Introduction
In recent decades, international commercial arbitration has been proved to be an effective mechanism for resolving commercial disputes. With the popularity of international commercial arbitration, its system has been formulated by international conventions, national arbitration legislation, institutional arbitration rules[1]as well as the UNCITRAL Model Law. These series of provisions have enhanced the enforceability of both arbitration agreements and its awards and have also sought measures for preventing the interference from national courts or other governmental authorities.[2] To some extent, a trend seems to have appeared that international commercial arbitration would become increasingly popular and would gradually replace functions of litigation in respect of resolving international commercial disputes.
The key concern of this essay is to investigate the characteristics of international commercial arbitration, in particular “the delocalisation theory” and “the seat theory”. This paper will examine whether delocalisation is an important aspect to attract the parties to set their international disputes in international commercial arbitration. That is to say, the parties to arbitration may wish to have a mean of dispute resolution which is entirely free from the control of the state in which the arbitration takes place. These parties advocate the delocalisation theory. They believe that international arbitration is fashioned to ensure the parties, who come from different jurisdictions, that their disputes will be solved neutrally. As a result, an independent decision-maker is commonly required. Moreover, the parties also need the internationally neutral procedural rules other than the procedural rules of the place of the arbitration.[3] Advocates of this theory have confidence that if international commercial arbitration was governed by the same law throughout the world, it would make great effectiveness to the arbitration process. In all probability, it would save substantial time, difficulties and huge amounts of money.[4]
To support the idea of delocalisation, there are a number of commentators who are in the opinion that international commercial arbitration can be independently conducted from the law of the place of arbitration. Also, the enforceability of the awards does not necessarily originate from the law of the seat of arbitration. For example, an arbitral proceeding rendered in contrary to the mandatory law which the arbitration took place may not essentially mean that its award will not be enforceable in other jurisdictions.[5]
In practice, however, the idea of delocalisation is unlikely to be adopted throughout the world on the grounds that each state has its own national characteristics which differ from one to another. A state also has its own interests to protect, so that in its opinion arbitrations should be conducted subject to its own law.
Occasionally, it is said that the parties’ reason of choosing a country as a seat of arbitration is in fact for its procedural law to govern their arbitration.[6] Choosing a seat of arbitration brings about the submission to the laws of that particular country including mandatory provisions of that state.[7] This idea is supported by people advocating the seat theory or jurisdictional theory in origin. They believe that if an English woman takes her car to France, it is unavoidable that she must follow the French traffic law.[8] As a consequence, prior to choosing the place of arbitration, the parties must precisely be understandable to the law of that particular state (lex arbitri). That is because once the place of arbitration is chosen; it means that all mandatory provisions of that state will automatically be applied to the arbitration.
Another aspect of the seat theory is the interference of national courts. The advocates believe that with a complete withdrawal of national court intervention, arbitral awards may not be rendered in accordance with fairness. This concept has been supported by a practical concern. National courts are required to provide supervision to the conduct of the arbitration so as to confirm that the arbitration proceedings are rendered in conformity with the minimum standard of international justice and fairness.[9] That is to say, the losing party may have another opportunity to allege the unfair award to a national court in which its proceeding was not carried out in accordance with fairness. As a result, the intervention from national courts seems to pay a significant role in international commercial arbitration.
According to the conflict of views between the delocalisation theory and the seat theory especially in the respect of the intervention of the municipal courts and laws of the place of arbitration, this paper will initially provide the relevant information towards the trend of delocalisation in various institutional arbitration rules, international conventions and the UNCITRAL Model Law, meanwhile, the leading cases related to this area will also be demonstrated. Next, this paper will not be disregarding the concept of the seat theory so that it will also be presented.
Prior to presenting the above main argument, this paper will first be illustrating the nature and merits of arbitration so as to provide fundamental background for further study in analyzing the major concern. Second, it seems remarkably useful to learn that why the parties prefer setting their international disputes to the international arbitration other than submitting their disputes to the national court of law. That is to say, are there any reasons regarding the delocalised characteristic of the arbitration? Third, the main argument will be presented. To begin with, the seat theory or jurisdictional theory in origin in which it will particularly be concerned on lex arbitri and the interference of the municipal state of the place of arbitration in both from the courts or its national law. Next, it will be the demonstration of delocalisation theory. In this field, the paper will provide the basic information regarding the theory then will illustrate the reality of delocalisation theory that how far, in practice, it does affect international commercial arbitration. Finally, the conclusion will be produced in respect of whether the delocalisation of lex arbitri does make the international arbitration attractive.
