What can a foreign party expect in relation to dispute resolution when doing business in China? If a dispute arises, negotiation is the best initial method of resolution. Most business contracts in China will include a clause requiring negotiation before other dispute settlement mechanisms are pursued. Negotiation might require attempts to enlist the help of local government officials by emphasising the importance of the foreign company’s investment.

If negotiation fails, it is arbitration that has for many years been the preferred method of resolution for foreign-related commercial disputes in China. Arbitrators have, at least until recently, been more experienced and better qualified in the subject matter than judges, and procedures have been more flexible and predictable. Arbitration also has the advantage of finality, in that awards are not subject to appeal whereas court rulings may result in a lengthy appeal process.

Arbitration in China is governed principally by the Arbitration Law 1995 and the Civil Procedure Law 1991. The most striking characteristic is that only institutional arbitration is recognised in China and it is unlikely that there will be any change in the near future to allow ad hoc arbitration. Parties are therefore bound to choose an institution and are restricted by some aspects of Chinese institutional practice. There is still considerable reluctance to allow foreign arbitral institutions to set up within China.

The China International Economic and Trade Arbitration Commission (CIETAC) is the best known institution for foreign-related disputes, but there are over 170 other arbitration commissions. CIETAC re-issued its panel of arbitrators in May this year and this included over 200 foreign arbitrators.

The procedure is normally inquisitorial although CIETAC now authorises adversarial procedures such as cross-examination. Documentary disclosure orders are rare. Hearings tend to be short, often only a day.

“The scale of the court system is staggering: 8.1 million cases were decided by China’s 220,000 judges in 2006”

One of the most frequently cited difficulties is enforcement of foreign-related awards made in China and international arbitration awards sought to be enforced in China under the New York Convention – to which China acceded in 1987. In response to international concern, the Supreme Court introduced a reporting procedure for courts intending to refuse enforcement. This and other measures have greatly improved matters although there are still residual difficulties in transparency and delay in the enforcement process.

How do foreign parties fare in court proceedings? The scale of the court system is staggering: 8.1 million cases were decided by China’s 220,000 judges in 2006 in the 3,234 courts. The four levels of courts comprise in ascending order: basic courts, intermediate courts, provincial high courts and the Supreme People’s Court in Beijing. Cases involving foreign interests will be heard by either a basic court or an intermediate court depending on subject matter and size.

The procedure involves a first instance trial and the possibility of one level of appeal. The process is subject to review by higher courts, with widened criteria introduced by a new Civil Procedure Law. This may increase safeguards in the process but at the expense of delay in achieving finality.

Part of the article writted by Adrian Hughes is a foreign panel member of China International Economic and Trade Arbitration Commission (CIETAC) in Building.

A Directive on certain aspects of mediation in civil and commercial matters was adopted today 23 April 2008. The purpose of the Directive is to facilitate access to cross-border dispute resolution and to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a sound relationship between mediation and judicial proceedings. The Directive is one of the follow-up actions to the Green Paper on alternative dispute resolution presented by the Commission in 2002, the other being the European Code of Conduct for Mediators established by a group of stakeholders with the assistance of the Commission and launched in July 2004.

Welcoming the adoption of this Directive, Vice-President Jacques Barrot said: “This Directive fulfils the political objective established in October 1999 by the European Council of Tampere, which – in the context of encouraging better access to justice in Europe – called for the creation of alternative, extrajudicial procedures for dispute resolution in the Member States. Mediation can provide cost-effective and quick extrajudicial resolution of disputes in civil and commercial matters through processes tailored to the needs of the parties. Agreements resulting from mediation are more likely to be complied with voluntarily and help preserve an amicable and sustainable relationship between the parties.

The Commission proposed the Directive in October 2004 (IP/04/1288). The Directive facilitates recourse to mediation by strengthening the legal guarantees accompanying it, thus giving real added value to citizens and businesses in the European Union. The key components of the Directive are as follows:

The Directive obliges Member States to encourage the training of mediators and the development of, and adherence to, voluntary codes of conduct and other effective quality control mechanisms concerning the provision of mediation services.

The Directive gives every Judge in the Community, at any stage of the proceedings, the right to suggest that the parties attend an information meeting on mediation and, if the Judge deems it appropriate, to invite the parties to have recourse to mediation.

The Directive enables parties to give an agreement concluded following mediation a status similar to that of a Court judgment by rendering it enforceable. This can be achieved, for example, by way of judicial approval or notarial certification, thereby allowing such agreements to be enforceable in the Member States under existing Community rules.

The Directive ensures that mediation takes place in an atmosphere of confidentiality and that information given or submissions made by any party during mediation cannot be used against that party in subsequent judicial proceedings if the mediation fails. This provision is essential to give parties confidence in, and to encourage them to make use of, mediation.

To this end, the Directive provides that the mediator cannot be compelled to give evidence about what took place during mediation in subsequent judicial proceedings between the parties.

The provision of the Directive on periods of limitation and prescription will ensure that parties that have recourse to mediation will not be prevented from going to court as a result of the time spent on mediation. The Directive thus preserves the parties’ access to justice should mediation not succeed.

Source: A boost for mediation in civil and commercial matters: European Parliament endorses new rules

The award followed four days of intense competition , as the team from Sao Paolo and the University of California Hastings College of Law were pitted against each other to mediate a complex business deal. The Brazilian team, made up of Gisela Ferreira Mation, Pedro Fida Fenelon Tibucheski, and Daniel Tabel Luis received a trophy, EUR 2 000 in prize money, an internship at ICC’s ADR Secretariat, and a set of legal reference books.

Every participant in this year’s competition received a year’s subscription to the ICC International Court of Arbitration Bulletin. The awards ceremony was officiated by Guy Sebban, ICC Secretary General, Jason Fry, Secretary General of the ICC International Court of Arbitration and ICC Dispute Resolution Services Director and Pierre Tercier, Chairman of the ICC International Court of Arbitration.

