ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH ECONOMIC AND COMMERCIAL NATURE

DIPLOMATIC ACADEMY OF VIETNAM FALCUTY OF INTERNATIONAL LAW INTERNATIONAL DISPUTE SETTLEMENT THESIS ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH ECONOMIC AND COMMERCIAL NATURE Student: Nguyễn Thị Thúy Mai – C34 Hanoi 10 2010 ii TABLE OF CONTENTTABLE OF CONTENT TABLE OF CONTENT TABLE OF CONTENTTABLE OF CONTENT TABLE OF CONTENTTABLE OF CONTENTTABLE OF CONTENT TABLE OF CONTENT TABLE OF CONTENT ....................................................................................................................... ii TABLE OF ABBREVIATION ........................................................................................................... iii BIBLIOGRAPHY ............................................................................................................................... v INTRODUCTION ............................................................................................................................... 1 ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH ECONOMIC AND COMMERCIAL NATURE.................................................................................................................. 2 I. DEFINITION OF ARBITRATION ......................................................................................... 2 II. ARBITRATION COLLECTS ADVATAGES OF THE OTHERS ......................................... 3 1. THE EFFECTIVENESS OF THE COURT ............................................................................. 3 2. ADVANTAGES SHARED WITH DIPLOMATIC MEASURES .......................................... 4 a. FLEXIBILITY AND ECONOMY ...................................................................................... 4 b. CONFIDENTIALITY ........................................................................................................ 5 III. HIGHLY SIGNIFICANT ADVANTAGES OF ARBITRATION ...................................... 6 1. A CHOICE OF NEUTRAL FORUM AND A NEUTRAL TRIBUNAL ................................ 6 a. NEUTRIALITY OF THE FORUM.................................................................................... 6 b. NEUTRAL AND APPROPRIATE TRIBUNAL ................................................................. 7 2. ENFORCEMENT OF ARBITRAL AWARD ......................................................................... 8 CONCLUSION ................................................................................................................................... 9 iii TABLE OF ABBREVIATIONTABLE OF ABBREVIATION TABLE OF ABBREVIATION TABLE OF ABBREVIATIONTABLE OF ABBREVIATIONTABLE OF ABBREVIATION TABLE OF ABBREVIATION TABLE OF ABBREVIATIONTABLE OF ABBREVIATION TABLE OF ABBREVIATIONTABLE OF ABBREVIATION Abbreviation Explanation % Percent 3rd Third 5th Fifth ADR Alternative Dispute Resolution ASEAN Association of South East Asian Nations CIETAC China International Economic and Trade Arbitration Commission Council Regulation 442001 in Europe European Council Regulation No. 442001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters e.g. Exempli gratia (for example) ed. Edition etc. et cetera (so on and so forth) i.e. Id est (that is) IBA International Bar Association ICDR International Centre for Dispute Resolution ICSID International Center for Settlement of Investment Disputes ICSID Arbitration Rules ICSID Rules of Procedures of Arbitration Proceedings, 2006 edition ICSID Convention Convention on The Settlement Of Investment Disputes Between States and Nationals of Other States Inc.

DIPLOMATIC ACADEMY OF VIETNAM

FALCUTY OF INTERNATIONAL LAW

INTERNATIONAL DISPUTE SETTLEMENT

THESIS

ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH ECONOMIC AND

COMMERCIAL NATURE

Student: Nguyễn Thị Thúy Mai – C34

Hanoi 10/ 2010

TABLE OF CONTENT

TABLE OF CONTENT ii

TABLE OF ABBREVIATION iii

BIBLIOGRAPHY v

INTRODUCTION 1

ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH ECONOMIC AND COMMERCIAL NATURE 2

