PRIMER ON INTERNATIONAL ARBITRATION Albert Jan van den Berg (Brussels and Amsterdam) ajvandenberg@hvdb

1. PRIMER ON INTERNATIONAL ARBITRATIONAlbert Jan van den Berg(Brussels and Amsterdam)ajvandenberg@hvdb.com World Bank Institute Poverty Reduction and Economic Management Team Global Development Learning Network – GDLN Course for Commercial and Trade Law for Jordan 23 March – 25 May 2005

2. ADVANTAGES OF INTERNATIONAL ARBITRATION • Enforceability of the arbitral award (and arbitration agreement) in more than 130 countries. • Level playing field for parties of different nationalities. • Parties can craft the conduct of the proceedings. • No interference in the merits by a (foreign) national court. • Decision makers (arbitrators) experienced in international business disputes. • Balanced solution for written and oral evidence. • Document production (discovery) and cross examination. • See IBA Rules on the Taking of Evidence in International Commercial Arbitration of 1999http://www.ibanet.org • On average, less expensive and faster than proceedings in national courts. • Protection of sensitive commercial information.

3. THE LEGAL FRAMEWORK • Arbitration agreement • Agreement requiring parties to arbitrate disputes and preventing them from litigating in national courts. • Usually a clause in a contract, but may be separate agreement. • Arbitration rules • Rules governing appointment of arbitrators, proceedings, award and costs, as administered by an arbitral institution. If ad hoc arbitration: Uncitral Arbitration Rules (see slide # 6). • Arbitration law • National law enabling the arbitration; includes provisions concerning arbitration agreements, appointment of arbitrators, proceedings, awards, enforcement, setting aside the award, and courts that are have jurisdiction in these matters. • International Conventions • Most important treaty: New York Convention of 1958. • National arbitration law applies to most legal aspects of an international arbitration; New York Convention regulates only two (though important) aspects: enforcement of award and agreement.

4. ARBITRATION AGREEMENT (I) • Distinction between ad hoc and administered (institutional) arbitration. • Generally preferable to use clause recommended by experienced and reputable arbitral institution, incorporating its rules and providing for administered arbitration. • Ad hoc clauses require careful drafting. • Party made rules versus off-the-shelf rules. • Reference to UNCITRAL Arbitration Rules (1976) is highly recommended. • Highly recommended elements. • Broad scope. • Choice of arbitration rules • See siides # 6-7. • Place of arbitration. • See silde # 8. • Number of arbitrators. • Language.

5. ARBITRATION AGREEMENT (II) • Recommended elements (if applicable). • Confidentiality. • Multi-party provisions. • Waiver of immunity from jurisdiction and execution by State parties. • Exclusion of appeals on the merits (some countries, e.g., UK). • Elements that merit reflection. • Split clauses (arbitration and litigation; arbitration and accountants). • Dispute escalation provisions (e.g., mediation prior to arbitration).

6. INTERNATIONAL ARBITRATION RULES (I) • ICC - International Chamber of Commerce (1998). • Administered by International Court of Arbitration. • http://www.iccwbo.org. • LCIA - London Court of International Arbitration (1998). • Administered by Registrar. • http://www.lcia-arbitration.com. • UNCITRAL - United Nations Commission on International Trade Law (1976). • For ad hoc arbitration. • Requirement to agree on Appointing Authority. • Adapted version used by a number of arbitral institutions. • http://www.uncitral.org.

7. INTERNATIONAL ARBITRATION RULES (II) • Some other institutions. • SCC - Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (1999). • http://www.chamber.se/arbitration/english/index.html • NAI – Netherlands Arbitration Institute Arbitration Rules (2001). • http://www.nai-nl.org • WIPO – World Intellectual Property Organization Arbitration Rules (1994). • http://www.arbiter.wipo.int/arbitration/arbitration-rules/index.html • AAA – American Arbitration Association International Arbitration Rules (2001). • Administered by ICDR – International Centre for Dispute Resolution (a division of the AAA). • http://www.adr.org. • CPR Rules for Non-Administered Arbitration of International Disputes (2000). • For ad hoc arbitration (“self administered”). • http://www.cpradr.org. • ICSID – International Centre for the Settlement of Investment Disputes (1984). • Investment disputes with host countries under Washington Convention of 1965 and Rules issued thereunder or under the Additional Facility Rules. • http://www.worldbank.org/icsid.

