The Modern Trend Towards Exclusion of Recourse Against Transnational Arbitral Awards: A European Perspective

Fordham International Law Journal, Dec 1988

This Article will analyze this trend [the liberal tradition in international commercial arbitration] and attempt to assess its impact on the efficiency of international commercial arbitration as a viable alternative to litigation before the national judiciary. Where appropriate, the new laws will be compared to the UNCITRAL Model Law (the "Model Law"), today's archetype of modern commercial arbitration laws. Finally, this Article will focus on the possible influence of the new laws on arbitration laws of other states, taking the Federal Republic of Germany as an illustrative example.

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The Modern Trend Towards Exclusion of Recourse Against Transnational Arbitral Awards: A European Perspective

606 FORDHAM INTERNATIONAL LA W JOURNAL [Vol. 12:605 Fordham International Law Journal - 1988 Article 1 Copyright c 1988 by the authors. Fordham International Law Journal is produced by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/ilj The Modern Trend Towards Exclusion of Recourse Against Transnational Arbitral Awards: A European Perspective Klaus Peter Berger This Article will analyze this trend [the liberal tradition in international commercial arbitration] and attempt to assess its impact on the efficiency of international commercial arbitration as a viable alternative to litigation before the national judiciary. Where appropriate, the new laws will be compared to the UNCITRAL Model Law (the “Model Law”), today’s archetype of modern commercial arbitration laws. Finally, this Article will focus on the possible influence of the new laws on arbitration laws of other states, taking the Federal Republic of Germany as an illustrative example. Klaw Peter Berger* CONTENTS • Banking Law Institute, University of Cologne, West Germany. J.D., 1987, University Bielefeld, West Germany; LL. M., 1988, University of Virginia. The author is particularly grateful to Professor Dr. Norbert Horn for making available the research facilities of the Centre for International Trade and Investment Contracts (CITIC), University of Cologne. 656 For the actors in internationalcommerce, it is the worst of both worlds when agreement to arbitrationresults in both arbitrationand litigation. Mark B. Feldman' INTRODUCTION It is common knowledge among lawyers from both common and civil law jurisdictions that the ever-growing case load of their national judiciary constitutes the main obstacle for an effective dispute resolution process. In the United States, the court system is close to breaking down,2 and in Germany it can take a litigant up to six years to take a case through all instances for a final judgment.3 Even the European Court ofJustice in Luxembourg is suffering from an increased case load of forty percent in 1987, which has triggered the proposal for a new European Court of First Instance.4 Viewed against this background, arbitration as an alternative to litigation gains additional importance. This is especially true for recourse to municipal courts against final arbitral awards and is of tremendous importance for the choice of the right situs and the ultimate enforcement of the award.5 There is an inherent conflict of interests involved in any arbitration proceeding that makes this relationship so difficult and problematic. On one side, there are the interests of the parties to a contract containing an arbitration clause (clause compromissoire).6 Some reasons for resorting to arbitration instead of the national courts, apart from its confidentiality, include the widespread mistrust of the efficiency, technical expertise, and impartiality of these courts. 7 Parties to a complex and technically intricate international transaction have always been and are becoming increasingly reluctant to rely on the national judiciary for dispute settlement, which, naturally, often lacks the required special economic, technical, and legal knowledge.8 The arbitration clause is expected to ensure an impartial, effective, knowledgeable, 9 and above all speedy resolution to any conflict that might arise out of or relating to the contract.'0 In contrast to this "flight from national 6. The term "clause compromissoire" is rooted in French law and refers to future disputes in contrast to a "compromis," which refers to submitting a current dispute to arbitration. A. REDFERN & M. HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 8 (1986). 7. See Yates, Arbitration or Court Litigation for Private Internationl Dispute Resolution: The Lesser of Two Evils, in RESOLVING TRANSNATIONAL DISPUTES THROUGH INTERNATIONAL ARBITRATION 224, 230-32 (T. Carbonneau ed. 1984). 8. Legal knowledge oftentimes does not keep pace with the growing internationalization of national legal systems and cases. To make matters worse, the doctrine of forum non conveniens regards international cases as an "unwarranted burden on our taxpayer... [and] an added impediment to the speedy disposition of the controversies between and on behalf of our own citizen[s]." M. FERID, INTERNATIONALES PRIVATRECHT 54-55 (3d ed. 1986). arbitration tribunals need to be informed, as procedural designers, about the state of the art of the common fund of arbitral knowledge, but also in a more detailed procedural sense, to be familiar with the sub-cultural practices and nuances of the particular commercial environment in which the dispute is placed. Id. at 49. The role of the technical expert varies, however, and seems to be more prominent in the arbitration proceedings of the Anglo-Saxon type, while on the Continent, the primary role is still with the lawyer. Glossner, Contract Adaptation Through Third Party Intervener. The Referee Arbitral, in ADAPTATION AND RENEGOTIATION OF CONTRACTS IN INTERNATIONAL TRADE AND FINANCE 191, 194-95 (N. Horn ed. 1985). 10. An arbitration clause may provide that: "Any dispute, controversy of claim arising out of or relation to this contract, of the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules." U.N. Comm'n on Int'l Trade Law, Arbitration Rules, art. 1( 1 )n. 1, U.N. Sales No. E.77.V6 (1977) [hereinafter UNCITRAL Rules]. Under U.S. law, a "narrow" arbitration clause submitting only claims "arising out of" the agreement to the arbitral tribunal might exclude the power of the tribunal to determine whether the agreement containing the arbitration clause is valid. SURVEY OF INTERNATIONAL ARBITRATION SITES 106 (Am. Arbitration Ass'n ed. 1984) [hereinafter INTERNATIONAL ARBITRATION SITES]. 608 FORDHAM INTERNATIONAL LA WJOURNAL [Vol. 12:605 courts," " one is confronted with the inherent paradox of arbitration: Arbitration proceedings sometimes cannot function properly without these courts. 12 The powers vested in national courts by the national legislature are oftentimes needed throughout the arbitration proceedings to prevent frustration of the arbitration clause and to ensure recognition and enforcement of the ultimate award. The national courts' authority in this area ranges from enforcing the arbitration agreement' 3 and provisional measures,' 4 to nominating and replacing arbitrators,' 5 as well as the taking of evidence.' 6 Most States, however, do not lend their support to arbitral tribunals operating on their soil without claiming some degree of control over the conduct of these tribunals.' 7 The most important way to gain this control is to provide for recourse against arbitral awards. 8 This procedure, however, in11. One writer has labeled this phenomenon "conflict avoidance." G. DELAUME, LAW AND PRACTICE OF TRANSNATIONAL CONTRACTS 290 (1988). 12. "[C]e sont les parties et le tribunal arbitral lui-m me qui sont int~ress~s S la puissance publique, dont l'aide leur est souvent indispensable ....[L]e r6le de la puissance public est subsidiare. Elle n'intervient que sur requte." Voyame, L 'Etatet l'Arbitrage Commercial International,in RECUEIL DE TRAVAUX SUISSES SUR L'ARBITRAGE INTERNATIONAL 15, 18 (Int'l Council for Commercial Arbitration ed. 1984). 13. Most arbitration laws provide that courts may stay proceedings or decline to accept jurisdiction to give effect to an arbitration clause in the principal contract. This is also true for arbitrations in foreign countries according to'article 11( 3 ) of the New York Convention. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, art. 11( 3 ), 21 U.S.T. 2517, 2519, T.I.A.S. No. 6997, at 1, 330 U.N.T.S. 38, 40 [hereinafter New York Convention]. See generally Stein & Wotman, InternationalCommercial Arbitration in the 1980s: A Comparison of the Major Arbitral Systems and Rules, 38 Bus. LAW. 1685, 1688-93 (1983) (discussing prearbitration judicial proceedings). 14. In the field of interim measures of protection related to the subject matter of the dispute, there is a duality of recourse to the arbitration tribunal and/or to the national courts. See UNCITRAL Rules, supra note 10, art. 26( 1 ), ( 3 ); International Chamber of Commerce, Rules of Conciliation and Arbitration of the ICC art. 8(5) (1975) [hereinafter ICC Arbitration Rules]; see also McDonell, The Availability of Provisional Relief in International Commercial Arbitration, 22 COLUM. J. TRANSNAT'L L. 273 ( 1984 ) (discussing judicial relief measures applicable to arbitration proceedings). 15. For a review on the power of national courts to aid the parties in the appointment of arbitrators, see G. DELAUME, supra note 11, at 316-19. 16. Under most arbitration laws, arbitrators have broad powers to procure evidence, but in some countries, such as France, assistance of the courts is necessary to compel production of documents possessed by third parties. See A. REDFERN & M. HUNTER, supra note 6, at 234; Stein & Wotman, supra note 13, at 1707-08. 17. See A. REDFERN & M. HUNTER, supra note 6, at 43, 316. 18. See id. at 316. 1989] creases the potential for the use of dilatory tactics by the losing party. Thus, the inherent conflict of the recourse problem becomes apparent: either restrain judicial recourse as much as possible in order to allow maximum arbitral freedom or provide for recourse to national courts, which might open the door to misuse by the losing party resulting in delay of the conflict resolution process. Where the latter option is followed, the original purpose of the arbitration clause is perverted by converting arbitration proceedings into nothing more than an additional instance of the national judiciary.' 9 In the past decade, national legislatures, especially those of the "classical" European arbitration nations, 20 have become increasingly concerned with the relationship between their courts and arbitral tribunals. Many have tried to relax the grip of their judiciary on final arbitral awards by confining supervision to some minimum standards. Realizing that international commercial arbitration constitutes an important source of revenues, 2' these states have tried to render their legal environment more attractive for arbitrations by enacting new, or revising their old, arbitration laws. These new or revised laws do not only provide the parties with a more flexible procedural framework, they also regulate to a varying extent the right of recourse against a final arbitral award before the national courts. This trend began in England in 1979 (the "U.K. Arbitration Act"), 2 2 followed by France in 1981 (the "French Arbitration Law"), 3 Austria in 1983 (the "Austrian Arbitration Law"),2 4 Belgium in 1985 (the "Belgium Recourse Provision"),2 5 The Netherlands (the "Dutch Arbitration Act") 26 in 1986, and Switzerland in 1989 (the "Swiss Arbitration Law").2 7 Sweden, which has a long-standing liberal tradition in international commercial arbitration,2 8 will also be examined in this Article. This Article will analyze this trend and attempt to assess its impact on the efficiency of international commercial arbitration as a viable alternative to litigation before the national judiciary. Where appropriate, the new laws will be compared to the UNCITRAL Model Law (the "Model Law"), 2 9 today's archetype of modern commercial arbitration laws. Finally, this TRANSNATIONAL ARBITRAL AWARDS Article will focus on the possible influence of the new laws on arbitration laws of other states, taking the Federal Republic of Germany as an illustrative example. TRANSNATIONAL COMMERCIAL ARBITRATION. A DEFINITIONAL APPROACH In contrast to the term "commercial," which is given wide meaning in most of the laws and the Model Law,3 ° it is necessary to find at least a rudimentary definition of "transnational" or "international" arbitration, since most of the new laws distinguish between national and international arbitration and apply the liberal provisions of their laws only to the latter with domestic arbitration remaining under more stringent control of municipal courts.' What exactly constitutes this international character of the arbitral proceedings is still disputed among courts, practitioners, and national legislatures. The new laws can be divided into three categories. The first category consists of those laws that provide an entire legal framework for international arbitration. The second category includes laws enacted with special provisions for recourse to national courts in international ARB. INT'L 6 ( 1985 ) (discussing the history of, and negotiation process leading to, the final version of the Model Law). 