Self-Regulation of International Arbitration
On Tuesday, 9 May 2013, There was a debate at the LSE on the question, "Is Self-Regulation of International Arbitration an Illusion", between Sundaresh Menon (Chief Justice of Singapore) and Jan Paulsson. I couldn't go. A pity, because the LSE has a handy balcony for my wheelchair.
These debates, about regulation, standardisation, and the like, always worry me. Arbitration doesn't belong in a regulated frame work. One of the definitions in the OED is "†1. A deciding according to one's will or pleasure; uncontrolled or absolute decision.". Admittedly it's marked as obsolete, but it reveals the history. Arbitration is, I suggest, nothing more but also nothing less than a means whereby two persons, individuals or corporate entities, can obtain a decision they themselves would be free to make.
Certainly they obtain that decision from a third party, who may be one or a panel, an ad-hoc committee. of their own choosing. The panel, called a tribunal, has no authority of its own, no standing, apart from the authority the parties choose to give. There is absolutely no authority over anyone else but the parties. The arbitrators are not a Court.
There are soi-disant courts, such as the London Court of Arbitration, or the Arbitration Court of the ICC, but they don't decide anything, they don't make rulings on the matters between the parties. I don't seek to detract from their significance or their reputation. They play a key role in the process of arbitration as do centres like the KLRCA, in Malaysia or the ICDR, the international wing of the AAA. Calling a private association a Court doesn't create any power. A body is what it is.
What these bodies do is act as agents for the parties, in appointing and, to a greater or lesser extent, controlling arbitrators. Like the arbitrators themselves, they exercise only the powers the parties give them.
The end product of arbitration is a decision. The decision of the arbitrators, the Award, is a decision made on behalf of the parties and only for the parties. It does not, and cannot, bind anyone else. It has no coercive power because the arbitrators have no coercive power. If one or other party elects to renege from that decision, the decision made on their behalf by an agency of their own choosing, the only proper coercive force is that of a Court having effective jurisdiction.
Now, we hope that the Award is right, the facts are correctly found and the proper law, whether it be the principles of the relevant trade or the law peculiar to some geographical district, properly applied. We also expect the rules of Natural Justice to have been observed.
If that is so, then National Courts will exercise their coercive power, either directly by the law of the seat or through the New York Convention 1958 or, if the Award is to be enforced where the NYC's writ does not run, as a contractual obligation. I write as a theoretician; practical outcome may be another matter.
If the Award is wrong, and here I turn to the main definition of arbitration, again from the OED, "The settlement of a dispute or question at issue by one to whom the conflicting parties agree to refer their claims in order to obtain an equitable decision", then clearly, as an equitable decision has not been achieved, the arbitration isn't an arbitration and the Award isn't an Award.
If that is right, then the process is self-regulating in a very real way. It needs no external controls. If it settles the questions posed with an equitable decision, it's arbitration; if it doesn't, it isn't.