Harmonization of International Civil Procedure and International Commercial Arbitration Term Paper

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Harmonization of International Civil Procedure and International Commercial Arbitration

The objective of this study is to address the idea that when all the recently formulated harmonization instruments relating to transnational commercial litigation (including the Hague Convention on Choice of Court Agreements) have been incorporated into national law or international practice, the choice between arbitration and litigation will be put on a level playing field for international commercial contracting parties, with both methods of international dispute resolution bringing the required certainty and predictability. Towards this end, this study will answer specific questions related to international dispute resolution, international civil litigation, jurisdiction, procedure and recognition and enforcement, procedure and international commercial arbitration.

History of Arbitration of Disputes

Goode (2001) reports that the relationship that exists between courts and private tribunals "has not always been as benevolent as it is today."[footnoteRef:1] Historically the central courts are reported to have had a jealous guard over their domains and were even between courts struggling for jurisdiction. Arbitration was viewed disfavorably for a long time and was held as a settlement method in private disputes only. The United Nations Convention on the Enforcement of Foreign Arbitral Awards 1958 'The New York Convention' was held to "facilitate the international enforcement of arbitral awards."[footnoteRef:2] This convention has been greatly successful and 128 states are party to this convention. Two articles of importance are those of Article V and VII. Article V makes provision of recognition and enforcement of a foreign arbitral reward refusal when the party against whom it is invoked makes a request seeking proof of one of the following: (1) that the award has not yet become binding or has been set aside or suspended. Proof of these grounds provides the court in a convention state to refuse to recognize or enforce the decision however; refusal is reported as "discretionary"[footnoteRef:3] Goode states that under Article VII the provision of the Convention must be impact the "validity of multilateral or bilateral agreements" in relation to the arbitral award enforcement or recognition that the Contracting States entered into and must be deprive an interested party of the right to seek an arbitral award in the "manner and to the extent allowed by the law or the treaties of the country where such an award is sought to be relied on."[footnoteRef:4] One of the stated remarkable features of the territoriality party autonomy debate is reported as the fact that "protagonists on both sides invoke the New York Convention to support their position; the territorialists on the ground that the numerous provision of the Convention explicitly recognize the role of the lex loci arbitri; the ado vacates of the party autonomy and the statelessness of awards, on the ground that Article VII plainly establishes the right of the enforcement states to allow enforcement of a foreign award which complies with their domestic law, despite its annulment by the court of origin, where that annulments not a ground under the domestic law for refusal of recognition of the award." [footnoteRef:5] The New York Convention is reported to acknowledge the "important role of the lex loci arbitri the New York Convention holds that a stateless award would not be enforceable under the Convention."[footnoteRef:6] [1: Goode (2001) p.22] [2: Goode (2001) p.22] [3: Goode (2001) p.23] [4: Good (2001) p.23] [5: Goode (2001) p.23] [6: Goode (2001) p.23]

II. International Dispute Resolution

The work of Smith, Gambrell & Russell LLP (2012) reports in the work entitled "International Construction Arbitration: When Cultures Collide" that companies in order to stay competitive must do business in foreign countries or with firms having an international prescience. The convergence of cultures results in "new and often unprecedented complexities when disputes inevitably arise." [footnoteRef:7] Reported however, is that a forum is in existence enabling the resolution of disagreement, which is that of international arbitration which provides a method for resolving disputes that is binding and that is not aligned to any specific national laws or legal system. The International Chamber of Commerce (ICC) and the London Court of International Arbitration as cited in the work of Lagerberg, (2006) notes that the growth in international trade and the flow of capital to find investment in new markets result in organizational opportunity being created. International arbitration is reported as being "favored in resolving cross border disputes because it offers the distinct advantages which outweigh the disadvantages."[footnoteRef:8] When participants in a study were asked to list the three reasons that were of primary importance in the use of international arbitration the most acknowledged advantage of international arbitration is that of the flexibility of the procedure and the fact that are parties are active participants in the determination and shaping of the procedure. Enforceability of the awards in international arbitration was reported as the most important of all advantages by the greatest number of respondents in the study. Also rated high was privacy. International arbitration is stated to be a method of keeping business practices trade secrets, industrial processes, intellectual property, as well as potential negative proceedings that would negatively affect a company's brand, private and away from the eyes of the public. While not ensuring that everything is confidential the proceedings themselves are stated as being both "private and confidential." [footnoteRef:9] (PriceWaterHouseCoopers, 2006, p.6) [7: Smith, Gambrell & Russell LLP (2008) p.1] [8: PriceWaterHouseCoopers (2006) p.5] [9: PriceWaterHouseCoopers (2006) p.6]

III. Advantages and Disadvantages of Arbitration

The abilities of parties to select arbitrators that have the skills and expertise needed and who are aligned with the cultural and legal context. Other advantages identified include:

(1) cost,

(2) speed; and (3) the possibility of avoiding specific legal systems and national courts; and the neutrality of the arbitral venue.

Stated as disadvantages of international arbitration includes the fact that corporations "are not entirely satisfied with the process of international arbitration."[footnoteRef:10] Participants were asked to list the three most significant concerns associated with the use of international arbitration and the study shows that one primary disadvantage is that of costs including costs associated with lawyers, arbitrators, and the arbitration institution involved. It is reported that approximately 70 of 80 respondents cited costs as a primary concern and half of respondents costs as their primary concern. [10: PriceWaterHouseCoopers (2006) p.6]

Also expressed as a concern is the time that the process of arbitration takes form the time that it is filed until the time of the award which is stated to be such that it is claimed by the International Chamber of Commerce (ICC) and the American Arbitration Association/Center for Dispute Resolution that most cases result in an award being rendered within 18 months from the time the request for arbitration is filed. This process is however stated to be much quicker than the majority of transnational cases. Identified, as a concern was the factor of national court intervention since the laws of many countries allow international arbitration to be conducted "with limited, if any, intervention by a national court in the proceedings. Court intervention is effectively limited by arbitration statutes and when the jurisdiction allows court interference there is very little that the arbitration tribunal can do about this therefore the choice of the seat of the arbitration is an issue of primary importance. . The lack of a third party mechanism in the international arbitration process is stated to be a concern that is acknowledged widely.

IV. Convention on Choice of Court Agreements

The Convention on Choice of Court Agreements relates that the convention is applicable in international cases to exclusive choice of court agreements concluded in civil or commercial matters and a case is stated to be considered as an international case unless the parties are resident in the same Contracting State and the parties' relationship and other elements relevant in the dispute are connected only with that State. The scope of the Convention is stated in Article 1(1) to be applicable "in international case to exclusive choice of court agreements concluded in civil or commercial matters. The term 'international' is broadly defined for both jurisdiction and recognition and enforcement purposes."[footnoteRef:11] Excluded by Article 2(1) from the Convention agreements are those entered into between consumers or between a consumer and a business as well as agreements that are in regards to "individual or collective contracts of employment."[footnoteRef:12] (Garnett, 2009, p.4) The definition applied to consumer is "a natural person acting primarily for personal, family, or household purposes." (Garnett, 2009, p.4) Intellectual property is stated to be an area where those drafting the Convention expanded. Excluded from the Convention in this area is any action that has as its object: (1) (1) the validity of intellectual property rights other than copyright or related rights or (2) the infringement of such rights except where infringement proceedings are brought for breach of a contract between the parties relating to such rights." The validity of registrable rights is stated to only be addressed as preliminary question to resolution of a breach of contract suit and that does fall within the Convention's scope. Garnett reports that from the…

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