Absolute Finality of Arbitral Awards-P Lalive
Absolute Finality of Arbitral Awards-P Lalive
Absolute Finality of Arbitral Awards-P Lalive
by PIERRE LALIVE
i. Introduction
During the last fifty years or so (or since the last World War),
as everyone knows, international arbitration has met a spectacular success,
which is still going on. And there is also no doubt that "international arbitration
law" (to use a somewhat ambiguous expression) - together with the
development of many national legislations - has made great progress. Let us
just mention, by way of examples, the New York Convention of 1958 on the
"recognition" of arbitral awards, the work of UNCITRAL (with its Model Law and
its Arbitration Rules) and the present work of the UNCITRAL Working Group -
not to cite many other institutions and rules.
From a "sociological" point of view, the fact is that many things have
changed in the last fifty years or so. Let me mention, in brief and by way of
introduction and if 1 may venture a few generalizations, a few elements which
should be taken into account.
(1) Today, the activity of the international arbitrator can hardly be described,
as it often was in the first half of the last century, as a "nobile officium". The fact
is that it has become a business (especially for lawyers, experts, engineers,
accountants and the like).
Emeritus Professor, Geneva University, Member of the Institut de Droit International, Honorary
President of the Swiss Arbitration Association and of the ICC Institute of World Business Law;
Senior Partner, LALIVE Attorneys, Geneva.
2
A few years ago, two sociologists, one French and one American,
Mr Yves Dezalay and Mr Bryan Garth, published a very interesting study under
the title of "Dea/ing in Virtue" 1. Although somewhat dated in a few respects, this
book remains very valuable, especially insofar as it analyzes in depth
international arbitration practice and, for example, what the authors describe as
the "conquest of the arbitration market by U.S. and English firms".
1 Chicago University Press, 1996, translated into French, Les Marchands de Droit.
3
(as has been the case before the Second World War), as "a simple, quick and
cheap way of solving disputes between gentlemen" !
(5) Another remark should be obvious: such consent or favour by States has
inevitable limits. To attempt here even a short summary of such limits would of
course go much beyond the scope of our subject. 1 need only refer the reader to
the well-known decision of the Court of Justice of the European Communities in
the famous Eco-Swiss v. Benetton case - where the Court states, in short, that
the effectiveness of arbitral procedure justifies that:
subject, it is sufficient to say here that, as we ail know, the prevailing judicial
practice, together with the majority of doctrinal writings, favours a very restricted
and narrow application of international public policy as a ground for annullng or
revoking arbitral decisions. 5
(7) Third and last remark: should the same or different considerations prevail
in international relations involving one State? And this suggests a question,
important in theory as weil as in practice, on which there is no agreed or
universal answer: is "Investor-State arbitration" a different kind, a different or
specific category, to be distinguished from "ordinary international commercial
arbitration"?
1 do not intend to discuss that question here, for lack of space, and even
less to answer it! It should suffice in this connection to mention the opinion of
René David who rightly observed that, while it is common to speak of
"arbitration" in the singular, there are in reality a fairly large variety of
"arbitrations", no one having been able to prove the existence of a simple,
monolihic or unique category or definition.
II.
This is hardly a "new" topic and it may be said to have always existed
ever since people resorted to arbitration. But it has become much more
"present" or important today than it used to be, especially with the remarkable
and recent development of Investor-State BITs (and the expanding activities of
institutions Iike ICSID (with its Additional Faciliy), NAFTA, or the Energy
Charter Treaty, not to mention again UNCITRAL, or the ICC, the LCIA, etc.)
The question is simple: "should arbitral awards be "absolutely" final and binding,
or should they be subject to "appeals" (in the narrow and in the wide sense of
the term)?
According to Art. 28(6) of the ICC Rules: "Every Award shall be binding
on the parties...
( and J ... by submittng to arbitration under these Rules,
ward without delay and shall be deemed
the parties undertake to carry out any A
to have waived their right to any form of recourse insofar as such waiver can
validly be made. "
The Swiss Private International Law Statute (Art. 192) states that an
Award "may not be challenged by way of an action for setting aside to the
extent that the parties have no domicile, habituai residence, or business
establishment in Switzerland and that they have expressly excluded ail setting
aside proceedings in the arbitration agreement.. ." And the same Swiss Statute
(in Art. 190) provides that:
dispute; and this for a variety of rather well-known reasons (including the
possibility of choosing the arbitrators and the procedure, including also,
presumably, confidentiality, and perhaps mainly in order to save time, to be able
to "turn the page" over their differences and quarrels so that they can resume
their normal commercial relations 9. ln other words, in the exercise of their
autonomy of the will, they have deliberately assumed the so-called "arbitration
risk".
