Lecture 3: Litigation, Arbitration & Enforcement Flashcards
Chapter 3 (27 cards)
What legal frameworks determine/handle where cases can go and how judgments are enforced for international civil and commercial disputes where contracts do not specify the jurisdiction?
- Brussels Ia regulation (EU) and Lugano Convention (EFTA states) set rules for jurisdiction and how court decisions are enforced across borders - if disputes arise, these will be handled in the town or country where the defendant is located (typically), unless otherwise specified in contract or further rules apply through national laws (e.g. based on where the contract was performed).
- Hague Choice of Court Convention supports party autonomy, ensuring courts respect jurisdiction clauses in contracts.
What legal framework determine/handle what country’s law applies to the case of international civil and commercial disputes where contracts do not specify the governing law?
Rome I (contracts) and Rome II (non-contractual matters) determine which national law applies when there’s no clear choice in international cases.
NB! Only for EU member states.
What happens if a party from an EU member state and a party from a non-EU member state need to settle a dispute but their contract does not include a choice of jurisdiction or governing law?
Jurisdiction depends on where the defendant is based:
- EU party: Brussels Ia regulation applies, so the EU court will use its own rules to decide jurisdiction (most like “sue in defendant country).
- Non-EU party: The court will use national rules of the EU state (not Brussels Ia) to decide jurisdiction over the non-EU party. But, the EU court may still claim jurisdiction if there’s a strong connection (e.g. contract was performed in the EU).
If one party is outside the EU, enforcement of a judgment may be uncertain unless international treaties apply.
Governing law:
- EU party: Rome I applies, even when the other party is outside.
- Non-EU party: Rome I does not apply to non-EU states.
So, the governing law is usually the law of the country where the party performing the main obligation (like delivering goods or services) is habitually resident.
Remember, it is always safer to include a jurisdiction and governing law clause in the contract, since not making a choice may lead to legal uncertainty and enforcement issues.
Define ligitation.
The process of settling disputes through state courts.
It involves formal legal procedures governed by national laws, where a judge (or sometimes a jury) decides the outcome of a dispute.
Key features:
- Public and formal process.
- Governed by state procedural and material law.
- May result in binding judgments.
- Enforcement of judgments often requires recognition under state enforcement laws or international treaties (e.g. Brussels Ia, Lugano Covention or Hague Convention on Choice of Court). If these doesn’t apply, enforcement follows bilateral agreements or national laws.
- Enforcement procedure is handled under state law.
Define arbitration.
The process of settling disputes in a private court, outside the state court system.
It is based on mutual agreement between parties and typically used in international commercial contracts.
Key features:
- Conducted by private arbitrators (e.g., lawyers, retired judges).
- Each party may appoint its own arbitrator.
- Proceedings are confidential and often faster than court litigation.
- The result is a binding arbitral award.
- Awards can be enforced under the New York Convention in over 170 countries. If the Convention doesn’t apply, enforcement follows bilateral agreements or national laws.
- Enforcement procedure is handled under state law.
Compare litigation and arbitration.
Judges
- Litigation: Assigned by court
- Arbitration: Assigned by parties
Speed
- Litigation: Rather slow
- Arbitration: (usually) Faster
Appeal
- Litigation: Yes
- Arbitration: (usually) limited
Foreign enforcement
- Litigation: No uniform procedure outside Europe
- Arbitration: (almost) global enforcement regime
Publicity
- Litigation: Public (in part private)
- Arbitration: Private (in part public)
Costs
- Litigation: Court fees usually lower, but slow procedure might increase costs
- Arbitration: Tribunal fees usually higher, but fast procedure might save costs
What are the main advantages and disadvantages of arbitration vs. litigation?
Arbitration:
- Advantages: Faster, private, party autonomy (freedom to choose), and easier international enforcement.
- Disadvantages: Party autonomy, costly, and limited appeal.