This year’s competition involved an even bigger roster of contenders from 30 universities in Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Morocco, Singapore, Switzerland, Ukraine, the UK and the US.

Competitors acted as counsel and parties before professional mediators and used ICC’s ADR rules to solve business problems.

“What better way to educate tomorrow’s lawyers on the range mechanisms available for resolving international business disputes than through an international competition?” said Pierre Tercier.

The competition is part of ICC’s Dispute Resolution Services core mission: to educate the next generation of law professionals. Inaugurated in 2006, the annual ICC International Mediation Competition is organized by the Amicable Dispute Resolution (ADR) division. The competition brings together law schools from all over the world, giving students an opportunity to test their problem-solving skills in a mock international mediation, and to meet experts from diverse legal and professional backgrounds.

Next year, the 4th ICC International Mediation Competition takes place 12 to 16 February.

For more information contact:

Ms Emilie ROMEO
Project Coordinator
Email: iccmediationcompetition(AT)iccwbo.org

Negotiation: The most common form of dispute resolution is negotiation. By this means alone nearly all disputes are solved. If negotiations fail, it is necessary to seek the assistance of a neutral third party or several neutral third parties to facilitate a solution.

Mr. Christopher To, Secretary General of Hong Kong International Arbitration Centre HKIAC, video:

Arbitration: For an arbitration to take place, the disputing parties must agree to take their dispute to arbitration. In practice, this agreement is often made before the dispute arises and is included as a clause in their commercial contract. In signing a contract with an arbitration clause, the parties are agreeing that their dispute will not be heard by a court but by a private individual or a panel of several private individuals. If parties have agreed to arbitration, they will generally have to go to arbitration rather than court as the courts will normally refuse to hear their case by staying it to force the reluctant party to honour their agreement to arbitrate.

Arbitration is a legal process which results in an award being issued by the arbitrator or arbitrators. Arbitration awards are final and binding on the parties and can only be challenged in very exceptional circumstances. An award has a status very like a court judgment and is enforceable in a very similar manner. Arbitration awards made in Hong Kong are enforceable through the courts of most of the world’s trading nations.

Litigation: In the absence of an arbitration agreement or other consensual means of dispute resolution, the parties may commence proceedings in the courts. Litigation in Hong Kong courts is handled very competently. The decision of the Court of First Instance is not, however, final as an aggrieved party has an automatic right of appeal to the Court of Appeal and if the amount in dispute exceeds HK$1,000,000, they have an automatic right of appeal from the Court of Appeal to the Hong Kong Court of Final Appeal.

Online Arbitration in Hong Kong International Arbitration Centre HKIAC

The Hong Kong International Arbitration Centre HKIAC places great emphasis to providing online dispute resolution services in a wide variety of areas including the areas of intellectual property and information technology. Thus it is fitting that the Hong Kong International Arbitration Centre HKIAC has set as one of its goals to be one of the leaders among online dispute resolution providers in regard to domain names and E-Commerce.

The Hong Kong International Arbitration Centre HKIAC provides online dispute resolution services in the following ways:-

Dispute Resolution Service for Domain Names:

1. Dispute Resolution for gTLDs (for example: .com, .net and .org etc) – (UDRP)
As a partner in and manager of the Hong Kong Office of in the Asian Domain Name Dispute Resolution Centre which is one of the four domain name dispute resolution providers approved by the Internet Corporation for the Assigned Names and Numbers (ICANN) to provide domain name dispute resolution services in regard to generic top level domain names (gTLDs) such as .com, .net and .org. Disputes in regard to gTLDs are carried out under the Uniform Domain Name Policy (UDRP) issued by ICANN. Dispute Resolution for gTLDs

2. Dispute Resolution for ccTLDs (for example: .hk, .cn , .pw and .ph etc)
a. The Hong Kong International Arbitration Centre HKIAC is the sole provider of dispute resolution services in regards to .hk domain names, having been appointed for such purpose by the Hong Kong Domain Name Registration Company Limited (HKDNR). Mandatory final and binding arbitration is the method chosen by HKDNR for the purpose of resolving disputes in regards to .hk domain names. Dispute Resolution for .hk
b. The Hong Kong International Arbitration Centre HKIAC has been appointed by the China Internet Network Information Center (CNNIC) to resolve .cn domain name disputes. Dispute Resolution for .cn
c.The Hong Kong International Arbitration Centre HKIAC was appointed by the .pw Registry Corporation as the sole .pw Domain Name Dispute Resolution Service Provider. Dispute Resolution for .pw
d.The Hong Kong International Arbitration Centre HKIAC was recently appointed by the .dotPH – the Official Domain Name Registry for Philippines to resolve .ph domain name disputes. Dispute Resolution for .ph

3. DotAsia Sunrise Challenge Policy.

The Hong Kong International Arbitration Centre (HKIAC) is the global official dispute resolution provider to handle disputes and challenges arising out of the launch of the .Asia domain.

Dispute Resolution for Registrar Transfer (TDRP)

The ADNDRC has started to handle Registrar Transfer Disputes under the ICANN Registrar Transfer Dispute Resolution Policy since 11 December 2004. Dispute Resolution for Registrar Transfer Disputes.

Dispute Resolution for Internet Keyword

The Hong Kong International Arbitration Centre HKIAC has been appointed by the CNNIC as a provider to handle Internet Keyword Dispute under CNNIC’s Internet Keyword Dispute Resolution Policy. Dispute Resolution for Internet Keyword Dispute.

Dispute Resolution for E-Commerce – HKIAC Webtrust Programme

Webtrust Programme is a third party arbitration framework for the use and adoption by on-line merchants to handle consumer disputes on-line. It is jointly promulgated by the HKIAC and the Hong Kong Institute of Certified Public Accounts in January 2002. The HKIAC is the administrative organisation of that programme, responsible for administering the Programme and appointing of arbitrator. The HKIAC Electronic Transaction Arbitration Rules was adopted as the rules for the arbitration process of that programme.