The nature of Arbitration
Prior to producing any further analysis towards the trend of delocalisation and the seat theory, it appears crucially important to provide with theoretic background concerning the nature of the arbitration as general concept and the evolution of the concept in the contemporary reality. This part of the essay will not concentrate on the current development in those theories, but will merely present them as a demonstrable background in order to reveal the existing attitude towards the delocalisation and the seat theories in various national laws, international laws and arbitration institutions. The following statement will emphasize four basic theories namely; the Contractual Theory, the Jurisdictional Theory, the Hybrid or Mixed Theory and the Autonomous Theory.
1.1 The Contractual Theory
This theory was divided into two classifications namely; the classical contractual theory and the modern contractual theory. The former concluded that all features of arbitration were derived from the permission of the parties by means of agreements; consequently, arbitrators acted as the parties’ agents so as to resolve their disputes. However, this theory was made into a more flexible approach by the modern contractual theory. In this scheme, arbitration was concluded that it involved a number of contractual relationships so that it could be regarded as private law rather than civil procedural law.[10]
1.2 The Jurisdictional Theory
The jurisdictional theory consists of two branches. The first presented by , he cited that arbitrators do not act as the parties’ agents, but rather, what they do is to judge the case submitted by the parties. As a consequence, the award rendered by the arbitrators must be treated as an act of jurisdiction. This concept is called “the judgment theory”. Next, a second school of thought which is divided into two groups; the first is called “delegation theory” represented by . He agued that the origin of the arbitrators’ power was the state in which the arbitration took place not from the contract as described in the contractual theory.[11] The second called “the municipal law theory” considered by . He cited that “every right or power a private person enjoys is inexorable conferred by or derived from a system of municipal law”[12]
It is obviously seen that the jurisdiction theory is of great influence on the recent trend of international commercial arbitration. Almost jurisdictions have treated international arbitration subject to this theory. That is to say, the arbitration proceeding and arbitral awards are acceptable to be interfered by municipal state in which the arbitration takes place; whether by means of the courts or other certain authorities. It is the theory which is strongly opposite to the concept of the delocalisation.
1.3 The Mixed or Hybrid Theory
The mixed or hybrid theory supported by , he made comments that an arbitral award are both a judgment and a contract. He explored that the arbitrators do not execute a public function and the award is undoubtedly not a contract. combined ’s, ’s and ’s concept together. He conclude that the arbitrator’s duty is to judge; as described by , however; an arbitrator does not perform as a representative of the state, but he or she get involved into the arbitration by the basis of a contract. [13]
This theory seems to be very closely linked to the current trend of international commercial arbitration. That is to say, the aspect of arbitration can not be considered separately whether the contractual relation of the agreement or jurisdictional concept of the award. They are both must come together.
1.4 The Autonomous Theory
Having looked at the three distinct theories above, it is obviously seen that there is no particular theory which can accurately or meaningfully provide the complete term of arbitration. As a result, there is an attempt of some jurists who endeavor to look beyond those structures. Authors, such as , she gave the description to arbitration that “In order to allow arbitration to enjoy the expansion it deserves, while all along keeping it within its appropriate limits, one must accept, I believe, that its nature is neither contractual, nor jurisdictional, nor hybrid, but autonomous.”[14]
According to this theory, it has been reflected to expectation of delocalisation of arbitration and points out a direction of development.
To sum up, after looking at the four theoretic background of arbitration, it is clearly understandable that there is no one who can produce a completely perfect description to the nature of arbitration. Nevertheless, they have incredibly provided useful backgrounds for the development of the arbitration.
Why to arbitrate?
To produce the further analysis on “does the delocalisation of lex arbitri make international commercial arbitration attractive?” it appears crucially significant to firstly identify the reasons that why the parties agree to summit their dispute(s) to the arbitration. What are the key points to be concerned making international commercial arbitration attractive? The answer inclines toward the trend of delocalisation or the seat theory. Furthermore, this essay will also provide both the advantages and disadvantages of the arbitration.
