Week 1: Introduction

Adjudicatory Power Vested in Arbitrators

Arbitrators are one or several individuals acting in a private capacity, distinguishing them from judges. They are selected/appointed by the parties, an arbitral institution, an appointing authority, or a state court.

Independence and Impartiality

Most arbitration statutes impose obligations of independence and impartiality on arbitrators. Safeguards include disclosure obligations and mechanisms for challenging biased appointments or awards. Parties cannot appoint partisan arbitrators.

Basis in Party Consent (Party Autonomy)

The power to adjudicate is based on the consent of the parties, evidenced by a waiver to go to court. Arbitration is founded on an arbitration agreement (clause), which expresses the decision whether and how to conduct the proceedings, though party autonomy is subject to limitations.

Arbitration Agreement

Defined by the New York Convention (NYC) as an "agreement in writing" to submit differences concerning a subject matter capable of settlement by arbitration. The agreement to arbitrate persists even if the main contract is null or void (the doctrine of separability).

Final, Binding, and Enforceable Award

Arbitrators are entitled to render an arbitral award, which is a decision that finally resolves all or part of the dispute. The award is binding, creating legal obligations, and may be enforced against a party's will. Awards must result from a procedure capable of respecting due process requirements.

Supervisory Function of the Courts

Courts may render decisions on the validity of the arbitration agreement, challenge and appointment of arbitrators, and set-aside or recognition and enforcement of an arbitral award.

Supportive Function of the Courts

Courts may compel parties to arbitrate, grant interim relief, examine witnesses who refuse to appear before the tribunal, and enforce the ultimate arbitration award.

Relationship of Arbitration with State Courts 

Arbitral tribunals do not enjoy independent coercive powers (imperium); this monopoly lies with the state and its organs. State courts, therefore, maintain limited oversight

Ad Hoc Arbitration

• Not administered by an institution. Parties or the tribunal organize the proceedings, often adopting frameworks like the UNCITRAL Arbitration Rules. Complete autonomy for the parties to tailor proceedings.

• Advantages: 

  • Greater flexibility and generally lower costs (no institutional fees).

  • Confidentiality, finality, and ease of enforcement.

• Disadvantages: 

  • Can lead to procedural uncertainty or delays if parties cannot agree on procedural issues.

  • All logistics must be managed by parties/tribunal.

Institutional Arbitration

• Administered by a permanent arbitral institution (e.g., ICC, LCIA, NAI). Governed by pre-established rules (e.g., ICC Rules). The institution handles administrative logistics.

• Advantages: 

  • Efficiency, predictability, administrative guidance, and greater procedural certainty.

  • Reliability and enforceability due to professional administration

• Disadvantages: 

  • Higher costs (administrative and arbitrator fees) and less flexibility compared to ad hoc arbitration.

Hierarchy of Norms Governing Arbitration

1. Treaties: In particular, the New York Convention.

2. Mandatory Rules of National Laws (Lex Arbitri/Law of the Seat).

3. Mandatory Rules of Applicable Institutional Rules (e.g., ICC Art. 34 scrutiny).

4. Party Autonomy (reflected in the written agreement and chosen rules).

5. Non-mandatory Rules of Applicable Institutional Rules.

6. Non-mandatory Rules of Law of the Seat.

7. Tribunal's Discretion.

8. Soft Law / Guidelines / Recommendations (e.g., IBA Rules on Taking Evidence).

The Law of the Seat / Lex Arbitri 

•  is the law of the place or seat of the arbitration.

• Function: It governs the conduct and external oversight of the arbitral proceedings, acting as the arbitration's legal center of gravity.

• Scope: Determines the procedural legal framework, including the constitution of the tribunal, court assistance, the definition of the arbitration agreement, arbitrability of the dispute, and the validity and finality of the award.

• Juridical Link: Choosing a seat (e.g., Paris) subjects the arbitration to that country's mandatory provisions (e.g., French arbitration law).

• Location Flexibility: The legal seat is fixed, but hearings and deliberations can occur in other geographical locations without changing the seat.

Law Applicable to the Substance

• This is the governing law that establishes the parties' rights and duties, governing interpretation and consequences of breaches.

• Party Autonomy: Parties have the freedom to choose the law or legal rules applicable, recognized in major conventions and arbitral rules (e.g., ICC, UNCITRAL).

• Limitations: This freedom is restricted by mandatory rules and principles of public policy (ordre public), such as laws concerning corruption or competition.

• Choices: Parties commonly choose National Law. They may also choose Public International Law, General Principles, or Transnational Law (such as the lex mercatoria or UNIDROIT Principles).

• Decisions Based on Equity: Arbitrators may be authorized to decide based on fairness (ex aequo et bono or as amiables compositeurs) rather than strict legal interpretation, but must respect mandatory law and contract terms.

• Absence of Choice: When parties fail to choose, the tribunal is not bound by the conflict-of-law rules of the seat(unlike a national judge). Arbitrators often use the "Direct Choice" Method (per ICC/UNCITRAL rules), applying "the rules of law which it determines to be appropriate".

Pathological Clauses and Enforcement

• Pathological Clause: An arbitration clause that expresses a clear intention to arbitrate but is defective because it leaves essential procedural elements unclear (e.g., missing the seat, institution, or rules).

• Limits on PA (ICC Example): 

  • The ICC considers the scrutiny of draft awards (Article 34 of the ICC Rules) a mandatory institutional feature and a non-derogable part of its rules. Therefore, parties cannot validly exclude Article 34; attempting to do so may cause the ICC to refuse administration.

Non-cooperation

If a respondent ignores all communication, the claimant can still commence proceedings by treating it as an ad hoc arbitration and applying to a court or appointing authority to select the respondent's arbitrator. The arbitration can then proceed ex parte (in the respondent's absence), and the award will be binding as long as proper notice was given and procedural fairness was maintained.

Advantages of Arbitration

• Enforceability / Recognition: Many countries are party to the NYC

• Finality: The solution is final, as normally there is no possibility of appeal, making it a faster route.

• Confidentiality / Privacy: The public does not have access to proceedings, protecting trade secrets.

• Free choice of arbitrators with expertise and neutrality.

• Flexibility to tailor proceedings to needs.

• Avoidance of a particular legal system or national court

Disadvantages of Arbitration

• Lack of right to appeal (though this is also an advantage of finality).

• Costs: Can be high.

• Lack of coercive power (imperium)

• Less discovery 

• Difficulty for all parties to join multiparty disputes.

• Lack of binding precedents (conflicting decisions).