Introduction to international arbitration and its place in the Asia-Pacific

544 Pages·2010·4.99 MB·English

by  Syriac Sebastian

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1
Introduction to international
arbitration and its place in the
Asia-Pacific
1 Introduction and definition of arbitration
Overthepast20–30years,internationalarbitrationhasbecomebyfarthemost 1.1
popularmechanismforresolvinginternationalcommercialdisputesintheAsia-
Pacificandglobally.Internationalarbitrationisexceptionallyeffectivebecauseof
itsflexibility,neutrality,finality,andenforceability.Itisflexiblebecauseparties
are accorded enormous freedom to choose the manner in which their dispute
isdecided.Theycan,forexample,agreeontheseatofarbitration,theidentity
ofthearbitrators,theapplicablelaw,thenumberofwrittenbriefs(ifany),the
numberoforalhearingsormeetings(ifany),andwhethertherewillbeexpert
orfactualevidence.Theneutralityofarbitrationprincipallyrelatestoseparating
thedisputeresolutionmechanismfromanyoftheparties’countriesandfrom
anypoliticalinterference.Partiescan,forexample,selectaseatofarbitration,
applicable law and arbitrators from a country that is neutral with respect to
allparties.Arbitrationisfinalbecausedomesticlegalsystemsgenerallydonot
permitanyappealfromarbitrators’awards,andallowonlyverylimitedreview
ofsuchawardsonproceduralgrounds.Arbitrationisenforceablethankstoits
recognition in virtually all domestic laws and thanks to several international
treaties.Arbitralawardsmaybeenforcedusingtheenforcementmechanismsof
statecourtsinmostcountriesthroughouttheworld.Aswewillsee,thestudy
ofinternationalarbitrationisexciting,innovative,creative,andyetsometimes
complex.
Inthischapter,afterbrieflydefiningarbitrationintheintroduction,weset 1.2
outitshistoricalevolutioninSection2.Section3summarisesthecharacteristics
ofinternationalarbitrationasweknowittoday,includingthesourcesofinter-
nationalarbitrationlaw,thusintroducingtheconceptswhichareaddressedin
1
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2 INTERNATIONALCOMMERCIALARBITRATION
muchgreaterdetailthroughoutthebook.Finally,Section4explainstherole,
statusandcultureofinternationalarbitrationintheAsia-Pacificregion.1
1.3 Adefinitionofarbitrationcanbefoundinanydictionary.Astraightforward
andaccuratedefinitionisthatprovidedinBlack’sLawDictionarywhichdefines
arbitrationas‘[a]methodofdisputeresolutioninvolvingoneormoreneutral
third parties who are usually agreed to by the disputing parties and whose
decisionisbinding’.2Thisidentifiesthecoreelementswhichareapplicableeven
inthemostadvancedformsofinternationalcommercialarbitration.Itstatesthat
arbitration:
(i) is a ‘method of dispute resolution’ (arbitration is simply a procedure or
methodforresolvingdisputes);
(ii) ‘involving one or more neutral third parties’ (the notion that all of the
arbitratorsbeneutral,independentandimpartialisanessentialfeatureof
arbitration);
(iii) ‘whoareusuallyagreedtobythedisputingparties’(appointmentofthe
arbitrator or arbitral tribunal by agreement of the parties, or by some
agreedmethod,isoneofthemostimportant,definingfeaturesofarbitra-
tion;moregenerally,partyconsentisessentialtoallaspectsofarbitration);
(iv) ‘whosedecisionisbinding’(therewouldbelimitedvalueinarbitrationif
apartytoanarbitrationagreementcouldsubsequentlyrefusetocomply
withitsobligationtoarbitrateorcouldrefusetohonourthearbitrator’s
decision. The binding nature of arbitral decisions (called ‘awards’) has
been facilitated by the law, which is comprised of both domestic laws
andinternationaltreaties.Thelawprovidesaframeworktoensurethat
arbitrationagreementsandarbitralawardsarelegallyenforceable).
1.4 There are many different types of arbitration, and even different species of
international commercial arbitration. The most common is sometimes called
‘NewYorkConventionarbitration’becausetheawardsareenforcedpursuantto
theproceduressetoutinthe1958NewYorkConventionontheRecognitionand
Enforcement of Foreign Arbitral Awards (‘New York Convention’). However,
‘New York Convention arbitration’ as a name is inaccurate because it omits a
smallnumberofprivatearbitrationsincountriesthatarenotsignatoriestothe
New York Convention. Some call this kind of arbitration simply ‘commercial
arbitration’butweprefer‘internationalcommercialarbitration’todistinguishit
fromdomesticarbitration.
