International arbitration is an alternative method of dispute resolution whereby parties agree to submit their dispute to an arbitral tribunal, which does not form part of any national judicial system.

Mediation

Principle

Mediation is a practice that involves a neutral and impartial third party to facilitate the resolution of disputes and thereby reach an amicable agreement between the parties.

Thus, mediation often occurs before disputes arise.

Indeed, in most cases, mediation is provided for by a pre-mediation clause included in contracts between professionals. While there is no obligation to reach a settlement, this pre-mediation clause must be executed in good faith (i.e., bona fide), as refusing to engage in mediation despite such a clause may be prejudicial to the subsequent proceedings.

Statute of Limitations

Mediation normally suspends the statute of limitations (Article 8, Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters).

Effect of Mediation

The mediator cannot make a decision in the legal sense of the term.

Indeed, the mediator merely facilitates the parties’ consent; thus, the outcome of mediation can only be an agreement or a settlement.

Enforcement of Agreements

Principle

One might assume that the available means to enforce a contract (i.e., the agreement) resulting from mediation are the standard methods in international commercial law.

This would likely be correct.

Nevertheless, for greater certainty, an international convention (the Singapore Convention, adopted under the auspices of UNCITRAL) was signed in August 2019 by approximately fifty countries to facilitate the enforcement of agreements reached through mediation.

Dispute Resolution Clause

We may question the applicability of this convention if a dispute resolution clause exists in the mediation agreement (e.g., the Vesoul court has jurisdiction): does the Singapore Convention apply?

Opinions appear to differ on this matter.

Refusal of Enforcement by a State

Enforcement of the agreement may be refused in a member state (Article 5 of the Singapore Convention) for several reasons, for example:

  • incapacity of one of the parties to sign the mediation agreement;
  • the agreement is not binding or final;
  • the obligations set out in the agreement have been fulfilled (e.g., the amount has been paid);
  • the mediator was not impartial;
  • the agreement is contrary to the public policy of the country where enforcement is sought;
  • the subject matter of the mediation is not capable of settlement by mediation under the law of the country where enforcement is sought.

Arbitration

Principle

Unlike mediation, the arbitrator has the power to resolve a dispute: they possess jurisdictional authority.

Thus, the arbitrator’s decision (i.e., the award) is binding.

This is all the more noteworthy given that it should never be forgotten that the arbitral tribunal exists solely by the will of the parties: the arbitral tribunal is not a state creation, and without the parties’ agreement to submit to arbitration, the arbitral tribunal has no power.

Similarly, arbitration is not tied to any specific country: it operates within a system that transcends national boundaries (even though, by definition, arbitration will physically take place somewhere… but this is merely for practical, not legal, reasons).

Choice of Arbitration Type

When parties opt for arbitration, they may choose between several types of arbitration:

  • institutional arbitration,
  • ad-hoc arbitration.

In reality, these two types of arbitration are very similar. The main difference is that institutional arbitration is conducted under the auspices of an international institution.

Law Applicable to Arbitration and Law Applicable to the Dispute

Applicable Law to Arbitration (lex arbitri)

In arbitration, it is possible to choose the lex arbitri, i.e., the law that will govern the procedure, the necessary qualifications of the arbitrators, the manner of summoning the parties, etc.

This is not necessarily a national law.

Most often, if the arbitral tribunal operates under the auspices of an international institution (such as the International Court of Arbitration of Paris, the London Court of International Arbitration, or the Swiss Chambers’ Arbitration Institution), that institution provides procedural rules that serve as the lex arbitri.

Applicable Law to the Dispute (lex causae)

Principle

It is also possible to choose the law applicable to the dispute.

Most often, the parties determine this in a special clause of the contract, and their choice is unrestricted.

If the contract is silent and the parties cannot reach an agreement, the determination of the law applicable to the dispute generally falls to the arbitral tribunal, which must decide based on the contractual context.

Exclusion of Public Policy

The only limitation on the parties regarding the lex causae is public policy: it is not possible to exclude the application of public policy.

However, this is not straightforward… indeed, which public policy should be considered?