7 + Art. 191 - ( they J may only be brought before the Federal Supreme Court.
8 Published in the Cahiers de l'Arbitrage - July 2007.
9 Cf. the formula suggested by E. Minoli in Italy (cited by R. David, op. ciL. W 20): "
Far giustizia,
conservando /'amicizia If.
7
II.
(a) The first observation may seem too general or even marginal but is
directly relevant, 1 submit, to the present topic, and in particular to the vexed
question whether, in the ICSID system, there has been too many, or too few
annulments of awards by ad hoc committees interpreting Article 52 of the
Washington Convention. 10 Experience shows that it may be very difficult for the
outside reader or observer to properly understand an arbitral decision, unless
he has had access to the file and the full facts of the case. Some distinguished
lawyers have thus been led, on occasions, to erroneous interpretations and
comments, whether or not it was also the fault of the arbitrators themselves
(or of members of an ICSID ad hoc Committee !) 11
11 For instance because they exercized perhaps too much diplomatic restraint in the drafting of
their decision. Practitioners as weil as commentators should keep in mind that often neglected
aspect of the arbitrators' task; cf. Erasmus' wise saying: "Toute vérité n'est pas toujours bonne à
dire! Ce qui importe principalement c'est la façon de la proclamer." Hence a potential conflict
with the dut
Y toop.
12 E. Gaillard, state
ciL. reasons (cf. Articles
in New York 52(1) March
Law Journal, and 48(3) ICSID Convention).
1, 2007.
13 A source of confusion here is the tendency of certain practitioners, institutions or legislators to
loose sight of the distinction between analogy and identity (see for example the theory of civil
irresponsibilty or immunity of arbitrators).
9
It is within such broad and general context that the consent, or favour of
States towards international arbitration, and that national legislations and
attitudes, should be viewed and analyzed. And before proceeding with
examples, three elementary points may be recalled: (i) States cannot be
expected to recognize and assist in the enforcement of awards without
reserving their right of supervision and control; (ii) in the absence of an
international commercial court (more or less similar to the International Court of
Justice) - which is not Iikely to be created before long - such control can only
take place in the national sphere; (iii) in such domestic sphere, such control can
only be exercised by the State's judicial organization (which, contrary to what
exists in the domain of arbitral institutions, is characterized by a hierarchy).
IV.
(a) ln a recent ICC case, a dispute had arisen between a foreign investor
(Japanese or American) and aState organization of the Czech Republic
regarding an international contract between the parties. A significant feature of
14 Cf. in German terminology the concepts of (a) formelle Rechtskraft and (b) materielle
Rechtskraft.
10
the case was that the Czech State had been c10sely involved in the negotiations
leading to the signing of the contract, including in the discussion about the
arbitration clause. So much so that an earlier version of the contract had
expressly mentioned the Czech State as a party. That clause had later been
deleted.
15 Strangely enough, the Federal Tribunal rejected the recourse without discussing the
existence or inexistence of consent between the Czech State and the appellant.
16 Two of them University Professors (but this is of course no guarantee !).
11
(c) A very interesting decision of the Swiss Supreme Court has attracted a
lot of attention, ail the more since it contrasts with the general and very
restrictive practice of that Court in annulment proceedings 17: ln an arbitration
between a tennis player and the ATP Tour, an Award of the Court of Arbitration
for Sport (CAS) was set aside - quite rightly in my submission - although the
player had signed an "exclusion agreement" expressly, providing for the "final,
non-reviewable, non-appealable and enforceable character of the decisions of
CAS".
Furthermore, it was held that the player's right to be heard by the arbitral
tribunal had been violated because the latter, either carelessly or willingly, had
failed to examine important elements relevant and capable to influence the
solution of the case - which had been invoked by the parties. 18
(d) ln still another case involving inter alia both public and private
international law, contract law and procedure, a case decided first in Geneva
and then, on appeal, in London, the Sole Arbitrator had decided to refuse to
hear several witnesses requested by the Respondent. Following which the latter
(which eventually lost the case) argued in London before the Commercial Court
and later the Court of Appeal that the ICC award should be annulled on the
ground of the "misconduct" of the Arbitrator when rejecting those procedural
requests. The appeal and the arguments were rejected and the award was
confirmed. 19
v.
Turning now to the ICSID system, where does it stand regarding finality
of awards ? It is not possible here to deal in any detail with the various grounds
for annulment of awards listed in Article 52 of the ICSID Convention or even to
attempt some general or synthetic judgement on the system regarding finality or
correctness of awards. Let me however submit to you a few personal opinions,
based on a practical experience of many years in different capacities - Counsel,
Arbitrator and Member of an Ad Hoc Committee.
