ADVOCATES FOR INTERNATIONAL DEVELOPMENT

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ADVOCATES FOR INTERNATIONAL DEVELOPMENT

AT A GLANCE GUIDE TO

ARBITRATION

Prepared by lawyers from

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Arbitration is a popular method of privately resolving disputes that arise out of commercial relationships

between businesses, investors and states. Disputes are an inevitable but unfortunate aspect of business life. Most

disputes are resolved through amicable negotiations. Others cannot be resolved without the assistance of an

impartial third party. When a contract is negotiated, consideration should be given to what is the most

appropriate means of finally resolving any disputes: mediation, litigation before national courts, or arbitration.

Arbitration has been used for centuries by merchants as a means of dispute resolution. It has become the

standard method for resolving disputes in certain industry sectors (such as construction, commodities, shipping

and insurance) where the arbitrators' technical expertise is particularly valued. Over the last 50 years or so,

arbitration has been embraced by the international community, with many states recognising its importance as

the primary means of resolving complex, transnational, commercial disputes. Many states have entered into

international treaties and have agreed to submit disputes with foreign investors to "investment arbitration" rather

than insisting on having disputes with foreign investors resolved by the states' national courts. The states expect

economic benefits in the form of an increase in foreign investment from being perceived as arbitration friendly.

Today, arbitration is probably the form of dispute resolution to which recourse is most frequently made in the

context of international commercial disputes.

Arbitrations are based on an express, often written, agreement between the parties to opt out of the public court

system and to have their disputes settled by private arbitrators. The parties' arbitration agreement generally

forms part of the main contract between them. Arbitration agreements are therefore concluded

before

a dispute

has arisen. All too often, insufficient attention is given to the drafting of arbitration agreements. Inadequate

drafting can result in significant practical and legal problems which may hamper the effective resolution of any

dispute. Even if the arbitration agreement has been adequately drafted, once a dispute has arisen, parties may

have difficulties protecting their interests and pleading their case as effectively as possible because they are not

familiar with the arbitration procedure.

This Guide is intended to assist with:

• Contract negotiation

- to help parties, or those who negotiate contracts on their behalf, decide whether

arbitration is to be the preferred method of dispute resolution and, if so, how the arbitration agreement

should be drafted.

• The conduct of arbitration proceedings

- to help those who find themselves faced with a dispute and about

to become involved in arbitration proceedings protect their interests to maximum effect.

The Guide, however, is no substitute for obtaining assistance from professional arbitration lawyers who can help

negotiate the arbitration agreement in the contract and who can represent the parties in the arbitration

proceedings. A4ID can help source lawyers with the relevant qualifications and experience.

The Guide seeks to address the following questions:

• What is arbitration and what are its principal advantages and disadvantages? (Sections 2 – 3)

• What matters should be considered when drafting the arbitration agreement? (Sections 4 – 7)

• What are the typical steps in arbitration proceedings? (Sections 8 – 9)

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• The Glossary (see Annex) explains the meaning of some of the terms which are commonly used in

international arbitration. The terms highlighted in the Guide are explained in the Glossary. The Glossary

also lists and explains additional terms not mentioned in the Guide.

2. What is Arbitration?

Arbitration is a method of private, binding dispute resolution conducted before an impartial arbitral tribunal. Arbitration may be chosen by parties - usually recorded in an arbitration agreement in a clause at the end of a contract - as an alternative to litigation before national courts. It emanates from the agreement of the parties but is regulated and enforced by the states where the arbitration proceedings take place and where the arbitral award is enforced. Most states require the parties to honour their contractual promise to arbitrate, provide for limited judicial supervision of arbitral proceedings and support enforcement of arbitral awards in a manner similar to that of the relevant state's national court judgements.

Arbitrations are typically conducted by either one or three arbitrators, referred to in each case as the "tribunal". The tribunal is the equivalent of a judge or panel of judges in a court action. The tribunal is generally selected by the parties (either directly or indirectly through a third party or institution) and, as a result, the parties maintain some control over who resolves their dispute. Arbitrators in international cases are usually experienced lawyers and / or experts in the field in which the dispute has arisen.

The tribunal's powers and duties are fixed by the terms of the parties' arbitration agreement (including, in particular, any arbitration rules which the parties have adopted) and the national law that applies. Under many legal systems, arbitrators are obliged to make their final decisions, called "awards", according to the applicable law unless the parties have agreed otherwise. (For example, the parties may empower the tribunal to decide in accordance with what it perceives to be "fair".) The tribunal is obliged to follow due process and ensure that each party has a proper opportunity to present its case and defend itself against that of its opponent. In all other respects, the procedure can be very flexible.

Arbitration and Alternative or Amicable Dispute Resolution (ADR)

National laws generally recognise and support arbitration as a mutually exclusive alternative form of final dispute resolution to litigation. Some practitioners (particularly in the USA) therefore refer to arbitration as a form of alternative dispute resolution ("ADR"). However, ADR is more often used to describe non-binding procedures (such as mediation – please see also the At a Glance Guide to Mediation) from which the binding procedures of litigation and arbitration can both be distinguished. In fact, non-binding procedures are not really an alternative to litigation and arbitration because the parties must still resort to a binding procedure, such as litigation or arbitration, unless they reach a settlement. It has been suggested that ADR be redefined as "amicable dispute resolution", as that term emphasises that mediation and related approaches depend on the voluntary cooperation and agreement of the parties for their dispute to be resolved.

Arbitration can also be distinguished from binding expert determination:

• Arbitrators are tasked with deciding the dispute primarily upon the basis of the parties' submissions and the applicable law. Experts use their own expertise to come to a decision, and any submissions by the parties play a more limited role.

• Arbitration is normally regulated by national arbitration laws, which safeguard the constitution of the tribunal and the procedure followed. Expert determination is virtually unregulated.

• In the international context, arbitration benefits from enforcement conventions that allow direct enforcement of awards. The decisions of the experts have the force of contract only and, to enforce them, a new a claim for breach of contract must be brought before an arbitral tribunal or the courts.

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3. Advantages and Disadvantages of Arbitration

Parties should consider whether or not to provide for arbitration as the chosen method of dispute resolution every time they enter into a contract. It is particularly important to do so where the parties or their assets are in different countries or where disputes give rise to complex technical issues. The most important advantages and disadvantages of arbitration that should be considered when deciding whether to provide for arbitration as the dispute resolution method in a contract are listed below:

(a) Advantages

• Enforceability: Due to international conventions, the potential for enforcing arbitral awards worldwide is much greater than that for court judgements. As there is little point in obtaining a court judgment which cannot be enforced against suitable assets, this feature often conclusively determines the choice of arbitration over litigation for international contracts. The most important enforcement convention is the New York Convention which provides for the enforcement of arbitral awards in over 140 countries. (For further details on enforcement of arbitral awards, see section 9 below.) There is no such wide-ranging convention providing for the enforcement of court judgements (the closest being the Brussels Regulation, which is limited to parties in Europe).

