This is due to several reasons.
First, many contracts are drafted, without the assistance of a lawyer, by businessmen who have no idea of what arbitration is, and who simply copy a clause from another contract. This means that a “bad” clause will circulate from contract to contract and sometimes become worse through additions made by inexperienced users.29
Second, even when a lawyer is involved in drafting the contract, the issue of dispute resolution is almost always considered at the very end of the negotiations, when all the “commercial” issues have been agreed. In such a context, there is often no time for an in-depth evaluation of the various options. If there is already a global agreement with an arbitration clause that could be improved, it will often be difficult for the lawyer to convince his client to insist on changing it.
4.5.1 The formal requirement of the arbitration clause: agreement in writing
In most legal systems, the arbitration agreement must be agreed in writing. This requirement is expressly foreseen in Article II of the New York Convention.
Article II - New York Convention
The requirement of the written form is of paramount importance because, in principle, if the arbitration clause has not been agreed in writing, the jurisdiction of the courts will not be excluded and, moreover, an award based on such clause may not be recognized by the courts, although the respect of the written form is not expressly mentioned between the conditions which justify the refusal of recognition under [Page83:]Article V of the New York Convention.30 It should in any case be considered that, according to prevailing case law, a party cannot avail itself of the alleged nullity of the arbitration agreement in the recognition stage, if it did not invoke it during the arbitration proceedings.31
4.5.1.1 Towards a reconsideration of the form requirement
In recent years, the requirement of the written form, and in particular the strict definition of the New York Convention which excludes agreements in writing accepted orally or tacitly, has been put in discussion, arguing that it is less justified in the actual commercial environment, where the prevailing rule is that commercial contracts do not require the written form. Thus, it has been stated, for instance, that:
There is no justification to submit arbitration agreements to stricter form requirements than other contractual provisions. Arbitration is no longer considered a dangerous waiver of substantial rights. In fact the selection of arbitration is not an exclusion of the national forum but rather the natural forum for international disputes. Form requirements do not necessarily promote legal certainty; they are often the source of additional disputes.32
This concern has been taken into account in the UNCITRAL Model Law which provides two definitions of the arbitration agreement: a first one requiring the written form, but with a less strict approach, which includes agreements in writing agreed orally or tacitly; a second one which does not require the written form.
UNCITRAL Model law (as amended in 2006) – Article 7 (Option I)
This definition, which has been adopted by several national legislations is wider than the definition of the New York Convention, which does not include the rather common situation of arbitration clauses in general conditions, accepted by conduct (infra, § 4.5.1.2).
UNCITRAL Model law (as amended in 2006) – Article 7 (Option II)
“Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
This approach has been followed by some jurisdictions (e.g. France, Sweden, New Zealand); most other jurisdictions have maintained the written form requirement, although in some cases with less demanding formal requirements.
4.5.1.2 The form requirement under the New York Convention
Article II of the New York Convention contains very strict requirements as to the written form of the arbitration agreement: it must be a clause or agreement signed by the parties or contained in an exchange of letters or telegrams.
[Page84:]
The first alternative of Article II (2) requires that the contract including the arbitration clause or the separate arbitration agreement bear the signature of the parties.33This is the simplest situation when the existence of a written agreement to arbitrate results from one document.
However, many international contracts are concluded through an exchange of messages. This is why the New York Convention expressly includes the possibility that the arbitral clause be contained in an exchange of letters or telegrams, which need not be signed by the parties. It is normally admitted that Article II also includes other means of communication, such as telex and telefax, but there have been some doubts regarding e-mails.34
When the arbitration clause is agreed through an exchange of letters, there must be a written proposal and an acceptance, which must also be in writing. The acceptance need not expressly mention the arbitration clause; an unconditional acceptance of a contract proposal containing the arbitration clause is considered to be sufficient.35
On the contrary, according to Article II of the New York Convention, a tacit acceptance of the document containing the arbitration clause is not sufficient.
Example 4-5 - Tacit acceptance of the contract containing the arbitration clause
Two parties entered into a sales contract through a broker. The broker sent an order confirmation to the buyer, and thereafter the seller sent the buyer two copies of the sales contract, one of which was to be signed and returned. The buyer did not sign or return a copy of the sales contract, but the contract was thereafter performed.
The sales contract referred to a standard contract that contained a clause for arbitration before the Chamber of Arbitration of Paris.
A dispute arose thereafter and an award in favour of the seller was rendered by the Chamber of Arbitration of Paris.
When the seller sought enforcement of the award in the buyer’s country, enforcement was refused holding that there was no arbitration agreement in writing.
The case described in the example was decided by the Spanish Supreme Court.36 Since the buyer never sent a written acceptance of the proposed contract, it cannot be said that the arbitral clause was accepted in writing (although the contract of sale was concluded tacitly, since the parties performed it).
A further problem is whether the written document should show the intent to accept the proposal containing the arbitration clause, as can be seen in the following case.