To begin with, why the parties allow their disputes to be decided by means of arbitration other than that of litigation? There are two mains principal reasons. First, the parties to arbitration have a chance to select a jurisdiction as their place of arbitration, that is to say, the forum. In other words, arbitration provides them an opportunity to ensure that they are able to achieve the neutral forum. Moreover, the parties can be free to choose their own arbitrators. Second, the arbitral awards are able to be broadly enforced against the losing party.[15] These two aspects will be explored as follow.
In the first place, a choice of a neutral forum and a neutral tribunal is the first aspect to be concerned. Regarding international commercial litigation, the contractual parties are, as often the case, from the different jurisdiction. In this concern, the litigation, in case the dispute arises, almost always causes some troubles to the parties. The first regarding is the home court of one party will be the foreign court of the others. That is to say, if the litigation of the dispute is conducted in a country of one party, it means that that party will be accustomed to the procedure more than the others. As a consequence, this would produce the unfairness to the foreign parties. Not only must the foreign party challenge the difficulty for searching the local lawyers, but it must also experience a taxing problem of foreign language which the foreign party might not be familiar with. Moreover, that procedural and substantive law, as the case may be, is probably not suitable for resolving an international dispute. Also the local judges and laws may not be appropriate for determining the disputes, as often the case; they have no any knowledge or experience to deal with the international case.[16]
Resolving a dispute by means of international commercial arbitration, on the other hand, the parties have the capacity to select the neutral forum rather than conducting their dispute in the jurisdiction which is the host of one party. That is to say, their dispute will be resolved by the neutral procedural law. Consequently, both parties will have the equality in defending their case. Moreover, as to they can freely dominate the arbitrators and choose the suitable laws; whether substantive and procedural law, to govern their dispute so their dispute will be effectively determined. For instance, the arbitrators dominated by the parties usually expertise in the concern of particular dispute. Accordingly, the dispute will be accurately decided.[17]
In the second place is the enforceability of decision. Firstly, to consider on litigation feature, the first step after the court judgments are rendered is a ladder of appeals. Secondly, when the judgments have a legal binding on the parties, they are more restrictedly enforceable than the arbitral awards. Although the court judgments are also able to be enforced internationally, it can be enforced only in the jurisdictions appearing in the list of the international treaties regarding the reciprocal enforcement of judgments.[18]
The arbitral awards, on the other hand, after being rendered by the tribunal, they have a binding effect on the parties. In the arbitration, the awards are regarded as the final step so that the parties, if the procedure has been accurately performed, have no entitlement to appeal the award. As a result, once the award is produced, it can be enforced in both nationally and internationally.
Regarding the enforceability of the award, it has much greater acceptance than that of the court judgment. That is because the enforceability of the award has been supported by the international treaties which have a widespread acceptance; such as the New York Convention, which has over 120 countries as its member. As to this convention, the member states have been entitled to enforce the arbitral awards in the other member states.[19] As a consequence, arbitral awards can easily and broadly be enforced than the courts’ judgment.
Having looked at the principle reasons making the international commercial arbitration attractive, it is worth considering on its advantages and disadvantages. The advantages of the arbitration seem to be located on the degree of flexibility of the arbitral proceeding and the confidentiality of the arbitral process. The disadvantages, on the other hand, are the limited powers of arbitrators, a general inability to bring multi-party disputes before the same tribunal, and conflicting awards.[20]
It will firstly be considering on the advantages of the arbitration. To begin with, the flexibility of the arbitral process, due to the arbitration is conducted by the intention of the parties; its proceeding, therefore, can be freely decorated. As a consequence, arbitration is the right answer to meet the particular needs of the parties. Courts, on the other hand, are always restricted by the national procedural laws consisting of complex rules so that it may influence the parties feel reluctant to submit their dispute to the courts. Moreover, the arbitrators can also be selected in the conformity of their special skill by the agreement of the parties. In general, arbitration is regarded as being less formalistic than litigation. [21]
Next, the confidentiality, it is commonly known that court proceedings, in general, are publicly conducted. Furthermore, court judgments are usually printed for the public. Arbitral proceedings, on the contrary, are privately held so that they can be kept confidential. Also, the awards are not normally made available for public, so that it is quite difficult to be scrutinised by an outside party.[22] This particular concern can fulfill the needs of businessmen who do not wish to allow other people to acquire the downside information of their companies.
