A Survey of International Arbitration Laws and Institutions

By Thomas Salzer

There are a number of laws and institutions available to govern arbitration processes both in the United States and internationally. A review of some institutions and appropriate laws follows along with a tabular representation of some traits of institutions that lend themselves to comparison. An attorney utilizing arbitration to resolve a dispute involving international parties or location may be interested in choosing applicable laws and institutions described in this article.

Arbitration laws/codes often used by arbitration institutions

UNCITRAL - The UNCITRAL Arbitration Rules were issued by the United Nations Committee on International Trade Law in 1976, later adopted by the Assembly of the United Nations and focus on the interests of developing countries. Under UNCITRAL rules, the appointing authority intervenes only when the parties cannot agree.¹ In contrast, the secretariat of the International Chamber of Commerce (ICC) court and the registrar of the London Court of International Arbitration (LCIA) monitor the entire arbitration. Note that UNCITRAL Rules govern about 10 percent of American Arbitration Association (AAA) proceedings.

Federal Arbitration Act (FAA) - In the United States, the FAA governs international arbitrations. However, some states have enacted statutes modeled on UNCITRAL.² Other countries have corresponding laws. Recent changes include statutes passed in India, England and Japan; respectively, the Indian Arbitration and Conciliation Act 1996, the English Arbitration Act 1996 and a law allowing non-Japanese lawyers to participate in arbitrations.

United Nations Economic Commission for Europe (ECE) - The United Nations Economic Commission for Europe (ECE) rules, published in 1966, are aimed at East-West trade disputes.³

LCIA, AAA, ICSID and UNCITRAL rules - see discussion within Arbitration Institutions.

Arbitration Institutions

Some of the institutions listed may provide a forum to conduct the arbitration as well as the associated rules.

London Court of International Arbitration (Tel.# 44-171-417-8228) - The LCIA is over 100 years old and conducts arbitrations worldwide under its own rules and UNCITRAL rules.⁴ The LCIA tends to appoint English Queen’s Counsels (Q.C.s) as its arbitrators.

American Arbitration Association (AAA), New York, N.Y. (Tel.# 212- 484-4000)- The AAA is headquartered in New York but has significant offices in Washington, D.C. as well as many major cities in the United States. While the AAA is most often involved in proceedings of a domestic nature, it also may be used for international disputes. While the AAA has its own rules, UNCITRAL rules are used in about 10 percent of the AAA proceedings.

International Chamber of Commerce (ICC) Paris, (Tel.# 33-1-4953-2828) - The ICC was created in 1923 and is comprised of an International Court of Arbitration, assisted by a Secretariat, which monitors the proceedings up to the final award.⁵ The Court, not the arbitrators, notifies the parties of an award although the arbitrators decide the resolution.

The International Center for the Settlement of Investment Disputes, (ICSID), 1818 H St. NW, Washington, D.C. 20006, (Tel.# 202-477-1234) - The ICSID was established in 1965 by the World Bank as a means of encouraging governments to arbitrate disputes. It is noteworthy that ICSID’s rules provide that the losing party may seek to have the award annulled by a review committee.

China International Economic and Trade Arbitration Commission (CIETAC), Beijing, (Tel.# 86-10-64646688) - The Arbitration Commission follows the laws of the People’s Republic of China and has subcommissions in the Shenzhen Special Economic Zone and Shanghai. Unlike most other institutions that allow the parties to have a say in the selection of the arbitrators, in CIETAC proceedings the China Council for the Promotion of International Trade (China Chamber of International Commerce) appoints the arbitrators.

Other institutions - The Stockholm Chamber of Commerce, Box 16050, SE 103 21, Stockholm (Tel.# 468613-1800) and the Federal Economic Chamber of Commerce in Vienna (Tel.# 431-501-050) are smaller institutions that generally handle East-West arbitrations. Also, Pacific Rim centers have been created in Vancouver, Hong Kong, Sydney and Melbourne.⁶

Enforcement

Arbitration decisions may be enforced in a country’s judicial system if prescribed by the governing arbitration law (e.g., FAA or ICSID). In other situations, the New York Convention may be utilized to provide the legal basis for the enforcement of international commercial arbitration awards by contracting states. The Convention has been ratified or acceded to by over 80 countries from every continent.⁷ The Panama Convention, essentially a carbon copy of the New York Convention, also may be used as a legal basis for enforcing an arbitral award made within the Western Hemisphere.⁸

To enforce a CIETAC decision, the moving party may apply to the Chinese courts under Chinese law or apply to a competent foreign court for enforcement of the arbitral award according to the 1958 Convention on the Recognition of Enforcement of Foreign Arbitral Awards.

