Scrutiny of the award by the ICC court of arbitration

IV - A possible questioning of the state justice of second degree?

A. An old «decentralized» judicial body

B. To a new arbitration founding a winner more than a co-operation

C. A new «internalized» form of control

D. The «judicialisation» of the International Chamber of Commerce action upon the arbitral award?

E. A possible control of nationals Courts after the scrutiny of the award?

CONCLUSION

A. The scrutiny of the award: The source of a state intervention decreased in posteriori

B. The scrutiny of the award: the roots of the most secure system of arbitration of the world

INTRODUCTION

Disputes have always been part of human relationships, whether they are economic, political or of any other type. In order to solve these disputes, other than by fighting, parties sought to solve their disputes through the intervention of a third party. In order to have a partial answer it is obviously better to give the resolution of a dispute to a third party. One of the oldest examples is the famous «King Salomon trial». In 950 AD, two women had a child of the same age, but one died accidentally, suffocating during his sleep. Each claimed that the child was hers. King Salomon ordered the child cut in two. The first one accepted, the second preferred losing the child to killing him. So Salomon decided to give the child to the second one, guessing that by her behavior she was the real mother.

In modern societies, parties have the choice of solving a dispute in court or by referring to a third party. In the lasts decades, it became common for the parties who had to deal with a dispute to prefer an alternative dispute resolution mode than a national judicial process. Some courts now require parties to resort to some type of alternative dispute resolution, usually mediation, before permitting the parties' cases to be tried. The rising popularity of alternative dispute resolution can be explained by the increasing caseload of traditional courts. There is a perception that alternative dispute resolution imposes fewer costs than litigation, involves greater confidentiality and provides parties with greater control over the selection of the individual or individuals who will decide their dispute.

The three main types of alternative dispute resolution are negotiation, mediation and arbitration. In negotiation, participation is voluntary and there is no third party who facilitates the resolution process or imposes a resolution. In mediation, there is a third party, a mediator, who facilitates the resolution process, but does not impose a resolution on the parties. In arbitration, participation is typically voluntary, and there is a third party who, as a private judge, imposes a resolution. Arbitration often occurs because parties contractually agree that any future dispute concerning the agreement will be resolved by arbitration. This is known as a 'Scott Avery Clause'. Lately, the enforceability of arbitration clauses, particularly in the context of consumer agreements, has drawn scrutiny from courts. Although parties may appeal arbitration outcomes to courts, such appeals face an exacting standard of review.

The growth of international trade brought greater sophistication to a process that had previously been largely ad hoc in relation to disputes between merchants resolved under the auspices of the lex mercatoria. As trade grew, so did the practice of arbitration, eventually leading to the creation of a variant now known as international arbitration as a means for resolving disputes under international commercial contracts. Indeed, the use of arbitration in an international point of view made a distinction between ad hoc arbitration and institutional arbitration.

Ad hoc arbitration is a proceeding that is not administered by others and requires the parties to make their own arrangements for the selection of arbitrators and for the designation of rules, applicable law, procedures and administrative support. The most popular rules chosen for ad hoc arbitrations are the UNCITRAL Arbitration Rules adopted by the United Nations General Assembly on 15 December 1976. Provided that the parties approach the arbitration in a spirit of cooperation, ad hoc proceedings can be more flexible, cheaper and faster than an administered proceeding. The absence of administrative fees alone makes this a popular choice.

Regarding this particular type of arbitration, it seems obvious that arbitration is cheaper than litigation; but usually the parties will opt for more security and rapidity: institutional arbitration. The legal comparatist, René David stated in 1965 that «to the ancient arbitration, which was organized on an ad hoc basis, justified by exceptional circumstances, tolerated because of the «scope limited solution» of the decision process, has been substituted a pre-organized, systematic institutional arbitration». This type of arbitration had its own disadvantages which are:

- Administrative fees for services and use of facilities may be high in disputes over large amounts

- The institution's bureaucracy may lead to added costs and delays

- The disputants may be required to respond within unrealistic time frames

In an institutional arbitration, the contract between the parties will contain an arbitration clause which will designate an institution as the arbitration administrator. The advantages of institutional arbitration are apparent^1(*):

- Availability of pre-established rules and procedures which assure that arbitration will get off the ground and proceed to conclusion with dispatch