To consider the disadvantages of the arbitration, the first aspect is the limited powers of arbitrators. It is widespread acceptance that arbitrators are not judges who are authorized the power by the state. As a consequence, the arbitrators’ power is limitedly delegated, for instance, the power to require the attendance of witnesses under penalty or imprisonment, or to enforce awards by the attachment of a bank account or the sequestration of assets. Such powers can not be directly utilized by the arbitrators. Nevertheless, if it becomes necessary to use those powers so as to deal properly with the case, the arbitrators have to exercise such actions through out the machinery of the local courts. In general, it is unlikely that a state will delegate such powers to a private arbitral tribunal.[23]
Next, the inability to bring multi-party disputes before the same tribunal is another concern regarded as the downside of arbitration. In common, an arbitral tribunal has no authority to order consolidation of actions, although, in many cases, it appears to be necessary for dealing the case in accordance with the interests of justice. That is because the interference of third parties is not welcome.[24]
Finally, the conflicting awards, as to the confidentiality of arbitral proceeding and awards, it leads the arbitration to the non-system of precedents. That is to say, similar issue rendered in one tribunal; the result may differently exist if it is conducted in another tribunal. In other words, there are no rules providing that the arbitrators are bound to determine the case in accordance with the similar disputes carried out previously. That is to say, each award stands on its own. To give a real example, In CME v. Czech Republic[25], a single investment dispute involving virtually undisputed facts produced conflicting awards from arbitral tribunals in London and Stockholm, as well as giving rise to litigation in the Czech Republic, the US and Sweden.[26]
To sum up, in the domestic aspect, the opportunity that the parties will submit their dispute to national courts or arbitration might be approximately equal. However, in the international aspect, it appears to be conclusive that the parties prefer to resolve their dispute by means of international commercial arbitration rather than international litigation. That is to say, in the domestic disputes, if the parties are searching for a binding decision, the choice might be equally balanceable between a national court and national arbitration. On the other hand, in the international disputes, there is no international court to assist the parties in respect of international commercial issues. There are only two alternatives which are resolving by national courts or by international arbitration.[27] The certain answer that the parties will choose is by means of international arbitration.
It is obviously seen that the main reason making the international commercial arbitration increasingly popular as the alternative mean of the dispute resolution is the flexibility of its nature. That is to say, the parties are able to design their own way to deal with the dispute. They can select any laws as well as arbitrators to determine their case. In these concerns, it is readily apparent that the parties desire to resolve their dispute by their own way and they do not wish to get involved with any other national laws or courts. The interference from them is also unwelcome. Under these circumstances, it can probably be assumed that the delocalisation theory may be one of major reasons which bring about attractiveness to the international commercial arbitration.
The Seat Theory
Initially, it is worth considering on the main concept of the seat theory. The theme concept of this theory contains two ideas. First, all arbitrations are governed by a national law, consequently; the national law of the seat of arbitration is the applicable law. The advocates of this theory believe that without a particular legal system, the arbitration will not be able to have the legal rights and obligations in that particular state.[28] In other words, the award rendered by that arbitration will lack nationality and will therefore not be able to obtain the enforcement within that country, nor, sometime, in the other countries[29].
Second, on the ground that the legal existence of awards is provided by the state in which the arbitration takes place, the state, thus, has the entitlement to get involved by rendering a mechanism for challenging the award’s procedural deficiencies. [30]
Lex loci arbitri
The law of the country in which the arbitration takes place, that is to say, lex loci arbitri, plays substantial roles in international commercial arbitration. Lex loci arbitri is, in practice, supporting the idea of jurisdictional theory. In this section, the paper will show the relationship between lex loci arbitri and international commercial arbitration. Also, it will illustrate in which aspect of arbitration that the law of the place of arbitration has the capacity to intervene.
