The development of world trade after the end of World War II gave rise to the problem of legal disputes between participants in international commerce. When the supplier and the buyer live in different states, everyone understands the responsibility for non-performance of contracts within the framework of their legislation. An independent intermediary was required to establish the degree of guilt of the parties and the amount of compensation for the failure of the agreements.
International arbitration and international courts were born in 1959. The first treaty on the consideration of international disputes by an independent commission was drawn up in New York and adopted by 154 countries, including the Soviet Union.
What is the International Court of Arbitration (MAC)
IAU is a neutral legal platform for resolving disputes with the participation of an independent judge, as well as an alternative way to resolve conflicts of representatives of different countries. It supersedes the trial. Having listened to the parties, the arbitrator makes his decision, which becomes binding on them.
The advantage of international arbitration over a traditional court:
- removes the issue of jurisdiction;
- carried out with the consent of both parties;
- costs to participants cheaper;
- resolved in a relatively short time;
- allows you to resolve both commercial and political disputes;
- allows you to keep confidential the circumstances of the case and the verdict.
It is possible to appeal to the international arbitration court with disputes for the settlement of which a standard procedure is not provided. Recently, most international contracts contain a clause on compulsory recourse to arbitration in case of violation of obligations and causing losses.
Types of International Arbitration
International arbitration courts are general and specialized.
General arbitration considers cases with a political bias and diplomatic disputes. He uses international law or the principle of “fairness” (ex aequo et bono) in his work, unless general rules apply to the case. Since 1928, only 4 cases have been considered in an "exceptional" order.
In order to collect specialized arbitration, the dispute should concern international cooperation in narrow areas, when the results of scientific and technical expertise are required to make a decision. Without fail, this court is applied for disagreements in:
- fisheries issues;
- conservation of the ecology of the oceans;
- scientific research at sea;
- landfill procedure.
Also, international arbitration courts are divided into:
- special (isolated, ad hoc);
- institutional (permanent).
Isolated processes are those that were created to hear a specific case. They are also called "ad hoc", which translates as "for this case." The parties to the dispute agree with each other the rules and conditions for familiarizing the arbiter with the case and the procedure for the execution of its decision. Special arbitration closes after sentencing.
Institutional courts are called that are created on an ongoing basis. The rules of their work are regulated, there is a staff of arbitrators. Permanent IACs are organized at state chambers of commerce and industry or non-governmental organizations.
To consider a case in an international arbitration court, the parties turn to one of the relevant associations. In their work, arbitration bodies are guided by the 1959 New York Convention or later regulations.
Ratification of the New York Convention in the USSR
Since 1960, these rules began to apply in the USSR.Then our country insisted on the introduction of the principle of reciprocity, which applies to the participation in the international arbitration of all countries, even if they have not ratified this convention.
The principle of reciprocity is the installation that all contracts are concluded on equal terms. In case of violation of the transaction, both parties have equal rights and benefits in the international arbitration court, even if they are not in the national law of one of the parties.
International Arbitration Court Procedure
To request an arbitration, an application is submitted and the agreed amount is paid as a fee for judicial review and administrative costs. The request is made by the company or a lawyer is hired to specialize in cases in international arbitration.
The application states the essence of the dispute, under which articles the violation of the contract falls under, what decision the plaintiff expects with an indication of the confirmed amount of losses.
Next, time is given to notify the second participant, which sends the MAC. At the end of the preparatory period, an arbitration agreement is signed, which indicates the main conditions of the process and selects the judges.
In the event of a change of ownership of the enterprise or reorganization of the company, they become the successors of the signed agreement and the arbitration case. If the company has shareholders, they are required to notify the arbitration tribunal, as they have the right to participate in a corporate dispute.
The judge hears the parties to the conflict, witnesses, experts in person or via video. The convenience of such a meeting is its flexibility and informality, if this does not harm the quality of the meeting.
Sometimes the participant in the process does not get in touch. Then, if there is evidence that he received a notification, the case is considered and a decision is made without it. This does not exempt the absent party from paying remuneration to international arbitration. Those who shy away from paying the premium to the court prove that they did not have information about its implementation.
After the decision is made, the arbitrator prepares an official document outlining it and sends it to the International Arbitration. When drawing up an agreement, international courts stipulate the issue of expenses separately - most of the expenses of the winning party are paid by the loser, unless they initially agree on another option. The arbitration shall fix the amount of its remuneration to each participant in the dispute in the decision.
Significant conventions after 1959
In addition to the 1959 New York Convention, several more conventions were adopted that defined the concept of international arbitration and regulated its work.
The European Convention on Foreign Trade Arbitration was adopted on April 21, 1961 with the assistance of the United Nations Economic Commission for Europe. It considered the possibility of foreign trade arbitration in a dispute between individuals and legal entities residing in Europe.
In 1962, the Soviet Union joined it. He supported the idea that an arbitrator in an international court could be a citizen of another country, and agreed with the established rules for determining jurisdiction or non-jurisdiction of cases.
The Inter-American Convention on International Commercial Arbitration was adopted in the United States and Latin America on June 16, 1976. It was created by countries that were part of the Organization of American States to resolve transnational commercial disputes between companies in the region.
The Moscow Convention was concluded in 1972. The USSR ratified it in 1973. Its full name is “The Convention on the Settlement of Arbitration of Civil Law Disputes Arising from the Relations of Economic, Scientific and Technical Cooperation of 1972”. It amended the abolition of the jurisdiction of cases by state courts, if these disputes are already being considered in international arbitrations.