Litigation:
- Advantages: Neutral forum, proven (long tradition), often less costly, little procedural influence of parties, and option to appeal.
- Disadvantages: Public, slower, and harder to enforce internationally.
What is the advantage of arbitration in terms of international enforcement?
Arbitral awards are easier to enforce internationally than court judgments.
The New York Convention provides a widely accepted framework (over 170 countries).
Limited grounds for refusing enforcement.
More certainty and global reach.
Summarise: Lititgation vs. arbitration, as well as their main advantage and disadvantage
1. Litigation: State court system - Cheap and reliable, but slow and lacks global enforcement system (Brussels Ia and Lugano Convention in the EU, whereas rely on national laws outside the EU) etc.
2. Arbitration: Private court system - Fast and enforceable (New York Convention), but expensive etc.
What is one myth about arbitration (in terms of state laws)?
Many think that if they choose arbitration, they are completely free from state laws.
But if someone breaks arbitration rules, the dispute might still end up in state court.
Arbitration depends on state law for:
- Ensuring fair process (due process).
- Enforcing awards through courts (New York Convention)
- Checking if arbitration agreements are legally valid.
So, arbitration is not fully independent of national legal systems.
A limitation of disbutes settled through arbitration is that these can be taken to state courts under specific circumstances - which?
1. Invalid arbitration agreement (clause) due to e.g. lack of concent, violation of national laws or missing key elements.
2. Non-arbitral matters: Some isputes cannot be resolved by arbitration due to public policy or national law restrictions, e.g. criminal matters.
3. Public policy violation: If the dispute or the arbitral award violates public policy in the enforcing state, courts can refuse to enforce it, e.g. violations of competition law.
4. Failure of arbitration process e.g. improper appointment of arbitrators.
5. Agreement to litigate: The parties may mutually agree to waive arbitration and take the dispute to court.
What are the five choices to make on arbitration in the contract? What five options can parties choose between?
- Ad hoc vs. institutional arbitration
- Hosting organization (if relevant)
- Location
- Fast track vs. normal proceedings
- Arbitration procedure and setup of panel
Define ad hoc vs. institutional arbitration (choice 1)
Ad hoc: Arbitration conducted without the help of an arbitration institution. The parties manage everything themselves.
Institutional: Arbitration conducted under the guidance and rules of an arbitration institution. The institution manages the process. Examples:
- ICC (International Chamber of Commerce)
- LCIA (London Court of International Arbitration
Who are possible hosting organizations for institutional arbitration? (choice 2)
- International Chamber of Commerce (ICC)
- London Court of International Arbitration (LCIA)
- Swiss Chamber of Commerce (SCC)
- Austrian Federal Economic Chamber of Commerce
- Stockholm Chamber of Commerce (…)
Define fast track vs. normal proceedings (choice 4)
Fast track proceedings
- Simplified and accelerated process.
- Shorter deadlines for submissions, hearings, and awards.
- Often limited evidence and fewer procedural steps.
- Usually involves a sole arbitrator.
- Lower cost and suitable for low-value or urgent cases.
Normal proceedings
Full procedure with standard timelines.
- Allows detailed evidence, multiple submissions, and full hearings.
- Often involves a panel of 3 arbitrators.
- Higher cost, suited for complex or high-stakes disputes.
Outline the arbitration procedure and setup of panel (choice 5)
Since it is not state-involved, the institution has to write it up. If no institution is involved (ad hoc), rules must be agreed upon by both parties (e.g. UNCITRAL Arbitration Rules).
Procedure:
- Start: One party sends a notice to begin arbitration.
- Choose arbitrators: Usually 1 or 3 arbitrators selected by the parties or an institution.
- Preliminary meeting: Plan the process (timelines, language, rules).
- Exchange of statements: Both parties submit written claims and defences.
- Hearing: Both sides present their case (witnesses, evidence).
- Award: Arbitrators give a final, binding decision.
Panel:
- Number: 1 for simple cases, 3 for complex disputes.