On these issues, there are three substantial problems which need to be noted. The first problem which is obviously seen regarding the existence of lex loci arbitri system is that each state has its own law and interest; sometimes be called public policy or state monopoly, which generally differs from one state to another. That is to say, the problem may arise, for instance, the state in which the arbitration takes place may welcome the parties to settle their particular dispute. Nonetheless, having rendered the award, it may not be able to enforce in the other states.[31] For example, the issue relating the assets belonging to a bankrupt company may legally be resolved in the place of arbitration, however; in the state of enforcement, according to the New York Convention, may have the entitlement to reject the enforcement if the subject- matter of the dispute (the assets belonging to a bankrupt company) is not capable of settlement by arbitration under the law of the enforcing state.[32]
Second, the effectiveness of an international commercial arbitration may be dependent on the law of the place of arbitration. As often the case, the arbitral tribunal is asked to order the interim measure of protection, such as orders for the preservation and inspection of property, by the parties. Although the allegation is proved to be crucial, the tribunal itself has no authority to make such order, or even if it does, the problem is there will not be any legal effect on, especially, the third party to comply that order. There is only one way to achieve such order and that is to turn to national courts for assistance.[33]
Finally, the law of the place of arbitration may produce the unexpected result to the parties. The reason is that the state in which the arbitration takes place may provide the power to the courts or the arbitral tribunal beyond the expectation of the parties, as occasionally the case, the power to consolidate arbitrations.[34]
As has been seen some details of lex arbitri, it is explicitly understood that the law of the place of arbitration usually gets involved in the matters of procedural law. As a consequence, it is frequently said that the lex loci arbitri is, in fact, the procedural law of the place of arbitration. So the advocates of this theory believe that whenever the international commercial arbitration is held in a state, the arbitration will automatically be governed by lex arbitri of that state. On this idea, there is an argument produced by . He stated that “For present purposes, the key point is simply that the procedural law of an international arbitration is not necessarily governed by the lex loci arbitri but may be regulated by another system of rules chosen or designed by the parties or, in the absence of choice, by the arbitrators.”[35]
This statement has left some weak points still to be arguable. That is the problem of dualism. In practice, an international commercial arbitration is not only governed by the laws chosen by the parties, or in some cases by the arbitral tribunal, but also by the law of the place of arbitration. Although the parties can freely choose any procedural law to govern their dispute, in some extents; such as the above examples, the arbitral tribunal is not able to circumvent those instances by itself. It needs, however; the assistance of the national courts and, that is to say, the lex loci arbitri will come into play.[36]
The concept that international commercial arbitration is governed by the law of the place of arbitration has been supported in both theoretical and practical ways. As can be seen in the states that “The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place.”[37]
In the recent practice, the intention of the parties can be expressed throughout the arbitration agreement. The parties are freely able to conduct their arbitration by adopting almost any procedural rules as they wish, under the condition of being given equal treatment. To give an example, the arbitration law of Switzerland, allows the party to produce their own set of proceeding.[38] However, although the parties have the autonomy to retail their own set of proceeding, most of them may not enjoy this freedom. That is because, in practice, if the procedural law is differently chosen from the law of the forum, it might cause some difficulties, such as being time consuming and the expensive cost.
The mandatory rules may differ from one state to another, nonetheless; they normally consist of statutory protection and public policy. Statutory protection is, for example, competition or antirust law or consumer protection.[39] Public policy, on the other hand, is the limitation of disputes arbitrability and supervision of the arbitral procedures.[40]
To sum up, whenever the parties have chosen a country as the seat of arbitration, it means that the parties agree to submit their dispute under the law of that particular state. Also, it means that all certain mandatory rules of that state will automatically govern the arbitration. As a consequence, it can be correctly said that the parties to the international arbitration select a country as the forum of their arbitration by finding that the lex arbitri of that country is satisfactory for them.[41]
The delocalisation theory
As has been mentioned in the first chapter regarding the nature of arbitration, the autonomous theory is a root of the delocalisation theory. The idea is that international commercial arbitration is not subject to the jurisdictional or contractual concepts, in fact, it is autonomously complete of itself.[42] This idea has also influenced the development of the arbitration that the international arbitration should not be subject to the law of particular jurisdiction. In other words, it should be of itself valid without the control from national laws. That is to say, as the nature of arbitration is qualified as autonomous so international commercial arbitration should also be regarded as autonomous.
