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 (). 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]
The context of legal arbitration in the context of the contractual theory rests largely on the laws and jurisprudence. A major part of most legal systems has originated in principles in general. Nevertheless, the contractual theory has displayed several attributes comparable to arbitration and other alternative dispute resolution techniques. Though, there is not much of actual data with regards to the details of the arbitration processes under the contractual theory, it had been noted that the system of arbitration has been used to resolve a lot of disputes. The notion of disputes here are not only limited to commercial or in terms of business. The practice of arbitration has also been used to avert any possibility of war involving the different societies.
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.
Among the numerous benefits of the jurisdictional theory in arbitration, flexibility is chiefly influential, particularly in contrast to the traditional, sluggish, public and costly character of court proceedings. Arbitration permits the parties much superior prudence in making a decision on the form their affairs will take. Parties can decide the extent of formality, the arbitrators and their number and where the arbitration will happen. In court actions formal process have to be monitored by all concerned, on pain of being assumed in contempt of court or risking the party’s case. This is frequently not attractive to commercial parties who are expected to prefer the issue resolved with the smallest amount of commotion. Nonetheless, this is not to claim that arbitration measures are totally informal and actually a lot are carried out in a similar way to court actions along with opening speeches, witness assessment and cross examination. The difference is that the parties do not have to pursue the firm rules of evidence of the courts unless they decide to.
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.
The selection of arbitrators can similarly accumulate huge advantage to the parties in arbitration proceedings based on the mix or hybrid theory In the courts parties cannot select their judges and may possibly lose out if they have chosen one who is indifferent or disinclined to grapple with technological concerns. The parties can select any natural or legal individual who has a wide-ranging contractual capability as an arbitrator on condition that they are unbiased and psychologically competent. This permits the parties to select someone acquainted with their business who will be capable of creating an appropriate and helpful award. If the parties desire they can ask for Judge Arbitrators who can command the arbitration award to be imposed as a decision of the Court. The parties can similarly have admission to organizations that can employ arbitrators, offer amenities for arbitration and double as administrators. Moreover, the parties have immense hold over arbitrators and can order their extent of discretion and conditions under which they can be eliminated. This can similarly be seen as a drawback of arbitration as the arbitrator’s authority can be restricted. Arbitrators possess no coercive authority and cannot implement all the remedies accessible to the Courts. Consequently the parties can make an arbitrator similar to a mediator if they want.
Moreover, even though courts cannot intercede on their own proposal, they can be requested to intervene and require attendance of witnesses, creation of documents and other acts which arbitrators cannot carry out. Sanctions can be imposed in opposition to disobedient parties by means of Peremptory Orders. These can be given when a party is not successful in doing something essential for the appropriate and speedy performance of the arbitration, like declining to supply documentation. Sanctions can take account of an unfavourable order for costs acquired, depicting unfavourable evidential inferences from disobedience, proceeding to an award on the foundation of existing materials and finishing the arbitration.
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.
In addition, the speed of arbitral measures under the autonomous theory is an advantage over the delays likely in courts as parties are not caused to experience court time accessibility and can proceed the moment the parties have decided to proceed. It is similarly lawfully valid to take account of time limits in arbitration agreements even though these can be lengthened or dismissed if they are believed to be unreasonable. The courts expand time limits where it is just to do so, if unexpected conditions take place or one party acts unreasonably.
Arbitral judgments are not only speedy but also final as the award is obligatory and only subject to very limited appeal. Then again, the swiftness of arbitration can save money through much briefer hearings which decrease the fees remunerated to the partakers. The knowledgeable nature of selected arbitrators boosts the probability that awards will be consistent with industry or local convention and decreases the risk of runaway awards or awards not in compliance with the recognized exercise or law. Arbitration agreements can similarly lock up the parties’ conflict to a single type lessening the cost and vagueness brought about by corresponding proceedings. In addition, the courts typically only carry out procedural reviews and are extremely unlikely to review the essence of the judgment. Similarly, arbitration awards are required to be reasoned, unless the parties demand that the arbitrators convey a reasoned award. Arbitration awards are then registered in courts permitting the winning parties to make the most of the court’s processes for the enforcement of decisions. A lot of business parties value the conclusiveness of such a verdict as it permits them to establish future business schemes on their award.