In order to facilitate the efficient and speedy disposition of domain name disputes, the HKIAC, with technology powered and supported by the Tradelink Electronic Commerce Ltd., has developed a proprietary on-line dispute resolution system for gTLD and hkTLD, which permits parties to conduct their domain name dispute cases by means of a sophisticated fully on-line web-based system.

More information: Hong Kong International Arbitration Centre HKIAC.

The most interesting issue is that e-Justice Centre, is a mediation and arbitration centre, in the 3D virtual world of Second Life.

Picture of the virtual ODR centre e-Justice:

Housed inside the building is the mediation and arbitration centre and all of the infrastructure needed to ensure its functioning. Besides this, the building has a further 3 rooms which can be used to hold conferences and the simulation of decisions and arbitration sessions, which will be the responsibility of the Lisbon New University’s Faculty of Law.

Through this initiative, the Ministry of Justice aims to promote the use of alternative means of dispute resolution as swift, informal and easy-to-use solutions via a channel accessible on a planetary scale, as well as emphasise the importance placed by the Portuguese government and the Presidency of the European Union on these resolution processes.

The initiative will also be an experiment into the use of methods of dispute resolution in an entirely informal and virtual manner, which could have future applications in real disputes.

It should be noted that in Second Life alone the number of resident avatars already exceeds 8 million, thereby representing a sufficient community of users to justify the creation of a dispute resolution centre.

Through this initiative, Portugal has become the first country to provide a means of dispute resolution in Second Life. Any Second Life resident with a dispute with any other resident related to a contract established in Second Life can use the Arbitration Centre provided by the eJustice Centre to settle the conflict.

The process is started by submitting a request for ADR to the eJustice Centre. The other party will then be notified and asked to accept settling the dispute using the eJustice Centre.

If they agree, both parties will then pay a fee for using the eJustice Centre (1% of the value under dispute) as well as deposit an escrow with the eJustice Centre up to 5% of the value under dispute (as a guarantee that they will submit to the decision made through mediation or arbitration). [Note: currently the fee is waived]

Both parties are then notified to present themselves to a mediation session. Mediation is an informal and flexible procedure where a third party — the mediator — will help both to enter an agreement to solve the dispute.

If during mediation, an agreement is found, the process finishes; if not, the arbitration phase begins.

Arbitration is presided by a panel of one to three arbitration judges, who will make an arbitration trial on the dispute, and, at the end, will emit a final decision.

If one party does not follow the decisions of the eJustice Centre, or does not follow the agreement established through mediation, the money held in escrow is given to the other party,

The mediation and arbitration provided by the eJustice Centre are overseen by the RAL Lab of the New University of Lisbon’s Law School.

More information about e-Justice Centre:
- Second Life
- e-Justice Centre

The competition takes place online with each match run in a dedicated webfile using the bespoke software of The MediationRoom.com Each team can include not only the negotiating members (usually 3 or 4) but an unlimited number of fellow students to follow negotiations and post suggestions in a private team area. The enrolment fee (300GBP) will include a licence for the school to run three additional online casefiles to use afterwards, as a training tool or for ad hoc matches with other law schools.

The main points to note from the unique competition format are as follows:

- Two matches,over two weeks for each match, with each team acting for the Claimant and then for the Defendant.

- The case scenario is split into two scenarios, one as presented by the Claimant and one as presented by the Defendant. They will vary in presentation to reflect different interests.

- Each team will have a client allocated. The scenario is learnt through online discussion with the ‘client’. It is up to the teams to extract the fullest information.

- After taking instructions on the case, each team then has to draft a case pleading, based on general principles, not on any specific law.

- Following pleadings,each team has 12 days to negotiate. If they fail to settle, the case goes to a 3 day mediation with an online mediator.

- Each team is expected to make use of an area for anonymous brainstorming of solutions where solutions can be brainstormed and considered objectively without attaching weight through knowledge of the interests of the party concerned.

Prize:

The winning team will receive its own version of an Online Pro Bono Clinic driven by the Software behind this service, branded to the school and hosted for five years.

Further, one member of the winning team (selected by the team) will receive flight and accommodation to attend the 2008 International Forum on Online Dispute Resolution to be held at Royal Roads University in Victoria and the Lester B. Pearson College of the Pacific on Vancouver Island June 18-19th 2008.

More information: International Law School Negotiation and Mediation Competition

China‘s top legislature started to read the draft law on labor dispute mediation and arbitration amid an increasing number of labor disputes that emerged in the country. The draft law was submitted Sunday to the seven-day 29th session of the Standing Committee of the National People’s Congress (NPC), or China’s top legislature, for the first reading. Arbitration in labor dispute cases will be important because in China are continuously increasing in recent years. Statistics show that labor dispute arbitration organizations at various levels dealt with 1.72 million labor dispute cases involving 5.32 million employees from 1987 to the end of 2005, with a growth rate of 27.3 percent annually.

Xin Chunying, vice Chairman of the Legislative Affairs Commission of the NPC Standing Committee said on the legislative session that excepting the increasing number of labor disputes, other problems also exist. For instance, the personnel in arbitration organizations are not professional and thus lack credibility and the process of arbitrating labor disputes is long, making the cost of arbitration high.

China resumed the labor dispute arbitration system in 1987 and formed the procedures for coping with labor disputes as “mediation, arbitration and trial” after the regulation on handling corporate labor dispute and Labor Law were promulgated in 1993 and 1994. The procedure and practice for dealing with labor disputes have been widely accepted by the public.

The draft bill is for strengthening mediation and improving arbitration so as to help fairly solve labor disputes without going to court and thus safeguard employee’s legitimate rights and promote social harmony. The draft bill said corporate itself is entitled to establish labor mediation committee to solve the labor disputes occurred in its own corporate so as to solve disputes at grassroots level. The corporate labor mediation committee should consist of employees and representatives of managerial level. When labor disputes occur, litigants can turn to the corporate mediation committee, or grassroots people’s labor disputes mediation organization, the draft bill said.