I DEFINITION OF ARBITRATION 2

II ARBITRATION COLLECTS ADVATAGES OF THE OTHERS 3

1 THE EFFECTIVENESS OF THE COURT 3

2 ADVANTAGES SHARED WITH DIPLOMATIC MEASURES 4

a FLEXIBILITY AND ECONOMY 4

b CONFIDENTIALITY 5

III HIGHLY SIGNIFICANT ADVANTAGES OF ARBITRATION 6

1 A CHOICE OF NEUTRAL FORUM AND A NEUTRAL TRIBUNAL 6

a NEUTRIALITY OF THE FORUM 6

b NEUTRAL AND APPROPRIATE TRIBUNAL 7

2 ENFORCEMENT OF ARBITRAL AWARD 8

CONCLUSION 9

TABLE OF ABBREVIATION

Abbreviation Explanation

3rd Third

5th Fifth

ADR Alternative Dispute Resolution

ASEAN Association of South East Asian Nations

CIETAC China International Economic and Trade Arbitration Commission Council Regulation

44/2001 in Europe

European Council Regulation No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters

e.g Exempli gratia (for example)

etc et cetera (so on and so forth)

i.e Id est (that is)

IBA International Bar Association

ICDR International Centre for Dispute Resolution

ICSID International Center for Settlement of Investment Disputes

ICSID Arbitration Rules ICSID Rules of Procedures of Arbitration Proceedings, 2006 edition ICSID Convention Convention on TheSettlement Of InvestmentDisputes Between States

andNationals of Other States

Inc Incorporated

JCAA Japan Commercial Arbitration Association

LCIA London Court of International Arbitration

Model Law UNCITRAL Model Law on International Commercial Arbitration

1985 with amendment adopted in 2006 NAFTA North American Free Trade Agreement

New York Convention Convention on the Recognition and Enforcement of Foreign Arbitral

Awards, New York, 1958

Para Paragraph

UNCITRAL United Nations Commission on International Trade Law

UNCTAD United Nations Conference on Trade and Development

WIPO World Intellectual Property Organization

BIBLIOGRAPHY

STATUTES AND TREATIES

1 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York,

1958

2 UNCITRAL Model Law on International Commercial Arbitration 1985 with amendment adopted in 2006

3 Convention on The Settlement Of Investment Disputes Between States and Nationals of Other States

RULES

1 European Council Regulation No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters

2 ICSID Rules of Procedures of Arbitration Proceedings, 2006 edition

3 UNCITRAL Arbitration Rules 1976

4 IBA Guidelines on Conflicts of Interest in International Arbitration 2004

CASE

1 Metalclad Corporation v United Mexican States, ICSID Case No ARB(AB)/97/1, (2000)

SCHOLARY WORKS AND ARTICLE

1 Betty Southard Murphy, “ADR’s Impact on International Commerce”, Dispute Resolution

Journal (1993)

2 Christian Burhing – Uhle, “A Survey on Arbitration and Settlement in International Business

Disputes”, in Christopher R Drahozal, Richard W Naimark, Towards a science of

international arbitration: collected empirical research, Kluwer Law International (2005)

3 Donald Carper, Bill West, John McKinsey, Understanding the Law, 5th ed., Thompson Learning Inc., (2008)

4 Estela Kennen, Advantages and Disadvantages of ADR - Understanding Alternative Dispute

Resolution (2008), available at http://www.suite101.com/content/advantages-and-disadvantages-of-adr-a58925

5 Garry B Born, International Arbitration and Forum Selection Agreements: Drafting and

Enforcing, Kluwer Law International (2010)

6 J.G Merrills, International Dispute Settlement, Cambridge University Press (2005)

7 Julian D M Lew, Loukas A Mistelis, Stefan Kröll, Comparative International Commercial

Arbitration, Kluwer Law International (2003)

8 Lewis L Maltby, “Private Justice: Employment Arbitration and Civil Rights”, Columbia

Human Rights Law Review (1998)

9 M.I.M Aboul Enein, International Commercial Arbitration, at Conference “Preventing and

Managing International Commercial Disputes Towards a EuroMed Alternative Dispute Resolution Infrastructure”, Rome (2007)

10 Margaret L Moses, The Principles and Practice of International Commercial Arbitration,

Cambridge University Press (2008)

11 Nigel Blackaby, Constantine Partasides, Alan Redfern, Martin Hunter, Redfern and Hunter

on International Arbitration, 5th ed Oxford University Press (2009)