In practice, it is generally necessary to consider the public policy of the countries for which the connection to the dispute is… sufficient: this must therefore be assessed on a case-by-case basis.

Fortunately, there are still certain principles common to many states:

  • the impartiality of the arbitral tribunal,
  • the adversarial nature of the proceedings,
  • etc.

This public policy issue is particularly important when seeking to enforce the arbitral award in a given country (so that the courts of that state do not set aside the arbitral award as contrary to public policy).

Arbitral Awards

Legal Framework

The legal framework for arbitral awards is diverse:

  • The New York Convention of 1958;
  • National legislations
    • These legislations may address domestic and/or international arbitration in the same text or in separate texts;
    • Many national legislations (around 90) have been inspired by the UNCITRAL Model Law: this is an example of legislation aimed at simplifying the convergence of laws.

Definition

To put it bluntly: there is no definition of what constitutes an arbitral award, neither in the New York Convention nor in the majority of national laws.

Ultimately, only the national court can determine whether a document is an arbitral award or not.

Examples

However, it is possible to state that the following are not arbitral awards:

  • a procedural order,
  • a decision regarding the jurisdiction of the arbitral tribunal,
  • an interim measure ordered by the arbitral tribunal,
  • an interlocutory award (i.e., a decision that does not finally resolve the parties’ claims, such as a decision on liability pending the determination of damages),
  • etc.

Conversely, the following is an arbitral award:

  • a default award (i.e., rendered in the absence of a party),
  • a consent award (i.e., recording the parties’ agreement on the dispute),
  • etc.

Form

There is no mandatory form.

However, the award must (A31(1) UNCITRAL Model Law):

  • be in writing,
  • be signed by a majority of the arbitrators, provided that the absence of signatures is explained (e.g., the arbitrator who did not sign disagrees with the award),
  • indicate the date of the award, and
  • specify the place of arbitration.

Of course, the reasons for the award (i.e., the grounds) must be stated unless the parties waive this requirement (A31(2) UNCITRAL Model Law) (though it is difficult to see why they would).

Effect

Arbitral awards are final and binding on the parties involved.

In practice, it must be acknowledged that 90% of awards are complied with without reluctance from the parties (but the remaining 10%… these 10% will be addressed in the section « Enforcement of decisions »).

Furthermore, arbitral awards have a « res judicata » effect: a party cannot raise the same dispute against the same defendants (same claim, same grounds, same parties).

Setting aside an arbitral award

No appeal possible

In most cases (i.e., under the national laws of the place of the arbitral institution or the law provided by the arbitration procedural rules), it is not possible to appeal an arbitral award.

However, if the arbitration law is English law, it should be noted that an appeal may be considered on points of law (but not of fact).

Therefore, it is more common to seek the setting aside of the award.

Competent jurisdiction

The setting aside must be requested before the court of the seat of the arbitral institution:

Thus, it is possible to avoid having to file multiple nullity actions in a large number of countries.

Applicable law

The law applicable to the setting-aside proceedings is the law of the court (lex fori).

Grounds for setting aside

The principle remains to presume the validity of the arbitral award (e.g., Eco Swiss China Time Ltd 1999 ECJ).

Otherwise, the grounds for setting aside are limited, but each country may determine its own grounds…

For example:

  • lack of capacity to sign the arbitration agreement,
  • the arbitration agreement is not valid (e.g., lack of consent),
  • the parties were not properly summoned or were unable to present their case,
  • the decision addresses points that were not requested (i.e., decision ultra petita),
  • the tribunal’s composition or rules are not in accordance with the parties’ agreement or, failing that, the law of the arbitral seat,
  • the points of the decision were not arbitrable under the law of the court hearing the setting-aside proceedings,
  • the decision is contrary to public policy under the law of the court hearing the setting-aside proceedings (e.g., A34 (2) b) ii) UNCITRAL Model Law, Article 1520(5) CPC, 190(2)(e) Swiss PILA) (e.g., Cass. civ. 1re, 12 June 2013, Case No. 12-16864, Victocor Technologies).

Waiver of the right to set aside

We may wonder whether it is possible to waive in advance (in the contract, for example) the right to seek the setting aside of an arbitral award.