Example 4-6 - Acceptance of the contract through invoices mentioningthe numbers of the orders
An American purchaser, Bobbie Brooks Inc., ordered goods from an Italian seller, Lanificio Walter Banci. The orders contained an arbitration clause in favour of the American Arbitration Association.
The seller sent the goods together with the respective invoices, which mentioned the numbers of the orders sent37 by the buyer.
[Page85:]
In this case, the Court of Appeal of Florence decided that the sending of the invoices implied a written acceptance of the orders and consequently of the arbitration clause.
Similar situations arise when a party sends written statements (for example, requests to postpone delivery, or information about the establishment of a letter of credit), which imply acceptance of a specific contract of sale. In all these cases, the observance of the written form may be doubtful; in fact, there is a written statement that shows the intent to accept the contract, but such statement does not in itself constitute an acceptance in writing of the conditions of the contract of sale (and in particular of the arbitration clause).
A further problem arises when the arbitration clause is contained in the general conditions of sale (or purchase).
If such conditions are printed on the back of the document (e.g. of the order confirmation), there should be no doubt that the written acceptance of such document also implies the acceptance of the arbitration clause contained in the general conditions.38
The question is more complicated when the arbitral clause is contained in general conditions to which the contract refers, but which are not included in the contract itself.
Several Court decisions consider sufficient a general reference to general conditions containing the arbitration clause,39 while others require that there should be evidence that that the counterpart knew or should have known such general conditions.40 This will normally be the case where the general conditions have been annexed to the contract or where it appears that they were actually known by the counterpart. However, some jurisdictions take a stricter approach and consider the arbitration clause as validly agreed in writing only if the document which refers to the general conditions expressly mentions that these conditions contain an arbitration clause.41
4.5.1.3 The application of more flexible national rules
Most national laws on arbitration, which entered into force in the years following the New York Convention, provide less demanding formal requirements for the arbitration agreement, and in some cases, even no such requirement. This means that arbitration clauses not complying with the strict rules of the New York Convention, may in some cases be nevertheless valid under a specific national law.
But when the validity of the arbitration agreement must be assessed under the New York Convention (e.g. because a party requests a national court to refer the dispute to arbitration, or recognize and enforce the award), is it possible to apply the less demanding form conditions of the applicable national law?
The answer would be negative, if one accepts the theory that Article II imposes a “minimum” form requirement which the contracting States are required to apply in any case.42 However, it is now generally accepted that the New York Convention sets a maximum standard: arbitration clauses cannot be submitted to stricter requirements[Page86:]under national law.43 Consequently, more liberal national rules of the lex fori can be applied instead of the requirements of the New York Convention.44 This view has been adopted by the UNCITRAL Recommendation of 7 July 2006, which provided that
Article VII, paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958, should be applied to allow any interested party to avail itself of rights it may have, under the law or treaties of the country where an arbitration agreement is sought to be relied upon, to seek recognition of the validity of such an arbitration agreement.
The situation described above implies that the same arbitration agreement can be considered to be valid or invalid according to the jurisdiction before which the issue is brought, as we can see in the following two examples, regarding the very frequent case of an arbitration clause contained in general conditions accepted tacitly by a party.
The two following examples show how different the outcome can be under different jurisdictions.
Example 4-7 - Tacit acceptance of general conditions containing the arbitration clause
A Dutch supplier, I.S.S. Tanks B.V. (ISS), sent as an Austrian counterpart, CMB Maschinenbau & Handels Gmbh (CMB) an offer subject to its conditions of sale, providing for the application of Dutch law and the exclusive jurisdiction of its courts. After further negotiations, CMB sent ISS a confirmation of order which contained an arbitration clause in favour of the Arbitral Centre of the Austrian Federal Economic Chamber in Vienna.
Thereafter ISS provided a bank guarantee as required in CMB’s confirmation of order. Thus, the contract could be considered as tacitly concluded since ISS, by providing the guarantee, implicitly accepted the proposal contained in CMB’s order confirmation.
When a dispute arose, ISS commenced proceedings in the Court of Leeuwarden, but CMB argued that the Dutch Court lacked jurisdiction (due to the arbitration clause contained in CMB’s confirmation of order) and should refer the case to arbitration in Austria.
The Court held that the arbitration clause, although not conforming to the form requirements of the New York Convention, was valid the less demanding rules of Dutch law and declared that it had no jurisdiction.
Rechtbank Leeuwarden, 3 September 2008, I.S.S. Tanks B.V. v CMB Maschinenbau & Handels Gmbh, in Yearbook XXXIII-2008, 613.
Example 4-8 - Arbitration clause contained in the order of the buyer, carried out by the seller
The English company Robobar, ordered certain refrigerating units to the Italian company Finncold. The purchase orders contained the following arbitration clause: any dispute arising out of this order shall be exclusively referred to arbitration by a person to be appointed by the President of the Law Society.
Finncold supplied the products ordered (and thus tacitly agreed to Robobar’s contract proposal, but did not accept the order in writing as required by the New York Convention.