International Arbitration Comparison Chart

Costs

While a number of factors, some of which are included in the enclosed table, distinguish arbitration institution’s costs to the parties may be significant in determining which arbitration institution is used. Costs cited here are not the most current but provide a comparative basis to make distinctions; current information may be obtained from the institutions at the telephone numbers provided in this article.

AAA - The AAA may apportion costs among the parties as it deems reasonable. A nonrefundable filing fee ranges from, for example, $500 for a $10,000 claim; $1,500 for claims between $50,000 and $250,000; to $5,000 for claims above $1 million.

LCIA & ICC - For a dispute before the ICC with a single arbitrator, the filing and arbitrator fees may amount to 3.6 percent of a $1 million claim and settlement; 1.4 percent of a $15 million claim and settlement; and 0.23 percent for a $100 million claim and settlement. The ICC Court may modify the fees. [Rule 20.1]

Under the ICC and LCIA rules, the two courts do not communicate the award to the parties until all costs of arbitration have been paid. UNCITRAL tribunals may not delay the release of an award until payment is made. The ICC and LCIA do not presume that the unsuccessful party will pay the prevailing party’s costs; other institutions are predisposed to have the losing party pay all costs. The LCIA, more so than the ICC, keys arbitrator’s fees to the amount of time spent on the case. In a qualitative and subjective fashion, LCIA costs appear to be lower than ICC costs for a similar arbitration process.

UNCITRAL - Under UNCITRAL Rule 39, fees must be reasonable, taking into account the amount in dispute, the complexity of the case and the time spent on the case. The costs of an UNCITRAL arbitration usually are borne by the unsuccessful party, but the tribunal has discretion to distribute the costs otherwise (Rule 40.1).

CIETAC - Pursuant to CIETAC Article 59, the arbitration tribunal has the power to order the losing party to pay a fraction of the winning party’s expenses, which shall not exceed 10 percent of the total amount awarded. Other arbitration fees range, for example, from 4 percent for claims of $10,000 to 0.5 percent for claims of about $500,000.

ICSID - For large cases, ICSID arbitration probably is less expensive than ICC arbitration because the ICSID uses the World Bank infrastructure. In principle, costs are borne by the unsuccessful party. However, the arbitration tribunal may apportion these costs as it deems reasonable.

¹Similar in philosophy to many countries’ laws, Belgium has removed the judicial courts from any appellate role in arbitration award involving only non-Belgian parties. Law of 27 March 1985, Code Judiciaire Art. 1717, Sec. 4.

²It is not always possible to determine whether a state’s arbitration law conflicts with the FAA. McClendon, "State International Arbitration Laws: Are They Needed or Desirable?" 1 Amer. Rev. Intern. Arbitration 245 (1990).

³Bockstiegel, RIW 1982, 706, Schutze/Tscherning/Wais, Annotated 795 et seq.

⁴There are four "Users" Councils covering the major trading areas of the world: LCIA European council, covering all European and adjacent countries including countries of Eastern Europe and the Middle East; LCIA North American Council, covering countries of North America and adjacent countries; LCIA Asia-Pacific Council, covering countries of South-East Asia and around the Pacific rim; LCIA Pan African Council, covering countries of sub-Sahara Africa.

⁵The leading areas addressed by ICC arbitration proceedings are: 1) Foreign trade; 2) Licensing; 3) Joint venture and industrial cooperation; 4) Construction; 5) Agency; 6) Finance; and 7) Other - maritime transport, consultancy, employment.

⁶The Hong Kong International Arbitration Centre’s case loads have expanded the most dramatically, on an average growth rate of 100 percent in 1990-92. The Vancouver facility appears to have a negative growth rate.

⁷The United States acceded to the Convention in 1970 when Congress passed the necessary implementing legislation. As an historical note, Article VII (2) states that the Geneva Protocol on Arbitration Clauses of 24 Sept. 1923 and the Geneva Convention for the Execution of Foreign Arbitral Awards of 26 Sept. 1927 "cease to have effect between Contracting States on their becoming bound, and to the extent that they become bound by the New York convention."

⁸The Convention has been ratified by Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, the United States, Uruguay and Venezuela. Some Latin American countries, however, most notably Brazil, have not ratified either the Panama Convention or the New York Convention.

Thomas Salzer is an attorney with a civil engineering background and has held positions as an associate with a construction litigation firm in Philadelphia, the Federal Energy Regulatory Commission and a construction claims firm. Currently, Mr. Salzer is associated with Foster Wheeler Constructors, Inc.