The draft bill said labor disputes concerning pay, medical fee of job-related injuries, compensation, pension whose relevant sum do not exceed 12 months of local minimum monthly wages could be solved by arbitration. The arbitration documents have legal effects upon being handed out. Labor disputes on working time, holidays, social insurance and collective contracts could also be solved by arbitration with legal effects, said the draft bill.

World of Arbitration In a civilised society, citizens look to the courts to settle their disputes. The courts put judges at the disposal of the parties, the courts determine the substantive and procedural law which is to be applied and the courts enforce their own orders through court officers, when necessary. It is a one-stop shop.

For those engaged in alternative dispute resolution – ADR, the courts are available not merely to enforce decisions and awards but also to supervise and control the chosen ADR procedures, should matters go awry.

Where disputes arise in the international arena, the picture is a little different because national courts are rarely acceptable to both sides. Disputes between states or between an individual and a foreign state or between an individual and an international organisation may be regarded as being in a special category, where the aggrieved party may have recourse to treaty arbitration. Examples are arbitration before the PCA1 and arbitration under the auspices of ICSID2. Beyond that special category, the parties must make express provision for dispute resolution in their agreement, failing which the aggrieved party will be left to seek his remedy from the domestic courts of one country or another, depending upon which will assume jurisdiction.

The result is a contrast. Whereas national courts often represent a convenient and acceptable means of dispute resolution for parties to a dispute which has no international element, there is no international equivalent. In consequence, most international disputes fall to be resolved through a process or by a tribunal which is essentially consensual in origin.

This paper is concerned with the resolution of disputes arising under international construction contracts. The purpose is to survey the available alternatives and to identify some of the considerations to be borne in mind by those concerned. In this last context, the emphasis is on two key considerations, being enforcement and applicable law.

Enforcement

It is convenient to note at this stage that there is more than one aspect to enforcement. Thus, we may distinguish between enforcement in the sense of ensuring implementation of the chosen disputes resolution procedure, on the one hand, and enforcement in the sense of giving effect to the resulting award or decision, on the other.

There are various conventions which bear upon enforcement. However, on the international stage, it is the New York Convention which is of most significance. Replacing the Geneva Convention of 1927, the New York Convention provides a simple and effective method of obtaining recognition and enforcement of foreign arbitral awards. By Article II, Contracting States agree to recognise arbitration agreements in writing and undertake that their courts, if seized of an action in respect of which the parties have made an arbitration agreement in writing, will, in principle, refer the parties to arbitration. Further, By Article III, awards made in the territory of a Contracting State, provided that they are made pursuant to an arbitration agreement in writing, are to be recognised and enforced by another Contracting State. Limited grounds for refusal of recognition and enforcement are set out in Article V. These are as follows:

Article V(1) (Conflict with the law of the State where the award was made or where the arbitration proceedings took place)

1. Incapacity of parties and invalidity of arbitration agreement.

5. Award not yet binding or already set aside or suspended.

Article V(2) (Conflict with the law of the State where recognition or enforcement is sought)

1. Dispute not capable of settlement by arbitration.

2. Recognition or enforcement contrary to public policy.

In applying such grounds for refusal of enforcement, it is customary for the courts of contracting states to allow a margin of appreciation in recognition of the fact that the award was made in another jurisdiction. For example, although ad hoc arbitration agreements are void under the PRC Arbitration Act 1995, the courts of the PRC have nevertheless chosen to enforce arbitration awards rendered by ad hoc tribunals in foreign jurisdictions, rather than invoking the public policy ground set out in Article V(ii)(b)5.

Applicable Law

The second key consideration concerns the applicable law. It is in the context of arbitration that the need to ascertain the applicable law is most acute. It has been said that, without undue sophistication, there are at least five different systems of law which may have a bearing on an international commercial arbitration6. Allowing for the fact that this paper is concerned not only with arbitration but also with other forms of ADR, the five may be expressed as follows:

1. The law governing the parties’ capacity to enter into an dispute resolution agreement;

2. The law which governs the dispute resolution agreement and its performance;

3. The law which governs the existence and proceedings of the mediator, conciliator or tribunal – sometimes known in the context of arbitration as the lex arbitri;

4. The law governing the substantive issues in dispute, generally described as the applicable law, the governing law, the substantive law or the proper law of the contract;

5. The law governing recognition and enforcement of the award or decision (which may in practice be more than one, if the attempt to enforce has to be made in more than one jurisdiction).

Having noted above a distinction between enforcement in different senses, it is to be observed that enforcement in the sense of ensuring implementation of the chosen disputes resolution procedure is governed by the law at (2) above, whilst enforcement in the sense of giving effect to the resulting award or decision is governed by the law at (5).

Mediation and Conciliation

The parties to an international dispute may embark on mediation or conciliation. If they do it will either be because the contract calls for it or because they have agreed to do so on an ad hoc basis. Various institutions involved in international dispute resolution have published protocols providing for mediation or conciliation, such as the ICE7, the ICC8, the LCIA9 and the HKIAC10.

Since such procedures depend largely for their success upon the parties reaching consensus, the fact that the dispute has an international element tends to have relatively little bearing on the proceedings, save that, for one party or the other (and perhaps both) the applicable substantive law may be foreign. However, the international element cannot wholly be overlooked. Those involved will wish to bear in mind the effect of anything said and done in the context of a mediation upon any subsequent means of dispute resolution to be undertaken if the mediation fails. For example:

1. The privilege against disclosure and production of documents which common lawyers associate with the epithet without prejudice is unknown in Greek law. Accordingly, if the ultimate arbitration is to be conducted according to Greek procedural law, the parties to any mediation process should be aware that any documents disclosed may ultimately come to the attention of the arbitral tribunal even if the parties purport to conduct the mediation on a without prejudice basis.

2. Parties who succeed in settling their dispute in mediation do well to include in the settlement agreement not only a term which identifies the law which governs the settlement agreement itself but also a term (if it can be agreed) to the effect that in the event of dispute both parties agree to submit to the jurisdiction of a particular national court.