- Administrative assistance from institutions providing a secretariat or court of arbitration

- Lists of qualified arbitrators, often broken down by fields of expertise

- Appointment of arbitrators by the institution

- Physical facilities and support services for arbitrations;

- Assistance in encouraging reluctant parties to proceed with arbitration and

- An established format with a proven record

There are approximately 1,200 institutions, organizations and businesses worldwide offering institutional arbitral services. Some of these institutions are associated with a trade association and many are independent. The four main ones are the London Court of International Arbitration, the Chartered Institute of Arbitrators (UK), the National Arbitration Forum (USA) and the International Chamber of Commerce of Paris. Each of these institutions has its own rules and some of them are famous for the quality of their rules. The most popular institutional rules are the Rules of Arbitration of the International Chamber of Commerce, effective as of 1 January 1998.

One particularity of this institution is situated in its article 27. This article stipulates that: «before signing any Award, the Arbitral Tribunal shall submit it in draft form to the Court. The Court may lay down modifications as to the form of the Award and, without affecting the Arbitral Tribunal's liberty of decision, it may also draw its attention to some points of substance. No award shall be rendered by the Arbitral Tribunal until it has been approved by the Court as to its form». This «quasi-judicial» function^2(*), as Pierre Lalive called it, is a fundamental feature of International Chamber of Commerce arbitration and distinguishes it from all of the other major international institutions. Even if the American Arbitration Association Rules also deter the practice of challenging the awards before the state courts (in the article 27), the International Chamber of Commerce Rules go further by providing a waiver of the rights to challenge the award before them. Indeed, the article 28(6) of the International Chamber of Commerce provides that «every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver validly can be made».

The validity of the Court's scrutiny of draft Awards has been challenged in the past. It has been argued that in scrutinizing Awards, the Court unduly interferes with the arbitrator's liberty of decision, violates the secrecy of their deliberations and deprives the parties of due process as they are not included in the exchanges between the Court and the Arbitral Tribunal with respect to draft Awards. Some argued also that, by scrutinizing the awards, the Court tries to take the place of a state Court of second degree.

These arguments bring 2 questions:

- Did this power of scrutiny of the award make a difference in the state intervention, on the Arbitral Award, after the Arbitration process?

- Did this power of scrutiny of the award is a consequence of the International Chamber of Commerce success?

After a presentation of the International Chamber of Commerce of Paris and of the power of scrutiny of the award by its Court of arbitration we will study these controversial arguments according to which the Court interferes in the arbitrators functions and exercises a second or appellate level of arbitral jurisdiction.

I - Presentation of the International Chamber of Commerce

As it is defined in the International Chamber of Commerce website, «The International Chamber of Commerce is the voice of world business championing the global economy as a force for economic growth, job creation and prosperity»^3(*). This organization works to promote and support global trade and globalization. It has direct access to national governments worldwide through its national committees among others and has developed a range of activities. The International Chamber of Commerce Court of Arbitration is a body which hears and resolves private disputes between parties. Under this Court Arbitration is on the increase at a rate of more than 500 (cases?) a year. This increase in making arbitral awards is due to the success of the rules which make the award safer than the award of another arbitral institution and less susceptible to the intervention of a national judge. The safety of this award is essentially due to the Court's power of scrutiny.

Before analyzing the contribution of the power of scrutiny of the award by the International Chamber of Commerce Court of Arbitration (b), we will start by analyzing the history and organization of the International Chamber of Commerce (a).

A - The International Chamber of Commerce and its rules

e. The International Chamber of Commerce history

The International Chamber of Commerce Court of Arbitration has a distinguished and long-standing history of international dispute resolution. In 2006 alone, it received almost 600 requests for arbitration from all over the world. This institution is almost one century old. Indeed, it was founded in 1919 to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital.

Much of the International Chamber of Commerce's initial impetus came from its first president,^4(*) Etienne Clémentel, a former French minister of commerce. Under his influence, the organization's international secretariat was established in Paris and he was instrumental in creating the ICC International Court of Arbitration in 1923. This Court is established in Paris but organizes international arbitrations in many countries and is the most important and most active international arbitration institution.