1 ThisbookfocusesonthefollowingAsia-Pacificjurisdictions:Australia,China(Mainland),HongKong,
India,Indonesia,Japan,Korea(Republicof),Malaysia,NewZealand,thePhilippinesandSingapore.How-
ever,examplesfromotherjurisdictionsarementionedfromtimetotime.
2 Black’sLawDictionary,8thedn,ThomsonWest,2004,p.112.Asimilardefinitioncanbefoundinany
dictionaryorinthevariousbooksonarbitration.See,e.g.thediscussionofthedefinitionsinJ-FPoudretand
SBesson,ComparativeLawofInternationalArbitration,2ndedn,Thomson,2007,paras1–3,whoconclude
that‘arbitrationisacontractualformofdisputeresolutionexercisedbyindividuals,appointeddirectlyor
indirectlybytheparties,andvestedwiththepowertoadjudicatethedisputeintheplaceofstatecourtsby
renderingadecisionhavingeffectsanalogoustothoseofajudgment’.Anotherusefuldefinitionisfoundin
Section3(d)ofthePhilippinesAlternativeDisputeResolutionAct2004:‘“Arbitration”meansavoluntary
disputeresolutionprocessinwhichoneormorearbitrators,appointedinaccordancewiththeagreementof
theparties,orrulespromulgatedpursuanttothisAct,resolveadisputebyrenderinganaward.’
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INTRODUCTIONTOINTERNATIONALARBITRATION 3
Internationalcommercialarbitrationmaybecontrastedwith‘ICSIDarbitra- 1.5
tion’ which is the most common type of ‘investment arbitration’. ICSID arbi-
trations arise under the 1965 Washington Convention on the Settlement of
InvestmentDisputesbetweenStatesandNationalsofOtherStates(‘ICSIDCon-
vention’).AdistinctivefeatureofICSIDarbitrationisthatonepartymustbea
state(i.e.government)orastateentity.Statescanalsobepartiestointernational
commercialarbitrations.3AlthoughICSIDarbitrationdiffersfrominternational
commercial arbitration in several respects, especially concerning the applica-
blesubstantivelawandrecourseagainstandenforcementofawards,thereare
numeroussimilaritiesintermsofprocedureandpractice.
Thisbookfocusesprincipallyoninternationalcommercialarbitration,which 1.6
isthemainformofinternationalarbitration,butmuchofthebookalsoappliesto
ICSIDarbitration.ThesectionsthatarespecifictoICSIDarbitrationarethebrief
historyofICSIDatSection2.3.2belowandthedescriptionofthemainfeatures
ofICSIDinChapter10.
2 A brief history of arbitration
2.1 Ancienthistorytothebirthofmoderninternationallaw
Internationalarbitrationhasseenenormousgrowthinthelast40–50yearsand 1.7
has unquestionably become the preferred method for resolving international
commercialdisputesbothintheAsia-Pacificandworldwide.However,thecon-
ceptofpartiesreferringtoaneutralthirdpartyoftheirchoicefortheresolution
ofdisputesbetweenthemisverymucholderanddatesbacktoancienttimes.
Arbitration is said to have existed ‘long before law was established, or courts
wereorganised,orjudgeshadformulatedprinciplesoflaw’.4
Recourse to arbitration indeed seems natural: when two people wish to 1.8
resolveadifferencebetweenthem,aninstinctivereactionistoturntoamutually
respectedthirdperson,suchasatribalelder.Itisthereforenotsurprisingthat
arbitrationwaspractisedinancienttimesinallcornersoftheglobe.
ArbitrationinChinacanbetracedbacktoabout2100–1600BC.5Mediation 1.9
gainedanevenstrongerfootholdinChinabecauseofConfucianism.Confuciusis
3 Infact,mostarbitrationsinvolvingstatepartiesareinternationalcommercialarbitrationsratherthan
ICSIDarbitrations.In2009,forexample,78oftheICCInternationalCourtofArbitration’s817newcases
involvedastateorstateentity.Bycomparison,ICSID’stotalnumberofnewcasesfortheyear2009was25.
Moreover,arbitrationsinvolvingstatesareoftenentirelyadhoc,forexampleusingtheUNCITRALArbitration
Rules,and/orpartiallyadministeredbythePermanentCourtofArbitrationinTheHague.
4 FKellor,AmericanArbitration,ItsHistory,FunctionsandAchievements1,Harper&Brothers,1948,p.3.
ForanexcellentcollectionofresourcesonthehistoryofarbitrationseeDRoebuck,‘SourcesfortheHistory
ofArbitration:ABibliographicalIntroduction’,(1998)14(3)ArbitrationInternational237.