It may also be necessary to have the law applicable to enforcement in mind when considering the possibility of dispensing with mediation even though it is expressly provided for. Thus, if the disputes resolution procedure laid down by the contract makes mediation a condition precedent to arbitration, the party who fails to cooperate in mediation may do so at its peril. The court from whom enforcement is sought might decline to do so under Article V of the New York Convention, either upon the basis that the arbitral procedure was not in accordance with the agreement of the parties (Article V(1)(d)) or on the basis that enforcement would be contrary to public policy (Article V(2)(b)).

A similar problem might arise in with the process sometimes known as “Med-Arb”. In, for example, the PRC an arbitral tribunal may well find itself acting as mediator and conciliator. In that jurisdiction, there is no objection to the tribunal subsequently resumed its arbitral function, provided that the award is rendered promptly. But, whereas such a procedure would be regarded as quite normal in the PRC, it might not be seen in the same light elsewhere. Accordingly, there is a risk that if enforcement were sought in some other jurisdiction, it might well be resisted under the New York Convention on public policy grounds.

Disputes Boards

For a project of any size involving contracting parties of different national origins, the contract which provides for the interim resolution of disputes on referral by a Disputes Board11 is now the rule rather than the exception. The rules under which such a body operates tend to vary from project to project. However, a degree of standardisation has been introduced as a result of the publication of standard rules both by the ICC12 and by FIDIC13.

Typically, the Disputes Board is appointed at the commencement of the project; its members are required to visit the site periodically and to familiarise themselves with the works; disputes come before the Disputes Board only upon referral by one or other of the parties; and the Disputes Board’s decision (or “recommendation”) binds the parties, subject to review by an Arbitral Tribunal (or, more rarely, by the courts).

Once again, the international element of the dispute tends to have little bearing on the proceedings conducted before the Disputes Board. However, practitioners still need to take into account the effect of different systems of law. Thus:

1. The enforceability of the Disputes Board procedure will be governed by the law which governs the disputes resolution provisions generally.

2. The enforceability of the Disputes Board’s decision will be governed by the law of the state in which enforcement is sought.

Let it be supposed that a substantial infrastructure is part complete when a dispute over valuation arises, leading the contractor to issue a threat to suspend all work on the relevant part of the project unless its demands for payment are met. Let it be supposed further that the employer then seeks injunctive relief to restrain the contractor from carrying out its threat. The contractor maintains that the court ought to decline jurisdiction in favour of the Disputes Board constituted in accordance with the Disputes Resolution provisions. The issue for the court is whether or not to enforce the contractual procedure. Many will recognise these as the outline facts of the Channel Tunnel case14. As is well known, the House of Lords preferred to enforce the contractual disputes resolution procedure. In doing so, it may be regarded as having applied the law governing the dispute resolution agreement and its performance.15

The moral of the tale is that the practitioner should keep well in mind the likely attitude of the courts in the state in which enforcement action might be taken.

Treaty Arbitration

The PCA situated at The Hague was established by the Convention for the Pacific Settlement of International Disputes included at The Hague in 1899 and revised in 1907. Where the relevant state is a party to one or other of the two Hague Conventions, a dispute may be referred to the PCA where at least one party is a state, state entity or an intergovernmental organisation.

ICSID was established by the Washington Convention of 1965,16 better known as the ICSID Convention. It gives both private individuals and corporations who are “investors” in a foreign state the right to bring legal proceedings against that state before an international arbitral tribunal. “Investors” in this context include a foreign contractor implementing a construction project in the territory of the state in question. Here, the source of authority to arbitrate is a bilateral investment treaty. For the contractor who qualifies as an “investor”, this offers the opportunity to institute proceedings before an international Arbitral Tribunal administered by ICSID in Washington. The advantages to the “investor” are that there is no fear of the outcome being influenced by the Respondent state as there might be if the dispute could only be litigated or arbitrated within the borders of that state. Furthermore, state immunity is much restricted.

A full review of ICSID arbitration is beyond the scope of this paper. However, a particular problem to be noted is that which can arise where the underlying construction contract itself provides for the arbitration of disputes. In such a case, what sometimes appears to be a contest between two tribunals can arise in the event that one party purports to refer to a dispute to the contract tribunal, whilst the other purports to refer the same dispute to a tribunal constituted by ICSID.17

Arbitration pursuant to Agreement

Turning to arbitration pursuant to agreement, there is a distinction between an arbitration agreement incorporated into the contract at the outset and an arbitration agreement which is concluded ad hoc. But, either way, the threshold questions concern what is agreed or provided for as to the constitution of the Tribunal and what procedural law is be applied.

Parties commonly agree that the dispute is to be arbitrated in accordance with specified institutional rules such as those of UNCITRAL,18 the ICC,19 the Stockholm Chamber of Commerce,20 the HKIAC,21 CIETAC,22 SIAC23 and the Swiss Chambers of Commerce.24 In such a case, these threshold questions are likely to be provided for, if not agreed.

Where the parties do not adopt institutional rules, matters such as the constitution of the tribunal and the choice of procedural law fall to be settled in the event of dispute by the courts of the state in which the arbitration takes place. In English law, the approach would be to resolve such disputes by reference to the law which governs the arbitration agreement.

Thus, in the Star International case,25 the contractual arbitration clause was silent as to the procedural rules to be followed. After the award had been published, the unsuccessful party sought to challenge it on the basis that no oral hearing had been held. The court, applying English law, held that the absence of a hearing did not amount to unfairness and declined to interfere with the award.

Once the tribunal has been constituted and the procedural rules identified, practitioners are likely to find it necessary to refer to any one or more of a number of different systems of law.