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 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.[28] 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.[29]
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.[30] 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.[31]
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 Model Law which state that “In matters governed by this Law, no court shall intervene except where so provided in this Law.”[32] The courts should perform for supervision not for control.[33]
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. [34] 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.[35] 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.[36]
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.[37]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.[38]
It is said that there are two versions of delocalisation, the origins and the modern of delocalisation.[39] To begin with the original version, the root of this theory is from the sovereign immunity doctrine.[40] 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.[41]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.[42]
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 Article 26 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.[43]”
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.[44]
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[45] 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.”[46]
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.[47]
The seat of arbitration can be extremely important. The seat does not essentially denote the location where the arbitration occurs but just the legal system the arbitration is put through. Frequently an international seat can be helpful to parties because of the features of the selected legal system and likely discrimination in a local situation. An international arbitration can similarly benefit impartiality principally if the seat is neither of the party’s domestic location. An international resolution can decrease the problems that are frequently come across in implementing national court judgments overseas. Arbitration can rectify a lot of the observed troubles of court proceedings. The possibility of existing bias on the arbitration process when done in a particular location favourable to one of the parties involved compromises the credibility of the process. To this extent, it is more preferable to address the situation in a more impartial seat, particularly in the international context.
On a more basic note, it is preferable for conflicting companies form the US and the Kingdom of Saudi Arabia to arbitrate on an international level. Although the United States may reveal a wide range of ADR methods as well as an established arbitration, choosing it as a seat of arbitration when one of the parties residing on the said nation would make the decision of the arbitrators open to doubt and charges of impartiality. For multinational corporations, doing arbitration processes in the Saudi Arabia may pose a considerable hindrance on them. This is because the arbitration methods in the said country are largely based on Islamic law. The decisions and judgements that may be provided in this context may well be based on the systems of Shari’a principles, the Sunna, and the Quran. To this end, the principles in which the judgements in this context may be considerably subjective to the parties involved. Thus, if there is any possibility of having one of the parties unsatisfied with the result of the arbitration, then the purpose of arbitration is well defeated.
Alternative Dispute Resolution Options
Alternate Dispute Resolutions are very functional in resolving an extensive variety of issues. The most important characteristics of ADR are that it permits for privacy and confidentiality, averts harmful of relations, decreases costs, saves time, and the ending solution is by and large advantageous to all concerned. As to a greater extent of litigants find out on a daily basis, litigation is frequently an unproductive and wasteful means to resolve conflicts and the final judgment depends in the hands of a third party whose judgment may not convince either party.
Moreover, litigation does have its benefits over ADR nevertheless. Litigation permits for complete and absolute discovery, definitive verdicts on troubled fields of law and a complete appeal procedure. No means of dispute resolution is ideal and they all possess their benefits and drawbacks. In general, ADR is sensible as it has more benefits than drawbacks and has much lesser unconstructive effects than does litigation. An amalgamation of diverse ADR methods will take into account proper solution of conflicts where the parties concerned are all content with the ending. Alternative Dispute Resolution (ADR) connotes to any ways of resolving disputes external of the courtroom, characteristically counting arbitration, mediation, early neutral evaluation, and conciliation. Progressively, nations have commenced to choose ADR as it is much less costly than litigation, there is the absence of time setbacks, no failure of privacy and it is an extremely efficient option where all the parties involved leave contented. Among the programs are voluntary even as others are obligatory. Parties can plan and put into practice practically any type of ADR, which is appropriate to their needs. The most frequent types of ADR are negotiation, mediation, arbitration among others. Out of which arbitration and mediation are the predominantly accepted. Mediation is a kind of casual gathering whereas arbitration is a decision procedure. Majority of ADR methods entail a neutral person or mediator who can help disputing parties in solving their differences. A lot of people become concerned that if they employ an alternative to a court procedure they are unable to compel the other side to meet with the solution as generally ADR are non-binding. Making the solution of the predicament into a legal contract or court order forestalls this setback.