• Flexibility: Arbitration rules are generally simpler and more flexible than those of court proceedings. They are relatively easy to understand for parties of different nationalities, and the parties can adapt the dispute resolution process to suit their relationship and the nature of their dispute. In many cases, parties (or tribunals exercising discretion left to them by the parties) choose to follow a procedure that is similar to court proceedings. In some cases, the parties make significant changes to court procedure. For example, they may decide that their dispute should be determined on the basis of documents only, without a hearing.

• Neutrality: Frequently, one party will not wish to submit to the local courts of another party. For example, party A may not be familiar with the language, legal culture or court procedure in party B's country or may fear that the courts in party B's country are not impartial. This will be a particular worry to party A where party B is a sovereign state, e.g. where A, a company based in Austria, has entered into a contract with B, the Republic of Bolivia. Arbitration can provide politically neutral dispute resolution. The parties can select a neutral venue in a third country for the arbitration (e.g. London, England), appoint a multinational tribunal, request that international procedural rules be applied and choose a language for the proceedings with which they are comfortable (very frequently English). • Technical expertise and experience: Parties may select arbitrators with the appropriate expertise or experience in the

subject matter of the dispute. Although some jurisdictions have very good specialist courts (e.g. the Commercial Division of the New York Supreme Court and the English Technology and Construction Court), parties run the risk of their dispute being decided by a judge with little or no relevant experience.

• Choice of arbitrators: Unlike court proceedings, where parties generally have no input into the choice of judge for their case, the parties to an arbitration usually appoint, nominate or at least have some input into the selection of the tribunal. Most developed international arbitration laws require that all the arbitrators be impartial. However, a party can use its input into the selection process to help ensure that, as far as possible, the tribunal will understand the commercial context, the relevant issues and the parties' procedural preferences.

• Cost / Speed / Finality: Lawyers' fees generally account for the majority of costs of proceedings (whether litigation or arbitration). The costs of the proceedings therefore generally depends on the complexity of the dispute, the way the proceedings are conducted and their length. Arbitration can be speedier and less costly than litigation because of the finality of the award. Whereas a court judgment can often be appealed (prolonging matters by months and years), parties to international contracts normally agree that there is no right of appeal on the merits from any award. In many

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countries, awards may only be reviewed in strictly limited circumstances. (For further details on the limited grounds for challenge of awards, see section 9.) Arbitration costs initially can be higher than those of court proceedings because the parties have to pay for arbitrators, any administering institution and the hiring of hearing venues. Arbitration can also take longer if the tribunal fails to impose strict deadlines. However, there are no court fees, and the parties can agree on streamlined or "fast-track" procedures. Moreover, it is increasingly common for a successful party to be awarded all or part of its costs of the arbitration whereas this is not the norm in litigation in many countries.

• Privacy: Although national laws and arbitration rules vary as to the degree of confidentiality afforded to arbitration, there can be no doubt that arbitration provides greater privacy and confidentiality than litigation (which is often public). The parties can expect that there will be no public right of access to the hearings and can provide for the required degree of confidentiality in their arbitration agreement, subject to any mandatory reporting obligations imposed by law, for example where there is a requirement to record any potential exposure to liability in the context of financial reporting. Any confidentiality might come to an end or at least be put at risk if enforcement through the courts becomes necessary.

• Commencement of proceedings: Arbitration proceedings can often be commenced more quickly than court proceedings. A party need generally only submit a short document to the appropriate arbitral institution and / or the other party to start the arbitration. The commencement of court proceedings can be more complicated, e.g. requiring a party to seek leave to serve process on the other party if that other party is abroad.

(b) Disadvantages

• Limits on tribunal's power to grant preventative or provisional remedies: While the parties can give a tribunal most of the powers enjoyed by the courts, a tribunal does not have the power to grant penal sanctions, for example, for contempt of court. Even if a tribunal has the power to grant a preventative or provisional remedy, such as the power to freeze assets, there may well be merit in an application to a court if the applicant believes that the tribunal's order would be ignored unless backed up by a penal sanction. There may also be a period of time immediately after the commencement of the arbitration proceedings where no relief is available from the tribunal at all because the tribunal has not yet been appointed. A party seeking pre-emptive remedies will again need to make an application to the court.

• Limit on tribunal's power to join parties and consolidate proceedings in multi-party disputes: Only those parties which enter into an arbitration agreement may be made parties to any resulting arbitration. It is not generally possible to join non-parties to arbitral proceedings or to consolidate two arbitrations (i.e. to hear them together) without the consent of all parties, including the new party joining the arbitration. In cases where consideration to the issue of multi-party disputes is given at the time the contract is drafted, the tribunal can be given powers to consolidate and join related disputes by obtaining advance consent from all the parties involved.

• Limits on tribunal's power to speed up the arbitration proceedings: It is rare for a party to obtain an award on the substance of a claim in international arbitration in the absence of a full hearing at which each party orally argues its case, presents its witnesses and cross-examines the other party's witnesses. A hearing can generally be requested by either party. Fast-track procedures in international arbitration without a hearing are rare. However, where the parties agree at the outset that a very quick resolution of the case may be appropriate where the dispute is clear-cut, they can draft a clause empowering the tribunal to make rulings on preliminary issues. For example, many lenders consider that the issue most likely to arise in a dispute under a loan agreement is whether or not the borrower has defaulted in its loan repayments, and lenders can have a clause included empowering the tribunal to deal with this issue in an accelerated procedure based on the parties limited written submissions only and without a hearing.

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4. The Choice of Arbitration Rules

Once the parties have chosen arbitration as their preferred method of dispute resolution, they will need to decide which rules should govern the arbitration. Many countries have arbitration laws that provide a legal framework for the conduct of arbitrations. Subject to mandatory requirements of the applicable national law, parties are free to agree on the procedure for their arbitration or simply accept the default procedure under the national law. Rather than setting up a tailor-made procedure for each contract, parties usually adopt a set of ready-made arbitration rules. These rules are amended and supplemented by the parties in the contract and are then interpreted against the backdrop of the provisions of the national law that applies to the arbitration.