1 remain convinced today that "the ICSID system as a whole, and its
annulment mechanics in particular, is a good and balanced system".
And 1 agree with Professor Emmanuel Gaillard who conceded that "an essential
part of the criticism" ~evelled at the first Annulment decisions) relates in fact to
the system of the Washington Convention itself." 21 - rather than with its
interpretation or practical application.
19 See the English decisions Dalmia Cement Ltd. v. National Bank of Pakistan ( 1975 Q.B.9 J;
l o1974
JurisPublishing Inc. and International Arbitration Institute, New York, 2004, 499 pages. The
J 3 Ali E.R. 189.
volume contains many valuable contributions and discussions of ICSID cases, such as Wena
Hotels v. Egypt, Vivendi v. Argentina, etc.
21 p. 197 ad Klöckner, E. Gaillard, La Jurisprudence du CIRDI, Editions A. Pedone, Paris 2004.
13
This would seem to follow from the very idea mentioned in some of the
decisions approved by critics of annulment decisions (Iike Wena 32 and Vivendi)
Le. that it is sufficient that arbitrators identify and "let the parties know the
factual and legal premises leading the tribunal to its decision". Similarly it has
been said that, "provided the reasons given by a tribunal can be followed and
relate to the issues that were before the tribunal, their correctness is beside the
point." (italics supplied)
30 ICSID Case W ARB/84/4; see also Wena Hotels v. Egypt, February 5, 2002 41 ILM M. 933,
atN°81.
31 ln the abovementioned Dissent supra Note 29, Sir Franklin Berman asks whether the
Arbitrators "did in fact adeauatelv explain" their reasons.
32 Wena decision Feb. 5, 2002 para 79.
16
33 For example, E. Gaillard, in his abovementioned article of the New York Law Journal, appears
to believe that an ad hoc Committee "engages in a substantive review of the award" if and when
it examines whether the reasoning is sufficient, "coherent" or "relevant".
34 at para 4.05.
35 ln "Reputation and Reality in the ICSID Annulment Process.... ", ICSID Review, vol 7, W 1,
Spring 1992, p. 48-49. The author stresses (quite rightly it is submitted, that "the international
community has a greater interest in substantive correctness of IGSID awards than is implicit in
the annulment process provided for in Art. 52." (p. 27). He concludes that "the criticism of IGSID
is misplaced." (p. 22).
17
should the award be annulled in part or in toto? Or has the Committee the
discretionarv power to reject the request for annulment, for instance because
the end result would not be substantially affected ? Can it maintain the award -
for instance by substituting its own reasons (a method often used by some
national Courts of appeal) ?
On the one hand, the text of Article 52 (in the English version - but not in
French) merely gives the Committee the authority to annul the award, but not
the mandate. On the other hand, to concede unlimited discretion to the
Committee seems to create a kind of legal "no man's land". It would be hardly in
keeping with an effective interpretation of Article 52, with the purpose and spirit
of the Convention and with what the first Ad Hoc Committee (in Klöckner v.
Cameroun) considered as "the absolute right of the parties to an ICSID
arbitration to comply with the Convention's provisions, in particular with Article
52." Today, 1 am inclined to believe the correct solution is probably to recognize
a certain but limited discretion to the Ad Hoc Committee, allowing it to take
appropriate account of the circumstances. Clearly the decision to annul is not,
should not be, and has never been "automatic". 36
1 submit that the answer is simple: Ad Hoc Committees not only have a
different mission, both more limited and more delicate, but have the c1ear
advantage of a "second study" of the case, or rather part of the case, and,
so to speak, the benefit of a second debate. This fact would be, in itself,
a sufficient justification if one were needed.
Vi. Conclusion
37 1 must confess that 1 have some personal responsibility in the position adopted by the Swiss
legislator on that point in the Chapter (12) of the Swiss Private International Law Statute of
December 18,1987.
19
And the second interrogation is the following: Is the same "favor arbitrÍÎ"
(or "favor arbitrationis'') - Le. that is the same hostility against "appeals" (in the
broad sense) also justified or acceptable also in the case of Investor-State
arbitrations, which often involve the public interest ?
But one may weil doubt that the judicial practice of States will or should
always accept to "close its eyes" and to recognize and enforce some
(manifestly) erroneous, ill-conceived and badly motivated Awards - especially,
of course, when public interests are involved. As far as 1 can see, the number of
such poorly reasoned and possibly erroneous awards (but not, let us hope, their
proportion of the whole !) appears to have increased - perhaps inevitably with
the expansion of international arbitration, and the increasing, and desirable,
participation of countries and individuals having a limited experience and
knowledge of international practice and "traditional" arbitral ethics.
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