Let it be supposed, for example, that the claimant seeks interim conservatory relief, perhaps an order that an area of allegedly defective flooring be preserved so that forensic tests can be conducted. In the first instance, there is a question whether the tribunal has jurisdiction to make such an order. The answer to that question will depend on the lex arbitri. In many cases, institutional rules expressly confer jurisdiction upon the tribunal to make such an order. Beyond that, if the tribunal does make an order, there is a question whether the local court should enforce it. The answer to that question will depend in part on the lex arbitri, in that the court would be unlikely to enforce an order made without jurisdiction. But it may depend also on the law of the state in which enforcement is sought. In the PRC, for example, it is unlikely that such an order would be enforced, since it seems that it is only the court which is regarded as having power to order interim relief.

Then again, let it be supposed that, following publication of the award, the losing party seeks to challenge it. The question whether or not the award can be challenged may depend in part on the lex arbitri. Thus, for example, the ICC Rules are regarded at least in England and Wales as excluding appeals26. But if the institutional rules are silent on the point, the question of challenge may depend on the law of the place of the arbitration. So, if such a situation were to arise in a case where the arbitration took place in, say, South Korea, the court would be likely to assume jurisdiction to set aside the award on grounds similar to those given in Article V of the New York Convention for refusing enforcement, provided that an order for enforcement has not already been made.27

In the same way, there are a number of circumstances in which the practitioner will wish to have in mind not only the lex arbitri but also the law of the state in which the arbitration takes place. These include where a party seeks to restrain the tribunal from proceeding at all, where a party seeks security for costs,28 where a party seeks to sub-poena witnesses; where a party seeks an order for disclosure of documents from a non-party; where a party seeks to challenge an award for lack of due process,29 and so on.

Discusion about this paper in Keating Chambers – United Kingdom – International Dispute Resolution website:
Article by John Marrin QC
United Kingdom: International Dispute Resolution.

http://www.mondaq.com/article.asp?articleid=44022&searchresults=1

I. Conciliation
Either party may demand conciliation. The demand for conciliation is made by letter, fax or Internet. Within 10 workdays, and once the administrative costs have been covered, the other party (parties) is (are) advised of this demand for conciliation. The applicant is notified of any response or reaction by the other party. If the case reveals a serious difficulty the parties may, in that event, call for an expert or a mediator to be appointed, so as to avoid litigation. After one month or when the conciliation fails, either party may initiate arbitration proceedings.

II. Expertise and Mediation
All the parties may demand, together, in writing, for an expert or mediator. Within 15 workdays, and once the administrative costs have been covered, an expert or a mediator will be appointed. Each party bears the costs thereof for equal parts. Within 30 days after the appointment, the expert or mediator shall meet the parties and, within 3 months, he shall make a compromise or give a report with a clear opinion.

III. Arbitration
Before initiating arbitration in the first instance parties are obliged to make an attempt at conciliation every time the law imposes it.

Art. 1: General
Arbitration has, since 1958, been an internationally recognized procedure (convention of New York). Unless otherwise agreed between the parties, only the laws of the country of the clerk’s office of the Court shall apply. The law applies to all that is not expressly stipulated in these rules.

Art. 2: Jurisdiction
Parties who had not foreseen an arbitration clause, may, after a dispute has arisen, conclude a contract thereto. An arbitration agreement must be incorporated in a document signed by both parties or in other legally binding documents. Disputes which cannot be legally submitted for arbitration shall be inadmissible. If one party refuses to take part in the proceedings or does not present its arguments within the stipulated time limit, the dispute will be heard anyway and an award shall be pronounced.

Either party may petition the judge to seek conservatory or provisional measures. This does not imply that this party waives the arbitration agreement. Also if suddenly a dispute or a protest arises after the obtaining of an enforcement ordinance, the claim shall be settled by arbitration only.

Art. 3:
In order to begin arbitration proceedings, the requesting party is required to send a registered ‘notification of arbitration’ (a) to the opposing party, as well as a ‘request’ (b) by registered letter to the secretariat referring to the arbitration clause.
In principle, the procedure shall take place in writing. Either party is entitled to ask for an audience with debates and to be assisted by or represented by an attorney or mandatory.

a) The notification of arbitration on a formal way invites the opposite party to give its point of view within 15 workdays and contains the same dossier as sent to the secretariat.

b) The request of arbitration is sent to the secretariat together with the notification of arbitration. It contains the complete identity of the parties, an accurate description of the claim (principal, interest, damage …) and a copy of the notification of arbitration with proof of sending to the opposite party.

c) The registration of the dossier by the secretariat is sent by ordinary mail to the parties, within 15 workdays after receipt.
The claimant is invited to pay a deposit estimated by the secretariat for initial costs. If it is not paid within the time limit, the request shall be, ex officio, considered withdrawn. In cases of serious financial difficulties, the secretariat shall ask for a bank security or guarantee or shall reduce or postpone the payment of this deposit.

d) Terms
- Within 15 workdays after receipt of the notification of arbitration, the defendant has to send his point of view (counter claim) and pieces to the claimant, and two copies to the secretariat with proof of sending to the claimant.
- Unless otherwise agreed by the parties, the clerk’s office who’s indicated after expiration of the previous deadline, shall appoint the Arbitral Court and inform the parties within 20 workdays.
- Within 15 workdays after receipt of the defendant’s statement, the claimant must send his final statement and supplementary proofs to the defendant and two copies to the clerk’s office with proof of sending to the opposite party.
- Within 15 workdays after receipt of the claimant’s final statement, the defendant must send his final statement to the claimant and two copies to the clerk’s office with proof of sending to the claimant.
The claimant has no right to reply, unless the defendant submits completely new elements. Only the Arbitral Court can decide about this. Conclusions and documents presented out of the terms fixed, can be kept out of the debates.
The receipts mentioned above are considered to be done, for national sending 3 workdays after the deposit to the post office and for international sending 6 workdays after the deposit to the post office. The contrary shall be proven by the requesting party. The proof of sending is the receipt of the Post Office. The day of sending does not count to calculate the terms.
Parties may foresee or decide to replace the exchange in writing mentioned above by an immediate hearing with debates. In this case it shall take place within one month after the appointment of the Arbitral Court.
The clerk’s office can postpone the proceedings at any time if the amount to cover the proceedings costs has not been paid. One party can request, by means of a well-motivated letter, the shortening or extension of terms. The clerk’s office decides sovereign about this request. The clerk’s office can also extend a term if useful for a good dispatch of the lawsuit. The Arbitral Court can also request the parties to formulate supplementary conclusions concerning one or more points, unclear to it.