After the second World War, leaders from the allied nations met for the first time in Atlantic City to make an international organization to promote trade between them. Therefore they trusted the Rules of the International Chamber of Commerce to be applied if two parties from a contracting country decided to resolve their dispute under this institution. The original nucleus, representing Belgium, Britain, France, Italy and the United States, has expanded to become a world business organization with thousands of member companies and associations in around 130 countries.

f. The International Chamber of Commerce organization

As we have seen, one of the disadvantages of this institutional arbitration is its bureaucracy. Indeed, the International Chamber of Commerce is a complex administration composed of several committees and bodies which make its existence possible. It is comparable to a well-organized company with a direction and different services, each of them playing a determining role in the elaboration of an arbitral award. Let us see these various pieces of the puzzle.

1. The World Council

The International Chamber of Commerce World Council is the equivalent of the general assembly of a major intergovernmental organization. The big difference is that the delegates are business executives and not government officials. There is a federal structure, based on the Council as the International Chamber of Commerce's supreme governing body. National committees name delegates to the Council, who normally meet twice a year. Ten direct members (from countries where there is no national committee) may also be invited to participate in the Council's work.

2. National committees and groups

They represent the International Chamber of Commerce in their respective countries. The national committees and groups make sure that International Chamber of Commerce takes into account their national business concerns in its policy recommendations to governments and international organizations.

3. The Executive Board

The Executive Board is responsible for implementing International Chamber of Commerce policy. The Executive Board has between 15 and 30 members of both business leaders and ex-officio members. They serve for three years. They have a one third rotation in membership. The Chairman, his immediate predecessor, and the Vice-Chairman form the Chairmanship.

4. The Chairmanship

The Council elects the Chairman and Vice-Chairman for two-year terms. The Chairman, his immediate predecessor and the Vice-Chairman form the Chairmanship. The Council also elects the Executive Board, responsible for implementing International Chamber of Commerce policy, on the Chairman's recommendation. The Executive Board has between 15 and 30 members, who serve for three years, with one third retiring at the end of each year.

The current Chairman is Victor K. Fung. He became the Chairman of the International Chamber of Commerce on 1 July 2008. He is Chairman of the Li & Fung Group of companies, with major subsidiaries in trading, distribution and retailing, including publicly-listed Li & Fung Limited, Integrated Distribution Services Group Limited, and Convenience Retail Asia.

The actual Vice Chairman is Rajat Kumar Gupta. He became the Vice-Chairman of the International Chamber of Commerce on 1 July 2008. He is the Senior Partner Emeritus of McKinsey & Company and served as the Managing Director Worldwide of McKinsey from 1994 to 2003.

5. International Secretariat

The Secretary General works with the national committees to carry out the International Chamber of Commerce's work programs and is appointed by the World Council. The International Chamber of Commerce International Secretariat is based in Paris and is the operational arm of International Chamber of Commerce. It carries out the work program approved by the World Council, feeding business views into intergovernmental organizations.

6. Secretary General

The Secretary General heads the International Secretariat and works closely with the national committees to carry out the International Chamber of Commerce's work program. The Secretary General is appointed by the Council at the initiative of the Presidency and on the recommendation of the Executive Board.

The current Secretary General is Jean Rozwadowski. He became the Secretary General of the International Chamber of Commerce on 1 July 2009. Prior to joining the International Chamber of Commerce, Mr Rozwadowski, a businessman with broad international experience, has lived and worked on five continents, holding senior executive positions in Bahrain, Belgium, Brazil, Britain, France, Germany, Singapore, and the United States.

7. The commissions

Member companies and business associations can shape the International Chamber of Commerce stance on any given business issue by participating in the work of International Chamber of Commerce commissions. Commissions are the bedrock of the International Chamber of Commerce, composed of a total of more than 500 business experts who give their time freely to formulate International Chamber of Commerce policy and elaborate its rules. Commissions scrutinize proposed international and national government initiatives affecting their subject areas and prepare business positions for submission to international organizations and governments

8. Finance committee

The finance Committee advises the Executive Board on all financial matters. It reviews the financial implications of the International Chamber of Commerce's activities and supervises the flow of revenues and expenses of the organization.