(a) Institutional Arbitration

There are many arbitral institutions across the world. They generally have their own set of procedural rules and will assume an involvement, to a greater or lesser extent, in the appointment of the arbitrators, the fixing of the arbitrators' fees, the approval of the award and the general administration of the arbitration. Some institutions are fully international in scope and used by parties throughout the world even though they may have a strong tie to the country or region in which they are based. Others focus on disputes in particular business and legal fields.

The most prominent international arbitration institutions are:

• In Europe: The International Court of Arbitration of the International Chamber of Commerce based in Paris and the London Court of International Arbitration.

• In the Americas: The American Arbitration Association based in New York and Dublin.

• In Asia: The Hong Kong International Arbitration Centre and the China International Economic and Trade Arbitration Commission ("CIETAC") based in Shanghai, Beijing and Shenzhen. CIETAC administers arbitrations related to commercial transactions and investments in China.

• In the Middle East: The Dubai International Arbitration Centre and the DIFC LCIA Arbitration Centre.

Specialist arbitral institutions for specific types of dispute include the International Centre for the Settlement of Investment Disputes based in Washington, which is concerned exclusively with disputes between states and foreign investors (see further section 10 below) and the World Intellectual Property Organisation Arbitration and Mediation Center based in Geneva, which administers the resolution of intellectual property disputes.

A non-exhaustive list by region of some well known arbitral institutions

The Americas

The United States - the American Arbitration Association ("AAA" - www.adr.org) and the International Centre for the Settlement of Investment Disputes ("ICSID" - www.worldbank.org/icsid).

Asia

China - the China International Economic and Trade Arbitration Commission ("CIETAC" - www.cietag.org.cn). Hong Kong - the Hong Kong International Arbitration Centre ("HKIAC" - www.hkiac.org).

Japan - the Japanese Commercial Arbitration Association ("JCAA" - www.jcaa.or.jp/e/index-e.html). Singapore - the Singapore International Arbitration Centre ("SIAC" - www.siac.org.sg).

Europe

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(www.wko.at/arbitration).

England - the London Court of International Arbitration ("LCIA" - www.lcia-arbitration.com).

France - the International Court of Arbitration of the International Chamber of Commerce (the "ICC" - www. iccarbitration.org).

Germany - the German Institute of Arbitration ("DIS" - www.dis-arb.de).

The Netherlands - the Netherlands Arbitration Institute ("NAI" - www.nai-nl.org/english). Sweden - the Arbitration Institute of the Stockholm Chamber of Commerce ("SCC" -

www.sccinstitute.com/uk/home).

Switzerland - the Swiss Arbitration Association ("ASA" - www.arbitration-ch.org); the Chamber of Commerce & Industry of Geneva (www.ccig.ch/pages/presentation.asp?lang=en); the Zurich Chamber of Commerce

(www.zurichcci.ch); the World Intellectual Property Organisation ("WIPO") Arbitration and Mediation Centre (www.arbiter.wipo.int/center/index.html).

Middle East

Bahrain - the GCC Commercial Arbitration Centre (www.gcac.biz/en).

Dubai - the Dubai International Arbitration Centre (DIAC) (www.diac.ae); the DIFC LCIA Arbitration Centre. Egypt - the Cairo Regional Centre for International Commercial Arbitration (www.crcica.org.eg).

(b) Unadministered and Ad Hoc Arbitration

In unadministered and ad hoc arbitrations, the parties choose procedural rules but there is no administration of the arbitration by arbitral institutions. Unless the parties agree that an arbitral institution should assist with the appointment of the tribunal, arbitral institutions will not be involved in the arbitration at all.

Unadministered arbitration under the UNCITRAL Arbitration Rules: The rules most often chosen for unadministered arbitrations are the UNCITRAL Arbitration Rules, which were developed by the United Nations Commission on International Trade Law (www.uncitral.org/pdf/english/texts/arbitration/arb-rules/arb-rules.pdf). The UNCITRAL Arbitration Rules have found widespread acceptance in general commercial arbitrations and in arbitrations between states and individuals. The UNCITRAL Arbitration Rules provide for the parties to select an appointing authority for the tribunal that will step in if the parties cannot agree on the arbitrators to be appointed. Many arbitral institutions (such as the ICC, the LCIA and the AAA) will serve as an appointing authority and appoint the tribunal for a fee. If the parties have not agreed on an appointing authority and cannot agree on the appointment of the tribunal, then the UNCITRAL Arbitration Rules provide that the Secretary General of the Permanent Court of Arbitration in The Hague select an appointing authority.

Ad hocarbitrations under national laws: Most countries allow parties to arbitrate ad hoc, without having adopted any procedural rules. The parties may agree simply that any arbitration is to be conducted under the national arbitration legislation of the country where the arbitration takes place. Most countries that have modern arbitration laws provide a procedural framework for the arbitration (covering e.g. the appointment of the tribunal) and for any procedural disputes that cannot be resolved by the tribunal to be referred to the courts. However, many national arbitration laws make only limited provision for the arbitration procedure to be followed, leaving it to the parties and the tribunal to decide how the arbitration is to be conducted. This can lead to disagreement and delay, especially before the tribunal has been appointed and can take control of the proceedings.

Unadministered and ad hoc arbitration often arises because parties fail to provide for any institutional rules. There is a widespread belief that ad hoc arbitration might prove cheaper than institutional arbitration because the administrative fees charged by the institution are avoided. This belief is generally mistaken. The benefits of the institution's administrative services in moving along the arbitration and the lower charges of arbitrators under institutional rules often outweigh the

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administrative costs involved. Ad hoc arbitration increases the likelihood of court intervention to overcome disagreement, which can prove expensive. Before selecting ad hoc arbitration, parties should satisfy themselves that they are not better served by institutional arbitration or - at the very least - unadministered arbitration under the UNCITRAL Arbitration Rules.

5. The Seat of Arbitration

The legal place or "seat" of an arbitration is not the same as the geographical location where the arbitration hearing takes place although the seat and the location of the hearing are often the same in practice. The seat - not the location of the hearing - determines the national law that applies to an arbitration and that provides the legal framework for the arbitration proceedings.

Parties often determine the seat in the dispute resolution provisions of the contract. Set out below is a list of factors that parties should take into consideration when choosing the seat:

• Is the seat in a New York Convention state? The seat of an arbitration is crucial to the enforceability of the resulting award. Each state that is a party to the New York Convention has agreed to enforce arbitral awards made in another contracting state, subject to limited grounds of refusal. By selecting a state that is a party to the New York Convention, the potential for enforcement of the award is drastically increased.