5 XuChuanbao,TracesofInternationalLawinPriorQingPeriod,1931,pp.254–255,citedinKayZhongjun
Ch’ien,MKMcCardellandHYu,RightsandRemedies:AComparisonofConsumerLawinChinaandHongKong,
InternPublicationsbyCivicExchange,2004,p.20;JingzhouTao,ArbitrationLawandPracticeinChina,2nd
edn,KluwerLawInternational,2008,p.1etseqbrieflydiscussesthehistoryofarbitrationinChinafrom
1912onwards.ForamorerecenteraseeRKWagner,‘MagistrateJustice,Proto-arbitrationandForeign-trader
DrivenLitigationReforms:AspectsofCommercialDisputeResolutioninLateImperialandEarlyRepublican
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4 INTERNATIONALCOMMERCIALARBITRATION
saidtohavebelievedthatconflictandlitigationweresourcesofgreatdisharmony
which in turn damaged social relationships.6 Arbitration was also popular in
ancient Egypt; it has been said that until about the mid-20th century, around
80%ofalldisputeswouldbesettledoutofcourtbyrecoursetoarespectedand
popularelderchosenforhiswisdom,integrityandstandinginthecommunity.7
Indiaalsohasanancienthistoryofresolvingdisputesinathree-tieredstructure
that is comparable to modern-day arbitration. This system continued through
until the British arrived in India and made significant changes to the judicial
system.8
1.10 EarlyexamplesofarbitrationfromtheWestincludeancientGreece,inpar-
ticularfortheresolutionofmaritimedisputeswithtradingpartnerssuchasthe
PhoeniciansandbetweenGreekcitystates,andancientRome.9Arbitrationwas
thepreferredmethodforresolvingcivildisputes inEuropeduringtheMiddle
Ages.Itwasalsousedtoresolvecolonialpowerstrugglesbetweenstates,such
astodefinethezonesofinfluenceamongcolonialempiresinthe15thand16th
centuries.WesternstateswouldoftenturntothePopetoarbitratesuchissues,
givingthearbitralawardanalmostdivineauthority.Knownexamplesincludethe
arbitraldecisionrenderedin1493byPopeAlexanderVIwhichclarifiedborders
betweenPortugueseandSpanishcoloniesinthePacificOceanandpavedtheway
forthelinguisticdivisionofLatinAmericabetweenSpanishandPortuguese.10It
alsoclarifiedlandownershipdivisioninIndia.11Internationaldisputeswerealso
frequentlyreferredtoothersovereignswhoactedasarbitratorsintheresolution
ofthosedisputes.12
1.11 ArbitrationwasnotwithoutitscriticsasitdevelopedintheWest.Somefelt
thattheideaofprivatejusticewasanaffronttoanationstate’sjudicialsystem.
China’,3September2008,unpublishedLLMdissertation,SchoolofOrientalandAfricanStudies,University
ofLondon(onfilewithauthors).
6 ESReinstein,‘FindingaHappyEndingforForeignInvestors:TheEnforcementofArbitrationAwardsin
thePeople’sRepublicofChina’,(2005–2006)16IndianaInternationalandComparativeLawReview37.
7 ASEl-Kosheri,‘IsThereaGrowingInternationalArbitrationCultureintheArab-IslamicJuridicalCulture?’,
(1996)ICCACongressSeries47atpp.47–8.SeealsoDRoebuck,‘CleopatraCompromised:Arbitrationin
EgyptintheFirstCenturyBC’,(2008)74Arbitration263.
8 VRaghavan,‘NewHorizonsforAlternativeDisputeResolutioninIndia’,(1996)13(4)JournalofInter-
nationalArbitration5,atpp.6–7.SeealsothetranscriptofaspeechbythethenPresidentofIndia,ShriKR
Narayanan:SpeechbythePresidentofIndiaattheInaugurationoftheInternationalCouncilforCommercial
ArbitrationConference–NewDelhi,2March2000;IntroductionbyFaliSNariman,PresidentofICCAand
ViceChairmanoftheInternationalCourtofArbitrationofICC,publishedin17(5)JournalofInternational
Arbitration153.ThePresidentspeaksofMohandasKaramchandGandhiandBuddhaasespousingthevalues
ofarbitration.
9 SeegenerallyCReus-Smit,‘TheConstitutionalStructureofInternationalSocietyandtheNatureof
FundamentalInstitutions’,(1997)51(4)InternationalOrganization555,whodiscussestheuseofarbitration
toresolveinterstatedisputes;GMurray,‘ReactionstothePeloponnesianWarinGreekThoughtandPractice’,
(1944)64TheJournalofHellenicStudies1,atp.5;HTKingandMALeForestier,‘ArbitrationinAncient
Greece’,(1994)49DisputeResolutionJournal38;DRoebuckandBdeLoynesdeFumichon,RomanArbitration,
HoloBooks,2004;andDRoebuck,AncientGreekArbitration,HoloBooks,2001.