When a dispute arose, Finncold initiated proceedings before the Court of First Instance of Casale Monferrato. Robobar, invoking the arbitration clause, requested a preliminary ruling on jurisdiction by the Court of Cassation.
The Court of Cassation affirmed the jurisdiction of the Italian courts, arguing that the arbitration clause was invalid, since it had not been agreed by letter or telegram, as required by the New York Convention.
If we compare these two examples, we can see that, depending on the court before which the dispute is brought, an arbitration clause concluded without respecting the strict formal requirements of the New York Convention, may be considered valid and[Page87:]effective or not. This aspect is of paramount importance when a party must decide if it should bring its claim before the courts which would have jurisdiction in the absence of the arbitration clause, or if it should, on the contrary, commence the arbitration proceedings.
4.5.2 The essential elements of an arbitration clause
The purpose of an arbitration clause is to submit certain future disputes regarding one or more specific legal issues to arbitrators instead of having recourse to ordinary courts.
This means that, provided the applicable law does not require specification as to further elements, the clause must at least:
In many legal systems, there are rules whereby even very “short” arbitration clauses may become effective. Therefore, for example, an ad hoc arbitration clause that does not specify the criteria for choosing the arbitrators or determining their number will be effective under legal systems that have specific rules for filling this “gap” (e.g. providing the right of a party to request a court to nominate the arbitrator). Also, the Geneva Convention of 1961 has interesting rules in this respect.
Of course, a clause that does not make clear that the parties intend to refer to arbitration,45 or that does not identify the disputes which are to be submitted to arbitration, or that does not give a minimum certainty about the type of arbitration the parties require (e.g. by naming an arbitral institution or by stating that each party must appoint an arbitrator, and the arbitrators a chairman), will, in principle, be ineffective.
However, the above risk is not as great as it would appear at first sight, because it will be possible, in many cases, to imply from other clauses of the contract what the parties actually intended. Consequently, an arbitration clause in a specific contract that does not specify the disputes to which it refers, may be interpreted as referring to disputes arising out of that particular contract;46 a clause not giving any detail about the type of arbitration may, in certain businesses, be interpreted as referring to the arbitration managed by the institution to which all the traders of that business refer.47 Finally, even a clause not mentioning the word “arbitration” may be considered as a valid arbitration clause if it appears clearly from the context that the parties actually wanted to submit their disputes to arbitration.
There are several cases of extremely concise arbitration clauses that have nevertheless been considered valid, such as, for example, the following two clauses:
Unless amicably settled, any dispute which may arise between the parties hereto out of or in connection with this agreement shall be finally settled by arbitration held and conducted (sic) in Geneva.48
Laws and Arbitration: Swiss law to apply.49
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On the contrary, there are other cases where too general clauses have been considered invalid. Thus, the Spanish Tribunal Supremo declared that the following clause could not be applied because of its vagueness.
Arbitration: Arbitration, if any, or general average, if any, shall take place in London and in accordance with English law.»50
It can therefore be concluded that even “bad” arbitration clauses may often be considered as effective. But the problem is that they give the defendant the opportunity to argue that the clause is invalid and give him the option of bringing the dispute before ordinary courts.
4.5.3 Some typical errors frequently found in arbitration clauses
In order to avoid problems, it may be useful to underline some typical errors often made in arbitration clauses.
4.5.3.1 Clauses that confuse applicable law and arbitration
Most businessmen do not understand the difference between the substantive law that governs the contract, on one side, and the jurisdiction of arbitrators or courts that may decide possible disputes arising between the parties, on the other. This misunderstanding may give rise to “pathological” arbitration clauses, which mix up the issues of applicable law and jurisdiction/arbitration and which may not always be effective.
We have examined this issue in Chapter 2, § 2.1, where a typical pathological clause of this type is also shown as Example 2-1.
4.5.3.2 Clauses that submit different types of disputes to different tribunals
Sometimes the parties try to escape a deadlock situation when negotiating the jurisdiction or arbitration clause, by inventing “original” compromise solutions, whereby certain issues are submitted to a particular jurisdiction, and others to a different one.
The most extreme example of clauses of this type is the clause stating that one arbitration tribunal should decide the issues relating to the obligations of one party, and another arbitral tribunal (or court) should decide those regarding the obligations of the other party.
It goes without saying that solutions of this kind make no sense, considering the close connection between the various obligations of the parties.
However, even more acceptable distinctions — such as those appointing different tribunals for technical and legal disputes — are dangerous, since they introduce a further legal issue (that of deciding where the dispute belongs) and may create very difficult problems with respect to issues that are both legal and technical.
A much less problematic situation is that of clauses that foresee alternative arbitration solutions between which the parties may choose in case of dispute, e.g. two different arbitral institutions established in the respective countries of the parties. Another possibility is to provide that the party that makes a claim must bring the claim before the arbitral institution of the country of the other party and vice versa (or before the institution of its own country and vice versa). Clauses of this type must be drafted very carefully in order not to leave doubts that the two solutions are alternatives, as shown by the following case.