• Is the national law of the seat arbitration-friendly? In choosing the seat of an arbitration, the parties determine the national procedural law that applies to the arbitration. The procedural laws applicable in arbitration-friendly countries restrict court intervention to measures that support arbitration and allow the parties flexibility to agree the procedure to be followed, to choose the lawyers to represent them, to select the language in which the arbitration is to be conducted and to appoint the tribunal. In countries that take a more hostile approach to arbitration, the courts have powers to assume control over the dispute resolution process and intervene in the decision-making process of the tribunal. Sometimes there are also requirements to use local lawyers and restrictions on who can act as arbitrators.

• Is local legal advice of good quality? Arbitration-friendly countries often have specialist lawyers, experts and other staff that have the experience in, and can meet the needs of parties to, international disputes.

6. A Standard Arbitration Agreement and Checklist of Issues to Consider

(a) A Standard Arbitration Agreement

Arbitration agreements transfer the power to resolve disputes between the parties that would otherwise be held by the courts to an arbitral tribunal. Special care needs to be given to drafting the arbitration agreement to make clear whether a dispute falls to be decided by the courts or the tribunal. Any uncertainty in the wording of the arbitration agreement can, and generally will, be used by the respondent to challenge and delay arbitral proceedings. Set out below is a basic recommended arbitration clause that can be tailored to suit parties that have chosen institutional arbitration or unadministered arbitration or the UNCITRAL Arbitration Rules.

Recommended Wording Explanatory Notes

“Any dispute, controversy or claim1_{, arising}

out of or in connection with 2_{this contract,}

including any question regarding its existence, validity or termination3_{, shall be}

1. Intended to encompass any type of difference between the parties.

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submitted to [name institution] to be finally resolved4_{by arbitration under [}_{name Rules}_],

which Rules are deemed to be incorporated by reference into this arbitration agreement5_.

The number of arbitrators shall be [one/three]6_.

The place of arbitration shall be [City and/or Country].

The language to be used in the arbitral proceedings shall be [name language].

The award is binding from the date it is made7_{, and the parties hereby waive any right}

of appeal on the merits and/or any point of law8_.

The proceedings and the award shall be kept confidential save as required by law9_.

The governing law of the contract and this arbitration agreement shall be the substantive

law of [name jurisdiction]10_{, without}

reference to its conflict rules11_.”

"The appointing authority shall be [name of institution] 12_."

and tortious claims.

3. Intended to avoid an argument that the agreement to arbitrate is not enforceable.

4. In some jurisdictions, this wording is construed a waiver of any right of appeal against the award before the courts although express wording is recommended (see note 8 below [link to note 8]).

5. Intended to ensure that the chosen rules form part of the agreement.

6. If the chosen rules permit, it may be better to leave a decision on the number of arbitrators until the size and complexity of the dispute is known.

7. Intended to avoid any argument that the award must be validated by the courts of the place of arbitration before it can enforced.

8. Some jurisdictions require the parties expressly to opt-out of any rights of appeal (if they wish to). 9. Intended to ensure confidentiality is respected. 10. Advisable if there is no governing law provision elsewhere.

11. Intended to avoid the application of domestic conflict of law rules.

12. If the UNCITRAL Arbitration Rules are to be adopted, wording for the designation of an appointing authority (such as the ICC, LCIA or AAA) should be specified.

Many arbitral institutions as well as UNCITRAL publish model arbitration clauses along with their arbitration rules. (b) Checklist of Issues to Consider - Anatomy of an Arbitration Agreement

The recommended wording and the model clauses promulgated by arbitration institutions and contained in the UNCITRAL Arbitration Rules are basic and may well require adaptation to suit the needs of a particular contract. Set out below is a checklist of matters that should be considered whenever an arbitration agreement is drafted.

• Alternative or Amicable Dispute Resolution (ADR): The parties may wish to include a provision requiring the parties to attempt an ADR procedure (see above section 3(a), such as mediation (please see also the At a Glance Guide to Mediation), before commencing (and as a means of avoiding) arbitration. There are a number of institutions, which will assist with ADR procedures. Many arbitral institutions, including the ICC, the LCIA and the AAA (see above section 4(a)) will administer ADR procedures. In addition, there are the Centre for Effective Dispute Resolution ("CEDR"), which is an ADR organisation based in London (www.CEDR.co.uk), the International Institute for Conflict Prevention & Resolution based in New York (www.cpradr.org) and the Judicial Arbitration and Mediation Services, Inc. ("JAMS") (www.jamsadr.com) based in Irvine, California. Providing for ADR as an initial method to resolve the dispute in the contract addresses the concern many parties have that proposing ADR after a dispute has arisen might be interpreted as a sign of weakness. However, the parties are always free to agree to an ADR procedure

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at any stage of the arbitration proceedings. Indeed, ADR proceedings generally have a greater chance of success after the arbitration proceedings have commenced, as the parties' respective positions are better defined and they are therefore more inclined to settle.

• Option clauses: Parties sometimes wish to postpone the decision whether they refer a dispute to arbitration or litigation until after the dispute has arisen. For example, if the dispute is a clear-cut default by the borrower under a loan agreement, the lender might want to obtain a quick court decision. If the dispute is technical and requires a detailed investigation of the facts and the applicable law, the lender might prefer to submit the dispute to arbitration. Parties may provide an option for one or more parties to refer a dispute to arbitration or litigation in the arbitration agreement. This requires careful legal analysis, as option clauses under some laws (but not under English law) invalidate the arbitration agreement (for lack of certainty or, where the option is given to some parties only and not to all, for lack of equality between the parties).

• Scope and arbitrability: The parties should decide what disputes are to be referred to arbitration. Arbitration agreements are usually drafted widely, so as to include all differences between the parties and to include both claims for breach of contract and other claims. The parties may wish to exclude some disputes from arbitration and instead refer them to an expert. The parties will need to provide who should determine whether a dispute should be resolved by arbitration or by an expert if the parties cannot agree. The parties will need to bear in mind that some disputes are not arbitrable as a matter of public policy and/or legislation, for example, custody of a child, criminal matters and, in some countries, anti-competition issues.

• Procedural rules: The choice of suitable arbitration rules is discussed above (see section 4). The preferred rules should be stated in the arbitration agreement when the contract is negotiated between the parties. The applicable rules will generally be those in force at the time when arbitration is commenced, but for certainty, the parties might wish to provide that the rules will be those in force at the time of the agreement. The parties should also consider whether they want to amend the arbitration rules. The arbitration agreement must comply with any mandatory rules of the seat of arbitration (see above section 6). Any gaps in the adopted procedural rules are usually filled by looking to the rules governing the conduct of arbitrations laid down by statute (or the courts) in the relevant jurisdiction. The parties may wish to give consideration to whether to provide expressly that the IBA Rules on the Taking of Evidence in

International Commercial Arbitration

(www.ibanet.org/images/downloads/IBA%20rules%20on%20the%20taking%20of%20Evidence.pdf), an international

set of procedural rules, should apply, although this can be left to the tribunal to decide.