10 SeeAGautier,100datesquiontfaitlemonde:3000ansdemondialisation,Studyrama,2005,p.157.
11 AGordon,LaviedupapeAlexandreVI.etdesonfilsCesarBorgia,ed.PierreMortier,1732,p.104.Seealso
FDespagnet,CoursdeDroitInternationalPublic,ed.LLarose1894,p.702.
12 PAMerlin,R´epertoireuniverseletraisonn´edejurisprudence,HTarlier,1825,p.28.Aninterestingbook
thatreproducesnumerousancienttreatiesinwhichthirdpartysovereignswereappointedasarbitratorsis
WGGrewe,FontesHistoriaeIurisGentium/SourcesRelatingtotheHistoryoftheLawofNations,Walterde
Gruyter,1995.
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INTRODUCTIONTOINTERNATIONALARBITRATION 5
InEnglandin1609,SirEdwardCokeheldthatanarbitrationagreementwas‘by
thelawandofitsownnaturecountermandable’.13Morethan200yearslater,a
similarcommentcanbefoundinUnitedStatesjurisprudence.TheUnitedStates
SupremeCourtin1836somewhatpatronisinglyreferredtoanarbitraltribunal
as‘amereamicabletribunal’.14 OneUScommentatorreflectingonthejudicial
viewofarbitrationatthattimehasnotedthat‘adisputesettledbyanarbitrator
couldbeappealedtoanAmericancourtandessentiallybetreatedasthoughit
hadneverbeeninvestigatedbefore’.15
The lack of specific legal recognition given to arbitrators’ decisions, and in 1.12
particulartheinabilitytoenforcearbitrationagreementswasindeeditshistorical
weakness.Forexample,theEnglishArbitrationAct1697allowedeitherpartyto
thedisputetowithdrawitsconsenttoarbitraterightuptothepointwhenthe
arbitrator’sdecisionwasissued.
Despitesuchearlyscepticismofarbitration,anddespiteitsmerepartialrecog- 1.13
nitionandenforceabilitybythelaw,recoursewasstillhadtoit.Itisinteresting
to note, for example, that George Washington’s will contained an arbitration
clauseprovidingthatanydisputeaboutinterpretationofitswordingshouldbe
resolvedbyapanelofthreearbitrators.16
Thefirstinternationalcommercialarbitrationofthemoderneraisoftensaid 1.14
to be the Alabama Claims Arbitration17 which took place in the aftermath of
the American Civil War. The US claimed that Britain had violated neutrality
obligations under international law by allowing the battle ship CSS Alabama
to be constructed in Britain in full knowledge that it would enter into service
withtheConfederacy.18Asaconsequence,theUSassertedthatUnionmerchant
marineandnavalforceshadsufferedheavydirectandindirectdamages.19After
yearsofunsuccessfulUSdiplomaticinitiativestoobtaincompensation,itwas
agreedintheTreatyofWashington1871thattheclaimswouldberesolvedbya
five-memberarbitraltribunalsittinginGeneva.20Thearbitraltribunalissuedits
13 Vynior’sCase,8Cohe.Rep81b,82a,77EngRep597,599(England,King’sBench).
14 HobartvDrogan35US108(1836)(USSupremeCourt)atp.119.
15 BLBenson,‘AnExplorationoftheImpactofModernArbitrationStatutesontheDevelopmentofArbitration
intheUnitedStates’,(1995)11JournalofLaw,EconomicsandOrganization479,atp.484.
16 ‘MyWillanddirectionexpresslyis,thatalldisputes(ifunhappilyanyshouldarise)shallbedecidedby
threeimpartialandintelligentmen,knownfortheirprobityandgoodunderstanding;twotobechosenbythe
disputants–eachhavingthechoiceofone–andthethirdbythosetwo.Whichthreementhuschosen,shall,
unfetteredbyLaw,orlegalconstructions,declaretheirsenseoftheTestatorsintention;andsuchdecisionis,
toallintentsandpurposestobeasbindingonthePartiesasifithadbeengivenintheSupremeCourtofthe
UnitedStates.’Citedwww.gwpapers.virginia.edu/documents/will/text.html.
17 ThisisthenamegiventotheclaimsintheTreatyofWashington1871.
18 TheCSSAlabama’sstory,beginningwiththemannerinwhichitwascommissionedandarmedthroughto
itsnavalbattlesanditsultimatedemise,isextraordinary.Itinvolvesmanyactsofsubterfugeandculminates
inaseabattlewitnessedbythousandsofpeoplestandingontheFrenchcoastline.See,e.g.TBingham,‘The
AlabamaClaimsArbitration’,(2005)54International&ComparativeLawQuarterly1;ECBruggink,‘The
AlabamaClaims’,(1996)57AlabamaLawyer339;EBCanfield,‘Alabama’sDefeatWasNoSurprise’,(2004)
18(4)NavalHistory43.