In another aspect, due to the principle of autonomy and independence of the parties, the arbitration can be entirely conducted by the intention of the parties. It means that the parties have a right to select the forum considered as a neutral country. Also, they can freely choose the laws applicable to the arbitration; whether substantive or procedural laws. That is to say, the arbitral tribunal must deliberate the dispute in accordance with the laws agreed by the parties. As a result, the interference from national courts and municipal laws are unwelcome.
General concept of delocalisation theory
It is said that if the laws applicable to arbitrations were the same throughout the world, that is to say, “a universal lex arbitri”, it would bring the parties huge benefit, such as saving considerable time, trouble and expense. In other words, whenever and wherever the international arbitration is conducted, the arbitration will be governed by the same law.[43]
Delocalisation is based on the party principle autonomy. The main purpose of this theory is to detach the arbitral process from the law of the country where the award is made; it usually is the country of the place of arbitration.[44] The intention of this theory is to reduce or eradicate the role of the courts and the law of the state in which the arbitration is held and the jurisdiction of the national court where the enforcement is sought.[45]
However, the aim of delocalisation is unlikely to achieve in the real world on the ground that each state has its own national characteristics and its own interest to be protected. Accordingly, such a state will not distribute its powers to the private interest such as the international arbitration. As a consequence, the development of delocalisation is mead in two ways.
First, instead of delivering all powers to the private arbitral tribunal, the state just loosen the control from the conducting of international commercial arbitration. This view is supported by the which state that “In matters governed by this Law, no court shall intervene except where so provided in this Law.”[46] The courts should perform for supervision not for control.[47]
Second, according to international arbitration is controlled by two separate legal systems, so to speak, by the law of the place of arbitration and the law of the state in which the enforcement and recognition is sought. The concept of the second development is that the arbitration should be controlled by only one legal system which is the law of the place the enforcement and recognition is sought. [48] In other words, the courts of the state where the arbitration takes place have no entitlement to intervene the arbitral proceedings under the conducting of the arbitral tribunal.[49] Under this regime, international commercial arbitration can be conducted at any countries around the world. Consequently, arbitral proceedings can be regarded as supra-national, a-national, transnational, delocalised or even expatriate.[50]
The delocalisation in practice
In practice, the ideal for proponents of delocalisation is that international commercial arbitration should not be subject to the law of the place of arbitration. However, they accepted that the courts of the seat of arbitration have the entitlement to provide the fundamentally basic justice to the arbitration, so to speak, the transnational minimum standards of justice. In other words, the courts of the place of arbitration have the restrictive duty merely to ensure that the conducts of the arbitration are rendered in conformity with the international minimum standards.[51]In any other respects, the courts will have no jurisdiction to intervene. Consequently, if an arbitral process is conducted in accordance with such standards, the arbitration can stand on its own legs, that is to say, it can be conducted independently from the law of the seat of arbitration. As a result of the independent conduct, the arbitral award does not necessarily to be subject to the law of the forum, to say in short, the delocalised award. As a consequence, it is clear to say that there are two aspects of delocalisation; first, delocalisation of arbitration proceeding and second, delocalisation of the award.[52]
It is said that there are two versions of delocalisation, the origins and the modern of delocalisation.[53] To begin with the original version, the root of this theory is from the sovereign immunity doctrine.[54] The belief is that if a state comes into the arbitration agreement as a party, it will be exempted for not applying any national arbitration laws. That is to say, the law governing the arbitration must be international laws.
Next, the modern version of delocalised arbitration, the idea is that delocalisation is not only applicable to state contract arbitrations, but also in all international arbitrations. Moreover, international arbitration does not necessarily to be governed by international law, but rather it can be governed by any national procedural laws agreed by the parties. The concept is simply to free arbitral proceedings from the laws of the place of arbitration which dose not conform to the transnational standards.[55]In other word, the procedural law of international arbitration does not of necessity to be governed by the lex loci arbitri, but it can be regulated by any procedural rules designed by the parties. Or in the default of the express agreement by the parties, the law governing the arbitration can be freely chosen by the arbitral tribunal if it is proved to be useful for the parties.[56]
The delocalisation is not only recognized by many legal systems of states, but also by adopted by various international arbitrations. The famous institution which has the high degree of delocalisation is the ICSID institution. Under its rules, the local courts in the countries which have ratified the ICSID Convention will have no entitlement to intervene the arbitration proceedings conducted under its provisions. The main argument provided in of the convention stating that “Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy.[57]”
There are those being fearful that if arbitral proceedings are made delocalised, there will be no accurate control over the wrongful conduct of the arbitrators. On this argument, it has been pointed out that the delocalisation of arbitral proceedings does not provide any negative effects on the rights and obligations of the parties. That is to say, the parties are still responsible to perform their case in good faith. Also, it is not truly speaking that there will be no control over the wrongful conduct of the arbitrators. It just simply shifts the burden of control from the jurisdiction of the seat of arbitration to that of the place of enforcement.
