Introduction to International Commercial

Arbitration
International Commercial Arbitration
 Syllabus

 Notion of (international commercial) arbitration

 Types of arbitration
 Advantages v. disadvantages of arbitration
 Basic concepts of international commercial arbitration

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 Resolution of (international commercial) disputes

 National courts
 Alternative Dispute Resolution (ADR)
 (International Commercial) Arbitration

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 Definition of arbitration

 Usually no definition in legal sources

 Various definitions in literature

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 Definitions - examples

 Private system of adjudication (Moses)

 (…) specially established mechanism for the final and binding determination
of disputes, concerning a contractual or other relationship, by independent
arbitrators, in accordance with procedures, structures and substantive legal
or non-legal standards chosen directly or indirectly by the parties (Lew,
Mistelis, Kröll)

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 Arbitration – characteristic features

 Consent = arbitration agreement

 Existence of dispute
 Third party deciding on dispute = arbitrator
 Final and binding determination of parties‘ rights and obligations =
arbitral award

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 Kinds/forms of arbitration

 Ad hoc x institutional
 National x international
 Domestic x foreign
 Commercial x other types (consumer, investment, ….)

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 Institutional x ad hoc arbitration

 Institutional – administered by permanent arbitral institution

 Advantages – existing procedural rules, smooth running of
arbitration (role of institution), forseeable costs
 Disadvantages – higher costs, less flexibility
 Ad hoc – no institution administers arbitration

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 Arbitral institutions

 Most preferred institutions

 International Court of Arbitration of International Chamber of Commerce (ICC)
 London Court of International Arbitration (LCIA)
 Hong Kong International Arbitration Centre
 Singapore International Arbitration Centre (SIAC)
 Arbitration Institute of Stockholm Chamber of Commerce (SCC)
 Others
 Vienna International Arbitral Centre (VIAC)
 American Arbitration Association (AAA)
 China International Economic Trade Arbitration Commission (CIETAC)

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 Reasons for preference of certain institutions

 General reputation and recognition of the institution

 High level of administration (efficiency, facilities, quality of staff)
 Previous experience
 Access to wide pool of high quality of arbitrators
 Overall costs of service
 Ability to administer arbitrations worldwide
 Free choice of arbitrators (no exclusive institutional list)
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 National x international arbitration

 International – presence of international element

 Different criteria of international element
 Subjective (parties to the arbitration agreement)
 Objective (subject matter of dispute)
 Combined (see Art. 1 of UNCITRAL Model Law on International
Commercial Arbitration)
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 Domestic x foreign arbitration

 Relevant for arbitral awards

 Place (seat) of arbitration is decisive

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 Commercial arbitration

 Nature of underlying transaction is decisive

 Footnote to Article 1 of UNCITRAL Model Law
 Wide interpretation
 All relationship of commercial nature (contractual or not)
 New York Convention – Article I(3)
 Commercial reservation
 National law
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 Investment arbitration

 State x investor
 Agreement to arbitrate in an international instrument (e.g. BITs) –
between states
 Investor – not a party to a international treaty
 Agreement to arbitrate – standing offer by a state

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 Advantages of international commercial arbitration

 Enforceability of awards
 Avoiding specific legal systems/national courts
 Flexibility
 Ability of parties to select arbitrators
 Privacy and confidentiality
 Neutrality (place, arbitrators)
 Finality
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 Disadvantages of international commercial arbitration

 Costs
 Lack of effective sanctions during arbitration
 Lack of power in relation to third parties
 Lack of speed
 National court intervention
 Lack of appeal mechanism

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 Arbitration agreement

 Agreement by the parties to submit any disputes or differences

between them to arbitration
 Arbitration clause (part of the main contract, for future disputes)
 Submission agreement (separate document, for an existing
dispute)

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 Place of arbitration

 Seat of arbitration
 Legal connection between arbitration and particular state and its legal
order
 Usually chosen by the parties in the arbitration agreement x arbitrators
 Venue of arbitration
 Geographical place
 E.g. oral hearing