19 CharlesSumner,thenChairmanoftheSenateForeignRelationsCommittee,arguedthatBritishaidto
theConfederacyhadprolongedtheCivilWarbytwoyearsandindirectlycosttheUShundredsofmillionsor
evenbillionsofdollars(SumnersuggestedUS$2.125billion).SomeAmericansadoptedthisargumentand
suggestedthatBritainshouldofferCanadatotheUSascompensation.
20 Thearbitratorappointmentprocesswasrelativelystraightforwardbutinteresting:‘oneshallbenamed
byHerBritannicMajesty;oneshallbenamedbythePresidentoftheUnitedStates;HisMajestytheKingof
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decisioninSeptember1872,orderingBritaintopaytheUSsome$15.5million21
incompensationfordirectdamagessuffered.Theclaimsforindirectdamages
wererejected.Unlikeinternationalarbitrationsthesedays,deliveryoftheaward
wasaccompaniedbyagunnerysalute.
1.15 TheAlabamaClaimsdisputepromptedtheglobalrecognitionofinternational
arbitrationandthedevelopmentofcertainprinciplesofinternationalarbitration
asweknowthemtoday.Italsohelpedtriggeramovementtowardscodifying
internationallawtofacilitatepeacefulsolutionstointernationaldisputes.22The
AlabamaClaimscanbeconsideredaprecursortoTheHagueConventionsof1899
and1907(whichinstitutedthePermanentCourtofArbitration),andperhaps
evenpartoftheinspirationforaspectsoftheLeagueofNations,theInternational
CourtofJusticeandtheUnitedNations.
2.2 Early20thcentury:Thebirthofglobalisationand
internationallaw
1.16 Theseedsofinternationalcommercialarbitrationasweknowittodayweresewn
inthelate19thandearly20thcenturiesasaresponsetogrowinginternational
trade,mainlyinEurope,andthedesireforaninternationallyenforceable,com-
mercially sensible mechanism to resolve disputes. Robert Briner and Virginia
Hamiltonexplain:23
Asnationsincreasinglyaffirmedtheirsovereigntyandinternationaltradeoutgrewits
formerstructures,thedisputeresolutionmechanismsdevelopedwithintradeassocia-
tionsbegantoproveinadequate.Thegrouppressurethathadformerlybeensuchan
effectivemeansofensuringenforcementofarbitralawardslostitspower,andthere
werenospecificlegalmeansofcompulsiontotakeitsplace.
1.17 Arbitral institutions contributed substantially to the growth of international
arbitration during this period. The London Court of International Arbitration
(‘LCIA’) was established in 1892 (then called the London Chamber of
Arbitration).TheLawQuarterlyReviewatthattimereportedthat‘thisChamber
is to have all the virtues which the law lacks. It is to be expeditious where
Italyshallberequestedtonameone;thePresidentoftheSwissConfederationshallberequestedtoname
one;andHisMajestytheEmperorofBrazilshallberequestedtonameone.’(Preamble,TreatyofWashington
1872).
21 Thiswouldcorrespondtoabout£160millionin2005,Binghamop.cit.fn18.Forfurtherdiscussion
ontheAlabamaclaimsseealsoSHilmer,‘TheAlabamaClaims–TheOriginsofInternationalArbitration’,
(2008)JulyAsianDisputeReview87.
22 Accordingtooneleadinginternationalarbitrator,thepeacemovementofthelate19thand20thcen-
turies‘consideredinternationaladjudicationandarbitrationasasubstituteforwarinsettlinginternational
conflicts’,K-HBo¨ckstiegel,‘TheRoleofArbitrationwithinToday’sChallengestotheWorldCommunityand
toInternationalLaw’,(2006)22(2)ArbitrationInternational165,atp.171.
23 RBrinerandVHamilton,‘TheHistoryandPurposeofthe[NewYork]Convention’inEGaillardandDDi
Pietro,EnforcementofArbitrationAgreementsandInternationalArbitralAwards,theNewYorkConventionin
Practice,CameronMay,2008,p.3.SeealsoYasuheiTaniguchi,‘IsThereaGrowingInternationalArbitration
Culture?–AnObservationfromAsia’,(1996)8ICCACongressSeries31,atpp.38–39.