30. The Model Law refers to the term "commercial" in a footnote to article 1( 1 ), emphasizing that the term should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractural or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road. MODEL LAw, supra note 29, art. I(I) n.i, reprintedin XI Y.B. COM. ARB. at 381. The Model Law leaves untouched, however, all laws "by virtue of which certain disputes may not be submitted to arbitration .... " Id. art. i(5), reprintedin XI Y.B. COM. ARB. at 381. The new Swiss arbitration law covers "any claim related to a party's assets, rights or liabilities," which includes "all types of claims, whether contractual, tortious, commercial, or financial." Poncet & Gaillard, Introductory Note, 27 I.L.M. 37, 45 n.l (1988). 31. See Lalive, Problemes Sp&ifiques de l'Arbitrage International, 1980 REVUE DE L'ARBITRAGE 341, 345; Klein, La Nouvelle Reglementation Fran~aisede lArbitrage International et les Lois Suisses, in RECUEIL DE TRAVAUX SUISSES SUR L'ARBITRAGE INTERNATIONAL 57, 58-59 (Int'l Council for Commercial Arbitration ed. 1984). arbitrations. The third category covers the laws that make no distinction at all between national and international arbitration taking place on their soil. The French Arbitration Law belongs to the first category and is rooted in the case law of the French Cour de Cassation.12 It focuses on the nature of the dispute and defines international arbitration as "any dispute that involves the interests of international trade. '3 3 This formulation requires a complex consideration of mostly economic criteria inherent in the transaction, the nationality of the parties, transborder movement of goods or payment, 34 and seat of the arbitration. 35 Similarly, to be recognized as international under the Swiss Arbitration Law, "at the time of the conclusion of the arbitration agreement, at least one of the parties had neither its domicile nor its habitual residence in Switzerland." 3' 6 The U.K. Arbitration Act belongs to the second category and by means of a negative definition, uses a geographic criterion to determine those arbitrations where exclusion agreements are allowed and regards as domestic any agreement that does not provide, expressly or by implication, for arbitration outside the United Kingdom or to which there was no foreign party, be it individual or corporation, at the time the agreement was made.3 7 The Belgian Recourse Provision is applicable only in cases where neither of the parties is a Belgian national, is a legal entity created in Belgium or has a branch or any other establishment in Belgium.38 Under Austrian law, an award is considered "foreign" if it is rendered outside Austria,39 meaning there is no distinction in Austria between domestic and international arbitration,40 and this approach also holds true for the Swedish Arbitration Act.4 The European Convention Providing a Uniform Law on Arbitration, on the other hand, although predating the new laws by more than twenty years, combines the "nature" and geographical test and looks at interests of international trade and residence or seat of the parties involved.42 The Model Law, in its efforts to reach maximum acceptability in the international community, combines all the above approaches and focuses alternatively on the place of business or seat of arbitration or place of performance or agreement of the parties.43 In addition, the Model Law is applicable in cases where "the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country." 44 The Dutch Arbitration Act belongs to the third category, since it applies equally to both domestic and international arbitral proceedings.4 5 The Dutch legislature was well aware of the problems and uncertainties connected with the traditional distinction between international and domestic arbitration, which is the major flaw of today's modern commercial arbitration.46 The drafters, strongly influenced by the Model Law, thought that the flexibility of the new law allows application and, more importantly, adjustment to both kinds of arbitration.47 Interestingly enough, the German delegation was not successful during the negotiations of the Model Law when it suggested a broad scope of application covering both domestic and transnational arbitrations. 48 Many countries opposed this idea, arguing that traditionally grown arbitrations, which have evolved out of the typical national particularities of each country, should be maintained.49 Consequently, negotiations on this issue were particularly tough and long.50 The traditional dichotomy, however, is not without flaws. Under the new Swiss Arbitration Law, a dispute involving a cross-border sale of goods by two subsidiaries incorporated in Switzerland, but fully owned by foreign companies, might be deemed domestic and hence fall outside of the scope of the new law. 5' The U.S. delegation, during the Model Law negotiations, tried to find a remedy for these frictions and favored a provision that included conflicts between domestic companies, if at least one of them is a foreign owned subsidiary.52 This proposal was rejected, however, which seems acceptable, given the fact that the broad coverage provision of article 1( 3 )(c) of the Model Law53 might eventually be applied to these cases. 54 The French judiciary has encountered considerable TRANSNATIONAL DISPUTES THROUGH INTERNATIONAL ARBITRATION 195, 223 (T. Carbonneau ed. 1984). 47. See van den Berg, The NetherlandsArbitrationAct 1986, 15 INT'L Bus. LAW. 356 ( 1987 ). 48. See B6ckstiegel, Das UNCITRAL-Modell-Gesetzfzir die Internationale WirtschaftsSchiedsgerichtsbarkeit, 30 RECHT DER INTERNATIONALEN WIRTSCHAFT [RIW] 670, 675 ( 1984 ). Professor B6ckstiegel participated in the negotiations of the Model Law as a representative of the International Law Association. 49. See Id. 50. Id. France favored a general, abstract definition, which was also rejected since many countries feared this would leave too much freedom to national courts to interpret this definition too restrictively. Id. 51. See Poncet & Gaillard, supra note 30, at 39. The result might be different under French law. See Gaillard, The UNCITRAL Aodel Law and Recent Statutes on InternationalArbitrationin Europe and North America, 2 ICSID REV.- FOREIGN INVESTMENT L.J. 424, 428-29 ( 1987 ). 52. See B6ckstiegel, supra note 48, at 676. 53. MODEL LAW, supra note 29, art. 1( 3 )(c), reprinted in XI Y.B. COM. ARB. 380, 381 (1986). Such conflict might involve substantial foreign commercial interests which might be sufficient to fall under the Model Law. See B6ckstiegel, supra note 48, at 676. 54. See B6ckstiegel, supra note 48, at 676. problems in determining consistent criteria for the international character of arbitration under the French Arbitration Law. The Cour d'appel, Paris, for example, had to pierce the corporate veil of one of the parties to consider as international an arbitration involving the sale of a vessel between two Italian companies in Rome that had provided for arbitration under the auspices of the International Chamber of Commerce (the "ICC") in Paris.55 In contrast, the Cour de Cassation refused to consider as international an arbitration involving an agency contract between two French parties concerning representation of one of the parties in Colombia.56 The German proposals during the Model Law negotiations and the new Dutch Arbitration Act question the different treatment of domestic and international arbitration.5 7 Today's dispute over the nature of transnational or international commercial arbitration seems to polarize the analysis into two extreme positions: either continue to cope with conflicting definitions deemed necessary to uphold a different treatment of both domestic and international arbitrations or abolish this traditional dual approach and find a uniform law for both. The latter extreme may lead to a harmonization of the national law but would by no means guarantee harmonization of the different national arbitration laws. In view of the still existing multifaceted picture of domestic arbitrations in many countries, the way of the Model Law seems more practical. At present, however, there is no uniform picture as to the scope of the new laws, and one needs to look at the approach chosen by the respective national legislature when interpreting the new laws. 55. Judgment of Apr. 26, 1985, Cour d'appel, Paris, Fr., reprinted in 113 J.D.I. 175 (1986), where the court, leaving aside the legal criteria of siege social(seat), which is used in French jurisprudence to determine the seat of a company, focused on two purely economic criteria, the foreign shareholders controlling the company and the funds for the transaction being obtained from foreign sources. Id., reprinted in 113 J.D.I. at 179-80. 56. Judgment of Oct. 7, 1980, Cass. civ. Ire, Fr., La Semaine Juridique (JurisClasseur Priodique) UJ.C.P.] II No. 54, 19480. 57. It should be pointed out that the element of consumer protection, a basic premise for control of domestic arbitration, is of less importance in international arbitrations. See A. REDFERN & M. HUNTER, supra note 6, at 10. RECOURSE AND RELA TED REMEDIES tion Law.6 2 When a litigant is dissatisfied with the judgment of a national court, he may appeal to a court of higher instance. The two- or multi-instance court system is established in both common- and civil-law systems and is designed to ensure justice and uniformity of case law. 58 The appeal is the only ordinary remedy and can be based on issues of procedural or substantive law and leaves the case within the court system. The arbitration process, on the other hand, is more complicated due to its dual private and jurisdictional nature.5 9 A first distinction has to be made between internal recourse, which leaves the case within the arbitral system, and external recourse, which transfers the case from arbitration into the national judicial system. The former is rarely utilized but can be found in commodity arbitrations or other arbitrations established by trade associations, 60 as well as in the Dutch Arbitra Act,6 ' and to a lesser extent the Austrian Arbitration Modern arbitration laws and institutional arbitration 58. See M. GLENDON, M. GORDON, & C. OSAKWE, COMPARATIVE LEGAL TRADITIONS 191 ( 1985 ). The authors discuss appellate review in the civil-law systems, pointing out that a party dissatisfied with the results of the appeal may seek review by the highest court (Cour de Cassation in France, Bundesgerichtshof in Germany) which, however, may only consider questions of law and not of facts. Id. For a discussion of appellate procedure in common-law jurisdictions, see id. at 547. Commercial arbitration is consensual in that it rests upon the agreement of the parties to submit their dispute for resolution to a third party. However, it is also judicial in that it provides for a final determination of the dispute which carries with it the possibility of direct enforcement, as does the judgment of an ordinary court. tween "quality" and "technical" arbitration since appeal provisions are usually only applicable to the latter. See ZENSKE, DIE SCHIEDSGERICHTSBARKEIT IM INTERNATIONALEN HANDEL MIT BAUMWOLLE, GETREIDE, KAFFEE UND ZUCKER 362 (1975). The Dutch arbitration law, however, provides that arbitration may be used to determine "only... the quality or condition of goods." Rv. art. 1020( 4 )(a), reprinted in XII Y.B. COM. ARB. 370, 372 ( 1987 ) (English trans.). 61. See Rv. art. 1050, reprinted in XII Y.B. COM. ARB. 370, 378-79 ( 1987 ) (English trans.). 62. See ZPO § 594( 1 ), reprinted in IX Y.B. COM. ARB. 301, 304 (1983) (English trans.). frameworks or standard arbitration clauses tend not to provide for internal recourse procedures, mainly because the parties want a speedy resolution of their dispute. External recourse is further distinguished between appeal to a court on points of law or factual mistakes and other grounds for recourse. Again, provisions that provide for appeal in international arbitration are unknown or have been abolished in most jurisdictions 63 and can only be found in the United Kingdom under the U.K. Arbitration Act.6 4 In the other jurisdictions that are analyzed in this Article, the term "recourse" includes any motion to vary or set aside (annul) the award or to remit it for reconsideration to the arbitral tribunal.65 In contrast to an appeal, however, the grounds for this recourse are limited to procedural deficiencies or violations of' public policy. 66 These forms of recourse, all of which may be characterized as ordinary remedies similar to those generally found in codes of civil procedure, have to be distinguished from mere corrections of awards, which are allowed under many national arbitration laws, 67 including the Model Law68 and the Arbitration Rules. 