The particular approach can be declared for there reasons. First, it is in common that the place of arbitration will be selected on account of its neutrality. That means both of parties, usually, will not have any connections to such a place either the nationality or business domiciles. Also, the underlying contract is normally irrelevant to the host state. Under this instance, there is no particular reason that why the municipal court of the host state should entwine in the dispute.[58]
The second reason is that, due to the core principle of arbitration, the parties are free to fashion their own way to resolve their disputes, that is to say, the party autonomy principle. The purpose is that to mark free and flexible of the arbitration. On this ground, the local judicial supervision from the host state generally seems to be unnecessary. However, the one that need to take action is the state in which the enforcement is sought. On the ground that most international arbitral awards are subject to the jurisdictional legal system of enforcing states[59] so there is no point that the awards should have duplicate controls; so to speak, under the municipal court of the place of arbitration and that of the place of enforcement. Therefore, no court should be authorized to intervene until the award is sought for the enforcement.
The argument for this ground might be that the control from the national court of the seat of arbitration should be of a necessity so as to prevent the creation of bad precedents. The advocates of this argument may think that even if an award does not reach the process of enforcement, it is still regarded as authority. The answer was rendered by . He said that “no award should be accorded great persuasive authority if it is never enforced. This prescription calls for a less abstract appreciation of legal authority.”[60]
Finally, the reason for asserting the idea of detaching international commercial arbitration from lex loci arbitri is that the parties, not often the case, may not desire to mark the award enforced under any municipal courts. That is to say, the parties may wish to rely upon good faith. For instance, by the economic reasons to ensure the effectiveness of their award, they may prefer to fashion their own independent methods of enforcement without depending on the national courts; such as security accounts or performance bonds. Under these circumstances, even the New York Convention will be proved to be irrelevant.[61]
Conclusion
The conclusion will be produced with a concentration on “whether the delocalisation of lex arbitri is an important factor influencing the parties to submit their disputes to international commercial arbitration”.
The arbitration in nature is unable to be explicitly described by only contractual theory or merely by jurisdictional theory. They are both need to be put together so as to provide the full characteristic of arbitration. In that sense, it has come to my attention that it would also not be possible that international commercial arbitration will be entirely complete of itself without the assistance from the municipal law of the place of arbitration. In fact, to seek a complete avoidance of national laws would be imprudent. International arbitration would totally be meaningless if no national jurisdictions supervise for recognition and enforcement of the awards. The meaning is that in some extents the arbitration will depend upon lex arbitri of the place of arbitration. (Supported by the seat theory) There is only a possibility which the international arbitration will be free from the law of the place of arbitration. It is that the local law of the seat is permissible to do so.[62] What I am trying to say is that in what manner the nature of arbitration needs to be explained by both of contractual and jurisdictional theories, likewise, the effectiveness of international arbitration also needs both delocalised characteristic and the cooperation from the lex loci aribitri.[63]
To begin with the seat theory, the theme concept of this theory consists of two ideas. First, all arbitrations are governed by a national law, consequently; the national law of the seat of arbitration is the applicable law. The advocates of this theory believe that without a particular legal system, the arbitration will not be able to have the legal rights and obligations in that particular state.[64] Moreover, it is believed that without the control from the national courts, there may be an opportunity that the arbitrators might probably not be able to make proper performance on their mission as effectively as they should. As to this view, the interventionists strongly believe that the operating of arbitral tribunal will not be in efficiency if there is no the control from the law of the place of arbitration.[65]
Second, on the ground that the legal existence of awards is provided by the state in which the arbitration takes place, the state, thus, has the entitlement to get involved by rendering a mechanism for challenging the award’s procedural deficiencies. [66]
The remarkable example of the country asserting this theory is England. In England, international commercial arbitration is authorized to be intervened from the English courts. Not only does it provide the rules for a losing party to appeal the award to the courts as to the misconduct of arbitral proceeding, but it does also provide a room for the party to against the award on the basis of a mistake in substantive law.[67] That is to say, the party, which is usually a losing party, will have two grounds for challenging the award. As a consequence, it will commonly cause a dissatisfactory to the party whom the award rendered in its favour. Thus, the parties will normally feel reluctant to consider England to be their place of arbitration. This is one of the reasons making England to be the unattractive place of international commercial arbitration.