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INTRODUCTIONTOINTERNATIONALARBITRATION 7
the law is slow, cheap where the law is costly, simple where the law is tech-
nical, a peacemaker instead of a stirrer-up of strife.’24 The LCIAwas followed
byestablishmentoftheCharteredInstituteofArbitratorsin1915.Thefirstedi-
tionoftheInstitute’sjournalArbitration,publishedinFebruary1916,reported
thatitwasformed‘attheinstanceofmembersofthoseprofessionswhoseser-
vicesareusuallyinvokedforthepurposeofactingasArbitratorsincommercial
matters...withaviewtotheircorporateassociation,bothfortheirownbenefit
andtheinterestofthegeneralpublic’.25
TheInternationalChamberofCommerce(‘ICC’)wasestablishedin1919bya 1.18
groupofinternationalbusinessmenwhocalledthemselves‘MerchantsofPeace’.
They quickly realised that an effective mechanism for resolving international
business disputes would foster growth in international commerce and assist
inachievingworldpeace.TheICCbeganadministeringinternationaldisputes
in 1921 and had dealt with 15 such cases before the ICC International Court
ofArbitration(‘ICCCourt’)wascreatedin1923.TheICCCourt’smissionwas
to foster international trade by providing a framework for the resolution of
internationalcommercialdisputes.
Various ICC congresses in the early 1920s called strongly for better legal 1.19
recognitionofarbitration,whichwasrapidlygainingpopularityamonginterna-
tionalbusinessmen.ThefollowingresolutionwasadoptedatanICCCongressin
RomeinMarch1923:26
TheInternationalChamberofCommerceconsidersthatforthepurposeindicatedin
theprecedingresolutionsitisdesirablethatoneormoreinternationalconventions
should be negotiated with the least possible delay, to embrace the largest possible
number of States, particularly those of commercial importance. Such conventions
shouldpledgethecontractingStatestorecogniseandmakeeffectivearbitrationclauses
ininternationalcommercialcontracts,andtoprovidethatiftwopartiesofdifferent
nationalitiesagreetoreferdisputesthatmayarisebetweenthemtoarbitration,an
actionbroughtbyeitherpartyinanycountryshallbestayedbytheCourt,provided
thattheCourtissatisfiedthattheotherpartyis,andhasbeen,willingtocarryoutthe
arbitration.
This and other pressure prompted the League of Nations to adopt the 1923 1.20
Geneva Protocol on Arbitration Clauses, the first genuine international treaty
specificallyconcernedwithcommercialarbitration.Itprovidedfortherecogni-
tionofarbitrationagreementsandawards.Italsoofferedamechanismforthe
enforcementofanarbitralawardinthejurisdictionthatitwasmade,butdid
notfacilitatetheenforcementofanarbitralawardmadeoutsidetheenforcing
jurisdiction, i.e. foreign arbitral awards. Foreign awards, if recognised at all,
24 EManson,‘TheCityofLondonChamberofArbitration’,(1893)9LawQuarterlyReview86.
25 (1916)1(2)Arbitration2.
26 InternationalChamberofCommerce,ResolutionsAdoptedattheSecondCongress,Rome,March1923,
Brochureno.31,at37,citedinBrinerandHamilton,op.cit.fn23,p.5.BrinerandHamiltonprovidea
captivatingaccountofthelobbyforlegalrecognitionofarbitrationduringthisperiod.
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8 INTERNATIONALCOMMERCIALARBITRATION
were subjected to various national enforcement procedures depending on the
lawofthestateinwhichenforcementwassought.
1.21 The Geneva Protocol was followed by the much wider 1927 Geneva Con-
vention on the Execution of Foreign Arbitral Awards. This convention sought
toimproveonthe1923GenevaProtocolbyextendingthescopeoftherecog-
nition and enforcement of awards to all contracting states. In other words, it
was not limited to enforcement of awards made in the enforcing court’s own
state(aswasthecaseunderthe1923GenevaProtocol).Whilethisassistedwith
the enforcement of foreign awards, a significant weakness of the two Geneva
conventionswasthatneithertheUSnorUSSRwereparties.Inaddition,thelan-
guageofthesetreatieswasfarfromideal,withvariousshortcomingsandunclear
provisions.27Neitherofthesetreatieshasmuchpracticaleffecttoday,eitherin
theAsia-Pacificorelsewhere,becausetheyhavebeensupersededbytheNew
YorkConvention.28
1.22 Aparticularlyinterestingexampleofaninternationalarbitrationinthepre-
WorldWarTwoperiodistheAbuDhabioilcase.29Itconcernedanoilconcession
grantedbytheSheikofAbuDhabitoaforeignprivatecompanyin1939.The
disputearoseoverthegeographicallimitsoftheconcessionholder’soilextraction
rights.ThetwoarbitratorsappointedunderthearbitrationagreementchoseLord
Asquith as their ‘umpire’ because they could not agree on the outcome of the
case.LordAsquithmadeacontroversialdecisionregardingthelawapplicable
tothedispute.WhileacknowledgingthatAbuDhabilawwouldordinarilyapply
sincethecontractwassignedandtobeperformedinAbuDhabi,LordAsquith
concludedthat:30
[theSheik,an]absolute,feudalmonarch...administersapurelydiscretionaryjustice
with the assistance of the Koran; and it would be fanciful to suggest that in this
very primitive region there is any settled body of legal principles applicable to the
constructionofmoderncommercialinstruments.