69 This refers to corrections of minor clerical or typographical errors in awards by the arbitral tribunal, which is 63. "Under the law of most countries, there is no appeal against an [international] arbitral award." Delaume, supra note 46, at 217. This general trend is understandable, given the fact that appeal'would lead to a reconsideration of the merits of the case with the court substituting its own decision for that of the arbitral tribunal, a procedure that runs counter to the trend of arbitral autonomy. See A. REDFERN & M. HUNTER, supra note 6, at 319, 325. The situation is different in domestic arbitrations, like in France, where the parties have the right to appeal. C. Civ. art. 1481, reprinted in VII Y.B. CoM. ARB. 272, 278 (1982) (English trans.). 64. Arbitration Act, 1979, ch. 42, § 2, reprinted in V Y.B. COM. ARB. 239, 240 ( 1980 ); see infra notes 175-176 and accompanying text. 65. See A. REDFERN & M. HUNTER, supra note 6, at 321. 66. For an analysis of whether the notion of "public policy" in this context comprises substantive rather than procedural issues, see infra notes 253-55 and accompanying text. 67. See, e.g., Rv. art. 1060( 1 ), reprinted in XII Y.B. COM. ARB. 370, 381 ( 1987 ) (English trans.) (correction justified no later than 36 days after deposit of award in the case of "manifest computing or clerical error," either upon request or upon its own initiative); Arbitration Act, 1950, 14 Geo. 6, ch. 27, § 17 (correction restricted to "any clerical mistake or error arising from any accidental slip or omission"). 68. The Model Law imposes a time limit of 30 days from the receipt of the award. MODEL LAW, supra note 29, art. 33(l)-( 2 ), reprinted in XI Y.B. COM. ARB. at 388. 69. UNCITRAL Rules, supra note 10, art. 36. common in many court systems, 70 and constitutes an informal procedure falling outside the scope of recourse or appeal. There is an inherent danger, however, that application for correction may be abused as a well disguised attempt to achieve review of the award on the merits. 7' The Model Law7 2 inspired the Dutch legislature to give parties the opportunity to apply to the tribunal for an "additional award" - in case of a material omission in the original award, i.e., the tribunal not having decided one of the issues before it (decision infra petita).73 Such application is an indispensible precondition for an action to have the award set aside.7 ' The new laws did not go as far, however, as to allow application to the tribunal for authoritative interpretation of the award, since the potential for abuse was deemed too dangerous for effective arbitration and enforcement proceedings. 775 A further important distinction has to be drawn between recourse from a final arbitral award and the defenses raised in enforcement proceedings under article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). 76 This is all the more important since most of the legislatures have tried to avoid frictions between judicial supervision of the award and the ensuing enforcement proceedings abroad by adapting the grounds for challenging an award to the defenses of article V of the New York Convention. In addition, decisions of the courts in the enforcement proceeding may be appealed to a higher court, so that there may be parallel recourse proceedings, one against the award itself and the other abroad against the enforcement decision of the foreign court.77 III. THE NEWARBITRATION LAWS The new arbitration laws analyzed in this section are in order of rigidity with which each national legislature has dealt with the issue of recourse and appeal to its national courts. This section also includes a brief look at the genesis of each law to reveal that the problem of challenging international arbitral awards was of paramount importance, in one way or another, in the drafting of the new laws. A. France: Limited, Non-Excludable Recourse The French Arbitration Law was mainly a response to the G6taverken 78 and NORSOLOR 79 cases in which the Cour d'appel, Paris flatly declined appellate jurisdiction over an award rendered in France under the ICC Arbitration Rules. The court, in these cases, reasoned that since the awards had no link whatsoever with the French legal system-even though in the NORSOLOR case the defendant was a French company-and appeal under the then existing French arbitration law8° was permissible only for domestic and not for international arbitration, the awards were insulated from any judicial review by the French courts. In the aftermath of these decisions, French arbitration experts feared that as a result of this laissez-faire attitude of the Cour d'appel, the international community would lose confidence in French international commercial arbitration, s and transnational awards rendered in France would become unenforceable abroad under the New York Convention.82 In response to these concerns, the French Arbitration Law was enacted to allow actions for annulment of transnational awards ("recours en annulation") if (i) there was no valid arbitration agreement or if the agreement had lapsed 8 3 (ii) there were irregularities in the appointment of the arbitrators or composition of the tribunal,8 4 (iii) the arbitrators exceeded their authority,85 (iv) the "principle of adversarial process" (due process) was ignored,8 6 or (v) the recognition or enforcement would be contrary to international public policy. 87 The action has to be brought within one month following official notification ofjudicial declaration of the award's executory force.88 The French legislature did not leave it up to the parties to exclude these mandatory recourse provisions,8 9 but the exhaustive list of grounds for annulment constitutes the minimum standard for judicial review and enforceability of transnational awards. 90 It should be noted, however, that execution of the award is suspended during the one-month period of challenge and the challenge itself.9 This provision may have serious repercussions on the enforceability of the award abroad under article V( 1 )(e) of the New York Convention, since the court of the enforcement jurisdiction may refuse enforcement on the grounds that the award has been suspended in the country in 1989] which it was made.92 Sweden: Limited, Non-Excludable Recourse Sweden, under the Swedish Arbitration Act, 93 has long maintained a liberal attitude towards the relation of its judiciary to arbitrations taking place on its soil,94 thus there is no appeal of arbitral awards to domestic courts under the Swedish Arbitration Act. An award is void ipso iune only if (i) there was no valid arbitration agreement, 9 5 (ii) the subject matter was non-arbitratable, 96 (iii) the award was not in writing or was not signed by at least a majority of the arbitrators, 97 (iv) the award involved a question that was subject to a pending court action,98 or (v) the award is so obscure as to make enforcement impossible. 99 The nullity of the award can be invoked by the parties, without prior motion to have the award set aside, but a declaratory action is permissible.' 00 In the case of "voidable" awards, the party has to launch an action to set aside the award within sixty days after the service of the award on pain of being considered to have waived the right.' 0 ' A waiver may also be inferred from procedural conduct of the party, one example being the party taking part in the proceedings without objec177. 96. Id. § 20( 3 ), reprinted in ARBITRATION IN SWEDEN, supra note 93, at 177. 97. Id. § 20( 2 ), reprintedinARBITRATION IN SWEDEN, supra note 93, at 177. 98. Id. § 20( 3 ), reprinted inArbitration in Sweden, supra note 93, at 177, in connection with § 1,reprinted in Arbitration in Sweden, supra note 93, at 172. 99. Id. § 22, reprinted in ARBITRATION IN SWEDEN, supra note 93, at 178. 100. See Alley, InternationalArbitration: The Alternative of the Stockholm Chamber of Commerce, 22 INT'L LAW. 837, 843 (1988). 101. 1929 SFS 145, § 21, reprintedin ARBITRATION IN SWEDEN, supra note 93, at tions. 0 2 The grounds for challenge include (i) excess ofjurisdiction, 10 3 (ii) choice of Sweden as improper forum, 10 4 (iii) improper appointment or disqualification of arbitrators, 0 5 (iv) award given after agreed arbitration period,'0 6 and (v) other procedural irregularities that "in probability" may be assumed to have influenced the decision of the tribunal.' °7 The action must be brought within sixty days from receipt of the original or certified copy of the award, 0 8 and decisions of the court may be appealed to the Court of Appeal and even to the Supreme Court, but neither court is allowed to review the award on the merits.' 0 9 The statutory time limit of six months for rendering an award does not apply to arbitrations when at least one party is domiciled outside Sweden. Section 17 of the Stockholm Chamber of Commerce Arbitration Rules, however, provides for a time limit of one year, extendable upon request of a party or the court,' 10 which triggers the mechanism of section 18 of the Swedish Arbitration Act."' Under this section, tdheereadrbwitritahtiinonthaegrpeeermioedntstbipecuolamteeds bvyoidthief tphaertaiwesa."rd2is not ren The Netherlands: Limited, Non-Excludable Recourse The Dutch Arbitration Act replaced the old Dutch arbitration law, which had remained almost unchanged since 1838.'13 Interestingly enough, the old Dutch arbitration law, though rooted firmly in the continental civil-law tradition, was strongly influenced and shaped by domestic case law to an extent that 102. See W.L. CRAIG, W. PARK &J. PAULSSON, supra note 20, § 31.03; Alley, supra note 100, at 843. 103. 1929 SFS 145, § 2 1( 1 ), reprintedin ARBITRATION IN SWEDEN, supra note 93, at 178. 104. Id. § 21( 2 ), reprintedin ARBITRATION IN SWEDEN, supra note 93, at 178. 105. Id. § 21( 3 ), reprintedin ARBITRATION IN SWEDEN, supra note 93, at 178. 106. Id. § 21( 1 ), reprintedin ARBITRATION IN SWEDEN, supra note 93, at 178. 107. Id. § 21( 4 ), reprintedin ARBITRATION IN SWEDEN, supra note 93, at 178. 108. Id. 109. See INTERNATIONAL ARBITRATION SITES, supra note 10, at 72. 110. Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, art. 17, reprintedin ARBITRATION IN SWEDEN, supra note 93, app. 6, at 211, 215. 111. 1929 SFS 145, § 18, reprintedin ARBITRATION IN SWEDEN, supra note 94, at 177. 112. Id. An award without reasons is not sufficient to keep this deadline. See M. ADEN, INTERNATIONALE HANDELSSCHIEDSGERICHTSBARKEIT 206 (1988). 113. See Vellekoop, The New Arbitration Law in the Netherlands, INT'L FIN. L. REV., May 1987, at 16. reference to boilerplate arbitration frameworks like that of the ICC becomes impossible.22 1 The filing of an action to set aside does not per se have a suspensive effect unless the court grants suspension. 2 22 A Swiss scholar has suggested that the Swiss courts should go beyond the letter of the new law and develop grounds that render an award void per se for non-arbitrability or violation of public policy, and to allow recourse in case of fraud, fraudulent documents, or wrong testimonies. 223 This would mean a serious set-back for the new law, since it would reduce its value as a predictable and modern arbitration law. One can only hope that Swiss courts respect the decision of the Swiss legislature and look at other jurisdictions, such as the German, where the statutory list of grounds to set aside arbitral awards is not open for construction praeter legem.224 G. Belgium: Exclusion of Recourse Ex Lege The Belgian legislature has taken the most radical approach towards restraint of judicial supervision of arbitral awards. Under the old law,225 which covered any award rendered in Belgium without distinguishing between national and international arbitration, appeal to a court on points of law was abolished, 22 6 and the only remedy available was the action to set aside on grounds of violation of public policy, non-arbi221. See W.L. CRAIG, W. PARK &J. PAULSSON, supra note 20, § 32.08. For a discussion of the liberal case law of the English courts, see supra note 184 and accompanying text. 222. IPRG art. 190(l), SR 291, RS 291, RS 291, reprintedin XIII Y.B. COM. ARB. 446, 450 (1988) (English trans.). The Dutch arbitration law contains a similar provision. See Rv. art. 1066( 1 ), reprinted in XII Y.B. COM. ARB. 370, 383 ( 1987 ) (English trans.). One author has pointed out that Swiss courts under the Concordat showed considerable reluctance to grant suspensive effect. Blessing, supra note 203, at 73. 223. See Habscheid, supra note 199, at 771. 1989] trability of the subject matter of the dispute, award obtained by fraud or based on false evidence, and other procedural irregularities. 221 Pre-arbitration agreements to contract out all or some causes for annulment are impermissible and void.228 The Belgian Arbitration Provision abolishes any judicial review of arbitral awards if no party has a connection to Belgium. 