9. The International Chamber of Commerce Court of Arbitration

As international commercial arbitration has grown and expanded with the growth of international trade, arbitral institutions have also grown and changed. For example, the American Arbitration Association has created an international division called the International Centre for dispute Resolution (ICDR) which is in charge of dealing with international disputes. Lots of arbitral institutions have updated their rules to present «an international arbitration-friendly format»^5(*). The cost and the quality of the Court of arbitration of the different institutions can be very different. For the same quality of work, a very old institution can ask for much more fees than another. But a lot of companies prefer to pay more for an old institution. In fact, the older an institution is, the more it has received cases and the more it can be trusted.

The International Chamber of Commerce Court of Arbitration has received 14000 cases since its inception in 1923^6(*). Over the past decade, the Court's workload has considerably expanded.

The Court's membership has also grown and now covers 86 countries. With representatives in North America, Latin and Central America, Africa and the Middle East and Asia, the International Chamber of Commerce Court has significantly increased its training activities on all continents and in all major languages used in international trade.

The number of cases received and the number of members make this institution one of the better-known and most prestigious arbitral institutions. The appellation International Chamber of Commerce «Court» of Arbitration does not mean Court from a domestic point of view. This Court is not part of any judicial system, but is more an administrative body. The Court is responsible for overseeing the arbitration process.

Two features of the International Chamber of Commerce Court of Arbitration underline the quality of administration of this institution. First, the «Terms of Reference» is a list of all the issues in dispute, the parties, the place of arbitration, the rules... This document ensures that everyone knows at the beginning of the process what the parameters of the arbitration will be. Secondly, the power of scrutiny of the award by which the award is not provided to the parties until it has been reviewed by the Court.

It is clear that the Court of Arbitration cannot be considered as a usual Court. In fact, the role of the Court is more carried by the Arbitral Tribunal (chosen by the parties). The Court of Arbitration will help the Arbitral Tribunal, from an administrative point of view, render an applicable award with less chance (in particular with the power of scrutiny of the award) to be questioned by a national Court.

g. Tasks of the International Chamber of Commerce Court of Arbitration

1. Designation of arbitrators

International arbitration is built around the idea that the individual parties select their own arbitrators who then appoint the chairman or presiding arbitrator and the International Chamber of Commerce rules conform to this principle. The ICC Rules specify that the dispute will be decided by either a sole arbitrator or by three arbitrators. If the parties do not agree on the number of arbitrators, the International Chamber of Commerce Court will decide.

The International Chamber of Commerce rules deal with how the arbitrator is appointed where the parties have agreed to just one arbitrator. If they do not agree on a nomination, the International Chamber of Commerce Court will appoint one on their behalf.

The ICC Rules also provide for when three arbitrators should be appointed. Each party could nominate one arbitrator with the chairman being nominated by the International Chamber of Commerce Court, subject to the agreement of both parties.

2. Control of the procedural aspect of the arbitration

Statement of case: Under the International Chamber of Commerce Rules, the claimant sets out the details of his claim when sending his request for arbitration to the secretariat. The respondent then has 30 days from when he receives the request from the secretariat to file an answer.

Awards: under the International Chamber of Commerce Rules, the tribunal is given a period of six months for the final award to be rendered. However, the International Chamber of Commerce Court may extend this period. Under the International Chamber of Commerce Rules, the award must state reasons. Although the International Chamber of Commerce Rules allow the tribunal to correct some errors in their award, they do not expressly provide for remedying an omission. The International Chamber of Commerce rules waive the right to object to the decision of the tribunal.

From this procedural point of view it is clear that the Court plays an administrative role. By looking to the delay for the answer of the respondent (30 days), by respecting the delay for the final award (6 months or more if extended) and correcting certain errors, the Court has a crucial role.

3. Determination of the payment of the arbitrators

The final act of the International Chamber of Commerce Court is to fix the total cost of the proceedings, which includes the fees and expenses of the arbitrators as well as the administrative costs of the International Chamber of Commerce.