Example 4-9 - Case decided by the Milan Court of Appeal in 1999
A contract between an Italian seller and a Chinese buyer provided that disputes between the parties were to be settled either by an ad hoc arbitration in Stockholm (if the seller was the claimant) or by the China International Economic Trade Arbitration Council (CIETAC) (if the buyer was the claimant). The Italian party commenced arbitration in Stockholm and, at a later date, the Chinese party made a claim in China before the CIETAC. Both arbitrations ended with an award. The Italian party obtained recognition in Italy of the Swedish award. When the Chinese party requested enforcement in Italy of the CIETAC award, the Italian party opposed the enforcement, arguing that the CIETAC tribunal was constituted in violation of the [Page89:]arbitration clause, because under such clause the two tribunals were alternative solutions, and, once the procedure in Stockholm was initiated, there was no place for a parallel procedure in China.
The Court of Appeal of Milan,51before which the case was brought, refused this interpretation of the clause and decided that the clause defined “the jurisdiction of either tribunal depending on whether the seller’s claims or the buyer’s claims are to be examined”.
The solution given by the Court of Appeal is not convincing, considering that the obvious way of interpreting such a clause has always been to consider the two procedures as alternatives. And, in fact, the judgment has been reversed by the Supreme Court,52 which rightly decided that the two arbitrations had been foreseen as alternative solutions and that consequently, once the dispute was brought before one of them, the other option could no more be exercised. However, it also shows how dangerous it is to use clauses of this type without additional drafting.
4.5.3.3 Clauses that give too narrow a definition of the disputes covered
The obvious way of writing an arbitration clause is to refer to any dispute arising out of or connected with a given contract.
However, sometimes the parties feel this is too simple and consequently prefer to make reference to disputes relating to the “interpretation, performance, validity, etc.” of the contract.
By doing so, they open the way to possible objections by the defendant when a dispute arises. For instance, a clause referring to the interpretation of the contract could mean that the parties did not want to cover disputes about its performance; or a clause mentioning the performance could be seen as excluding the issues regarding contract termination. Of course, if these problems are brought before courts experienced in arbitration, such courts will understand that the parties did not actually intend to create such limitations. However, courts with a more formalistic approach may take a different view, arguing that, since the arbitral clause implies a derogation from the ordinary jurisdiction, it must be interpreted restrictively.
4.5.3.4 Contracts containing both arbitration and choice of forum clauses
It is not unusual to see contracts that provide for arbitration and jurisdiction of ordinary (domestic) courts at the same time. This type of situation, which may entail the ineffectiveness of the arbitration clause, should be avoided. For more details, see supra, § 3.2.1.3.
4.5.3.5 Clauses in which the reference to the arbitral institution is ambiguous
A rather common problem arises when the arbitration clause refers to an arbitral institution, but defines such institution ambiguously so that different institutions could be implied. Typical examples are clauses indicating the International Chamber of Commerce of Geneva, or of Zurich, where doubt arises as to whether the parties are referring to the chamber of commerce of that city, or are indicating arbitration under the ICC rules, with a seat in Switzerland.
Awards and court judgments exist that have considered clauses of this kind as a valid choice of ICC arbitration.53 Thus, the Court of Appeal of Paris54 decided that a clause making reference to “l’arbitrage de la Chambre de commerce internationale de Genève” must be interpreted:
comme désignant la Chambre de Commerce Internationale de Paris comme organisatrice de l’arbitrage et Genève comme siège de l’arbitrage.
On the contrary, in a similar case, a German court55 decided that the clause was invalid.
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A similar problem of uncertainty arises when the same contract indicates two different arbitration institutions, without explaining how the choice between them should be made. In a case decided by the Austrian Supreme Court,56 the clause said:
The present contract is submitted to the exclusive jurisdiction of the arbitration tribunals of the Hungarian Chamber of Commerce and the Federal Economic Chamber of Vienna.57
The Supreme Court decided that the clause gave each party the right to choose between the two institutions. However, in a similar case, the Lebanese Supreme Court58 came to the conclusion that a clause of this type required a subsequent agreement by the parties as to choice, and that a unilateral choice made by one party was to be considered invalid.
4.5.4 The optional elements of the arbitration clause
As a general rule, it is preferable to use a standard clause without optional elements, and only to add provisions when it is really useful and it has been verified that these elements may not adversely affect the course of the arbitration.
In other words, before adding further elements to the arbitration clause, one should ask oneself if they are really necessary and, in the case of a positive answer, check that there are no reasons to exclude them.
I will examine, in the next section, some typical additional elements and their pros and cons.
4.5.4.1 Seat of the arbitration
This is almost an essential element, at least in ad hoc arbitration (in administered arbitration the arbitration rules will give an answer, if no choice is made).
The place of arbitration is very important, because the courts of the country of the seat will normally be competent with respect to possible actions for annulment or setting aside of the award.