229 This new provision bluntly prohibits the action to set aside in cases of international arbitration between two foreign parties, instead of leaving the choice to the parties as in England and Switzerland. The situation in Belgium is now parallel to that in France before the enactment of the French Arbitration Law when the French Cour de Cassation flatly declined to review awards rendered in international arbitration in France. 230 The burden of reviewing the award is shifted to those courts abroad where the winning party seeks to have the award enforced under the New York Convention or the respective national laws. Again, the underlying premise for this revision to the law was that means of recourse against arbitral awards at the seat of the arbitration often serve merely dilatory purposes. 23' Although the U.K. Arbitration Act served as a model for the Belgian Arbitration Provision,232 Belgium went much further in that it excluded any judicial review directly ex lege and not indirectly through party agreement. Further, the Belgian Arbitration Provision abolished any review, whereas under the U.K. Arbitration Act, supervision over arbitrators' misconduct remains non-excluda227. C. JUD. art. 1704( 2 ), ( 3 ) (providing thirteen grounds for annulment). 228. C.JuD. art. 1704( 2 ). For a discussion of the possible effects on article 1704 resulting from the enactment of the Belgium Arbitration Provision, see Matray, Belgium, V Y.B. COM. ARB. 1, 22 ( 1980 ); Vanderelst, Increasingthe Appeal of Belgium as an InternationalArbitrationForum? The Belgian Law ofMarch 27, 1985 Concerningthe Annulment of ArbitralAwards, J. INT'L ARB., June 1986, at 77, 80. 229. C. JuD. art. 1717( 4 ). Article 1717( 4 ) provides as follows: Les tribunaux beiges ne peuvent connaltre d'une demande en annulation que lorsqu'au moins une partie au diff~rend tranch6 par la sentence arbitrale est soit une personne physique ayant la nationalit6 beige ou une r~sidence en Belgique, soit une personne morale constitute en Belgique ou y ayant une succursale ou un si~ge quelconque d'op6ration. Id. 230. See supra note 78-82 and accompanying text. 231. See Nelissen-Grade, The Annulment ofArbitral Awards in Belgium, Int'l Fin. L. Rev., Nov. 1986, at 35. 232. See id. 2 33 UNSETTLED ISSUES UNDER THE NEW LAWS The new laws have considerably liberalized international arbitration in general and the review of arbitral awards in particular. Narrow grounds for review, time limits for motions to set aside, and optional exclusion agreements contribute to the growing attractiveness of many European arbitration centers. Finality seems to be more important than legality of awards.23 4 This development has gained such momentum that the U.K. Arbitration Act has become outdated before it has reached its tenth anniversary. Yet, the new laws are by no means a pan acea for the problems and intricacies of transnational commercial arbitration. This is especially true for the concept of public policy in international arbitration and the issue of "de-localized" awards. Public Policy: Appeal Through the Back Door? The above analysis reveals that there are basically three groups of grounds for recourse against arbitral awards in international arbitration laws. The first group addresses the contractual basis for an award, including incapacity of a party to the arbitration agreement or invalid arbitration clause,2 3 5 excess ofjurisdiction, 23 6 and non-arbitrability of the subject-matter. 1 7 The second group encompasses procedural irregulari True it is, that formerly the Court was careful to maintain its supervisory jurisdiction over arbitrators and their awards. But that aspect of public policy has now given way to the need for finality. In this respect the striving for legal accuracy may be said to have been overtaken by commercial expediency. Id. at 423. 235. MODEL LAw, supra note 29, arts. 34( 2 )(a)(i), 36( 1 )(a)(i), reprinted in XI Y.B. CoM. ARB. 380, 389, 390 (1986); New York Convention, supra note 13, art. V(l)(a), 21 U.S.T. at 2520, T.I.A.S. No. 6997, at 4, 330 U.N.T.S. at 40. 236. MODEL LAW, supra note 29, arts. 34( 2 )(a)(iii), 36(l)(a)(iii), reprinted in XI Y.B. CoM. ARB. at 389, 390; New York Convention, supra note 13, art. V(I)(c), 21 U.S.T. at 2520, T.I.A.S. No. 6997, at 4, 330 U.N.T.S. at 42. 237. MODEL LAW, supra note 29, arts. 34( 2 )(b)(i), 36(l)(b)(i), reprintedin XI Y.B. CoM. ARB. at 389, 390; New York Convention, supra note 13, art. V( 2 )(a), 21 U.S.T. at 2520, T.I.A.S. No. 6997, at 4, 330 U.N.T.S. at 42. ties including forged documents, defects of the award itself, improper notice of arbitrator appointment or the proceedings or inability to state one's case,2 38 and the composition of the tribunal violating the agreement of the parties. 23 9' The third category involves violation of public policy. 2 0 The Model Law, both in its recourse 24' and enforcement 24 2 provisions, as well as the New York Convention,2 43 clearly reflect this classical trias and present an example "par excellence" for the growing unification of international arbitration law. The most important ground in the first group, which is comparatively easy to detect and open to objective ascertainment, is the issue ofjurisdiction of the arbitrator.2 4 4 The tribunal has the right to rule on its own jurisdiction (KompetenzKompetenz),2 4 5 but the ultimate determination is left to the national courts. 246 Under English law, excess of jurisdiction is part of the arbitrator's misconduct, a ground for setting aside that cannot be excluded through party agreement, 24 7 thus forcing the courts to distinguish between errors of law, which cin be excluded as grounds for recourse, and excess of jurisdiction, which cannot. 248 The grounds included in the second group are concerned with procedural irregularities and defective awards and vary according to the rigidity and requirements of the domestic law. A typical example is the missing arbitrator's signature, which is a ground for setting aside under the Austrian Arbitration Law 2 49 and under the Dutch Arbitration Act, 250 but not under the Swiss Arbitration Law, even though all three jurisdictions require the award to be signed by the arbitrators. 251 A fundamental principle, reflected in most of the laws, is that of "due process," i.e., procedural equality of the parties and the right to be heard and to present one's case. 2 52 The third group, setting aside an award on the ground that it is in violation of "public policy," is contained in all of the laws and the Model Law, but is by far the most problematic. The problem lies in the hybrid and ambiguous nature of a provision that embraces both procedural and substantive aspects2-5 and that refers to "the fundamental economic, legal, moral, political, religious and social standards of every State or extra-national community ....[which are] 'so sacrosanct as to require their maintenance at all costs and without exception.' ,254 Since the procedural aspect of public policy is al1989] ready covered by the various grounds included within the first and second group discussed above, the ground of public policy will be mainly concerned with the substantive defects of the award.2 5 5 This might ultimately reintroduce review of awards on the merits, which would run counter to the modern trend of arbitral autonomy and independence. The legislatures were well aware of this danger when they enacted the new arbitration laws and some of them have tried to confine this ground to the very basic principles of law and morality. The Austrian legislature, for example, no longer relies on "violation of mandatory provisions of Austrian law, ' 2 56 which covered a broader field than just Austrian public ordAeurs,2tr5i7anbultegoanl isnycstoemmp.2a5t8ibiTlihtyis ws hitihft thine pbuabsliicc pproi nlicciyplfeoscuosf itmheplies that an award might well be contrary to mandatory provisions of Austrian domestic law without violating Austrian public policy. 259 Violation of mandatory law is not totally excluded, however, but the applicable Austrian procedural rules are not relevant in international arbitration.2 6 ° A differentapproach has been taken by the French and Swiss legislatures. Both the French Arbitration Law and the Swiss Arbitration Law have restricted the notion of public policy to "international" public policy2 6C1 in order to save the award from the strict application of purely domestic rules of public policy. The change to international public policy is particularly surprising in the Swiss legal context, since the Swiss Federal Tribunal has held that "[i]t cannot be ascertained how an 'ordre public international' would limit the application of foreign law more, or in other manner, than Swiss public order does. ' 262 The French and Swiss legislatures have, therefore, reacted to a general trend in international arbitration, whereas the courts have carefully begun to develop a narrow and restricted concept of "international" public policy. 2 63 Though difficult to define, international public policy involves the fundamental rule of natural law, the principles of "universal justice," jus cogens in public international law, and the general principles of morality and public policy accepted by civilized nations.264 It is clear that if the courts do actually adhere to this restrictive notion of public policy, awards will be set aside only in very rare "absolutely blatant cases."' 265 The concept of international public policy, however, does not alleviate the burden of the courts to determine the contents of "public policy." Its vagueness and flexible character, leaving it in a constant state of flux, leaves great responsibility with the courts, especially since international public policy may well embrace principles of domestic public policy. 26 6 This fact may tempt the French and Swiss courts to rule according to the wider principles of "their" domestic public policy, a concept with which they are more familiar. A final but important safeguard against a liberal application of the public policy ground is found in Swiss, Austrian, and French legal doctrine according to which the holding of the award itself, and not just the reasons given by the arbitra262. Judgment of May 5, 1976, Bundesgericht, Switz., 102 BGE la 574, 583 (translation by author). 263. See, e.g., id.;Judgment of July 12, 1984, Cours d'appel, Paris, Fr., reprinted in 23 I.L.M. 1048 ( 1984 ) (English trans.); see also Domke, Towards an "International"Public Policy in CommercialArbitration, in FESTSCHRIFT FOR ARTHUR BOLOw 49, 51 (K.H. B6ckstiegel ed. 1981). 264. SeeJ. LEW, supra note 254, at 534. Typical examples would be protection of fundamental human rights and abhorrence of slavery; racial, religious, and sexual discrimination; kidnapping; murder; piracy; and terrorism. Id. 265. Blessing, supra note 203, at 70. "[Qjue le tribunal f~dral limite son examen aux cas absolument crasses." Id. at 70-71 (quoting the minutes of the Swiss Conseil National). 266. In France, the principle of suspension of individual claim in bankruptcy law is an element of both domestic and international public policy: "est Aila fois d'ordre public interne et international . Judgment of Mar. 8, 1988, Cass. civ., Ire, Fr., 1988 Bull. Civ. 1, 42, 43. 643. tors, have to violate public policy. 26 7 If the award can be upahweladrdanitdsejluf,sttihfieend thoenregriosunnodsviooltahteiornthoafnputhbolisce ploislitceyd. 2i6n8 the In all jurisdictions that subject international awards to judicial control of violations of international public policy, much will depend on whether the courts are able and willing to develop a restrictive concept of public policy that does not lead to an appeal through the back door. The New Laws and DelocalizedAwards 1. Delocalization Through Party Agreement Under the U.K. Arbitration Act, Swiss Arbitration Law, and to a much more limited extent the Austrian Arbitration Law, parties may agree. to exclude judicial supervision of arbitral awards. This leads to the much disputed question of whether parties to an arbitration agreement may, regardless of any provisions allowing exclusion agreements, avoid constraints of any domestic procedural arbitration law, and with it the intervention and supervision of national courts, by "detaching" the proceedings from domestic laws and lifting them on a transnational, even non-legal plane. 269 This involves both the law applicable to the merits of the dispute (substantive aspect of denationalization) and the rules governing the procedure (procedural aspect of denationalization), an important distinction that is oftentimes not properly drawn.270 This is astounding, given the fact that in a transnational context it happens more often than not that different laws govern the procedure and the substance of the arbitration proceeding. 