Scrutiny of the award by the ICC court of arbitration

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

By analyzing the history of international commercial arbitration it seems that during its history this form of dispute resolution shifted from a «primitive legal system» based on a decentralized judicial body to a more centralized one, based on unifying «quasi legislative» institutions^16(*). After analyzing this evolution we will determine if by scrutinizing the award the International Chamber of Commerce Court of Arbitration is not playing the role of a state justice of second degree.

F. An old «decentralized» judicial body

In 1965, the legal comparatist, René David, stated 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 old system of international arbitration, the ad hoc arbitration, is a «decentralized» system as it is not administered by a state Court (like litigation) or by an institution. Following the definition proposed by Leben, a «decentralized» order is a «legal order in which the functions of the creation of law and administration of justice have not yet been concentrated in the hands of central organs»^17(*).

In this decentralized system of ad hoc arbitration, the parties are required to determine all aspects of the arbitration like the number of arbitrators, the manner of their appointment, the procedure for conducting an arbitration, etc... If the parties operate with a minimum of cooperation, ad hoc proceedings can be more flexible, cheaper and faster than an administered proceeding. In this type of arbitration, the arbitrator plays the role of jurisdiction and administration at the same time.

Those two tasks being resolved by one body, the arbitrator, makes the ad hoc arbitration a more flexible type of arbitration.

The second reason which made the success of ad hoc arbitration was that under this system, in cases involving state parties, the parties felt that their sovereignty was not devaluate. Indeed, under institutional arbitration, state parties often felt that their sovereignty was lost under the powers of the institution.

The third advantage of ad hoc arbitration is that it is less expensive than institutional arbitration. Parties only pay fees to the arbitrator, lawyers or representatives. They do not have to pay for a large institution which includes many employees.

Finally, ad hoc arbitration was appreciated for the fact that the parties negotiated and settled arbitrators' fees with him directly. The parties can negotiate a reduction in fees.

In several cases, the combination of jurisdictional and administrative powers brought the arbitrator to fail at one of these functions. Splitting the role of jurisdiction and administration in two different organizations, new international arbitration is based on an institutional system, the arbitrator being responsible for the jurisdictional aspect and the institution for the administrative aspect.

Furthermore, some parties were looking for a more structured mode of dispute resolution. The parties were looking for the more predictable character of institutional arbitration.

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

The generalization of international arbitration has been accompanied by an increasing number of cases in which the main goal of the parties is to win the dispute. They are not looking to find an average result that aims at preserving the relationships within the merchants' community as well as promoting an equitable result^18(*). This trend goes against the original features of the arbitral community, described by Stone Sweet as presenting a certain degree of «co-operation and commitment»^19(*). This communitarian, consensual environment has progressively evolved into a more aggressive, conflict-orientated one. The switch from a cooperative environment to a conflict-orientated one has increased the probability that the losing party would follow the fight before the national courts. In this new system, users have fewer interests in maintaining a high degree of cooperation. Consequently, the tensions between arbitral autonomy and state control are likely to find different outcomes, especially with regards to the growing intervention of arbitral institutions.

H. A new «internalized» form of control

Under institutional arbitration, fees are stipulated by the institution directly and parties cannot negotiate it. This makes institutional arbitration a less flexible type of arbitration.

The administrative aspect of arbitration being centralized in one institution gave this system a new, internalized form of control. Such an institutional control of awards leads to a process of re-centralization, through which international commercial arbitration is shifting from a «primitive legal system» based on decentralized judicial bodies to a more centralized one, based on unifying «quasi-legislative» institutions.

But this new system of arbitration brought new issues, the main one being to determine if by scrutinizing the award the Court cannot be assimilated to an appeal or a second degree arbitration».

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

As we have seen, the arbitrator is responsible for the judicial manner of the arbitration and the institution is responsible, from an administrative standpoint, for the arbitration. But article 27 of the International Chamber of Commerce Rules gave the opportunity to oppose to this clear distinction the fact that the International Chamber of Commerce Court of Arbitration is also playing a judicial role in the arbitral process. Indeed, by scrutinizing the award, the Court is acting as a second degree of arbitration, the first one being the Award rendered by the Arbitral tribunal.