The answer is: it depends…

Indeed:

Effect of setting aside

Setting aside allows for a new arbitration.

Furthermore, the setting aside of an arbitral award prevents the enforcement of the award:

  • in the country that issued the setting-aside decision;
  • in countries that recognize this setting-aside, i.e.:
    • countries that have acceded to the New York Convention (Article V 1 e));
    • and that do not have more favorable national provisions for the party seeking enforcement (e.g., provisions recognizing that enforcement may be sought even if the award is set aside, Article VII and the recommendation concerning the interpretation of this article).

Enforcement of arbitral awards

Principle

The New York Convention establishes the rules concerning the recognition and enforcement of foreign arbitral awards.

This convention has been signed by over 161 countries.

Of course, as with virtually all international conventions, countries may make reservations on specific points (Article I(3) of the New York Convention), and in particular may provide that the convention shall apply only:

  • to arbitrations rendered in member countries;
  • if the nature of the arbitration is commercial under national law.

Furthermore, Article VII of the New York Convention provides that member states may have more favorable provisions toward the person seeking enforcement of an arbitral award within their territory.

Grounds for Refusing Enforcement

Under the New York Convention (Article V), there are only seven grounds for refusing enforcement of an arbitral award:

  • the dispute was not capable of settlement by arbitration under the national law (may be raised ex officio by the court); the award is contrary to the public policy of the country where enforcement is sought (may be raised ex officio by the court); the parties were under some incapacity or the arbitration agreement is invalid; the arbitration was not conducted properly (e.g., non-adversarial arbitration); the award deals with matters beyond the scope of the arbitration; the arbitration did not comply with the rules applicable thereto;
  • the award has not yet become binding or has been set aside by a competent authority.

Grounds for Refusing Enforcement (in France)

In France, these same grounds are generally found in Articles 1514 CPC and 1522 CPC, which refer to the grounds for setting aside under Article 1520 CPC.

However, it should be noted that the ground for non-enforcement relating to the setting aside of an award by a competent authority has not been reproduced in French law. This is permissible because it is more favorable to the person seeking enforcement (Article VII of the New York Convention).

I emphasize this point, as it will be significant in an example below (major teaser…).

A Brief Example of Complexity (in France)

The Putrabali case (Cour de Cass, 1st civ. ch., June 29, 2007, Case No. 05-18053) can be summarized as follows:

  • Putrabali company sold a shipment of white pepper to Rena Holding;
  • this shipment sank during transport by sea;
  • Rena Holding therefore refused to pay the price of the shipment;
  • a first arbitration (2001) took place in London, ruling that Rena Holding was entitled to refuse payment;
  • this first arbitration was set aside by the English Supreme Court, as it considered the refusal to pay to be a breach of contract;
  • a second arbitration (2003) took place, still in London, ruling that Rena Holding had to pay for the shipment.

And now things get a bit complicated…

  • Rena sought enforcement in France of the 2001 arbitral award (which had been set aside by the English courts), and enforcement was granted;
  • Putrabali appealed against this enforcement, as the award had been set aside;
  • Nevertheless, the French courts held that the setting aside of an arbitral award was not a ground under French law for refusing enforcement thereof.

But considering that an international arbitral award, which is not attached to any national legal system, is an international judicial decision whose regularity is examined in light of the rules applicable in the country where recognition and enforcement are sought; that pursuant to Article VII of the New York Convention of January 10, 1958, Rena Holding was entitled to present in France the award rendered in London on April 10, 2001, in accordance with the arbitration agreement and the IGPA rules, and was justified in relying on the provisions of French international arbitration law, which does not provide for the setting aside of the award in its country of origin as a ground for refusing recognition and enforcement of a foreign award.

Of course, the enforcement of the 2001 arbitral award makes it impossible to enforce the 2003 award simultaneously: the latter award therefore cannot take effect in France.

This clearly illustrates the limits of international arbitration and the leeway afforded to member states to have more favorable laws for the person seeking enforcement of international arbitral awards.

Effect of an appeal against enforcement (in France)

Appeals against the enforcement of an arbitral award in France do not have a suspensive effect (Article 1526 CPC).