27' In the context of this analysis, only the procedural aspects of the theory are of interest.17 2 The premise underlying this theory is clear. If states do actually have less interest in arbitrations involving non-nationals and if the only legal basis of any arbitration and the source of the arbitrator's power is the arbitration agreement, then the parties should be entitled to create their own transnational arbitration law, the lex arbitri, which is totally different from the arbitration law of the seat, the lex loci arbitri.2 73 The arbitration law is thus "contractualized."' 7 4 This approach, which emerged in the 1960s,2 7 5 seems to give maximum effect to the current trend towards arbitral autonomy and renders choice of situs meaningless for questions of applicable law. This doctrine, however, is also impractical for two reasons. First, there is no comprehensive and consistent procedural framework provided by international law that could cover any issue arising during the arbitration proceedings where the parties, having expressly excluded application of any domestic law, exclude the "supplemental ' 2 76 role of these laws and of the relevant courts to fill gaps in the arbitration agreement where necessary. This is especially true for recourse to national courts. The parties themselves cannot "create" authority for national, and frequently, foreign courts' supervision of arbitral awards in their arbitration clause unless the law of the situs allows such "contracting in."' 2 77 Hence, the losing Seguros del Peru, [1988] 1 Lloyd's Rep. 116 (C.A.). There the court stated that all contracts providing for arbitration may involve three potentially relevant systems of law: the law governing the substance, the law governing the arbitration clause, and the law governing the conduct of the arbitration proceedings, i.e., the lex arbitri, and the latter two will often be different from the first. Id. at 119. 272. For a comprehensive analysis of the various ways to determine the applicable substantive law rules-with or without reference to a particular national system of private international law-and of arbitrations governed by non-national law, see J. LEW, supra note 254, at 285-508. 273. For a discussion of this distinction, see Hirsch, The PlaceofArbitration and the Lex Arbitri, ARB. J., Sept. 1979, at 43; Park, The Lex Loci Arbitri and International Commercial Arbitration, 32 INT'L & COMP. L.Q. 21 (1983). 274. "La loi est en d'autres termes, 'contractualis~e.' " Klein, supra note 31, at 59. 275. See P. FOUCHARD, L'ARBITRAGE COMMERCIAL INTERNATIONAL 22-27 ( 1965 ). 276. See Bfihler, Staatsgerichtliche Aufhebungskontrolle am Schiedsort? Zur Reform Belgiens, 7 PRAXIS DES INTERNATIONALEN PRIVAT-UND VERFAHRENSRECHTS [IPRAx] 253, 254 ( 1987 ) (discussing "Aushilfsfunktion" (supportive function) of courts); Shindler, ArbitrationStill Bound, 102 L.Q. REV. 500, 504 (1986). 277. Professor Schmitthoff suggests that the principle of "contracting out" used in the 1979 Arbitration Act should be reversed by the principle of "contracting in," claimant would not be able to challenge the "de-localized" award even if the law of the seat provides for recourse to national courts, a result that seems to contradict the basic notions of procedural fairness and equity. The losing defendant, on the other hand, would be forced to raise defenses under article V of the New York Convention in every country where enforcement is sought by the claimant, instead of having the award declared void once and for all before the courts of the situs, a very cumbersome procedure that also hinders the losing party from obtaining redress.2 78 More important, it is more than doubtful whether the New York Convention applies at all to these kinds of internationalized awards, 27 an argument that ultimately led to the revision of the French law in the aftermath of the G6taverken case 2 80 and hints at the strong interaction of judicial supervision and ultimate enforcement of the award. This is also expressed in article 24 of the ICC Arbitration Rules, which commands the tribunal to ensure enforceability of its award.2 8 ' Under article V( 1 )(e) of the New York Convention, enforcement may be refused if the award has been set aside "by a competent authority of the country in which, or under the law of which, the award was made,' ' 282 implying that every award must have a nationality and every arbitration is to be governed by a national arbitration law. 83 This law has to be the law of the seat and only if i.e., allowing the parties to provide for judicial review on points of law in their arbitration agreement. Schmitthoff, supra note 190, at 20. 278. See Vanderelst, supra note 228, at 86. "Lui permettre de contester imm~diatement et sur place la r~gularit6 de la sentence est pour la partie condamn~e une garantie essentielle, et non un encouragement lachicane." Fouchard, supra note 34, at 412. 279. See A. VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958, at 34-40 (1981). 280. Judgment of Feb. 21, 1980, Cours d'appel, Paris, Fr., 1980 Recueil DallozSirey,Jurisprudence[D.S. Jur.] 568. 281. ICC Arbitration Rules, supra note 14, art. 24. "In conferring authority upon an arbitrator to settle an international dispute, a term is implied in the parties' agreement with the arbitrator that he will render an award which is enforceable under the New York Convention." Poznanski, supra note 59, at 86 (footnote omitted). 282. New York Convention, supra note 13, art. V( 1 )(e), 21 U.S.T. at 2520, T.I.A.S. No. 6997, at 4, 330 U.N.T.S. at 42 (emphasis added). 283. SeeJ.G. WETTER, supra note 270, at 409. For a discussion on the emerging enforcement problems under the New York Convention, see van den Berg, Some Recent Problems in the Practiceof Enforcement Under the New York and ICSID Conventions, 2 ISCID REV.-FOREIGN INVESTMENT L.J. 439, 445 ( 1987 ) [hereinafter Recent Problems]; this law allows party autonomy may the parties create their own procedural framework, which has to comply, however, with the mandatory provisions of the lex loci arbitri2.8 4 States have a legitimate interest in regulating arbitrations on their soil. 2 8 5 The growing conviction that arbitrations should be linked to the law of the seat is also reflected in the Dutch Arbitration Act, which requires application of Dutch law to arbitrations taking place in the Netherlands.2 8 6 The same is true under the U.K. Arbitration Act 28 7 and is also reflected in the Model Law. 288 However, the Swiss Arbitration Law, after lengthy parliamentary debates, disconnected the international arbitration from domestic procedural law. 28 9 This doctrine must necessarily lead to the converse conclusion that in cases where the arbitration clause provides for a certain law to govern the proceedings without determining the seat, that country has to be the seat and its courts are competent to control and assist the arbitration.2 90 Detachment from any national law may be appropriate in arbitration with state parties where international comity and respect of the jurisdictional immunity of states that are parties to an arbitration may require application of non-national van den Berg, Should an InternationalArbitratorApply the New York ArbitrationConvention of 1958?, in THE ART OF ARBITRATION 39, 47 (J. Schultsz ed. 1982). 284. Mann, Lex FacitArbitrum, in INTERNATIONAL ARBITRATION 157, 161 (P. Sanders ed. 1967). "It is the law that confers such a right [to disregard the national law of the forum]. Where the law fails to grant it, no arbitrator can lawfully arrogate it to himself." Id. at 170 (footnote omitted); see also Catranis,'Problemeder Nationalisierung Ausldndischer Unternehmen vor Internationalen Schiedsgerichten, 28 RIW 19, 21 (1982); Iwasaki, supra note 5, at 67; Recent Problems, supra note 283, at 443; von Hoffmann, Die Novellierung des Deutschen Schiedsverfahrensrechtsvon 1986, 6 IPRAx 337 (1986). 285. "Certes, 6tant une institution juridique, l'arbitrage ne peut se soustraire A l'autorit6 de l'Etat." Voyame, supra note 12, at 22. 286. See Tebbens, supra note 115, at 143. 287. Arbitration Act, 1950, 14 Geo. 6, ch. 27, § 12(6); see also Mann, England Rejects "De-Localized" Contracts and Arbitration, 33 INT'L & COMP. L.Q 193, 197-98 ( 1984 ). But see G. DELAUME, supra note 11, at 326 (noting that French law is more liberal in this respect and does not adhere to the lex loci arbitri doctrine). 288. It has been pointed out that the mandatory character of some provisions of the Model Law shows that the Model Law does not accept the concept of delocalized or floating arbitration. B6ckstiegel, supra note 48, at 675. 289. Otherwise the parties "have to take the trouble to look into the local niceties of purely domestic procedural rules and appoint Swiss counsel to look into bulky commentaries and trace abundant case law of purely domestic courts, materials not even available in English." Blessing, supra note 203, at 47. 290. See Naviera Amazonica Peruana S.A. v. Compania Internacional de Seguros del Peru, [1988] 1 Lloyd's Rep. 116, 119 (C.A.). standards. 29 ' Example of this would be the awards of the USIran Claims Tribunal in The Hague 29 2 and investment arbitration under the auspices of ICSID.293 These rules, however, cannot be transferred to private party arbitration. As a matter of international practice, arbitrators frequently have the nationality of the seat and tend to apply "their" arbitration law in case no predetermination has been made by the parties.294 This serves as an additional safeguard for the lex loci arbitri rule.. If an effective interaction of arbitration and enforcement requires respect of the law of the seat, the question remains whether these laws may abolish judicial review of transnational awards-directly as in Belgium or indirectly by allowing exclusion agreements as in Switzerland-without destroying the complicated equilibrium of arbitration and enforcement. In Belgium, the proceedings are still governed by domestic law 2 95 and domestic courts may still exercise their assistory role during the proceedings. 296 The award, however, cannot be supervised by the courts of the seat, although its law, to the 291. The delocalization doctrine was first employed in the Saudi Arabia v. ARAMCO, 27 INT'L L. REP. 117 (1963), and Lybia v. TOPCO, 17 I.L.M. 3 (1979), arbitrations. Both arbitrations involved state parties (Saudi Arabia and Libya respectively) where the arbitrators held that the respect for the jurisidictional immunity of foreign states forbids a state party in arbitration to be subject to the law of another state. 292. Some consider the awards of the Tribunal as "anational" since they are governed by the UNCITRAL Rules instead of Dutch arbitration law. van den Berg, Recent Problems, supra note 283, at 442. But see Dallal v. Bank Mellat, 1986 QB. 441, where the court recognized an award of the arbitration tribunal as valid even though the arbitration agreement violated Dutch arbitration law. The court stressed that the decision would have been different in case of a purely "consensual arbitration" involving only non-state parties with no authority and competence derived from international law. See id. at 456. 293. The ICSID Convention takes account of the interaction of arbitration and enforcement and obligates member states to enforce ICSID awards, thereby insulating them from any national enforcement provisions. Delaume, Foreign Sovereign Immunity: Impact on Arbitration, 38 ARB. J. 34, 35-36 (1983).. 294. See Triebel & Viertel, Die Bundesrepublik Deutschland wird als Schiedsgerichtsort im Internationalen Schiedsverfahrengemieden, 41 BETRIEBS-BERATER 1168, 1169 (1986). 295. See Buihler, supra note 276, at 255; Vanderelst, supra note 228, at 85. Awards rendered in Belgium are considered Belgium awards under the Belgium Judicial Code. See Matray, La Loi Beige du 27 Mars 1985 et Ses Repercussions sur IArbitrage Commercial International,64 REVUE DE DROIT INTERNATIONAL ET DE DROIT COMPARi 243, 256 ( 1987 ). 296. See Vanderelst, supra note 228, at 84. "[T]here can be no question that the extent that it contains mandatory provisions, has to be applied by the arbitrators. This is a paradoxical situation and it seems that these legislatures have gone too far in their efforts to achieve "the best of both worlds." Judicial control during the proceedings seems to be no appropriate surrogate for recourse,2 9 7 since oftentimes parties and their counsel cannot determine chances for recourse -before they have the ultimate award. It also seems very problematic to rely on the expertise and reputation of acknowledged arbitration centers instead of judicial control, 298 because this can by no means guarantee insulation from any procedural irregularities to an extent that would render judicial control superfluous and would mean an invitation for executor shopping by the winning party.2 9 9 More importantly, courts of the enforcement state frequently rely on judicial control through the courts of the situs. Apart from these practical considerations, it seems that, as in the case of delocalization through party agreements, article V( 1 )(e) of the New York Convention prohibits the enforcement of awards insulated from any judicial control of the situs, requiring not only application of its law but also control through its courts. 