1.23 Applying‘principlesrootedinthegoodsenseandcommonpracticeofthegen-
erality of civilised nations – a sort of “modern law of nature”’,31 Lord Asquith
determinedthatthesubsoiloftheterritorialbeltwasincludedintheconcession
agreement.InfavouroftheSheikofAbuDhabi,however,LordAsquithfound
thattheconcessionholderhadnorightswithregardtothesubsoiloutsidethe
territorialbeltontheContinentalShelf.
27 BrinerandHamilton,op.cit.fn23,pp.7–8;ARedfern,MHunter,NBlackabyandCPartasides,Lawand
PracticeofInternationalCommercialArbitration,4thedn,SweetandMaxwell,2004,paras1–146,3–4and
10–22.SeealsoVPetocha,‘GenevaConventionontheExecutionofForeignArbitralAwards’,(1986–1987)
1WorldArbitrationReporter11.
28 ArticleVII(2)oftheNewYorkConventionstatesthat‘TheGenevaProtocolonArbitrationClausesof
1923andtheGenevaConventionontheExecutionofForeignArbitralAwardsof1927shallceasetohave
effectbetweenContractingStatesontheirbecomingboundandtotheextentthattheybecomebound,by
thisConvention’.Fordomesticlegislationimplementingthesetreatiessee,asanexample,Sections53–60of
theIndianArbitrationandConciliationAct1996.
29 PetroleumDev(TrucialCoast)LtdvSheikhofAbuDhabi(awardof28August1951),reprintedin(1952)
1InternationalandComparativeLawQuarterly247.
30 Ibid.,at250–251.
31 Ibid.,at251.
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INTRODUCTIONTOINTERNATIONALARBITRATION 9
LordAsquith’sawardwasmadefromanexcessivelyWesternperspectiveand 1.24
would not be acceptable in the globalised world of international arbitration
today.
2.3 Post-WorldWarTwo:Developmentofaframeworkfor
internationalarbitration
The outbreak of World War Two halted international business. However, its 1.25
immediateaftermathsawhugeeconomicgrowthandtrade,particularlyfrom
the 1950s onwards when global commerce between private parties began to
flourish.Thiswasstimulatedbyvariouspost-warinitiativesattheinternational
level,includingtheestablishmentoftheInternationalBankforReconstruction
andDevelopment(laterrenamedtheWorldBank)andInternationalMonetary
Fundin1944;andtheestablishmentoftheGeneralAgreementonTariffsand
Trade(usuallycalledthe‘GATT’)in1947.
2.3.1 1958NewYorkConvention
Perhapsthemostimportantmilestoneintheentirehistoryofinternationalcom- 1.26
mercialarbitrationwastheadoptionoftheNewYorkConvention.Itscomple-
tion in 1958 cannot be viewed in isolation as a sudden act of innovation. It
wasaproductofthedevelopmentsdescribedaboveandfurtherlobbyingbythe
internationalbusinessandlegalcommunitiessincetheearly20thcentury.
TheICCplayedasignificantroleinthelobbyingprocessofthe1950s,includ- 1.27
ing submitting to the United Nations a ‘Preliminary Draft Convention’ on the
recognitionandenforcementofinternationalarbitralawardsandagreements.32
TheICC’sproposalforaninternationalawardthatwasnotsubjecttoanycontrol
bythecourtsoftheplaceofarbitrationprovedtobeunacceptabletomoststates.
TheUnitedNationsEconomicandSocialCouncil(‘ECOSOC’)insteadproduced
its own draft convention for the enforcement of foreign awards.33 ECOSOC’s
draft was debated by representatives of some 40 countries at the ‘Conference
onInternationalCommercialArbitration’,alsoknownastheNewYorkConfer-
ence,heldatUnitedNationsHeadquartersinNewYorkfrom20Mayto10June
1958.34Afterthefirstweekofthisconference,theDutchdelegationsubmitteda
substantiallyalteredversionofArticlesIIItoVoftheECOSOCdraft.35Thereafter,
32 SeeAJvandenBerg,TheNewYorkConventionof1958:TowardsaUniformInterpretation,KluwerLaw
International,1981,p.7andBrinerandHamilton,op.cit.fn23,pp.8–9.
33 UnitedNationsEconomicandSocialCouncil,DraftConventionontheEnforcementofForeignArbitral
Awards,UNDocE/2704andCorr1.
