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Arbitrations

Issues pertaining to International Arbitrations under the Private International Law

1. Introduction to International Arbitration under Private International Law

Arbitration is a method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding. It is a private and voluntary dispute resolution process that invests in private individuals the authority to hear a dispute, simultaneously divesting courts of such authority. The arbitration process is contractual in nature and as such the autonomy of the parties' will is extensive.

Private International law regulates international arbitrations. Parties to international contracts may utilize one of the three principal methods used to resolve disputes namely litigation (judicial proceedings), conciliation (mediation), and arbitration (settlement of disputes by third party pursuant to agreement of the parties). An arbitration clause in an international contract may contain provisions delineating the arbitrable issues, the governing law, the situs of arbitration, the procedures by which arbitrators are appointed and the number of arbitrators, the language to be used in arbitral proceedings, and the applicable time limits.

2. Issues involved in arbitration under the Private International Law

A. Frequent emendation in International Arbitration Rules

Most of the major independent arbitral organizations, including the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), and the American Arbitration Association (AAA), have frequently redrafted their international arbitration rules. These changes massively affect the overall structure of international arbitrations due to their impact on uniformity and predictability of the both substantive as well as procedural rules of arbitration under the Private International Law.

Another issue relating to the recurring amendments in the international arbitration rules subsides with the domination of arbitration institutions which formulate these rules according to their own internal policies. Such administered arbitrations become interdependent upon the institutions which administer these arbitrations. Therefore, the ever changing arbitration rules of institutions like the ICC, the AAA, and the LCIA put a great deal of influence on such ad hoc and individually borrowed rules of arbitration.

B. The Confrontation between National and International Laws and the issue of Delocalization of Arbitral Practice

As with the confrontation between national laws and international institutions' harmonization and competition policies, the primary question confronting delocalized arbitration is whether there are policy objectives-such as competition policy-that will preempt the desire of states to respect complete party autonomy in international commercial arbitration. Facing similar policy questions, the U.S. Supreme Court has definitively vindicated delocalized arbitration despite public policy arguments based on antitrust or securities regulatory policy.

C. Cross-Cultural Problems

Another pertinent issue in international arbitration is with regard to the cross-cultural differences, which may affect various aspects of arbitral proceedings including examination of witnesses; the active or passive role of the tribunal; use of written pleadings and oral submissions; use of expert evidence; and, proof and application of foreign law and transnational commercial law.

D. Drafting of Arbitration Contracts - Problems and Implications

Choice of law issues in international arbitration agreements emanates while drafting an international arbitration contract, when making broad generalizations is difficult because, of course, the individual language and specific commercial context of each contract gives it a particularized quality that is difficult to apply broadly to other contracts in other contexts. Nevertheless, few generally applicable principles can be useful in construing and applying the language of specific contracts.

First, the nature of an arbitration is consensual. This principle is called party autonomy. Second, the consensual characteristic extends itself to the realm of choice of law. Third, arbitration clause is an entirely separate agreement, distinct from any other contractual obligations between the parties, which remains intact even if the whole contract is illegal. This third principle is usually referred to as the separability doctrine. The doctrine of separability, or autonomy, of the arbitration clause provides that an arbitration clause embedded in a contract is considered separate from the main contract.

E. Choice of Law

The foremost issue in determining the international arbitration agreements is the choice-of-law. Usually an international arbitration agreement includes a choice of law clause. If the parties have chosen a specific law to govern their contractual agreement, a court is usually required to respect that decision.

F. Making "Trade Norms" part of the Contract

Most commercial codes, including the Uniform Commercial Code (UCC), regard common business practices (or "trade usages") as important interpretive sources for courts to consider when resolving contract disputes. Yet some scholars criticize this incorporation strategy, arguing that reliance on commercial norms is often inappropriate and may distort the true nature of the parties' agreement.