This is a good reason for establishing the seat in countries that have modern rules on international arbitration and where international arbitrations are regularly held, so that the local courts have practical experience (and will consequently not attach importance to purely formalistic objections to the award). Of course, the strategy could be different if one needs to prepare a defence against a future award where one expects to be the losing party.
Parties should in principle avoid having the seat in either of their respective countries. In such a case, there is a risk that an enforcement of the award in the country of the seat may be not be considered as being the enforcement of a “foreign” award and thus not submitted to the New York Convention,59 but rather to the domestic law of such country. This will not normally be a problem, because the effectiveness of a domestic award will be greater than that of a foreign award. However, in countries where the domestic rules are less favourable to arbitration than those of international origin, the enforcement of the award may give rise to problems.
4.5.4.2 Language of the arbitration
This is certainly a very important point. If it is not prima facie obvious that a certain language must be used, disputes about this matter should be avoided from the very beginning.
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However, too rigid rules on this issue may be dangerous. Where several languages are used in the relations between the parties, and provided the arbitrators are proficient in all of them, it would be excessively burdensome to oblige a party to translate documents produced in a language that is understandable to every party involved in the arbitral procedure. In fact, the clause should leave some flexibility so that the details can be decided by the arbitrators.
It should be remembered that some “less international” arbitral institutions consider the use of the local language as the normal solution. Since this may prove dangerous if the other party (or the arbitral tribunal) refuses to make an exception, the mention of the language in the arbitration clause may be of great importance in such a context.
4.5.4.3 The number of arbitrators
It is difficult to foresee, before the dispute arises, if one arbitrator or a tribunal of three members should be preferred. It is clear that the standard solution of a three-member tribunal is normally to be preferred. However, if the dispute is too small, the “full” tribunal will normally be too burdensome a solution.
A decision on the number of arbitrators in the clause itself may be inappropriate, since the parties cannot know beforehand what type of dispute may arise in the future. This is why it may be advisable to leave this matter open. particularly in cases of administered arbitration, where the final decision can be taken by a neutral and competent organization if the parties cannot agree on this point when the dispute arises.
For example, under the ICC rules, which provide in Article 12 (2) the appointment of a sole arbitrator “save where it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators”, the system is flexible enough to warrant that in case the parties cannot agree on the number of arbitrators when the dispute arises, the Court can take the most appropriate decision.
Of course, if a party is certain that — independently of the amount and characteristics of the future dispute — a particular solution is preferable (e.g. that there should in any case be an arbitral tribunal with a one-party arbitrator of its choice), this issue should be expressly dealt with in the clause.
4.5.4.4 Obligation to try an amicable settlement before arbitration
Businessmen are fond of using arbitral clauses that state in general terms that the parties must seek an amicable settlement before beginning arbitration proceedings. Clauses of this type almost never reach the goal pursued by their drafters. If the parties can settle, they will do so, independently of what the arbitral clause says.
On the contrary, such clauses can create a pretext for the defendant to object that the arbitration proceedings do not conform to the clause, because not all possible ways of settlement have been pursued by the claimant before commencing the arbitration. Even if this type of problem will normally be overcome by arbitrators, the fact remains that this can be an additional issue for litigation.
If the parties wish to increase the chances of an amicable settlement, they should foresee a mediation procedure, making reference to an experienced organization (e.g. under the ICC Mediation Rules60) capable of providing a competent, neutral forum and then set out a time schedule whereby, if no settlement is reached within a given time, the arbitration procedure can begin without hindrance.
4.5.4.5 Setting of time limits for rendering the award
Another dangerous initiative is to fix rigid time limits for the award within the arbitration clause. Clauses of this type are based on the illusion that the procedure will be faster if the clause says that the arbitrators must decide within a given date. In practice, this is not always possible (for reasons for which the arbitrators may not be responsible), and the final result may be that the non-observance of the time limit will affect the validity of the arbitration proceedings.
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For example, a French court61decided that the failure by the arbitrators to respect the three-month time limit for rendering the award, contained in the arbitration clause, constituted a violation of public policy, justifying a refusal to grant enforcement of the award.
If the parties require a swift procedure, they should choose “fast-track” arbitration, provided such procedure is considered to be appropriate for their needs, since this type of procedure inevitably sacrifices some procedural rights to the goal of rapidity, and they should, in any case, bear in mind that truly complicated issues cannot be discussed within too short a time limit.
4.5.4.6 Qualifications of the arbitrators
Another rather illusory addition is to establish criteria — such as languages known, nationality, experience, etc. — to which the arbitrator(s) must conform, in order to warrant their neutrality and technical qualifications. Except in cases where there are special reasons justifying this approach, it is far preferable to concentrate upon the procedures for choosing the arbitrators. If such procedures warrant a sufficient involvement of the parties — such as the right to appoint an arbitrator and the possibility to agree with the other party on the name of the chairman — the parties will use these means when there is already an actual dispute in order to ensure that the arbitrators have the desired qualities, as far as possible.
On the contrary, a rigid clause will, in most cases, have the effect of giving the other party a pretext for sabotaging the arbitration proceedings.