34 SeegenerallyBrinerandHamilton,op.cit.fn23,pp.13–19.FortheSummaryRecordsoftheNewYork
Conference,seeUNDocE/Conf26/SR1–25;andforotherpreparatorymaterialsofthatconference,including
suggestedamendmentstotheECOSOCdraftandreportsoftheWorkingParties,seeUNDocE/Conf26/7
andL7–63.ThesedocumentsarereproducedinGGaja,InternationalCommercialArbitration:TheNewYork
Convention,OceanaPublicationsInc,1978–1980,PartIII.Seealsowww.uncitral.org.
35 UnitedNationsEconomicandSocialCouncil,UnitedNationsConferenceonInternationalCommercial
Arbitration,‘ConsiderationoftheDraftConventionontheRecognitionandEnforcementofforeignarbitral
Awards(Item4ontheAgenda)–Netherlands:amendmentstoDraftConvention;UNDoc/CONF.26/L.17
(26May1958).
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10 INTERNATIONALCOMMERCIALARBITRATION
theconferencecontinueditsdeliberationsusingtheDutchproposalsasthebasis
for discussions. A Working Party was appointed and prepared a revised draft
inthelightofthediscussions.36Thatversion,withsomefurthermodifications,
wasadoptedbytheconferenceon10June1958by35votestonone,withfour
abstentions.37
1.28 ThefinaltextoftheNewYorkConventionwasnotquiteasbusiness-friendly
assomelobbyistsmighthavewished,butwasnonethelessaremarkableachieve-
mentgiventhediversityofculturalandpoliticalintereststhatultimatelycon-
sentedtoit.
1.29 The New York Convention facilitates the recognition and enforcement of
foreign arbitral awards and agreements. It is said to have a pro-enforcement
bias.Therearemanyreasonsforthisbiasbuttwoareparamount.First,amajor
objectandpurposeofitis‘toencourageandliberalisetheprocessofrecognition
andenforcementofawardsbydecreasingthescopeforobstructionbynational
courtsandlaws’.38Thesecondreasonisduetotheprincipleofcomity.AsJustice
PrakashstatedintheSingaporeHighCourtdecisionofHainanMachineryImport
&ExportCorporationvDonald&McArthyPteLtd:39
theprincipleofcomityofnationsrequiresthattheawardsofforeignarbitrationtri-
bunalsbegivenduedeferenceandbeenforcedunlessexceptionalcircumstancesexist.
Asanationwhichitselfaspirestobeaninternationalarbitrationcentre,Singapore
mustrecogniseforeignawardsifitexpectsitsownawardstoberecognisedabroad.
1.30 If the party against whom enforcement of an award is sought does not resist
enforcement,theprocedureshouldbeverystraightforwardandakintoquasi-
administrative proceedings.40 There are very limited grounds in Article V on
whichapartycanresistenforcement.41
1.31 Twenty-five states were parties to the New York Convention by the end of
1958. Since then, numerous others have signed, bringing the total number of
partiesatthetimeofwritingtoapproximately145.42Statesseekingtoportray
themselves as players on an international commercial market, and wishing to
attract foreign investment, readily adopted it. The growing number of parties
meantthattheNewYorkConventioninturnexpandeditsgeographicalreach
and,consequently,theadvantagesthatitoffered.Itbecamevitaltotheexpansion
ofcross-bordertradeandinvestmentandcausedadramaticshiftinthewaythat
36 UnitedNationsEconomicandSocialCouncil,UnitedNationsConferenceonInternationalCommercial
Arbitration,ConsiderationoftheDraftConventionontheRecognitionandEnforcementofForeignArbitral
Awards(Item4ontheAgenda),UNDocE/CONF.26/L.43(NewYorkConventiondraftofWorkingParty
no.3)(3June1958).
37 UnitedNationsEconomicandSocialCouncil,UnitedNationsConferenceonInternationalCommercial
Arbitration,SummaryRecordoftheTwenty-fourthMeeting,UNDocE/CONF.26/SR.24(12September
1958).
38 RGarnettandMPryles,‘RecognitionandEnforcementofForeignAwardsundertheNewYorkConvention
inAustraliaandNewZealand’,(2008)25JournalofInternationalArbitration899,at904.
39 [1996]1SLR34,atpara45;(1997)XXIIYearbookofCommercialArbitration771.SeealsoHebeiImport
&ExportCorpvPolytekEngineeringCoLtd[1999]1HKLRD665.
40 ThesearethewordsofLordJusticeRixinGaterAssetsLtdvNakNaftogazUkrainiy[2007]2Lloyd’s
Rep588at603,para72.
41 EnforcementofawardsisdealtwithbrieflybelowatSection3.4.6,andinmuchmoredetailinChapter9.
42 AlistofpartiestotheNewYorkConventionisprovidedatAppendix4.