Social and legal nature of arbitral consideration of economic disputes

International practice shows the increasing importance of reference tribunals and international courts of arbitration in social and political life of the most developed countries and those only striving for prosperity, as well as the international community as a whole.

Moreover, this trend has the global context being typical for most countries of the world:

 

  •  the world-view aspect recognition of reference tribunals as an undoubtedly effective democratic institution of a jural state;
  •  the functional aspect - in the context of optimal and efficient transfer of a relevant human rights advocacy burden from state courts to judicial institutions based on public self-organization, professionalism, reputation and legitimacy.

 

It is obvious that emergence of disputes between participants of international economic activities is practically unavoidable.

Even though the parties may seek to maximally ensure proper fulfillment of obligations in the dynamics of execution of the corresponding contracts, their actual failure may occur due to various reasons.

In such cases, the party suffering from improper fulfillment of a particular obligation, will naturally seek for justice and an adequate compensation.

In conditions of the so-called "internal dispute", when residents of one country act as the parties to the dispute, the sequence of actions necessary to resolve a legal conflict is obvious: the majority of states have their own developed national judicial and legal systems able to provide the realization of interests of the injured party and to ensure the restoration of its violated rights through the administration of justice.

On the international level things somewhat differ. International business is developing in the vast and relatively unstable space where relations between partners are formed in the absence of strict regulation of unified legal standards for arrangement and realization of transactions and, if necessary, mandatory settlement of disputes.

In this area one can’t find any special international court, any special and unified international procedures for consideration of commercial disputes, or even completely recognized and commonly used law. There are only several conventions in the field of international trade law, and even they have not been ratified by many countries, being used only in limited areas of trade and other economic activities.

These are the conditions, under which a special mechanism for considering international commercial disputes named "international commercial arbitration" has developed in almost "experimental and evolutionary" way. Within this supranational legal institution, an arbitral tribunal formed in accordance with the will of the parties is, in fact, entitled to "withdraw" a dispute, arising between counterparties in relation to interpretation and execution of a contract, out of the authority of national courts of general jurisdiction and consider such dispute independently.

It is obvious that the reduction of grounds for state courts to interfere with the course and results of arbitration, legislatively initiated in various countries, has contributed to the rapid development of international commercial arbitration around the globe to a certain extent.

Legislation of many countries provides a considerable autonomy of the will of the parties when concluding the arbitration agreement, selecting a place of arbitration, appointing arbitrators and selecting the law applicable to the substance of a basic agreement.

Thus, international commercial arbitration is one of the main and most effective tools for resolving problematic issues in international economic relations.

International commercial arbitration, as an instrument of justice, is structurally a court of arbitration, operating on the international level and having the competence to settle disputes related to international transactions.

The following permanent International Commercial Arbitration Courts are known in the practice of law enforcement: the International Court of Arbitration of the International Chamber of Commerce in Paris (ICC International Court of Arbitration), the Arbitration Institute of the Stockholm Chamber of Commerce, the International Centre for Dispute Resolution (ICDR) of the American Arbitration Association, London Court of International Arbitration (LCIA), the Vienna International Arbitration Centre, etc.

Legal institutions having the status of an International Commercial Arbitration Court consider disputes related to dealing in the field of trade and other economic relations between organizations and companies of different countries (i.e. provided that there is a foreign contractor in a dispute).

According to the documents of title (rules, regulations, statutes, etc.) of most international arbitration institutions, disputes referred for their consideration in the presence of mutual will of corresponding conflicting parties, are those arising from contractual and other civil legal relations in the course of implementation of foreign trade and other types of international economic relations, provided that at least one party's venture is located outside the country where an arbitration court is legalized, as well as the disputes between companies with foreign investments, international associations and organizations established in the country of an arbitration institution between themselves, disputes between their members, as well as their disputes with other subjects of law in the country where the arbitration court is located.

Institutions of international commercial arbitration can also take under their consideration disputes being within their jurisdiction in accordance with international agreements. In such cases, an arbitration agreement between the parties is not required. Legal and functional content of the modern interpretation of the "international commercial arbitration" concept is associated primarily with the withdrawal of the dispute from the scope of the courts of general competence of a particular country, and the terms "arbitration" and "reference tribunal" are mostly used as synonyms in the legislation of different countries, scientific literature and practice.

The category of "international" in the indication of the described concept and the corresponding legal phenomenon has the same meaning as in the semantic construction "private international law", and is used in a broad sense, indicating that the corresponding disputable relation subject to consideration by an arbitration court lies in the field of international economic (civil) turnover.

The legal ground for an international commercial arbitration court to take a dispute under its consideration is an agreement between the parties (arbitration agreement) stating that a dispute or a controversy which has arisen (or may possibly arise) from the contract shall be subject to arbitration. In this regard, there are several types of arbitration agreements: an arbitration clause, i.e. a contractual clause on arbitration aimed at settling the future (eventual) disputes, and sometimes named a "contract in the contract", and the so-called submission bond - an agreement on arbitral consideration of an already existing dispute.

It is also necessary to mention the "proprio vigore" arbitration agreement, when the parties draw up a separate agreement on arbitration and together with the main contract these are the basis for the possible arbitration consideration of disputes.

One of the fundamental principles characterizing the legal nature of an arbitration agreement is the principle of its autonomy from the principal contract, which is fixed directly in international and national normative acts, as well as in the regulations of arbitration institutions. As far as an arbitration court is a non-governmental institution, the activity of international commercial arbitration courts is not directly regulated by the standards of civil procedure law of a state the court is located in.