12 Nigel Blackaby, Constantine Partasides, Alan Redfern, Martin Hunter, Law and Practice of

International Commercial Arbitration, 3rd ed., Kluwer Law International (2004)

13 Norton Rose Group, “Arbitration – a Guide to International Arbitration”, Arbitration Across

the Regions, www.nortonrose.com, access on October 31st, 2010, available at

http://www.nortonrose.com/knowledge/publications/pdf/Arbitration%20manuals/file26050.p df

14 Paul Jacobs, “Arbitration and Mediation: A Viable Alternative to Court Proceedings?”,

published in Stern Cohen, Chartered Accountants, Executive Summary (1995)

15 Peter Sherwin, Ana Vermal, Elizabeth Figueira, Proskauer on International Litigation and

Arbitration: Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes, Proskauer (2010), available at http://www.proskauerguide.com/arbitration/19/I

16 Richard Smith, Tim Portwood and Michael d Nolan, “Talking Point: International

Arbitration”, Financial Worldwide (2010)

17 UNCITRAL, Report of the Secretary General: Possible Features of a Model Law on

International Commercial Arbitration, A/CN.9/207

18 UNCITRAL, Report of the Working Group on International Contract Practices on the work

of its third session, A/CN.9/216;

19 UNCTAD, 5.1 International Commercial Arbitration, United Nations, New York and

Geneva (2005)

INTRODUCTION

For settlement of international disputes, there are two types of means The first one is diplomatic measures, including good office, negotiation, mediation, conciliation and inquiry in case

of public international disputes; or conciliation, mediation, mini-trial, expert evaluation, dispute board, in case of private international disputes The second one names legal means, including arbitration and judicial settlement, i.e., litigation Those are all means to settle both public international disputes and private international disputes

In case of disputes with economic and commercial nature, their parties are reluctant to refer them to national court as they do not want the government to get involved This is especially true in investment disputes where one party is nature person or judicial person and another is a state Litigation at court brings many difficulties that businessmen never want to face However, if they seek to diplomatic means, there is a bigger risk that their dispute may be impossible to be resolved, and finally they still have to resort to adjudication As a result, the best choice for them is arbitration, which collects many collects many advantages of both litigation and diplomatic measures (II) Besides, arbitration also has its own advantages, and the most significant ones are always favored by businessmen (III) After all, it can be concluded that arbitration is a good choice for the disputes with economic and commercial nature However, before doing that, it is necessary

to consider the general concept of arbitration (I)

ARBITRATION – A GOOD CHOICE FOR DISPUTES WITH

ECONOMIC AND COMMERCIAL NATURE

Means to settle dispute are divided into two groups: diplomatic and legal means Arbitration

is known as a legal means for dispute settlement1 It has become the most prevalent method using international commercial disputes2

To ascertain what arbitration is, it is necessary known that there is not an exact definition of arbitration “Arbitration” is rarely defined in national law and arbitration rules Even New York Convention left the term undefined The drafters of the Model Law said that defining the term is

“unnecessary”3

However, it is believed that the true reason is “difficult to formulate”4 In a simply way, arbitration is known as a specially established mechanism for the final and binding determination of disputes, by independent arbitrators, in accordance with procedures, structures and substantive legal or non-legal standards chosen directly or indirectly by the parties5

Although there is no definition, arbitration is characterized by some typical elements It is a dispute settlement mechanism producing a final and binding award, based on the consensus of the parties Especially, in arbitration, parties can choose who will judge their dispute on their own and choose the appropriate procedure rules applied, and moreover, request to keep all information in confidentiality

1 J.G Merrills, International Dispute Settlement, Cambridge University Press (2005), p 91

2 Betty Southard Murphy, “ADR’s Impact on International Commerce”, Dispute Resolution Journal (1993), p 68

3 UNCITRAL, Report of the Working Group on International Contract Practices on the work of its third session, A/CN.9/216, paras 15-18, 17; Report of the Secretary General: Possible Features of a Model Law on International

Commercial Arbitration, A/CN.9/207, paras 29-30

4

UNCTAD, 5.1 International Commercial Arbitration, United Nations, New York and Geneva (2005), p 4