The application of all these tasks is the reason of the success of the International Chamber of Commerce Court of Arbitration. Once the parties decide to resolve their dispute with this institution, the Arbitral Tribunal is always supported by the Court of Arbitration. It is the efficiency of a ground system which is looked for. The regulation of the conflict stage by stage and the research for a just and incontestable award returned in time are the fruits of supports of the Court.

a. The International Chamber of Commerce Rules

1. Modifications of the Rules

The Rules of Arbitration of the International Chamber of Commerce, whose headquarters are in Paris, date from 1922.  Their application is overseen by the International Chamber of Commerce International Court of Arbitration, whose members come from various sectors of the society. During their 80-year history, the rules have had a strong and lasting influence on the development of international arbitration. Many of the world's most reputed international arbitrators have acted in proceedings conducted under the auspices of the International Chamber of Commerce, thereby contributing significantly to the recognition of International Chamber of Commerce arbitration in industrial and commercial circles. The International Chamber of Commerce arbitration clause is today used in countless contracts of all kinds. Over 13,000 cases have been filed with the International Chamber of Commerce since the inception of International Chamber of Commerce arbitration. 

The International Chamber of Commerce International Court of Arbitration has always been attentive to changing needs and has periodically adapted its rules.  

The International Chamber of Commerce Arbitration Rules have been revised on several occasions (1922, 1955, 1975, 1988 and 1998^7(*)), and the latest reform is one of the most important. The revision process began in 1995 and involved two years of discussion within the International Chamber of Commerce's International Committee. The new rules were adopted in April 1997 by the International Chamber of Commerce Council and entered into force on January 1, 1998. Those new rules will apply to any arbitration beginning after that date, unless otherwise agreed by the parties.

The International Chamber of Commerce Commission on Arbitration and its Task Forces and Groups boast over 500 members from 90 countries, including partners in international law firms, in-house counsel, law professors, experts in different dispute resolution services, and trade executives in member companies and international organizations. The Task Force on the Revision of the International Chamber of Commerce Rules of Arbitration was created in October 2008. The Task force was mandated:

- To study all suggestions received from National Committees, members of the International Chamber of Commerce, users of the International Chamber of Commerce rules of arbitration, Court members and members of the Secretariat;

- To determine if amendments to the International Chamber of Commerce rules of arbitration are useful or necessary;

- To make any recommendations for the amendment of the International Chamber of Commerce rules of arbitration that the Task Force deems to be useful or necessary.

The Task Force is composed of over 175 members from 41 different countries. The Drafting Sub-Committee of the Task Force held its first meeting in Paris on 23 March 2009.

After all the modifications of the International Chamber of Commerce Rules we can see that the Task Force is looking for another modification of these rules. It seems obvious that the International Chamber of Commerce rules have always been in constant modification. Indeed, this «constant modification» is understandable as international trade relations are always changing. It seems obvious that the rules have to be in adequacy with international trade modification.

2. The modifications of the «scrutiny of the Award by the Court» article

Prior to the modification of 1998 the article 27 of the International Chamber of Commerce Rules of 1998 was the article 21 of the International Chamber of Commerce Rules of 1975. This old article provides that «Before signing an award, whether partial or definitive, the arbitrator shall submit it in draft form to the International Court of Arbitration. The Court may lay down modifications as to the form of the award and, without affecting the arbitrator's liberty of decision, may also draw his attention to points of substance. No award shall be signed until it has been approved by the Court as to its form».

In the new definition of the article 27 of the 1998 International Chamber of Commerce Rules, the qualifying phrase «whether partial or definitive» is omitted, certainly because the distinction was not necessary.

Secondly, all the terms previously defined in Article 2 of the Rules now take their abbreviated form. «Arbitral Tribunal» is used instead of «arbitrator and «by the Arbitral Tribunal» is appended to «No Award shall be rendered».

* ¹ http://www.carrow.com/ad-hoc.html (Mister Carrow 10/07/2009)

* ² Lalive, Note sous Cour d'appel de Paris, 15 septembre 1998 [Case note Court of Appeal of Paris] (1999) Revue de l'Arbitrage [Arbitration Review] 118

* ³ http://www.iccwbo.org/id93/index.html (11/07/2009)

* ⁴ http://www.iccwbo.org/id93/index.html (ICC website 25/06/2009)

* ⁵ Margaret L. Moses, The Principles and Practice of International Commercial Arbitration, Cambridge, 2002.

* ⁶ Fouchard Gaillard Goldman, International Commercial Arbitration, Edited by Emmanuel Gaillard, John Savage, Kluwer Law International, 2008.

* ⁷ Guide to ICC Arbitration (ICC Publication No 448, 1994)