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 Seat of arbitration

 Most preferred seats

 London
 Paris
 Singapore
 Hong Kong
 Geneva
 New York
 Stockholm

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 Reasons for preferences of certain seat

 General reputation and recognition

 National arbitration law
 Track record in enforcing arbitration agreements and awards
 Availability of quality arbitrators who are familiar with the seat
 Efficiency of local court proceedings

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 Lex arbitri

 Law governing the arbitration = body of rules which sets a

standard for the conduct of arbitration
 Seat of arbitration is decisive
 Has to be distinguished from:
 Law governing arbitration agreement
 Law governing the substance of a dispute
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 Case 1

 Company A (seller) from Germany and Company B (buyer) from Switzerland

conclude a sales contract. They also concluded arbitration agreement
providing for arbitration taking place in Switzerland. The dispute arose
between the parties and arbitration was commenced in Switzerland.
 Article 176 of Swiss Private International Law Act (Chapter 12 – Swiss
international arbitration law) states:
 The provisions of this chapter shall apply to all arbitrations if the seat of
the arbitral tribunal is in Switzerland and if, at the time of the conclusion of
the arbitration agreement, at least one of the parties had neither its
domicile nor its habitual residence in Switzerland.

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 Case 1

 Is the arbitration national or international?

 International – at least one of the parties has its domicile outside Switzerland
 Is the arbitration domestic or foreign?
 From the point of view of Swiss regulation (and Swiss courts) it is domestic –
seat of arbitration is located in Switzerland (agreement of the parties)
 From the point of view of other countries – foreign

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 Case 2

 Company A (seller) from Germany and Company B (buyer) from

France conclude a sales contract. They also concluded arbitration
agreement providing for arbitration taking place in France. The
dispute arose between the parties and arbitration was
commenced in France.
 Article 1504 of French New Code of Civil Procedure (Book IV,
Title II – Frech international arbitration law) states:
 An arbitration is international when international trade interests
are at stake.
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 Case 2

 Is the arbitration national or international?

 International – international trade is at stake (cross-border sale of goods)
 Is the arbitration domestic or foreign?
 From the point of view of French regulation it is domestic – seat of
arbitration is located in France (agreement of the parties)
 From the point of view of other countries – foreign

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 Case 3

 Company A (seller) from Germany and Company B (buyer) from

the Czech Republic conclude a sales contract. They also
concluded arbitration agreement providing for arbitration taking
place in Germany. The dispute arose between the parties and
arbitration was commenced in Germany.
 Section 1025 of German Code of Civil Procedure (Tenth Book –
German arbitration law) states:
 The provisions of this Book apply if the place of arbitration (…)
is situated in Germany.
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 Case 3

 Is the arbitration national or international?

 Probably international – international element is present
 Not relevant for German regulation of arbitration – single regulation for both national
and international arbitration
 Is the arbitration domestic or foreign?
 From the point of view of German regulation it is domestic – seat of arbitration is
located in Germany (agreement of the parties)
 From the point of view of other countries – foreign

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 Sources for presentation

 Moses, M.L. The Principles and Practice of International Commercial Arbitration.

3rd ed. Cambridge: Cambridge University Press, 2017. Chapter 1.
 Lew, J.D.M., Mistelis, L. A., Kröll, S.M. Comparative International Commercial
Arbitration. The Hague: Kluwer Law International, 2003, Chapters 1, 3, 4, 5.
 Blackaby, N., Partasides, C., Redfern, A., Hunter, M. Redfern and Hunter on
International Arbitration. 6th ed. Oxford: Oxford University Press, 2015, Chapter 1.
 2018 International Arbitration Survey: The Evolution of International Arbitration
(Queen Mary, White and Case)
https://www.whitecase.com/sites/whitecase/files/files/download/publications/qmul-
international-arbitration-survey-2018-18.pdf

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