According to the above example, it is readily apparent that a high degree of the control from national courts makes the parties dissatisfied. Now, it should be the turn of a consideration on the delocalisation theory that whether it can bring the parties satisfactory to their arbitration.
The advocates of the delocalisation believe that international commercial arbitration is not subject to the law of the place in which the arbitration takes place. It can run efficiently without the supervision or the interference from municipal courts of the seat of arbitration. Nevertheless, the position in reality is that the movement in favour of total delocalisation of lex loci arbitri has no longer been accepted. A good instance can be seen in Belgium by its old law of March 27, 1985. In that period, Belgian arbitration rules did not authorize a losing party to challenge the award rendered in Belgium to the Belgian courts.[68]It was said by that this law is deemed to be a “paradise for international commercial arbitration”.[69] However, it has, unfortunately, turned out that without the assistance from the national courts, it discouraged parties from selecting Belgium as their place of arbitration. In other words, “parties to an arbitration may well prefer an arbitral tribunal which is subject to some legal control, rather than risk a runaway tribunal.” [70] As a result, Belgium has changed its law in May 19, 1998.
As can be seen, a high degree of delocalisation is also dissatisfying for the parties. The question, therefore, is that what is the exact need of the parties that they want from the international arbitration? The answer can be found by questioning that why the parties agree to resolve their international disputes by mean of international arbitration.
As already mentioned, there are three main points making the parties to choose international arbitration as the mean of dispute resolution. First is the opportunity for achieving a neutral country as the place of arbitration and second is the wide range of the enforcement of arbitral award. Third is that the parties are entitled to freely choose any laws and decision-makers to deliberate their disputes. Under these circumstances, if we make a deep consideration of these particular three points, the result will come out that the parties prefer solving their disputes by their own way and they do not desire the municipal courts of the place of arbitration to intervene to the arbitral proceedings or, if it is unavoidable, to interfere as less as it is possible.
As a consequence, it is obviously seen that the idea of freeing international commercial arbitration from the control of law of the place of arbitration (lex loci arbitri) is the interesting position for the parties to the international arbitration. The reason is that the parties usually agree with the terms of the arbitral provisions which they think that they understand. The forum is selected from merely the reason of convenience and not out of admiration for any national legal principles. If the result eventually comes out that the award which they just prevailed is set aside by the national court of the seat, it will sturdily be dissatisfying for such parties.[71] Therefore, if it is often the case, international arbitration will no longer be considered as the effective mean of dispute resolution.
To sum up, international commercial arbitration will have effectiveness to deal with the disputes submitted by the parties if it contains both a proper degree of delocalisation and an appropriate degree of national court intervention. However, if it is crucially to render the answer to the question that “does the delocalisation of lex arbitri make international commercial arbitration attractive?” the answer to this question will be “yes”.
The answer is confidently asserted by two major international projects namely; the New York Convention and the Model Law. Both of them mightily recognize the doctrine of party autonomy and play a role in respect of the will of the parties. Particularly the Model Law, its aim is that to enhance international arbitration rules by precluding international arbitrations from being controlled by the domestic peculiarities of the seat of arbitration. In order to accomplish this goal, therefore, the little need of delocalisation will be required.[72]
As a consequence of the reasons all mentioned above, it is my personal contention that the delocalisation of lex arbitri will be the crucial characteristic for international commercial arbitration so as to attract the parties to resolve their international disputes by the mean of arbitration.
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