30 0 awards, though no longer subject to annulment, are still subject to the control of the Belgian courts." Nelissen-Grade, supra note 231, at 36. 297. Mr. Nelissen-Grade seems to argue that judicial control during the proceedings makes control of the ultimate award redundant. See Nelissen-Grade, supra note 231, at 36. 298. "To us, there seems to be only little danger that the award is defective so as to prevent enforcement under the New York Convention; this is especially true for a well respected and experienced arbitration center like the Zurich Chamber of Commerce." Letter from the Zurich Chamber of Commerce to Klaus Peter Berger (Sept. 27, 1988) (copy on file at the FordhamInternationalLaw Journaloffice) (translation by the author). Mr. Buihler, the former legal counsel to the ICC Court of Arbitration in Paris, maintains that in institutional arbitration such as that under the auspices of the ICC, reputation of arbitrators may be adversely affected by defective awards, a fact that they want to avoid especially when interested in their reelection. Biihler, supra note 276, at 255 n.39. Lord Justice M. Kerr recommends that arbitrations be conducted without an exclusion agreement "unless it is possible to agree in advance on an arbitral tribunal of known high calibre-but in practice this is rarely a realistic possibility." Kerr, supra note 157, at 14. 299. Mr. Nelissen-Grade concedes that "[a]lthough difficulties may exist for the winning party trying to obtain an exequatur if the award contains serious flaws, its existence is not impaired. The losing party cannot have it annulled by a Belgian court." Nelissen-Grade, supra note 231, at 37; see also Vanderelst, supra note 228, at 85. 300. See Habscheid, supra note 199, at 772 (Swiss law). Although it is true that awards rendered by the Arbitration Court at the USSR Chamber of Commerce and Industry are enforceable under the New York Convention, though they are not subject to any means of recourse, 0 l this is mainly due to the specificities of the Soviet legal system and should not be generalized.30 2 If the arbitrator has to apply the mandatory standards of the local law, which under the new laws constitute the minimum standards of international arbitration, then it should be the judiciary of this country that controls the application of these standards once and for all with binding force for the enforcement jurisdiction. Article V( 1 )(e) of the New York Convention, in connection with a bilateral treaty containing special enforcement provisions, led the Austrian Supreme Court in NORSOLOR 30 3 to accept jurisdiction of Austrian courts for actions of annulment over an award rendered in Austria between two foreign parties, though there was a movement in Austria that its courts should refrain from reviewing such "international" awards. 0 4 In Sweden, where commentators have voiced similar concerns against judicial review of purely international awards, a lower court has accepted jurisdiction for an action under section 21 of the Swedish Arbitration Act.3 5 The Austrian Arbitration Law has introduced a provision that provides for a competent court for any applications during the arbitration proceedings, including actions to set aside, 0 6 while in Sweden the issue remains to be settled. 7 Judicial control over international awards through the courts of the situs should hence be maintained, °8 and the Belgian solution, aimed at increasing the attractiveness of Belgium for international arbitration, might turn out to be a flop, because the Belgian legislature, focusing solely on the dilatory aspect of the problem, might not have been aware of the legal and practical problems connected with its radical approach. 0 9 Today's modern arbitration practice shows that parties generally want the mandatory rules of the local arbitration law to govern the proceedings, because parties want their case to be decided in clearly defined and workable procedural frameworks that guarantee effective enforcement proceeding*s. 310 DEVELOPMENTS IN GERMAN LA W: GOING AHEAD OR LAGGING BEHIND? The trend towards more arbitral freedom and judicial restraint has gained momentum both within and outside Europe. Italy,3 1' Australia,3 12 Canada, 31 3 and Hong Kong 31 4 have opened the worldwide competition. Egypt is considering 308. The annulment of awards solely in the jurisdiction in which they were rendered results in a "simplication considerable du statut international des sentences; elles ne pourraient ktre annul~es que dans le pays o6 elles ont &6 rendues, mais elles pourraient toujours y tre, pour les causes d~termines par cet Etat." Fouchard, supra note 34, at 411. This is also the opinion of the German Committee on Arbitration, Bonn. "We are of the opinion that it does not promote arbitration if such ground for annulment [i.e. for violation of public policy] is negated." Letter from the German Committee on Arbitration, Bonn, to Klaus Peter Berger (Aug. 31, 1988) (copy on file at the Fordham InternationalLaw Journaloffice) (translation by the author). 309. See Vanderelst, supra note 228, at 84-85. 310. See Habscheid, supra note 199, at 767. Interested parties during the negotiations of the Model Law opposed the concept of "denationalized" awards, which they considered to peril the predictability of the proceedings and the enforcement of the transnational award. See B6ckstiegel, supra note 48, at 675. 1989] TRANSNATIONAL ARBITRAL A WARDS adopting a modified version of the Model Law,. 15 and the 1983 Lebanese Code of Civil Procedure 316 contains new arbitration provisions closely modeled after those of the French Arbitration Law, an indication that the trend has reached the trade centers of the Middle East. In view of this international development it seems strange that the Federal Republic of Germany is still relying on an arbitration law that is now more than 100 years old (the "German Arbitration Law").3 t 7 In spite of Germany's strong position in world trade, only 2.5% of ICC arbitrations conducted between 1980 and 1982 took place in Germany, and of the two hundred arbitration proceedings conducted in Europe in 1985, only seven had a German situs.3 1 8 The reasons for this skepticism are the perceived flaws of German Arbitration Law, which are partly justified and partly due to international practitioners' lack of familiarity with the German laws on arbitration." 9 In spite of its age, the German Arbitration Law is considered to be one of the most liberal and flexible in the world,320 but it is still not without flaws. In contrast to most jurisdictions, the German Arbitration Law recognizes as international every arbitration that is not covered by German Arbitration Law irrespective of the situs.3 2 ' This may lead to unforeseen frictions with other arbitration laws.3 The 1986 revision of the German International Private Law 32 3 has further improved the legal environment in that it allows signatures of the majority of arbitrators instead of all of them, thus following the Model Law and the French Arbitration Law, Swiss Arbitration Law, and Austrian Arbitration Law.3 24 It also allows different ways of notification of the award to the parties instead of solely by formal service through state organs3 2 5 and no longer requires as mandatory recording of the award at the clerk's office of the competent court.3 26 This revision was intended to make it more difficult for an unwilling foreign party to escape a final award under German procedural law, thus meeting concerns that had been raised before the revision.3 2 7 As to grounds for setting aside an award, German Arbitration Law provides that awards may be set aside only if (i) there was no valid arbitration agreement,3 28 (ii) the award is based on improper proceedings (including violation of institutional arbitration rules, application of lex mercatoriawithout authorization, 329 improper appointment of arbitrators,3 3 0 excess ofjurisdiction and awards infra and ultrapetita3 3 1), 3 32 (iii) the party was not represented according to the provisions of the law (unless recourse according to their domestic arbitration law. See Triebel & Petzold, Grenzen der lex Mercatoria in der InternationalenSchiedsgerichtsbarkeit, 34 RIW 245, 249 (1988). 323. Gesetz zur Neuregelung des Internationalen Privatrechts [GNIP], 1986 Bundesgesetzblatt, Teil 1 [BGBI.I] 43 (W. Ger.), reprintedin 27 I.L.M. 6 (1988) (English trans.); see also Gildeggen & Langkeit, The New Conflict of Laws Code Provisions of the Federal Republic of Germany, 17 GA. J. INT'L & CoMP. L. 229 ( 1987 ). 324. Compare ZPO § 1039( 1 ), as amended by GNIP, art. 4(10), 1986 BGBI.I 1152, reprintedin 27 I.L.M. 6, 28 (1988) (English trans.) with MODEL LAW, supra note 29, art. 31( 1 ), reprintedin XI Y.B. CoM. ARB. at 388. Under the former § 1039, an arbitrator, sometimes influenced by "his" party, could prevent the award from becoming final by simply refusing his signature. To sue the arbitrator for his signature was possible but particularly cumbersome, especially in the case of foreign arbitrators. 325. ZPO § 1039( 2 ), as amended by GNIP, art. 4(10), 1986 BGBI.I 1152, reprinted in 27 I.L.M. 6, 28 (1988) (English trans.). 326. ZPO § 1039( 3 ), as amended by GNIP, art. 4(10), 1986 BGBI.I 1152, reprinted in 27 I.L.M. 6, 29 (1988) (English trans.). 327. See Triebel & Viertel, supra note 294, at 1170-72. 328. ZPO § 1041( 1 ). 329. Application of lex mercatoriawithout authorization also constitutes a ground for refusing enforcement under article V( 1 )(c) of the New York Convention. See Triebel & Petzold, supra note 322, at 250. 330. Judgment of May 5, 1986, Bundesgerichtsnof, W. Ger., 49 Neue Juristiche Wochenschrift [NJW] 3079, 3080 (1986). 331. See BAUMBACH, LAUTERBACH & ALBERS, supra note 224, at 2151. 332. ZPO § 1041( 1 ). it has agreed either tacitly or explicitly to the proceedings), 333 (iv) there existed a violation of the right to be heard,334 (v) the award is rendered without reasons, 335 or (vi) as grounds for a trial de novo-in case of fraud, forged documents, wrong testimonies under oath, and other violations of criminal laws.3 3 6 As to violations of public policy, the German Arbitration Law no longer relies on mere "violation of public policy," because the 1986 revision of Germany's International Private Law has changed the wording to any awards the recognition of which would lead "to a result that is manifestly incompatible with essential principles of German law, in particular if the recognition is incompatible with fundamental rights. ' 337 The changed wording of this provision finds some parallels in the Austrian Arbitration Law.338 The German solution is more ambiguous, though, because it relies on a "manifest" violation, leaving the exact determination to future case law, which does not contribute to certainty and predictability. It was for this reason that the Swiss legislature expressly avoided such qualifications. 39 As in the case of the French Arbitration Law, Austrian Arbitration Law, and the Swiss Arbitration Law, the award itself has to violate the essential principles of German law. 3 40 According to the German Federal High Court, parties cannot waive their right of recourse until after the award has been rendered and the ground for setting aside is known to them.3 4 ' The right to have the award set aside for absence of reasons, however, may be waived in advance by the parties. 34 2 Improper application of substantive law does not constitute a ground for setting aside,343 but the German Federal High 333. Id. § 1041( 1 )( 3 ). 334. Id. § 1041( 1 )( 4 ). 335. Id. § 1041( 1 )(5). 336. Id. § 1041( 1 )(6). 337. Id. § 1041(l)( 2 ), as amended by GNIP, art. 4(11), 1986 BGBI.I 1152, reprinted in 27 I.L.M. 6, 29 (1988) (English trans.). 338. See supra notes 143, 258 and accompanying text. 339. See Blessing, supra note 203, at 70. 340. See BAUMBACH, LAUTERBACH & ALBERS, supra note 224, at 2152 (discussing this issue as developed by German scholars and practitioners). 341. See Judgment of Sept. 26, 1985, Bundesgerichtshof, W. Ger., 39 NJW 1436 (ICC Arbitration Rule article 24 does not constitute a valid waiver ofjudicial review under German arbitration law); Judgment of Dec. 21, 1983, Oberlandesgericht, Frankfurt, W. Ger., 37 NJW 2768. 342. See ZPO § 1041. 