- Selection: Parties choose or rely on an institution.
- Qualifications: Arbitrators are experts (lawyers or industry professionals).
- Chairperson: Leads and ensures fairness if there’s a 3-member panel.
Define the stages of arbitration.
Stage 1: Initiation
- One party sends a formal request for arbitration to start the process - The arbitration clause in the contract determines the rules, location, and language.
- The hosing organization takes the case, sends “welcome” papers to the parties and determine the procedural matters
Stage 2: Arbitrator invitation
- Parties are asked to join the arbitration - only parties within the contract.
- Arbitrators are invited.
- Parties select the arbitrator(s).
- If there are three arbitrators, each party picks one, and the third is chosen jointly - has to be an uneven number.
Stage 3: Arbitrator selection
- Parties confirm the arbitrators.
- If there is disagreement, an institution (like the London Court of International Arbitration) can appoint them.
Stage 4: Hearings
- Evidence and arguments are presented.
- Witnesses may testify, and both parties present their case.
- The process is less formal than a court but still follows set rules.
Stage 5: Arbitral award
- The arbitrator(s) deliberate and issue a final and binding decision.
- The award resolves the dispute and is enforceable under the New York Convention in many countries.
When should the parties agree on arbitration (if relevant)?
The choice of arbitration clause can show up anywhere, not just the contract.
What should be included in an arbitration clause (model clause)?
(In order)
- Ad hoc / institutional
- Procedure
- Set up of panel (odd number) / language
- Location (lex arbitri)
- Governing law for arbitration clause
Remember: Do not combine with jurisdiction clause! You cannot do both, since there would be two possible outcomes and therefore ambiguous.
How is the law governing an arbitration clause determined?
It can be chosen by the parties.
If not, it’s determined by the law of the seat of arbitration (lex arbitri) or the law most closely connected.
It is separate from the main contract law (Doctrine of Separability).
What does the Doctrine of Separability imply in contract disputes?
It means the arbitration clause is treated as an independent agreement. Even if the main contract is invalid, the arbitration clause may still be valid and enforceable.
Define the applicable laws (layers) in arbitration.
Summary:
- Law governing the main contract (substantive law).
- Law governing the arbitration clause (can be different from contract law).
- Lex arbitri: procedural law of the arbitration seat.
- Arbitration rules (procedure): chosen institutional or ad hoc rules.
- Enforcement law: national law where enforcement is sought.
Five types of law:
1. Contractual provisions: The governing law (state law or non-state law) of the main contract, which impacts the interpretation of rights and obligations, breach, and remedies.
2. Arbitration agreement under state laws: The law chosen by parties or the default national law, which determines if the agreement (arbitration clause) is valid and legally binding (formation, representation, and formal requirements).
3. Arbitration framework - Lex arbitri under state laws: The procedural law of the seat of arbitration, which determines the framework for arbitration (e.g. scope, due process requirements, and court involvement).
4. Arbitration procedures under non-state laws: The procedural rules set by the chosen institution or ad hoc rules (e.g., ICC, LCIA, UNCITRAL), which details how proceedings are conducted (e.g. arbitrator appointment hearings, and evidence).
5. Enforcement under state laws: The national laws that determine enforcement (The New York Convention)
Would it be true to say that arbitration is not influenced by national law?
No, that would be false.
Arbitration is influenced by national laws at several stages:
- Validity of the arbitration agreement.
- Procedural framework (lex arbitri).
- Enforcement governed by local courts and national public policy.
- National courts may review awards under certain conditions (e.g., under the New York Convention).
Can you take the enforceability of judgements in foreign countries for granted?
No, enforcement is not automatic.
Depends on international treaties (e.g., Brussels Ia, Lugano, Hague Conventions) or bilateral agreements.
If no treaty applies, enforcement relies on national laws and often requires an exequatur procedure.
Local courts may refuse recognition due to jurisdictional, procedural, or public policy issues.