This assimilation of the International Chamber of Commerce Court of Arbitration as an appeal Court brings a problem of competition between the International Chamber of Commerce scrutiny of the award and a national Court of Appeal. If this comparison is applicable, it leads to the paradoxical statement that the International Chamber of Commerce Court is «better treated than the judges themselves»^20(*). For example, in the French system, if the decision of a an Appeal Court is not permitted by the French Constitution, the «Conseil Constitutionnel« could avoid the decision and ask for a re-examination of the case by another Appeal Court. But in International Chamber of Commerce Court scrutiny of the award, the principle is that the French jurisdiction will not intervene in the work of the Court of Arbitration^21(*). This is the result of what Pierre Lalive called a contradiction between the International Chamber of Commerce's claim for its «quasi-judicial» function ^22(*) and the emphasis that it puts on its administrative tasks when its action is challenged before the court. In fact, according to him, it seems that the International Chamber of Commerce Court of Arbitration's practice goes further than simply «providing drafting advice»^23(*). As Lalive stressed, it is difficult to establish a clear line between the «form» of the temporary award, with which the court is supposed to deal, and its «substance», to which the court is supposed to draw the arbitrators' attention^24(*). Consequently, the court is likely to extend its prerogative of control, ultimately to the merits of the awards^25(*). However, even under the assumption that this review extends to the merits, the International Chamber of Commerce Court of Arbitration still exercises such a control in an automatic way, before the award is rendered, which prevents one from qualifying this control as a true «appeal».

Pierre Lalive is not the only one who proved that the International Chamber of Commerce Court of Arbitration is not a second level of arbitral jurisdiction, even nationals Courts have argued that.

In France, the Court of Appeal of Paris^26(*) approved by the Court de cassation^27(*) has recognized that the Court of Arbitration does not exercise a second or appellate level of arbitral jurisdiction, and that it does not infringe upon the arbitrators' liberty of decision. The Court held that that such control is perfectly sound and does not endanger the independence of the arbitrators. The reasoning of the courts was the following: the control exercised by the Court of Arbitration «does not lead to any interference into the jurisdictional task of the arbitrators, but only aim[s] at ensuring the efficacy of the arbitration». Ultimately the French Court qualified the International Chamber of Commerce Court of arbitration as «an association which does not constitute a jurisdiction», as opposed to the arbitral tribunal which is entitled to exercise a jurisdictional function. From this differentiation comes the non-intervention of the French jurisdiction into the work of the Court of Arbitration.

In Germany, the Superior Court of the Canton of Zurich^28(*) found that the powers of the Court did not constitute a forbidden interference in the freedom of decision of the arbitral tribunal.

The International Chamber of Commerce is not exerting a second or appellate level of arbitral jurisdiction, does it mean that national Courts can exercise an appeal of an Award scrutinized by the Institution?

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

Contrary to the International Centre for Settlement of Investment Disputes, the waiver of the article 27 of the International Chamber of Commerce does not preclude national courts from exercising their traditional control over arbitral awards. Some parties have even provided in their arbitration agreement for «rights of recourse beyond those that cannot validly be waived»^29(*), thus expressing their willingness to submit awards to an increased degree of control from national courts. For instance, Stephen Bond reported that in 1989 only 26 per cent of the International Chamber of Commerce clauses specifically provided such a waiver^30(*). As a whole, the International Chamber of Commerce, as well as the American Arbitration Association and the International Centre for Settlement of Investment Disputes, strive to «autonomise» their action from state courts' supervision to encompassing rules.

CONCLUSION

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

Some authors have argued that the success of the arbitral institutions, and especially of the International Chamber of Commerce, was due to the elimination of the «need for the parties to refer to the courts if difficulties arise in setting in motion, or during, the arbitration^31(*).» The willingness of the International Chamber of Commerce to play the role of a true «court» of arbitration and therefore to reduce the need to resort to national courts during the proceedings has translated into its rules dealing with the exclusion of liability^32(*) or pre-arbitral referee procedures. By providing an internalized system of control, the International Chamber of Commerce may also have reduced the need for the parties to refer to the courts after the rendering of the award.

By «keeping the review within the institution», the International Chamber of Commerce has probably fulfilled the users current claims for an increased judicial review of awards. As a result of this control, an International Chamber of Commerce practitioner stressed that 90 percent of the International Chamber of Commerce awards are voluntarily complied with^33(*).

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

This «internalized» system of control has certainly contributed to the preeminence of the International Chamber of Commerce in the field of international commercial arbitration. Jan Paulsson, the President of the London Court of International Arbitration, stressed how this internalized review of awards has allowed the International Chamber of Commerce Court of Arbitration to check the arbitrators' work and to increase its pool of arbitrators^34(*).