1 With the Geneva Protocol of 1923 and the Geneva Convention of 1927.
2 These laws can be found, together with national reports, in ICCA, International Handbook on Commercial Arbitration
3 The Model Law was adopted in 1985 and amended in 2006
4 The formal requirement of the written form will be examined in more detail when dealing with the arbitration clause: infra, 4.5.1
5 For example, if the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present his case, or if the award deals with a difference not contemplated by or not falling within the terms of the arbitration clause or the composition of the arbtral authority, or the arbitral procedure was not in accordance with the agreement of the parties.
6 Art. II (1) New York Convention, which provides that “each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them […] concerning a subject matter capable of settlement”. The clause does not say according to which law the arbitrability is to be judged. The prevailing opinion is that one should refer to the lex fori (i.e. the courts will decide on the basis of their own law if the matter is arbitrable). However, a different view has been taken by some Belgian courts with respect to the rules protecting distributors, which have decided that the arbitrability should be judged under the law governing the contract (lex causae). This position, however, was rejected by the Belgian Court of Cassation in the case Colvi v Interdica of 15 October 2004
7 See Article V (2) (a), of the New York Convention, whereunder the court may refuse enforcement of a foreign award when the subject matter of the difference is not capable of settlement by arbitration under the law of the country where enforcement is sought.
8 According to the definition commonly used in the US: see, for instance, United States District Court, Southern District of New York, 9 October 2002, Sarbank Group v Oracle Corp., Yearbook XXVIII -2003, 1043, 1052
9 Thus, the Supreme Court of the United States decided in the Mitsubishi case (Mitsubishi Motors Corporation v Soler Chrysler Plymouth Inc, 473 U.S. 614) to consider antitrust matters as arbitrable, reversing the traditional view which reserved this type of issue to the courts of the United States. A similar approach has been taken with respect to the competition rules of the European Union: although there are no judgments of the European Court of Justice dealing with this matter, the judgments regarding the possible setting aside of arbitral awards which do not respect Article 81 of the Treaty are based on the assumption that arbitrators may deal with competition matters, provided they respect the rules in question. (See, in particular, the judgment of 1 June 1999, C-126/97, Eco Swiss v Benetton, in ECR 1999, 3055)
10 ICC case 1110 of 15 January 1963, in Yearbook, XXI-1996, p. 47 ss.
11 Article V (2): “Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: […] (b) the recognition or enforcement of the award would be contrary to the public policy of that country.”
12 See for example, US Court of Appeal, Fifth Cir., 23 March 2004, Karaha Bodas Co. v Perusahaan Pertambangan Minyak Dan Gas, in Yearbook XXIX-2004, 1291: “The public policy defense is to be construed narrowly to be applied only where enforcement would violate the forum state’s most basic notions of morality and justice”; Federal Supreme Court (Switzerland), 8 December 2003, A SA v B Co Ltd, in Yearbook XXIX-2004, 840: “there is a violation of public policy where the recognition or enforcement of a foreign decision is intolerably at odds with the Swiss concept of justice”; Supreme Court (Austria), 26 January 2005, in Yearbook XXX-2005, 428: “the relevant standard for the autonomous public policy review of the foreign arbitral award by the court of the enforcement state, Austria, is whether the arbitral award is irreconcilable with the fundamental principles of the Austrian legal system …”
13 Provided the award need not be recognized and enforced in the country in question.
14 ICC award 6379/90 in Yearbook, XVII-1992, 212 et seq.; ICC award 6752/91, in Yearbook, XVIII-1993, 54 et seq
15 Thus, the Swiss Federal Court (judgment of 28 April 1992, G.S.A c. v S.p.A., in IPRax, 1994, 459 et seq.) annulled an award where the arbitrators refused to consider the applicability of European antitrust rules in a contract between parties belonging to Member States of the European Union
16 16. Dispute Resolution Statistics published by the ICC show that in the year 2015 the seat of arbitration was located in more than 50 countries
17 . More than 75 nationalities according to 2015 ICC Dispute Resolution Statistics.
18 For a detailed examination of the 2012 Rules see, inter alia, Fry, Greenberg, Mazza, The Secretariat’s Guide to ICC Arbitration, 2012. Verbist, Schäfer, ICC Arbitration in Practice, 2nd ed. Kluwer, 2015; Grierson, van Hooft, Arbitrating under the 2012 ICC Rules, Kluwer, 2012
19 According to the Secretariat’s Guide (§ 3-440), “Subject to all other relevant factors, it has in the past been unusual for the Court to decide in favour of three arbitrators where the amount in dispute is below US$5 million or to decide in favour of a sole arbitrator where the amount in dispute exceeds US$30 million.”
20 The normal procedure is that the Court will ask an ICC national committee from a country other than that of the parties to propose a suitable name.