8. NATIONAL ARBITRATION LAWS (I) • General rule: arbitration law of the place of arbitration applies. • National arbitration laws govern most legal aspects of an international arbitration. • Exceptions: ICSID Arbitration (Washington Convention of 1965) and agreed de-nationalized arbitration (rare). • Distinction between place in legal sense and physical sense. • Selection of place of arbitration operates as choice of the applicable arbitration law. • Arbitration can take place physically at any place (venue) that is convenient under the circumstances (depending on the applicable arbitration law). • Distinction between law applicable to the arbitration and law applicable to the substance (merits). • Law applicable to the arbitration: see above. • Law applicable to the substance: law under which the merits of the dispute are to be decided. Primary rule: law chosen by the parties; if no choice of law, arbitrators determine that law. • Applicable substantive law may be a national law or some form of supra-national law (such as general principles of law, lex mercatoria (law merchant), UNIDROIT principles of International Commercial Contracts of 1994). The use of supra-national law is controversial.

9. NATIONAL ARBITRATION LAWS (II) • Some countries have a separate law governing international arbitration that is different from the law they have for domestic arbitration. • E.g., France, Switzerland, and UNCITRAL Model Law countries (see below). • Importance of the UNCITRAL Model Law on International Commercial Arbitration (1985). • Benchmark for adequate arbitration legislation. • Implemented by more than 40 countries. • Legislation based on the Model Lawhas been enacted in Australia, Bahrain, Belarus, Bermuda, Bulgaria, Canada, Cyprus, Egypt, Germany, Greece, Guatemala, Hong Kong Special Administrative Region of China, Hungary, India, Iran (Islamic Republic of), Ireland, Jordan, Kenya, Lithuania, Macau Special Administrative Region of China, Madagascar, Malta, Mexico, New Zealand, Nigeria, Oman, Peru, Republic of Korea, Russian Federation, Singapore, Sri Lanka, Tunisia, Ukraine, within the United Kingdom of Great Britain and Northern Ireland: Scotland; within the United States of America: California, Connecticut, Oregon and Texas, Zambia; and Zimbabwe. • Importance to choose an “arbitration friendly” country. • To ensure a smooth functioning of the arbitration and an enforceable award. • Adequate legislation; experienced judges; Party to the New York Convention.

10. INTERNATIONAL CONVENTIONS • New York Convention of 1958. • It applies to two actions only: (1) enforcement of arbitral award made in another (contracting) country, see articles I, III-VII; (2) enforcement of the arbitration agreement, see article II(3). • Adhered to by 135 countries (as of 15 April 2005). • More than 90% of the cases are in favor of enforcement. • Panama Convention of 1975. • Regional version of the New York Convention for the Western Hemisphere. • IACAC (Inter-American Commercial Arbitration Commission) Arbitration Rules apply if the parties have not agreed otherwise. • http://www.sice.oas.org/dispute/comarb/iacac/rop_e.asp • Washington Convention of 1965. • Applies to investment disputes between foreign private investors and host countries. • Requires specific agreement. • Administration of arbitration by ICSID – International Centre for the Settlement of Investment Disputes.

11. ROLE OF NATIONAL COURTS • Generally accepted principle: No review of the merits. • Assistance. • Examples: appointment and challenge of arbitrator (if and to the extent that they are not provided for in arbitration agreement or arbitration rules); examination of unwilling witness. • Supervision. • Validity of arbitration agreement; due process; irregularities in (agreed) procedure; award in excess of, or different from, claim; arbitrability; (international) public policy • Exercised in enforcement or setting aside proceedings. • Interim measures. • Generally accepted that arbitration agreement is not incompatible with recourse to a national court for interim measures (except for some courts in the United States in relation to the New York Convention).

12. TO LEARN MORE • Arbitration portal: http://www.arbitration-icca.org • Redfern & Hunter, Law and Practice of International Commercial Arbitration,3d ed. (1999). • Sweet & Maxwell, London. • Craig, Park & Paulsson, International Chamber of Commerce Arbitration, 3d ed. (1998). • Oceana, Dobbs Ferry, NY. • Yearbook: Commercial Arbitration • A publication of ICCA – International Council for Commercial Arbitration. • Kluwer Law International, kluwerlaw@wkap.com. • International Handbook on Commercial Arbitration. • Loose-leaf. Also a publication of ICCA – International Council for Commercial Arbitration. • Kluwer Law International, kluwerlaw@wkap.com. • Arbitration CD-ROM – Resources on International Commercial Arbitration. • Kluwer Law International, kluwerlaw@wkap.com.