• Number and appointment of arbitrators: The number of arbitrators and method of appointment should be stated to the extent that this is not provided for in the arbitral rules that the parties have chosen. The selection of the tribunal is addressed below (see section 7).

• Seat of arbitration: It saves time and costs once a dispute has arisen if the preferred seat of arbitration is stated in the agreement. The factors to be taken into account when selecting the seat are addressed above (see section 5).

• Language: If the parties speak different languages, the language of the arbitration should be set out expressly in the arbitration agreement. This will avoid disagreement over which language to conduct the arbitration proceedings in once the dispute has arisen. The language of the arbitration should generally be the language of the contract and/or of the most relevant documentation and correspondence.

• Confidentiality: Confidentiality may be prescribed by some institutional rules (for example, the LCIA) or implied by law, but the extent to which arbitration is confidential varies (as discussed above in section 3(a)). The parties may wish to agree expressly in the arbitration agreement to keep the proceedings and the award confidential unless otherwise required by law.

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• Interim measures: National courts generally have power to make preliminary orders to secure the amount in dispute. For example, courts may grant interim injunctions preventing party A from removing its assets to a country where party B will have difficulty enforcing any judgment against party A's assets. Courts may also grant orders preventing the parties from removing or destroying documents that are relevant to the dispute. Under most arbitration rules, the tribunal has similar (but usually more limited) powers. In the arbitration agreement, the parties may wish to extend (or limit) the tribunal’s powers or exclude or limit the court’s powers (to the extent permitted under the applicable law). • Speeding up the arbitration proceedings: The parties may wish to make express provision for the tribunal to have

power to issue a quick award (for example, based on documents only and without a hearing), in circumstances where there is no reasonably arguable defence (for example, a simple claim where a payment that is due under the contract has not been made).

• Right of appeal: In some countries, a dissatisfied party has the right to appeal an arbitral award to the courts of the country where the award was made (on the merits of the tribunal's decision and/or the law applied by the tribunal). Some arbitration rules (for example, the ICC and LCIA, but notably not the AAA or the UNCITRAL Arbitration Rules) include a waiver of any rights of appeal to the extent that this is permitted under the applicable country's law. Depending on which arbitration rules the parties have chosen, the parties will need to make an express statement in the arbitration agreement if they want to waive any right of appeal. (The financial advantages of waiving the right to appeal are referred to above (see section 3(a)). While parties can waive their rights to appeal an award on the merits of the tribunal's decision and on an error by the tribunal in the application of the law, parties normally cannot waive rights to challenge an award on procedural grounds, such as failure give proper notice to one of the parties that the tribunal has been appointed (see further section 9(a) below).

• Multi-party contract/multiple contracts: Often a dispute arises out of a contract between more than two parties or out of a chain of contracts (e.g. where A supplies goods to B, who supplies them to C). This is a complex area. Specialist advice should be sought when drafting the arbitration agreement or agreements in multi-party contracts and multiple contracts, in particular in relation to the appointment of the tribunal, joinder of parties and consolidation of proceedings.

Appointment of the tribunal: Where there are only two parties to the dispute and they both wish to appoint a tribunal of three arbitrators, they often agree to select one arbitrator each. If there are more than two parties, questions arise as to how two or more claimants or respondents should appoint an arbitrator whilst maintaining equality of treatment between the parties. The absence of equality may invalidate the award in some countries. The issue may be avoided by providing for a sole arbitrator or by prescribing how joint claimants or respondents should appoint their arbitrator or by requiring that all of the members of the tribunal must be appointed by an appointing authority.

Joinder of parties: Arbitration is based on the arbitration agreement between the disputing parties. Generally, all parties must agree if the tribunal is to have the power to join a new third party to the arbitration. That third party must also agree. Once a dispute has arisen, the disputing parties will probably not cooperate with each other and agree to the joinder of a third party even if the joinder of that third party helps resolve the dispute. It is therefore preferable to record the consent (as between the parties to the arbitration agreement itself, at least) in the arbitration agreement at the outset. Of course, it will not be possible to obtain advance consent to arbitration from a third party that is not a party to contract A which contains the arbitration agreement. However, advance consent can be obtained from the third party if that third party is a party to contract B from the same group or chain of contracts as contract A. Language will then need to be incorporated into contract B that links any arbitrations that may be commenced under contract B with arbitrations launched under contract A.

Consolidation: Generally, all parties must agree if the tribunal is to have power to consolidate separate but related arbitrations (i.e. to hear them together), and it is preferable to record such consent in the arbitration agreement.

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Where there are a number of contracts between different parties, all relating to one project, it may be sensible to execute a separate "master" or "umbrella" arbitration agreement to avoid the problem that only parties to a contract can generally enforce its terms.

• Equity clauses: It is possible to provide in the arbitration agreement that the tribunal should determine any dispute, not according to strict law, but according to what it considers "fair" or equitable. The tribunal then acts as "amiable compositeur" or decides "ex aequo et bono". Most institutional procedural rules exclude this power unless the parties have expressly provided for it in their agreement.

• Mandatory and non-mandatory requirements: The law governing the arbitration agreement and/or the arbitration law of the designated seat of arbitration may impose mandatory requirements on the parties and the tribunal. These will need to be taken into consideration. For example, it may be a requirement that the arbitration agreement be signed or, if a government or public law entity is involved, special requirements may apply for them to enter into an arbitration agreement. The applicable law(s) may also have a number of non-mandatory provisions that the parties can opt out of by expressly agreeing to do so in the arbitration agreement.

• Capacity/authority: The parties entering into the arbitration agreement must have capacity and/or authority to do so. This is a question of a party’s national law and should be checked before the arbitration agreement is drafted. For example, national law may exclude or limit the ability of state or public entities to enter into an arbitration agreement, or impose a requirement for governmental or legislative consent.

• Governing law: Unnecessary argument can be avoided if the parties have expressly chosen the law governing their commercial relationship before a dispute arises. The law governing the arbitration agreement may be different to that governing the rest of their relationships. The parties should therefore expressly state the governing law of the arbitration agreement in addition to the governing law of the contract.

• State immunity: Governmental entities often enjoy immunities and privileges in relation to both legal proceedings and the enforcement of judgments or awards, particularly before foreign courts. Agreeing to refer future disputes to arbitration is usually regarded as a waiver of immunity from the jurisdiction of the tribunal. It is not, however, generally regarded as waiver of immunity from enforcement of any subsequent award. Where an arbitration agreement is entered into with a governmental entity, an express waiver of immunity from enforcement should therefore be added into the agreement.

