Article by William W. Park
The law chosen to govern the merits of an international contract dispute does not always lead to results hat satisfy an arbitrator's personal sense of what is right. The arbitrator therefore may be tempted to resolve the dispute according to his own notion of justice. Seduced away from the rules of the otherwise applicable law, the arbitrator may take on unauthorized powers of amiable composition. While most international arbitrators are conscientious in respecting the bounds of their mission, some have been known to boast of their skill in finding ways to bypass the established rules of the party-chosen law. To circumvent the prescribed limits of their authority, they have discerned ‘emerging trends' that lead in a contrary direction, or invented new principles of trade usage and lex mercatoria.
When an arbitration implicates foreigners, the judiciary of the arbitral seat might not examine the award according to the same standards applied to domestic controversies. Recent legislation in major European arbitral centers has curtailed the power of local courts to set aside awards in international arbitration. Belgium has gone so far as to eliminate any right to have an award set aside, even for such defects as arbitrator fraud and excess of authority, unless at least one party is Belgian. Switzerland has enacted a statute that permits contractual exclusion of any and all court challenges to awards when all parties are non-Swiss.
Practitioners and policymakers alike can appreciate the international arbitrator's desire for freedom from constraints of substantive and procedural national law. One can also understand the winner's desire not to see a challenge to an award in its favor. However, the arbitration affects not only winners, but also losers, and often society at large as well. The fashions for non-national justice and arbitral autonomy, if pushed too far, will ultimately backfire to compromise the integrity of international dispute resolution. The chemistry of these trends may inflict on the business community an unjust uncertainty even less appealing than the mandatory norms of local arbitration law.
The interests at stake include not only those of the parties, but also the rights of persons who may never have consented to arbitration at all. Under a system of complete arbitral autonomy, such as now prevails with respect to foreigners in Belgium, the victim of arbitrator fraud or other procedural irregularity would have no opportunity to challenge the arbitrator's decision where rendered. Such a ‘loser’ would be required to defend against enforcement in every country in which it had substantial assets. When the victim of procedural irregularities is the losing claimant, the results of arbitral autonomy are even more dramatically unfair. If denied the opportunity to have the award set aside where rendered, the unsuccessful claimant has no enforcement forum in which to contest the defective award, for the simple reason that there is nothing to enforce. The losing claimant's only recourse would be to commence litigation and to deny the award's res judicata effect—a solution hardly compatible with the bargain to resolve disputes through arbitration rather than the courts.
The following remarks will suggest that the arbitral situs bears a duty to provide the loser of an arbitration with a nonwaivable right to challenge an award for an arbitrator's disregard either of his mission or of fundamental due process in the proceedings. This obligation springs from the active and passive support that the country of the proceedings gives to the arbitration. Elimination of any and all grounds for challenge of awards is an intriguing but misguided experiment, likely to do more harm than good to fair and efficient international dispute resolution.
About the Author
William W. Park. Professor of Law, Boston University. Adjunct Professor of International Law, The Fletcher School of Law and Diplomacy. B.A., Yale University; J.D., Columbia University; M.A., Cambridge University. Visiting Professor of Law, University of Dijon. Visiting Professor of Law, Institut Universitaire de Hautes Etudes Internationales (Geneva).
Citation
63 Tul. L. Rev. 647 (1989)