All conventions recognize three sources of law for arbitration proceedings:
- international;
- national;
- private - agreement of the parties and regulations.
Conventions also affirm the indisputability of decisions of international arbitration in other courts of the countries participating in the proceedings and determine the requirements for its judges.
Requirements for International Arbitrators
The participants in the process have the right to agree on their selection criteria for the arbitrator to consider their case. In this case, the judge, under the agreed conditions, is appointed by the board. Or the arbiter is elected by the parties at the stage of signing the agreement.
Reject his candidacy at the selection stage under the following conditions:
- dependence on a party and interest in winning it;
- prejudice against certain individuals or subject matter.
Challenge to the selected judge is also declared during the trial, if his impartiality is called into question for objective reasons, or after a decision is made, if this can be seen in the text of the verdict. In the latter case, he is appealed. The New York Convention has identified a list of grounds for appealing against the actions of an arbitrator.
The most famous international arbitration courts
Seven of the most sought after global arbitration sites:
- Arbitration Institute of the Stockholm Chamber of Commerce. His services are often used by representatives of the former Soviet Union republics.
- London International Arbitration Court. It was founded in Great Britain during the reign of Queen Victoria in 1892.
- International Dispute Resolution Center in the USA. Specialized Branch of the American Arbitration Association.
- International Arbitration Court in Paris. It is considered the most qualified. Half of world applications are submitted to it;
- China Commission on International Economic and Commercial Arbitration. The main Asian platform for arbitration.
- Maritime Arbitration Commission at the Chamber of Commerce and Industry of the Russian Federation in Moscow. It was created to consider disputes related to the rescue of ships and cargo in the oceans. Now he is dealing with all disagreements in merchant shipping.
- International Commercial Arbitration Court in Voronezh. He replaced the Foreign Trade Arbitration Commission, which has been involved in international disputes since 1932.
What is the International Commercial Arbitration Court (ICAC)
An arbitration court is called commercial if one or both parties to the dispute are individuals or legal entities. This arbitration specializes in commercial disputes of representatives of different countries that engage in international trade. In his work, both international and national law can be used. Commercial arbitration is conducted on an ad hoc or permanent basis. The very concept of international commercial arbitration suggests that it is a non-state body. The process is closed to preserve the trade secrets of the parties.
Legal basis in the ICA
Cases in international commercial arbitration are considered on a principle that is taken as a basis by agreement. A choice is made between a material or procedural approach. In terms of legal assessment, an ICA is classified as a procedure:
- Negotiated. The process is considered as a civil law transaction, which consists of concluding an agreement on proceedings and its practical execution, which ends with the verdict of the arbitrator;
- Procedural. In this case, international commercial arbitration adheres to the national law of the country where the case is being considered. It is considered a standard trial in terms of examining the evidence base and making a decision;
- Mixed. In this case, the selection of the rules and conclusion of the arbitration agreement are referred to the contractual component, and the adoption and enforcement of the decision is referred to the procedural one.
Examples of disputes in the MAC and the ICAC
- Foreign citizens against the country. A default in Argentina in 2008 cost foreign holders of government securities $ 100 billion.The government has proposed replacing old securities with new ones that have significantly lost value. The Italian owners of depreciated bonds filed a lawsuit in 2011 at the International Center for the Settlement of Investment Disputes. The decision was made in favor of the applicants on the basis of a pre-existing agreement between Italy and Argentina.
- Country versus country. In 1986, Nicaragua filed a lawsuit against the United States with a case on interference in its sovereign affairs and causing material damage. A court in The Hague found the defendant guilty of using force against another state and awarded compensation in favor of the injured party. The decision was not enforced. The United States blocked it at the UN Security Council level.
- The company is against its country. The lawsuit was filed with the ICAC in The Hague in 2005. Yukos shareholders challenged the lawfulness of the bankruptcy and sale of its assets by the Russian government. In 2014, a decision was made in favor of the company, but was not fully implemented by the Russian side.
RF Law on International Commercial Arbitration
On July 7, 1993, President of the Russian Federation Yeltsin B.N. signed the law under number 5338-I. He defined the functions of the international arbitration court, the requirements for the arbitrators, the norms for observing the equal rights of the parties in the course of the proceedings, the rights and obligations of the participants in the process. The law applies to ships that are conducted on the territory of the Russian Federation.
The Law on International Commercial Arbitration consists of 8 sections, which are divided into 36 articles. It was repeatedly supplemented by amendments, the latter was introduced on December 29, 2015.
The Law on International Arbitration establishes the conditions for starting a trial:
- the contested agreement is concluded on the basis of international trade relations;
- the subject of the dispute is the supply of goods, the contract of sale, the provision of transport services and investment agreements;
- Mandatory conclusion of an arbitration agreement before the start of the process.
The latest amendments to the 2015 law concerned 6 articles, namely:
- the rules of action of the ICA of the Russian Federation were determined, a list of cases that were excluded for proceedings abroad was introduced;
- the terminology of arbitration proceedings has been clarified;
- The competent authorities of the Russian Federation that provide assistance to the ICA and their powers were indicated;
- a detailed explanation of the essence of the arbitration agreement, the methods of its signing;
- by default, the principle of the oddness of the number of judges is adopted, unless a different number is specified in the agreement;
- The process of appointing arbitration mediators is agreed.
Each party proposes one judge, then the selected pair is determined with the candidacy of the third arbitrator.
When a decision is made by two or more arbitrators, a majority rule may be applied. If opinions are divided, the presiding arbitrator shall render a verdict.