7. The Tribunal

The tribunal nearly always consists of one or three arbitrators. In many countries, it is a requirement that the tribunal consist of an uneven number of arbitrators to ensure that a decision is not prevented by a tie between equal numbers of arbitrators. The parties can set out the choice between one and three arbitrators in advance in the arbitration agreement or decide on the number of arbitrators after the dispute has arisen. Arbitration with a sole arbitrator is generally quicker and cheaper because the parties save the fees of two extra arbitrators and because the proceedings can be conducted more quickly, without the need to coordinate with two additional arbitrators. However, if there is a sole arbitrator, the parties cannot each select an arbitrator and therefore may have less confidence in the tribunal's decision-making. They must rely on one arbitrator only whose decision is final and binding. For these reasons, high value and complex international disputes are generally referred to three arbitrators.

Most arbitration rules provide a method of appointing arbitrators. For example, sole arbitrators are agreed between the parties or, if no agreement is reached within a specified period of time, by the chosen appointing authority. Where a three-member tribunal is provided for, two arbitrators are usually selected by the parties, and the chairman of the tribunal is

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either selected by the party-selected arbitrators or by the chosen appointing authority. If the parties wish to deviate from the procedures set out in the arbitration rules, they should say so expressly in the arbitration agreement. The parties can require that the arbitrators possess specified qualities. For example, the parties may require that the arbitrators not be of the same nationality as the parties or that they have experience of, for example, construction disputes. Caution is required, as the greater the number of criteria introduced by the parties into the arbitration agreement, the smaller the pool of arbitrators from which an arbitrator can be chosen, sometimes to the point that it is impossible to find a suitable candidate. Arbitrators need not be lawyers, but for high value disputes they often are.

The parties should seek advice from their lawyers on suitable arbitrators. Factors to be taken into account when choosing an arbitrator include:

• the candidate's familiarity with the governing law and the applicable arbitration rules • the candidate's legal training and experience in the relevant industry

• the candidate's legal views expressed either in academic publications or in past awards • the language and seat of the arbitration

• interactions with the candidate in previous arbitrations or at conferences and the candidate's general reputation

• if there is a three-member tribunal, perceptions as to the candidate's ability to influence the other party-selected arbitrator when choosing a chairman and the likelihood that the candidate's views will carry weight with the other arbitrators when the award is prepared.

8. Typical Steps in Arbitration Proceedings

The procedure for arbitration proceedings is agreed by the parties and can take many forms. In some arbitrations, the parties decide to dispense with an oral hearing and have the dispute resolved on the basis of written submissions only. In others, there may be not one but several hearings because the parties have decided to split the decision on whether the respondent is liable for breach of contract from the decision on how much compensation the respondent should pay to the claimant.

(a) Timetable

Typically, a substantial international arbitration will take around 1.5 to 2 years from submission of the claimant's initial request for arbitration to the issuing of the final award by the tribunal. The table below sets out the steps and timescales typically involved in a substantial international arbitration, incorporating features of the IBA Rules of Evidence such as document production and witness statements. (Faster arbitration proceedings may be available depending on the complexity of the dispute and the procedure agreed by the parties.)

Number of Step

Description of Step in Arbitration Proceedings

Time that Typically Passes from Step 1

Step 1 Claimant's written request for arbitration, including at least a summary of the claims

Time starts running

Step 2 Respondent's written answer, including a summary of the counterclaims

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Number of Step

Description of Step in Arbitration Proceedings

Time that Typically Passes from Step 1

Step 3 Appointment of the tribunal (by the parties and / or the appointing authority)

Step 1 + 2 months to 3 months

Step 4 Procedural hearing setting the steps and

timetable for the remainder of the arbitration

As agreed by the parties or ordered by the tribunal

Step 5 Claimant's full statement of claim (if not included in the request for arbitration)

As agreed by the parties or ordered by the tribunal:

Step 1 + 3 months to 5 months Step 6 Respondent's full defence and counterclaim (if

not served with the answer to the request for arbitration)

As agreed by the parties or ordered by the tribunal:

Step 1 + 4 months to 7 months Step 7 Production of the documents relied on or the

category of documents requested by the other party

Step 8 Exchange of witness statements As agreed by the parties or ordered by the tribunal

Step 9 Exchange of reply or "rebuttal" witness statements

Step 10 Exchange of expert reports As agreed by the parties or ordered by the tribunal

Step 11 Meeting of experts to narrow issues in dispute and sometimes to produce a joint statement of matters agreed or in dispute

Step 12 Exchange of reply or "rebuttal" expert reports As agreed by the parties or ordered by the tribunal

Step 13 Exchange of written pre-hearing submissions As agreed by the parties or ordered by the tribunal

Step 14 Hearing (generally no more than 10 days) Step 1 + 9 months to 21 months Step 15 Exchange of written closing submissions Step 1 + 12 months to 22 months

Step 16 Award Step 1 + 18 months to 24 months

(b) Representation of the Parties

Arbitration is a private process between the parties and the members of the tribunal. Others may only be present if the parties agree. However, unless the parties have expressly agreed that they will not be represented by lawyers, a tribunal always permits a party to be represented by a lawyer or a team of lawyers.

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9. Challenge and Enforcement of an Award

(a) Challenge of Awards

Once the tribunal has made its final decision and issued its award, there is generally only limited scope for the losing party to challenge the award. The law of the seat of the arbitration usually contains some provisions for challenging an award. In addition, some arbitration rules establish an internal appeal procedure.

Challenges of awards are generally made to the courts at the seat of the arbitration. Grounds for challenge generally fall into two broad categories, procedural grounds and substantive grounds. Procedural grounds include the failure to give proper notice of the appointment of an arbitrator, issues of jurisdiction (e.g. where the award deals with a dispute not covered by the arbitration agreement), lack of arbitrability where the dispute is not capable of settlement by arbitration and a conflict between the award and the public policy of the seat of the arbitration. Substantive grounds for challenge may exist where the tribunal makes a mistake of law.

The purpose of challenging an award before a national court at the seat of arbitration is to have it modified in some way by the relevant court or to have the court declare that the award is to be disregarded or "annulled" or "set aside" in whole or in part. If an award is annulled or set aside, it will usually be treated as invalid and will be unenforceable both by the courts at the seat of arbitration and by courts elsewhere.

(b) Enforcement of Awards

While some awards are challenged by the losing party, most are complied with voluntarily. However, if the losing party refuses to comply with the award, the winning party can have the award "recognised and enforced" by asking the courts to recognise the award as validly made and binding on the parties and by using legal sanctions to ensure that the losing party complies with the award. The losing party is made to pay the amount that the tribunal has determined is due to the winning party.

