In conjunction with the Treaty of Versailles, a group of industrialists, financiers and traders founded the International Chamber of Commerce in 1919 and called themselves "the merchants of peace". The International Court of Arbitration founded in 1923 is part of the International Chamber of Commerce, as is the International Centre for Alternative Dispute Resolution (ADR). The aforementioned industrialists, financiers and traders were looking for a way to carry-out their business and political activities outside of the international legal system and saw arbitration, as well as other forms of alternative dispute resolution, as good ways of doing that.
A 2012 paper published by the International Council for Commercial Arbitration tells us that, International arbitration is increasingly recognised as a transnational system of justice, if not a genuinely autonomous legal order. And that arbitration is considered by many to be a free-standing procedure, conceptually and politically independent of the apparatus of the state. The International Association of Defense Counsel informs us (p.6) that “Arbitrators are not bound by the rules of evidence.” Unfavourable arbitration rulings, known as arbitral awards, can be made in various countries and then enforced in over 150 countries that are signatories of the New York Convention.
Due to international conventions, (p.4) the potential for enforcing arbitral awards worldwide is much greater than that for court judgments. The most important enforcement convention is the 1958 'United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards' (known as the New York Convention). A 2010 UK Supreme Court decision, regarding the New York Convention, states that, “The court before which recognition or enforcement is sought has a discretion to recognise or enforce even if the party resisting recognition or enforcement has proved that there was no valid arbitration agreement.” There is currently over 150 countries that are signatories to the New York Convention. The rules of commercial arbitration also apply to public sector entities such as local authorities which, in the UK and most other countries, are municipal corporations.
The most prevalent form of arbitration law worldwide is the UNCITRAL Model Law on International Commercial Arbitration which contains no right to appeal and was developed (p.1) to address considerable disparities in national laws on arbitration. Article 5 of the UNCITRAL Model Law informs us that, "In matters governed by this Law, no court shall intervene except where so provided in this Law." And Article 28 tells us that "The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute."
Arbitration is a way to resolve disputes outside of judicial courts and is a form of Alternative Dispute Resolution (ADR). Arbitration takes place in a very informal way. Since it is not related to court, it need not abide by the rules of the law. Therefore, arbitration award or the final judgment may be purely based on the principles of justice followed by the arbitrator and not according to the law. There is no right of appeal even if the arbitrator makes a mistake of fact or law. Arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and employees sometimes do not know in advance that they have agreed to mandatory binding arbitration by taking a particular job. Unlike court judgments, arbitration awards themselves are not directly enforceable; a party seeking to enforce an arbitration award must resort to judicial remedies. In most legal systems, arbitration also leaves no room for an appeals process in the overwhelming majority of instances. Disputes can also be settled through other forms of ADR such as mediation, or good offices i.e. the influence or power that an individual, organisation, or state can use to help you.
In 2016 Lord Thomas, Lord Chief Justice of England and Wales, condemned the pervasiveness of international arbitration as the first choice of resolving international disputes and called for an urgent rebalancing of the relationship between the courts and arbitration. Lord Thomas observed that arbitral disputes are resolved "firmly behind closed doors", "hidden from view," and are "retarding public understanding of the law and public debate over its application."
Lord Thomas, while speaking about courts in the UK, (p.5), observed that "the [UK] Arbitration Act 1996 established a general principle of non-intervention in arbitral proceedings." And in regard to section 69 of the Arbitration Act 1996, Lord Thomas (pp.9 & 10) tells us that "Even in the case of a decision on a standard from contract or matter of general public importance, the court is only permitted under section 69 to give permission to appeal if the arbitrator’s decision is open to serious doubt."
J William Rowley QC informs us (p.10) that "the exclusion of the right of appeal forms part of the standard rules of both the LCIA and the ICC International Court of Arbitration...the English appellate courts are unable adequately to develop English common law because, absent the ability to review far more arbitration awards, they have an insufficient diet of appropriate commercial cases to enable them to do so."
Courts in the USA (p.4) have found that some arbitration agreements override vital public interests related to consumer protection, foreign policy, antitrusts, securities regulation, and the bankruptcy code. The UK, Lord Thomas says, "has not reached the stark example which appears to be taking place in the United States, where mandatory arbitration clauses in contracts are removing whole classes of claim from the jurisdiction of the courts and undermining aspects of the law’s development." Lord Thomas (p.17) has commented that "The UK went too far in 1979 and again in 1996 in favouring the perceived advantages for arbitration as a means of dispute resolution in London over the development of the common law; the time is right to look again at the balance.”
An article in the Vanderbilt Journal of Transnational Law (p.1090) tells us that the world may very soon see a virtually unified system of global commercial legal order, while legal order of a non-commercial nature remains languishing in the deep mud of entrenched regionalism. And it may be that, absent of a central authority with real legislative and enforcement power, a legal order of a non-commercial nature will simply lack the structural ability to ever achieve global unity.
Posted by Ken Craggs