343. Judgment of Sept. 26, 1985, Bundesgerichtshof, W. Ger., 96 BGHZ 40, 46. Court has applied article 1041 of the German Code of Civil Procedure in a case where the tribunal disregarded a choice of law contract of the parties,344 which is clearly an error related to substantive and not to procedural law. 45 This illustrates the still existing problems and intricacies of German arbitration case law. All in all, the 1986 revision has not substantially changed the legal environment for international arbitrations except for the issue of achieving finality. In view of the worldwide development towards more uniformity of law and more arbitral freedom, it seems sensible to suggest a principal revision of German arbitration law and adoption of the Model Law.346 This would mean that judicial control of international awards would be maintained 347 but confined to the exhaustive catalogue of article 34 of the Model Law. In addition, German arbitration law would no longer be a conglomerate of statutory and voluminous case law, thus becoming more attractive for foreign counsel. To safeguard a speedy disposition of such cases through the national judiciary, the legislature should work towards a substantial reduction of case duration. Under the present German Arbitration Law, parties may take an action to have an award set aside through three instances up to the Federal High Court, which may refer the case back to the second instance. If the award is set aside, the court has to decide the case instead of remitting it to the arbitral tribunal, because the arbitration clause is consummated when the award has been set aside. 48 In a recent case, the German Federal High Court referred a case back to the second instance nine years after 344. Id. at 44. 345. See Sandrock, supra note 318, at 374-75. 346. Several authors have already suggested this step. See L6rcher, supra note 319, at 232; von Hoffmann, supra note 284, at 340. The 1987 working group at the German Institute for Arbitration in Cologne recommended the adoption of the Model Law, albeit limited to international arbitrations. See Schwab, Das UncitralModel Law und das Deutsche Recht, in BEITRAGE ZUM INTERNATIONALEN VERFAHRENSRECHT UND ZUR SCHIEDSGERICHTSBARKEIT 427, 445 (H. Nagel ed. 1987). 347. Most German commentators favor judicial control of arbitral awards according to some minimal principles. See Biuhler, supra note 276, at 256; Sandrock, supra note 318, at 378; von Hoffmann, supra note 284, at 340. 348. See R. SCHUTZE, D. TSCHERNING & W. WAIS, HANDBUCH DES SCHIEDSVERFAHRENS: PRAXIS DER DEUTSCHEN UND INTERNATIONALEN SCHIEDSGERICHTSBARKEIT 84 ( 1985 ). The parties may provide for the reopening of arbitral proceedings. Id. commencement of the arbitral proceedings 4 9 and the case was still far from settled. The district court had to reconsider the whole case, English documents had to be translated and English speaking witnesses required translators. 5 ° In addition, since the court language has to be German, parties had to hire German attorneys that were admitted at the court, thus incurring substantial attorneys' fees. According to a very promising proposal, 5 ' one should concentrate the jurisdiction to recognize and enforce international awards and to have them set aside in one court, possibly of a higher instance, without the possibility of further appeal. This would guarantee accumulation of expertise in international matters in this court and consistency and predictability of case law. The latter would substantially increase the confidence of foreign parties and their counsel in German arbitration law. This proposal should also be considered in other jurisdictions, because it seems to offer an ideal way to reconcile the expectations of the parties to an international arbitration with the intricacies of a national court system. This proposal would curtail the stages of appeal, in that it bars appeal to the Federal High Court,3 52 which is the ultimate supervisory instance of the German civil court system, but this is no real disadvantage given the high expertise of the new court, which would guarantee legally and economically sound decisions. Interestingly enough, this system has already been established, albeit optional and on a smaller scale, in Switzerland, where the parties may agree for the cantonal court to hear the action for setting aside instead of the Federal Tribunal. 53 These decisions cannot be appealed, though in all other matters, cantonal court decisions may be appealed up to the Federal Supreme Court. 54 349. Judgment of Sept. 26, 1985, Bundesgerichtshof, W. Ger., 96 BGHZ 40. 350. See Sandrock, supra note 318, at 377-78. 351. See Glossner, Eine Zentrale Gerichtsinstanzfir InternationaleSchiedsverfahren in der Bundesrepublik Deutschland?, 32 RIW 214 (1986). 352. One author considers circumvention of the Federal High Court the major flaw of the proposal. Raeschke-Kessler, Neuere Entwicklungen im Bereich der Internationalen Schiedsgerichtsbarkeit, 4 1'NJW 3042, 3051 (1988). 353. IPRG, art. 191( 2 ), SR 291, RS 291, RS 291, reprinted in XIII Y.B. CoM. ARB. 446, 450 (1988). 354. Id. "Cantonal courts ... have earned a high degree of confidence, and from this point of view it is a welcome decision that parties are given the option to CONCLUSION International commercial arbitration and its relation to national courts is still far from being a settled issue. However, the attempts made by the legislatures within and outside Europe coupled with the strong influence of the Model Law represent a promising step in the right direction. These legislatures had to fulfill a difficult task. The international arbitration community demanded more arbitral freedom while the complicated and fragile equilibrium of arbitration and enforcement abroad requires a careful and deliberate approach in order to maintain the major benefit of arbitration, the quick and easy enforcement of arbitral awards. Radical solutions, often praised as panaceas to all problems, be they "contracting-in," "contracting-out," or abolishing all judicial review, are not suitable for the solution of this sensitive issue. Instead, most legislatures have taken the right way in maintaining judicial control of transnational awards but confining it to the minimum standards of international arbitration law as embodied in the Model Law and developed by national courts over the past decades. The national court judge as "guarantor of arbitral integrity" 355 remains an indispensable factor in the international arbitration system, but he also holds an enormous responsibility. He has to develop the right "sensitivity to the need of the international commercial system for predictability in the resolution of disputes. '3 56 In international arbitration cases more than in others, he has to be aware of the effects of his decision, which go beyond the case before him, especially since such cases are ca3r5e7fully monitored by the international arbitration community. Review of arbitral awards also involves an important psychological aspect. The constant threat ofjudicial review along clearly defined criteria leads arbitrators to pay due regard to the interests of the parties and factual and legal setting of the agree on an action for setting aside being heard by the cantonal court acting in place of the Federal Supreme Court." Blessing, supra note 203, at 74. 355. Schlosser, Notwendige Reformen des Deutscheni Rechts der Schiedsgerichtsbarkeit,8 ZEITSCHRIFT FiR WIRTSCHA-rSRECHT 492 ( 1987 ) (translation by the author). 356. Mitsubishi Motors Corp. v. Soler Chrylser-Plymouth, 473 U.S. 614, 629 ( 1985 ). 357. Raeschke-Kessler, supra note 352, at 3042-43. case, thus further contributing to more legality in arbitral proceedings. As to stages of appeal, the practice of the Swiss cantonal courts and the English commercial courts, both having acquired substantial expertise in arbitration matters, shows that courts with a high degree of experience in international commercial matters can make the multi-instance recourse system obsolete without being a "denial of justice" to the parties. If the courts support the efforts of national legislatures and develop a liberal attitude towards international arbitrations on their soil, parties to an international contract resorting to arbitration instead of litigation will ultimately realize that they have chosen the best and not the worst of both worlds, provided however, they pay due regard to the careful drafting of the arbitration clause instead of just "hop[ing] for the best."35 358. "In practice both parties tend to be exhausted by the time the negotiations have reached the stage of the arbitration clause. They will rarely get beyond the applicable rules (if any) and the venue. For the rest they just hope for the best." Kerr, supra note 157, at 14. Introduction ............................................ 606 Definitional Approach ............................. 611 II. Recourse and Related Remedies ................... 615 III. The New Laws .................................... 619 A . France: Limited, Non-Excludable Recourse ... 619 B. Sweden : Limited, Non-Excludable Recourse .. 621 Recourse ..................................... 622 Recourse ..................................... 625 R ecourse ...................................... 627 F. Switzerland : Limited, Excludable Recourse ... 632 G. Belgium : Exclusion of Recourse Ex Lege ...... 636 IV. Unsettled Issues Under the New Laws ............. 638 D oor? ......................................... 638 B. The New Laws and Delocalized Awards ....... 643 1. Delocalization Through Party Agreement.. 643 2. Detachment Through National Legislatures 647 Lagging Behind? .................................. 650 1 . Feldman, The Annulment Proceedings and the Finality of ICSID Arbitral Awards , 2 ICSID REV.-FOREIGN INVESTMENT L.J . 85 , 87 ( 1987 ). 2. "We have reached the point where our system ofjustice-both state and fed- tives to Litigation: TheirApplication to InternationalBusiness Disputes, ARB . J., Dec . 1983 , at 4 (quoting ChiefJustice Warren Burger). 3. M611er, Die Handelsschiedsgerichte sind eine Alternative zur Steitbeilegung vor den Staatlichen Gerichten , Handelsblatt, Oct. 7 /8, 1988, at 8, col. 4. For a comprehensive tion: The German Designfrom an American Perspective , 5 HASTINGS INT'L & COMP. L. REV . 27 ( 1981 ). A German judge, complaining about the case load and insufficient staffing gen , West Germany, in Bielefeld, West Germany (Sept. 26 , 1988 ). 4. See CriticalSituation Pending in Luxembourg, Bus. L. BRIEF, Apr. 1988 , at 19. 5. See Iwasaki , Selection of Situs: Criteriasand Priorities, I ARB. INT'L 57 ( 1986 ). 9. Shilston, The Evolution of Modern Commercial Arbitration , J. INT'L ARB ., June 1987, at 45. Shilston notes that 19. See Schlosser , Schiedsgerichtsbarkeitund Rechtsmittel zu den Staallichen Gerichten, 92 ZEITSCHRIFT FUR ZIVILPROZESS 125 , 150 ( 1979 ). 20 . Some countries have been traditionally preferred as situs of arbitral proceed- 32. 5% of the arbitrations under the auspices of the ICC between 1980 and 1982 took place in France, 26 .5% in Switzerland, 9 % in the United Kingdom, 5 % in Belgium, 3% in Austria, and 3% in The Netherlands . W.L. CRAIG, W. PARK & J. PAULSSON , INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION app. I, at 15 ( 1984 ). Around 85% of the ICC arbitrations are held in Europe . See Jarvin , The Enforcement of I.C.C. ArbitralAwards , 1988 REVUE DE DROIT DES AFFAIRES INTERNATIONALES 242, 243 . 21. Lord Cullen of Ashborne estimated that a new English arbitration law might attract as much as £500 million per year of additional revenues in the form of fees for PAULSSON , supra note 20, § 29 . 03 . 22. Arbitration Act , 1979 , ch. 42, reprintedin V Y.B. COM . ARB. 239 ( 1980 ). The 32 . The court focused on this criterion as early as 1930 . See Judgment of Feb. 19, 1930 , Cass. civ., Fr., 1930 Bulletin des arrts de la Cour de cassation, chambres civiles [Bull . Civ.] 75 ( "mettant ainsi enjeu des int~rts de commerce international" ); accordJudgment ofJanuary 27 , 1931 , Cass. civ., Fr., 1931 Bull. Civ . 13 . 33. C. Civ . art. 1492 , reprinted in VII Y.B. CoM. ARB. 280 ( 1982 ) (English trans .). 34 .. "[L] e contrat doit produire comme un mouvement de flux et de reflux au- Fouchard , L ArbitrageInternationalen FranceAprs le Decret du 12 Mai 1981 ; 109JOURNAL DU DROIT INTERNATIONAL U.D .I.] 374 , 377 ( 1982 ) (quoting Judgment of May 17, 1927, Cass. Civ., Fr., 1928 P6riodique et Critique 25) . 35. SeeJudgment of Apr. 26 , 1985 , Cour d'appel, Paris, Fr., reprintedin 113J.D.I. 175 , 179 ( 1986 ) ; see also Fouchard , Quand un Arbitrageest-Il International?, 1970 REVUE DE L'ARBITRAGE 59. 36 . IPRG art. 176 ( 1 ), SR 291, RS 291, RS 291, reprinted in XIII Y.B . COM. ARB. 446 , 447 ( 1988 ) (English trans .). 37 : Arbitration Act , 1979 , ch. 42, art . 3 ( 7 ), reprintedin V Y.B. CoM. ARB. 239 , 243 ( 1980 ). 38. C. JUD. art. 1717 ( 4 ), reprinted in XI Y.B. CoM. ARB. 369 ( 1986 ) (English trans.) . 39 . See Melis, supra note 24 , at 29 . 40. See Melis , Austria, IV Y.B. COM. ARB. 21 , 35 ( 1979 ). 41 . See ARBITRATION IN SWEDEN 160 (Stockholm Chamber of Commerce ed. 1984). 42. European Convention Providing a Uniform Law on Arbitration, June 20 , 1966, art. l(1)(a), II Europ . T.S. No. 56 . 43. MODEL LAW , supra note 29, art. 1 ( 3 ), reprinted in XI Y.B. COM. ARB. at 381 . 44. Id. art. 1 ( 3 )(c), reprinted in XI Y.B. COM. ARB. at 381 . 45. The new Arbitration Rules of the Netherlands Arbitration Institute , in force as of December 1 , 1986 , contain some provisions that apply only to international arbitration. Article 1 ( g ), for example, defines international arbitration as "an arbitra- art. l(g), reprinted in XIII Y.B. COM. ARB . 