There are four principal methods of enforcing an award against a losing party that is refusing to pay:

• Deposit or registration: The award is deposited or registered with a court and may then be enforced as if it is a judgment of that court. This is the formality required for enforcement under the New York Convention (see below). • Direct enforcement: The laws of the country of enforcement provide that, with the leave of the court, the award may

be enforced directly without any need for deposit or registration. This is the mechanism for enforcement under English law.

• Application for recognition: It is necessary to apply to the courts for some form of recognition as a preliminary step to enforcement. This is a requirement under French law.

• Debt claim: The award is sued on as evidence of a debt on the basis that the arbitration agreement is a contractual promise to perform the award. This last method is cumbersome and should generally be avoided.

Enforcement usually takes place against assets. This means that, as a first step, the losing party's assets must be traced before applying to the national court where the assets are located for an order against them. The losing party's assets are usually located in a country other than that of the seat of arbitration. The winning party will therefore often need to enforce the award before courts that are in a different country from the seat of the arbitration and will therefore regard the award as foreign. For example, an award made in London or Paris, the seat of the arbitration, may need to be enforced

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before the Swiss courts because the losing party has assets in Switzerland. The Swiss courts will regard an English or French award as foreign to the Swiss legal system.

The most important international convention for the enforcement of foreign awards is the New York Convention.

The New York Convention

More than 140 states are party to the New York Convention and agree, broadly, to enforce foreign arbitral awards. Some states have restricted the application of the New York Convention to enforcing awards made in another state that is a party to the New York Convention and / or to awards that relate to disputes arising out of commercial relationships.

A list of the contracting states can be found at

www.UNCITRAL.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html.

A state that is a party to the New York Convention undertakes to enforce awards to which the New York Convention applies in accordance with its local procedural rules. The New York Convention does not permit any review on the merits of an award. However, there are limited grounds on which the local courts may refuse recognition and enforcement:

• The parties do not have the capacity to enter into the arbitration agreement or the arbitration agreement is invalid for other reasons. The award falls outside the tribunal's jurisdiction. No proper notice of an arbitrator or of the proceedings has been given to the parties or there has been some other form of lack of due process. The composition of the tribunal or the procedure were not in accordance with the arbitration agreement or with relevant law.

• The award is not binding, has been suspended or set aside.

• The dispute is not capable of settlement by arbitration. Recognition and enforcement of the award would be contrary to the public policy of the enforcement state.

The full text of the New York Convention can be found at www.uncitral.org/pdf/english/texts/arbitration/NY-conv/XXII_1_e.pdf.

10. Investment Arbitration

The resolution of disputes by arbitration is generally based on an arbitration agreement concluded directly between the parties to the dispute (see above section 3). However, arbitration is also used to resolve disputes between foreign investors and host states that fall within the scope of investment treaties concluded between two or more states. Under these treaties foreign investors are granted the right to submit claims against the host state to arbitration even though the foreign investor may not have entered into a direct arbitration agreement with the host state.

There has been a boom in arbitrations between foreign investors and states over the past decade. The dramatic growth of bilateral investment treaties ("BITs") from less than 400 in the late 1980s to over 2,500 today and the adoption of investment provisions in multilateral agreements has caused the number and value of investment arbitrations to increase significantly.

(a) Investment Treaties - Core Standards of Protection

BITs are short agreements, often of no more than ten pages, entered into between two states. BITs provide for the mutual promotion and protection of investments made by investors from one state in the other state. Each state promises to encourage and create favourable conditions for investors of the other state to invest capital in the host state's territory. BITs also prescribe certain minimum standards of protection. Crucially, BITs provide that the investor may bring a claim for compensation against the host state in arbitration.

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Similar provisions to those found in BITs have been adopted in economic cooperation treaties between several different states and in free trade agreements. For example, there is the Association of South East Asian Nations ("ASEAN") Agreement for the Protection and Promotion of Investments to which ten states are now a party, the North American Free Trade Agreement ("NAFTA") between the US, Canada and Mexico, and the Energy Charter Treaty ("ECT") to which more than 50 countries are a party.

The core standards of protection that can typically be found in investment treaties are:

• Protection against expropriation of investments without compensation: The term "expropriation" generally means that an investor has been deprived of its assets or property without due process and adequate compensation. It typically occurs following the nationalisation of an industry sector and the taking of an investor's property and has been held to include, for example, withdrawals of operating licences and permits granted to the investor.

• Fair and equitable treatment and full protection and security: These two standards complement each other to protect investors against state measures that are contrary to express assurances made to investors as an inducement to invest and against deliberate or grossly careless omissions by the state in physically protecting the foreign investment, such as police inaction.

• Non-discrimination: The three non-discrimination standards included in many investment treaties are:

National treatment - requiring the host state to the treat the foreign investor in the same way as its own nationals. Most favoured nation treatment - requiring the host state to treat the foreign investor no less favourably than a foreign investor from a third country.

A prohibition against arbitrary and discriminatory measures - protecting the investor against discrimination on the basis of factors other than nationality, such as discrimination by industry sector.

• The right to repatriate investment related funds: The foreign investor may transfer funds out of the host state in freely convertible currency. This protection includes, for example, the investor's right to make debt payments to repay the investor's lenders, which are often banks outside the host state.

• Observance of undertakings: Many investment treaties include promises by the state to observe all undertakings it has given to foreign investors. These provisions are also known as "umbrella clauses". The purpose of umbrella clauses is to ensure that each state party to the treaty will respect specific undertakings towards foreign investors.

Treaty Texts

Many BITs can be found at www.unctadxi.org/templates/DocSearch____779.aspx or the websites of the Foreign Ministries of the states that have entered into the BITs.

The ASEAN Agreement for the Protection and Promotion of Investments can be found at

www.aseansec.org/12812.htm.

The NAFTA can be found at www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=78. The ECT can be found at www.encharter.org/fileadmin/user_upload/document/EN.pdf.

(b) Using BITs and Multilateral Investment Treaties to Protect Foreign Investments

Whether a foreign investment is protected by BITs and multilateral investment treaties primarily depends on the nationality of the foreign investor and on the host state. When making their investment in the host state, investors should check

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whether there is anything they can do to take advantage of the protection offered by investment treaties into which the host state has entered. Investors - with help from specialist legal counsel - should consider the issues set out below:

• What investment treaties are in effect with the host state?

• What is the scope of those investment treaties? How do they define the covered investors or investments? Which of the core standards of protection are granted to foreign investors?