e) The award
Within 10 workdays after receipt of the defendant’s final statements or before the hearing, the whole dossier shall be remitted by the clerk’s office to the Arbitral Court.
Within 20 workdays after receipt the dossier, the Arbitral Court shall give a verdict. This term can only be lengthened on motivated request by the Arbitral Court, and the clerk’s office’s approval. Without a verdict within the term and without approved longer term the proceedings are postponed, the clerk’s office will nominate, ex officio, a new Arbitral Court. In this case only Art.3e shall be applicable.

The clerk’s office informs the parties about this award. The award specifies also which party shall pay the procedure bill or in which proportion this charges are divided amongst parties and to whom they shall be paid or reimbursed.
If the defendant neither reacts in the first instance on the notification of arbitration nor responds to the notification of composition of the Arbitral Court, sent by registered letter, a verdict by default shall be pronounced. The Arbitral Court is authorized to declare, ex officio, an award provisionally enforceable and to exclude consignations. The parties undertake to execute the award. The clerk’s office lodges the original award at clerk’s office of the public Court. One party shall obtain the enforcement (exequatur) after homologation.

f) Procedural requirements
- All mailed items between parties shall be sent by registered mail, unless otherwise permitted by the parties and by law. – The documents shall be sent to the secretariat or the clerk’s office by registered mail, duly numbered and in DUPLICATE (QUADRUPLICATE in appeal).
- The clerk’s office is entitled to ask the parties for missing and/or additional copies or to impose an extra administrative charge for the inconvenience thus caused.
- The parties are exempted from the obligation to send their mailed items to the secretariat or the clerk’s office by registered mail provided they send them by e-mail and between the parties provided a mutual agreement after the dispute has arisen.
- The pleadings may, provided all parties agree thereto, be conducted via web- or videoconferencing.

g) International arbitration
The regulation-law of the United Nations (UNCITRAL, 21/06/1985), is applicable, as far as it is supplementary, and not contrary to the legislation of the country of the clerk’s office or to the present rules. If at least one of the disputing parties has its location outside of the European Union, all periods mentioned in Art. 3d) shall be doubled.

h) In case of bankruptcy or death of a party the procedure shall be postponed. On request of one party the procedure shall continue after payment of the costs and giving of the new identity of the parties.

Art. 4: Place and language
The place of the award shall be considered the place of arbitration.
Unless other agreement it shall be the place of the clerk’s office. This may be different from the place of debates which is sovereign chosen by the clerk’s office.
The parties shall choose the language of the proceedings. The proceedings may take place in two languages. In the absence of an agreement, the language(s) of the proceedings is/are that/those of the country of the clerk’s office. All charges for translations shall be paid by the party remitting documents in another language. The verdict is written in the language of the procedure, in accordance with the place of enforcement.

Art. 5: Multipartite arbitration
- Linking of controversies: If between the same parties, there are controversies that are connected or indivisible, the clerk’s office can order to link these controversies, if the parties are bound by the same arbitration clause on binding documents. The linking is not possible if already an award has been taken “before justice has been done” on its merits. – Third party intervention: The parties give to any third party the right to intervene in the proceedings. The third party shall accept by agreement the rules. It is conditional on the assent of the Arbitral Court.

Art. 6: The Arbitral Court
a) The mission: The Arbitral Court decides autonomously, even in cases where one party raises objections, on the competence and existence or validity of the arbitration agreement. The clerk’s office should be informed, at once, of any other decisions of other judicial authorities regarding the unresolved dispute.
The challenging of an arbitrator must be effected in a reasoned request (and by registered mail) to the clerk’s office within 10 days of receiving notification of the composition of the Arbitral Court. The challenged ar¬bitrator is duly advised thereof by the clerk’s office. The challenged arbitrator shall duly resign within 10 workdays or notify the objecting party that (s)he will not be withdrawing. The replacement shall be effected according to the rules governing new appointments. The Arbitral Court may decide autonomously whether to hear the parties (or their mandatory), to summon witnesses and/or to order an on-site inspection and, if appropriate, to appoint external experts whose brief shall be specified in writing. A board member, personally, a secretary, a clerk of the Court or an arbitrator cannot be held liable for their actions within the scope of, or in connection with, the rules. All disputes must be settled only by arbitration.

b) The appointment: Unless the parties have agreed otherwise, the clerk’s office in the first instance shall appoint one arbitrator and three for the appeals court. The parties are prohibited from contacting an arbitrator appointed by the clerk’s office, this under pain of absolute nullity and an order to pay damages to the other party.
If the parties, by mutual agreement, have themselves appointed an Arbitral Court, this Court may, in such a case, assign the duties of the clerk’s office and the appeals level to the Institute of Arbitration.
If an arbitrator dies or is legally impeded, the clerk’s office is in charge of the replacement.

Art. 7: Hoger beroep
Either party has the right to appeal against an award within the time limit of 30 calendar days after the postmarked date of the registered notification of the award of first instance, except if the parties, after the dispute arises, have expressly excluded the appeal level and in this case the award in first instance is not by default.
If the appeal period begins or ends during the legal vacations of the clerk’s office country, said appeal shall be extended until the 15th day of the new calendar year. Once this deadline has expired, it will no longer be possible to make an appeal.

