International arbitration can take place due to the existence of an agreement to resolve disputes under arbitration. In that sense, international arbitration is a voluntary procedure, that is, in order to resolve a dispute under international arbitration, first there should be the will of the parties agreeing to solving their dispute under arbitration. I know, it sounds a little bit circular.
But what it entails is that, first, you need an arbitration agreement, and second, this will allow you to resolve your dispute under arbitration, whether it is national or international. In order to have a valid international arbitration procedure, there is forcibly the need to have a valid arbitration agreement, either as an arbitration clause under an agreement, or as a stand alone agreement apart from the main transaction or transactions.
What does that mean? Or why is it so important?
The cornerstone of international agreements resides precisely in the consensual relationship between the parties. It should be inequivocal about their willingness to resort to arbitration; if there are some problems regarding this will, then the arbitral award may be set aside, not recognized, or rendered simply null and void due to some invalidity or because one of the parties was incapable of agreeing to arbitration. For commercial arbitration and to some extent to investment arbitrations outside ICSID the New York Convention is applicable (obviously if the state parties where enforcement is sought are part of the New York Convention)
Article V(1)(a) of the New York Convention establishes that:
Article V
- Recognition and enforcement of the award may be refused, at the
request of the party against whom it is invoked, only if that party furnishes
to the competent authority where the recognition and enforcement is sought,
proof that:
(a) The parties to the agreement referred to in article II were, under
the law applicable to them, under some incapacity, or the said agreement is
not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made;
or
If you are a corporate lawyer or you are representing one of the parties take due consideration of the capacity of the parties or any possible outcomes where the agreement to arbitrate might be invalid. Since this can cause future problems to your clients.
As said before your arbitration agreement can be expressed as an arbitration clause or as a stand alone agreement to solve a dispute.
Arbitration clauses are typically agreed upon within the main contract and take place before the dispute occurs. The idea behind these arbitration clauses is that they allow the parties to express an inequivocal willingness to resolve their dispute under international arbitration if such dispute arises out of or in connection with the said contract. And as well, to avoid resolving their disputes under the courts of the jurisdiction applicable to the contract.
Another way an arbitration agreement is expressed is in a stand-alone arbitration agreement. It is a whole contract to resolve the dispute under international arbitration; this type of agreement is usually agreed upon by the parties once the dispute arises. So, the dispute is already known, however, reaching an agreement when the parties already have an ongoing dispute can be hard to obtain, but it is possible.
A different type is that of investment arbitration. Under this approach there is an offer to arbitrate, what it means is that under Bilateral or Multilateral Treaties for the promotion and protection of foreign investments, the state parties to the treaty agree to refer the dispute to investment arbitration. So, the states put an offer to the foreign investors of the contracting state, so they can have access to resolve their dispute under investment arbitration, and the receiving state of the investment will agree to solve the dispute under investment arbitration.
A possible fourth type is that of forum prorrogatum which has been dealt quite extensively in international disputes between states, and to a lesser extent in commercial and investment arbitrations. But in this case, it is possible for resolving a dispute under international arbitration even if there is no agreement to arbitrate. This takes place when the claimant seeks to resolve the dispute before an arbitral tribunal, and the respondent continues to resolve the dispute under arbitration, without establishing that the agreement to arbitrate is inexistent. It is a possibility as well.
So there you have it. We started with two possible ways to agree to arbitration, in order to find other possible two. That is an offer to arbitrate in investment arbitratoin, and forum prorrogatum. In essence what should be clear is that there is an inequivocal agreement by the parties to resolve their dispute under arbitration.
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