• Could the investment be structured so that it is directly or indirectly controlled by a company that is incorporated in a state with which the host state has entered into an investment treaty?

(c) Enforcement of BITs and Multilateral Investment Treaties Once a Dispute Has Arisen

The majority of investment treaties allow the foreign investor to submit a claim for breach of treaty violation to international arbitration. The most frequent types of arbitration specified in BITs and multilateral investment treaties are institutional arbitrations administered by ICSID and arbitrations under the UNCITRAL Arbitration Rules (see above section 4(b)). Awards against states in investment arbitrations are often enforced under the New York Convention (see above section 9(b)) or under the ICSID Convention, a multilateral treaty that has been ratified by more than 140 states. States that are a party to the ICSID Convention are required to abide by and comply with the terms of an award. This is an important advantage of ICSID arbitration.

ICSID

ICSID (ICSID.worldbank.org/ICSID/Index.jsp) is an arm of the World Bank and was created by the ICSID Convention (ICSID.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=RulesMain). Unlike most forms of international commercial arbitration, ICSID arbitration operates within a completely autonomous jurisdictional system. National courts have no jurisdiction to support or intervene directly in ICSID proceedings. A losing party may only challenge the award before a second ICSID panel, called an "ad hoc committee", on the basis of grounds in the ICSID Convention, and not before national courts. An ICSID award is directly enforceable in a state as if it were a final local court judgement.

The ICSID Additional Facility

(ICSID.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=AdditionalFacilityRules) is available for disputes in which one of the states is not a party to the ICSID Convention. One key difference is that the award is not enforceable under the ICSID Convention, but requires an independent basis for enforcement.

(d) Transparency in Arbitrations Between Foreign Investors and a State: ICSID and NAFTA

Investment arbitrations often involve important issues in the public interest, such as health, environmental and social concerns. For example, the foreign investment that is the subject of a dispute between the investor and the host state may have a significant impact on the host state's environment.

Arbitral rules used to administer arbitrations often prescribe that the arbitration proceedings must be private and that third parties may not attend the hearing. Some rules contain an additionnal requirement that the proceedings must be kept confidential.

The ICSID Rules of Procedure for Arbitration Proceedings, however, have been amended to allow for transparency of the proceedings and a limited amount of public participation. A list of pending cases is publicly available at the ICSID website (see above). In addition, the ICSID Rules permit the tribunal, after consultation with the parties, to permit written submissions from persons or groups that have an interest in the proceedings, so called "amicus curiae briefs". Hearings

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may be opened up to third parties provided there has been no objection from the parties to the dispute. Extracts taken from the award may be published without the parties' consent.

Disputes arising under the NAFTA have been subject to similar measures to increase transparency and public participation.

Amendments to the UNCITRAL Arbitration Rules to reflect the need for transparency are being considered by the Working Group currently revising the Rules.

For examples on participation of non-governmental organisations that have been involved in investment arbitrations, please see also the At a Glance Guide to International Courts and Tribunals.

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ANNEX – At a Glance Guide to Arbitration - Glossary A

AAA: American Arbitration Association: An international arbitral institution based in New York with offices throughout the USA as well as in Dublin, Ireland. It administers arbitrations conducted under its own rules (of which there are several variants, such as the International Arbitration Rules, the Commercial Arbitration Rules and the Construction Industry Arbitration Rules) and under the UNCITRAL Rules. The AAA’s current International Arbitration Rules were brought into effect on 1 September 2000.

ADR: Alternative Dispute Resolution: A generic term for a variety of procedures, including mediation, conciliation and mini-trials, in which an independent person (for example, a mediator or conciliator or mini-trial panel) assists the parties to resolve their dispute. The independent person or panel cannot impose a decision, but rather seeks to facilitate the parties reaching a mutually acceptable compromise. If this is achieved, it can be made contractually binding by the parties

entering into a settlement agreement. All forms of ADR are without prejudice vis-à-vis any subsequent arbitration or litigation. In the USA, arbitration is often referred to as an ADR procedure, because it is alternative to litigation.

Ad hoc arbitration: An arbitration which is not administered by an arbitral institution, although it may still be run in accordance established arbitration rules published by an arbitral institution. The UNCITRAL Arbitration Rules are designed for use in ad hoc arbitration. Arbitration conducted under the procedure set down in national legislation is also said to be ad hoc.

Amiable compositeur: The general intention of empowering an arbitral tribunal to act as amiable compositeur is that the arbitral tribunal should not be bound by the application of strict legal principles, and should apply notions of fairness rather than being bound to the parties' strict legal rights only. The parties must have expressly agreed for the arbitral

tribunal to have this power. However, the precise effect of the power differs from country to country. The power to act as amiable compositeur is also referred to as the power to act ex aequo et bono or according to equity.

Appeal: The reconsideration of the substance of an award by a national court or a second arbitral tribunal which may reach a different decision. There is usually no appeal against arbitral awards. Even where a right of appeal exists, it is normally limited (for example, to questions of law) and, in any event, will more often than not be excluded altogether by the parties. An appeal should be distinguished from an application to set the award aside (for example, for lack of jurisdiction or procedural irregularity) or to remit the award to the arbitral tribunal (for example, to correct an error).

Applicable law: The law which applies to the arbitration. Many international arbitrations require the application of more than one law. See also lex arbitri, lex fori, lex mercatoria and procedural lawbelow.

Arbitrability: Whether a dispute is capable of being settled by means of arbitration. Certain national laws prohibit the determination of some kinds of dispute by arbitration, for example, bankruptcy, matrimonial status, securities laws and anti-competition issues. If the subject-matter of dispute is incapable of being settled by arbitration - whether under the law of the agreement, the law of the place of arbitration or the place where the award is to be enforced - any award rendered may be unenforceable.

Arbitration agreement: An agreement to refer disputes to arbitration. The agreement may be to refer existing disputes to arbitration (see also submission agreement), but more commonly it refers to disputes which may arise in the future. The dispute need not be contractual. Notwithstanding that the arbitration agreement may form part of the principal contract, it is deemed to be a separate agreement and so will "survive" if the underlying contract is deemed void or invalid or is terminated. (See also Kompetenz - Kompetenz.)

Award: A decision by an arbitral tribunal on one or more of the issues referred to it for determination. Awards may be described as interim (where they may be varied by a subsequent award of the same arbitral tribunal), partial (where they only deal with some of the issues referred to the arbitral tribunal) or final (where the issues cannot be reconsidered by the arbitral tribunal). An “order” of the arbitral tribunal usually deals with procedural matters only.

ADVOCATES FOR INTERNATIONAL DEVELOPMENT