The request for appeal should be sent, by registered mail, to the clerk’s office. On registered request of the clerks’ office the appellant does pay within 15 workdays the registration and the asked advance. The clerk’s office fixes sovereign this advance. If the registration fees and costs are not total paid within 15 workdays, these appeal proceedings shall be deemed to be not existed.
The appeals procedure and terms are the same as the proceedings in first instance (III.Art.3), with the difference that the notification of arbitration is given by the clerk’s office after the registration fees and costs have been paid and that this notification does duty for registration of the arbitration. The Arbitral Appeals Court is composed of three arbitrators.

IV. Costs
The administrative cost for each dossier is maximum 50 EUR (15 EUR if the request is introduced by Internet).

a) Conciliation: For a financial claim the cost is max. 100 EUR. For other disputes see IV b.

b) Expertise or mediation: The cost is limited to half of the arbitration (see IV.c.).

c) Arbitration:

For the registration of the request and the appointment of the Arbitral Court the costs per party for the first instance is 75 EUR and 200 EUR for the appeal level.
The cost for arbitration (clerk’s office & fees) is 100 EUR per hour (min. 1 hour) with a maximum fixed according to the amount of the value of the litigation (main issue and counterclaim, if any): On the:
1st range up to 6.000 EUR: 10%
2nd range from 6.000 EUR up to 12.000 EUR: 8 %
3rd range from 12.000 EUR up to 25.000 EUR: 6 %
4th range from 25.000 EUR up to 125.000 EUR: 3 %
5th range from 125.000 EUR up to 250.000 EUR: 1,5 %
6th range from 250.000 EUR up to 625.000 EUR: 1 %
7th range from 625.000 EUR up to 1.250.000 EUR: 0,5 %
8th range from 1.250.000 EUR and more: 0,25 %
The costs of an award by default about a not contested money claim in the first instance are not due but doubled in appeal or when the Arbitral Court is composed by three arbitrators.

Exceptional expenses.
The Arbitral Court will be condemned, ex officio, to pay an indemnification for the lawyer’s intervention in the procedure, of 400 EUR for the first instance and 800 EUR for the appeal. The expenses provided for audiences, hearing of witnesses, appearing, visits to the scene of the occurrence, translations, supplementary copies, research, corrections and rejection are not included and are estimated separately by the Arbitral Court, and shall be paid by one or more parties. If the value of the controversy cannot be determinate, the clerk’s office will fix the amount needed to cover the retainers and the operating expenses.
Only in cases where the arbitration was stopped before the notification to the parties of the Arbitral Court the costs shall be reduced to the administrative charge.

All travelling expenses and costs resulting from a deviation from these rules are exceptional expenses. All amounts are exclusive of taxes, duties or charges.

V. Standard Dispute Rules
Unless otherwise agreed between the parties, the Institute of Arbitration non-profit organization of Brussels, shall designate the arbitration committee or chamber and the clerk’s office of the Court, which shall be tasked with organizing the arbitration proceedings and monitoring the progress thereof, according to the rules. The clerk’s office means the secretariat of an Arbitration Committee or Chamber.

These Rules are subject to modification at any time. The modifications do not apply to an arbitration which is already pending (‘lis pendens’). The interpretation of the Standard Dispute Rules and of the correct application thereof falls within the competence of the Institute of Arbitration non-profit organisation, Drève Sainte Anne 68b, in 1020 Brussels, +32-(0)70-233.620.

In application from 1 January 2006
Institute of Arbitration Legal registration 1998, 2001, 2004 & D/2004/6878/1

More Information:

Institute of Arbitration
Drève Sainte Anne 68 b
1020 Brussels
E-Mail: info(at)euro-arbitration.org
Tel: +32-(0)70-233.620 (9h-12h)
Fax: +32-(0)70-233.620

Despite the dot.com bust, the future of Internet commerce (e-commerce) still looks rosy. According to recent studies, it is now projected that by 2005 one billion people will be on the Internet and at least one third will make online purchases. What is even more remarkable is that this huge, $1.6 trillion business will be based essentially on trust, among sellers and buyers who are unlikely to ever see or speak to each other.

Inevitably, some of those e-commerce transactions are bound to turn into disputes. So what happens when a seller in the USA and a buyer in Russia disagree over a sale transaction worth only a few hundred dollars? What recourse do they have, when litigation, Small Claims court and arbitration are obviously not feasible options?

More and more online merchants are realizing that, if trust is indeed such a critical factor in e-commerce, having reliable products, clear return/refund policies and a multi-language web site may not be enough. It is far more effective if worldwide customers are reassured that, if they have a disagreement with the seller, they can get it resolved through an independent, neutral and inexpensive dispute resolution process.

Ebay has already proven how this can be done. With more than four million auctions daily, eBay is the world’s largest online auction. When sellers and buyers throughout the world have a dispute, they are referred to Square Trade, an independent ODR (Online Dispute Resolution) company based in San Francisco. A Square Trade trained mediator assigned to the case then gets in touch with both parties and helps them negotiate a mutually acceptable settlement. The purpose of mediation is not to determine which party is right or wrong, but to help seller and buyer answer one simple question: How can your case be resolved in a way you can both live with?

The entire mediation process takes place by email, and neither the mediator nor the parties need to be online at the same time. Therefore, parties can read and respond to the mediator’s messages whenever they want: after a few minutes, hours or even days.

As a Square Trade mediator, I have mediated over 900 eBay cases, with parties across the USA, Europe, Asia, and transactions worth anywhere between one penny and $35,000. All cases have fundamentally the same features. There are some substantive, tangible issues (like money, products, refunds, etc.); and there are also intangible issues (like the buyer’s need to feel heard and respected), which can often be resolved just with an apology.

Interestingly enough, the settlement rate achieved through online mediation is similar to the settlement rate achieved in face-to-face mediation in Small Claims courts. In other words, it does not really matter whether seller and buyer know each other since they live in the same city, or are total strangers because they live in different countries. What matters most is that both parties feel equally empowered by a neutral process that does not favor one party over the other, and gives them total control on its outcome.

Giuseppe Leone is a Square Trade online mediator and MCP mediator for Hawaii Small Claims courts. mediationplus@yahoo.com

Year 2003