2.2 The modern concept of arbitration

While the history of arbitration is built on the position of States and their jurisdictions with regard to the acceptance of this alternative mechanism for solving disputes, the exclusive exercise of public power on which State justice is based does not necessarily enter into conflict with arbitration, whose origin is purely consensual. Indeed in medieval England, where recourse to arbitration was common, there was a healthy and continuous working relationship between judges and arbitrators, where judges in all the King’s courts often acted as arbitrators, both informally and formally. However the relationship between the courts and the arbitral process was much closer under the English system than was the case in continental Europe, where there was the tendency to favour what, in current jargon, would be called ‘institutional’ arbitration. Three broad categories of ‘institutional’ arbitration, each involving a standingbody which formed a pseudo-court, functioning in parallel with the State legal system, have been distinguished:

• the bodies which regulated disputes in a particular trade;

• developed special courts, or arbitral tribunals, dealing with more diverse trade disputes;

• the regulatory bodies which governed the affairs of the components of a particular religious community, rather than a particular trade or group of trades.

Different legal traditions have, therefore, influenced, and still do influence, different perceplions of arbitration. Although these various tribunals did not exercise the fierce remedies available to the civil power, they had sanctions enough—ie the merchant who quarrelled with his guild was finished, and in other contexts a failure to honour a decision could have severe social or business consequences. The link here between consent to the use of arbitration as a dispute resolution mechanism and its social acceptance can already be observed.

Later, the struggle that many legal orders went through to establish a monopoly of the administration of justice in the central political authority left a residual government antagonism towards—and a related tendency to suspect—private tribunals. During this period there was significant national court intervention in the arbitration process, including reviewing the substantive decisions of the arbitrators. At the same time, there was no international regulation of arbitration. Nevertheless, in time States have begun to develop judicial control of the awards and to recognize that decisions taken by individuals may, under certain conditions, have the same effects as judgments taken by its own tribunals: it is the consecration of the jurisdictional function of arbitration.

I n the late 19 th century and early 20 th century the development of modem international arbitration practice began—and was essentially based on national laws. Then, with the expansion of world trade, the need to create a mechanism for international recognition and enforcement of both arbitration agreements and awards in relation to international commercial agreements became of paramount importance. The aftermath of the First World War saw the rise of idealistic internationalism, which provided fertile soil for the growth of an international spirit in the field of commercial arbitration.100 In particular, two features should be mentioned in this context:

• The worlds business community established the International Chamber of Commerce (ICC) in 1919, which has been and remains the voice of the international business community. In 1923 the ICC then created its Court of International Arbitration to provide the framework for an independent and neutral arbitration system for thedetermination of commercial disputes between parties from different countries. The rule of law in trans-border arbitration has been substantially influenced by private arbitration institutions, particularly the ICC.

• There has been an emergence of a network of international instruments pertaining to international commercial arbitration, as a result of which arbitration agreements have become reliable, whereas arbitral awards have become more efficient (more readily enforceable) than court decisions on the international scene. It has been observed that the 1958 New York Convention was the beginning of internationalism in arbitration.

In commercial arbitration today the parties mainly agree to make recourse to arbitration before the dispute has broken out (generally by inserting an arbitration clause into the main contract), thereby reducing the pure consensual character of arbitration. Indeed, the acceptance of, and recourse to, arbitration are often a necessary pre-condition to entry into the international marketplace. Essentially, the New York Convention established three fundamental principles which are the cornerstone of modern international arbitration:

• the arbitration must conform with or come within the terms of the arbitration agreement;

• the parties must be treated fairly and with equality (ie international due process);

• and the award must respect international public policy, both with respect to its content and its subject matter.

These three principles, which are also the grounds which may allow a national court to refuse to enforce an award made outside its jurisdiction, have been incorporated into most national arbitration laws and are fundamental to autonomous international arbitration.

2.3The UNCITRAL Model Law’s progressive and modern arbitration regime has had

considerable influence on national arbitration laws, both through direct adoption and more indirectly. It has been designed to provide States with a highly advanced statutory framework of arbitration law—in effect to make it possible, especially for developing States, to become instantly supportive of arbitration and thereby able to participate in trans-border commerce. The UNCITRAL Model Law provided a reduced role for local court supervision over international arbitrations and permitted the parties to choose and tailor the arbitration system they wanted.

In the context of investment arbitration the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘the ICSID Convention’), which entered into force on 14 October 1966, has been fundamental.

However, nowadays there is not only major involvement by the State, but also a general acceptance of arbitration as a mechanism for resolving disputes. Indeed, in a national context the need for the efficient and speedy resolution of disputes has led to arbitration being considered as an appropriate means to solve, for instance, labour and consumer disputes. In an international context the same reasons, and the need to have the most possible uniform decisions, have made arbitration the privileged dispute resolution mechanism in the field of sport.