It is even argued that the International Chamber of Commerce control is the main reason for its success, and that consequently this control should be enlarged. The reasoning is the following: with regard to the increased technicalities of international arbitral proceedings, judicial review is becoming more popular, de facto enlarged to the merits of the awards. Hence, the judicial review of arbitral awards is occasionally extended to an appeal review. In this context, the International Chamber of Commerce should be «prepared to broaden its review to include the clarity and comprehensiveness of an award, or establish a procedure for the parties to submit (through the court) requests for clarification or completion^35(*).» Such an evolution would allow the International Chamber of Commerce Court of Arbitration to exercise similar powers to those exercised by national courts, which would eventually lead this court to limit and replace their control.

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11500 Words

* ¹⁶ Florian Grizel, «Control of awards and re-centralisation of international commercial arbitration», Civil Justice Quarterly, 2006

* ¹⁷ Hans Kelsen, «Compulsory Adjudication of International Disputes» (1943) 37 Am.J.Int'l L. 397 at p.400

* ¹⁸ Philippe Fouchard, «Où va l'Arbitrage International ?» [Where is International Arbitration Going?] (1989) 34 McGill L.J. 435.

* ¹⁹ Alec Stone Sweet, « Islands of Transnational Governance» in Martin Shapiro and Alec Stone Sweet (eds), On Law, Politics, and Judicialization (2002)

* ²⁰ Florian Grizel, «Control of awards and re-centralisation of international commercial arbitration», Civil Justice Quarterly, 2006

* ²¹ Fouchard, Cour d'appel [CA] [regional court of Appeal] Paris, November 18, 1987 and May 4, 1988, "Chambre arbitrale de Paris, Sociétés Carfa Trade Group et Omnium de travaux c. République de Guinée et autres" [Case note] (1988) [Arbitration Review]

* ²² Lalive, Note sous Cour d'appel de Paris, 15 septembre 1998 [Case note] (1999) Revue de l'Arbitrage [Arbitration Review] 118.

* ²³ Pierre Lalive, Note sous Cour d'appel de Paris, 15 septembre 1998 [Case note] (1999) Revue de l'Arbitrage [Arbitration Review] p 114 - 115.

* ²⁴ Pierre Lalive, Note sous Cour d'appel de Paris, 15 septembre 1998 [Case note] (1999) Revue de l'Arbitrage [Arbitration Review] 118

* ²⁵ Pierre Lalive, Note sous Cour d'appel de Paris, 15 septembre 1998 [Case note] (1999) Revue de l'Arbitrage [Arbitration Review] p 115 ; Antoine Kassis, Réflexions sur le Règlement d'Arbitrage de la Chambre de Commerce Internationale [Reflections on the Arbitration Rules of the International Chamber of Commerce] (1988) L.G.D.J. p. 71.

* ²⁶ 20/04/1972, Societe Schutte Lenz v. Veuve Gallais [Case Note]

* ²⁷ 23/01/1974

* ²⁸ 29/06/1979

* ²⁹ Yves Derains and Eric A. Schwartz, A Guide to the New ICC Rules of Arbitration (Kluwer Law International, 1998), p.298.

* ³⁰ Stephen R. Bond, How to Draft an ICC Arbitration Clause (Revisited), (1992) 7 ICSID Rev.--Foreign Inv.L. J. 153 at p.165.

* ³¹ Eric A. Schwartz, « The Role of the Arbitral Institution in the New Millennium» (1999) 65 Arbitration Journal of Chartered Institute [Arb.J. of Chartered Inst] 324.

* ³² ICC Rules Art.34.

* ³³ Ottoarndt Glossner, «The Influence of the International Chamber of Commerce upon Modern Arbitration» in 60 Years of ICC Arbitration: a Look at the Future (International Chamber of Commerce, 1984), p.403.

* ³⁴ Jan Paulsson, «Vicarious Hypochondria and Institutional Arbitration» in Yearbook of the Arbitration Institute of Stockholm Chamber of Commerce (1990), p.99 («The ICC Court's scrutiny of awards makes it easier for parties and the Court, knowing that mistakes of ignorance may be averted, to accept arbitrators with little or no experience in international cases. There is no question but that this factor enables the ICC to increase the pool of prospective arbitrators, all the while holding true to its standards»).

* ³⁵ Samuel G. Goekjian, ICC Arbitration from a Practitioner's Perspective, (1980) 14 J.Int'l L. & Econ. 407 at p.433.