International Commercial Arbitration: A Panacea For Global Trade?
It is fair to say that in recent years commercial arbitration has become a preferred
solution in the field of resolving legal disputes between corporations and even between business partners. Apart from this, arbitration is in many aspects a win/win solution for disputants which avoids expensive traditional litigation involving costly discovery and, as in the United States, deposition. What we have to remember is that business partners in many instances still want to do business together; however, disputes arise and solutions have to be crafted to resolve this temporary discordance. Arbitration offers the opportunity to settle a dispute in a simple, quick and fair manner. In many instances, time is of the essence,and a quick solution to a legal dispute has to be reached. This makes commercial arbitration the preferred course.
In the long run, what matters is the resolution of disputes and outstanding issues. Our national court systems are overwhelmed,and the waiting period before having a dispute heard and settled is far too long. More often than not, parties run out of money to continue the litigation and to exercise their rights, so the question of costs is another factor to be considered. The more time that is spent on a matter, the more costly it becomes.
1. The basic of International commercial arbitration
First of all, most arbitration takes its source from a prior agreement between the parties. More often than not, a specific clause of a contract stipulates the conditions and the rules to be followed in an arbitration. It often tells us the applicable governing law, the number of arbitrators, if mediation should precede arbitration or not, and the time when a dispute should be referred for arbitration. We also often have in well-drafted contracts an arbitration clause that determines the site of an arbitration and the rules that will be applicable. Even if an arbitration clause in a contract is silent as to all the above or is so poorly drafted that there is conflicting information as to the applicable laws, this does not mean that a matter should not or would not be brought before an arbitrator.
There are many ways to interpret arbitration clauses and often, the commercial conduct of the parties who, at the time, have multiple agreements, may help an arbitrator to preliminarily determine the applicable procedures and governing laws. Finally, the parties may agree on applicable laws and permit an arbitrator to proceed without having to settle that preliminary issue. In essence, the flexibility that arbitration offers permits the parties to be creative in the way that their dispute will be resolved, unlike national justice courts which have to follow very strict and rigid rules of practice.
2. Enforcement of awards
The enforcement of awards or the arbitral decision is the key to all commercial litigation. Once we have a favorable decision after having spent time and resources, including money, in arbitration, how can it be enforced? It is important to remember that an arbitral decision is not a decision of a national
court of law, nor does it have "comity" value in a sister jurisdiction. In many jurisdictions, we have an Arbitration Act Where a mechanism was contemplated by legislatures for the enforcement of a provincial, territorial or state level of an arbitral decision. If such legislation is not available, we can always rely on international instruments such as the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards. It is the principal instrument governing international arbitration awards and decisions. More than 140 countries have ratified the NYC, and these include the majority of countries involved in international trade. It also can be said that the NYC established a new commercial regime which favours trade between countries and between corporations.
To illustrate the efficiency of the NYC, let us say that we are in the presence of an airline company which lost a commercial arbitration and, with the NYC, the creditor has the opportunity to ask for a "writ of seizure" in a country which is party to the NYC in having arbitration awards enforced and thus having the outstanding judgment satisfied. This international instrument also gives businesses that are doing international trade the confidence that, in case of non-payment or other contractual breach, there is effective recourse available even if the country in which they are conducting business is not a party to the NYC. What is important is the possibility of enforcing an arbitral decision in a country where the corporation with which they are conducting business and is signatory to the NYC has assets. I will always advise a corporate client to ensure, as a preventive measure, that they identify the jurisdictions in which assets of a corporation with which they are conducting business can be eventually seized. If such a possibility did not exist, I would be reluctant to recommend that a client does business with a company that is, essentially, creditor-proof, unless guaranty or bonds had been posted.
3. The particulars of arbitration
The logic behind commercial arbitration is simple. As mentioned, the reason to submit a commercial dispute to arbitration is to have a binding resolution. A trade dispute gives the opportunity to the parties to use a quick, efficient and reputable system to end a commercial dispute without drags it on for years. Time is of the essence in commercial law.
One very positive aspect of commercial arbitration for international trade is the question of confidentiality. What company wants to have its trade secrets exposed in the public domain? Who wants former employees to testify publicly about trade practices? Confidentiality is sacred in commercial and trade exchanges, and international commercial arbitration permits the parties to keep their disputes or the testimonies regarding their affairs confidential, unlike national courts of justice where litigation is public rather than private.
I must state that one of the downsides of international commercial arbitration is the lack of jurisprudence, unlike a national court system where decisions are published and where, in the common law system, the state decisions makes laws, this is not available in the case of international arbitration.
By its confidential nature, international commercial arbitration does not allow for the publication of decisions, nor access to decisions in the scope of the same forum. Also, unlike national courts of justice, there is no binding precedent on an arbitrator, and neither is there a higher arbitrator forum. Is this really a disadvantage? It may not be. Does the commercial nature of the relationship between parties call for such an exhaustive corpus of jurisprudence when we are in the presence of trade partners that entered freely into a commercial agreement under their own terms and conditions?
4. Conclusion
Are national courts of justice the modern panacea for international commercial trade? If the international trade arena of domestic courts offered confidentiality and global enforceability among states in order to ease the execution of their decisions, it could be said that we were on the right path for functional and efficient global trade. Unfortunately, this is not the case. National court systems offer limited options to international trade partners and cannot always be relied upon to render enforceable decisions; also, there is the problem of the lack of execution of judgments.
In closing, it will be interesting to see where international commercial arbitration will lead us in the future. With the development of new technologies, genetic science, e-commerce and new energy litigation in the oil and gas field, we will certainly see an improvement and new trends in international commercial arbitration. Personally, over the 15 years that I have been in practice and a decision-maker, I have seen tremendous changes in the way corporations are conducting their businesses, and the arrival of the internet and e-commerce have contributed greatly to those changes.
by: Robert Neron
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