205 , 209 ( 1988 ) (English trans .). The Netherlands Arbitration Institute has, thus, adopted the Swiss approach . 46. See generally Delaume, Court Intervention in Arbitral Proceedings, in RESOLVING 59 . See Poznanski, The Nature and Extent of an Arbitrator's Powers in International Commercial Arbitration , J. INT'L ARB ., Sept . 1987 , at 71 . 60. Typical examples are the Grain and Feed Trade Association Arbitration Rules , reprintedin 3 C. SCHMITrHOFF, INTERNATIONAL COMMERCIAL ARBITRATION Pt. V ( 1985 ), and Netherlands Oils, Fats and Oilseeds Trade Association, Rules of Arbitra- tion, reprinted in C. SCHMITrHOFF, supra . In this context, one has to distinguish be70. See, e.g., Zivilprozessordnung [ZPO] § 319 (W . Ger.) (corrections of judg- ments) . 71 . English courts require strong prima facie proof of mistake by arbitrator . See Food Corp . of India v. Marastro Cia Naviera S.A. , 1986 Lloyd's Rep . 209 , 216 (C. A .). 72 . The MODEL LAW, supra note 29 , art. 33 ( 3 ), reprintedin XI Y.B. COM. ARB. at 388- 89 , and the UNCITRAL Rules, supra note 10 , art. 37, both impose a time limit of 30 days upon receipt of the award . 73. Rv. art. 1061 , reprinted in XII Y.B. COM. ARB. 370 , 381 - 82 ( 1987 ) (English HUNTER , supra note 6, at 328. 74. Rv. art. 1065 ( 6 ), reprinted in XII Y.B. COM. ARB. 370 , 383 ( 1987 ) (English trans.) . 75 . For a comment on the result under the Swiss arbitration law , see Briner, Die Anfechtung und Vo1streckung des Schiedsentscheides, in DIE INTERNATIONALE SCHIEDSGER- ICHTSBARKEIT IN DER SCHWEIZ (II) 99, 106 (K . B6ckstiegel ed. 1989 ). 76 . New York Convention, supra note 13, art . V, 21 U.S.T. at 2520, T.I.A.S. No . 6997, at 4, 330 U.N. T.S. at 40. 77. In Judgment ofJuly 12 , 1984 , District Court Amsterdam (The Pyramids), re - printed in X Y.B. CoM . ARB. 487 ( 1985 ) (English trans.), an arbitration award was Judgment of July 12 , 1984 , Cour d'appel, Paris, Fr. (The Pyramids), reprinted in 23 I.L.M. 1048 ( 1984 ) (English trans .). 78 . Judgment of Feb. 21 , 1980 , Cour d'appel, Paris, Fr., 1980 Recueil Dalloz- Sirey , Jurisprudence[D.S. Jur.] 568 . 79 . Judgment of Dec. 9 , 1980 , Cour d'appel, Paris, Fr., reprintedin 20 I.L.M. 887 ( 1980 ) (English trans .). 80 . France had just promulgated a new law on domestic arbitration , Decree No. 80- 354 , 1980J .O. 1238 ( codified as amended at C. Civ . art. 1442 - 1491 ). For a gen- eral discussion of Decree No. 80-354 , see La Reforme de Droit Fran~ais de IArbitrage, 1980 REVUE DE L'ARBITRAGE 579. 81 . See W.L. CRAIG , W. PARK & J. PAULSSON , supra note 20, § 30 . 03 . 82. See Fouchard , Les Recours Contre les Sentences Non Fran~aises , 1980 REVUE DE L'ARBITRAGE 693 , 696 . 83. C. Civ . art. 1504 , reprintedin VII Y.B. CoM . ARB. 272 , 282 ( 1982 ) (English trans.) . 84 . Id. art. 1502 ( l ), reprintedin VII Y.B. Com. ARB. at 281 . 85. Id. art. 1502 ( 2 ), reprintedin VII Y.B. COM. ARB. at 281 . 86. Id. art. 1502 ( 3 ), reprintedin VII Y.B. COM. ARB. at 281 . 87. Id. art. 1502 ( 5 ), reprintedin VII Y.B. COM. ARB. at 282 . 88. Id. art. 1505 , reprinted in VII Y.B. CoM. ARB. at 282. 89. In Judgment ofJuly 12 , 1984 , Cours d'appel, Paris, Fr., reprintedin 23 I.L.M. 1048 ( 1984 ) (English trans.), the court held that article 24 of the ICC Arbitration Rules did not contemplate a waiver of recourse under French law . Id., reprintedin 23 I.L.M. at 1055. 90. W.L. CRAIG , W. PARK & J. PAULSSON , supra note 20, § 30 . 04 . 91. C. Civ . art. 1506 , reprinted in VII Y.B. CoM. ARB. 272 , 282 ( 1982 ) (English trans.) . 92 . New York Convention, supra note 13, art . V, 21 U.S.T. at 2520, T.I.A.S. No . 6997, at 5, 330 U.N.T.S. at 40 . 93. Lag om skiljemin, 1929 SVENSK FORFATrNINGSSAMLING [SFs] 145 , reprintedin ARBITRATION IN SWEDEN app. 2 , at 172 (Stockholm Chamber of Commerce ed. 1984 ) (English trans .); Lag om utlindska Skiljeavtal och skiljedomar , 1929 SFS 147 , re- printed in ARBITRATION IN SWEDEN, supra , app. 3, at 181. 94. Judgment of Oct. 11 , 1955 , 1955 NyttJuridiskt Arkiv [NJA] 500 . There the TransnationalCommercial Arbitration , 21 VA. J. INT'L L . 211 , 230 ( 1981 ). 95 . 1929 SFS 145, § 20 ( i ), reprintedin ARBITRATION IN SWEDEN, supra note 93 , at 224. See BAUMBACH , LAUTERBACH & ALBERS, COMMENTARY ON THE GERMAN CODE OF CIVIL PROCEDURE § 1041 (44th ed. 1986 ). 225 . Loi Approuvant la Convention Europ6enne Loi Uniforme en Matibre d'Arbitrage, Faite A Strasbourg 20 Janvier 1966 et Introduisant dans le Code Judiciaire une Sixi~me Partie Concernant I'Arbitrage (1), 1972 MONITEUR BELGE 8717 (implementing the European Convention) . Belgium is the only European country to have adopted the Convention . 226 . It was one of the goals of the European Convention to abolish any rights of appeal to national courts in order to avoid dilatory tactics by the losing party . See 3 P. SANDERS , ARBITRATION INTERNATIONAL COMMERCIAL 387 ( Int'l Ass 'n of Lawyers ed . 1965 ). 233 . Compare C. JUD. art. 1717 ( 4 ), reprinted in XI Y.B. CoM. ARB. 369 ( 1986 ) (English trans.) with Arbitration Act , 1950 , 14 Geo. 6, ch. 27 , §§ 22 - 23 . 234 . Typical in this respect is the statement of Judge Leggat , in Arab African Energy Corp . v. Olieprodukten Nederland B.V. , [ 1983 ] 2 Lloyd's Rep. 419 (QB .). 238. MODEL LAW , supra note 29, arts. 34 ( 2 ) (a)(ii ), 36 ( 1 ) (a)(ii), reprintedin XI Y .B. CoM. ARB. at 389 , 390; New York Convention, supra note 13, art . V( 1)(b ), 21 U.S.T. at 2520, T.I.A.S. No . 6997 , at 4, 330 U.N.T.S. at 42 . 239. MODEL LAW , supra note 29, arts. 34 ( 2 ) (a)(iv ), 36 (l) (a)(iv), reprintedin XI Y .B. CoM. ARB. at 389 , 390; New York Convention, supra note 13, art . V( 1)(d ), 21 U.S.T. at 2520, T.I.A.S. No . 6997 , at 4, 330 U.N.T.S. at 42 . 240. See Schlosser, supra note 19 , at 131. Some authors suggest that challenges of awards should be allowed only in case of (1) violation of procedural fairness, (2) excess of arbitral authority, or (3) violation of international public policy . See Stein & Wotman , supra note 13, at 1725 . 241. MODEL LAW , supra note 29, art. 34, reprinted in XI Y.B. CoM. ARB. at 389 . 242. MODEL LAW , supra note 29, art. 36, reprinted in XI Y.B. CoM. ARB. at 390 . 243. New York Convention, supra note 13, art . V, 21 U.S.T. at 2520, T.I.A.S. No . 6997, at 5, 330 U.N.T.S. at 42 . 244. See A. REDFERN & M. HUNTER , supra note 6, at 330. 245. See , e.g., MODEL LAW, supra note 29 , art. 16 ( 1 ), reprintedin XI Y.B. CoM. ARB. at 385; Rv. art. 1052 ( 1 ), reprinted in XII Y.B. CoM. ARB. 370 , 379 ( 1987 ) (English trans.); IPRG art . 186 ( 1 ), SR 291, RS 291, RS 291, reprinted in XIII Y.B. CoM. ARB. 446 , 449 ( 1988 ) (English trans.); ICC Arbitration Rules , supra note 14 , art. 8 ( 3 ). See generally Schmitthoff, TheJurisdictionof the Arbitrator , in THE ART OF ARBITRATION 285 U. Schultsz ed. 1982 ) (discussing issues affecting arbitrators'jurisdictional decisions ). 246 . See , e.g., MODEL LAW, supra note 29, art. 6 , 16 ( 3 ), reprintedin XI Y.B. CoM. ARB. at 382 , 385; Rv. art. 1065 ( 1 ) (a), (b), reprintedin XII Y.B. CoM . ARB. 370 , 380 - 81 , 382 ( 1987 ) (English trans .); IPRG art. 190 ( 2 )(b), SR 291, RS 291, RS 291 , reprintedin XIII Y.B. CoM . ARB. 446 , 450 ( 1988 ) (English trans .); see also Judgment of July 12 , 1984, Cour d'appel, Paris, Fr., reprinted in 23 I.L.M. 1048 ( 1984 ) (English trans .). the power without being subject to review to rule on its jurisdiction . Id. at 1054 (emphasis added) . 247. See supra note 177 and accompanying text . 248 . "Whenever a tribunal goes wrong in law, it goes outside the jurisdiction supra note 20, § 29.06 (quoting Lord Denning) . 249 . ZPO § 595 ( 1)(3), reprinted in IX Y.B . COM. ARB. 301 , 304 ( 1984 ) (English trans.) . 250 . Rv. art. 1065 ( 1 )(d), reprintedin XII Y.B. COM. ARB . 370 , 383 ( 1987 ) (English trans.) . 251. ZPO § 592 ( 2 ), reprinted in IX Y.B. COM. ARB. 301 , 304 ( 1984 ) (English trans.); Rv. art. 1057 ( 2 ) -(3), reprintedin XII Y.B . COM. ARB. 370 , 380 ( 1987 ) (English trans.); IPRG art . 189 ( 2 ), SR 291, RS 291, RS 291, reprinted in XIII Y.B . COM. ARB. 446 , 450 ( 1988 ) (English trans .). 252 . See , e.g., IPRG art . 190 ( 2 )(d), SR 291, RS 291, RS 291 , reprintedin XIII Y.B. COM. ARB . 446 , 450 ( 1988 ) (English trans .). 253 . "[Tihe term 'public policy', which was used in the 1958 New York Conven- A /40/17, § 297 ( 1985 ) (empahsis added). 254 . J. LEW , APPLICABLE LAW IN INTERNATIONAL COMMERCIAL ARBITRATION 532 ( 1978 ) (quoting CHESHIRE & NORTH , PRIVATE INTERNATIONAL LAW 149- 50 (9th ed.)). A comprehensive and generally accepted definition has not yet been proposed . 255. C. CALAVROS, DAS UNCITRAL-MDELLGESETZ UBER DIE INTERNATIONALE HANDELSSCHIEDSGERICHTSBARKEIT 161 ( 1988 ). 256. ZPO § 595 (l)( 6 ) (repealed 1983 ). 257 . See Melis , Austria, IX Y.B. CoM . ARB. 42 , 48 ( 1984 ). This was seen as offer- ing the possibility for Austrian courts to review cases on the merits . Id . 258. ZPO § 595 (l)( 6), reprinted in IX Y.B. CoM . ARB. 301 , 304 ( 1984 ) (English trans.) . 259 . See H. FASCHING , supra note 144, at 1001. A decision of the Swiss Federal foreign rule is contrary to a mandatory provision of Swiss law . Judgment of May 5 , 1976, Bundesgericht, Switz. (Bangladesh), 102 BGE Ia 574. 260. See supra note 147 and accompanying text . 261. C. Civ . art. 1502 ( 5 ), reprinted in VII Y.B. COM. ARB. 280 , 282 ( 1982 ) (Eng- 190 (e), SR 291, RS 291, RS 291 , reprintedin XIII Y.B. CoM . ARB. 446 , 450 ( 1988 ) public policy . See Bucher, supra note 210 , at 121 . 267. See H. FASCHING , supra note 144, at 1001 (Austrian law); Blessing, supra note 203, at 71 (Swiss law); Fouchard, supra note 34, at 417 (French law) . 268 . See Fouchard, supra note 34 , at 417. Mr . Blessing gives the example that Blessing , supra note 203, at 71 . 269. See Mann , State Contractsand InternationalArbitration, 1983 BRIT. Y.B. INT'L L. 1; Paulsson , Arbitration Unbound: Award Detachedfrom the Law of Its Country of Origin, 30 INT'L & COMP. L .Q 358 ( 1981 ). 270 . See 2 J.G. WEITER, THE INTERNATIONAL ARBITRAL PROCESS: PUBLIC AND PRIVATE 369 ( 1979 ). 271 . See , e.g., Naviera Amazonica Peruana S.A . v. Compania Internacional de 2. 301 . See Timmermans , The New Statute on the ArbitrationCourt at the USSR Chamber of Commerce and Industry, J. INT'L ARB ., Sept . 1988 , at 97 , 100 - 02 . 302 . But see Matray, supra note 295 , at 261 ( wanting to generalize experience with Soviet awards) . 303. Judgment of Feb. 1 , 1980 , Oberster Gerichtshof , Aust., reprintedin VII Y.B. COM. ARB . 312 ( 1982 ) (English trans .). The court also referred to art. IX(l) of the tually set aside the award . Id. at 313 . 304. See Melis, supra note 135 , at 134. The arbitral proceedings involved a VII Y.B. COM . ARB. 314 , 315 ( 1982 ). With the Austrian courts having jurisdiction, the action to have the award set aside again reached the Austrian Supreme Court . Id. 305 . See W.L. CRAIG , W. PARK & J. PAULSSON , supra note 20, § 31 . 04 . 306. ZPO § 582 , reprintedin IX Y.B. CoM . ARB. 301 , 302 ( 1984 ) (English trans .). 307 . See Paulsson, supra note 94, at 230-35. 311. Law No. 28 of Feb. 9 , 1983 (codified as amended at Codice di Procedura Civile , arts. 806 - 831 (Italy)), reprinted in IX Y.B. COM. ARB . 309 ( 1984 ) (English trans.) . 312 . Most Australian states have adopted a "uniform" arbitration law since 1984, which has substantially changed the powers of the courts to entertain chal- lenges to arbital awards and is closely modelled on the U.K . Arbitration Act, 1979 , Australia , XIII Y.B. COM . ARB. 381 - 92 ( 1988 ). 313 . See Noecker & Hentzen, The New Legislation on Arbitration in Canada, 22 INT'L LAW. 829 , 830 n. 10 ( 1988 ). 314 . See De Speville, Arbitration in Hong Kong, 1 ARB. INT'L 109 ( 1985 ). 315 . See Rashed , The UNCITRAL Model Law and Recent Developments in Egypt, 3 ICSID REV.- FOREIGN INVESTMENT L.J . 126 ( 1988 ). 316 . Legislative Decree No. 90 /83 of Sept. 16 , 1983 (Lebanon), reprinted in 27 I.L.M. 1022 ( 1988 ) (English trans .). 317. ZPO §§ 1025 - 1048 . 318 . See Sandrock , Zigzgkeit und Leichtigkeit Versus Grindlichkeit , 41 JURISTEN ZEITUNG 370 n.2 ( 1986 ) ; von Hoffmann , supra note 284 , at 338 . 319. See Lrcher , Schiedsgerichtsbarkeit: b'bernahme des UNCITRAL-Modellgesetzes?, 20 ZEITSCHRIFT FUR RECHTSPOLITIK 230 , 231 ( 1987 ). 320 . See von Hoffmann, supra note 284, at 340. 321. See Judgment of Sept. 26 , 1985 , Bundesgerichtshof, W. Ger ., 96 Bundesgerichtshof in Zivilsachen [BGHZ] 40 , 41; Judgment of Oct. 3 , 1956 , Bundesgerichtshof , W. Ger ., 27 BGHZ 365. The law implementing the New York einkommen vom 10 . Juni 1958 uber die Anerkennung und Vollstreckung auslandis- cher Schiedssprfiche § 2 ( 1 ), 1961 BGBI 11 121 (W. Ger.) . 322 . An award subject to English arbitration law but rendered in Germany


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Klaus Peter Berger. The Modern Trend Towards Exclusion of Recourse Against Transnational Arbitral Awards: A European Perspective, Fordham International Law Journal, 1988,