5

Julian D M Lew, Loukas A Mistelis, Stefan Kröll, Comparative International Commercial Arbitration, Kluwer Law

International (2003), para 1-1

II ARBITRATION COLLECTS ADVATAGES OF THE OTHERS

1 THE EFFECTIVENESS OF THE COURT

Different from diplomatic measures which produces non-binding decisions, parties employ legal means including arbitration and judicial means when what is wanted it a binding decision6 It means that Arbitral Tribunal must render a determination of rights and obligations of the parties, and such decision must be final and binding A procedure that does not lead to a final and binding award

is not arbitration7, and such award shall be refused to recognition and enforcement in national court, under New York Convention8

Diplomatic measures, such as negotiation, mediation, conciliation, and inquiry, aim to arrive

at a negotiated settlement9 The parties employ such measures have to face a possibility that the all effort has failed and the dispute remains unresolved Even a resolution is reached; there is no guarantee for it to be implemented This means that they could invest the time and money in trying

to resolve the dispute by all ways and still end up having to go to legal means10 which guarantee a decision to be reached and enforceable at law The guarantee of a decision is important especially for disputes with economic nature Different from other kinds of dispute, they are always in need of

a solution as soon as possible Therefore, many commercial and investment disputes are entirely appropriate to be resolved by adjudication11

Like court, arbitration guarantees a final and binding resolution for the parties For such advantage, parties to the dispute can make sure that their dispute will properly be resolved

6

Supra note 1

7

Supra note 4 p 8

8 New York Convention, article V(1)(e)

9Nigel Blackaby, Constantine Partasides, Alan Redfern, Martin Hunter, Redfern and Hunter on International

Arbitration, 5th ed Oxford University Press (2009), para 1.75

10 Estela Kennen, Advantages and Disadvantages of ADR - Understanding Alternative Dispute Resolution (2008),

available at

http://www.suite101.com/content/advantages-and-disadvantages-of-adr-a58925

11

M.I.M Aboul Enein, International Commercial Arbitration, at Conference “Preventing and Managing International

2 ADVANTAGES SHARED WITH DIPLOMATIC MEASURES

Arbitration is also considered as an “alternative dispute resolution” or ADR together with the means of diplomatic measures12, refer to all kinds of dispute resolution methods other than litigation Therefore, the latter share many their advantages to arbitration In arbitration and other diplomatic measures, parties can keep their control on proceedings and adjust them more suitable than litigation As a result, parties can gain many advantages that litigation can never bring13 This part will indicates some prominent advantages only

a FLEXIBILITY AND ECONOMY

In general, litigation at court is quite complicated and prolix Even, courts in many jurisdictions have been overloaded In there, parties have to wait for a long time to take their turn Differently, Arbitration gives parties substantial autonomy and control over the process that will be used so resolve their dispute14 They are free to choose rules applied to proceedings, modify it or self-designate one by agreement at any time during the proceedings Therefore, arbitration is deemed more flexible than court

Besides, to restrict cost and time consuming, parties can involve controlling the time limit for dispute resolution In general, it takes about one or more a year, or takes longer if the dispute relates to investment To evaluate, employment cases, for example, can be arbitrated in half to a third the amount of time that they otherwise would be litigated15 Some experts concern that arbitration is not in fact cost less money and time as in theory Arbitration proceeding is easy to be delayed if one party does not perform his task, e.g., appointing arbitrator And parties will have to pay more if they refer to an institutional arbitration However, in my opinion, arbitration rules all anticipate and provide provisions to prevent or overcome these circumstances It is not unrecognizable that arbitration helps save much time, this means save money Hence, at any circumstance, resolving dispute by arbitration is much more economical than by court

12 Margaret L Moses, The Principles and Practice of International Commercial Arbitration, Cambridge University

Press (2008), p 13 This view is mainly adopted in the United States

13 Supra note 11, p 5

14

Supra note 12, p 1

15

Lewis L Maltby, “Private Justice: Employment Arbitration and Civil Rights”, Columbia Human Rights Law Review

(1998)