International commercial arbitration courts consider disputes on the basis of ex acquo et bono principle ("in justice and fairness" or "in good conscience"). In accordance with the UNCITRAL Model Law on International Commercial Arbitration (1985), the parties are free to agree on the procedure for conducting arbitration. In the absence of such agreement, the arbitral tribunal shall conduct the proceedings in such manner as it deems appropriate, based on general principles of fairness, legal traditions and principles of modern sense of justice.

As a general rule, powers conferred to an arbitral tribunal also include competences classical for competent court proceedings: determining the admissibility, relevance, materiality and weight of any evidence, both presented by the parties and searched out.

As to the merits of a dispute, an arbitral tribunal resolves it on the basis of rules of substantive law chosen by the parties as applicable ones, or, in the absence of any instructions from the parties, in accordance with conflict of laws rules considered applicable by the court.

However, in all cases international commercial arbitration court usually makes decisions with regard for trade customs and business practice applicable to the transaction as well as for the contractual provisions directly.

Today international commercial arbitration is already one of the practically indispensable institutions of modern private international law. Having quite a long and multifaceted history of legal development, international commercial arbitration has become by now a widely known and frequently used instrument for settling foreign economic disputes of civil law nature, together with the judicial procedure carried out under the administration of justice on behalf of a state.

Moreover, as compared to the court-based consideration of international commercial disputes, arbitration has a number of advantages which, being clearly proven in the practice of law enforcement, have been repeatedly emphasized and grounded by foreign and domestic experts and scholars.

Firstly, using the arbitration procedure for dispute settlement, parties to international commercial contract can independently select arbitrators to whom they entrust the resolution of their controversies. Since such counterparties are located and operate in different states, legislations of which are sometimes based on legal concepts emerging from different traditions and cultures, they are usually not inclined to apply to national courts, although in most developed countries special commercial (economic, arbitration) courts are, as a rule, not biased, fairly solidly functioning and effectively administering justice.

Secondly, by applying to international commercial arbitration courts, parties thereby prefer operational consistency and completeness of the administration of justice process characterizing these institutions - not pedantic legal accuracy of formal (and often overburdened with unreasonable "ceremonies") procedural actions.

As it is generally known, an arbitral award is legally final (other things being equal). On the contrary, a legal case traditionally considered within the state jurisdiction may be referred to the appeals instance, and then appealed to the Supreme Court, so in the state system of justice in most cases it takes a very long time before a final award for the case is made.

Thirdly, arbitration is traditionally (and this is one of its specific features) conducted "behind closed doors", and not in open court session. Under certain circumstances it becomes an obvious advantage, allowing parties to use the maximum possible set of legal means to reach a compromise and settle a dispute.

As a general rule, powers conferred to an arbitral tribunal include competences, particularly those classical for competent court proceedings, to determine the admissibility, relevance, materiality and weight of any evidence, both presented by the parties and searched out.

As to the merits of a dispute, an arbitral tribunal settles it on the basis of rules of substantive law chosen by the parties as applicable ones, or, in the absence of any instructions from the parties - in accordance with the conflict of laws rules, considered applicable by the court.

However, in all cases international commercial arbitration court usually makes decisions with regard for trade customs and business practice applicable to the transaction, as well as for the contractual provisions directly.

In modern conditions the area of functioning of international commercial arbitration is regulated not only by national legal acts, but also by international treaties, as well as guidance documents. The first category of international acts includes primarily the European Convention "On International Commercial Arbitration" (1961), which regulates "ad hoc" arbitration ("one-time" arbitration), the New York Convention "On the Recognition and Enforcement of Foreign Arbitral Awards" (1958), the Washington Convention "On the Settlement of Investment Disputes Between States and Nationals of Other States" (1965), the Convention "On the Settlement by Arbitration of Civil Law Disputes Resulting from Relations of Economic and Scientific-Technical Cooperation" (1972) concluded by the member countries of Comecon. Among the documents of the second group the following should be indicated: The UNCITRAL Arbitration Rules "On International Commercial Arbitration" (1976), Arbitration Rules of the United Nations Economic Commission for Europe (1966), the Rules of International Commercial Arbitration developed by the UN Economic Commission for Asia and the Far East (ECAFE: in the future - ESCAP) in 1966, UNCITRAL Model Law on International Commercial Arbitration (1985).

"International arbitration exists to serve the needs of international business ...". This thesis rule is the credo of arbitration justice proclaimed in 1892, when the oldest arbitration center ever, the London Chamber of Arbitration (in 1981 renamed the London Court of International Arbitration) and the first actually international commercial arbitration system, the International Chamber of Commerce (in 1922), were established. As it is generally known, these authoritative structures had been created before the actual legal mechanisms for unification of the global legal understanding of arbitration procedures were developed and generally implemented. As a global trend this has emerged only in 1953, when the development of mechanisms for international recognition and enforcement of arbitral awards has started, resulting in the New York Convention adopted in 1958.

The above-mentioned Convention became a successful (active and efficient) interstate instrument for promoting the development of international trade. That is why more than 120 countries have joined this international document by now.

It is obvious that at the present stage of development of public relations in the sphere of global economy, international commercial arbitration is one of the main tools for resolving problematic issues in international economic relations. Modern procedures of alternative dispute settlement offered by international arbitration institutions, greatly improve the quality and efficiency of consideration of cases, administration of justice and real attainment of fair legal protection of violated rights of counterparties arising from commercial contracts.