ADR is getting hold of fame with people concerned in court cases and litigation for it’s cost effective, speedy, flexible and just features to all parties concerned. It provides all affiliates of the community the chance to resolve conflicts devoid of going to the courts. The parties concerned can choose the kind of ADR that they consider is best appropriate for them and pursue the procedure to solve their legal issues. Each type of ADR has its own laws and ways of resolving the conflict. In some instances, over one kind of ADR is employed in combination with each other. These are the different ADR methods available for the companies from the US and Saudi Arabia in dispute.
Negotiation
This is an open method of conversing and resolving a predicament. Parties or their delegates, who may possibly be lawyers, talk openly with each other. The negotiators try to find a means to please the requirements of the parties encountering the quandary.
Mediation
Mediation is an even less ceremonial substitute to litigation. This problem alternative employs a neutral individual similarly called as the mediator, to direct the dialogue and discuss means to resolve the predicament. The mediator functions the role of catalyst that allows the parties to start advancement toward their own resolution of problems in conflict. The mediator does not possess any executive power, but provides conflicting parties in concert and assists with creating practical and efficient answers with the parties. Mediation is practical in extremely polarized disagreements where the parties have either been not capable to start a fruitful discussion or where the parties have been having discussions and have arrived at an ostensibly intractable stalemate.
Facilitation
This entails the employment of techniques to perk up the stream of data in a meeting involving parties to a dispute. The techniques may similarly be implemented to decision-making gatherings where a particular result is required. The word “facilitator” is frequently employed interchangeably with the word “mediator”, nevertheless a facilitator does not characteristically grow to be as caught up in the substantive concerns as does a mediator. The facilitator concentrates more on the procedure concerned in resolving an issue
Conciliation
The conciliation process is frequently employed together with other ways like facilitation or mediation. This entails building a positive connection involving the parties to a disagreement. The parties, to assist in creating such affairs may employ a third party or conciliator. A conciliator may possibly help parties by serving to set up communication, explaining misperceptions, tackling strong sentiments, and constructing the trust essential for accommodating problem-solving. A number of the methods employed by conciliators take account of providing for an impartial seat, transporting early communications between the parties, reality testing on the subject of insights or misperceptions, and asserting the parties’ capabilities to join forces. Given that a general purpose of conciliation is frequently to encourage openness by the parties, this process permits parties to start discussions, become acquainted with each other much better, make constructive perceptions, and improve confidence with one another.
Conclusion
An arbitration agreement is a statement by both parties that they will defer to arbitration in existing or prospective conflicts, and this is necessary to begin proceedings. This is frequently incorporated in a general contract in a particular clause. A stay of legal proceedings is approved to permit resolution of the conflict by means of arbitration devoid of the involvement of the courts. This more private method is frequently favoured by commercial parties and emphasizes one innate benefit of arbitration. Nevertheless, as with all alternative dispute resolution processes, there are drawbacks which show the flaws of successful systems. The existence of an arbitration clause is one such disadvantage. Such a clause in a long-standing contract needs a lasting pledge for a lot of parties and this can be intimidating and off-putting particularly if alterations in the future are likely. An institutional policy backing up arbitration similarly needs alterations in the view of executives and counsel and this alteration is not constantly well-received. Whereas this type of long term relationship can build a connection of trust involving parties and reinforce their business bonds, particularly if they are aware that court action will not be the consequence of every conflict.
In the said study, the discussion of arbitration laws has provided significant information with regards to the study of international arbitration. The study found out that the for international organizations, it would be beneficial for them to take on arbitration procedures in the United States considering the fact that the other countries have instituted a law claiming to use of the Arabic language in the cases in the said country. This would prove to be inconvenient for the majority of multinational companies considering that the preponderance of them may well presumably be employing English as their language. Moreover, employing arbitration with the United States as the seat provides a greater presentation and much open provision of facts among the parties involved. Nevertheless, this study still supports it initial claim of employing third party arbitration in the international context in order to ensure that the process is unbiased and objective. In so doing, the parties would essentially be satisfied with the outcomes of the arbitration process.
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