21 See: Voser, Petti, “The Revised IBA Guidelines on Conflicts of Interest in International Arbitration”, in ASA bull., 2015, 6; Bertrou, De Margerie, “Obligation de révélation de l'arbitre : tentative de synthèse après la publication des nouvelles règles de l’IBA”, in Cahiers de l'Arb./Paris J. o
22 Which should have legislation on arbitration that conforms to the international standards, and be a signatory to the New York Convention.
23 This does not exclude the possibility that arbitrators may justify their choice by showing that the rules of private international law of the countries involved give the same result.
24 Published in Journ. dr. intern., 2003, 1142 et seq. f Intl Arb. 29, 2015 (1);
25 The Secretary General may fix a provisional advance, upon receipt of the request, intended to cover the costs of arbitration until the terms of reference are drawn up, based on the minimum of the fees of the scale, to be paid by the claimant: see Article 37(1) of the Rules and Article 1(2) of Appendix III.
26 . However, in the final award the arbitrators may decide that the costs shall be borne by one of the parties or that they should be apportioned otherwise.
27 . Article 23(2) of the 2017 Rules. In the 2012 Rules the term was two months. It is to be seen if the reduction of this term will have the effect of speeding up the approval of the terms of reference, since getting to an agreement between the parties may require lengthy discussions.
28 A possible decision by the sole arbitrator to decide the dispute on documents only, without hearing and examination of witnesses, may be inappropriate in complex cases, even when the amount in dispute is below US$2 million. If parties wish to make sure that they can in any case pretend a hearing for the examination of the parties and witnesses, they should expressly exclude the expedited procedure in the arbitration clause.
29 A good example is a clause referring to a non-existent “International Chamber of Commerce of Geneva” that was frequently found in international contracts some years ago.
30 See, for instance, Corte di Cassazione (Italy) 18 June 1991, § 6857, Eastern Mediterranean Maritime Ltd. v Cereal Toscana, in Riv. dir. int. priv. proc., 1993, 190 et seq..; Oberlandesgericht Frankfurt am Main, 26 June 2006, in Yearbook XXXII-2007, 351; Superior Tribunal de Justiça (Brazil) 17 December 2008, Indutech SpA v Algocentro Armazéns Gerais Ltda, in Yearbook, XXXIV-2009, 242. Some courts have decided, on the contrary, that the absence of the written form does not prevent recognition of the award under Article V of the Convention: Corte di Cassazione (Italy), 15 July 1994, § 6337, Conceria G. De Maio & F. s.n.c. v Ditta EMAG AG, in Riv. arb., 1995, 449.
31 See. for instance: U.S. District Court, District of New York, 25 November 2004, Oltchim SA v Velco Chemicals Inc., in Yearbook,
32 Lew, Mistelis, Kröll, Comparative International Commercial Arbitration, Kluwer Law Intl The Hague/London/New York, 2003, 132
33 33. If the clause is contained in a contract, it is, of course, sufficient that the contract be signed: a specific signature under the arbitration clause is not necessary.
34 See for instance, Hålgoland Court of Appeal, 16 August 1999, in Yearbook XXVII – 2002, 519, where e-mails were not considered to meet the requirement of the written form. On 7 July 2006, UNCITRAL issued a recommendation that Art. II (2) of the New York Convention be applied recognizing that the circumstances described therein (i.e. exchange of letters and telegraphs) are not exhaustive. (Recommendation regarding the interpretation of Article II, Paragraph 2, and Article VII, Paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958, adopted by the United Nations Commission on International Trade Law on 7 July 2006 at its 39th session.)
35 However, the courts may not always follow this obvious principle: see, for instance, Cass. (Italy), 10 March 2000, Krauss Maffei v Bristol Myers Squibb, in Yearbook XXVI-2001, 816 et seq. where it is said that “… an arbitral clause is not valid when it is contained, as in the present case, only in the documents drawn up and signed by the foreign seller, and it does not appear in the document signed by the Italian buyer”.
36 Tribunal Supremo (Spain), 6 October 1998, Delta Cereales v Barredo Hermanos, in Yearbook XXVI-2001, 854 et seq.
37 Judgment of 8 October 1977, Bobbie Brooks Inc. v Lanificio Walter Banci s.a.s., in Rass. arb., 1978, 161.
38 However, if the document is sent by fax, it may not be easy to prove that also the back page was sent
39 Tribunal Supremo (Spain), 31 May 2005, Pueblo Film Distribution c. Laurenfilm SA, in Yearbook, XXXII-2007, 608; Oberlandesgericht Celle, 14 December 2006, in Yearbook, XXXII-2007, 372: United States Court of Appeals, Third Circuit, 15 October 2009, Century Indemnity Company c. Certain Underwriters, in Yearbook XXXV-2010, 485.
40 See, for instance, United States District Court, Western District of Washington, 19 May 2000, Atlas v Hitachi, in Yearbook XXVI-2001, 939 et seq. where the court denies the existence of a valid arbitration agreement in a case where the arbitration clause was contained in “Terms and Conditions” mentioned in the purchase order, but never handed over to the other party. However, in other cases the incorporation by reference seems to be admitted without limitations: see United States Court of Appeals, Third Circuit, 20 June 2003, Standard Bent Glass v Glassrobots Oy, in Yearbook XXIX-2004, 978 et seq.
41 Corte di Cassazione (Italy), 2 March 1996, § 1649, Molini Lo Presti v Continentale Italiana, in Riv. arb., 1996, 717. Corte di Cassazione (Italy), 19 May 2009, § 11529, Louis Dreyfus Commodities Italia spa v Cereal Mangimi srl, in Foro pad., 2009, 2, I, 278.
42 See, e.g. Paris Cour d’Appel, 20 January 1987, Société Bomar Oil NV v ETAP, in Rev. arb., 1987, 482, 485; Swiss Federal Tribunal, 21 March 1995, in Yearbook XXII-1997, 800, 804
43 Lew, Mistelis, Kröll, Comparative International Commercial Arbitration, Kluwer Law Intl, 113
44 44. Born, 672-673
45 Thus, the Swiss Federal Court (judgment of 3 June 2015, in ASA Bull., 2015, 548), confirmed the decision of the arbitral tribunal to refuse jurisdiction with respect to the following clause: “This agreement shall be interpreted in accordance with and governed in all respects by the provisions and statutes of the International Chamber of Commerce in Zürich, Switzerland and subsidiary by the laws of Germany”, arguing that the clause does not show with sufficient clarity that the parties agreed to submit their dispute to arbitration excluding the jurisdiction of state courts.
46 See, for instance, Areios Pagos (Supreme Court, Greece), 9 May 2014, in Yearbook XL-2015, 427.
47 However, courts do not always follow this approach. So, for instance, in a case regarding a contract for the sale of skins, the arbitration clause made reference to arbitration according to the usages of commerce and the rules of arbitration and appeal in force in the place specified in clause 1 (London). Although this wording is unambiguous for the traders of hides and skins (who know exactly to which arbitration facility reference is made), the Court of Appeal of Salerno before which the dispute was brought, held that a simple reference to the city of London was insufficient (judgment of 31 December 1990, Concerie Est Partenio s.p.a. v James Garnar and Sons e Scotblair Pelts Ltd. in Riv. dir. int. priv. proc., 1992, p. 115)
48 US District Court, Eastern District of Pennsylvania, 16 November 1992, Euro-Mec Import, Inc. c. Pantrem & C. S.p.a., in Yearbook, XIX-1994, 781 et seq
49 Court of Appeal of Bermuda, 9 November 1988, Dupont Scandinavia AB v Coastal (Bermuda) Limited, in Yearbook, XV-1990, 378
50 Judgment of 29 November 2002, Rederij Empire CV v Previsión Española SA, in Yearbook, XXXII-2007, 567
51 Court of Appeal of Milan, 2 July 1999, Tema Frugoli spa v Hubei Space Quarry Industry Ltd, in Yearbook, XXVI-2001, 807 et seq
52 52. Court of Cassation (Italy), 7 February 2001, Tema Frugoli spa v Hubei Space Quarry Industry Ltd, in Riv. dir. int. priv. proc., 2001, 443 et seq
53 See, for instance, ICC award in case 4472/84, in Jarvin, Derains, ICC Awards 1974-1985, p. 524; ICC award 2626/77 in Jarvin, Derains, ICC Awards 1974-1985, 316
54 Judgment of 28 October 1997, Société Procédés de préfabrication pour le béton v Libye, in Rev. arb., 1998, 399.
55 Oberlandesgericht Hamm, 15 November 1994, in RIW, 1995, p. 681.
56 Oberster Gerichtshof (Austria), 11 July 1990, in Gaja, New York Convention, V.324.
57 “Der vorliegende Vertrag unterliegt der ausschließlichen Kompetenz der Schiedgerichte der Ungarischen Handelskammer, Budapest, sowie der Bundeswirtschaftskammer, Wien”
58 Cour de Cassation libanaise, 27 April 1987, in Rev. arb., 1988, p. 723
59 59. Which Convention, as specified in Article I (1), applies to the recognition and enforcement of arbitral awards “made in the territory of a State other than the State where the recognition or enforcement of such awards are sought” or to arbitral awards “not considered as domestic awards in the State where their recognition and enforcement are sought”. Actually, some countries give a broad interpretation to the notion of non-domestic awards and apply the New York Convention to awards made in their country that show connections with foreign countries or involve foreign parties: see for example United States District Court, Southern District of Florida, 4 June 2003, Four Seasons Hotels v Consorcio Barr, in Yearbook XXIX-2004, 882 et seq.; United States District Court, Southern District of New York, 4 February 2004, Shanghai Foodstuffs Import & Export v International Chemical, Inc., in Yearbook XXIX-2004, 1209 et seq
60 Supra, § 3.2.3.92
61 Cour d’Appel de Paris, 22 September 1995, Dubois & Vanderwalle v Boots Frites BV, in Yearbook, XXIV-1999, p. 640.